Cargills Ceylon PLC · 2011-08-31 · 2 Annual Report 2011 Our businesses Cargills (Ceylon) PLC...

Cargills (Ceylon) PLC

The year 2010/11 was a year of unprecedented investment for Cargills (Ceylon) PLC. We accelerated

the expansion of our flagship supermarket chain while continuing to build on our strength in the food

manufacturing sector. We entered new product categories and invested in people and in technology

to harness this expansion. We redefined our place in the dairy sector acquiring a brand with a distinct

identity that is synonymous with the industry. Through these investments we will connect our brands

with millions of consumers to improve quality of life. Our investments will continue to help farmers and

communities succeed, and our stakeholders enjoy sustainable returns. In the year 2011/12 and beyond our

commitment towards Investing for Growth remains steadfast.

Our businesses 2 - 3

Financial highlights 4 - 5

Profile of Directors 6

Chairman’s statement 7 - 11

Corporate governance 12 - 16

Audit & Remuneration Committee reports 17

Risk management 18-19

Sustainability report 20 - 26

Financial information 27 - 66

Statement of value added 67

Five year financial summary 68

Group real estate portfolio 69

Investor relations supplement 70 - 71

Notice of Annual General Meeting 72

The proxy form is on page 73

Contents

2 Annual Report 2011

Our businesses

Cargills (Ceylon) PLC

Cargills is Sri Lanka’s largest modern retailer with more than 50% of the modern trade market share. Its pioneer venture into modern trade was an innovation of the Company’s trading legacy. Thereafter Cargills Food City continued to challenge the norm by taking to the masses what was traditionally an affluent focused business and offering ‘higher value for the lowest price’.

Today the Cargills retail operation has grown to 163 outlets spread across the 25 districts, as ‘Cargills Food City’ supermarkets, ‘Cargills Express’ convenience stores and Cargills ‘Big City’ hypermarket. In its short span of operation of 28 years, Cargills Food City has been consistently rated among the most valuable brands in Sri Lanka as per the Brand Finance Index rating.

The Company is also in the business of food manufacturing, restaurant and distribution through its subsidiaries given below.

Cargills Quality Dairies (Private) Limited

Magic is the number one dairy ice cream in Sri Lankaand is a strong number two player in the overall ice cream market. Cargills Quality Dairies which produces Cargills Magic ice cream, Milk and Milk Shakes is the first and only dairy product manufacturing Company in Sri Lanka to be accredited with all three ISO certifications; ISO 9001: 2000 Quality Management System certification, ISO 22000: 2005 Food Safety Management System certification and ISO 14001: 2004 Environment Management System certification. Cargills Magic was the first to introduce fresh fruits and local flavours to its portfolio of ice creams creating a new trend in the overall ice cream industry. Through its innovation driven focus Cargills Magic has expanded its market share exponentially and is now the fastest growing ice cream brand in Sri Lanka.

Cargills Agrifoods Limited

Kist is one of the most trusted brand names in Sri Lanka known by generations for its true Sri Lankan flavours and high standards of quality. Cargills Kist which is traditionally renowned for its delectable selection of jams, sauces and cordials has expanded its 100% fruit based product range introducing fruit based nectars to the market. Today the nutritious and delicious Kist nectar range has revolutionized the industry and is popular for its genuine fruity taste.

Cargills Quality Foods Limited

The processed meats range consists of Cargills Supremo catering to mass market demand, Cargillls Finest a premium deli range and traditional favorites ‘Goldi’ and ‘Sams’. Cargills is rapidly gaining market share in this category through its product innovation, quality and unique taste. Cargills Quality Foods is the only meat processing plant in Sri Lanka that has secured the ISO 9001: 2000 Quality

3Annual Report 2011

Our businesses contd...

Management System certification, ISO 22000: 2005 Food Safety Management System certification and ISO 14001: 2004 Environment Management System certification. The Company has also engaged international expertise to develop new and innovative products which offer a novel variety of taste whilst catering to the nutritional needs of the consumer.

Cargills Food Processors (Private) Limited

The Company holds the franchise for the internationally acclaimed KFC chain which is the largest and most popular international restaurant chain in the country. The success of KFC was in the fusion of an international brand with well - loved Sri Lankan recipes. The locally inspired additions to the KFC menu have now been included into the regional product portfolio.

Kotmale Holdings PLC

Kotmale is a leading brand in the dairy sector known for highest quality products at a reasonable price having entered the market three decades ago. The Brand is synonymous with locally produced cheese and has won mass appeal for its delicious range of dairy ice cream as well as pasteurized milk, yoghurt, fresh cream, ghee, curd and fruit drinks. Established in 1967 as Lambretta (Ceylon) Ltd, its beginnings are traced back to the cool surroundings of Bogahawatte, Patana (Upper Kotmale). Kotmale Holdings PLC was acquired by the Cargills Group in 2010.

Diana Biscuits Manufactures (Private) Limited

Diana Biscuits Manufactures (Private) Limited is engaged in the manufacturing, distribution and marketing of biscuits and confectionaries under the Brand name ‘Helan’. The Company was a family owned business established in 2006 and acquired by Cargills in 2010 and manufactures soft & hard dough biscuits & wafers. The factory is located at the Nalanda Industrial Estate in Matale. The Company has now been renamed as Cargills Quality Confectionaries (Private) Limited. The biscuits would be relaunched shortly under a new Brand name and would be an altogether new and improved range.

Millers Brewery Limited

Millers Brewery Limited is the brewer of the finest beers in the country such as ‘Three Coins’ ‘Irish Dark’, ‘Sando Stout’ and ‘Grand blonde’ that have also won international appeal. The Company which came into the Cargills fold in 2011 is presently expanding its capacity and upgrading its infrastructure.

Millers Limited

The Group’s marketing and distribution arm Millers, is one of the largest distribution and logistic operations in the country geared with a network spread across the 25 districts of Sri Lanka. Millers is the island wide distributor for international brands such as Kodak, Kraft, Cadbury, Bonlac, Nabisco, Tang, Toblerone etc and is also the mass market distributor for own brands.

THREE COINS

MILLERS BREWERY LIMITED, SRI LANKA

T H E A L L M A L T B E E R


Financial highlights

Group 2011 2010 change

Rs. ‘ 000 Rs. ‘ 000 %

OperationsTurnover 37,128,661 30,874,797 20.26

Profit from operation 1,825,442 1,429,545 27.69

Profit before taxation 1,406,703 1,000,726 40.57

Profit after taxation 1,094,173 712,392 53.59

Balance sheet

Non current assets 13,568,878 9,251,241 46.67

Current assets 5,736,722 4,697,601 22.12

Current liabilities 11,348,392 7,085,476 60.16

Non current liabilities 907,775 722,211 25.69

Capital and reserves 7,049,433 6,141,155 14.79

Per share data (Rs.)

Earnings per share 4.86 3.18 52.83

Dividend per share 1.50 1.10 36.36

Net assets per share 31.07 27.42 13.31

Market value per share 228.30 70.50 223.83

Cash Flow

Net cash generated from / (used in)

- Operating activities 2,088,275 1,374,544

- Investing activities (4,844,610) (1,040,320)

- Financing activities 1,488,868 (156,951)

Rs. Bn

Rs. Mn

Rs. Mn

Rs. Bn

5Annual Report 2011

Company 2011 2010 change

Rs. ‘ 000 Rs. ‘ 000 %

OperationsTurnover 29,669,660 17,328,142 71.22

Profit from operation 1,050,355 642,721 63.42

Profit before taxation 756,107 345,487 118.85

Profit after taxation 555,285 315,443 76.03

Balance sheet

Non current assets 9,355,826 8,400,290 11.38

Current assets 6,501,560 2,730,386 138.12

Current liabilities 10,599,605 6,134,818 72.78

Non current liabilities 452,215 474,465 (4.69)

Capital and reserves 4,805,566 4,521,393 6.29

Per share data (Rs.)

Earnings per share 2.48 1.41 75.89

Dividend per share 1.50 1.10 36.36

Net assets per share 21.45 20.18 6.29

Market value per share 228.30 70.50 223.83

Cash Flow

Net cash generated from / (used in)

- Operating activities (253,515) 805,110

- Investing activities (2,566,322) (751,156)

- Financing activities 1,702,310 (87,697)

Financial highlights

Rs. Bn

Rs. Mn

Rs. Mn

Rs. Bn


Mr. L R Page**ChairmanMr. Louis R Page is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and a Fellow Member of the Chartered Institute of Management Accountants (UK). He has been involved in the operations of the C T Holdings group in a non - executive capacity and in the setting and review of policy framework, and in key investment decision-making. He has also held a number of senior management and board positions in overseas companies.

Mr. V R PageDeputy Chairman / CEOMr. Ranjit Page possesses over 28 years of management experience with expertise in food retailing, food service, and manufacturing, having introduced the concept of supermarketing to the Sri Lankan masses. He also serves on the boards of several other companies. He is also a Founder- Director of the Mawbima Lanka Foundation, set up to promote local industry and produce. He was appointed Managing Director of C T Holdings PLC on 1 January 2011.

Mr. M I Abdul WahidManaging Director / Deputy CEOMr. M. Imtiaz Abdul Wahid is an Associate Member of the Institute of Chartered Accountants of Sri Lanka and a Fellow Member of the Chartered Institute of Management Accountants (UK). He has been involved in the operations of the Company in an executive capacity at different intervals progressively at higher levels (appointed Director 1997 and Deputy Managing Director in 2001) spanning a period of 24 years, leaving the services of the Company for employment abroad on two occasions in between whereby he also gained valuable exposure holding a number of senior management positions in overseas companies. He was appointed Managing Director/Deputy CEO in May 2010.

Mr. S V KodikaraExecutive DirectorMr. Sidath Kodikara is the Chief Operating Officer for Retail and Restaurant operations. He is a Member of the Institute of Hospitality of United Kingdom. He counts over 26 years of managerial experience in the hospitality and retail sector.

Mr. P S MathavanExecutive DirectorMr. Prabhu Mathavan is the Chief Financial Officer. He is an Associate Member of the Chartered Institute of Management Accountants (UK) and the Institute of Chartered Accountants of Sri Lanka. He also holds a Bachelors Degree in Commerce. He possesses over 18 years of experience in the fields of Finance, Auditing, Accounting and Taxation.

Mr. Jayantha Dhanapala*DirectorMr. Jayantha Dhanapala is a former United Nations Under- Secretary-General for Disarmament Affairs (1998-2003) and a former Ambassador of Sri Lanka to the USA (1995-1997) and to the UN Office in Geneva (1984-1987). He was Director of the UN Institute for Disarmament Research (UNIDIR) from 1987-1992. As a Sri Lankan diplomat Mr. Dhanapala served in London, Beijing, Washington D.C., New Delhi and Geneva and represented Sri Lanka at many international conferences chairing several of them. He is currently the President of the Pugwash Conferences on Science and World Affairs ; a member of the Governing Board of the Stockholm International Peace Research Institute (SIPRI) and several other advisory boards of international bodies.

Mr. A T P Edirisinghe*DirectorMr. Priya Edirisinghe is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and a Fellow Member of the Chartered Institute of Management Accountants (UK) and holds a Diploma in Commercial Arbitration. He was the Senior Partner of HLB Edirsinghe & Co., Chartered Accountants and currently serves as Consultant / Advisor. He counts over 41 years of experience in both public practice and in the private sector. He serves on the Boards of a number of other listed and non-listed companies.

Mr. Sanjeev Gardiner**DirectorMr. Sanjeev Gardiner is the Chairman and Chief Executive Officer of the Gardiner group, comprising the Galle Face Hotel Co. Limited, the Ceylon Hotels Corporation PLC, Kandy Hotels Company (1938) PLC (which owns the Queen’s and Suisse Hotels in Kandy), and The Surf, Bentota. He is also a Director of several public and private companies and counts over 22 years of management experience. He holds a Bachelor of Business Degree from Royal Melbourne Institute of Technology and Bachelor of Business Degree (Banking and Finance) from Monash University, Australia. He has been a Council Member of HelpAge International, Sri Lanka branch for several years.

Mr. Sunil Mendis*DirectorDesamanya Sunil Mendis was formerly the Chairman of Hayleys group, and the immediate former Governor of the Central Bank of Sri Lanka. He possesses around 44 years of wide and varied commercial experience most of which has been in very senior positions.

Mr. Anthony A Page**DirectorMr. Anthony Page is the Chairman of C T Holdings group of companies and counts 42 years of management experience in a diverse array of businesses. He serves on the Boards of many group as well as other companies. He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka. He was on the Board of the Colombo Stock Exchange and also was a former Council Member of the Employers Federation of Ceylon.

Mr. J C Page**DirectorMr. Joseph Page is the Deputy Chairman/Managing Director of C T Land Development PLC. He is also Executive Director of C T Properties Limited. Prior to joining C T Land Development PLC he was Executive Director of Millers Limited. He has over 28 years of management experience in the private sector.

Mr. E A D Perera*DirectorMr. Errol Perera has held Senior Management positions in England and Malaysia. On his return to Sri Lanka he focused on promoting joint venture projects with foreign investment and technology transfer. He was successful in obtaining Board of Investment approval with pioneer status for projects in the field of telecommunications and financial services. He is at present a Director of several other listed and non-listed companies in Sri Lanka and overseas.

Profile of Directors

* Independent Non Executive** Non Independent Non Executive

7Annual Report 2011

Chairman’s statement

Dear Shareholders,

It gives me great pleasure to present, on behalf of the Board of Directors, the Annual Report and the Audited Financial Statements for the year ended 31 March 2011.

In 2010 the Sri Lankan economy maintained a steady growth of 8% whilst most developed economies continued to grapple with the implications of the 2008 financial meltdown. State investments in infrastructure development and progressive policy changes proposed through the 2010 budget have laid the foundation for the private sector to fast track investment. Considering this promising economic and policy environment, your Company has continued to invest and expand with the long term vision of evolving into a globally competitive enterprise. The year saw the highest ever annual investment made by your Company in its 167 year history. Strategic investments were made towards developing business models that are led by professional management teams, supported by advanced technology delivering quality products and services. With all of the above we aim to transform your Company into an enterprise that can compete with multinational corporations in our industry.

The year concluded, saw your Company excelling its performance in all areas of business with both Retail and Fast Moving Consumer Goods (FMCG) reporting appreciable growth in revenue and profits.

Retail

‘Cargills Food City’ your flagship brand continues to lead the modern trade category with the chain now reaching 163 locations island wide. This sector’s success has been achieved through a constant focus on what matters to our customers.

“Cargills Food City Express” is a new store concept that is now being established to meet consumer needs even in the remotest locations of each district. This smaller store model is stylized to meet the unique needs of its immediate neighborhood while offering the same comfort and convenience of the larger format. Our infrastructure and leadership is in place to maintain the current pace of expansion and the focus on a smaller and leaner format would certainly see healthier returns in the long term.

Cargills Food City has also remained consistent in offering the most competitive prices in every department for identified products that impact everyday living. We believe our initiatives in reducing the cost of living whilst engaging with rural youth and farmer communities to create sustainable value, is aligned with the needs of our core customer base. Training farmers on best practices in crop and animal agriculture, facilitating credit, providing inputs, transport and infrastructure along with fair

Group Turnover

Rs. 37,129 Mn(2010 - Rs. 30,875 Mn)

20.26 % Growth

The year concluded saw your Company excelling its performance in all areas of business with both Retail and FMCG reporting appreciable growth in revenue and profits.

2007 2008 2009 2010 2011

Rs. Bn

40

35

30

25

20

15

10

5

Turnover

-


Chairman’s statement contd...

and transparent pricing policies has elevated the dignity of farming to that of a profitable and attractive enterprise. The approach has helped retain a new generation of young rural farmers within the industry reducing regional unemployment and under-employment. This commitment reinforces our position as a responsible retailer and makes us the preferred choice for consumers.

FMCG

The success enjoyed by the FMCG sector of your Company stems from years of strategic planning and dynamic management complemented by a vibrant team. Our national brands have emerged key players in their categories through an innovation driven focus.

Cargills Magic continues to set the benchmark in the ice cream industry growing market share and churning out new product variations both in take-home and impulse categories. The investments made in the latest technology have elevated Cargills Magic to a new tier of taste, variety and quality. Magic is now well positioned as the No 1 dairy ice cream in Sri Lanka and stands as a strong brand in its own right. In the year concluded the Company expanded its distribution network establishing a strong presence in the Northern region. Investments made in strengthening its cold-chain have yielded results with Magic gaining popularity and market share.

The Company’s agri-processing business Cargills Kist has enhanced its product portfolio by introducing two-fruit variations to its popular nectar and jam ranges. The culinary range was also expanded to provide consumers exciting new accompaniments to their meals and snacks. Kist has now matured into a truly household brand closely linked with the daily lives and eating habits of Sri Lankans.The brand will soon increase this presence in the near future with the entry into new product segments and categories.

Cargills processed meats continues to enjoy a steady progress. The Company’s approach towards catering to varied market segments has proven successful. Cargills Finest, the unique European deli range has now taken leadership in the premium product segment and enjoys a good demand from the institutional market. Traditional favourites ‘Goldi’ and ‘Sams’ too have been re-introduced to the market. The continued delivery of exciting and innovative products would see the brands consolidating the Company’s presence in the processed meat category. The year ended saw Cargills meats enhancing market presence in Maldives and India.

Group Profit before tax

Rs. 1,407 Mn(2010 - Rs. 1,001 Mn)

40.57 % Growth

Profit before tax

2007 2008 2009 2010 2011

Rs. Mn

1,600

1,400

1,200

1,000

800

600

400

200

The success enjoyed by the FMCG sector of your Company stems from years of strategic planning and a dynamic management style complemented by a vibrant team.

-

9Annual Report 2011


The KFC chain of restaurants enjoyed a vibrant year with some popular products being relaunched and growing transactions. The increased tendency for urban clientele to seek modern yet affordable ‘eating-out’ facilities is reflected in the exceptional performance of the restaurant sector. The Company is bullish about this sector and looks forward to playing a greater role in the hospitality arena as the country welcomes an increased number of travellers and economic activity stimulates demand from a growing segment of middle income families.

Millers Limited is now being nurtured to take on the responsibility of driving the FMCG business through its strong sales force and advanced logistics operation that reaches 40,000 retailers islandwide. The distribution and marketing operation is being further strengthened in terms of personnel and infrastructure to support the Company’s increased interests in the sector. The Company’s international agency lines are also performing to expectation and would be further enhanced in tandem with the demand for branded consumer goods.

FMCG Expansion

Your Company has identified the expansion and diversification of the FMCG sector to be a thrust in its overall growth plans. The year ended saw your Company making strategic investments to strengthen its position as a lead player in the FMCG industry. These investments reflect our strong commitment to growth and would enable us to connect our brands with millions of consumers to improve quality of life, help farmers and communities succeed, and our stakeholders enjoy sustainable returns.

In November 2010 Cargills expanded its interests in the dairy sector with the acquisition of Kotmale Holdings PLC. The Company now holds an 81.72% stake in Kotmale. With the change in ownership, the Kotmale Board of Directors was reconstituted on 5 January 2011 and Mr. Stuart Young was appointed Chairman to consolidates Cargills’s interests in the dairy sector and expand its product range from its present leadership in the dairy ice cream category through Cargills Magic. This also offers Cargills the opportunity to build on its successful out-grower model that directly impacts rural economies island wide. Kotmale and Cargills Magic together collect 22 million litres of fresh milk from an over 20,000 strong dairy farmer network, making Cargills the 3rd largest milk collector in the island.

Cargills entered the confectionary industry in November 2010 when Cargills Quality Foods Limited acquired Diana Biscuits Manufactures (Pvt) Ltd. The production plant located

2007 2008 2009 2010 2011

Rs. Mn

1,200

1,000

800

600

400

200

Profit after tax

Your Company has identified the expansion and diversification of the FMCG sector to be a thrust in its overall growth plans.

Shareholders’ funds

Rs. 6,960 Mn(2010 - Rs. 6,141Mn)

13.33 % Growth

-



in Nalanda, Matale is now being modified to develop a wider product range than what was hitherto marketed under the ‘Helan’ brand. The first range of biscuits made to new recipes is to be launched shortly under a new brand name and would without doubt excite customers and the industry with its sensational new selection of biscuit varieties. The Company has since been renamed Cargills Quality Confectionaries (Pvt) Ltd.

In the fourth quarter of 2010/11 the newly incorporated subsidiary Millers Brewery Limited (MBL) entered into an agreement for the purchase of the business and business assets, including the brands of McCallum Breweries (Ceylon) Limited, McCallum Brewing Company (Private) Limited and Three Coins Company (Private) Limited . In relation to this transaction, MBL has obtained the relevant licenses dated 7 February 2011 from the Excise Commissioner (Revenue) of the Excise Department of Sri Lanka. The acquisition included renowned brands such as ‘Three Coins’, ‘Sando Stout’, ‘Three Coins Riva’, ‘Irish Dark’ and ‘Grand Blonde’. Mr. Stuart Young was also entrusted with the responsibility of driving the success of MBL.

The upbeat forecasts from the tourism sector and the change in lifestyle stemming from economic growth augurs well for our investments in the soft alcohol industry. MBL has now commenced production and distribution while a sales strategy is being implemented to revive the ‘Three Coins’ brand. The management team of MBL would be developing a range of high quality beverages with local roots but with an international outlook with a view to catering to both the mass market and niche clientele. The ready access the MBL brands would have to distribution channels including linkages with institutional customers provides a strong platform from which MBL should certainly develop into a formidable player in the medium term.

The Company is optimistic that said investments would yield above average returns in the medium to long term and is also aware of the initial impact on the bottom line in terms of higher interest costs and turnaround time of the two loss making biscuit and brewery operations. We are confident of minimising this turnaround time based on our previous experience in purchasing loss making business entities and transforming them into formidable industry leaders in the medium term.

My Country. My Company

Over the years Cargills has practiced a multi-stakeholder value creation approach through which your Company has impacted the development of our Country. Cargills has remained closely engaged with our community in our sustainable business practices by supporting the reduction of cost of living, enhancing youth skills and bridging regional disparity. Our continued confidence in our Country and the resilience of our people coupled with our commitment to play an increasingly

Total assets (Group)

Rs. 19,306 Mn(2010 - Rs. 13,949 Mn)

38.40 % Growth

Over the years Cargills has practiced a multi-stakeholder value creation approach through which your Company has impacted the development of our Country.

Profit after tax

Turnover

Turnover vs profit after tax

40

35

30

25

20

15

10

5

-

Rs. Bn

1,200

1,000

800

600

400

200

2007 2008 2009 2010 2011

Rs. Mn

-

11Annual Report 2011


nurturing role in uplifting our community now warrants taking this platform to an even higher level. The year ahead would see your Company playing an even more significant role in building on its core strength of food and nutrition whilst investing into key growth sectors of our Country. Your Company believes in a bright and prosperous future for Sri Lanka and is now well positioned as a trusted partner of Sri Lanka to spearhead that journey of success.

Summary of Performance

Your Company recorded an excellent performance in the year concluded with Profit after tax crossing the Rs. 1 Bn milestone. This is a growth of 54% from Rs. 712 Mn reported last year. The Group consolidated turnover exceeded Rs. 37 Bn having achieved a growth of 20%. Profit before tax has recorded a 41% increase to Rs. 1.4 Bn. The Group after tax profit attributable to share holders was Rs. 1.1 Bn a growth of 53% over the previous year’s profit of Rs. 712 Mn.

Appropriation

A dividend of 50 cents per share was paid on 7 February 2011 as interim dividend and a dividend of Rs. 1 per share will be proposed at the forthcoming annual general meeting. The Company maintains a consistent dividend policy being aware of its capital commitments towards investment aimed at long-term growth. The performance of the share bears ample testimony to shareholder appreciation of the increasing value of the Company. We are confident that the Company would continue to create substantial and sustainable capital wealth in the future.

Acknowledgement

In conclusion I take this opportunity to commend our team of 6,790 persons who have worked with enduring commitment and loyalty to engage every opportunity that has come our way. The quality of our performance is attributed to this remarkably competent team, their knowledge, skills and professionalism. I extend my sincere thanks to the Board of Directors whose leadership and foresight has steered the Company to success. I thank our business partners in the farming communities and small and medium enterprises as well as our principals, suppliers and financial institutions for their continued support. I express my thanks to our shareholders for their continued confidence in us. I am sure you will stay with us as we strive to create greater value in our enterprise and contribute towards the progress and prosperity of our country.

SignedL R PageChairman

17 August 2011

Earnings per share (Group)

Rs. 4.86(2010 - Rs. 3.18)

52.83 % Growth

Net assets per share (Group)

Rs. 31.07(2010 - Rs. 27.42)

13.31 % Growth


Corporate governance

The disclosures below demonstrate the extent to which the principles of good corporate governance are complied with within the Group. Further to the above, the Board of Directors to the best of knowledge and belief is also satisfied that all statutory payments due to the Government, other regulatory institutions, and related to the employees, have been made on time.

Company’s adherence to the Corporate Governance Rules as required by Section 7.10 of the Listing Rules of the Colombo Stock Exchange:

7.10.1 Non-Executive Directorsa) The board of directors of a Listed Entity shall include at

least, (i) Two non-executive directors; or (ii) Such number of non-executive directors equivalent to one

third of the total number of directors whichever is higher.

b) The total number of directors is to be calculated based on the number as at the conclusion of the immediately preceding Annual General Meeting.

c) Any change occurring to this ratio shall be rectified within ninety (90) days from the date of the change.

7.10.2 Independent Directorsa) Where the constitution of the board of directors includes only

two non-executive directors as mentioned above, both such non-executive directors shall be ‘independent’.

In all other instances two or 1/3 of non-executive directors appointed to the board of directors, whichever is higher shall be ‘independent’

b) The board shall require each non-executive director to submit a signed and dated declaration annually of his/her independence or non-independence against the specified criteria.

7.10.3 Disclosures Relating to Directorsa) The board shall make a determination annually as to the

independence or non-independence of each non-executive director based on such declaration and other information available to the board and shall set out in the annual report the names of directors determined to be ‘independent.’

b) In the event a director does not qualify as ‘independent’ against any of the criteria set out below but if the board, taking account all the circumstances, is of the opinion that the director is nevertheless ‘independent’, The board shall specify the criteria not met and the basis for its determination in the annual report.

c) In addition to the disclosures relating to the Independence of a director set out above, the board shall publish in its annual report a brief resume of each director on its board which Includes information on the nature of his/her expertise in relevant functional areas.

d) Upon appointment of a new director to its board, the Entity shall forthwith provide to the exchange a brief resume of such director for dissemination to the public. Such resume shall include information on the matters itemized in paragraphs (a), (b) and (c) above.

Corporate Governance Rule DetailsCompliance Status

Complied with

Complied with

Not applicable (N/A)

Complied with

Complied with

Complied with

Complied with

Complied with

Complied with

Company has eight non executive directors and four executive directors on its board.

The composition of the Board remain unchanged all throughout.

During the year no changes occurred to this ratio.

One half of non executive directors determined to be independent.

Each non executive director has provided a signed and dated declaration of his/ her independence or non independence against the criteria laid down in the listing rules.

One non executive director is an independent director as per the criteria set.

Three other non executive directors are deemed independent by the Board and the criteria not met and the basis for such determination is set out in Note on page 16.

Please refer profile of directors on page 6.

Mr. M I Abdul Wahid was appointed to the Board on 21 May 2010 and the required details were submitted to the exchange the same day.


Corporate Governance Rule DetailsCompliance

Status

7.10.5 Remuneration CommitteeA Listed Entity shall have a remuneration committee in conformity with the following:(a) Composition The remuneration committee shall comprise;

(i) a minimum of two independent non-executive directors (in instances where an Entity has only two directors of on its board); or

(ii) non-executive directors a majority of whom shall be independent, whichever shall be higher.

In a situation where both the parent company and the subsidiary are ‘Listed Entities’, the remuneration committee of the parent company may be permitted to function as the remuneration committee of the subsidiary.

However, if the parent company is not a Listed Entity, then the remuneration committee of the parent company is not permitted to act as the remuneration committee of the subsidiary. The subsidiary shall have a separate remuneration committee.

One non-executive director shall be appointed as Chairman of the committee by the board of directors.

(b)FunctionsThe remuneration committee shall recommend the remuneration payable to the executive directors and Chief Executive Officer of the Listed Entity and/or equivalent position thereof, to the board of the Listed Entity which will make the final determination upon consideration of such recommendations.

(c) DisclosuresThe annual report should set out the names of directors (or persons in the parent company’s committee in the case of a group company) comprising the remuneration committee, contain a statement of the remuneration policy and set out the aggregate remuneration paid to executive and non-executive directors.

The term “remuneration” shall make reference to cash and all non-cash benefits whatsoever received in consideration of employment with the Listed Entity (excluding statutory entitlements such as Employees Provident Fund and Employees Trust Fund).

7.10.6 Audit CommitteeA Listed Entity shall have an audit committee inconformity with the following:

(a) CompositionThe audit committee shall comprise;

(i) a minimum of two independent non-executive directors (in instances where an Entity has only two directors on its board); or

(ii) non-executive directors a majority of whom shall be independent, whichever shall be higher.

Complied with

Complied with

N/A

Complied with

Complied with

Complied with

Complied with

Corporate governance contd...

The remuneration committee comprise three independent non executive directors and the details are given on the inner back cover.

Kotmale Holdings PLC is a subsidiary of the Company and has its own remuneration committee.

N/A

Please refer inner back cover.

The Committee recommends to the Board the remuneration payable to the Executive Directors and the Chief Executive Officer. In recommending an appropriate remuneration package the primary objective of the Committee is to attract and retain the services of highly qualified and experienced personnel.

Please refer inner back cover for the names of directors of the remuneration committee.

Please refer the remuneration committee report on page 17 for a statement of the remuneration policy.

Please refer Note 7 to the financial statements for the aggregate remuneration paid to the directors.

The audit committee comprise three independent non executive directors.



In a situation where both the parent company and the subsidiary are ‘Listed Entities’, the audit committee of the parent company may function as the audit committee of the subsidiary.

However, if the parent company is not a Listed Entity, then the audit committee of the parent company is not permitted to act as the audit committee of the subsidiary. The subsidiary should have a separate audit committee.

One non-executive director shall be appointed as Chairman of the committee by the board of directors.

Unless otherwise determined by the audit committee, the Chief Executive Officer and the Chief Financial Officer of the Listed Entity shall attend audit committee meetings.

The Chairman or one member of the committee should be a member of a recognized professional accounting body.

(b) FunctionsShall include,

(i) Overseeing of the preparation, presentation and adequacy of disclosures in the financial statements of a Listed Entity, in accordance with Sri Lanka Accounting Standards.

(ii) Overseeing of the Entity’s compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements.

(iii) Overseeing the processes to ensure that the Entity’s internal controls and risk management are adequate, to meet the requirements of the Sri Lanka Auditing Standards.

(iv) Assessment of the independence and performance of the Entity’s external auditors.

(v) To make recommendation to the board pertaining to appointment, re-appointment and removal of external auditors and to approve the remuneration and terms of engagement of the external auditors.

(c) DisclosuresThe names of the directors (or persons in the parent company’s committee in the case of a group company) comprising the audit committee should be disclosed in the annual report.

The committee shall make a determination of the independence of the auditors and shall disclose the basis for such determination in the annual report.

The annual report shall contain a report by the audit committee, setting out the manner of compliance by the Entity in relation to the above, during the period to which the annual report relates.

Corporate governance contd.

Complied with

N/A

Complied with

Complied with

Complied with

Complied with

Complied with

Complied with

Complied with

Complied with

Complied with

Complied with

Complied with

Kotmale Holdings PLC is a subsidiary of the Company and has its own audit committee.

N/A


Please refer audit committee report on page 17.

The Chairman of the committee is a member of ICASL and CIMA (UK).







A Listed Entity must include in its annual reports and accounts, inter alia;

i) Names of persons who were Directors of the Entity during the financial year.

ii) Principal activities of the Entity and its subsidiaries during the year and any changes therein.

iii) The names and the number of shares held by the 20 largest holders of voting and nonvoting shares and the percentage of such shares held.

iv) The public holding percentage.

v) A statement of each director’s holding and Chief Executive Officer’s holding in shares of the Entity at the beginning and end of each financial year.

vi) Information pertaining to material foreseeable risk factors of the Entity.

vii) Details of material issues pertaining to employees and industrial relations of the Entity.

viii)Extents, locations, valuations and the number of buildings of the Entity’s land holding and investment properties.

ix) Number of shares representing the Entity’s stated capital.

x) A distribution schedule of the number of holders in each class of equity securities and the percentage of their total holdings in the specified categories.

xi) The following ratios and market price information.

EQUITY1. Dividend per share2. Dividend pay out3. Net asset value per share4. Market value per share Highest and lowest value recorded Value as at the end of financial year.

DEBT (Only if listed)xii) Significant changes in the Entity’s or its subsidiaries’

fixed asset and the market value of land, if the value differs substantially from the book value.

xiii) If during the year the Entity has raised funds either through a public issue, Right issue, and private placement;

a. A statement as to the manner in which the proceeds of such issue has been utilized.

b. If any shares or debentures have been issued, the number, class and consideration received and the reason for the issue; and,

c. Any material change in the use of funds raised through an issue of securities.

Corporate governance contd...

Complied with

Complied with

Complied with

Complied with

Complied with

Complied with

N/A

Complied with

Complied with

Complied with

Complied with

Complied with

N/A

N/A

Please refer inner back cover for the names of directors of the Company.

Please refer Note 1.1 to the financial statements.

Please refer Investor relations supplement on page 71.

Please refer Investor relations supplement on page 71.

Please refer page 31.

Please refer report on Risk management on page 18 to 19.

No material issues pertaining to employees and industrial relations

Please refer page 69 Group real estate portfolio.

Please refer page 70 Investor relations supplement.


Please refer page 68 Five year summary.


N/A

N/A

Company’s adherence to the Provisions of Rule 7.6 as required by the Listing Rules of the Colombo Stock Exchange on disclosure in Annual Reports of Listed Entities:


Corporate governance contd.

Note :Based on the declarations provided by the non executive directors, the Board has decided the following directors as independent:

Mr. Jayantha Dhanapala, and

Mr. E A D Perera- who has served on the Company’s Board now for a period in excess of nine years and

Mr. A T P Edirisinghe- who has served on the Company’s Board for a period in excess of nine years and- is also a Director of C T Holdings PLC which has a significant shareholding in the Company, and

Mr. Sunil Mendis- who is also a Director of C T Holdings PLC

who, in spite of their service on the Company’s Board for over nine years and / or being Directors in another company which has a significant shareholding in the Company, the Board has nevertheless determined as in the previous years to be independent considering their credentials and integrity.


xiv) The following information should be disclosed in respect of each employees share ownership or stock option scheme.

- Total number of shares allotted during the financial year

- Price at which shares were allotted- Highest, lowest and closing price of the share

recorded during the financial year- Details of funding granted to employees (if any)

xv) Disclosures pertaining to Corporate Governance practices in terms of Rules 7.10.3, 7.10.5 c. and 7.10.6 c. of section 7 of the Rules.

xvi) Related Party transactions exceeding 10% of the Equity or 5% of the total assets of the Entity as per Audited Financial Statements, whichever is lower.

Details of investments in a Related Party and/or amounts due from a Related Party to be set out separately.

The details shall include, as a minimum:a. The date of transaction;b. The name of the Related Party;c. The relationship between the Entity and the Related

Party;d. The amount of the transaction and terms of the

transaction;e. The rationale for entering into the transaction.

N/A

Complied with

Complied with

N/A

Please refer page 12 to 14 for the disclosures in terms of Section 7.10.

Please refer Note 20 and 35.


Audit & Remuneration Committee reports

Audit Committee Report

The Audit Committee is appointed by the Board of Directors of the Company and reports directly to the Board. The Audit Committee comprise three members who are non-executive Directors who are deemed independent. The Chairman of the Audit Committee is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and a Fellow Member of the Chartered Institute of Management Accountants (UK). The composition of the members of the Audit Committee satisfies the criteria as specified in the Standards on Corporate Governance for listed companies.

The Members of the Audit Committee:

Name / Independence Mr. A T P Edirisinghe FCMA, FCA - Chairman IndependentMr. Sunil Mendis - IndependentMr. E A D Perera - Independent

The Chief Financial Officer (CFO) and the Chief Internal Auditor attend all meetings and the Chief Executive Officer (CEO) and the Managing Director attend audit committee meetings as and when requested to do so by the Audit Committee. The Company Secretary acts as the Secretary to the Committee.

The oversight function of (a) the preparation, presentation and adequacy of disclosures in the quarterly and annual financial statements of the Company, in accordance with Sri Lanka Accounting Standards and (b) the Company’s compliance with financial reporting requirements, information requirements of the Companies Act and other relevant financial reporting related regulations and requirements, was duly performed and the Audit Committee reviewed and discussed the year-end financial statements and recommended their adoption to the Board, whilst this was done on circulation at quarter-ends. In all instances, the Audit Committee obtained a declaration from the CFO stating that the respective financial statements are in conformity with the applicable accounting standards, Company law and other statues including corporate governance rules and that the presentation of such financial statements are consistent with those of the previous quarter or year as the case may be, and further states any departures from financial reporting, statutory requirements and Group policies, (if any). Quarterly Compliance Certificates are also obtained from the Finance, Legal, and Secretarial divisions of the Company on an updated standardized exception reporting format perfected by the Audit Committee, stating any instances (where applicable) of, and reasons for, non-compliance.

The oversight function over the processes to ensure that the Company’s internal controls and risk management, are adequate, to meet the requirements of the Sri Lanka Auditing Standards was duly performed and the Audit Committee reviewed and discussed (a) the business risk management processes and procedures adopted by the company, to manage and mitigate the effects of such risks and measures taken to

minimize the impact of such risks, (b) the internal audit plan and monitoring the performance of the internal auditor and adherence to the internal audit plan and (c) the internal audit reports and monitoring follow up action by the management. Based on the recommendations of the Audit Committee, the Company has engaged a third party Audit Firm to obtain an independent verification, of stock and cash counts at all its outlets and the factories and other facilities of its own and subsidiary companies, and also adherence to standard systems and procedures as laid down by the Company, commencing in the new Financial Year. The Audit Committee assessed the independence and performance of the Company’s external auditors and made recommendations to the Board pertaining to appointment/ re-appointment. The Audit Committee also reviewed the audit fees for the Company and approved the remuneration and terms of engagement of the external auditors and made recommendations to the Board. When doing so, the Audit Committee reviewed the type and quantum of non-audit services (if any) provided by the external auditors to the Company to ensure that their independence as Auditors has not been impaired. The Audit Committee obtains an ‘Auditor’s Statement ‘ from Messrs KPMG Ford, Rhodes, Thornton and Company confirming independence as required by Section 163 (3) of the Companies Act No. 7 of 2007 on the audit of the balance sheet and the related statements of income, changes in equity, and cash flows of the Company and the Cargills Group.

The Audit Committee has recommended to the Board that Messrs KPMG Ford, Rhodes, Thornton and Company, Chartered Accountants, be continued as external auditors of the Company for the financial year ending 31 March 2012.

A T P Edirisinghe - FCMA, FCAChairman – Audit Committee

17 August 2011

Remuneration Committee Report

The Remuneration Committee of Cargills (Ceylon) PLC consists of three Non – Executive Directors – Messrs. Sunil Mendis (Chairman), Jayantha Dhanapala and A T P Edirisinghe. The Deputy Chairman & CEO and the Managing Director may also be invited to join in the deliberations as required.

The Committee studies and recommends the remuneration and perquisites applicable to the Executive Directors of the Company and makes appropriate recommendations to the Board of Directors of the Company for approval.

The Committee also carries out periodic reviews to ensure that the remunerations are in line with market conditions.

Sunil MendisChairman – Remuneration Committee

17 August 2011


Risk management

Introduction

Risk management is of paramount importance to Cargills (Ceylon) PLC to safeguard the interest of all stakeholders. To keep risk management at the centre of the executive agenda, continuous awareness is created and it is embedded in everyday business management.

The expansion drive of the Cargills Food City operation and manufacturing subsidiaries together with latest business acquisitions has meant that the Group’s operation has become more complex with an increased risk profile. In an improving economic environment the Group also anticipates a higher business risk in terms of increased competition.

The management considers each business risk in the context of the Group’s strategy by identifying the potential upside and downside to the Group business. Any identified downside is subject to mitigation and any upside is fully made use of to strengthen the competitive position of the Group. Risks and methodology of mitigation are presented here in the areas of business (operation), financial reporting and compliance with applicable laws and regulations.

Administrative support for risk management

Corporate Management Committee (CMC)

The Board as the focal point in managing the business has been vested with the final responsibility of managing the risks the Group faces. A Corporate Management Committee (CMC) has been set up to assist the Board in meeting this responsibility. The CMC with the help of senior management decides the risk profile of the Group. It also evaluates the business proposals in view of the existing risk appetite and keeps the Board informed of the suitability of the business proposals. The CMC reviews the operational issues tabled in the monthly meetings to identify the key risks faced by the Group including their impact, likelihood and controls and procedures implemented to mitigate these risks. The Board is required to take decisions that would increase the intrinsic value of the Company in terms of investing in capital assets which would enhance the future earnings capacity. In this perspective, tolerable risk levels are defined by the CMC provided those investments show commercial justification striking a balance between risk and return. In addition, the management letter issued by external auditors of the Company is reviewed by the audit committee. Any material findings adversely affecting the smooth operation of the business are addressed in detail and corrective actions are taken.

Centralised Legal Function

The Group obtains the service of a centralized legal department to ensure that the Group complies with applicable laws and regulations. The department reports on a monthly basis to the Board verifying compliance with laws and regulations. All legal

agreements are thoroughly scrutinized by competent legal officers while the Company Secretary ensures compliance with the Companies Act.

Corporate Financial Reporting Function

Documentation and reporting also plays a key role in managing risk. The corporate financial reporting division has been set up to ensure all financial reporting aspects are addressed. The division coordinates with relevant authorities and institutions. The audit committee reviews all financial and related information that is reported and disseminated.

Internal Controls and Internal Audit Function

The Company has put in place a system of internal control to assist in achieving the management’s objective of ensuring orderly and efficient conduct of business, safeguarding of assets, the prevention and detection of fraud and error, timely preparation of reliable financial information, and compliance with relevant laws and regulations.

At Cargills, we believe that an effective internal audit function would enhance the Company’s performance in every aspect of business. This function would primarily involve monitoring of internal control, examination of financial and operating information, review of the efficiency and effectiveness of the operation, and review compliance with legal and regulatory requirements. It also continuously verifies and audits the systems and promptly escalates any problems or potential risks to the management. Evaluation of the existing risk management setup is also a task assigned to the internal audit function. Internal audit reports are reviewed by the audit committee and any material findings are inquired into in detail.

Overview of Risks Affecting the Business

Business Risk

The business risk management is a dynamic process due to the constant change and complexity in the operating environment of the Group. The different business operations of the Group and their performances are subject to a variety of risk factors which are constantly monitored and evaluated by the management in order to respond effectively. All manufacturing facilities are maintained according to best international food manufacturing standards to mitigate business risk arising from production processes.

Competitive Environment

The retail industry in Sri Lanka is highly competitive. To remain competitive the Group is focused on areas such as price, product range, quality and service. We monitor our performance against a range of measures including customer satisfaction, perception and experience while also evaluating the performance of competitors.


People capabilities

Our greatest asset is our employees. It is critical to our success to attract, retain, develop and motivate the best people with the right capabilities at all levels of operations. We review our people policies regularly and are committed to investing in training and development. We also carry out succession planning to ensure that the future needs of the business are considered and provided for. There are clear processes for understanding and responding to employees’ needs through HR initiatives, staff surveys, and regular communication of business developments.

Reputational Risk

Failure to protect the Group’s reputation and brands could lead to a loss of trust and confidence. This could result in a decline in the customer base and affect the ability to recruit and retain high-calibre people. Emotional loyalty to the Cargills brand has helped us diversify into new areas of businesses through integration and diversification strategies. We recognise the commercial imperative to safeguard the interests of all our stakeholders and avoid the loss of such loyalty. The ‘Cargills Values’ are embedded in the way we do business at every level. Our Code of Ethics guides our relationships with customers, employees and suppliers. We engage with stakeholders in every sphere, take into account their views and endeavor to develop strategy that reflects their interests.

Product safety

The safety and quality of our products is of paramount importance to Cargills as well as being essential for maintaining customer trust and confidence. A breach in confidence could affect the size of our customer base and hence financial results. We have detailed and established procedures for ensuring product integrity at all times. There are strict product safety processes in place and regular management reports. We work in partnership with suppliers to ensure mutual understanding of the standards required. We also monitor developments in areas such as health, safety and nutrition in order to respond appropriately to changing customer trends and new legislation.

Health and Safety risks

Provision of adequate safety to our staff and customers is of the utmost importance to us. Injury or loss of life cannot be measured in financial terms. We operate stringent health and safety processes in line with best practice in our outlets, manufacturing facilities and offices, which are monitored and audited regularly.

IT Systems and Infrastructure

The business is dependent on efficient Information Technology (IT) systems. We recognise the essential role that IT plays

across our operations in enabling us to operate efficiently. We

have extensive controls in place to maintain the integrity and

efficiency of our IT infrastructure and to ensure consistency of

delivery. All relevant staff is effectively engaged to mitigate IT

related risks through effective policy and procedures as well as

increased awareness.

Regulatory and Political Environment

Due to the diverse nature of our businesses we are subject to

a wide variety of regulations prevailing in the country. We

consider these uncertainties in the external environment when

developing strategy and reviewing performance. We remain

vigilant to future changes. As part of our day-to-day operations

we engage with governmental and non-governmental

organizations to ensure the views of our customers and

employees are represented and try to anticipate and contribute

to important changes in public policy whenever possible.

Funding and Liquidity

The Group finances its operations by a combination of retained

earnings, long term and short term loans. The objective is to

ensure the continuity of funding and to arrange funding ahead

of requirements and to maintain sufficient undrawn committed

bank facilities. We as a Group maintain a portfolio of banking

institutions to cater to the funding requirements and to obtain

them on favorable terms. Healthy relationships with bankers

allow us to have borrowing arrangement within a shorter

period of time.

Interest rate risk

It is the Company’s objective to limit its exposure to increases

in interest rates while retaining the opportunity to benefit

from interest rate reductions. Accordingly the Group manages

interest rate fluctuations with an appropriate mix of fixed and

variable rate debts through a centralized treasury management

function.

Credit risk

The Company aims to reduce the risk of loss arising from default

by parties to financial transactions. Risk of default is routinely

monitored and required actions are taken. Our manufacturing

subsidiaries are more exposed to credit risk by the very nature

of their business and this risk is neutralised through a rigorous

process of credit management.

Foreign Exchange Rate Risk

The Group’s exposure to this risk is minimal as exports

are negligible. Risk on imports of plant, machineries and

equipments are managed adequately.

Risk management contd.


01. Our approach to Sustainability

1.1 Introduction

From a single seed in a farmer’s field to homes and hearths halfway across Sri Lanka Cargills brings ideas together to help satisfy our nation’s needs. To get there, we collaborate with customers to create better products and services, streamline supply chains, save energy, reduce costs and move goods to every corner of Sri Lanka. We help farmers get higher yields from fewer acres, and store crops so they have greater flexibility in marketing their harvest. We give back to the communities where we do business through continuous efforts to improve nutrition, health and education, and protect natural resources. Every day, Cargills nourishes people and ideas-in both expected and unexpected ways.

Our sustainability strategy is to make social responsibility an integral part of everything we do. It is a Company-wide commitment that channels our expertise and knowledge to create sustainable value for every direct and indirect stakeholder we touch.

02 Responsible to our People

Treating our team with dignity and respect and striving to create a safe work environment.

At the heart of the Cargills culture is the desire to embrace our differences and make connections across business units, at every location in every district across the island - so that each employee can reach their full potential.

Our multi-cultural work environment is warm and equitable ensuring that each member of our team is valued for their

capabilities and respected for who they are. We strive to create a happy and focused work atmosphere that celebrates the team and encourages innovation.

Our goal is to provide a workplace where all employees can thrive and grow - A workplace where employees feel included, safe and are given the opportunities to make valuable contributions to Cargills and thereby partner the progress of Sri Lanka.

2.1 Nurturing an exceptional team

We are committed to attracting, developing, and retaining a group of talented Team Members and to creating a workplace that allows each Team Member to contribute to the collective success of our Company. Our programs and initiatives related to employment practices, compensation and benefits, talent management, diversity and inclusion, and Team Member relations are important to fulfilling this commitment, especially in today’s challenging economic climate. To be an inspiration to our Team Members about their work, their contributions, and their company is our pledge.

2.1.1 Our Team Members

Cargills employs 6,790 employees as at 31 March 2011. We are committed to providing a good working environment and to retaining our Team Members through competitive wages, fair treatment, training, benefits, and safe working conditions. We recognize that the nature of our industry and the changing external environment means that retention of our team is foremost challenge. This is a challenge that we seek to address by providing inspiration and motivation to our Team Members about their work, their contributions, and their company’s role in partnering the development of Sri Lanka and its people.

Sustainability report

Total No. of Employees as at 31 March 2011 6,790 Executive cadre 1,186

Non- Executive cadre 5,604

Permanent cadre 6,613

Contract Staff 177

Male 3,884

Female 2,906

Non-Executive

Executive

Executive 17%

Non Executive 83%

Contract

Permanent Male

Female


Sustainability report contd...

2.2 Health and Safety of Our Team

2.2.1 Management System Approach

All Cargills manufacturing facilities have implemented Environmental, Health, and Safety Management Systems in line with statutory and ISO requirements. The health and safety aspect of this system fulfills the requirements set forth in international occupational health and safety management system specifications. As such, each facility has developed and

implemented procedures and controls regarding health and safety

2.3 Training & Development

AAPI provides training and development opportunities for youth from rural Sri Lanka as a non profit initiative. AAPI collaborates with civil society partners to identify and train young men and women who lack the necessary skills-sets to gain employment in the private sector. Many go on to be a part of Team Cargills.

ALBERT A. PAGE INSTITUTE OF FOOD BUSINESS

The Albert A. Page Institute (AAPI) of Food Business was established in 2006 in response to the needs of young Sri Lankans from rural areas. As Cargills expanded its presence in regional Sri Lanka it understood the true potential of rural youth who were either under-employed or unemployed due to the lack of professional skills. On the other hand the value derived to our economy from unskilled labor employed overseas is significant. Unskilled migrant labor sourced largely from rural Sri Lanka draws the highest foreign exchange earnings to the country. This further encouraged Cargills to work towards the capacity-building of rural youth.

AAPI has developed series of certificate and diploma programmes aimed at creating opportunity for career advancement in the food and manufacturing sector. The Certificate programs develop the various basic skills required to become an effective and efficient executives. The courses are designed to cater to all sectors of Food Marketing encompassing Operations, Manufacturing, Support Services, Sales and Distribution and Central Warehouse, Agri – Business. The advanced certificate courses for Managerial Skills Development have been designed considering all the aspects of Organizational needs of Technical, Human and Conceptual skills which are crucial elements of becoming an effective and efficient Executive aligned with today’s competitive and dynamic business environment. Once students acquire the Advanced Certificate they have the option of enhancing the certification to a Diploma. Currently Cargills is exploring the possibility of offering the Diploma’s in affiliation with Sri Lanka’s premier post-graduate education college.

Accelerated Skills Acquisition Programme (ASAP)

ASAP is a programme which has been developed by the USAID is endorsed by the Ceylon Chamber of Commerce as study material that is suitable for potential employees in the private sector. The programme which is focused on attitude development consists of five-day, 10-day and 20-day study programmes on IT, English proficiency, career guidance and entrepreneurial skills. The objective of the programme is to endow recipients with the essential skills required for competitive employment.

AAPI has been certified as a trainer of the ASAP programme and is currently carrying out training for identified target groups in collaboration with non-profit partners such as the Gemi Diriya project funded by the World Bank.

Independent Grocers Alliance Online Training

The IGA Institute is a non-profit educational foundation developed by IGA (Independent Grocers Alliance), to provide on-line training materials, web based job certification courses, class room training to support the career development needs of its retail food associated around the globe. The IGA Institute functions as the Alliance’s Learning & development department by bringing competitive skills to independent retailers world wide. AAPI is currently registered with the IGA Institute and is able to offer these courses online for students. Cargills utilizes these online learning opportunity to empower youth in rural areas using ICT as a tool for development.

3. Responsible to our Planet

Fulfilling our purpose of nourishing people requires clean water, soil and air. As a food Company, we are focused on a sustainable future that reduces demands on the environment as populations continue to grow.

Green Business

The primary objectives that drive the Cargills Green Business

is to reduce, re-use and recycle energy, plastics, water and all other natural resources that we use in our day to day business practice.

Through the ‘Green Business’ programme Cargills is committed to minimizing its environmental impacts throughout our entire supply chain, from the farm to the trolley. Cargills is also committed to a role of environmental leadership in all facets of our business.


SBU Energy Saving measures and renewable energy use

SBU Initiatives taken

Initiatives eligible for Carbon Credit

Energy Saving measures and renewable energy use


- Best use of treated effluent water to create humus matter in the rocky barren land. Its enrichment has enabled the utilization of the land to produce agriculture crops (papaya, pineapple, passion fruit, forest trees).

- Used polythene/ cardboard recycled.- Separate the fat from ETP and used in biogas plant; Ammonia is used as a refrigerant.- Coconut cultivation and in-house garden.

- Rainwater harvesting.- Pork Fat used in ‘Pig Power’ project to operate incinerator as substitute for diesel in delivery vehicles.

Part of the pork fat is to be used for conversion to Bio diesel.- Bones disposed for fertilizer manufacture reduces incineration load.- In house garden- enrichment of garden excellent landscaping and use of spare/surplus land for

improving the quality of rocky land generating agriculture products.

- Wormiculture/ hormone digestion project - Worms/ hormones are being tested to hasten the decomposition process of elements that are slow to decompose.

- Coconut cultivation in previously barren land.- In house garden project.

- Cargills has sealed a Memorandum of Understanding with the University of Moratuwa to operate a Food Process Development Incubator which carries out scientific research especially towards making Cargills a leaner and greener operation. As part of the project the University of Moratuwa has provided Cargills the technology to convert used oil discarded as waste by KFC into bio-diesel. This bio-diesel is now used to run a diesel three-wheeler for KFC logistical support services.

- It is notable that in an economic sense KFC incurs a significant cost to convert oil into bio diesel however in line with the corporate strategy of creating sustainable value for the community KFC has opted to take the economically expenses yet environmentally and socially responsible route.

Cargills Quality Dairies

Cargills Quality Foods

Cargills Agrifoods

Cargills Food Processors

Cargills Quality Dairies

Cargills Quality Foods

Cargills Agrifoods

- Phased out and controlled operation of the compressors in refrigeration plant.- Energy saving CFL bulbs and controlled use of all machinery, air-conditioning and lightings.- Computers kept on standby mode.- Insulation of boiler and all steam pipe lines.- Minimizing steam leakages.- Maintenance of condensate recovery pumps in working order.- Solar heaters for hot water generation.

- Solar heaters for hot water generation.- Hot water generated from incinerators.- Capacitor Bank to reduce the maximum demand.- Energy saving blasters for fluorescent lights.- Control of air condition temperature according to atmospheric conditions.- Training of staff on energy savings, especially in cold rooms and smoke chamber operations.- Automated switching system for outdoor lights.

- Capacitor Bank to reduce the maximum demand.- Production plan scheduled to reduce the maximum demand.- Oversized motors replaced by smaller sized motors according to application.- Routine monitoring and cleaning of air filters in ventilation fans.- Cooling water re-cycling.- Solar heaters.



4. Responsible to our Customers

Fostering a Companywide culture that drives continuous

improvement towards the safety and wellbeing of our Customers.

As the leader in Retail and Consumer Goods in Sri Lanka our

goal is to ensure that our customers enjoy the best possible

products and services at the best possible price with minimum

implications on the wellbeing of all our stakeholders. Cargills

uses it widespread retail and mass market distribution

operation to provide essential commodities to consumers at

a consistently affordable price. Cargills applies effort at every

step in the process from where food is produced through

where it is purchased to ensure we provide the safest and

most high quality products and services to our customers.

Our food processing plants are equipped with comprehensive

ISO and SLS certification to ensure that our superior taste is

complemented by superior safety and quality.

4.1 Managing Food Safety and Quality

Cargills approach to food safety and quality is comprehensive,

preventive, and proactive. We implement controls and

measures at every level to make sure our products are second-

to-none in food safety and quality. We assess our products

for improvement during product research and development,

manufacturing and production, marketing and promotion,

storage and distribution, and use. We believe this approach

helps guarantee the safety and quality of our products from the

farm all the way to the point of purchase.

4.1.1 At the Farm

Cargills is engaged in every aspect of its supply chain to ensure

only the best products of highest nutrition and quality reach

our retail outlets and manufacturing units. Our advanced

post harvest technologies ensure that all fresh produce reach

customers at optimum levels of freshness with minimal

wastage. The waste within our supply chain is as little as 3-4%

while national post harvest losses are as much as 40%. This

helps Cargills give customers the best choice in quality and

nutrition and affordability.

4.1.2 Systematic Management Approach

In addition to governmental regulatory requirements, we have

developed our own highly integrated policies, procedures,

controls, and good manufacturing practices designed to ensure

the safety and quality of our food products. Our system often

extends beyond regulatory requirements to address such

issues as facility sanitation, team member training, personal

hygiene, product handling, food protection, foreign material

prevention, product quality, storage, and transportation. All

our manufacturing plants are accredited with ISO 9001:2000

for Quality Management, ISO 14001:2004 for Environment

Management and ISO 22000: 2005 for Food Safety Management

as well as SLS standards.

4.2 Research, Development and Innovation

Cargills is dedicated to developing a best-in-class, value-added

product portfolio that meets the needs of today’s changing

market. By applying in-depth understanding of consumer

and customer needs, analytical skills, and strategic thinking,

we are positioned at the forefront of product innovation.

We will continue to demonstrate our commitment to research

and development by creating new and relevant food solutions

for years to come.

4.2.1 Food Process Development Incubator

Sri Lanka is clearly in need of a new national approach to

research and development. This new approach must bring

together the country’s best minds, working in the best facilities,

and focused on the challenges and opportunities that lie ahead

for Sri Lanka’s Food and Agribusiness sector working in

partnership with industry. It is in the hope of filling this void

that the Food Process Development Incubator was established

by Cargills together with the University of Moratuwa. This

institution will endeavor to develop a more competitive

innovation led Food and Agriculture sector which creates

value for consumers, farmers and the industry in manner that

is sustainable to the community and the environment.

The incubator conducts R & D in the following areas:

To enhance human health and wellness through food,

nutrition and innovative products.

To enhance the quality of food and the safety of the

food system.

To enhance security and protection of the food supply

by improving scientific capacity and knowledge to

detect, monitor and control various food production

and distribution systems.

To seek opportunities to enhance the profitability and

competitiveness of farmers, the Agri-food system, rural

communities, and local industry.

To enhance the environmental performance of the Food

and Agriculture industry.


4.3 Promoting National Nutrition and Wellness

As Sri Lanka’s largest food retailing and manufacturing

business house Cargills is conscious of its role in facilitating

affordable nutrition for all Sri Lankans. While our research

and development initiatives help us develop more nutritious

products our sustainable supply chain ensures these products

reach every part of Sri Lanka safely and at an affordable price.

Our direct links with farming communities and entrepreneurs

provide us the strength to bring essential commodities to

consumers minus the intermediary costs. This is why our

products at our retail outlets and from our manufacturing

facilities are of better quality and are easier to afford.

5. Responsible to our Partners

Working directly with our partners to overcome challenges, providing

knowledge and resources to help them succeed.

Our focus on rural development involves our direct

investment in and engagement with the agriculture sector. Our

investments have improved livelihoods for rural Sri Lankans

in economically meaningful, environmentally sustainable and

socially responsible ways. Today we are a global role model in

corporate driven rural development. Each year, Cargills works

directly with thousands of farmers and small scale entrepreneurs

to help increase their productivity, thereby helping to raise

their standard of living and increase our access to quality raw

materials.

5.1 Sustainable Agribusiness

Promoting and practicing sustainable agribusiness is an

important part of our commitment to conduct business with

integrity and responsibility, treat people with dignity and

respect, and help protect and conserve the environment. We

work with business partners, governments, nongovernmental

organizations and communities to foster sustainable economic

development and promote responsible practices throughout

our agribusiness supply chains. Together, our activities are

improving agricultural and labor practices, as well as helping to

conserve the environment.

5.1.1 Farmer Training and Development

Our team works directly with farmers to overcome challenges,

providing knowledge and resources to help farmers succeed.

Across Sri Lanka thousands of farmers have participated in

Cargills productivity and product quality enhancing programs.

We have committed to expanding this program to a larger

farmer base island wide to help improve efficiencies and

increase incomes.

Agribusiness Projects - Activities during the Year 2010/11

1. Project : Nutritious Snacks/Food Manufacturing

Project’

Location : Dehiattakandiya

Partners : USAID/CORE.

Objective : To raise productivity, profitability and

stability farmers engaged in minor

highland crops by strengthening input

support, knowledge and know-how base

of farmers and establishing strong buyback

arrangements.

Project Cost : SLR. 35 Million

No. of farmers : 500 farmers (stage 1)

2. Project : Northern Horticultural Alliance (NHA)

Project

Locations : Jaffna & Killinochchi

Partner : USAID

Objective : Sustainable Livelihoods through Processing

and Value addition.

Aim to resuscitate economic and

employment security of fruit and vegetable

farmers of Northern Province by improving

cultivation and infusing value adding

processes

Project Cost : SLR. 135 Million

3. Project : Vegetable Processing Unit for Boralanda

Location : Boralanda

Partner : IFAD

Objective : Vegetable Collection Center

A new vegetable collection center established

at Boralanda. Land for building has been

allotted by the Divisional Secretariat

Walimada.

Project Cost : SLR. 3.5 Million

No. of farmers : 300 farmers (Stage 1)

4. Project : Passion Fruit Cultivation

Locations : Monaragala & Galgamuwa

Partner : IFAD

Objective : Provide passion fruit seeds/seedlings,

technical support in terms of professional

guidance to farmers on scientific methods

of cultivation and management of passion

fruit crop.




Expected Annual

Crop yield : To surpass 1250 MT and cater to both local

market and international markets

No. of farmers : 250 farmers from Monaragala & Uva

Provinces

5. Project : Cashew Processing Project

Location : Anamaduwa

Partners : Green Vision / World Vision

Objective : To revive the livelihoods of cashew

cultivators in the area who are facing sever

economic hardships due to inability to face

increasing competition

Workforce : 200 strong workforce (mostly women).

Would have over arching impact on the life

and living of rural poor in the region

6. Project : Seed Testing Project

Locations : Island wide

Partner : Department of Agriculture

Objective : In order to improve productivity and

profitability of vegetable cultivation good

quality high yielding seed is the most

crucial intervention. As per the statutory

requirements, systematic testing of the

imported seed would be conducted either

at the farm of the Horticulture Research and

Development Institute (HORDI) or in the

farmers’ fields.

7. Project : Yal Utpaththi

Location : Jaffna Peninsula

Partners : Central Bank of Sri Lanka & Bank of

Ceylon

Objective : Cargills and the Central of Bank of Sri

Lanka have launched a joint programme to

create markets for farmers from the Jaffna

peninsula who specialize in Palmyrah based

products. This follows the Central Bank’s

Poverty Alleviation Microfinance Project

funded by the Bank of Ceylon. Under the

project farmers received micro-credit as

means of reinvigorating the traditional

livelihoods. Cargills came forward to

provide a market for products made by the

beneficiary farmers.

5.2 Investing in regional economies

At Cargills a relationship we establish with farmers is a bond

we have with the fields they sow, the families they nurture, the

communities they live in and the schools where their children

learn. Cargills has therefore initiated farmer community

development funds where 50 cents is given back to the village

against each kilogram of vegetables purchased from our

farmers. This fund is used to provide scholarships for needy

children from the community, to provide resources for learning

and advancement, to meet basic community infrastructure

needs such as utility connections, community centres, libraries

etc. Our focus is to engage the communities that work with us

to charter their own course of development.

6. Responsible to Our Community

Our continued success depends on the growth and health of the

communities we work with.

One Trust Sri Lanka

One Trust came into being from the very heart of Cargills out

of compassion and empathy for our fellow Sri Lankans whose

lives were devastated in the Boxing Day Tsunami of 2004.

One Trust targeted the children who survived the mental and

physical trauma of the Tsunami disaster and helped rebuild

identified schools from Southern and Eastern coastal areas.

Today One Trust has expanded its vision to heal the spirits and

hearts of children affected by war and restore their ability to

hope and dream.

One Trust in Vavuniya

The project is being supported by the Department of Probation

and Child Care Services which is coordinating the process

of identifying beneficiaries’ currently in institutional care or

in the care of immediate family. The Department would also

facilitate the process of channeling funds to the identified

children in supporting and monitoring their educational needs.

This is done as a bi-annual event, where Cargills sponsor their

educational needs through the One Trust Fund. These includes,

school text books, Uniforms, stationery items, cupboards,

mosquito nets, bedding, medicines, vaccines and other needs

identified at the time of distribution. These identified children

are given an opportunity to re-build their lives by re-opening

doors for education through ongoing school based projects.

An Inspired Swan Lake & Nut Cracker by Center Stage

Production

The One Trust partnership with Center-stage production is


Description of Principle

7. Cargills compliance with global sustainability benchmarks

ComplianceUNGC Principles

Human Rights

Principle 1

Principle 2

Labor

Principle 3

Principle 4

Principle 5

Principle 6

Environment

Principle 7

Principle 8

Principle 9

Anti-Corruption

Principle 10

Businesses should support and respect the protection of internationally proclaimed human rights.

Make sure that they are not complicit in human rights abuses.

Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.

The elimination of all forms of forced and compulsory labor.

The effective abolition of child labor.

Elimination of discrimination in respect of employment and occupation.

Businesses should support a precautionary approach to environmental challenges.

Undertake initiatives to promote greater environmental responsibility.

Encourage the development and diffusion of environmentally friendly technologies.

Businesses should work against corruption in all its forms, including extortion and bribery.

Comply

Comply

Comply

Comply

Comply

Comply

Comply

Comply

Comply

Comply

especially noteworthy where “An Inspired Swan Lake” and

most recently ‘Nutcracker’ directed and choreographed by

Jehan Aloysius brought together the cause of One Trust with

the complementary and commendable efforts of ‘Center-Stage

Productions. The participants of these production consisted

of an inspiring physically-challenged cast of soldiers from

Ranaviru Sevana who were injured in the line of duty and

hearing impaired performers from the Sunera Foundation. One

Trust will undoubtedly sponsor such events in the future as

means of promoting theater and art as a form of expression for

those who are facing different forms of challenges. This would

in turn inspire many others to transcend beyond their own

challenges to re-discover their inner strength.

One Trust in our Community

One Trust partners Cargills Agribusiness efforts to uplift the

communities it works with across Sri Lanka. Accordingly One

Trust complements the efforts of community development

initiated by Cargills by providing scholarships for higher

education as well as educational material including laptops for

tertiary level students.

One Trust in association with Deutsche Bank Colombo organized

a one day programme that involved an educational tour of

Colombo for 50 children in the Cargills farming community,

many of whom who have never visited the commercial capital.

This program was initiated with a broader aim to include

children from communities that Cargills works with in the

‘Children of Change’ initiative carried out by Deutsche Bank, to

igniting a spark, to embrace change, in the hearts of Sri Lankan

children in this new environment of peace.




Financial information

Annual Report of the Directors on the affairs of the Company ............. ..........................................................................................................................

29 - 31

Statement of Directors’ responsibilities..........................................................................................................................

32

Independent Auditors’ report..........................................................................................................................

33

Income statements..........................................................................................................................

34

Balance sheets..........................................................................................................................

35

Statements of changes in equity..........................................................................................................................

36

Cash flow statements..........................................................................................................................

37

Notes to the financial statements ..........................................................................................................................

38 - 66


Annual Report of the Directors on the affairs of the Company

The Directors are pleased to submit the Annual Report together with the audited financial statements of Cargills (Ceylon) PLC and consolidated audited financial statements of the Group for the year ended 31 March 2011.

Review of the yearThe chairman’s statement describes in brief the Group’s affairs, performance and important events of the year.

ActivitiesManufacturing of and trading in Food and Beverage and Distribution are the principal activities.The Group:a) Operates a chain of supermarkets, convenience stores and a hyper market.b) Distributes world renowned brands of beverages and other FMCG products.c) Manufactures / produces / processes and markets processed meats, dairy ice creams, milk, jams, cordials, sauces, biscuits and

beverages.d) Operates the ‘Kentucky Fried Chicken’ franchise restaurants in Sri Lanka, by processing of agricultural produce.e) Operates a Hotel in hill - country.f) Operates a chain of photo processing outlets.

Financial statementsThe audited financial statements include the income statements, balance sheets, statements of changes in equity and notes to the financial statements of the Company and the Group for the financial year ended 31 March 2011 are given on page 34 to 66 form an integral part of the Annual Report of the Board.

Auditors’ reportThe auditors’ report is set out on page 33.

Accounting policiesThe accounting policies adopted in the preparation of the financial statements are given on the pages 38 to 43. There were no signifi-cant changes to the accounting policies of the Group during the year.

Results and dividends Group Company

For the year ended 31 March 2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Profit for the year after taxation amounted to 1,094,173 712,392 555,285 315,443After deducting the amount attributable to minority interest of 5,623 - - -The profit attributable to shareholders was 1,088,550 712,392 555,285 315,443To which profit brought forward from previous year is added 1,522,745 989,553 407,152 270,909Transfer to General reserve 100,000 - 100,000 -Leaving an amount available to the Companyfor appropriation of 2,511,295 1,701,945 862,437 586,352From which your Directors have made appropriationsas follows :Dividend paid for the year ended 31 March 2010Interim 20 Cents per share - 44,800 - 44,800Final 30 Cents per share - 67,200 - 67,200Interim 30 Cents per share - 67,200 - 67,200Dividend paid for the year ended 31 March 2011Final 80 Cents per share 179,200 - 179,200 - Interim 50 Cents per share 112,000 - 112,000 -Leaving an unappropriated balance to be carried forward of 2,220,095 1,522,745 571,237 407,152 2,511,295 1,701,945 862,437 586,352

An interim dividend of 50 Cents per share (Rs. 112,000,000) was paid on 7 February 2011 for the year ended 31 March 2011. A final dividend of Rs. 1 per share (Rs. 224,000,000) is proposed for the year ended 31 March 2011. These will be reflected in the subsequent year’s financial statements. (refer note 11 to the financial statements on page 47).

ReservesAfter the above mentioned appropriations, the total reserves of the Group stands at Rs. 6,829 Mn (2010 - Rs. 6,010 Mn), while the total reserves of the Company stand at Rs. 4,675 Mn (2010 - Rs. 4,391 Mn).

Stated capitalStated capital of the Company as at 31 March 2011 was Rs. 131 Mn. The details of the stated capital is given in note 21 to the financial statements on page 55.


Annual Report of the Directors on the affairs of the Company contd...

Capital expenditureThe Group’s capital outlay on property, plant and equipment amounted to Rs. 1,408.9 Mn (2010 - 602.7 Mn) while the capital outlay of the Company on property, plant and equipment amounted to Rs. 877.2 Mn (2010 - Rs. 458.4 Mn). Details are given in note 12 to the financial statements on pages 48 and 49.

The movement of property, plant and equipment during the year is given in note 12 to the financial statements on pages 48 and 49.

Market value of propertiesThe Group land and buildings were revalued as at 31 March 2010. Details are given in note 12 to the financial statements on pages 48 and 49.The portfolio of the revalued land and buildings are given on page 69 to the financial statements.

ShareholdingsThe Company is a subsidiary of C T Holdings PLC and there were 2,243 of registered share holders as at 31 March 2011 (2010 - 1,922).An analysis of shareholdings according to the size of holding and the names of the 20 largest shareholders is given on pages 70 and 71.

DirectorateThe Directors listed on the inner back cover have been Directors of the Company throughout the year under review except for Mr. M I Abdul wahid who was appointed on 21 May 2010.

Messrs A T P Edirisinghe, E A D Perera and S E C Gardiner retire by rotation in terms of the Company’s Articles of Association and being eligible offer themselves for re - election.

Mrs. S R Thambiayah tendered her resignation on 21 May 2010 in keeping with the newly established Company policy with regard to Directors over 70 years of age which reads thus:

“Group Policy on Retirement Age of DirectorsA Director to retire on reaching the age of 70 years provided such Director has completed five years as a Director of such Company. Such Director may continue up to the said 5 years at his/her request unless the Company decides otherwise.”

With the resignation of Mrs. S R Thambiayah Mr. M I Abdul Wahid was appointed to the Board in the capacity of Managing Director & Deputy CEO on 21 May 2010.

Consequent to the appointment of Mr. M I Abdul Wahid as Managing Director, Mr. V R Page’s designation was changed from ‘Deputy Chairman and Managing Director’ to ‘Deputy Chairman and CEO’.

Mr. Jayantha Dhanapala (72) is due to retire in terms of Section 210 (2) (b) of the Companies Act No. 7 of 2007, and offers himself for re-election in terms of Section 211 (1) and (2) of the Companies Act No. 7 of 2007.

The newly established Company policy with regard to Directors over 70 years of age does not apply to Mr. Jayantha Dhanapala as he has not completed 5 years as a Director of the Company being first appointed a Director on 1 June 2008. The re - election of the retiring Directors has the unanimous support of the other Directors.

Directors’ remunerationThe remuneration of the directors is given in note 35 on page 63 to the consolidated financial statements.

Directors’ interests in contractsDirectors’ interest in transactions of the Company are disclosed in note 35 to the financial statements and have been declared at meetings of the directors. The directors have had no direct or indirect interest in any other contracts in relation to the business of the Company.

Interest registerThe Company maintains an Interest Register conforming to the Provisions of the Companies Act No. 7 of 2007.

Directors’ shareholdingThe Directors’ shareholdings in the Company were as follows:


Annual Report of the Directors on the affairs of the Company contd...

DonationsDuring the year Rs. 8,765 (2010 - Rs. 71,696) had been made by the Company.

AuditorsMessrs KPMG Ford, Rhodes, Thornton & Co. are deemed reappointed as Auditors at the Annual General Meeting of the Company in terms of Section 158 of the Companies Act No. 7 of 2007. The Directors have been authorised to determine the remuneration of the Auditors and the fee paid to auditors are disclosed in note 7 to the financial statements. As far as the Directors are aware, the auditors do not have any relationship (other than that of an auditor) with the Company or any of its Subsidiaries other than those disclosed in the above note.

Post balance sheet eventsPost balance sheet events of the Company are given in note 34 to the financial statements on page 63.

Statutory paymentsAll statutory payments due to the Government of Sri Lanka and on behalf of employees have been made or accrued for the balance sheet date.

Future developmentsThe chairman’s statement describes the future developments of the Group.

Environmental protectionAfter making adequate enquiries from the management, the Directors are satisfied that the Company and its subsidiaries operate in a manner that minimizes the detrimental effect on the environment and provide products and services that have a beneficial effect on the customers and the communities within which the Group operates.

Going concernThe directors have adopted the Going concern basis in preparing these financial statements. After making enquiries from the man-agement, the Directors are satisfied that the Group has adequate resources to continue its operations in the foreseeable future.

For and on behalf of the Board

Signed M I Abdul Wahid (Managing Director / Deputy CEO)Signed P S Mathavan (Executive Director / CFO)

Signed S L W Dissanayake (Company Secretary)

17 August 2011

As at As at

31 March 2011 31 March 2010

Mr. L R Page 36,760 36,760

Mr. V R Page 14,380,200 14,285,000

Mr. M I Abdul Wahid (w.e.f. 21 May 2010) 4,000 -

Mr. S V Kodikara 124,000 124,000

Mr. P S Mathavan 500 20,000

Mr. Jayantha Dhanapala - -

Mr. A T P Edirisinghe 50,000 50,000

Mr. S E C Gardiner 20,000 20,000

Mr. Sunil Mendis 20,000 20,000

Mr. Anthony A Page 5,050,000 4,838,500

Mr. J C Page 1,705,500 1,705,500

Mr. E A D Perera 10,000 20,000

Mrs. S R Thambiayah (resigned w.e.f. 21 May 2010) - 40,000


Statement of Directors’ responsibilities

The Companies Act No. 7 of 2007 places the responsibility on the Directors to prepare and present financial statements for each year comprising a balance sheet as at year end date and statements of income, cash flows and changes in equity for the year together with the accounting policies and explanatory notes. The responsibility of the auditors with regard to these financial statements, which differ from that of the Directors, isset out in the Auditors’ report (page 33).

Considering the present financial position of the Company and the forecasts for the next year, the Directors have adopted the going concern basis for the preparation of these financial statements.

The Directors confirm that the financial statements have been prepared and presented in accordance with the Sri Lanka Accounting Standards, which have been consistently applied and supported, by reasonable and prudent judgments and estimates.

The Directors are responsible for ensuring that the Company maintains adequate accounting records to be able to disclose with reasonable accuracy, the financial position of the Company

and the Group and for ensuring that the financial statements are prepared and presented in accordance with the Sri Lanka Accounting Standards and provide the information required by the Companies Act.

The Directors are responsible for the proper management of the resources of the Company. The internal control system has been designed and implemented to obtain reasonable but not absolute assurance that the Company is protected from undue risks, frauds and other irregularities. The Directors are satisfied that the control procedures operated effectively during the year.

The Directors, to the best of their knowledge and belief, are satisfied that all statutory payments have been made up to date or have been provided for in these financial statements.

By order of the Board

S L W DissanayakeCompany Secretary

17 August 2011


Independent Auditors’ report

KPMG Ford, Rhodes, Thornton & Co Tel : +94 - 11 242 6426(Chartered Accountants) +94 - 11 542 642632A, Sir Mohamed Macan Markar Mawatha Fax : +94 - 11 244 5872P. O. Box 186, +94 - 11 244 6058Colombo 00300 +94 - 11 254 1249Sri Lanka +94 - 11 230 7345 Internet : www.lk.kpmg.com

TO THE SHAREHOLDERS OF CARGILLS (CEYLON) PLC

Report on the Financial Statements

We have audited the accompanying financial statements of Cargills (Ceylon) PLC (the “Company”), the consolidated financial statements of the Company and its subsidiaries as at 31 March 2011 which comprise the balance sheet as at 31 March 2011, 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 as set out on pages 34 to 66 of this Annual Report.

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 Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 March 2011 and the financial statements give a true and fair view of the Company’s state of affairs as at 31 March 2011 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs as at 31 March 2011 and the profit and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards, of the Company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Company.

Report on Other Legal and Regulatory Requirements

These financial statements also comply with the requirements of Sections 153 (2) to 153 (7) as appropriate of the Companies Act No. 7 of 2007.

SignedKPMG Ford, Rhodes, Thornton & Co.

Chartered AccountantsColombo

17 August 2011


Income statements

Revenue 3 37,128,661 30,874,797 29,669,660 17,328,142

Cost of sales 4 (33,646,234) (28,234,424) (28,210,024) (16,732,614)

Gross profit 3,482,427 2,640,373 1,459,636 595,528

Other income 5 582,450 510,453 633,048 634,121

Distribution costs (635,971) (506,121) (176,045) (110,907)

Administrative expenses (1,412,112) (1,072,180) (806,978) (437,074)

Other expenses (191,352) (142,980) (59,306) (38,947)

Operating profit 1,825,442 1,429,545 1,050,355 642,721

Finance costs 6 (363,946) (428,819) (294,248) (297,234)

Share of loss of equity accounted investee 14.4 (54,793) - - -

Profit before taxation 7 1,406,703 1,000,726 756,107 345,487

Income tax expense 8 (312,530) (288,334) (200,822) (30,044)

Net profit for the year 1,094,173 712,392 555,285 315,443

Attributable to :

Equity shareholders of the parent 1,088,550 712,392 555,285 315,443

Minority interest 5,623 - - -

1,094,173 712,392 555,285 315,443

Earnings per share (Rs.) 10 4.86 3.18 2.48 1.41

Dividend per share (Rs.) 11 1.50 1.10 1.50 1.10

Dividend paid per share (Rs.) 1.30 0.80 1.30 0.80

The accounting policies and notes from pages 38 to 66 form an integral part of these financial statements.

Group Company

For the year ended 31 March 2011 2010 2011 2010 Notes Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000


ASSETSNon - current assetsProperty, plant and equipment 12 11,104,597 8,691,716 7,471,198 6,515,762Intangible assets 13 1,054,384 291,923 - -Investments in subsidiaries 14.1 - - 1,668,553 1,668,453Investment in associate 14.2 161,282 216,075 216,075 216,075Advance paid for acquisition of assets 15 1,205,425 - - -Prepayment on leasehold land and building 16 28,875 29,750 - -Deferred tax assets 17 14,315 21,777 - - 13,568,878 9,251,241 9,355,826 8,400,290Current assetsInventories 18 3,576,322 3,059,389 2,707,913 1,823,335Trade and other receivables 19 1,584,089 1,119,749 699,823 474,571Amount due from related companies 20 197,079 252,941 2,800,698 268,757Short term investments 14.3 75,587 3,759 46,965 3,672Cash and cash equivalents 23 303,645 261,763 246,161 160,051 5,736,722 4,697,601 6,501,560 2,730,386Total assets 19,305,600 13,948,842 15,857,386 11,130,676

EQUITYStated capital 21 130,723 130,723 130,723 130,723Reserves 22 4,608,892 4,487,687 4,103,606 3,983,518Retained earnings 2,220,095 1,522,745 571,237 407,152Total equity attributable to equity holders of the company 6,959,710 6,141,155 4,805,566 4,521,393Minority interest 89,723 - - -Total Equity 7,049,433 6,141,155 4,805,566 4,521,393

LIABILITIESNon - current liabilitiesBorrowings 24 384,167 198,499 - -Deferred tax liability 25 328,458 360,352 287,662 324,195Capital grant 26 2,389 - - -Retirement benefit obligations 27 192,761 163,360 164,553 150,270 907,775 722,211 452,215 474,465

Current liabilitiesTrade and other payables 28 4,817,170 4,086,484 3,843,632 3,433,827Current tax liability 277,501 181,175 229,719 57,983Amount due to related companies 20 1,636 4,166 1,035,803 349,704Dividend payable 29 17,610 14,080 17,609 14,080Borrowings 24 6,234,475 2,799,571 5,472,842 2,279,224 11,348,392 7,085,476 10,599,605 6,134,818Total liabilities 12,256,167 7,807,687 11,051,820 6,609,283Total equity and liabilities 19,305,600 13,948,842 15,857,386 11,130,676

I certify that these financial statements have been prepared in accordance with the requirements of the Companies Act No. 7 of 2007.

Signed K D N S Perera (General Manager - Finance)

The Board of Directors is responsible for the preparation and presentation of these financial statements.

The accounting policies and notes from page 38 to 66 form an integral part of these financial statements.

These financial statements have been approved by the Board on 17 August 2011.

Signed for and on behalf of the Board

Signed M I Abdul Wahid (Managing Director / Deputy CEO)

Signed P S Mathavan (Executive Director / CFO)

Colombo

Balance sheets

Group Company

As at 31 March 2011 2010 2011 2010 Notes Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000


Statements of changes in equity

Attributable to equity holders of Parent Stated Capital Revaluation General Retained Total Minority Total capital reserve reserve reserve earnings interest Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Group

Balance as at 1 April 2009 130,723 7,928 619,000 385,500 989,553 2,132,704 - 2,132,704

Revaluation - - 3,571,724 - - 3,571,724 - 3,571,724

Net profit for the year - - - - 712,392 712,392 - 712,392

Deferred tax on revaluation - - (96,465) - - (96,465) - (96,465)

Dividends - - - - (179,200) (179,200) - (179,200)

Balance as at 31 March 2010 130,723 7,928 4,094,259 385,500 1,522,745 6,141,155 - 6,141,155

Balance as at 1 April 2010 130,723 7,928 4,094,259 385,500 1,522,745 6,141,155 - 6,141,155

Acquisition of subsidiaries - - - - - - 84,100 84,100

Net profit for the year - - - - 1,088,550 1,088,550 5,623 1,094,173

Deferred tax on revaluation - - 21,205 - - 21,205 - 21,205

Transferred to General reserve - - - 100,000 (100,000) - - -

Dividends - - - - (291,200) (291,200) - (291,200)

Balance as at 31 March 2011 130,723 7,928 4,115,464 485,500 2,220,095 6,959,710 89,723 7,049,433

Stated Revaluation General Retained Total capital reserve reserve earnings Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Company

Balance as at 1 April 2009 130,723 619,000 385,500 270,909 1,406,132

Revaluation - 3,072,021 - - 3,072,021

Net profit for the year - - - 315,443 315,443

Deferred tax on revaluation - (93,003) - - (93,003)

Dividends - - - (179,200) (179,200)

Balance as at 31 March 2010 130,723 3,598,018 385,500 407,152 4,521,393

Balance as at 1 April 2010 130,723 3,598,018 385,500 407,152 4,521,393

Transferred to General reserve - - 100,000 (100,000) -

Net profit for the year - - - 555,285 555,285

Deferred tax on revaluation - 20,088 - - 20,088

Dividends - - - (291,200) (291,200)

Balance as at 31 March 2011 130,723 3,618,106 485,500 571,237 4,805,566



Cash flows from operating activitiesProfit before tax 1,406,703 1,000,726 756,107 345,487 Adjustments for: Depreciation 12 851,291 772,852 535,586 455,641 Retirement benefit obligations 27 28,454 79,693 24,753 75,816 Amortisation of intangible assets 13 7,785 7,478 - - Amortisation of prepayment on leasehold land & building 16 875 875 - - Loss / (profit) on sales of property, plant and equipment 5 151 (8,604) 113 (2,825) Impairment of property, plant and equipment 12 10,967 - - - Write-off of capital work in progress 814 - - - Amortisation of capital grant 26 (477) - - - Share of Associate results 14.4 54,793 - - - Profit from disposal of investments 5 (7,768) - (7,768) - Provision for inventories 11,355 6,276 - - Provision / (reversal) for doubtful debtors 9,186 (16,658) - (10,222) Provision / (reversal) for investments 1,844 (506) 1,877 (461) Finance cost 6 363,946 428,819 294,248 297,234 Dividend income 5 (8) - (48,603) (275,382)

Operating profit before working capital changes 2,739,911 2,270,951 1,556,313 885,288 Changes in working capital - (Increase) / decrease in inventories (417,291) (415,879) (884,578) (236,934) - (Increase) / decrease in trade and other receivables (214,243) 11,374 (164,244) 61,062 - (Increase) / decrease in related company receivables 115,368 20,976 (1,445,653) 3,842 - Increase / (decrease) in trade and other payables 464,888 168,963 409,805 57,149 - Increase / (decrease) in related company payables (14,431) (4,510) 686,099 408,082

Cash generated from operations 2,674,202 2,051,875 157,742 1,178,489Taxes paid (210,753) (240,624) (106,539) (68,836)Interest paid (363,946) (428,819) (294,248) (297,234)Gratuity paid 27 (11,228) (7,888) (10,470) (7,309)Net cash generated from / (used in) operating activities 2,088,275 1,374,544 (253,515) 805,110

Cash flows from investing activitiesAddition of property, plant and equipment (2,188,963) (835,266) (1,491,135) (539,690)Addition to intangible assets 13 (5,853) - - -Acquisition of subsidiaries 14.6 (1,380,668) - (1,037,785) -Advance paid for acquisition of assets 15 (1,205,425) - - -Short term investments (64,535) - (37,402) -Investment in associates - (216,075) - (216,075)Sales of property, plant and equipment 826 11,021 - 4,609Dividend received 5 8 - - -Net cash generated from / (used in) investing activities (4,844,610) (1,040,320) (2,566,322) (751,156)

Cash flows from financing activitiesNet proceeds from short term borrowings 1,920,315 717,062 2,039,980 634,980Repayments of long term borrowings 24 (143,776) (701,337) (49,999) (550,001)Dividend paid (287,671) (172,676) (287,671) (172,676)Net cash generated from / (used in) financing activities 1,488,868 (156,951) 1,702,310 (87,697) Increase / (decrease) in cash and cash equivalents (1,267,467) 177,273 (1,117,527) (33,743) Movement in cash and cash equivalents At the beginning of the year (806,429) (983,702) (819,194) (785,451)On acquisition of subsidiaries 14.6 (196,547) - - -Movement during the year (1,267,467) 177,273 (1,117,527) (33,743)At the end of the year 23 (2,270,443) (806,429) (1,936,721) (819,194)

Cash flow statements

Group Company

For the year ended 31 March 2011 2010 2011 2010 Notes Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000



1.1 Reporting entity

Cargills (Ceylon) PLC is a quoted public limited liability Company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at 40, York Street, Colombo 1.

The principal activities of the Group are operation of large supermarket chain, “Food City” in Sri Lanka, manufacture/ produce/ process and marketing of “ Cargills Magic” ice cream and dairy products, “Kist” fruit base products “Supremo” meat products, “Kotmale” dairy products, “Helan” biscuits and franchise holder to operate Kentucky Fried Chicken (KFC) restaurants in Sri Lanka, by processing agricultural produce. Further the subsidiary Millers Limited engages in Island wide distribution of fast moving consumer goods, operation of hotel in Bandarawela and operation of chain of photo processing outlets.

The Company, in the Financial Statements, refers to Cargills (Ceylon) PLC and Group refers to the Company and all its subsidiaries whose financial statements have been consolidated.

1.2 Basis of preparation

The financial statements are prepared in accordance with and comply with Sri Lanka Accounting Standards (SLAS) laid down by the Institute of Chartered Accountants of Sri Lanka and the requirements of Companies Act No. 7 of 2007. These financial statements have been prepared under the historical cost convention, as modified by the revaluation of free hold land and building.

The preparation of financial statements in conformity with SLASs requires the use of certain critical accounting estimates. It requires management to exercise their judgment in the process of applying the Company’s accounting policies. The areas where assumptions and estimate are significant to the consolidated financial statements are disclosed.

The directors have made an assessment of the Group’s ability to continue as a going concern in the foreseeable future, and they do not intend either to liquidate or cease operations.

1.3 Significant accounting policies

These accounting policies applied by the Group are, unless otherwise stated, consistent with those used in the previous year. Previous year figures and phrases have been re-arranged, wherever necessary, to conform to the current year’s presentation.

1.3.1 Basis of consolidation

The consolidated financial statements (referred to as the “Group”) comprise the financial statements of the Company and its subsidiaries and the Group’s interest in associate companies. Subsidiaries and associates consolidated are disclosed in note 14 to the financial statements.

1.3.1.1 Subsidiaries

Subsidiaries are all entities over which the Group 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 considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. 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 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. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Inter - company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

The subsidiary undertakings financial years are coterminous with that of the Company.

1.3.1.2 Minority interests

Minority interest is measured at the minorities’ share of the post acquisition fair values of the identifiable assets and liabilities of the acquired entity. Separate disclosure is made of minority interest.

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.

1.3.1.3 Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.

Notes to the financial statements


Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

Dilution gains and losses in associates are recognised in the income statement.

1.3.1.4 Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill acquired in a business combination is tested annually for impairment, or more frequently if events or changes in circumstance indicate that it might be impaired; and carried at costs less accumulated impairment losses. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash generating units or groups of cash generating units that are expected to benefit from the business combination in which the goodwill arose.

1.3.1.5 Reporting date

All the Group’s subsidiaries and associate company have a common financial year ends on the 31 March.

1.3.2 Transactions in foreign exchange

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial

statements are presented in Sri Lankan Rupees, which is the Company’s functional and presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement.

1.3.3 Assets and bases of their valuation

1.3.3.1 Property, plant and equipment

Recognition and measurement

The property, plant and equipment are measured at cost/fair value less accumulated depreciation and any accumulated impairment losses.

The cost of property, plant and equipment includes expenditures that are directly attributable to the acquisition of the asset. When a property, plant and equipment comprise components which has different useful life, they are accounted for as a separate items of property, plant and equipment.

Carrying amounts of property plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 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.

All the property, plant and equipment are initially recorded at cost. Where items of property, plant and equipment are subsequently revalued, any increases in the carrying amount are credited to revaluation reserve in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against the revaluation reserve directly in equity, any excess and all other decreases are charged to the income statement. Revaluation of property, plant and equipment are undertaken by professionally qualified independent valuers.

Subsequent cost

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Property, plant and equipment are derecognised upon replacement, disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of property plant and equipment is included in the income statement in the year it is derecognised. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.

Notes to the financial statements contd...


Depreciation

Provision for depreciation is calculated based on their estimated useful lives of each part of an item of property, plant and equipment other than land. Depreciation is calculated using straight line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives.

The estimated useful lives are as follows

Freehold buildings 50 years Plant and machinery 5 years Office and other equipment 5 years Furniture and fittings 5 years IT equipment and software 3 - 5 years Motor vehicles 4 years Air condition and refrigeration 5 -10 years Improvements to leasehold assets 4 -10 years Improvements on leasehold buildings and buildings

constructed on leasehold land are amortised over the lower of their economic useful lives or unexpired period of lease.

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the assets is classified as held for sale and the date that the assets is derecognised.

The useful life, depreciating methods and residual values are assessed annually or in an earlier date where any circumstance indicates such assessment is required.

1.3.3.2 Leases

Finance leases

Assets are classified as acquired by finance leases when by an agreement, the Group substantially assumes the risk and rewards incidental to the ownership of an asset.

Assets acquired by the way of finance lease are measured at an amount equal to the lower of their fair value and the present value of minimum lease payments at the inception less accumulated depreciation and accumulated impairment losses.

Operating leases

When the lessor effectively retains substantially all the risks and rewards of an asset under the lease agreement, such leases are classified as operating leases. Payments under operating leases are recognised as an expense in the income statement over the period of lease on a straight line basis.

1.3.3.3 Investments

Quoted and unquoted investments held on long term basis are classified as non-current investments and are measured at cost less impairment losses. The cost of the investment is the cost of acquisition inclusive of brokerage and cost

of transaction. Provision for impairment is made in the income statement, when there has been a decline other than temporary in the value of investments, determined on an individual basis.

Marketable securities which have been classified under short term investments are valued at lower of cost and market value, on an aggregate portfolio basis. Market value is calculated by reference to closing share values as at the balance sheet date published by the Colombo Stock Exchange.

1.3.3.4 Intangible assets

Franchisee fee

Franchisee fee are shown at historical cost. Franchisee fee have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of Franchisee fee over their estimated useful life of 10 years.

Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful life of 4 years.

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include the software development employee costs and an appropriate portion of relevant overheads. Computer software development costs recognised as assets are amortised over their estimated useful lives.

1.3.3.5 Inventories

Inventories are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the normal course of business less estimated cost of realisation and/or cost of conversion from their existing state to saleable condition.

The cost of each category of inventory of the Group is determined on the following basis.

Raw Materials - Actual cost on a First In First Out (FIFO) basis

Finished goods and - Directly attributable work-in-progress manufacturing cost

Merchandising goods - Actual cost on a First In First Out (FIFO) basis

Other inventories - Actual cost



1.3.3.6 Receivables

Trade receivables are recognised at the amounts that they

are estimated to realise less provision for impairment. A

provision for impairment of trade receivables is established

when there is objective evidence that the Group will not be

able to collect all amounts due according to the original terms

of receivables. Significant financial difficulties of the debtor,

probability that the debtor will enter bankruptcy or financial

reorganisation, and default or delinquency in payments are

considered indicators that the trade receivable is impaired.

The amount of the provision is the difference between the

asset’s carrying amount and the estimated realisable value.

The amount of the provision is recognised in the income

statement within selling and distribution costs. When a

trade receivable is uncollectible, it is written off against

the allowance account for trade receivables. Subsequent

recoveries of amounts previously written off are credited in

the income statement.

1.3.3.7 Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and at

bank and short term highly liquid investments, readily

convertible to known amounts.

For the purpose of cash flow statements, cash and cash

equivalents comprise cash in hand and at bank net of

outstanding bank overdraft.

Cash flow statement is prepared based on the indirect method.

1.3.3.8 Impairment of assets

Assets that have an indefinite useful life, for example land,

are not subject to amortisation and are tested annually for

impairment. Assets that are subject to amortisation are

reviewed for impairment annually or at an earlier date

where events or changes in circumstances indicate that the

carrying amount may not be recoverable. An impairment

loss is recognised in the income statement for the amount by

which the asset’s carrying amount exceeds its recoverable

amount. The recoverable amount is the higher of an asset’s

fair value less costs to sell and value in use.

1.3.4 Equity and liabilities

1.3.4.1 Stated capital

Incremental costs directly attributable to the issue of new

shares are shown in equity as a deduction, net of tax, from

the proceeds.

1.3.4.2 Borrowings

Borrowings are classified as current liabilities unless the

Company has an unconditional right to defer settlement

of the liability for at least 12 months after the balance sheet

date.

1.3.4.3 Employee benefits

Defined benefit plan – retiring gratuity

A defined benefit plan is a post employment benefit

plan other than a defined contribution plan. The liability

recognised in the balance sheet, in respect of defined benefit

plan is the present value of defined benefit obligation at the

balance sheet date. Benefits falling due more than 12 months

after the balance sheet date are discounted to present value.

The defined benefit obligation is calculated annually

by independent actuaries using Projected Unit Credit

Method (PUC) as recommended by SLAS 16 - “Employees

benefits”.

The actuarial gains and losses are credited or charged to

income statement in the period in which they arise.

The assumptions based on which the results of the actuarial

valuation was determined, are included in Note 27 to the

financial statements.

However, according to the Payment of Gratuity Act No.12

of 1983, the liability for the gratuity payment to an employee

arises only on the completion of 5 years of continued service

with the Company.

Defined contribution plan - Employees’ Provident Fund

and Employees’ Trust Fund

A defined contribution plan is a post employment benefit

plan under which an entity pays fixed contribution into

a separate entity and will have no legal or constructive

obligations to pay further amounts.

All the employees who are eligible for Employees’ Provident

Fund and Employees’ Trust Fund are covered by relevant

contribution funds in line with the respective statutes.

Employer’s contribution to the defined contribution plans

are recognised as an expense in the income statement when

incurred.

1.3.4.4 Provisions, contingent assets and contingent

liabilities

Provisions are recognised when the Group has a legal

or constructive obligation, as a result of past events, it is

probable that an outflow of resources embodying economic

benefits will be required to settle the obligation and a reliable

estimate of the amount of such obligation can be made.

All contingent liabilities are disclosed, as notes to the

financial statements unless the outflow of resources is

remote.

Contingent assets if exist, are disclosed, when inflow of

economic benefit is probable.



1.3.4.5 Commitments

All material commitments as at the balance sheet date have been identified and disclosed in the notes to the financial statements.

1.3.5 Income statement

1.3.5.1 Presentation

The income statement is presented on the “function of expenses” method, as it represents fairly the elements of Company performance and prescribed by Sri Lanka Accounting Standards.

1.3.5.2 Revenue

The turnover of the Company and Group represents invoiced value of goods to customers other than to companies in the Group, net of discounts and returns.

1.3.5.3 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefit will flow to the Group and the revenue can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and value added taxes, net of sales within the Group.

The following specific criteria are used to recognize revenue.

Revenue from sale of goods is recognised when the significant risk and reward of ownership have been transferred to the buyer, the consideration is recoverable, the associated costs and possible return of goods can be estimated reliably and there is no continuing management involvement with the goods.

Rental income is recognised on an accrual basis.

Interest income is recognised as it accrues.

Dividend income is recognised in the income statement on an accrual basis when the company’s right to receive the dividend is established.

Gains or losses of revenue nature arising from the disposal of property, plant and equipment and other non-current assets, including investments, are accounted for in the income statement, after deducting from the net sales proceeds on disposal the carrying amount of such assets.

All other income is recognised on an accrual basis.

1.3.5.4 Expenditure

Expenses are recognised in the income statement on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenses incurred in the running of the business and in maintaining

the property, plant and equipment in a state of efficiency has

been charged to the income statement.

1.3.5.5 Borrowing costs

Borrowing costs are recognised as an expense in the period

in which they are incurred.

1.3.5.6 Disposal of property, plant and equipment

Gain or losses on the disposal of property, plant and

equipment have been accounted for in the income

statement.

1.3.5.7 Grants and subsidies

Grants and subsidies related to assets are immediately

recognised in the balance sheet as a deferred income and

recognised in the income statement on a systematic and

rational basis over the useful life of the asset.

1.3.5.8 Income tax expense

Current tax

The provision for income tax is based on the element of

income and expenditure in the financial statements and is

computed in accordance with the provisions of the Inland

Revenue Act.

Deferred taxation

Deferred taxation is the tax attributable to the temporary

differences that arise when the carrying amounts of assets

and liabilities and their value derived based on the taxation

rules (tax base).

Deferred taxation is provided based on the balance sheet

liability method on the temporary differences at the balance

sheet date between the tax bases of assets and liabilities

and their carrying amounts in the financial statements.

Deferred tax assets are recognised for all deductible

temporary differences, carry forward of unused tax credits

and unused tax losses only to the extent that it is probable

that future taxable profits will be available against which

the asset can be utilised.

The carrying amount of deferred tax assets is reviewed at

each balance sheet date and reduced to the extent that it

is no longer probable that sufficient taxable profit will be

available to allow all or part of the deferred tax assets to be

utilised.

Deferred tax assets and liabilities are measured at tax rates

that are expected to apply to the year when the assets is

realised or liability is settled, based on the tax rates that

have been enacted or substantively enacted as at the

balance sheet date.



1.3.5.9 Segment information

A business segment is a group of assets and operations

engaged in providing products or services that are subject

to risks and returns that are different from those of other

business segments. A geographical segment is engaged in

providing products or services within a particular economic

environment that are subject to risks and returns that

are different from those of segments operating in other

economic environments.

A segment is a distinguishable component of the Group

that is engaged either in providing products or services

(business/industry segment) or in providing products

or services within a particular economic environment

geographical segment), which is subject to risks and rewards

that are different from those of other segments.

The activities/businesses of the Group fall under the Food

& Beverages and Distributor categories. There are no

distinguishable components to be identified as geographical

segment for the Group. The business segments are reported

based on the Group’s management and internal reporting

structures.

Inter segment pricing is determined at prices mutually

agreed by the companies.

Segment results, assets and liabilities include items directly

attributable to a segment as well as those that can be allocated

on a reasonable basis. Unallocated items mainly comprise

income earning assets and revenues, interest bearing loans,

borrowings and expenses, corporate assets and expenses.

Segment capital expenditure is the total cost incurred during

the period to acquire segment assets, which are expected to

be used for more than one accounting period.

1.3.6 Events occurring after the balance sheet date

All material post balance sheet events have been considered,

disclosed and adjusted where applicable.

1.3.7 New accounting standards issued but not

effective as at balance sheet date

The Institute of Chartered Accountants of Sri Lanka issued a

new volume of Sri Lanka Accounting Standards which will

become applicable for annual periods beginning on or after

1 January 2012. Accordingly these standards have not been

applied in preparing these financial statements as they are

not effective for the year ended 31 March 2011.

These Sri Lanka Accounting Standards comprise accounting

standards prefixed both SLFRS (corresponding to IFRS)

and LKAS (corresponding to IAS). Apllication of Sri Lanka

Accounting Standards prefixed SLFRS and LKAS for the

first time shall be deemed to be an adoption of SLFRSs.

The Group is currently in the process of evaluating the potential effect of the adoption of these standards on its financial statements. Such impact has not been quantified as at the reporting date.

2 Risk Management

Credit risk

Credit risk arises from cash and cash equivalents, deposits with banks as well as credit exposure to customers including outstanding receivables. For bank and financial institutions only rated financial institutions are accepted. The credit control assess the credit quality of customers, taking into account their financial position, past experience and other factors. The individual risk limits are set based on internal ratings in accordance with limits set by the Board. The utilisation of credit limits are regularly monitored.

Liquidity risk

Effective liquidity risk management includes maintaining sufficient cash and marketable securities and the availability of funding from adequate amount of committed credit facilities. The Group maintains flexibility in funding by maintaining sufficient cash reserves and committed credit lines.

Interest rate risk

The Group’s income and operating cash flows are substantially independent of changes in market interest rates.

The Group’s interest rate risk arises from long-term borrowings. The borrowings at variable rates expose the Group to cash flow interest rate risk whilst borrowings at fixed rates exposes the Group to interest rate risk. The Group analyses its interest rate exposure on a dynamic basis.



5 Other income Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Dividend income 8 - 48,603 275,382Rental income 19,150 14,100 32,188 21,710(Loss) / profit on sale of property, plant and equipment (151) 8,604 (113) 2,825Merchandising income 534,032 473,675 544,602 333,457Profit on sale of investments 7,768 - 7,768 -Exchange gain 6,329 10,899 - -Amortisation of capital grant 477 - - -Sundry income 14,837 3,175 - 747 582,450 510,453 633,048 634,121


3 Revenue Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

3.1 Gross revenue Gross revenue 38,156,172 31,772,821 30,150,911 17,624,661Turnover tax (1,027,511) (898,024) (481,251) (296,519)Net turnover 37,128,661 30,874,797 29,669,660 17,328,142 3.2 Business segment analysis Food and beverages 36,861,287 30,559,093 29,653,892 17,306,716Wholesale distribution 3,172,727 2,792,425 15,768 21,426Leisure 65,085 45,935 - -Photo processing 72,878 61,350 - - 40,171,977 33,458,803 29,669,660 17,328,142Inter segment sales (3,043,316) (2,584,006) - - 37,128,661 30,874,797 29,669,660 17,328,142

3.3 Geographical dispersion of turnover The Group does not distinguish its turnover into significant geographical segments. The almost total turnover consists of turnover within Sri Lanka.

4 Cost of sales Cost of sales of the Company and Group include direct operating costs of super markets, factories and restaurants.

6 Finance costs Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Interest expense on - Commercial papers and loans 139,814 150,647 120,243 122,183 - Bank overdrafts 107,545 85,309 95,452 63,696 - Other loans and bank charges 116,186 192,486 78,152 110,978 - Staff security deposits 401 377 401 377 363,946 428,819 294,248 297,234


8 Income tax expense Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

(a) Current tax charge Income tax 322,094 217,597 226,324 57,126 Social Responsibility Levy 4,434 3,024 3,395 856 Irrecoverable ESC 2,439 852 - - Dividend tax 6,864 20,708 - 7,125 (Over)/ under provision (15,243) 92,828 (12,452) - Deferred tax [Note 8 (f)] (8,058) (46,675) (16,445) (35,063) 312,530 288,334 200,822 30,044

(b) The Company and its subsidiaries other than which enjoy a tax holiday or are exempt from income tax as referred below in note 8 (c), are liable for income tax at 35% on their taxable income.

(c ) Subsidiary companies enjoying tax holiday / exempt from income tax. Cargills Quality Dairies (Private) Limited, Cargills Quality Foods Limited, Cargills Agrifoods Limited, Cargills Food Processors

(Private) Limited and Cargills Food Services (Private) Limited are exempt from income tax in accordance with the provisions of the Inland Revenue Act No. 38 of 2000 and Act No. 10 of 2006 and subsequent amendments thereto.

Diana Biscuits Manufactures (Private) Limited is exempt from income tax in accordance with the provisions of the Inland

Revenue Act No. 10 of 2006 and subsequent amendments thereto. Cargills Quality Dairies (Private) Limited, Cargills Quality Foods Limited and Cargills Agrifoods Limited are on tax holiday till

the year of assessment 2010/11 and subject to a concessionary tax rate of 10% thereafter. Cargills Food Processors (Private) Limited and Cargills Food Services (Private) Limited are on tax holiday till the year

of assessment 2010/11. Cargills Food Processors (Private) Limited is subject to a concessionary tax rate of 10% from year of assessment 2011/12. However, after reviewing the position as at the balance sheet date, a tax provision of Rs. 31 Mn (2010 - Rs. 81.1 Mn) has been made for the above two companies for the financial year ended 31 March 2011.

Diana Biscuits Manufactures (Private) Limited is on a tax holiday till the year of assessment 2017/18 and subject to a normal tax

rate thereafter.

(a) Staff costs

Salaries, wages and other costs 1,808,132 1,458,132 1,311,277 768,261 Pension costs - retirement benefit obligations (Note 27) 28,454 79,693 24,753 75,816 Defined contribution plan cost - EPF and ETF 158,875 126,395 116,328 68,431 1,995,461 1,664,220 1,452,358 912,508 Number of employees as at 31 March 6,790 5,267 5,007 4,285

7 Profit before taxation


Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Profit before taxation is stated after charging all expenses including the following :

Staff costs (Note 7 (a)) 1,995,461 1,664,220 1,452,358 912,508Auditors’ remuneration - audit 3,981 2,345 690 575 - non audit services 462 270 255 80Depreciation on property, plant and equipment (Note 12) 851,291 772,852 535,586 455,641Donations 114 72 9 72Amortisation of intangible assets (Note 13) 7,785 7,478 - -Foreign exchange gain (Note 5) (6,329) (10,899) - -Provision for inventories 11,355 6,276 - -Impairment of property, plant and equipment (Note 12) 10,967 - - -Directors’ emoluments 74,625 40,883 70,113 39,458


(f) Deferred tax Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Deferred tax expense arising from; Accelerated depreciation for tax purposes 33,782 (44,500) 33,790 (30,997) Retirement benefit obligation (2,794) (24,549) (4,000) (23,977) Tax losses 1,361 22,374 - 19,911 Decrease in future tax rate (40,407) - (46,235) - Deferred tax release (8,058) (46,675) (16,445) (35,063) Deferred tax has been computed taking into consideration the revised tax rates effective from 1 April 2011 which is 28% for allstandard rate companies. The deferred tax effect on undistributed reserves of subsidiaries has not been recognized since the parent can control the timing of the reversal of these temporary differences.

Temporary differences associated with Cargills Retail (Private) Limited, Cargills Agrifoods Limited, Cargills Quality Dairies (Pri vate) Limited, Kotmale Dairy Products (Private) Limited and Kotmale Milk Foods Limited, subsidiary companies for which a deferred tax assets have not been recognized, are disclosed as follows.

Temporary Tax effect on Temporary Tax effect on difference temporary difference temporary difference difference Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Property, plant and equipment 332,427 93,080 379,145 120,152 Retirement benefit obligations 9,976 1,072 8,649 3,027 Carried forward losses 435,959 45,435 389,125 136,194 778,362 139,587 776,919 259,373

2011 2010


(c ) Subsidiary companies enjoying tax holiday / exempt from income tax (Contd.). Kotmale Milk Products Limited, Kotmale Dairy Products (Private) Limited and Kotmale Kiri (Private) Limited are on tax holiday

till the year of assessment 2010/11 and subject to a concessionary tax rate of 10% thereafter. (d) During the year the Company and the subsidiaries paid Economic Service Charge (ESC) amounting to Rs. 106.41 Mn

(2010 - Rs. 68.68 Mn) and Rs. 31.73 Mn (2010 - Rs. 60.83 Mn) respectively.

(e) Reconciliation between income tax charge Group Company

and profit before tax is given below : 2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Profit before tax 1,406,703 1,000,726 756,107 345,487Aggregate disallowed expenses 1,226,405 1,079,558 628,778 574,263Aggregate allowable expenses (843,616) (653,095) (631,341) (416,535)Aggregate other income (7,961) (1,427) (56,371) (275,382)Aggregate exempt income (757,859) (646,839) (34,382) (7,726)Adjusted profit (a) 1,023,672 778,923 662,791 220,107

Tax losses brought forward 459,625 523,551 16,150 73,040Tax losses added (b) 44,653 - - -Tax losses acquired ( c ) 373,468 - - -Tax losses utilised (d) (28,924) (63,926) (16,150) (56,890)Tax losses carried forward 848,822 459,625 - 16,150

Taxable income (a+b+d) 1,039,401 714,997 646,641 163,217Income tax @ 35% 290,821 193,108 226,324 57,126Income tax @ 15% 31,273 24,489 - -Income tax expense 322,094 217,597 226,324 57,126


10 Earnings per share Group Company

2011 2010 2011 2010

Profit attributable to ordinary shareholders (Rs. ‘000) 1,088,550 712,392 555,285 315,443 Weighted average number of ordinary shares in issue 224,000,000 224,000,000 224,000,000 224,000,000 Basic earnings per share (Rs.) 4.86 3.18 2.48 1.41 Basic earnings per share is calculated based on the net profit attributable to ordinary shareholders of Cargills (Ceylon) PLC divided by the weighted average number of ordinary shares in issue during the year.

11 Dividend per share Group Company

2011 2010 2011 2010 Rs. Rs. ‘ 000 Rs. ‘ 000 Rs. Rs. ‘ 000 Rs. ‘ 000

Dividend for the year Interim 0.50 112,000 67,200 0.50 112,000 67,200 Final - proposed 1.00 224,000 179,200 1.00 224,000 179,200 1.50 336,000 246,400 1.50 336,000 246,400

An interim dividend of 50 Cents per share (Rs. 112,000,000) was paid on 7 February 2011 for the year ended 31 March 2011. A final dividend of Rs. 1 per share is proposed for the year ended 31 March 2011. The final dividend proposed on 17 August 2011 has not been recognised as at the balance sheet date in compliance with SLAS 12 (Revised 2005) - “Events after the Balance Sheet Date”.

9 Segment profit Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Segment profit before unallocated overheads Food & beverages 2,197,584 1,581,406 1,456,482 591,243 Wholesale distribution operation 68,223 141,840 3,154 4,285 Photo processing 2,805 3,166 - - Leisure 11,582 8,701 - - 2,280,194 1,735,113 1,459,636 595,528 Unallocated overheads (473,742) (320,794) (497,727) (252,724) Dividend income 8 - 48,603 275,382 Rental income 19,150 14,100 32,188 21,710 Profit from sale of investment 7,768 - 7,768 - (Loss) / Profit from sale of property, plant and equipment (151) 8,604 (113) 2,825 Amortisation of intangible assets (7,785) (7,478) - - Finance costs (363,946) (428,819) (294,248) (297,234) Share of Associate result (54,793) - - - Income tax expense (312,530) (288,334) (200,822) (30,044) Profit after taxation 1,094,173 712,392 555,285 315,443


(f) Deferred tax (Contd.). The Management recognises deferred tax assets only when it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. It is probable that taxable profits will not be available against which the above de-ductible temporary differences amounting to Rs. 778.4 Mn (2010 - Rs. 776.9 Mn) can be utilized in accordance with SLAS 14 (Revised 2005) - “Income taxes”.



Freehold Freehold Expenditure Plant, Motor Total Total land building incurred on machinery vehicles 2011 2010 leasehold and others building Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Company

Cost / revaluationAs at 1 April 3,590,420 529,154 762,201 2,672,886 140,178 7,694,839 4,172,279Additions - - 249,739 573,662 53,804 877,205 458,414Revaluation - - - - - - 3,072,021Disposals - - - (622) - (622) (7,875)As at 31 March 3,590,420 529,154 1,011,940 3,245,926 193,982 8,571,422 7,694,839

Depreciation / amortisationAs at 1 April - 21,073 410,736 1,141,675 70,306 1,643,790 1,194,240Charge for the year - 10,584 132,222 361,998 30,782 535,586 455,641Disposals - - - (509) - (509) (6,091)As at 31 March - 31,657 542,958 1,503,164 101,088 2,178,867 1,643,790

Net book valueAs at 31 March 2011 3,590,420 497,497 468,982 1,742,762 92,894 6,392,555Capital work in progress - - - - - 1,078,643 3,590,420 497,497 468,982 1,742,762 92,894 7,471,198

As at 1 April 2010 3,590,420 508,081 351,465 1,531,211 69,872 6,051,049Capital work in progress - - - - - 464,713 3,590,420 508,081 351,465 1,531,211 69,872 6,515,762

12 Property, plant and equipment Freehold Freehold Expenditure Plant, Motor Total Total land building incurred on machinery vehicles 2011 2010 leasehold and others building Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Group

Cost / revaluationAs at 1 April 4,030,820 1,292,223 1,428,245 4,643,156 370,775 11,765,219 7,610,401Additions 250,758 3,212 300,462 791,976 62,530 1,408,938 602,720Revaluation - - - - - - 3,571,724On acquisition of subsidiaries 49,000 32,000 215,500 842,762 33,388 1,172,650 -Disposals - - - (3,181) (1,239) (4,420) (19,626)Impairment - - - (10,967) - (10,967) -As at 31 March 4,330,578 1,327,435 1,944,207 6,263,746 465,454 14,331,420 11,765,219

Depreciation / amortisationAs at 1 April - 227,218 795,842 2,457,182 241,610 3,721,852 2,966,209Charge for the year - 45,225 162,464 588,398 55,204 851,291 772,852On acquisition of subsidiaries - 2,582 4,690 80,658 16,290 104,220 -Disposals - - - (2,203) (1,239) (3,442) (17,209)As at 31 March - 275,025 962,996 3,124,035 311,865 4,673,921 3,721,852

Net book valueAs at 31 March 2011 4,330,578 1,052,410 981,211 3,139,711 153,589 9,657,499Capital work in progress - - - - - 1,447,098 4,330,578 1,052,410 981,211 3,139,711 153,589 11,104,597

As at 1 April 2010 4,030,820 1,065,005 632,403 2,185,974 129,165 8,043,367Capital work in progress - - - - - 648,349 4,030,820 1,065,005 632,403 2,185,974 129,165 8,691,716


(a) Expenditure incurred on leasehold building represent the cost incurred in setting up new outlets.

(b) Freehold land owned by the Group was revalued as at 31 March 2010 by Mr. T Weeratne (FIV), an independent professional valuer on a depreciated replacement cost basis for buildings and market value basis for land as at the date of valuation. The revalued amount was accordingly incorporated in the financial statements.

This revaluation has been carried out in conformity with the requirements of the Sri Lanka Accounting Standard No. 18 (Revised 2005) - “Property, plant and equipment”. The surplus on revaluation was credited to the revaluation reserve account.

(c ) The details of assets mortgaged for banking facilities obtained have been given in the note [24 ( c)] to the financial statements.

(d) If land and buildings were stated at the historical cost basis, the amounts would have been as follows:

Land Building

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Group Cost 213,163 213,163 711,014 711,014Accumulated depreciation - - (273,617) (227,218)Net book value 213,163 213,163 437,397 483,796

Company Cost 137,122 137,122 263,431 263,431Accumulated depreciation - - (26,342) (21,073)Net book value 137,122 137,122 237,089 242,358

(e) Depreciation expense of Rs. 669 Mn (2010 - Rs. 629.8 Mn) for the Group and Rs. 478.1 Mn (2010 - Rs. 416.7 Mn) for the Company has been charged in cost of goods sold, Rs. 182.3 Mn (2010 - Rs. 143.0 Mn) for the Group and Rs. 57.5 Mn (2010 - Rs. 38.9 Mn) for the Company in distribution and other expenses.

(f) Capital work in progress consists of expenditure incurred on projects where operations had not completed as at the balance sheet date.

(g) Fully depreciated assets of the Group as at the year end is Rs. 1,281 Mn (2010 - Rs. 863.2 Mn) and that of Company is Rs. 412.8 Mn (2010 - Rs. 188.5 Mn).

(h) It was identified that machinery purchased on an agreement with Tetra Pak Singapore and Emerging Markets, a division of Tetra Pak South Asia (Pte) Ltd, has been impaired. Consequently an impairment loss of Rs. 11 Mn has been charged in the financial statement of Kotmale Milk Products Limited.


13 Intangible assets Goodwill Franchisee fee Software Total

Group 2011 2010 2011 2010 2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Gross value As at 1 April 294,043 294,043 65,801 65,801 9,314 9,314 369,158 369,158Additions 764,393 - - - 5,853 - 770,246 -As at 31 March 1,058,436 294,043 65,801 65,801 15,167 9,314 1,139,404 369,158

Amortisation As at 1 April 36,450 36,450 36,013 30,864 4,772 2,443 77,235 69,757Amortisation for the year - - 5,148 5,149 2,637 2,329 7,785 7,478As at 31 March 36,450 36,450 41,161 36,013 7,409 4,772 85,020 77,235

Net book value as at 31 March 1,021,986 257,593 24,640 29,788 7,758 4,542 1,054,384 291,923

Goodwill as at the balance sheet date has been tested for impairment and found no impairment in carrying value. Recoverable values have been estimated based on the value in use or fair value less cost to sell, as applicable.

During the year addition to the Goodwill reflects the excess of the purchase consideration made for the fair value of assets and liabilities acquired in acquiring the Kotmale Holdings PLC and Diana Biscuits Manufactures (Private) Limited.



14 Investments No. of Holding Market Group Company Shares % Value 2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

14.1 Investments in subsidiaries Unquoted : Cargills Retail (Pvt) Ltd 47,500,002 100% - - 475,000 475,000 Cargills Quality Foods Ltd 4,860,291 100% - - 1,193,453 1,193,453 Millers Brewery Ltd 1,002 100% - - 100 - Dawson Office Complex (Pvt) Ltd 1 100% - - - - - - 1,668,553 1,668,453

14.2 Investment in associates Unquoted : C T Properties Limited 21,500,000 25% 161,282 216,075 216,075 216,075 161,282 216,075 216,075 216,075

14.3 Short term investments Quoted : Lanka IOC PLC 200,000 3,520 5,400 5,400 5,400 5,400 Sierra Cables PLC 49,500 267 150 150 30 30 Aitken Spence PLC 267,500 43,415 45,170 - 45,170 - 47,202 50,720 5,550 50,600 5,430 Provision for falling value (3,635) (1,791) (3,635) (1,758) 47,202 47,085 3,759 46,965 3,672 Unquoted : REPO Investments 28,502 - - - 75,587 3,759 46,965 3,672

(a) Cargills Quality Foods Limited, Cargills Retail (Private) Limited, Millers Brewery Limited and Dawson Office Complex (Private)

Limited are subsidiaries of Cargills (Ceylon) PLC.

(b) During the year, Cargills Quality Foods Limited a wholly owned subsidiary of Cargills (Ceylon) PLC, acquired 100% ownership

of Diana Biscuits Manufactures (Private) Limited with an investment of Rs. 342.89 Mn. The main business activity of the Company

is manufacture and distribution of biscuits.

(c) During the year, the Company acquired majority shareholding of Kotmale Holdings PLC at a purchase consideration of

Rs. 1,038 Mn. Initially, the shareholding increased to 73.4% and subsequently with the mandatory offer closing on 30 December

2010, the shareholding was increased to 81.72%.

As at 31 March 2011, Cargills (Ceylon) PLC transferred the ownership of Kotmale Holdings PLC to its wholly owned subsidiary

Cargills Quality Foods Limited. This transaction was done outside the trading floor of Colombo Stock Exchange consequent to a

special approval from the Securities and Exchange Commission of Sri Lanka. The sales consideration amounted to Rs. 1,038 Mn

and was accounted as intercompany receivable.

(d) During the year, the Company incorporated Millers Brewery Limited to set up a brewery venture, which would commence

business in the next financial year. The initial share capital issued amounted to Rs. 100,020/-.

(e) Dawson Office Complex (Private) Limited incorporated with an initial share investment of Rs. 100 for the purpose of building an

office complex to be utilised as head office of Cargills (Ceylon) PLC.

13 Intangible assets (Contd.).

Amortisation of intangible assets of Rs. 5.1 Mn (2010 - 5.1 Mn) has been charged in cost of goods sold and Rs. 2.6 Mn (2010 - 2.3 Mn)

in administrative expenses.



(f) Cargills Agrifoods Limited, CPC (Lanka) Limited, Cargills Quality Dairies (Private) Limited, Cargills Distributors (Private) Limited, Cargills Food Processors (Private) Limited, Millers Limited and Diana Biscuits Manufactures (Private) Limited are subsidiaries of Cargills Quality Foods Limited (CQF). The financial statements of the said subsidiaries of CQF have been consolidated as 100% subsidiaries in view of the minority shareholders (subscriber shares) confirming that they hold the shares in trust for CQF.

(g) Kotmale Holdings PLC is a subsidiary of Cargills Quality Foods Limited (CQF) in which CQF has 81.72% stake and the financial statements of the said subsidiary has been consolidated.

(h) The financial statements of Cargills Food Services (Private) Limited (CFS) has been consolidated with that of Cargills Food Processors (Private) Limited (CFP) as a 100% subsidiary in view of the two shareholders of CFS holding the shares in trust for CFP.

(i) The financial statements of Kotmale Products Limited, Kotmale Marketing (Private) Limited, Kotmale Dairy Products (Private) Limited, Kotmale Milk Products Limited, Kotmale Kiri (Private) Limited and Kotmale Milk Foods Limited have been consolidated with that of Kotmale Holdings PLC as 100% subsidiaries.

(j) The market value of quoted short term investments as at 31 March 2011, as quoted by the Colombo Stock Exchange amounted to Rs. 47,202,550 (2010 - Rs. 3,758,900)

14.4 Investment in associates Group

2011 2010 Rs. ‘000 Rs. ‘000 As at 1 April 216,075 - Acquisition - 216,075 Share of loss incurred (54,793) - As at 31 March 161,282 216,075

14.5 Summarised financial information of associates Group

2011 2010 Rs. ‘000 Rs. ‘000 Group share of; Revenue 183,728 - Operating expenses (203,156) - Finance expenses (33,331) - Income tax expense (2,034) - Loss for the year (54,793) - Group share of; Total assets 329,218 461,061 Total liabilities (375,279) (452,329) Net assets (46,061) 8,732 Goodwill 207,343 207,343 161,282 216,075


14.6 Acquisitions during the year

A detailed disclosure as required by SLAS 9 - Cash Flow Statements, is given below for the two acquisitions made during the year. Kotmale Holdings PLC (KHP) and Diana Biscuits Manufactures (Private) Limited (DBML) were acquired by the Group. KHP DBML

Rs. ‘000 Rs. ‘000 Total purchase consideration 1,037,785 342,883 Cash paid for acquisition (1,037,785) (342,883) Cash and cash equivalents acquired (2,662) (193,885) Net cash flow from acquisition of subsidiaries (1,040,447) (536,768) Net assets attributable to parent on acquisition 375,919 240,356 Goodwill on acquisition 661,866 102,527 Net assets holding % 81.72% 100% Summary of net assets as of acquisition date is as follows;

Property, plant and equipment 296,993 790,976 Inventories 89,064 21,934 Trade and other receivables 284,981 16,329 Short term investments 1,369 - Total assets 672,407 829,239 Borrowings (36,891) (301,246) Retirement benefit obligations, deferred tax and capital grant (19,872) - Trade and other payables (152,963) (93,752) Net assets acquired other than cash and cash equivalents 462,681 434,241

Buildings, plant and machinery owned by the Diana Biscuits Manufactures (Private) Limited was revalued as at 17 October 2010 by Mr. M C Abdul Malick (FIV), an independent professional valuer on a depreciated replacement cost basis to determine the fair value of assets as at the acquisition date. The revalued amount was accordingly incorporated in the financial statements of Diana Biscuits Manufactures (Private) Limited.

15 Advance paid for acquisition of assets

During the financial year, newly formed wholly owned subsidiary of Cargills (Ceylon) PLC, Millers Brewery Limited entered in to an agreement for the sale and purchase of the business and business assets, including the brands, of McCallum Breweries (Ceylon) (Private) Limited, McCallum Brewing Company (Private) Limited and Three Coins Company (Private) Limited at a purchase consideration of Rs. 1,415 Mn. In relation to this agreement, payments made up to the balance sheet date amounted to Rs. 1,187.7 Mn. Further sum of Rs. 17.7 Mn was advanced to acquire various assets. Advance paid (Rs.’000) 1,205,425


16 Prepayment on leasehold land and building Group 2011 2010 Rs. ‘000 Rs. ‘000 Gross value As at 31 March 35,000 35,000 Amortisation As at 1 April 4,375 3,500 Amortisation for the year 875 875 As at 31 March 5,250 4,375 Balance as at 31 March 29,750 30,625 Current portion of the prepayment 875 875 Non- current portion of the prepayment 28,875 29,750 29,750 30,625


17 Deferred tax assets Group

2011 2010 Rs. ‘ 000 Rs. ‘ 000 As at 1 April 21,777 21,573 (Charge) / release for the year (7,462) 204 As at 31 March 14,315 21,777 Deferred tax assets as at the year end is made up as follows: Deferred tax assets arising from - temporary difference of property, plant and equipment - 2,163 - temporary difference of retirement benefit obligations 2,644 591 - carried forward tax losses 11,671 19,023 14,315 21,777

19 Trade and other receivables Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Trade receivables 830,553 548,842 126,905 98,991Provision for bad & doubtful debts for trade receivables (96,592) (71,230) (3,546) (3,546) 733,961 477,612 123,359 95,445Prepayments and deposits 355,545 228,926 281,335 183,215Other receivables 125,947 84,848 33,275 41,466Loans and advances [refer note 19 (a)] 20,607 7,513 6,819 7,389Tax recoverable [refer note 19 (b)] 348,029 320,850 255,035 147,056 1,584,089 1,119,749 699,823 474,571


18 Inventories Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Raw materials 471,446 337,915 - -Work in progress 8,253 8,879 - -Finished goods 77,730 38,192 - -Merchandising stock for sale 2,918,880 2,638,907 2,630,352 1,803,966Food and beverages - restaurant operations 34,131 21,295 - -Consumables 81,352 30,336 58,760 19,369 3,591,792 3,075,524 2,689,112 1,823,335Provision for obsolete inventories (61,087) (37,918) - - 3,530,705 3,037,606 2,689,112 1,823,335Goods in transit 45,617 21,783 18,801 - 3,576,322 3,059,389 2,707,913 1,823,335

Inventories amounting to Rs. 194 Mn has been mortgaged for bank facilities obtained [refer note 24 (C)]



20 Amounts due from / due to related companies Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Amounts due from subsidiaries Cargills Quality Foods Limited - - 1,112,836 - Millers Limited - - 21,302 17,421 Millers Brewery Limited - - 1,221,688 - Dawson Office Complex (Private) Limited - - 249,599 - - - 2,605,425 17,421

Amounts due from holding company C T Holdings PLC 17,865 17,796 17,254 17,252

Amounts due from other related companies Ceylon Hotels Corporation PLC 404 23 - 23 Ceylon Printers PLC 8 23 - - C T Properties Limited 94,251 80,900 94,242 80,891 Ceylon Theatres (Private) Limited 2,228 2,257 2,208 2,213 C T Land Development PLC 77,002 150,875 77,002 150,937 Dialog Telekom PLC 3,887 - 3,887 - Galle Face Hotel Co. Limited 435 886 6 20 Kalamazoo Systems PLC - 36 - - Kandy Hotels Co.(1938) PLC 325 145 - - Lanka Tiles PLC 674 - 674 - 179,214 235,145 178,019 234,084Total amounts due from related companies 197,079 252,941 2,800,698 268,757

Amounts due to subsidiaries Cargills Retail (Private) Limited - - 857,245 103,149 Cargills Quality Foods Limited - - - 134,327 Cargills Distributors (Private) Limited - - 18,604 13,972 Cargills Quality Dairies (Private) Limited - - 59,961 40,843 Cargills Agrifoods Limited - - 34,037 47,007 C P C (Lanka) Limited - - 17,329 6,759 Diana Biscuits Manufactures (Private) Limited - - 2,998 - Kotmale Dairy Products Limited - - 45,378 - - - 1,035,552 346,057Amounts due to other related companies Dialog Telekom PLC - 3,247 - 3,247 Lanka Ceramics PLC 251 400 251 400 Paragon Ceylon PLC - 1 - - Unidil Packaging (Private) Limited 1,385 518 - - 1,636 4,166 251 3,647Total amount due to related companies 1,636 4,166 1,035,803 349,704

19 (a) Loans and advances represents loans to employees Group Company

and the movement during the year is as follows :

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

As at 1 April 7,513 6,007 7,389 5,839 On acquisition of subsidiaries 10,656 - - -Loans granted 21,523 14,022 18,156 13,852 39,692 20,029 25,545 19,691Repayments (19,085) (12,516) (18,726) (12,302)As at 31 March 20,607 7,513 6,819 7,389

19 (b) Tax recoverable This includes Economic Service Charges, VAT recoverable, WHT recoverable and Income tax overpayments.



21 Stated capital Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Issued and fully paid :224,000,000 Ordinary shares 130,723 130,723 130,723 130,723

22 Reserves Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Capital reserves Revaluation reserve 4,115,464 4,094,259 3,618,106 3,598,018Capital reserve 7,928 7,928 - - 4,123,392 4,102,187 3,618,106 3,598,018 Revenue reserve General reserve 485,500 385,500 485,500 385,500 4,608,892 4,487,687 4,103,606 3,983,518

Revaluation reserve consists of net surplus resulting from the revaluation of property, plant & equipment.

Capital reserve consists of share of capital reserve resulting from consolidation.

General reserve represents the amount set aside by the directors for general applications.

23 Cash and cash equivalents Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Cash at bank and in hand 303,645 261,763 246,161 160,051

For the purpose of the cash flow statement, the year end

cash and cash equivalents comprise the following:

Cash and bank balances 303,645 261,763 246,161 160,051

Bank overdraft (2,574,088) (1,068,192) (2,182,882) (979,245)

(2,270,443) (806,429) (1,936,721) (819,194)

For the purpose of the cash flow statement, following major non-cash transactions have been eliminated.

- Transfer consideration of Kotmale Holdings PLC - - 1,037,785 -

- Dividend received from subsidiary companies - - 48,603 275,382


Principal Institution & facility amount Repayment terms & interest rate Rs. ‘ 000 Cargills (Ceylon) PLC Bank Overdrafts

- Bank of Ceylon 94,000 Average interest rate of 14.17 %

- Commercial Bank 200,000 Average interest rate of 8.8 %


- Deutsche Bank 200,000 Average interest rate of 8.58 %

- Hatton National Bank 500,000 Average interest rate of 7.88 %

- HSBC Bank 500,000 Average interest rate of 9.05 %

- MCB Bank 200,000 Average interest rate of 7.5 %

- Nation Trust Bank 700,000 Average interest rate of 8.89 %

- Sampath Bank 100,000 Average interest rate of 11.75 %

- Seylan Bank 100,000 Average interest rate of 9.9 %

- Standard Chartered Bank 10,000 Average interest rate of 9.15 %

Bank Loans

Long Term Loan

- Sampath Bank 500,000 59 monthly installments of Rs. 8.33 Mn per month, commencing from April 2009 and final installment of Rs. 8.24 Mn, at average interest rate of 9.68 %

Short Term Loans


- DFCC Bank 200,000 Average interest rate of 8.36 %

- Hatton National Bank 1,000,000 Average interest rate of 7.85 %

- Hatton National Bank 500,000 Average interest rate of 7.85 %

- NDB Bank 100,000 Average interest rate of 8.63 %




24 Borrowings Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Current Current portion of long term loan 127,427 130,399 - 49,999 Commercial papers and short term loans 3,532,960 1,600,980 3,289,960 1,249,980 Bank overdraft 2,574,088 1,068,192 2,182,882 979,245 6,234,475 2,799,571 5,472,842 2,279,224

Non-current Bank borrowings 384,167 198,499 - - 384,167 198,499 - - Total borrowings 6,618,642 2,998,070 5,472,842 2,279,224

(a) Non current As at 1 April 328,898 1,030,235 49,999 600,000 On acquisition of subsidiaries 326,472 - - - Repayments (143,776) (701,337) (49,999) (550,001) As at 31 March 511,594 328,898 - 49,999 Falling due within one year (127,427) (130,399) - (49,999) 384,167 198,499 - -

Repayment during 1-2 years 141,289 130,800 - - Repayment during 2-5 years 242,878 67,699 - - 384,167 198,499 - -

(b) Details of all loans outstanding at the balance sheet date are set out below:


Cargills Retail (Private) Limited

Bank Loan

- DFCC Bank 150,000 60 monthly installments of Rs. 2.5 Mn per month, commencing from March 2009 at average interest rate of 11.71 %

Cargills Quality Foods Limited

Bank Overdraft

- Commercial Bank 40,000 Average interest rate of 8.8%

Bank Loan

- Commercial Bank 300,000 71 monthly installments of Rs. 4.2 Mn per month, commencing from July 2007 and final installment of Rs. 1.8 Mn at average interest rate of 9.58 % for the year

Cargills Quality Dairies (Private) Limited

Bank Overdraft

- Seylan Bank 80,000 Average interest rate of 9.97%

Cargills Agrifoods Limited

Bank Overdraft


Cargills Food Processors (Private) Limited

Bank Overdraft


Millers Limited

Bank Overdrafts


- Hatton National Bank 175,000 Average interest rate of 10.38%

- HSBC Bank 200,000 Average interest rate of 9.63%

Bank Loan

Short Term Loan

- Standard Chartered Bank 250,000 Repayable on maturity at average interest rate of 9.15%


Bank Overdrafts

- Bank of Ceylon 176,450 Average interest rate of 9.5%


Bank Loans

- Bank of Ceylon 11,115 54 monthly installments of Rs. 205,835 per month , commencing from July 2011, at average interest rate of 6% for the year. Grace period of 6 months available

Institution & facility Principal amount Repayment term & interest rate Rs. ‘ 000



Institution & facility Principal amount Repayment term & interest rate Rs. ‘ 000

- Bank of Ceylon 282,560 64 monthly installments of Rs. 4.42 Mn per month , commencing from July 2011, at average interest rate of 7.67% for the year. Grace period of 6 months available

- Bank of Ceylon 7,482 72 monthly installments of Rs. 103,920 per month , commencing from January 2011, at average interest rate of 6.5% for the year

Kotmale Dairy Products (Private) Limited

Bank Overdraft


Import Loan

- Bank of Ceylon 40,000 Repayable on maturity at average interest rate of 11.75%

Bank Loans

- Lankaputhra Development Bank 11,196 60 monthly installments of Rs. 186,599 per month , commencing from March 2009, at average interest rate of 14% for the year

-Peoples Leasing Co. 3,549 48 monthly installments of Rs. 73,940 per month , commencing from September 2009, at average interest rate of 6.5 % for the year

- Peoples Leasing Co. 4,500 48 monthly installments of Rs. 93,750 per month , commencing from August 2010, at average interest rate of 6.5 % for the year


Bank Overdraft

- DFCC Vardana Bank 25,000 Average interest rate of 15%

Kotmale Milk Products Limited

Bank Overdraft

Pan Asia Bank 5,000 Average interest rate of 16%

Bank Loan

Short Term Loan

Pan Asia Bank 20,000 Average interest rate of 16.5%

(c) The security offered to each loan are set out below: Loan Security offered Cargills (Ceylon) PLC Bank of Ceylon - Overdraft facility of Rs. 94 Mn Trading stock of 15 locations

Commercial Bank - Overdraft facility of Rs. 200 Mn An agreement to mortgage land and building at Kandy for Rs. 100 Mn and

Corporate guarantee from C T Holdings PLC for Rs. 50 Mn MCB Bank - Overdraft facility of Rs. 200 Mn Demand promissory note for Rs. 200 Mn.

Sampath Bank - Long term loan facility of Rs. 500 Mn Primary mortgage for Rs. 400 Mn over Machinery and equipments of

Rs. 535 Mn, imported and locally purchased. Undertaking to execute mortgage bond for Rs. 100 Mn over equipments to be imported during 2009 to a total value of Rs. 135 Mn.



Loan Security offered

Seylan Bank - Overdraft facility of Rs. 100 Mn Stock mortgage for Rs. 100 Mn and Demand promissory note for Rs. 100

Mn

Standard Chartered Bank - Overdraft facility of Rs. 10 Mn Undertaking to mortgage land and building at Staple Street, Colombo-2 for - Short term loan facility of Rs. 465 Mn Rs. 75 Mn and Corporate guarantee from C T Holdings PLC for Rs. 75 Mn. - Short term loan facility of Rs. 525 Mn

Cargills Retail (Private) Limited DFCC Bank - Long term loan facility of Rs. 150 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 150 Mn

Cargills Quality Foods Limited Commercial Bank - Long term loan facility of Rs. 400 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 425 Mn Primary mortgage for Rs. 300 Mn over leasehold land, building and project

assets at Bandigoda, Ja -Ela

Millers Limited Commercial Bank - Overdraft facility of Rs. 165 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 215 Mn

Hatton National Bank - Overdraft facility of Rs. 175 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 335Mn

HSBC Bank - Overdraft facility of Rs. 200 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 200 Mn

Standard Chartered Bank - Short term loan facility of Rs. 250 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 250 Mn


Bank of Ceylon - Overdraft facility of Rs. 176.45 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 176.45 Mn - Overdraft facility of Rs. 47.54 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 47.54 Mn - Long term loan facility of Rs. 11.12 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 11.12 Mn - Long term loan facility of Rs. 282.56 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 282.56 Mn - Long term loan facility of Rs. 7.48 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 7.48 Mn

Kotmale Dairy Products (Private) Limited Bank of Ceylon - Overdraft facility of Rs. 10 Mn Corporate guarantee from Kotmale Holdings PLC over stocks and book

debts. - Letter of credit facility of Rs. 40 Mn Corporate guarantee from Kotmale Holdings PLC over stocks and book

debts. - Import loan facility of Rs. 40 Mn Corporate guarantee from Kotmale Holdings PLC over stocks and book

debts. Lankaputhra Development Bank - Long term loan facility of Rs. 11.2 Mn Primary mortgage on project machinery along with relevant insurance cov-

ers and a corporate guarantee from Kotmale Holdings PLC. Peoples Leasing Co. - Long term loan facility of Rs. 3.55 Mn Corporate guarantee from Kotmale Holdings PLC.

- Long term loan facility of Rs. 4.5 Mn Corporate guarantee from Kotmale Holdings PLC.


}


26 Capital grant Group

2011 Rs. ‘ 000

As at 1 April -On acquisition of subsidiaries 2,866Amortisation (477)As at 31 March 2,389

Grant represents funds received in the form of plant. Grant is amortised on straight line basis over the useful life of such asset.


25 Deferred tax liability Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

As at 1 April 360,352 310,358 324,195 266,256

On acquisition of subsidiaries 4,831 - - -

On revaluation surplus of building (21,205) 96,465 (20,088) 93,003

Release for the year (15,520) (46,471) (16,445) (35,064)

As at 31 March 328,458 360,352 287,662 324,195

Deferred tax provision as at the year end is made up as follows. Group Company

2011 2010 2011 2010 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Deferred tax provision from - temporary difference of property plant and equipment 303,399 317,446 260,822 283,787- temporary difference of revaluation surplus of building 75,259 96,465 72,915 93,003- temporary difference of retirement benefit obligations (50,200) (53,559) (46,075) (52,595) 328,458 360,352 287,662 324,195

27 Retirement benefit obligations Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

At beginning of year 163,360 91,555 150,270 81,763On acquisition of subsidiaries 12,175 - - -Income statement charge 28,454 79,693 24,753 75,816Contributions paid (11,228) (7,888) (10,470) (7,309)At end of year 192,761 163,360 164,553 150,270

(a) The amount recognised in the balance sheet is as follows Present value of unfunded obligations 192,761 163,360 164,553 150,270 Present value of funded obligations - - - - Total present value of obligations 192,761 163,360 164,553 150,270 Fair value of plan assets - - - - Recognised liability for defined benefit obligation 192,761 163,360 164,553 150,270



Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

(b) The movement in retirement benefit obligations over the year as follows At beginning of year 163,360 91,555 150,270 81,763 On acquisition of subsidiaries 12,175 - - - Current service cost 24,515 21,583 21,398 20,626 Interest cost 17,137 10,988 16,530 9,812 Benefit paid (11,228) (7,888) (10,470) (7,309) Actuarial (gain)/loss (13,198) 47,122 (13,175) 45,378 Present value obligation as at the year end 192,761 163,360 164,553 150,270

(c) The amount recognised in the income statement as follows

Current service cost 24,515 21,583 21,398 20,626 Interest cost 17,137 10,988 16,530 9,812 Net actuarial (gain)/loss (13,198) 47,122 (13,175) 45,378 28,454 79,693 24,753 75,816

(d) This obligation is not externally funded.

(e) The Gratuity liability is based on the actuarial valuation carried out by Messrs. Actuarial and Management Consultants

(Private) Limited, Actuaries, on 29 April 2011. The principal assumptions used in the actuarial valuation were as follows: 2011 2010 % % 1. Discount rate (the rate of interest used to discount the future cash flows in order to determine the present value) 11 11

2. Future salary increase - Executives 10 12 - Staff 10 8 In addition to the above, demographic assumptions such as mortality, withdrawal and disability, and retirement age were

considered for the actuarial valuation. “A 67/70 mortality table” issued by the Institute of Actuaries London was used to estimate the gratuity liabilities of the Company.

28 Trade and other payables Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Trade payables 3,560,049 3,022,209 3,143,698 2,744,763Other payables 718,404 607,090 513,520 438,295Accrued expenses 538,717 457,185 186,414 250,769 4,817,170 4,086,484 3,843,632 3,433,827

29 Dividend payable Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Unclaimed dividend 17,610 14,080 17,609 14,080



30 Segment information - Group

Food & Beverage Distribution Photo processing Leisure Total

2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Assets and liabilitiesSegment assets 16,933,755 12,310,493 1,068,669 1,088,470 3,851 27,941 26,154 22,734 18,032,429 13,449,638Unallocated assets - - - - - - - - 1,036,301 279,370Unallocated investments - - - - - - - - 236,870 219,834Consolidated assets 19,305,600 13,948,842

Segment liabilities 11,270,683 6,817,117 650,404 626,169 - - 6,622 4,050 11,927,709 7,447,336Unallocated liabilities - - - - - - - - 328,458 360,351Consolidated liabilities 12,256,167 7,807,687

Capital expenditure 2,086,719 801,931 97,878 30,768 3,851 617 515 1,950 2,188,963 835,266

Segment depreciation 801,720 735,582 34,642 23,232 9,584 8,312 745 725 846,691 767,851Unallocated depreciation - - - - - - - - 4,600 5,001Total depreciation 851,291 772,852

Non cash expenses otherthan depreciation 106,245 79,265 19,827 428 - - - - 126,072 79,693

31 Commitments Group Company

2011 2010 2011 2010 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Capital commitments

Approved and contracted 395,553 - 168,254 -

Financial commitments

Future payments of operating lease rentals :- within 1 year 320,792 213,444 214,971 153,842- between 1 - 5 years 1,674,997 868,353 1,131,292 622,097- more than 5 years 1,844,745 1,572,407 1,397,082 1,239,222 3,840,534 2,654,204 2,743,345 2,015,161

32 Contingent liabilities

The Company has given letters of guarantee to commercial banks on behalf of the subsidiary companies amounting to Rs. 2.1 Bn. Kotmale Holdings PLC, a subsidiary of the Company has given letters of guarantee to Commercial Banks on behalf of its subsidiary companies amounting to Rs. 109 Mn.The Directors do not expect any claim on these guarantees. Accordingly, no provision has been made in the financial statements.

There are no material pending litigations as at the balance sheet date which would result in material liability.

There are no other material contingent liabilities as at the balance sheet date.



33 Transfer of operations within the Group

With effect from 1 June 2010, the operations of Cargills Retail (Private) Limited, a wholly owned subsidiary of Cargills (Ceylon) PLC, was transferred to Cargills (Ceylon) PLC as part of a restructuring process of the Group. Consequently the business assets of Cargills Retail (Private) Limited is now used by the Company for which a rent is paid to the subsidiary. The Company expects to purchase all the assets and liabilities of Cargills Retail (Private) Limited.

The operations of Cargills Food Services (Private) Limited was transferred to Cargills Food Processors (Private) Limited, the parent of Cargills Food Services (Private) Limited, with effect from 1 October 2010. Cargills Food Processors (Private) Limited expects to purchase all the assets and liabilities of Cargills Food Services (Private) Limited.

34 Events after the balance sheet date

Millers Brewery Limited (MBL), wholly owned subsidiary of Cargills (Ceylon) PLC, finalised the sale and purchase agreement with MaCallum Breweries (Ceylon) (Private) Limited, MaCallum Brewing Company (Private) Limited and Three Coins Company (Private) Limited, and commercial operations commenced in May 2011. With the finalisation of agreement, the business and business assets of above companies were transferred to MBL.

The Board of Directors has proposed a final dividend of Rs. 1 per share (on the 224,000,000 shares now in issue) for the year ended 31 March 2011 which is to be approved by the shareholders at the Annual General Meeting.

As required by Section 56 (2) of the Companies Act No. 7 of 2007, the Board of Directors has confirmed the Company satisfies the Solvency test, and has obtained a certificate from the auditors. In accordance with SLAS 12 (Revised 2005) - “Events after the Balance Sheet Date”, the proposed dividend has not been recognised as a liability in the financial statements.

Dawson Office Complex (Private) Limited made a share issue to Cargills (Ceylon) PLC amounting to Rs. 100,000 subsequent to the balance sheet date.

Subsequent to the balance sheet date, the name of Diana Biscuits Manufactures (Private) Limited, a sub-subsidiary of the Company, was changed to Cargills Quality Confectionaries (Private) Limited.

No events other than the above, have occurred since the balance sheet date which would require any adjustment to, or disclosure in the financial statements.

35 Transactions with group companies

The Company has provided corporate guarantees for term loans and banking facilities obtained by its subsidiary companies, the details of which have been disclosed under note 24 (c ) to the financial statements.

The Company provides Secretarial and Management services to its subsidiary companies free of charge.

Companies within the Group engage in trading and business transactions under normal commercial terms which give rise to related company balances. The balances have been disclosed under note 20 to the financial statements.

(a) Transactions with key management personnel (KMP)

According to SLAS 30 (revised 2005) - “Related Party Disclosure”, KMP are those having authority and responsibility for planning, directing, controlling the activities of the entity. Accordingly, the Directors of the Company and its parent (including executive and non - executive Directors) and their immediate family members have been classified as KMP of the Group.

The Company has provided an owned apartment to the Deputy Chairman/Chief Executive Officer for the due performance of his office.

The Group has paid Rs. 74.63 Mn (2010 - Rs. 40.88 Mn) to the Directors as emoluments during the year. There are no other payments made to key management personnel apart from the disclosed amount.


(b) The Directorates of Directors of the group companies

The Directors of the Company are also directors of the following companies with which the Company had regular business transac-tions as disclosed in below.

Mr. Anthony Mr. L R Mr. A T P Mr. S E C Mr. Sunil Mr. J C Mr. E A D Mr. Jayantha Mr. V R Mr. M I Mr. S V Mr. P S A Page Page Edirisinghe Gardiner Mendis Page Perera Danapala Page Abdul Wahid Kodikara Mathavan

Group CompaniesCargills (Ceylon)PLC Cargills Distributors (Pvt) Ltd Cargills Food Processors (Pvt) Ltd Cargills Food Services (Pvt) Ltd

Cargills Quality Dairies (Pvt) Ltd

Cargills Quality Foods Ltd. Cargills Retail (Pvt) Ltd C P C (Lanka) Ltd

Cargills Agrifoods Ltd

Dawson Office Complex (Pvt) Ltd.

Diana Biscuits Manufactures (Pvt) Ltd.

Kotmale Dairy Products (Pvt) Ltd.


Kotmale Kiri (Pvt) Ltd.

Kotmale Marketing (Pvt) Ltd.

Kotmale Milk Products Ltd.

Kotmale Milk Foods Ltd.

Kotmale Products Ltd.

Millers Brewery Ltd.

Millers Ltd

Mr. Anthony Mr. L R Mr. A T P Mr. S E C Mr. Sunil Mr. J C Mr. E A D Mr. Jayantha Mr. V R Mr. M I Mr. S V Mr. P S A Page Page Edirisinghe Gardiner Mendis Page Perera Danapala Page Abdul Wahid Kodikara Mathavan

Other companies Ceylon Hotels Corporation PLC Ceylon Printers PLC Ceylon Theartres (Pvt) Ltd

C T Holdings PLC

C T Capital Ltd

C T Land Development PLC

C T Properties Ltd

Dialog Telekom PLC Galle Face Hotel Co. Ltd Kalamazoo Systems PLC Kandy Hotels Co. (1938) PLC Lanka Ceramics PLC

Lanka Tiles PLC Lanka Walltiles PLC

Paragon Ceylon PLC Unidil Packaging Ltd

Directors have no direct or indirect interest in any other contracts with the Company. The above interest in contracts have been declared at Board Meeting by the Directors concerned.



2011 2010 Rs. ‘ 000 Rs. ‘ 000


Company 2011 2010

Sales Other Purchases Other Sales Other Purchases Other income expenses income expenses Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000

Transactions with subsidiaries Cargills Retail (Pvt) Ltd - - - 64,950 - - - -

Cargills Quality Foods Ltd. 1,819 1,437 340,011 - 1,385 - 297,607 - Cargills Distributors (Pvt) Ltd - 712 245,417 - - - 185,808 -

Cargills Food Services (Pvt) Ltd 8,146 2,242 - - 902 4,771 - - Cargills Food Processors (Pvt) Ltd 9,108 10,310 - - - 7,794 - - Cargills Quality Dairies (Pvt) Ltd 2,312 3,289 668,079 - 892 - 600,431 - Cargills Agrifoods Ltd 6,922 3,455 290,514 - 3,687 - 254,357 - C P C (Lanka) Ltd 18,018 - 76,661 - - - 60,468 - Millers Ltd 35,002 28,278 357,240 18 24,286 20,637 398,895 18 Diana Biscuits Manufactures (Pvt) Ltd 5,335 - 8,044 - - - - - Kotmale Dairy Products (Pvt) Ltd - - 50,499 - - - - -

Transactions with holding company C T Holdings PLC - - - - 72 - - -

Transactions with other related companies Ceylon Hotels Corporation PLC 117 - - - 142 - - - Ceylon Printers PLC - - - 979 - - - 243 Ceylon Theatres (Pvt) Ltd 31 - - - - - - - C T Capital Ltd - - - - - - - 347 C T Land Development PLC - - - 23,846 16 - - 14,889 Dialog Telekom PLC - 99,998 - - - 52,304 - 7,562 Galle Face Hotel Co. Ltd 122 - - - 289 - - - Kalamazoo Systems PLC - - - - - - - 633 Lanka Tiles PLC 714 - - 8,590 137 - - 2,000

Lanka Walltile Meepe (Pvt) Ltd - - - 1,991 - - - 29 Lanka Ceramics Ltd - - 1,258 22 - - 396 - Lanka Walltiles PLC - - - 704 - - - 424

Dividend received from subsidiary companies Cargills Retail (Pvt) Ltd - 71,250 Cargills Quality Foods Ltd 48,603 204,132

Transfer of investment Cargills Quality Foods Ltd 1,037,785 - As at 31 March 2011, Cargills (Ceylon) PLC transferred the ownership of Kotmale Holdings PLC to its wholly owned subsidiary

Cargills Quality Foods Limited. This transaction was done outside the trading floor of Colombo Stock Exchange consequent to a special approval from the Securities and Exchange Commission of Sri Lanka. The sales consideration amounted to Rs. 1,038 Mn and was accounted as intercompany receivable. As at the balance sheet date, the entire amount was due to the Company.

Advance for funding investment Millers Brewery Ltd 1,205,425 - Dawson Office Complex (Pvt) Ltd 249,599 -

Cargills (Ceylon) PLC has advanced a sum of Rs. 1,205 Mn to Millers Brewery Limited to fund the purchase of assets. This amount is reflected as an intercompany receivable pending the issue of shares in Millers Brewery Limited.

Company has advanced a sum of Rs. 250 Mn to Dawson Office Complex (Private) Limited to fund the purchase of assets. This amount is reflected as an intercompany receivable pending the issue of shares in Dawson Office Complex (Private) Limited.

(c) Transactions with related companies



Group 2011 2010

Sales Other Purchases Other Sales Other Purchases Other income expenses income expenses Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Transactions with holding company C T Holdings PLC 497 - - - 632 - - 629

Transactions with associate C T Properties Ltd - - - - 4 - - -

Transactions with other related companies Ceylon Hotels Corporation PLC 928 - - - 890 - - - Ceylon Printers PLC 87 - - 979 23 - - 243 Ceylon Theatres (Pvt) Ltd 395 - - - - - - -

C T Capital Ltd - - - - - - - 347 C T Land Development PLC - - - 48,521 80 - - 31,462 Dialog Telekom PLC - 99,998 - 61 - 80,792 - 7,593 Galle Face Hotel Co. Ltd 2,680 - - - 2,605 - - 10 Kalamazoo Systems Ltd - - - - 139 - - 633 Kandy Hotels Co. (1938) PLC 894 - - - 432 - - - Lanka Tiles PLC 714 - - 8,590 137 - - 2,230 Lanka Walltile Meepe (Pvt) Ltd - - - 2,106 - - - 2,303 Lanka Ceramics PLC - - 1,258 22 - - 396 - Lanka Walltiles PLC - - - 789 - - - 424 Paragon Ceylon Ltd - - - - - - - 495 Unidil Packaging (Pvt) Ltd - - 4,705 - - - 9,569 -

Panadaria (Private) Limited

Mrs. R Page, wife of the Deputy Chairman/CEO is a Director of the above company with which the Company had the following transaction during the year and the amount outstanding as at 31 March 2011 was Rs. 2,055,684 (2010 - Rs. 2,146,032).

- Purchases for re-sale in the ordinary course of business of Rs. 27,953,221 (2010 - Rs. 23,023,373) - Rental income of Rs. 1,560,000 (2010 - Rs. 780,000) There are no material related party transactions other than those disclosed above. (d) Amounts due from / due to related companies

Amounts due from and due to related companies as at the year end have been disclosed under note 20 to these financial statements.


Statement of value added

Value addition for 2011 Value addition for 2010

36.19%

6.46%

35.50%

27.17%28.83%

24.68%

8.92%

23.43%

5.09% 3.73%

To associatesTo associates

To government To government

To lenders of capitalTo lenders of capital

Retained for growthRetained for growth

To shareholdersTo shareholders

Group

2011 2010 % Rs. ‘ 000 % Rs. ‘ 000

Creation of value added

Gross revenue 38,156,172 31,772,821Cost of good and service (33,019,093) (27,476,535)

Value added from operation 5,137,079 4,296,286Dividend received 8 -Other income 582,450 510,453Total value added 5,719,537 4,806,739

Distribution of value added

To associatesSalaries, wages and other related costs 34.89 1,995,461 34.62 1,664,220Directors’ fees and remuneration 1.30 74,625 0.88 42,098 36.19 2,070,086 35.50 1,706,318To governmentGovernment levies 17.97 1,027,511 18.68 898,024Corporate taxes 5.46 312,530 6.00 288,334 23.43 1,340,041 24.68 1,186,358To lenders of capitalInterest 6.36 363,946 8.92 428,819Minority interest 0.10 5,623 - - 6.46 369,569 8.92 428,819To shareholdersDividends 5.09 291,200 3.73 179,200

Retained for growthDepreciation 14.88 851,291 16.08 772,852Retained earnings 13.95 797,350 11.09 533,192 28.83 1,648,641 27.17 1,306,044 100.00 5,719,537 100.00 4,806,739


Five year financial summary 2007 2008 2009 2010 2011 Group Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Financial resultsRevenue 17,936,712 23,142,619 28,692,481 30,874,797 37,128,661Profit from operation 675,013 947,199 1,232,186 1,429,545 1,825,442Profit before taxation 394,924 607,152 702,586 1,000,726 1,406,703Profit after taxation 337,454 491,016 539,900 712,392 1,094,173Minority interests (75,419) (43,169) (40,446) - (5,623)Profit attributable to Equity shareholders of the parent 262,035 447,847 499,454 712,392 1,088,550

Financial positionStated capital 130,723 130,723 130,723 130,723 130,723 Reserves 1,153,889 1,410,967 2,001,981 6,010,432 6,828,987Minority Interest 183,731 353,818 - - 89,723Capital and reserves 1,468,343 1,895,508 2,132,704 6,141,155 7,049,433

Current assets 2,681,012 3,627,091 4,249,141 4,697,601 5,736,722Current liabilities (4,578,529) (5,548,754) (6,371,303) (7,085,476) (11,348,392)Working capital (1,897,517) (1,921,663) (2,122,162) (2,387,875) (5,611,670)Non current assets 4,091,504 4,712,094 5,411,594 9,251,241 13,568,878Non current liabilities (725,644) (894,923) (1,156,728) (722,211) (907,775)Minority interest (183,731) (353,818) - - (89,723)Net assets 1,284,612 1,541,690 2,132,704 6,141,155 6,959,710 Key IndicatorsGrowth in turnover (%) 27.30 29.02 23.98 7.61 20.26Growth in earnings (%) 61.70 70.91 11.52 42.63 52.83Return on total assets (%) 3.87 5.37 5.17 5.11 5.67Growth in total assets (%) 23.42 23.13 15.85 44.39 38.40Growth in capital and reserves (%) 24.99 29.09 12.51 187.95 14.79Return on capital and reserves (%) 22.98 25.90 25.32 11.60 15.52Return on investment (%) 25.53 29.19 26.81 17.22 16.59Earnings per share (Rs.) 1.17 2.00 2.23 3.18 4.86Dividends per share (Rs.) 0.30 0.39 0.50 1.10 1.50Net assets per share (Rs.) 5.73 6.88 9.52 27.42 31.07Dividend pay out (%) 25.65 19.38 22.42 34.59 30.87Dividends paid 67,200 67,200 86,800 179,200 291,200Debt equity ratio (times) 4.13 4.18 3.53 1.27 1.74Interest cover (times) 2.41 1.79 2.33 3.33 5.02Current ratio (times) 0.59 0.65 0.67 0.66 0.51Quick assets ratio (times) 0.18 0.19 0.25 0.23 0.19Capital additions 954,353 1,058,914 1,096,392 602,720 1,408,938Market capitalisation 2,520,000 11,198,600 5,264,000 15,792,000 51,139,200

(a) Return on investment is computed by dividing the profit for the year by total average assets employed. (b) Debt equity ratio is computed by dividing the total liabilities by the shareholders’ funds. (c ) Above ratios have been computed based on 224,000,000 shares in issue as at 31 March 2011.


Group real estate portfolioLocation Land extent Building area Valuation / Costs Year of (Sq. ft.) Rs. ‘ 000 valuation

Cargills (Ceylon) PLC Colombo 01 141 Perches 140,000 1,640,000 2010 Colombo 02 82 Perches 12,450 473,000 2010 Kandy 94 Perches 6,729 750,000 2010 Maharagama 145 Perches 6,384 382,000 2010 Nuwara Eliya 57 Perches 6,900 106,000 2010 Mattakuliya 330 Perches 65,000 552,000 2010 Park Road - 4,332 28,000 2010 Boralasgamuwa 2.5 Acres - 167,500 2010

Cargills Quality Foods Limited Mattakuliya 1.5 Acres 6,667 188,500 2010 Ja - Ela 5.1 Acres 23,067 294,000 2010

Cargills Agrifoods Limited Katana 11.3 Acres 10,210 183,680 2010

Millers Limited Bandarawela 85 Perches 6,345 100,000 2010 Kelaniya 1.2 Acres 62,985 197,600 2010

C P C (Lanka) Limited Katoolaya estate, Thawalantenne 4 Acres 550 4,159 - Dawson Office Complex (Private) Limited Colombo 02 99 Perches - 249,599 - Kotmale Dairy Products (Private) Limited Mulleriyawa 1.7 Acres 29,615 69,000 - Bogahawatta 1.7 Acres 17,442 12,000 -

Note: Current year addition to the real estate portfolio from C P C (Lanka) Limited, Dawson Office Complex (Private) Limited and

Kotmale Dairy Products (Private) Limited are stated at their respective historical cost for which no valuation has been made during the financial year.


Investor relations supplement

5. Group companies

During the year Company acquired majority shareholding of Kotmale Holdings PLC at a purchase consideration of Rs. 1,038 Mn. Initially, the shareholding increased to 73.4% and subsequently with the mandatory offer closing on 30 December 2010, the shareholding was increased to 81.72%.

As at 31 March 2011, Cargills (Ceylon) PLC transferred the ownership of Kotmale Holdings PLC to its wholly owned subsidiary Cargills Quality Foods Limited.

During the year, Cargills Quality Foods Limited a wholly owned subsidiary of Cargills (Ceylon) PLC, acquired 100% ownership of Diana Biscuits Manufactures (Private) Limited with an investment of Rs. 343 Mn.

During the year, the Company incorporated Millers Brewery Limited to set up a brewery venture, which would commence busi-ness in the next financial year. The initial share capital issued amounted to Rs. 100,020/-.

Dawson Office Complex (Private) Limited incorporated with an initial share investment of Rs. 100 for the purpose of building an office complex to be utilised as head office of Cargills (Ceylon) PLC.

1. General

Stated capital Rs. 130,723,000 Issued shares 224,000,000 Class of shares Ordinary shares Voting rights One vote per ordinary share

2. Stock exchange listing

The issued ordinary shares of Cargills (Ceylon) PLC are listed in the Colombo Stock Exchange.

3. Distribution of shareholders

31 March 2011 31 March 2010 Size of Shareholders Holding Shareholders Holding Number % Number % Number % Number %

1 - 1,000 1,307 58.27 433,523 0.19 1,056 54.94 338,875 0.15

1,001 - 10,000 638 28.45 2,436,337 1.09 561 29.19 2,255,985 1.01

10,001 - 100,000 242 10.79 6,885,808 3.07 254 13.22 7,347,258 3.28

100,001 - 1,000,000 42 1.87 11,731,632 5.24 40 2.08 10,973,882 4.90

1,000,001 and over 14 0.62 202,512,700 90.41 11 0.57 203,084,000 90.66

2,243 100.00 224,000,000 100.00 1,922 100.00 224,000,000 100.00

4. Analysis of shareholders

31 March 2011 31 March 2010 Group of Shareholders Holding Shareholders Holding Number % Number % Number % Number %

Institutions 177 7.89 185,265,631 82.71 111 5.78 184,952,040 82.57

Individuals 2,066 92.11 38,734,369 17.29 1,811 94.22 39,047,960 17.43

Total 2,243 100.00 224,000,000 100.00 1,922 100.00 224,000,000 100.00

Residents 2,146 95.68 217,441,965 97.07 1,844 95.94 221,662,440 98.96

Non residents 97 4.32 6,558,035 2.93 78 4.06 2,337,560 1.04

Total 2,243 100.00 224,000,000 100.00 1,922 100.00 224,000,000 100.00


Investor relations supplement contd...

6. Share Valuation

The market price per share recorded during the year ended 31 March 2011 2010 Rs. Rs.

Highest 253.00 73.50 Lowest 70.00 23.00 Last traded price 228.30 70.50

7. Top 20 shareholders 31 March 2011 31 March 2010 The holdings of the top 20 shareholders Number of Number of Shares % Shares %

C T Holdings PLC 156,749,240 69.98 156,749,240 69.98 Mr. V R Page 14,380,200 6.42 14,285,000 6.38 Ceylon Guardian Investment Trust - A/C No.1 6,558,700 2.93 6,949,700 3.10 Employees Provident Fund 6,263,600 2.80 - - Mr. Anthony A Page 5,050,000 2.25 4,838,500 2.16 Odeon Holdings (Ceylon) Limited 4,622,920 2.06 4,622,920 2.06 Ms. M M Page 2,648,400 1.18 2,280,400 1.02 Mr. J C Page 1,705,500 0.76 1,705,500 0.76 Est. of Mrs. M M Udeshi 1,536,640 0.69 1,536,640 0.69 BNY - CF Ruffer Investment Funds : CF Ruffer Pacific Fund 1,500,000 0.67 - - HINL - JPMCB - Butterfield Trust (Bermuda) Limited 1,497,500 0.67 1,597,500 0.71 The Gilpin Fund Limited 864,000 0.39 864,000 0.39 The Associated Newspapers of Ceylon Limited 799,840 0.36 799,840 0.36 Bank of Ceylon No.1 Account 799,600 0.36 - - Northern Trust Co S/A - Northern Trust Fiduciary Services (Ireland) Ltd - as Trustee 787,500 0.35 - - Mr. C Gardiner, The Bishop of Jaffna, The Archbishop of Colombo 563,040 0.25 563,040 0.25 National Savings Bank 548,300 0.24 - - Pictet & Cie 500,000 0.22 500,000 0.22 Mr. P E Muttukumaru 393,500 0.18 356,040 0.16 Sri Lanka Insurance Corporation Ltd - Life Fund 382,100 0.17 8,518,600 3.80 Deutsche Bank -Employee Provident Fund - - 511,600 0.23 Deutsche Bank AG - National Equity Fund - - 500,000 0.22 Nikan (Private) Limited - - 466,800 0.21 Mr. B N Shiner - - 492,000 0.22 Mr. M M Udeshi - - 387,500 0.17 Total 208,150,580 92.93 208,524,820 93.09

8. Public holding

The percentage of shares held by the public as at 31 March 2011 was 18.38 % (2010 - 18.49%)


Notice of Annual General MeetingNotice is hereby given that the sixty fifth Annual General Meeting of the Company will be held at the Sri Lanka Foundation Institute, No. 100, Independence Square, on Thursday, 29 September 2011, at 10.00 a.m. and the business to be brought before the meeting will be:

1 To consider and adopt the Annual Report of the Board and the Statements of Accounts for the year ended 31 March 2011, with the Report of the Auditors thereon

2. To declare a dividend as recommended by the Directors

3. To re - elect Directors a) A. T. P. Edirisinghe, b) E. A. D. Perera, c) Sanjeev Gardiner, who retire by rotation, and d) Jayantha Dhanapala, who retires in terms of Section 210 (2) (b) of the Companies Act No. 7 of 2007 having attained

the age of seventy two years and offers himself for re-election in terms of Section 211 (1) and (2) of the Companies Act No. 7 of 2007.

Ordinary Resolution “Resolved that Jayantha Dhanapala, a retiring Director, who has attained the age of seventy-two years be and is hereby

reappointed a Director of the Company and it is hereby declared that the age limit of seventy years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the appointment of the said Director”

4. To authorise the Directors to determine contributions to charities for the financial year 2011/12

5. To authorise the Directors to determine the remuneration of the Auditors, Messrs. KPMG Ford, Rhodes, Thornton & Co., who are deemed reappointed as Auditors at the Annual General Meeting of the Company in terms of Section 158 of the Companies Act No. 7 of 2007

By Order of the BoardCargills (Ceylon) PLC

S L W Dissanayake Company Secretary

17 August 2011

Notes :

i. A member is entitled to appoint a proxy to attend and vote at the meeting in his or her stead and the proxy need not be a member of the Company.

ii. A form of proxy is enclosed for this purpose.

iii. The instrument appointing a proxy must be completed and deposited at the registered office of the Company not less than 48 hours before the time fixed for the meeting.


Proxy form

..............................................Date

...............................................................Signature of member (s)

For use at the sixty fifth Annual General Meeting

*I / We ………………………..................................................................................…………….......................................................………………

of ……………………………………....................….........................………………………............................................................................. being

a *member/members of Cargills (Ceylon) PLC hereby appoint …...............................................................................................................…..

of …................................................................…..…………...........................................……......................….......………….……......whom failing

.........................….......………......................................................................………........................................................................…....…………of ..

........................................................................................................................... or failing him / her,

the Chairman of the Meeting as *my/our Proxy to represent *me/us and to vote for on *my/our behalf at the sixty fifth Annual General Meeting of the Company to be held on Thursday, 29 September 2011 and at any adjournment thereof and at every Poll which may be taken in consequent thereof in the manner indicated below:

Ordinary resolutions

Resolution number 1 2 3 (a) 3 (b) 3 (c) 3 (d) 4 5

For

Against

NOTES:

(a) *Strike out whichever is not desired

(b) Instructions as to completion of the Form of Proxy are set out in the reverse hereof

(c) A Proxy holder need not be a Member of the Company

(d) Please indicate with an “X” in the cage provided how your Proxy holder should vote. If no indication is given, or if there is, in the view of the Proxy holder, any doubt (by reason of the manner in which the instructions contained in the Proxy have been completed) as to the way in which the Proxy holder should vote, the Proxy holder in his/her discretion may vote as he/she thinks fit


Instructions as to completion of the proxy form

1. To be valid, the completed Form of Proxy should be depos-ited at the Registered Office of the Company at No: 40, York Street, Colombo 1, not less than 48 hours before the time appointed for the holding of the Meeting.

2. In perfecting the form, please ensure that all details are legi-ble. If you wish to appoint a person other than the Chairman as your proxy, please fill in your full name and address, the name and address of the proxy holder and sign in the space provided and fill in the date of signature.

3. The instrument appointing a Proxy shall, in the case of an individual, be signed by the appointer or by his Attorney and in the case of a Corporation must be executed under its Common Seal or in such other manner prescribed by its Articles of Association or other constitutional documents.

4. If the Proxy Form is signed by an Attorney, the relevant Power of Attorney or a notarially certified copy thereof, should also accompany the completed Form of Proxy, if it has not already been registered with the Company.

5. In the case of joint holders, only one need sign. The votes of the senior holder who tenders a vote will alone be counted.

6. In the case of non-resident Shareholders, the stamping will be attended to upon return of the completed form of proxy to Sri Lanka.

Proxy form contd...

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