2011 Annual Report - Cargills (Ceylon)

Cargills (Ceylon) PLCThe year 2010/11 was a year of unprecedented investment for Cargills (Ceylon) PLC. We acceleratedthe expansion of our flagship supermarket chain while continuing to build on our strength in the foodmanufacturing sector. We entered new product categories and invested in people and in technologyto harness this expansion. We redefined our place in the dairy sector acquiring a brand with a distinctidentity that is synonymous with the industry. Through these investments we will connect our brandswith millions of consumers to improve quality of life. Our investments will continue to help farmers andcommunities succeed, and our stakeholders enjoy sustainable returns. In the year 2011/12 and beyond ourcommitment towards Investing for Growth remains steadfast.ContentsOur businesses 2 - 3Financial highlights 4 - 5Profile of Directors 6Chairman’s statement 7 - 11Corporate governance 12 - 16Audit & Remuneration Committee reports 17Risk management 18-19Sustainability report 20 - 26Financial information 27 - 66Statement of value added 67Five year financial summary 68Group real estate portfolio 69Investor relations supplement 70 - 71Notice of Annual General Meeting 72The proxy form is on page 73

2 Annual Report 2011Our businessesCargills (Ceylon) PLCCargills is Sri Lanka’s largest modern retailer with more than50% of the modern trade market share. Its pioneer venture intomodern trade was an innovation of the Company’s tradinglegacy. Thereafter Cargills Food City continued to challengethe norm by taking to the masses what was traditionally anaffluent focused business and offering ‘higher value for thelowest price’.Today the Cargills retail operation has grown to 163outlets spread across the 25 districts, as ‘Cargills Food City’supermarkets, ‘Cargills Express’ convenience stores andCargills ‘Big City’ hypermarket. In its short span of operation of28 years, Cargills Food City has been consistently rated amongthe most valuable brands in Sri Lanka as per the Brand FinanceIndex rating.The Company is also in the business of food manufacturing,restaurant and distribution through its subsidiaries givenbelow.Cargills Quality Dairies (Private) LimitedMagic is the number one dairy ice cream in Sri Lankaand is a strong number two player in the overall ice creammarket. Cargills Quality Dairies which produces CargillsMagic ice cream, Milk and Milk Shakes is the first and onlydairy product manufacturing Company in Sri Lanka to beaccredited with all three ISO certifications; ISO 9001: 2000Quality Management System certification, ISO 22000: 2005Food Safety Management System certification and ISO 14001:2004 Environment Management System certification. CargillsMagic was the first to introduce fresh fruits and local flavours toits portfolio of ice creams creating a new trend in the overall icecream industry. Through its innovation driven focus CargillsMagic has expanded its market share exponentially and is nowthe fastest growing ice cream brand in Sri Lanka.Cargills Agrifoods LimitedKist is one of the most trusted brand names in Sri Lanka knownby generations for its true Sri Lankan flavours and high standardsof quality. Cargills Kist which is traditionally renowned for itsdelectable selection of jams, sauces and cordials has expandedits 100% fruit based product range introducing fruit basednectars to the market. Today the nutritious and delicious Kistnectar range has revolutionized the industry and is popular forits genuine fruity taste.Cargills Quality Foods LimitedThe processed meats range consists of Cargills Supremocatering to mass market demand, Cargillls Finest a premiumdeli range and traditional favorites ‘Goldi’ and ‘Sams’.Cargills is rapidly gaining market share in this categorythrough its product innovation, quality and unique taste.Cargills Quality Foods is the only meat processing plant inSri Lanka that has secured the ISO 9001: 2000 Quality

Annual Report 20113Our businesses contd...Management System certification, ISO 22000: 2005 FoodSafety Management System certification and ISO 14001: 2004Environment Management System certification. The Companyhas also engaged international expertise to develop new andinnovative products which offer a novel variety of taste whilstcatering to the nutritional needs of the consumer.Cargills Food Processors (Private) LimitedThe Company holds the franchise for the internationallyacclaimed KFC chain which is the largest and most popularinternational restaurant chain in the country. The successof KFC was in the fusion of an international brand withwell - loved Sri Lankan recipes. The locally inspired additionsto the KFC menu have now been included into the regionalproduct portfolio.Kotmale Holdings PLCKotmale is a leading brand in the dairy sector known forhighest quality products at a reasonable price having enteredthe market three decades ago. The Brand is synonymous withlocally produced cheese and has won mass appeal for itsdelicious range of dairy ice cream as well as pasteurized milk,yoghurt, fresh cream, ghee, curd and fruit drinks. Establishedin 1967 as Lambretta (Ceylon) Ltd, its beginnings are tracedback to the cool surroundings of Bogahawatte, Patana (UpperKotmale). Kotmale Holdings PLC was acquired by the CargillsGroup in 2010.Diana Biscuits Manufactures (Private) LimitedDiana Biscuits Manufactures (Private) Limited is engaged inthe manufacturing, distribution and marketing of biscuits andconfectionaries under the Brand name ‘Helan’. The Companywas a family owned business established in 2006 and acquiredby Cargills in 2010 and manufactures soft & hard doughbiscuits & wafers. The factory is located at the NalandaIndustrial Estate in Matale. The Company has now beenrenamed as Cargills Quality Confectionaries (Private) Limited.The biscuits would be relaunched shortly under a new Brandname and would be an altogether new and improved range.Millers Brewery LimitedMillers Brewery Limited is the brewer of the finest beers in thecountry such as ‘Three Coins’ ‘Irish Dark’, ‘Sando Stout’ and‘Grand blonde’ that have also won international appeal. TheCompany which came into the Cargills fold in 2011 is presentlyexpanding its capacity and upgrading its infrastructure.THREE COINST H E A L L M A L T B E E RMILLERS BREWERY LIMITED, SRI LANKAMillers LimitedThe Group’s marketing and distribution arm Millers, is one ofthe largest distribution and logistic operations in the countrygeared with a network spread across the 25 districts of SriLanka. Millers is the island wide distributor for internationalbrands such as Kodak, Kraft, Cadbury, Bonlac, Nabisco, Tang,Toblerone etc and is also the mass market distributor for ownbrands.

4 Annual Report 2011Financial highlightsRs. BnGroup 2011 2010 changeRs. ‘ 000 Rs. ‘ 000 %OperationsTurnover 37,128,661 30,874,797 20.26Profit from operation 1,825,442 1,429,545 27.69Rs. MnProfit before taxation 1,406,703 1,000,726 40.57Profit after taxation 1,094,173 712,392 53.59Balance sheetNon current assets 13,568,878 9,251,241 46.67Current assets 5,736,722 4,697,601 22.12Current liabilities 11,348,392 7,085,476 60.16Non current liabilities 907,775 722,211 25.69Capital and reserves 7,049,433 6,141,155 14.79Per share data (Rs.)Rs. MnEarnings per share 4.86 3.18 52.83Dividend per share 1.50 1.10 36.36Net assets per share 31.07 27.42 13.31Market value per share 228.30 70.50 223.83Cash FlowNet 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

Annual Report 20115Financial highlightsRs. BnCompany 2011 2010 changeRs. ‘ 000 Rs. ‘ 000 %OperationsTurnover 29,669,660 17,328,142 71.22Profit from operation 1,050,355 642,721 63.42Profit before taxation 756,107 345,487 118.85Profit after taxation 555,285 315,443 76.03Rs. MnBalance sheetNon current assets 9,355,826 8,400,290 11.38Current assets 6,501,560 2,730,386 138.12Current liabilities 10,599,605 6,134,818 72.78Non current liabilities 452,215 474,465 (4.69)Capital and reserves 4,805,566 4,521,393 6.29Per share data (Rs.)Earnings per share 2.48 1.41 75.89Dividend per share 1.50 1.10 36.36Net assets per share 21.45 20.18 6.29Market value per share 228.30 70.50 223.83Rs. MnCash FlowNet 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)Rs. Bn

6 Annual Report 2011Profile of DirectorsMr. L R Page**ChairmanMr. Louis R Page is a Fellow Member of the Institute ofChartered Accountants of Sri Lanka and a Fellow Member ofthe Chartered Institute of Management Accountants (UK). Hehas been involved in the operations of the C T Holdings groupin a non - executive capacity and in the setting and review ofpolicy framework, and in key investment decision-making.He has also held a number of senior management and boardpositions in overseas companies.Mr. V R PageDeputy Chairman / CEOMr. Ranjit Page possesses over 28 years of managementexperience with expertise in food retailing, food service,and manufacturing, having introduced the concept ofsupermarketing to the Sri Lankan masses. He also serves onthe boards of several other companies. He is also a Founder-Director of the Mawbima Lanka Foundation, set up to promotelocal industry and produce. He was appointed ManagingDirector 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 theInstitute of Chartered Accountants of Sri Lanka and a FellowMember of the Chartered Institute of Management Accountants(UK). He has been involved in the operations of the Companyin an executive capacity at different intervals progressively athigher levels (appointed Director 1997 and Deputy ManagingDirector in 2001) spanning a period of 24 years, leaving theservices of the Company for employment abroad on twooccasions in between whereby he also gained valuable exposureholding a number of senior management positions in overseascompanies. He was appointed Managing Director/DeputyCEO in May 2010.Mr. S V KodikaraExecutive DirectorMr. Sidath Kodikara is the Chief Operating Officer for Retailand Restaurant operations. He is a Member of the Institute ofHospitality of United Kingdom. He counts over 26 years ofmanagerial experience in the hospitality and retail sector.Mr. P S MathavanExecutive DirectorMr. Prabhu Mathavan is the Chief Financial Officer. He is anAssociate Member of the Chartered Institute of ManagementAccountants (UK) and the Institute of Chartered Accountants ofSri Lanka. He also holds a Bachelors Degree in Commerce. Hepossesses 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 aformer Ambassador of Sri Lanka to the USA (1995-1997) andto the UN Office in Geneva (1984-1987). He was Director ofthe UN Institute for Disarmament Research (UNIDIR) from1987-1992. As a Sri Lankan diplomat Mr. Dhanapala servedin London, Beijing, Washington D.C., New Delhi and Genevaand represented Sri Lanka at many international conferenceschairing several of them. He is currently the President of thePugwash Conferences on Science and World Affairs ; a memberof the Governing Board of the Stockholm International PeaceResearch Institute (SIPRI) and several other advisory boards ofinternational bodies.Mr. A T P Edirisinghe*DirectorMr. Priya Edirisinghe is a Fellow Member of the Institute ofChartered Accountants of Sri Lanka and a Fellow Member ofthe Chartered Institute of Management Accountants (UK) andholds a Diploma in Commercial Arbitration. He was the SeniorPartner of HLB Edirsinghe & Co., Chartered Accountants andcurrently serves as Consultant / Advisor. He counts over 41years of experience in both public practice and in the privatesector. He serves on the Boards of a number of other listed andnon-listed companies.Mr. Sanjeev Gardiner**DirectorMr. Sanjeev Gardiner is the Chairman and Chief ExecutiveOfficer of the Gardiner group, comprising the Galle Face HotelCo. Limited, the Ceylon Hotels Corporation PLC, Kandy HotelsCompany (1938) PLC (which owns the Queen’s and SuisseHotels in Kandy), and The Surf, Bentota. He is also a Directorof several public and private companies and counts over22 years of management experience. He holds a Bachelor ofBusiness Degree from Royal Melbourne Institute of Technologyand Bachelor of Business Degree (Banking and Finance) fromMonash University, Australia. He has been a Council Memberof HelpAge International, Sri Lanka branch for several years.Mr. Sunil Mendis*DirectorDesamanya Sunil Mendis was formerly the Chairman ofHayleys group, and the immediate former Governor of theCentral Bank of Sri Lanka. He possesses around 44 years ofwide and varied commercial experience most of which has beenin very senior positions.Mr. Anthony A Page**DirectorMr. Anthony Page is the Chairman of C T Holdings group ofcompanies and counts 42 years of management experience ina diverse array of businesses. He serves on the Boards of manygroup as well as other companies. He is a Fellow Member of theInstitute of Chartered Accountants of Sri Lanka. He was on theBoard of the Colombo Stock Exchange and also was a formerCouncil Member of the Employers Federation of Ceylon.Mr. J C Page**DirectorMr. Joseph Page is the Deputy Chairman/Managing Directorof C T Land Development PLC. He is also Executive Director ofC T Properties Limited. Prior to joining C T Land DevelopmentPLC he was Executive Director of Millers Limited. He has over28 years of management experience in the private sector.Mr. E A D Perera*DirectorMr. Errol Perera has held Senior Management positions inEngland and Malaysia. On his return to Sri Lanka he focused onpromoting joint venture projects with foreign investment andtechnology transfer. He was successful in obtaining Board ofInvestment approval with pioneer status for projects in the fieldof telecommunications and financial services. He is at present aDirector of several other listed and non-listed companies in SriLanka and overseas.* Independent Non Executive** Non Independent Non Executive

Annual Report 20117Chairman’s statementDear Shareholders,It gives me great pleasure to present, on behalf of the Boardof Directors, the Annual Report and the Audited FinancialStatements for the year ended 31 March 2011.Rs. 37,129 Mn(2010 - Rs. 30,875 Mn)Group Turnover20.26 % GrowthIn 2010 the Sri Lankan economy maintained a steady growthof 8% whilst most developed economies continued to grapplewith the implications of the 2008 financial meltdown. Stateinvestments in infrastructure development and progressivepolicy changes proposed through the 2010 budget have laidthe foundation for the private sector to fast track investment.Considering this promising economic and policy environment,your Company has continued to invest and expand withthe long term vision of evolving into a globally competitiveenterprise. The year saw the highest ever annual investmentmade by your Company in its 167 year history. Strategicinvestments were made towards developing business modelsthat are led by professional management teams, supported byadvanced technology delivering quality products and services.With all of the above we aim to transform your Company intoan enterprise that can compete with multinational corporationsin our industry.The year concluded saw your Companyexcelling its performance in all areas ofbusiness with both Retail and FMCGreporting appreciable growth in revenueand profits.The year concluded, saw your Company excelling itsperformance in all areas of business with both Retail and FastMoving Consumer Goods (FMCG) reporting appreciablegrowth in revenue and profits.Retail‘Cargills Food City’ your flagship brand continues to leadthe modern trade category with the chain now reaching 163locations island wide. This sector’s success has been achievedthrough a constant focus on what matters to our customers.“Cargills Food City Express” is a new store concept that is nowbeing established to meet consumer needs even in the remotestlocations of each district. This smaller store model is stylizedto meet the unique needs of its immediate neighborhood whileoffering the same comfort and convenience of the larger format.Our infrastructure and leadership is in place to maintain thecurrent pace of expansion and the focus on a smaller and leanerformat would certainly see healthier returns in the long term.Cargills Food City has also remained consistent in offeringthe most competitive prices in every department for identifiedproducts that impact everyday living. We believe our initiativesin reducing the cost of living whilst engaging with rural youthand farmer communities to create sustainable value, is alignedwith the needs of our core customer base. Training farmers onbest practices in crop and animal agriculture, facilitating credit,providing inputs, transport and infrastructure along with fairRs. Bn403530252015105-Turnover2007 2008 2009 2010 2011

8 Annual Report 2011Chairman’s statement contd...Rs. 1,407 Mn(2010 - Rs. 1,001 Mn)Group Profit before tax40.57 % GrowthThe success enjoyed by the FMCG sectorof your Company stems from yearsof strategic planning and a dynamicmanagement style complemented by avibrant team.Rs. Mn1,6001,4001,2001,000800600400200-Profit before tax2007 2008 2009 2010 2011and transparent pricing policies has elevated the dignity offarming to that of a profitable and attractive enterprise. Theapproach has helped retain a new generation of young ruralfarmers within the industry reducing regional unemploymentand under-employment. This commitment reinforces ourposition as a responsible retailer and makes us the preferredchoice for consumers.FMCGThe success enjoyed by the FMCG sector of your Company stemsfrom years of strategic planning and dynamic managementcomplemented by a vibrant team. Our national brands haveemerged key players in their categories through an innovationdriven focus.Cargills Magic continues to set the benchmark in the ice creamindustry growing market share and churning out new productvariations both in take-home and impulse categories. Theinvestments made in the latest technology have elevated CargillsMagic to a new tier of taste, variety and quality. Magic is nowwell positioned as the No 1 dairy ice cream in Sri Lanka andstands as a strong brand in its own right. In the year concludedthe Company expanded its distribution network establishing astrong presence in the Northern region. Investments made instrengthening its cold-chain have yielded results with Magicgaining popularity and market share.The Company’s agri-processing business Cargills Kist hasenhanced its product portfolio by introducing two-fruitvariations to its popular nectar and jam ranges. The culinaryrange was also expanded to provide consumers exciting newaccompaniments to their meals and snacks. Kist has nowmatured into a truly household brand closely linked with thedaily lives and eating habits of Sri Lankans.The brand will soonincrease this presence in the near future with the entry into newproduct segments and categories.Cargills processed meats continues to enjoy a steady progress.The Company’s approach towards catering to varied marketsegments has proven successful. Cargills Finest, the uniqueEuropean deli range has now taken leadership in the premiumproduct segment and enjoys a good demand from theinstitutional market. Traditional favourites ‘Goldi’ and ‘Sams’too have been re-introduced to the market. The continueddelivery of exciting and innovative products would see thebrands consolidating the Company’s presence in the processedmeat category. The year ended saw Cargills meats enhancingmarket presence in Maldives and India.

Annual Report 20119Chairman’s statement contd...Rs. 6,960 Mn(2010 - Rs. 6,141Mn)Shareholders’ funds13.33 % GrowthThe KFC chain of restaurants enjoyed a vibrant year with somepopular products being re- launched and growing transactions.The increased tendency for urban clientele to seek modern yetaffordable ‘eating-out’ facilities is reflected in the exceptionalperformance of the restaurant sector. The Company is bullishabout this sector and looks forward to playing a greater rolein the hospitality arena as the country welcomes an increasednumber of travellers and economic activity stimulates demandfrom a growing segment of middle income families.Millers Limited is now being nurtured to take on theresponsibility of driving the FMCG business through its strongsales force and advanced logistics operation that reaches 40,000retailers islandwide. The distribution and marketing operationis being further strengthened in terms of personnel andinfrastructure to support the Company’s increased interests inthe sector. The Company’s international agency lines are alsoperforming to expectation and would be further enhanced intandem with the demand for branded consumer goods.FMCG ExpansionYour Company has identified the expansion and diversificationof the FMCG sector to be a thrust in its overall growth plans. Theyear ended saw your Company making strategic investments tostrengthen its position as a lead player in the FMCG industry.These investments reflect our strong commitment to growthand would enable us to connect our brands with millionsof consumers to improve quality of life, help farmers andcommunities succeed, and our stakeholders enjoy sustainablereturns.Rs. Mn1,2001,000800600400200-Profit after tax2007 2008 2009 2010 2011In November 2010 Cargills expanded its interests in the dairysector with the acquisition of Kotmale Holdings PLC. TheCompany now holds an 81.72% stake in Kotmale. With thechange in ownership, the Kotmale Board of Directors wasreconstituted on 5 January 2011 and Mr. Stuart Young wasappointed Chairman to consolidates Cargills’s interests in thedairy sector and expand its product range from its presentleadership in the dairy ice cream category through CargillsMagic. This also offers Cargills the opportunity to build onits successful out-grower model that directly impacts ruraleconomies island wide. Kotmale and Cargills Magic togethercollect 22 million litres of fresh milk from an over 20,000 strongdairy farmer network, making Cargills the 3rd largest milkcollector in the island.Your Company has identified theexpansion and diversification of theFMCG sector to be a thrust in its overallgrowth plans.Cargills entered the confectionary industry in November2010 when Cargills Quality Foods Limited acquired DianaBiscuits Manufactures (Pvt) Ltd. The production plant located

10 Annual Report 2011Chairman’s statement contd...Rs. Mn1,2001,000800600400200-Rs. 19,306 Mn(2010 - Rs. 13,949 Mn)Total assets (Group)38.40 % GrowthOver the years Cargills has practiceda multi-stakeholder value creationapproach through which your Companyhas impacted the development of ourCountry.Turnover vs profit after tax2007 2008 2009 2010 2011TurnoverProfit after taxRs. Bn403530252015105-in Nalanda, Matale is now being modified to develop a widerproduct range than what was hitherto marketed under the‘Helan’ brand. The first range of biscuits made to new recipesis to be launched shortly under a new brand name and wouldwithout doubt excite customers and the industry with itssensational new selection of biscuit varieties. The Company hassince been renamed Cargills Quality Confectionaries (Pvt) Ltd.In the fourth quarter of 2010/11 the newly incorporatedsubsidiary Millers Brewery Limited (MBL) entered into anagreement for the purchase of the business and business assets,including the brands of McCallum Breweries (Ceylon) Limited,McCallum Brewing Company (Private) Limited and Three CoinsCompany (Private) Limited . In relation to this transaction, MBLhas obtained the relevant licenses dated 7 February 2011 fromthe Excise Commissioner (Revenue) of the Excise Departmentof Sri Lanka. The acquisition included renowned brands suchas ‘Three Coins’, ‘Sando Stout’, ‘Three Coins Riva’, ‘Irish Dark’and ‘Grand Blonde’. Mr. Stuart Young was also entrusted withthe responsibility of driving the success of MBL.The upbeat forecasts from the tourism sector and the changein lifestyle stemming from economic growth augurs well forour investments in the soft alcohol industry. MBL has nowcommenced production and distribution while a sales strategyis being implemented to revive the ‘Three Coins’ brand. Themanagement team of MBL would be developing a range of highquality beverages with local roots but with an internationaloutlook with a view to catering to both the mass market andniche clientele. The ready access the MBL brands would haveto distribution channels including linkages with institutionalcustomers provides a strong platform from which MBL shouldcertainly develop into a formidable player in the medium term.The Company is optimistic that said investments would yieldabove average returns in the medium to long term and is alsoaware of the initial impact on the bottom line in terms of higherinterest costs and turnaround time of the two loss makingbiscuit and brewery operations. We are confident of minimisingthis turnaround time based on our previous experience inpurchasing loss making business entities and transformingthem into formidable industry leaders in the medium term.My Country. My CompanyOver the years Cargills has practiced a multi-stakeholder valuecreation approach through which your Company has impactedthe development of our Country. Cargills has remained closelyengaged with our community in our sustainable businesspractices by supporting the reduction of cost of living,enhancing youth skills and bridging regional disparity. Ourcontinued confidence in our Country and the resilience of ourpeople coupled with our commitment to play an increasingly

Annual Report 201111Chairman’s statement contd...nurturing role in uplifting our community now warrantstaking this platform to an even higher level. The year aheadwould see your Company playing an even more significantrole in building on its core strength of food and nutritionwhilst investing into key growth sectors of our Country. YourCompany believes in a bright and prosperous future for SriLanka and is now well positioned as a trusted partner of SriLanka to spearhead that journey of success.Rs. 4.86(2010 - Rs. 3.18)Earnings per share (Group)52.83 % GrowthRs. 31.07(2010 - Rs. 27.42)Net assets per share (Group)13.31 % GrowthSummary of PerformanceYour Company recorded an excellent performance in the yearconcluded 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 havingachieved a growth of 20%. Profit before tax has recorded a 41%increase to Rs. 1.4 Bn. The Group after tax profit attributable toshare holders was Rs. 1.1 Bn a growth of 53% over the previousyear’s profit of Rs. 712 Mn.AppropriationA dividend of 50 cents per share was paid on 7 February2011 as interim dividend and a dividend of Rs. 1 per sharewill be proposed at the forthcoming annual general meeting.The Company maintains a consistent dividend policy beingaware of its capital commitments towards investment aimedat long-term growth. The performance of the share bears ampletestimony to shareholder appreciation of the increasing valueof the Company. We are confident that the Company wouldcontinue to create substantial and sustainable capital wealth inthe future.AcknowledgementIn conclusion I take this opportunity to commend our team of6,790 persons who have worked with enduring commitmentand loyalty to engage every opportunity that has come our way.The quality of our performance is attributed to this remarkablycompetent team, their knowledge, skills and professionalism.I extend my sincere thanks to the Board of Directors whoseleadership and foresight has steered the Company to success.I thank our business partners in the farming communitiesand 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 continuedconfidence in us. I am sure you will stay with us as we strive tocreate greater value in our enterprise and contribute towardsthe progress and prosperity of our country.SignedL R PageChairman17 August 2011

12 Annual Report 2011Corporate governanceThe disclosures below demonstrate the extent to which the principles of good corporate governance are complied with within theGroup. Further to the above, the Board of Directors to the best of knowledge and belief is also satisfied that all statutory paymentsdue 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 ColomboStock Exchange:Corporate Governance Rule7.10.1 Non-Executive Directorsa) The board of directors of a Listed Entity shall include atleast,(i) Two non-executive directors; or(ii) Such number of non-executive directors equivalent to onethird of the total number of directors whichever is higher.b) The total number of directors is to be calculated based on thenumber as at the conclusion of the immediately precedingAnnual General Meeting.c) Any change occurring to this ratio shall be rectified withinninety (90) days from the date of the change.ComplianceStatusComplied withComplied withNot applicable(N/A)DetailsCompany has eight non executive directorsand four executive directors on its board.The composition of the Board remainunchanged all throughout.During the year no changes occurred to thisratio.7.10.2 Independent Directorsa) Where the constitution of the board of directors includes onlytwo non-executive directors as mentioned above, both suchnon-executive directors shall be ‘independent’.In all other instances two or 1/3 of non-executive directorsappointed to the board of directors, whichever is higher shallbe ‘independent’b) The board shall require each non-executive director tosubmit a signed and dated declaration annually of his/herindependence or non-independence against the specifiedcriteria.7.10.3 Disclosures Relating to Directorsa) The board shall make a determination annually as to theindependence or non-independence of each non-executivedirector based on such declaration and other informationavailable to the board and shall set out in the annual reportthe 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 thatthe director is nevertheless ‘independent’, The board shallspecify the criteria not met and the basis for its determinationin the annual report.c) In addition to the disclosures relating to the Independence ofa director set out above, the board shall publish in its annualreport a brief resume of each director on its board whichIncludes information on the nature of his/her expertise inrelevant functional areas.d) Upon appointment of a new director to its board, the Entityshall forthwith provide to the exchange a brief resume of suchdirector for dissemination to the public. Such resume shallinclude information on the matters itemized in paragraphs(a), (b) and (c) above.Complied withComplied withComplied withComplied withComplied withComplied withOne half of non executive directors determinedto be independent.Each non executive director has provideda signed and dated declaration of his/ herindependence or non independence againstthe criteria laid down in the listing rules.One non executive director is an independentdirector as per the criteria set.Three other non executive directors aredeemed independent by the Board andthe criteria not met and the basis for suchdetermination is set out in Note on page 16.Please refer profile of directors on page 6.Mr. M I Abdul Wahid was appointed tothe Board on 21 May 2010 and the requireddetails were submitted to the exchange thesame day.

Annual Report 201113Corporate governance contd...Corporate Governance RuleComplianceStatusDetails7.10.5 Remuneration CommitteeA Listed Entity shall have a remuneration committee inconformity with the following:(a) CompositionThe remuneration committee shall comprise;(i) a minimum of two independent non-executive directors(in instances where an Entity has only two directors of onits board); or(ii) non-executive directors a majority of whom shall beindependent, whichever shall be higher.In a situation where both the parent company and the subsidiaryare ‘Listed Entities’, the remuneration committee of the parentcompany may be permitted to function as the remunerationcommittee of the subsidiary.However, if the parent company is not a Listed Entity, then theremuneration committee of the parent company is not permittedto act as the remuneration committee of the subsidiary. Thesubsidiary shall have a separate remuneration committee.Complied withComplied withN/AThe remuneration committee comprise threeindependent non executive directors and thedetails are given on the inner back cover.Kotmale Holdings PLC is a subsidiary ofthe Company and has its own remunerationcommittee.N/AOne non-executive director shall be appointed as Chairman ofthe committee by the board of directors.Complied withPlease refer inner back cover.(b)FunctionsThe remuneration committee shall recommend the remunerationpayable to the executive directors and Chief Executive Officer ofthe Listed Entity and/or equivalent position thereof, to the boardof the Listed Entity which will make the final determinationupon consideration of such recommendations.(c) DisclosuresThe annual report should set out the names of directors (orpersons in the parent company’s committee in the case of a groupcompany) comprising the remuneration committee, contain astatement of the remuneration policy and set out the aggregateremuneration paid to executive and non-executive directors.The term “remuneration” shall make reference to cash andall non-cash benefits whatsoever received in considerationof employment with the Listed Entity (excluding statutoryentitlements such as Employees Provident Fund and EmployeesTrust Fund).Complied withComplied withThe Committee recommends to theBoard the remuneration payable to theExecutive Directors and the Chief ExecutiveOfficer. In recommending an appropriateremuneration package the primary objectiveof the Committee is to attract and retain theservices of highly qualified and experiencedpersonnel.Please refer inner back cover for the names ofdirectors of the remuneration committee.Please refer the remuneration committeereport on page 17 for a statement of theremuneration policy.Please refer Note 7 to the financial statementsfor the aggregate remuneration paid to thedirectors.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 itsboard); or(ii) non-executive directors a majority of whom shall beindependent, whichever shall be higher.Complied withThe audit committee comprise threeindependent non executive directors.

14 Annual Report 2011Corporate governance contd.Corporate Governance RuleComplianceStatusDetailsIn a situation where both the parent company and the subsidiaryare ‘Listed Entities’, the audit committee of the parent companymay function as the audit committee of the subsidiary.However, if the parent company is not a Listed Entity, then theaudit committee of the parent company is not permitted to actas the audit committee of the subsidiary. The subsidiary shouldhave a separate audit committee.Complied withN/AKotmale Holdings PLC is a subsidiary of theCompany and has its own audit committee.N/AOne non-executive director shall be appointed as Chairman ofthe committee by the board of directors.Complied withPlease refer inner back cover.Unless otherwise determined by the audit committee, the ChiefExecutive Officer and the Chief Financial Officer of the ListedEntity shall attend audit committee meetings.Complied withPlease refer audit committee report on page 17.The Chairman or one member of the committee should be amember of a recognized professional accounting body.Complied withThe Chairman of the committee is a memberof ICASL and CIMA (UK).(b) FunctionsShall include,(i) Overseeing of the preparation, presentation and adequacyof disclosures in the financial statements of a Listed Entity,in accordance with Sri Lanka Accounting Standards.Complied withPlease refer audit committee report on page 17.(ii) Overseeing of the Entity’s compliance with financialreporting requirements, information requirements of theCompanies Act and other relevant financial reportingrelated regulations and requirements.(iii) Overseeing the processes to ensure that the Entity’sinternal controls and risk management are adequate,to meet the requirements of the Sri Lanka AuditingStandards.Complied withComplied with(iv) Assessment of the independence and performance of theEntity’s external auditors.Complied with(v) To make recommendation to the board pertaining toappointment, re-appointment and removal of externalauditors and to approve the remuneration and terms ofengagement of the external auditors.Complied with(c) DisclosuresThe names of the directors (or persons in the parent company’scommittee in the case of a group company) comprising the auditcommittee should be disclosed in the annual report.The committee shall make a determination of the independenceof the auditors and shall disclose the basis for such determinationin 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 tothe above, during the period to which the annual report relates.Complied withComplied withComplied withPlease refer inner back cover.Please refer audit committee report on page 17.Please refer audit committee report on page 17.

Annual Report 201115Corporate governance contd...Company’s adherence to the Provisions of Rule 7.6 as required by the Listing Rules of the Colombo Stock Exchange ondisclosure in Annual Reports of Listed Entities:Corporate Governance RuleA Listed Entity must include in its annual reports and accounts,inter alia;i) Names of persons who were Directors of the Entityduring the financial year.ii) Principal activities of the Entity and its subsidiariesduring the year and any changes therein.iii) The names and the number of shares held by the 20largest holders of voting and nonvoting shares and thepercentage of such shares held.iv) The public holding percentage.v) A statement of each director’s holding and Chief ExecutiveOfficer’s holding in shares of the Entity at the beginningand end of each financial year.vi) Information pertaining to material foreseeable risk factorsof the Entity.vii) Details of material issues pertaining to employees andindustrial relations of the Entity.viii)Extents, locations, valuations and the number of buildingsof the Entity’s land holding and investment properties.ix) Number of shares representing the Entity’s statedcapital.x) A distribution schedule of the number of holders in eachclass of equity securities and the percentage of their totalholdings 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 shareHighest and lowest value recordedValue as at the end of financial year.ComplianceStatusComplied withComplied withComplied withComplied withComplied withComplied withN/AComplied withComplied withComplied withComplied withComplied withDetailsPlease refer inner back cover for the names ofdirectors of the Company.Please refer Note 1.1 to the financialstatements.Please refer Investor relations supplement onpage 71.Please refer Investor relations supplement onpage 71.Please refer page 31.Please refer report on Risk management onpage 18 to 19.No material issues pertaining to employeesand industrial relationsPlease refer page 69 Group real estateportfolio.Please refer page 70 Investor relationssupplement.Please refer page 70 Investor relationssupplement.Please refer page 68 Five year summary.Please refer page 71 Investor relationssupplement.DEBT (Only if listed)xii) Significant changes in the Entity’s or its subsidiaries’fixed asset and the market value of land, if the valuediffers substantially from the book value.N/AN/Axiii) If during the year the Entity has raised funds eitherthrough a public issue, Right issue, and privateplacement;N/AN/Aa. A statement as to the manner in which the proceedsof such issue has been utilized.b. If any shares or debentures have been issued, thenumber, class and consideration received and thereason for the issue; and,c. Any material change in the use of funds raisedthrough an issue of securities.

16 Annual Report 2011Corporate governance contd.Corporate Governance Rulexiv) The following information should be disclosed in respectof each employees share ownership or stock optionscheme.ComplianceStatusN/AN/ADetails- Total number of shares allotted during the financialyear- Price at which shares were allotted- Highest, lowest and closing price of the sharerecorded during the financial year- Details of funding granted to employees (if any)xv) Disclosures pertaining to Corporate Governance practicesin terms of Rules 7.10.3, 7.10.5 c. and 7.10.6 c. of section 7of the Rules.xvi) Related Party transactions exceeding 10% of the Equityor 5% of the total assets of the Entity as per AuditedFinancial Statements, whichever is lower.Complied withComplied withPlease refer page 12 to 14 for the disclosures interms of Section 7.10.Please refer Note 20 and 35.Details of investments in a Related Party and/or amountsdue 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 RelatedParty;d. The amount of the transaction and terms of thetransaction;e. The rationale for entering into the transaction.Note :Based on the declarations provided by the non executive directors, the Board has decided the following directors as independent:Mr. Jayantha Dhanapala, andMr. E A D Perera- who has served on the Company’s Board now for a period in excess of nine years andMr. 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, andMr. Sunil Mendis- who is also a Director of C T Holdings PLCwho, in spite of their service on the Company’s Board for over nine years and / or being Directors in another company which hasa significant shareholding in the Company, the Board has nevertheless determined as in the previous years to be independentconsidering their credentials and integrity.

18 Annual Report 2011Risk managementIntroductionRisk management is of paramount importance to Cargills(Ceylon) PLC to safeguard the interest of all stakeholders. Tokeep risk management at the centre of the executive agenda,continuous awareness is created and it is embedded in everydaybusiness management.The expansion drive of the Cargills Food City operation andmanufacturing subsidiaries together with latest businessacquisitions has meant that the Group’s operation has becomemore complex with an increased risk profile. In an improvingeconomic environment the Group also anticipates a higherbusiness risk in terms of increased competition.The management considers each business risk in the context ofthe Group’s strategy by identifying the potential upside anddownside to the Group business. Any identified downside issubject to mitigation and any upside is fully made use of tostrengthen the competitive position of the Group. Risks andmethodology of mitigation are presented here in the areas ofbusiness (operation), financial reporting and compliance withapplicable laws and regulations.Administrative support for risk managementCorporate Management Committee (CMC)The Board as the focal point in managing the business has beenvested with the final responsibility of managing the risks theGroup faces. A Corporate Management Committee (CMC) hasbeen set up to assist the Board in meeting this responsibility.The CMC with the help of senior management decides the riskprofile of the Group. It also evaluates the business proposalsin view of the existing risk appetite and keeps the Boardinformed of the suitability of the business proposals. The CMCreviews the operational issues tabled in the monthly meetingsto identify the key risks faced by the Group including theirimpact, likelihood and controls and procedures implementedto mitigate these risks. The Board is required to take decisionsthat would increase the intrinsic value of the Company in termsof investing in capital assets which would enhance the futureearnings capacity. In this perspective, tolerable risk levelsare defined by the CMC provided those investments showcommercial justification striking a balance between risk andreturn. In addition, the management letter issued by externalauditors of the Company is reviewed by the audit committee.Any material findings adversely affecting the smooth operationof the business are addressed in detail and corrective actionsare taken.Centralised Legal FunctionThe Group obtains the service of a centralized legal departmentto ensure that the Group complies with applicable laws andregulations. The department reports on a monthly basis to theBoard verifying compliance with laws and regulations. All legalagreements are thoroughly scrutinized by competent legalofficers while the Company Secretary ensures compliance withthe Companies Act.Corporate Financial Reporting FunctionDocumentation and reporting also plays a key role in managingrisk. The corporate financial reporting division has been set upto ensure all financial reporting aspects are addressed. Thedivision coordinates with relevant authorities and institutions.The audit committee reviews all financial and relatedinformation that is reported and disseminated.Internal Controls and Internal Audit FunctionThe Company has put in place a system of internal control toassist in achieving the management’s objective of ensuringorderly and efficient conduct of business, safeguarding ofassets, the prevention and detection of fraud and error, timelypreparation of reliable financial information, and compliancewith relevant laws and regulations.At Cargills, we believe that an effective internal audit functionwould enhance the Company’s performance in every aspect ofbusiness. This function would primarily involve monitoringof internal control, examination of financial and operatinginformation, review of the efficiency and effectiveness of theoperation, and review compliance with legal and regulatoryrequirements. It also continuously verifies and audits thesystems and promptly escalates any problems or potential risksto the management. Evaluation of the existing risk managementsetup is also a task assigned to the internal audit function.Internal audit reports are reviewed by the audit committee andany material findings are inquired into in detail.Overview of Risks Affecting the BusinessBusiness RiskThe business risk management is a dynamic process due to theconstant change and complexity in the operating environmentof the Group. The different business operations of the Group andtheir performances are subject to a variety of risk factors whichare constantly monitored and evaluated by the managementin order to respond effectively. All manufacturing facilities aremaintained according to best international food manufacturingstandards to mitigate business risk arising from productionprocesses.Competitive EnvironmentThe retail industry in Sri Lanka is highly competitive. Toremain competitive the Group is focused on areas such asprice, product range, quality and service. We monitor ourperformance against a range of measures including customersatisfaction, perception and experience while also evaluatingthe performance of competitors.

Annual Report 201119Risk management contd.People capabilitiesOur greatest asset is our employees. It is critical to our successto attract, retain, develop and motivate the best people withthe right capabilities at all levels of operations. We reviewour people policies regularly and are committed to investingin training and development. We also carry out successionplanning to ensure that the future needs of the business areconsidered and provided for. There are clear processes forunderstanding and responding to employees’ needs throughHR initiatives, staff surveys, and regular communication ofbusiness developments.Reputational RiskFailure to protect the Group’s reputation and brands could leadto a loss of trust and confidence. This could result in a declinein the customer base and affect the ability to recruit and retainhigh-calibre people. Emotional loyalty to the Cargills brandhas helped us diversify into new areas of businesses throughintegration and diversification strategies. We recognise thecommercial imperative to safeguard the interests of all ourstakeholders and avoid the loss of such loyalty. The ‘CargillsValues’ 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 inevery sphere, take into account their views and endeavor todevelop strategy that reflects their interests.Product safetyThe safety and quality of our products is of paramountimportance to Cargills as well as being essential for maintainingcustomer trust and confidence. A breach in confidence couldaffect the size of our customer base and hence financial results.We have detailed and established procedures for ensuringproduct integrity at all times. There are strict product safetyprocesses in place and regular management reports. We workin partnership with suppliers to ensure mutual understandingof the standards required. We also monitor developmentsin areas such as health, safety and nutrition in order torespond appropriately to changing customer trends and newlegislation.Health and Safety risksProvision of adequate safety to our staff and customers is ofthe utmost importance to us. Injury or loss of life cannot bemeasured in financial terms. We operate stringent healthand safety processes in line with best practice in our outlets,manufacturing facilities and offices, which are monitored andaudited regularly.IT Systems and InfrastructureThe business is dependent on efficient Information Technology(IT) systems. We recognise the essential role that IT playsacross our operations in enabling us to operate efficiently. Wehave extensive controls in place to maintain the integrity andefficiency of our IT infrastructure and to ensure consistency ofdelivery. All relevant staff is effectively engaged to mitigate ITrelated risks through effective policy and procedures as well asincreased awareness.Regulatory and Political EnvironmentDue to the diverse nature of our businesses we are subject toa wide variety of regulations prevailing in the country. Weconsider these uncertainties in the external environment whendeveloping strategy and reviewing performance. We remainvigilant to future changes. As part of our day-to-day operationswe engage with governmental and non-governmentalorganizations to ensure the views of our customers andemployees are represented and try to anticipate and contributeto important changes in public policy whenever possible.Funding and LiquidityThe Group finances its operations by a combination of retainedearnings, long term and short term loans. The objective is toensure the continuity of funding and to arrange funding aheadof requirements and to maintain sufficient undrawn committedbank facilities. We as a Group maintain a portfolio of bankinginstitutions to cater to the funding requirements and to obtainthem on favorable terms. Healthy relationships with bankersallow us to have borrowing arrangement within a shorterperiod of time.Interest rate riskIt is the Company’s objective to limit its exposure to increasesin interest rates while retaining the opportunity to benefitfrom interest rate reductions. Accordingly the Group managesinterest rate fluctuations with an appropriate mix of fixed andvariable rate debts through a centralized treasury managementfunction.Credit riskThe Company aims to reduce the risk of loss arising from defaultby parties to financial transactions. Risk of default is routinelymonitored and required actions are taken. Our manufacturingsubsidiaries are more exposed to credit risk by the very natureof their business and this risk is neutralised through a rigorousprocess of credit management.Foreign Exchange Rate RiskThe Group’s exposure to this risk is minimal as exportsare negligible. Risk on imports of plant, machineries andequipments are managed adequately.

20 Annual Report 2011Sustainability report01. Our approach to Sustainability1.1 IntroductionFrom a single seed in a farmer’s field to homes and hearthshalfway across Sri Lanka Cargills brings ideas together to helpsatisfy our nation’s needs. To get there, we collaborate withcustomers to create better products and services, streamlinesupply chains, save energy, reduce costs and move goods toevery corner of Sri Lanka. We help farmers get higher yieldsfrom fewer acres, and store crops so they have greater flexibilityin marketing their harvest. We give back to the communitieswhere we do business through continuous efforts to improvenutrition, health and education, and protect natural resources.Every day, Cargills nourishes people and ideas-in both expectedand unexpected ways.Our sustainability strategy is to make social responsibilityan integral part of everything we do. It is a Company-widecommitment that channels our expertise and knowledgeto create sustainable value for every direct and indirectstakeholder we touch.02 Responsible to our PeopleTreating our team with dignity and respect and striving to createa safe work environment.At the heart of the Cargills culture is the desire to embraceour differences and make connections across business units, atevery location in every district across the island - so that eachemployee can reach their full potential.Our multi-cultural work environment is warm and equitableensuring that each member of our team is valued for theircapabilities and respected for who they are. We strive to createa happy and focused work atmosphere that celebrates the teamand encourages innovation.Our goal is to provide a workplace where all employeescan thrive and grow - A workplace where employees feelincluded, safe and are given the opportunities to make valuablecontributions to Cargills and thereby partner the progress ofSri Lanka.2.1 Nurturing an exceptional teamWe are committed to attracting, developing, and retaining agroup of talented Team Members and to creating a workplacethat allows each Team Member to contribute to the collectivesuccess of our Company. Our programs and initiatives relatedto employment practices, compensation and benefits, talentmanagement, diversity and inclusion, and Team Memberrelations are important to fulfilling this commitment, especiallyin today’s challenging economic climate. To be an inspiration toour Team Members about their work, their contributions, andtheir company is our pledge.2.1.1 Our Team MembersCargills employs 6,790 employees as at 31 March 2011. We arecommitted to providing a good working environment and toretaining our Team Members through competitive wages, fairtreatment, training, benefits, and safe working conditions. Werecognize that the nature of our industry and the changingexternal environment means that retention of our team isforemost challenge. This is a challenge that we seek to addressby providing inspiration and motivation to our Team Membersabout their work, their contributions, and their company’s rolein partnering the development of Sri Lanka and its people.Total No. of Employees as at 31 March 2011 6,790 Executive cadre 1,186Non- Executive cadre 5,604Permanent cadre 6,613Contract Staff 177Male 3,884Female 2,906Non Executive 83%Executive 17%PermanentContractNon-ExecutiveExecutiveMaleFemale

Annual Report 201121Sustainability report contd...2.2 Health and Safety of Our Team2.2.1 Management System ApproachAll Cargills manufacturing facilities have implementedEnvironmental, Health, and Safety Management Systemsin line with statutory and ISO requirements. The health andsafety aspect of this system fulfills the requirements set forthin international occupational health and safety managementsystem specifications. As such, each facility has developed andimplemented procedures and controls regarding health andsafety2.3 Training & DevelopmentAAPI provides training and development opportunities for youthfrom rural Sri Lanka as a non profit initiative. AAPI collaborates withcivil society partners to identify and train young men and womenwho lack the necessary skills-sets to gain employment in the privatesector. Many go on to be a part of Team Cargills.ALBERT A. PAGE INSTITUTE OF FOOD BUSINESSThe Albert A. Page Institute (AAPI) of Food Business was established in 2006 in response to the needs of young Sri Lankans fromrural areas. As Cargills expanded its presence in regional Sri Lanka it understood the true potential of rural youth who were eitherunder-employed or unemployed due to the lack of professional skills. On the other hand the value derived to our economy fromunskilled labor employed overseas is significant. Unskilled migrant labor sourced largely from rural Sri Lanka draws the highestforeign 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 thefood and manufacturing sector. The Certificate programs develop the various basic skills required to become an effective andefficient 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 ManagerialSkills Development have been designed considering all the aspects of Organizational needs of Technical, Human and Conceptualskills which are crucial elements of becoming an effective and efficient Executive aligned with today’s competitive and dynamicbusiness environment. Once students acquire the Advanced Certificate they have the option of enhancing the certification to aDiploma. Currently Cargills is exploring the possibility of offering the Diploma’s in affiliation with Sri Lanka’s premier postgraduateeducation 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 studymaterial that is suitable for potential employees in the private sector. The programme which is focused on attitude developmentconsists 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 incollaboration with non-profit partners such as the Gemi Diriya project funded by the World Bank.Independent Grocers Alliance Online TrainingThe IGA Institute is a non-profit educational foundation developed by IGA (Independent Grocers Alliance), to provide on-linetraining materials, web based job certification courses, class room training to support the career development needs of its retailfood associated around the globe. The IGA Institute functions as the Alliance’s Learning & development department by bringingcompetitive skills to independent retailers world wide. AAPI is currently registered with the IGA Institute and is able to offer thesecourses online for students. Cargills utilizes these online learning opportunity to empower youth in rural areas using ICT as a toolfor development.3. Responsible to our PlanetFulfilling our purpose of nourishing people requires clean water, soiland air. As a food Company, we are focused on a sustainable futurethat reduces demands on the environment as populations continue togrow.Green BusinessThe primary objectives that drive the Cargills Green Businessis to reduce, re-use and recycle energy, plastics, water and allother natural resources that we use in our day to day businesspractice.Through the ‘Green Business’ programme Cargills is committedto minimizing its environmental impacts throughout our entiresupply chain, from the farm to the trolley. Cargills is alsocommitted to a role of environmental leadership in all facetsof our business.

22 Annual Report 2011Sustainability report contd...Initiatives eligible for Carbon CreditSBUCargills Quality DairiesCargills Quality FoodsCargills AgrifoodsCargills FoodProcessorsInitiatives taken- Best use of treated effluent water to create humus matter in the rocky barren land. Its enrichment hasenabled 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 forimproving the quality of rocky land generating agriculture products.- Wormiculture/ hormone digestion project - Worms/ hormones are being tested to hasten thedecomposition 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 operatea Food Process Development Incubator which carries out scientific research especially towardsmaking Cargills a leaner and greener operation. As part of the project the University of Moratuwa hasprovided Cargills the technology to convert used oil discarded as waste by KFC into bio-diesel. Thisbio-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 dieselhowever in line with the corporate strategy of creating sustainable value for the community KFC hasopted to take the economically expenses yet environmentally and socially responsible route.Energy Saving measures and renewable energy useSBUCargills Quality DairiesCargills Quality FoodsCargills AgrifoodsEnergy Saving measures and renewable energy use- 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.

Annual Report 201123Sustainability report contd...4. Responsible to our CustomersFostering a Companywide culture that drives continuousimprovement towards the safety and wellbeing of our Customers.As the leader in Retail and Consumer Goods in Sri Lanka ourgoal is to ensure that our customers enjoy the best possibleproducts and services at the best possible price with minimumimplications on the wellbeing of all our stakeholders. Cargillsuses it widespread retail and mass market distributionoperation to provide essential commodities to consumers ata consistently affordable price. Cargills applies effort at everystep in the process from where food is produced throughwhere it is purchased to ensure we provide the safest andmost high quality products and services to our customers.Our food processing plants are equipped with comprehensiveISO and SLS certification to ensure that our superior taste iscomplemented by superior safety and quality.4.1 Managing Food Safety and QualityCargills approach to food safety and quality is comprehensive,preventive, and proactive. We implement controls andmeasures at every level to make sure our products are secondto-nonein food safety and quality. We assess our productsfor improvement during product research and development,manufacturing and production, marketing and promotion,storage and distribution, and use. We believe this approachhelps guarantee the safety and quality of our products from thefarm all the way to the point of purchase.4.1.1 At the FarmCargills is engaged in every aspect of its supply chain to ensureonly the best products of highest nutrition and quality reachour retail outlets and manufacturing units. Our advancedpost harvest technologies ensure that all fresh produce reachcustomers at optimum levels of freshness with minimalwastage. The waste within our supply chain is as little as 3-4%while national post harvest losses are as much as 40%. Thishelps Cargills give customers the best choice in quality andnutrition and affordability.4.1.2 Systematic Management ApproachIn addition to governmental regulatory requirements, we havedeveloped our own highly integrated policies, procedures,controls, and good manufacturing practices designed to ensurethe safety and quality of our food products. Our system oftenextends beyond regulatory requirements to address suchissues as facility sanitation, team member training, personalhygiene, product handling, food protection, foreign materialprevention, product quality, storage, and transportation. Allour manufacturing plants are accredited with ISO 9001:2000for Quality Management, ISO 14001:2004 for EnvironmentManagement and ISO 22000: 2005 for Food Safety Managementas well as SLS standards.4.2 Research, Development and InnovationCargills is dedicated to developing a best-in-class, value-addedproduct portfolio that meets the needs of today’s changingmarket. By applying in-depth understanding of consumerand customer needs, analytical skills, and strategic thinking,we are positioned at the forefront of product innovation.We will continue to demonstrate our commitment to researchand development by creating new and relevant food solutionsfor years to come.4.2.1 Food Process Development IncubatorSri Lanka is clearly in need of a new national approach toresearch and development. This new approach must bringtogether the country’s best minds, working in the best facilities,and focused on the challenges and opportunities that lie aheadfor Sri Lanka’s Food and Agribusiness sector working inpartnership with industry. It is in the hope of filling this voidthat the Food Process Development Incubator was establishedby Cargills together with the University of Moratuwa. Thisinstitution will endeavor to develop a more competitiveinnovation led Food and Agriculture sector which createsvalue for consumers, farmers and the industry in manner thatis 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 thefood system.‣ To enhance security and protection of the food supplyby improving scientific capacity and knowledge todetect, monitor and control various food productionand distribution systems.‣ To seek opportunities to enhance the profitability andcompetitiveness of farmers, the Agri-food system, ruralcommunities, and local industry.‣ To enhance the environmental performance of the Foodand Agriculture industry.

24 Annual Report 2011Sustainability report contd...4.3 Promoting National Nutrition and WellnessAs Sri Lanka’s largest food retailing and manufacturingbusiness house Cargills is conscious of its role in facilitatingaffordable nutrition for all Sri Lankans. While our researchand development initiatives help us develop more nutritiousproducts our sustainable supply chain ensures these productsreach every part of Sri Lanka safely and at an affordable price.Our direct links with farming communities and entrepreneursprovide us the strength to bring essential commodities toconsumers minus the intermediary costs. This is why ourproducts at our retail outlets and from our manufacturingfacilities are of better quality and are easier to afford.5. Responsible to our PartnersWorking directly with our partners to overcome challenges, providingknowledge and resources to help them succeed.Our focus on rural development involves our directinvestment in and engagement with the agriculture sector. Ourinvestments have improved livelihoods for rural Sri Lankansin economically meaningful, environmentally sustainable andsocially responsible ways. Today we are a global role model incorporate driven rural development. Each year, Cargills worksdirectly with thousands of farmers and small scale entrepreneursto help increase their productivity, thereby helping to raisetheir standard of living and increase our access to quality rawmaterials.5.1 Sustainable AgribusinessPromoting and practicing sustainable agribusiness is animportant part of our commitment to conduct business withintegrity and responsibility, treat people with dignity andrespect, and help protect and conserve the environment. Wework with business partners, governments, nongovernmentalorganizations and communities to foster sustainable economicdevelopment and promote responsible practices throughoutour agribusiness supply chains. Together, our activities areimproving agricultural and labor practices, as well as helping toconserve the environment.5.1.1 Farmer Training and DevelopmentOur team works directly with farmers to overcome challenges,providing knowledge and resources to help farmers succeed.Across Sri Lanka thousands of farmers have participated inCargills productivity and product quality enhancing programs.We have committed to expanding this program to a largerfarmer base island wide to help improve efficiencies andincrease incomes.Agribusiness Projects - Activities during the Year 2010/111. Project : Nutritious Snacks/Food ManufacturingProject’Location : DehiattakandiyaPartners : USAID/CORE.Objective : To raise productivity, profitability andstability farmers engaged in minorhighland crops by strengthening inputsupport, knowledge and know-how baseof farmers and establishing strong buybackarrangements.Project Cost : SLR. 35 MillionNo. of farmers : 500 farmers (stage 1)2. Project : Northern Horticultural Alliance (NHA)ProjectLocations : Jaffna & KillinochchiPartner : USAIDObjective : Sustainable Livelihoods through Processingand Value addition.Aim to resuscitate economic andemployment security of fruit and vegetablefarmers of Northern Province by improvingcultivation and infusing value addingprocessesProject Cost : SLR. 135 Million3. Project : Vegetable Processing Unit for BoralandaLocation : BoralandaPartner : IFADObjective : Vegetable Collection CenterA new vegetable collection center establishedat Boralanda. Land for building has beenallotted by the Divisional SecretariatWalimada.Project Cost : SLR. 3.5 MillionNo. of farmers : 300 farmers (Stage 1)4. Project : Passion Fruit CultivationLocations : Monaragala & GalgamuwaPartner : IFADObjective : Provide passion fruit seeds/seedlings,technical support in terms of professionalguidance to farmers on scientific methodsof cultivation and management of passionfruit crop.

Annual Report 201125Sustainability report contd...Expected AnnualCrop yield : To surpass 1250 MT and cater to both localmarket and international marketsNo. of farmers : 250 farmers from Monaragala & UvaProvinces5. Project : Cashew Processing ProjectLocation : AnamaduwaPartners : Green Vision / World VisionObjective : To revive the livelihoods of cashewcultivators in the area who are facing severeconomic hardships due to inability to faceincreasing competitionWorkforce : 200 strong workforce (mostly women).Would have over arching impact on the lifeand living of rural poor in the regionwe have with the fields they sow, the families they nurture, thecommunities they live in and the schools where their childrenlearn. Cargills has therefore initiated farmer communitydevelopment funds where 50 cents is given back to the villageagainst each kilogram of vegetables purchased from ourfarmers. This fund is used to provide scholarships for needychildren from the community, to provide resources for learningand advancement, to meet basic community infrastructureneeds such as utility connections, community centres, librariesetc. Our focus is to engage the communities that work with usto charter their own course of development.6. Responsible to Our CommunityOur continued success depends on the growth and health of thecommunities we work with.6. Project : Seed Testing ProjectLocations : Island widePartner : Department of AgricultureObjective : In order to improve productivity andprofitability of vegetable cultivation goodquality high yielding seed is the mostcrucial intervention. As per the statutoryrequirements, systematic testing of theimported seed would be conducted eitherat the farm of the Horticulture Research andDevelopment Institute (HORDI) or in thefarmers’ fields.One Trust Sri LankaOne Trust came into being from the very heart of Cargills outof compassion and empathy for our fellow Sri Lankans whoselives were devastated in the Boxing Day Tsunami of 2004.One Trust targeted the children who survived the mental andphysical trauma of the Tsunami disaster and helped rebuildidentified schools from Southern and Eastern coastal areas.Today One Trust has expanded its vision to heal the spirits andhearts of children affected by war and restore their ability tohope and dream.7. Project : Yal UtpaththiLocation : Jaffna PeninsulaPartners : Central Bank of Sri Lanka & Bank ofCeylonObjective : Cargills and the Central of Bank of SriLanka have launched a joint programme tocreate markets for farmers from the Jaffnapeninsula who specialize in Palmyrah basedproducts. This follows the Central Bank’sPoverty Alleviation Microfinance Projectfunded by the Bank of Ceylon. Under theproject farmers received micro-credit asmeans of reinvigorating the traditionallivelihoods. Cargills came forward toprovide a market for products made by thebeneficiary farmers.5.2 Investing in regional economiesOne Trust in VavuniyaThe project is being supported by the Department of Probationand Child Care Services which is coordinating the processof identifying beneficiaries’ currently in institutional care orin the care of immediate family. The Department would alsofacilitate the process of channeling funds to the identifiedchildren in supporting and monitoring their educational needs.This is done as a bi-annual event, where Cargills sponsor theireducational needs through the One Trust Fund. These includes,school text books, Uniforms, stationery items, cupboards,mosquito nets, bedding, medicines, vaccines and other needsidentified at the time of distribution. These identified childrenare given an opportunity to re-build their lives by re-openingdoors for education through ongoing school based projects.An Inspired Swan Lake & Nut Cracker by Center StageProductionAt Cargills a relationship we establish with farmers is a bondThe One Trust partnership with Center-stage production is

26 Annual Report 2011Sustainability report contd...especially noteworthy where “An Inspired Swan Lake” andmost recently ‘Nutcracker’ directed and choreographed byJehan Aloysius brought together the cause of One Trust withthe complementary and commendable efforts of ‘Center-StageProductions. The participants of these production consistedof an inspiring physically-challenged cast of soldiers fromRanaviru Sevana who were injured in the line of duty andhearing impaired performers from the Sunera Foundation. OneTrust will undoubtedly sponsor such events in the future asmeans of promoting theater and art as a form of expression forthose who are facing different forms of challenges. This wouldin turn inspire many others to transcend beyond their ownchallenges to re-discover their inner strength.One Trust in our CommunityOne Trust partners Cargills Agribusiness efforts to uplift thecommunities it works with across Sri Lanka. Accordingly OneTrust complements the efforts of community developmentinitiated by Cargills by providing scholarships for highereducation as well as educational material including laptops fortertiary level students.One Trust in association with Deutsche Bank Colombo organizeda one day programme that involved an educational tour ofColombo 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 includechildren from communities that Cargills works with in the‘Children of Change’ initiative carried out by Deutsche Bank, toigniting a spark, to embrace change, in the hearts of Sri Lankanchildren in this new environment of peace.7. Cargills compliance with global sustainability benchmarksUNGC PrinciplesHuman RightsDescription of PrincipleCompliancePrinciple 1Principle 2Businesses should support and respect the protection of internationally proclaimed humanrights.Make sure that they are not complicit in human rights abuses.ComplyComplyLaborPrinciple 3Principle 4Principle 5Principle 6Businesses should uphold the freedom of association and the effective recognition of the rightto 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.ComplyComplyComplyComplyEnvironmentPrinciple 7Principle 8Principle 9Businesses should support a precautionary approach to environmental challenges.Undertake initiatives to promote greater environmental responsibility.Encourage the development and diffusion of environmentally friendly technologies.ComplyComplyComplyAnti-CorruptionPrinciple 10Businesses should work against corruption in all its forms, including extortion and bribery.Comply

Annual Report 201127

28 Annual Report 2011Financial informationAnnual Report of the Directors on the affairs of the Company .......................................................................................................................................Statement of Directors’ responsibilities..........................................................................................................................Independent Auditors’ report..........................................................................................................................Income statements..........................................................................................................................Balance sheets..........................................................................................................................Statements of changes in equity..........................................................................................................................Cash flow statements..........................................................................................................................Notes to the financial statements..........................................................................................................................29 - 3132333435363738 - 66

Annual Report 201129Annual Report of the Directors on the affairs of theCompanyThe Directors are pleased to submit the Annual Report together with the audited financial statements of Cargills (Ceylon) PLC andconsolidated 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 andbeverages.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 thefinancial statements of the Company and the Group for the financial year ended 31 March 2011 are given on page 34 to 66 form anintegral 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 significantchanges to the accounting policies of the Group during the year.Results and dividendsGroupCompanyFor the year ended 31 March 2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Profit 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 1,522,745 571,237 407,1522,511,295 1,701,945 862,437 586,352An 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 finaldividend of Rs. 1 per share (Rs. 224,000,000) is proposed for the year ended 31 March 2011. These will be reflected in the subsequentyear’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 totalreserves 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 financialstatements on page 55.

30 Annual Report 2011Annual Report of the Directors on the affairs of theCompany 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 outlayof 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 thefinancial 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 pages48 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 and71.DirectorateThe Directors listed on the inner back cover have been Directors of the Company throughout the year under review except forMr. 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 andbeing 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 regardto 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 forre-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 hehas not completed 5 years as a Director of the Company being first appointed a Director on 1 June 2008. The re - election of the retiringDirectors 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 atmeetings of the directors. The directors have had no direct or indirect interest in any other contracts in relation to the business of theCompany.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 201131Annual Report of the Directors on the affairs of theCompany contd...As atAs at31 March 2011 31 March 2010Mr. L R Page 36,760 36,760Mr. V R Page 14,380,200 14,285,000Mr. M I Abdul Wahid (w.e.f. 21 May 2010) 4,000 -Mr. S V Kodikara 124,000 124,000Mr. P S Mathavan 500 20,000Mr. Jayantha Dhanapala - -Mr. A T P Edirisinghe 50,000 50,000Mr. S E C Gardiner 20,000 20,000Mr. Sunil Mendis 20,000 20,000Mr. Anthony A Page 5,050,000 4,838,500Mr. J C Page 1,705,500 1,705,500Mr. E A D Perera 10,000 20,000Mrs. S R Thambiayah (resigned w.e.f. 21 May 2010) - 40,000DonationsDuring 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 Companyin terms of Section 158 of the Companies Act No. 7 of 2007. The Directors have been authorised to determine the remuneration of theAuditors and the fee paid to auditors are disclosed in note 7 to the financial statements. As far as the Directors are aware, the auditorsdo not have any relationship (other than that of an auditor) with the Company or any of its Subsidiaries other than those disclosedin 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 balancesheet 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 amanner that minimizes the detrimental effect on the environment and provide products and services that have a beneficial effect onthe 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 management,the Directors are satisfied that the Group has adequate resources to continue its operations in the foreseeable future.For and on behalf of the BoardSigned 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

32 Annual Report 2011Statement of Directors’ responsibilitiesThe Companies Act No. 7 of 2007 places the responsibility onthe Directors to prepare and present financial statements foreach year comprising a balance sheet as at year end date andstatements of income, cash flows and changes in equity for theyear together with the accounting policies and explanatorynotes. The responsibility of the auditors with regard to thesefinancial statements, which differ from that of the Directors, isset out in the Auditors’ report (page 33).Considering the present financial position of the Companyand the forecasts for the next year, the Directors have adoptedthe going concern basis for the preparation of these financialstatements.The Directors confirm that the financial statements have beenprepared and presented in accordance with the Sri LankaAccounting Standards, which have been consistently appliedand supported, by reasonable and prudent judgments andestimates.The Directors are responsible for ensuring that the Companymaintains adequate accounting records to be able to disclosewith reasonable accuracy, the financial position of the Companyand the Group and for ensuring that the financial statementsare prepared and presented in accordance with the Sri LankaAccounting Standards and provide the information required bythe Companies Act.The Directors are responsible for the proper management ofthe resources of the Company. The internal control system hasbeen designed and implemented to obtain reasonable but notabsolute assurance that the Company is protected from unduerisks, frauds and other irregularities. The Directors are satisfiedthat the control procedures operated effectively during theyear.The Directors, to the best of their knowledge and belief, aresatisfied that all statutory payments have been made up to dateor have been provided for in these financial statements.By order of the BoardS L W DissanayakeCompany Secretary17 August 2011

Annual Report 201133Independent Auditors’ reportTO THE SHAREHOLDERS OF CARGILLS (CEYLON) PLCKPMG 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 7345Internet : www.lk.kpmg.comReport on the Financial StatementsWe have audited the accompanying financial statements ofCargills (Ceylon) PLC (the “Company”), the consolidatedfinancial statements of the Company and its subsidiaries as at31 March 2011 which comprise the balance sheet as at 31 March2011, and the income statement, statement of changes in equityand cash flow statement for the year then ended, and a summaryof significant accounting policies and other explanatory notesas set out on pages 34 to 66 of this Annual Report.Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fairpresentation of these financial statements in accordance withSri Lanka Accounting Standards. This responsibility includes:designing, implementing and maintaining internal controlrelevant to the preparation and fair presentation of financialstatements that are free from material misstatement, whetherdue to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that arereasonable in the circumstances.We have obtained all the information and explanations whichto the best of our knowledge and belief were necessary forthe purposes of our audit. We therefore believe that our auditprovides a reasonable basis for our opinion.OpinionIn our opinion, so far as appears from our examination, theCompany maintained proper accounting records for the yearended 31 March 2011 and the financial statements give a trueand fair view of the Company’s state of affairs as at 31 March2011 and its profit and cash flows for the year then ended inaccordance with Sri Lanka Accounting Standards.In our opinion, the consolidated financial statements give atrue and fair view of the state of affairs as at 31 March 2011 andthe profit and cash flows for the year then ended, in accordancewith Sri Lanka Accounting Standards, of the Company andits subsidiaries dealt with thereby, so far as concerns theshareholders of the Company.Scope of Audit and Basis of OpinionOur responsibility is to express an opinion on these financialstatements based on our audit. We conducted our auditin accordance with Sri Lanka Auditing Standards. Thosestandards require that we plan and perform the audit to obtainreasonable assurance whether the financial statements are freefrom material misstatement.An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accountingpolicies used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.Report on Other Legal and Regulatory RequirementsThese financial statements also comply with the requirementsof Sections 153 (2) to 153 (7) as appropriate of the CompaniesAct No. 7 of 2007.SignedKPMG Ford, Rhodes, Thornton & Co.Chartered AccountantsColombo17 August 2011

34 Annual Report 2011Income statementsGroupCompanyFor the year ended 31 March 2011 2010 2011 2010Notes Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Revenue 3 37,128,661 30,874,797 29,669,660 17,328,142Cost of sales 4 (33,646,234) (28,234,424) (28,210,024) (16,732,614)Gross profit 3,482,427 2,640,373 1,459,636 595,528Other income 5 582,450 510,453 633,048 634,121Distribution 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 1,050,355 642,721Finance 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 1,000,726 756,107 345,487Income tax expense 8 (312,530) (288,334) (200,822) (30,044)Net profit for the year 1,094,173 712,392 555,285 315,443Attributable to :Equity shareholders of the parent 1,088,550 712,392 555,285 315,443Minority interest 5,623 - - -1,094,173 712,392 555,285 315,443Earnings per share (Rs.) 10 4.86 3.18 2.48 1.41Dividend per share (Rs.) 11 1.50 1.10 1.50 1.10Dividend paid per share (Rs.) 1.30 0.80 1.30 0.80The accounting policies and notes from pages 38 to 66 form an integral part of these financial statements.

Annual Report 201135Balance sheetsGroupCompanyAs at 31 March 2011 2010 2011 2010Notes Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000ASSETSNon - 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 23 303,645 261,763 246,161 160,0515,736,722 4,697,601 6,501,560 2,730,386Total assets 19,305,600 13,948,842 15,857,386 11,130,676EQUITYStated 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 4,521,393LIABILITIESNon - 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 27 192,761 163,360 164,553 150,270907,775 722,211 452,215 474,465Current 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 2,279,22411,348,392 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 11,130,676I 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 BoardSigned M I Abdul Wahid (Managing Director / Deputy CEO)Signed P S Mathavan (Executive Director / CFO)Colombo

36 Annual Report 2011Statements of changes in equityGroupAttributable to equity holders of ParentStated Capital Revaluation General Retained Total Minority Totalcapital reserve reserve reserve earnings interestRs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Balance as at 1 April 2009 130,723 7,928 619,000 385,500 989,553 2,132,704 - 2,132,704Revaluation - - 3,571,724 - - 3,571,724 - 3,571,724Net profit for the year - - - - 712,392 712,392 - 712,392Deferred 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 - 6,141,155Balance as at 1 April 2010 130,723 7,928 4,094,259 385,500 1,522,745 6,141,155 - 6,141,155Acquisition of subsidiaries - - - - - - 84,100 84,100Net profit for the year - - - - 1,088,550 1,088,550 5,623 1,094,173Deferred tax on revaluation - - 21,205 - - 21,205 - 21,205Transferred 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 7,049,433CompanyStated Revaluation General Retained Totalcapital reserve reserve earningsRs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Balance as at 1 April 2009 130,723 619,000 385,500 270,909 1,406,132Revaluation - 3,072,021 - - 3,072,021Net profit for the year - - - 315,443 315,443Deferred 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 4,521,393Balance as at 1 April 2010 130,723 3,598,018 385,500 407,152 4,521,393Transferred to General reserve - - 100,000 (100,000) -Net profit for the year - - - 555,285 555,285Deferred tax on revaluation - 20,088 - - 20,088Dividends - - - (291,200) (291,200)Balance as at 31 March 2011 130,723 3,618,106 485,500 571,237 4,805,566The accounting policies and notes from pages 38 to 66 form an integral part of these financial statements.

Annual Report 201137Cash flow statementsGroupCompanyFor the year ended 31 March 2011 2010 2011 2010Notes Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Cash flows from operating activitiesProfit before tax 1,406,703 1,000,726 756,107 345,487Adjustments for:Depreciation 12 851,291 772,852 535,586 455,641Retirement benefit obligations 27 28,454 79,693 24,753 75,816Amortisation 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 6 363,946 428,819 294,248 297,234Dividend income 5 (8) - (48,603) (275,382)Operating profit before working capital changes 2,739,911 2,270,951 1,556,313 885,288Changes 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) 686,099 408,082Cash 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) 805,110Cash 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 equivalentsAt 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)The accounting policies and notes from pages 38 to 66 form an integral part of these financial statements.

38 Annual Report 2011Notes to the financial statements1.1 Reporting entityCargills (Ceylon) PLC is a quoted public limited liabilityCompany incorporated and domiciled in Sri Lanka. Theregistered office of the Company is located at 40, YorkStreet, Colombo 1.The principal activities of the Group are operation of largesupermarket 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 KentuckyFried Chicken (KFC) restaurants in Sri Lanka, by processingagricultural produce. Further the subsidiary Millers Limitedengages in Island wide distribution of fast moving consumergoods, operation of hotel in Bandarawela and operation ofchain of photo processing outlets.The Company, in the Financial Statements, refers to Cargills(Ceylon) PLC and Group refers to the Company and allits subsidiaries whose financial statements have beenconsolidated.1.2 Basis of preparationThe financial statements are prepared in accordance withand comply with Sri Lanka Accounting Standards (SLAS)laid down by the Institute of Chartered Accountants of SriLanka and the requirements of Companies Act No. 7 of 2007.These financial statements have been prepared under thehistorical cost convention, as modified by the revaluation offree hold land and building.The preparation of financial statements in conformity withSLASs requires the use of certain critical accounting estimates.It requires management to exercise their judgment in theprocess of applying the Company’s accounting policies. Theareas where assumptions and estimate are significant to theconsolidated financial statements are disclosed.The directors have made an assessment of the Group’s abilityto continue as a going concern in the foreseeable future, andthey do not intend either to liquidate or cease operations.1.3 Significant accounting policiesThese accounting policies applied by the Group are, unlessotherwise stated, consistent with those used in the previousyear. Previous year figures and phrases have been rearranged,wherever necessary, to conform to the currentyear’s presentation.1.3.1 Basis of consolidationThe consolidated financial statements (referred to as the“Group”) comprise the financial statements of the Companyand its subsidiaries and the Group’s interest in associatecompanies. Subsidiaries and associates consolidated aredisclosed in note 14 to the financial statements.1.3.1.1 SubsidiariesSubsidiaries are all entities over which the Group hasthe power to govern the financial and operating policiesgenerally accompanying a shareholding of more than onehalf of the voting rights. The existence and effect of potentialvoting rights that are currently exercisable or convertibleare considered when assessing whether the Group controlsanother entity. Subsidiaries are fully consolidated from thedate on which control is transferred to the Group. They arede-consolidated from the date that control ceases.The purchase method of accounting is used to account forthe acquisition of subsidiaries by the Group. The cost of anacquisition is measured as the fair value of the assets given,equity instruments issued and liabilities incurred or assumedat the date of exchange, plus costs directly attributable to theacquisition. Identifiable assets acquired and liabilities andcontingent liabilities assumed in a business combination aremeasured initially at their fair values at the acquisition date,irrespective of the extent of any minority interest. The excessof the cost of acquisition over the fair value of the Group’sshare of the identifiable net assets acquired is recorded asgoodwill. If the cost of acquisition is less than the fair valueof the net assets of the subsidiary acquired, the difference isrecognised directly in the income statement.Inter - company transactions, balances and unrealised gainson transactions between group companies are eliminated.Unrealised losses are also eliminated but considered animpairment indicator of the asset transferred. Accountingpolicies of subsidiaries have been changed where necessaryto ensure consistency with the policies adopted by theGroup.The subsidiary undertakings financial years are coterminouswith that of the Company.1.3.1.2 Minority interestsMinority interest is measured at the minorities’ share of thepost acquisition fair values of the identifiable assets andliabilities of the acquired entity. Separate disclosure is madeof minority interest.The Group applies a policy of treating transactions withminority interests as transactions with parties external to theGroup. Disposals to minority interests result in gains andlosses for the Group are recorded in the income statement.Purchases from minority interests result in goodwill, beingthe difference between any consideration paid and therelevant share acquired of the carrying value of net assets ofthe subsidiary.1.3.1.3 AssociatesAssociates are all entities over which the Group hassignificant influence but not control, generally accompanyinga shareholding of between 20% and 50% of the voting rights.

Annual Report 201139Notes to the financial statements contd...Investments in associates are accounted for using the equitymethod of accounting and are initially recognised at cost.The Group’s investment in associates includes goodwillidentified on acquisition, net of any accumulated impairmentloss.The Group’s share of its associates’ post-acquisition profitsor losses is recognised in the income statement, and its shareof post-acquisition movements in reserves is recognised inreserves. The cumulative post acquisition movements areadjusted against the carrying amount of the investment.When the Group’s share of losses in an associate equalsor exceeds its interest in the associate, including any otherunsecured receivables, the Group does not recognise furtherlosses, unless it has incurred obligations or made paymentson behalf of the associate.Unrealised gains on transactions between the Group and itsassociates are eliminated to the extent of the Group’s interestin the associates. Unrealised losses are also eliminatedunless the transaction provides evidence of an impairmentof the asset transferred. Accounting policies of associateshave been changed where necessary to ensure consistencywith the policies adopted by the Group.Dilution gains and losses in associates are recognised in theincome statement.1.3.1.4 GoodwillGoodwill represents the excess of the cost of an acquisitionover the fair value of the Group’s share of the net identifiableassets of the acquired subsidiary at the date of acquisition.Goodwill on acquisitions of subsidiaries is includedin intangible assets. Goodwill acquired in a businesscombination is tested annually for impairment, or morefrequently if events or changes in circumstance indicate thatit might be impaired; and carried at costs less accumulatedimpairment losses. Separately recognised goodwill is testedannually for impairment and carried at cost less accumulatedimpairment losses. Impairment losses on goodwill are notreversed.Goodwill is allocated to cash-generating units for the purposeof impairment testing. The allocation is made to those cashgenerating units or groups of cash generating units that areexpected to benefit from the business combination in whichthe goodwill arose.1.3.1.5 Reporting dateAll the Group’s subsidiaries and associate company have acommon financial year ends on the 31 March.1.3.2 Transactions in foreign exchangeItems included in the financial statements of each of theGroup’s entities are measured using the currency of theprimary economic environment in which the entity operates(‘the functional currency’). The consolidated financialstatements are presented in Sri Lankan Rupees, which is theCompany’s functional and presentation currency.Foreign currency transactions are translated into thefunctional currency using the exchange rates prevailing atthe dates of the transactions. Foreign exchange gains andlosses resulting from the settlement of such transactions andfrom the translation at year-end exchange rates of monetaryassets and liabilities denominated in foreign currencies arerecognized in the income statement.1.3.3 Assets and bases of their valuation1.3.3.1 Property, plant and equipmentRecognition and measurementThe property, plant and equipment are measured at cost/fairvalue less accumulated depreciation and any accumulatedimpairment losses.The cost of property, plant and equipment includesexpenditures that are directly attributable to the acquisitionof the asset. When a property, plant and equipmentcomprise components which has different useful life, theyare accounted for as a separate items of property, plant andequipment.Carrying amounts of property plant and equipment arereviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may notbe recoverable. An asset’s carrying amount is written downimmediately to its recoverable amount if the asset’s carryingamount is greater than its estimated recoverable amount.All the property, plant and equipment are initially recordedat cost. Where items of property, plant and equipment aresubsequently revalued, any increases in the carrying amountare credited to revaluation reserve in shareholders’ equity.Decreases that offset previous increases of the same asset arecharged against the revaluation reserve directly in equity,any excess and all other decreases are charged to the incomestatement. Revaluation of property, plant and equipmentare undertaken by professionally qualified independentvaluers.Subsequent costSubsequent costs are included in the asset’s carrying amountor recognised as a separate asset, as appropriate, only whenit is probable that future economic benefits associated withthe item will flow to the Group and the cost of the itemcan be measured reliably. Property, plant and equipmentare derecognised upon replacement, disposal or when nofuture economic benefits are expected from its use. Anygain or loss arising on derecognition of property plant andequipment is included in the income statement in the year itis derecognised. All other repairs and maintenance costs arecharged to the income statement during the financial periodin which they are incurred.

40 Annual Report 2011Notes to the financial statements contd...DepreciationProvision for depreciation is calculated based on theirestimated useful lives of each part of an item of property,plant and equipment other than land. Depreciation iscalculated using straight line method to allocate their costor revalued amounts to their residual values over theirestimated useful lives.The estimated useful lives are as followsFreehold buildings50 yearsPlant and machinery5 yearsOffice and other equipment5 yearsFurniture and fittings5 yearsIT equipment and software3 - 5 yearsMotor vehicles4 yearsAir condition and refrigeration5 -10 yearsImprovements to leasehold assets4 -10 yearsImprovements on leasehold buildings and buildingsconstructed on leasehold land are amortised over the lowerof their economic useful lives or unexpired period of lease.Depreciation of an asset begins when it is available for useand ceases at the earlier of the date that the assets is classifiedas held for sale and the date that the assets is derecognised.The useful life, depreciating methods and residual valuesare assessed annually or in an earlier date where anycircumstance indicates such assessment is required.1.3.3.2 LeasesFinance leasesAssets are classified as acquired by finance leases when byan agreement, the Group substantially assumes the risk andrewards incidental to the ownership of an asset.Assets acquired by the way of finance lease are measuredat an amount equal to the lower of their fair value and thepresent value of minimum lease payments at the inceptionless accumulated depreciation and accumulated impairmentlosses.Operating leasesWhen the lessor effectively retains substantially all the risksand rewards of an asset under the lease agreement, suchleases are classified as operating leases. Payments underoperating leases are recognised as an expense in the incomestatement over the period of lease on a straight line basis.1.3.3.3 InvestmentsQuoted and unquoted investments held on long term basisare classified as non-current investments and are measuredat cost less impairment losses. The cost of the investmentis the cost of acquisition inclusive of brokerage and costof transaction. Provision for impairment is made in theincome statement, when there has been a decline other thantemporary in the value of investments, determined on anindividual basis.Marketable securities which have been classified undershort term investments are valued at lower of cost andmarket value, on an aggregate portfolio basis. Marketvalue is calculated by reference to closing share values asat the balance sheet date published by the Colombo StockExchange.1.3.3.4 Intangible assetsFranchisee feeFranchisee fee are shown at historical cost. Franchiseefee have a finite useful life and are carried at cost lessaccumulated amortisation. Amortisation is calculated usingthe straight-line method to allocate the cost of Franchisee feeover their estimated useful life of 10 years.Computer softwareAcquired computer software licences are capitalised onthe basis of the costs incurred to acquire and bring to usethe specific software. These costs are amortised over theirestimated useful life of 4 years.Costs associated with developing or maintaining computersoftware programmes are recognised as an expenseas incurred. Costs that are directly associated with theproduction of identifiable and unique software productscontrolled by the Group, and that will probably generateeconomic benefits exceeding costs beyond one year, arerecognised as intangible assets. Costs include the softwaredevelopment employee costs and an appropriate portionof relevant overheads. Computer software developmentcosts recognised as assets are amortised over their estimateduseful lives.1.3.3.5 InventoriesInventories are valued at the lower of cost and net realisablevalue. Net realisable value is the estimated selling pricein the normal course of business less estimated cost ofrealisation and/or cost of conversion from their existingstate to saleable condition.The cost of each category of inventory of the Group isdetermined on the following basis.Raw Materials - Actual cost on a First In First Out(FIFO) basisFinished goods and - Directly attributablework-in-progress manufacturing costMerchandising goods - Actual cost on a First In First Out(FIFO) basisOther inventories - Actual cost

Annual Report 201141Notes to the financial statements contd...1.3.3.6 ReceivablesTrade receivables are recognised at the amounts that theyare estimated to realise less provision for impairment. Aprovision for impairment of trade receivables is establishedwhen there is objective evidence that the Group will not beable to collect all amounts due according to the original termsof receivables. Significant financial difficulties of the debtor,probability that the debtor will enter bankruptcy or financialreorganisation, and default or delinquency in payments areconsidered indicators that the trade receivable is impaired.The amount of the provision is the difference between theasset’s carrying amount and the estimated realisable value.The amount of the provision is recognised in the incomestatement within selling and distribution costs. When atrade receivable is uncollectible, it is written off againstthe allowance account for trade receivables. Subsequentrecoveries of amounts previously written off are credited inthe income statement.1.3.3.7 Cash and cash equivalentsCash and cash equivalents comprise cash in hand and atbank and short term highly liquid investments, readilyconvertible to known amounts.For the purpose of cash flow statements, cash and cashequivalents comprise cash in hand and at bank net ofoutstanding bank overdraft.Cash flow statement is prepared based on the indirect method.1.3.3.8 Impairment of assetsAssets that have an indefinite useful life, for example land,are not subject to amortisation and are tested annually forimpairment. Assets that are subject to amortisation arereviewed for impairment annually or at an earlier datewhere events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairmentloss is recognised in the income statement for the amount bywhich the asset’s carrying amount exceeds its recoverableamount. The recoverable amount is the higher of an asset’sfair value less costs to sell and value in use.1.3.4 Equity and liabilities1.3.4.1 Stated capitalIncremental costs directly attributable to the issue of newshares are shown in equity as a deduction, net of tax, fromthe proceeds.1.3.4.2 BorrowingsBorrowings are classified as current liabilities unless theCompany has an unconditional right to defer settlementof the liability for at least 12 months after the balance sheetdate.1.3.4.3 Employee benefitsDefined benefit plan – retiring gratuityA defined benefit plan is a post employment benefitplan other than a defined contribution plan. The liabilityrecognised in the balance sheet, in respect of defined benefitplan is the present value of defined benefit obligation at thebalance sheet date. Benefits falling due more than 12 monthsafter the balance sheet date are discounted to present value.The defined benefit obligation is calculated annuallyby independent actuaries using Projected Unit CreditMethod (PUC) as recommended by SLAS 16 - “Employeesbenefits”.The actuarial gains and losses are credited or charged toincome statement in the period in which they arise.The assumptions based on which the results of the actuarialvaluation was determined, are included in Note 27 to thefinancial statements.However, according to the Payment of Gratuity Act No.12of 1983, the liability for the gratuity payment to an employeearises only on the completion of 5 years of continued servicewith the Company.Defined contribution plan - Employees’ Provident Fundand Employees’ Trust FundA defined contribution plan is a post employment benefitplan under which an entity pays fixed contribution intoa separate entity and will have no legal or constructiveobligations to pay further amounts.All the employees who are eligible for Employees’ ProvidentFund and Employees’ Trust Fund are covered by relevantcontribution funds in line with the respective statutes.Employer’s contribution to the defined contribution plansare recognised as an expense in the income statement whenincurred.1.3.4.4 Provisions, contingent assets and contingentliabilitiesProvisions are recognised when the Group has a legalor constructive obligation, as a result of past events, it isprobable that an outflow of resources embodying economicbenefits will be required to settle the obligation and a reliableestimate of the amount of such obligation can be made.All contingent liabilities are disclosed, as notes to thefinancial statements unless the outflow of resources isremote.Contingent assets if exist, are disclosed, when inflow ofeconomic benefit is probable.

42 Annual Report 2011Notes to the financial statements contd...1.3.4.5 CommitmentsAll material commitments as at the balance sheet date havebeen identified and disclosed in the notes to the financialstatements.1.3.5 Income statement1.3.5.1 PresentationThe income statement is presented on the “function ofexpenses” method, as it represents fairly the elementsof Company performance and prescribed by Sri LankaAccounting Standards.1.3.5.2 RevenueThe turnover of the Company and Group represents invoicedvalue of goods to customers other than to companies in theGroup, net of discounts and returns.1.3.5.3 Revenue recognitionRevenue is recognised to the extent that it is probable thatthe economic benefit will flow to the Group and the revenuecan be measured reliably. Revenue is measured at the fairvalue of the consideration received or receivable, net oftrade discounts and value added taxes, net of sales withinthe Group.The following specific criteria are used to recognizerevenue.Revenue from sale of goods is recognised when the significantrisk and reward of ownership have been transferred to thebuyer, the consideration is recoverable, the associated costsand possible return of goods can be estimated reliably andthere is no continuing management involvement with thegoods.Rental income is recognised on an accrual basis.Interest income is recognised as it accrues.Dividend income is recognised in the income statement onan accrual basis when the company’s right to receive thedividend is established.Gains or losses of revenue nature arising from the disposal ofproperty, plant and equipment and other non-current assets,including investments, are accounted for in the incomestatement, after deducting from the net sales proceeds ondisposal the carrying amount of such assets.All other income is recognised on an accrual basis.1.3.5.4 ExpenditureExpenses are recognised in the income statement on thebasis of a direct association between the cost incurredand the earning of specific items of income. All expensesincurred in the running of the business and in maintainingthe property, plant and equipment in a state of efficiency hasbeen charged to the income statement.1.3.5.5 Borrowing costsBorrowing costs are recognised as an expense in the periodin which they are incurred.1.3.5.6 Disposal of property, plant and equipmentGain or losses on the disposal of property, plant andequipment have been accounted for in the incomestatement.1.3.5.7 Grants and subsidiesGrants and subsidies related to assets are immediatelyrecognised in the balance sheet as a deferred income andrecognised in the income statement on a systematic andrational basis over the useful life of the asset.1.3.5.8 Income tax expenseCurrent taxThe provision for income tax is based on the element ofincome and expenditure in the financial statements and iscomputed in accordance with the provisions of the InlandRevenue Act.Deferred taxationDeferred taxation is the tax attributable to the temporarydifferences that arise when the carrying amounts of assetsand liabilities and their value derived based on the taxationrules (tax base).Deferred taxation is provided based on the balance sheetliability method on the temporary differences at the balancesheet date between the tax bases of assets and liabilitiesand their carrying amounts in the financial statements.Deferred tax assets are recognised for all deductibletemporary differences, carry forward of unused tax creditsand unused tax losses only to the extent that it is probablethat future taxable profits will be available against whichthe asset can be utilised.The carrying amount of deferred tax assets is reviewed ateach balance sheet date and reduced to the extent that itis no longer probable that sufficient taxable profit will beavailable to allow all or part of the deferred tax assets to beutilised.Deferred tax assets and liabilities are measured at tax ratesthat are expected to apply to the year when the assets isrealised or liability is settled, based on the tax rates thathave been enacted or substantively enacted as at thebalance sheet date.

Annual Report 201143Notes to the financial statements contd...1.3.5.9 Segment informationA business segment is a group of assets and operationsengaged in providing products or services that are subjectto risks and returns that are different from those of otherbusiness segments. A geographical segment is engaged inproviding products or services within a particular economicenvironment that are subject to risks and returns thatare different from those of segments operating in othereconomic environments.A segment is a distinguishable component of the Groupthat is engaged either in providing products or services(business/industry segment) or in providing productsor services within a particular economic environmentgeographical segment), which is subject to risks and rewardsthat are different from those of other segments.The activities/businesses of the Group fall under the Food& Beverages and Distributor categories. There are nodistinguishable components to be identified as geographicalsegment for the Group. The business segments are reportedbased on the Group’s management and internal reportingstructures.Inter segment pricing is determined at prices mutuallyagreed by the companies.Segment results, assets and liabilities include items directlyattributable to a segment as well as those that can be allocatedon a reasonable basis. Unallocated items mainly compriseincome earning assets and revenues, interest bearing loans,borrowings and expenses, corporate assets and expenses.Segment capital expenditure is the total cost incurred duringthe period to acquire segment assets, which are expected tobe used for more than one accounting period.The Group is currently in the process of evaluating thepotential effect of the adoption of these standards on itsfinancial statements. Such impact has not been quantified asat the reporting date.2 Risk ManagementCredit riskCredit risk arises from cash and cash equivalents, depositswith banks as well as credit exposure to customers includingoutstanding receivables. For bank and financial institutionsonly rated financial institutions are accepted. The creditcontrol assess the credit quality of customers, taking intoaccount their financial position, past experience and otherfactors. The individual risk limits are set based on internalratings in accordance with limits set by the Board. Theutilisation of credit limits are regularly monitored.Liquidity riskEffective liquidity risk management includes maintainingsufficient cash and marketable securities and the availabilityof funding from adequate amount of committed creditfacilities. The Group maintains flexibility in funding bymaintaining sufficient cash reserves and committed creditlines.Interest rate riskThe Group’s income and operating cash flows aresubstantially independent of changes in market interestrates.The Group’s interest rate risk arises from long-termborrowings. The borrowings at variable rates expose theGroup to cash flow interest rate risk whilst borrowings atfixed rates exposes the Group to interest rate risk. The Groupanalyses its interest rate exposure on a dynamic basis.1.3.6 Events occurring after the balance sheet dateAll material post balance sheet events have been considered,disclosed and adjusted where applicable.1.3.7 New accounting standards issued but noteffective as at balance sheet dateThe Institute of Chartered Accountants of Sri Lanka issued anew volume of Sri Lanka Accounting Standards which willbecome applicable for annual periods beginning on or after1 January 2012. Accordingly these standards have not beenapplied in preparing these financial statements as they arenot effective for the year ended 31 March 2011.These Sri Lanka Accounting Standards comprise accountingstandards prefixed both SLFRS (corresponding to IFRS)and LKAS (corresponding to IAS). Apllication of Sri LankaAccounting Standards prefixed SLFRS and LKAS for thefirst time shall be deemed to be an adoption of SLFRSs.

44 Annual Report 2011Notes to the financial statements contd...3 Revenue Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 0003.1 Gross revenueGross 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 17,328,1423.2 Business segment analysisFood 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 17,328,1423.3 Geographical dispersion of turnoverThe Group does not distinguish its turnover into significant geographical segments. The almost total turnover consists of turnoverwithin Sri Lanka.4 Cost of salesCost of sales of the Company and Group include direct operating costs of super markets, factories and restaurants.5 Other income Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Dividend 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 - 747582,450 510,453 633,048 634,1216 Finance costs Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Interest 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 377363,946 428,819 294,248 297,234

Annual Report 201145Notes to the financial statements contd...7 Profit before taxationGroupCompany2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Profit before taxation is stated after charging all expensesincluding 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(a) Staff costsSalaries, wages and other costs 1,808,132 1,458,132 1,311,277 768,261Pension costs - retirement benefit obligations (Note 27) 28,454 79,693 24,753 75,816Defined contribution plan cost - EPF and ETF 158,875 126,395 116,328 68,4311,995,461 1,664,220 1,452,358 912,508Number of employees as at 31 March 6,790 5,267 5,007 4,2858 Income tax expense Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000(a) Current tax chargeIncome tax 322,094 217,597 226,324 57,126Social Responsibility Levy 4,434 3,024 3,395 856Irrecoverable 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 note8 (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 ofthe 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 InlandRevenue 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 tillthe 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 yearof assessment 2010/11. Cargills Food Processors (Private) Limited is subject to a concessionary tax rate of 10% from yearof 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 taxrate thereafter.

46 Annual Report 2011Notes to the financial statements contd...(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 holidaytill 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 Companyand profit before tax is given below : 2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Profit 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) 1,023,672 778,923 662,791 220,107Tax 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 - 16,150Taxable 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(f) Deferred tax Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Deferred 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 - 19,911Decrease 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 parentcan 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 adeferred tax assets have not been recognized, are disclosed as follows.2011 2010Temporary Tax effect on Temporary Tax effect ondifference temporary difference temporarydifferencedifferenceRs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Property, plant and equipment 332,427 93,080 379,145 120,152Retirement benefit obligations 9,976 1,072 8,649 3,027Carried forward losses 435,959 45,435 389,125 136,194778,362 139,587 776,919 259,373

Annual Report 201147Notes to the financial statements contd...(f) Deferred tax (Contd.).The Management recognises deferred tax assets only when it is probable that taxable profit will be available against which thedeductible temporary differences can be utilized. It is probable that taxable profits will not be available against which the above deductibletemporary differences amounting to Rs. 778.4 Mn (2010 - Rs. 776.9 Mn) can be utilized in accordance with SLAS 14 (Revised2005) - “Income taxes”.9 Segment profit Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Segment profit before unallocated overheadsFood & beverages 2,197,584 1,581,406 1,456,482 591,243Wholesale distribution operation 68,223 141,840 3,154 4,285Photo processing 2,805 3,166 - -Leisure 11,582 8,701 - -2,280,194 1,735,113 1,459,636 595,528Unallocated overheads (473,742) (320,794) (497,727) (252,724)Dividend income 8 - 48,603 275,382Rental income 19,150 14,100 32,188 21,710Profit from sale of investment 7,768 - 7,768 -(Loss) / Profit from sale of property, plant and equipment (151) 8,604 (113) 2,825Amortisation 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 1,094,173 712,392 555,285 315,44310 Earnings per share Group Company2011 2010 2011 2010Profit attributable to ordinary shareholders (Rs. ‘000) 1,088,550 712,392 555,285 315,443Weighted average number of ordinary shares in issue 224,000,000 224,000,000 224,000,000 224,000,000Basic earnings per share (Rs.) 4.86 3.18 2.48 1.41Basic earnings per share is calculated based on the net profit attributable to ordinary shareholders of Cargills (Ceylon) PLCdivided by the weighted average number of ordinary shares in issue during the year.11 Dividend per share Group Company2011 2010 2011 2010Rs. Rs. ‘ 000 Rs. ‘ 000 Rs. Rs. ‘ 000 Rs. ‘ 000Dividend for the yearInterim 0.50 112,000 67,200 0.50 112,000 67,200Final - proposed 1.00 224,000 179,200 1.00 224,000 179,2001.50 336,000 246,400 1.50 336,000 246,400An 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 finaldividend of Rs. 1 per share is proposed for the year ended 31 March 2011. The final dividend proposed on 17 August 2011 has notbeen recognised as at the balance sheet date in compliance with SLAS 12 (Revised 2005) - “Events after the Balance Sheet Date”.

48 Annual Report 2011Notes to the financial statements contd...12 Property, plant and equipmentGroupFreehold Freehold Expenditure Plant, Motor Total Totalland building incurred on machinery vehicles 2011 2010leasehold and othersbuildingRs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Cost / 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 11,765,219Depreciation / 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 3,721,852Net 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 - - - - - 1,447,0984,330,578 1,052,410 981,211 3,139,711 153,589 11,104,597As at 1 April 2010 4,030,820 1,065,005 632,403 2,185,974 129,165 8,043,367Capital work in progress - - - - - 648,3494,030,820 1,065,005 632,403 2,185,974 129,165 8,691,716CompanyFreehold Freehold Expenditure Plant, Motor Total Totalland building incurred on machinery vehicles 2011 2010leasehold and othersbuildingRs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Cost / 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 7,694,839Depreciation / 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 1,643,790Net book valueAs at 31 March 2011 3,590,420 497,497 468,982 1,742,762 92,894 6,392,555Capital work in progress - - - - - 1,078,6433,590,420 497,497 468,982 1,742,762 92,894 7,471,198As at 1 April 2010 3,590,420 508,081 351,465 1,531,211 69,872 6,051,049Capital work in progress - - - - - 464,7133,590,420 508,081 351,465 1,531,211 69,872 6,515,762

Annual Report 201149Notes to the financial statements contd...(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 professionalvaluer on a depreciated replacement cost basis for buildings and market value basis for land as at the date of valuation. Therevalued 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 (Revised2005) - “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:LandBuilding2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000GroupCost 213,163 213,163 711,014 711,014Accumulated depreciation - - (273,617) (227,218)Net book value 213,163 213,163 437,397 483,796CompanyCost 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 Companyhas 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) forthe 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 sheetdate.(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. 412.8Mn (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 TetraPak South Asia (Pte) Ltd, has been impaired. Consequently an impairment loss of Rs. 11 Mn has been charged in the financialstatement of Kotmale Milk Products Limited.13 Intangible assets Goodwill Franchisee fee Software TotalGroup 2011 2010 2011 2010 2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Gross valueAs 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 1,139,404 369,158AmortisationAs 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 77,235Net book value as at 31 March 1,021,986 257,593 24,640 29,788 7,758 4,542 1,054,384 291,923Goodwill as at the balance sheet date has been tested for impairment and found no impairment in carrying value. Recoverable valueshave 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 andliabilities acquired in acquiring the Kotmale Holdings PLC and Diana Biscuits Manufactures (Private) Limited.

50 Annual Report 2011Notes to the financial statements contd...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.14 Investments No. of Holding Market Group CompanyShares % Value 2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 00014.1 Investments in subsidiariesUnquoted :Cargills Retail (Pvt) Ltd 47,500,002 100% - - 475,000 475,000Cargills Quality Foods Ltd 4,860,291 100% - - 1,193,453 1,193,453Millers Brewery Ltd 1,002 100% - - 100 -Dawson Office Complex (Pvt) Ltd 1 100% - - - -- - 1,668,553 1,668,45314.2 Investment in associatesUnquoted :C T Properties Limited 21,500,000 25% 161,282 216,075 216,075 216,075161,282 216,075 216,075 216,07514.3 Short term investmentsQuoted :Lanka IOC PLC 200,000 3,520 5,400 5,400 5,400 5,400Sierra Cables PLC 49,500 267 150 150 30 30Aitken Spence PLC 267,500 43,415 45,170 - 45,170 -47,202 50,720 5,550 50,600 5,430Provision for falling value (3,635) (1,791) (3,635) (1,758)47,202 47,085 3,759 46,965 3,672Unquoted :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% ownershipof Diana Biscuits Manufactures (Private) Limited with an investment of Rs. 342.89 Mn. The main business activity of the Companyis manufacture and distribution of biscuits.(c) During the year, the Company acquired majority shareholding of Kotmale Holdings PLC at a purchase consideration ofRs. 1,038 Mn. Initially, the shareholding increased to 73.4% and subsequently with the mandatory offer closing on 30 December2010, 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 subsidiaryCargills Quality Foods Limited. This transaction was done outside the trading floor of Colombo Stock Exchange consequent to aspecial approval from the Securities and Exchange Commission of Sri Lanka. The sales consideration amounted to Rs. 1,038 Mnand was accounted as intercompany receivable.(d) During the year, the Company incorporated Millers Brewery Limited to set up a brewery venture, which would commencebusiness 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 anoffice complex to be utilised as head office of Cargills (Ceylon) PLC.

Annual Report 201151Notes to the financial statements contd...(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) Limitedare subsidiaries of Cargills Quality Foods Limited (CQF). The financial statements of the said subsidiaries of CQF have beenconsolidated as 100% subsidiaries in view of the minority shareholders (subscriber shares) confirming that they hold the sharesin 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 financialstatements 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 consolidatedwith 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 toRs. 47,202,550 (2010 - Rs. 3,758,900)14.4 Investment in associates Group2011 2010Rs. ‘000 Rs. ‘000As at 1 April 216,075 -Acquisition - 216,075Share of loss incurred (54,793) -As at 31 March 161,282 216,07514.5 Summarised financial information of associates Group2011 2010Rs. ‘000 Rs. ‘000Group 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 329,218 461,061Total liabilities (375,279) (452,329)Net assets (46,061) 8,732Goodwill 207,343 207,343161,282 216,075

52 Annual Report 2011Notes to the financial statements contd...14.6 Acquisitions during the yearA detailed disclosure as required by SLAS 9 - Cash Flow Statements, is given below for the two acquisitions made during theyear. Kotmale Holdings PLC (KHP) and Diana Biscuits Manufactures (Private) Limited (DBML) were acquired by the Group.KHPDBMLRs. ‘000 Rs. ‘000Total purchase consideration 1,037,785 342,883Cash 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 375,919 240,356Goodwill on acquisition 661,866 102,527Net assets holding % 81.72% 100%Summary of net assets as of acquisition date is as follows;Property, plant and equipment 296,993 790,976Inventories 89,064 21,934Trade and other receivables 284,981 16,329Short term investments 1,369 -Total assets 672,407 829,239Borrowings (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 462,681 434,241Buildings, plant and machinery owned by the Diana Biscuits Manufactures (Private) Limited was revalued as at 17 October 2010by Mr. M C Abdul Malick (FIV), an independent professional valuer on a depreciated replacement cost basis to determine thefair value of assets as at the acquisition date. The revalued amount was accordingly incorporated in the financial statements ofDiana Biscuits Manufactures (Private) Limited.15 Advance paid for acquisition of assetsDuring the financial year, newly formed wholly owned subsidiary of Cargills (Ceylon) PLC, Millers Brewery Limitedentered in to an agreement for the sale and purchase of the business and business assets, including the brands, of McCallumBreweries (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 dateamounted to Rs. 1,187.7 Mn. Further sum of Rs. 17.7 Mn was advanced to acquire various assets.Advance paid (Rs.’000) 1,205,42516 Prepayment on leasehold land and building Group2011 2010Rs. ‘000 Rs. ‘000Gross valueAs at 31 March 35,000 35,000AmortisationAs at 1 April 4,375 3,500Amortisation for the year 875 875As at 31 March 5,250 4,375Balance as at 31 March 29,750 30,625Current portion of the prepayment 875 875Non- current portion of the prepayment 28,875 29,75029,750 30,625

Annual Report 201153Notes to the financial statements contd...17 Deferred tax assets Group2011 2010Rs. ‘ 000 Rs. ‘ 000As at 1 April 21,777 21,573(Charge) / release for the year (7,462) 204As at 31 March 14,315 21,777Deferred 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 19,02314,315 21,77718 Inventories Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Raw 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 19,3693,591,792 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 1,823,335Inventories amounting to Rs. 194 Mn has been mortgaged for bank facilities obtained [refer note 24 (C)]19 Trade and other receivables Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Trade 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)] 348,029 320,850 255,035 147,0561,584,089 1,119,749 699,823 474,571

54 Annual Report 2011Notes to the financial statements contd...19 (a) Loans and advances represents loans to employees Group Companyand the movement during the year is as follows :2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000As at 1 April 7,513 6,007 7,389 5,839On acquisition of subsidiaries 10,656 - - -Loans granted 21,523 14,022 18,156 13,85239,692 20,029 25,545 19,691Repayments (19,085) (12,516) (18,726) (12,302)As at 31 March 20,607 7,513 6,819 7,38919 (b) Tax recoverableThis includes Economic Service Charges, VAT recoverable, WHT recoverable and Income tax overpayments.20 Amounts due from / due to related companies Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Amounts due from subsidiariesCargills Quality Foods Limited - - 1,112,836 -Millers Limited - - 21,302 17,421Millers Brewery Limited - - 1,221,688 -Dawson Office Complex (Private) Limited - - 249,599 -- - 2,605,425 17,421Amounts due from holding companyC T Holdings PLC 17,865 17,796 17,254 17,252Amounts due from other related companiesCeylon Hotels Corporation PLC 404 23 - 23Ceylon Printers PLC 8 23 - -C T Properties Limited 94,251 80,900 94,242 80,891Ceylon Theatres (Private) Limited 2,228 2,257 2,208 2,213C T Land Development PLC 77,002 150,875 77,002 150,937Dialog Telekom PLC 3,887 - 3,887 -Galle Face Hotel Co. Limited 435 886 6 20Kalamazoo 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 2,800,698 268,757Amounts due to subsidiariesCargills Retail (Private) Limited - - 857,245 103,149Cargills Quality Foods Limited - - - 134,327Cargills Distributors (Private) Limited - - 18,604 13,972Cargills Quality Dairies (Private) Limited - - 59,961 40,843Cargills Agrifoods Limited - - 34,037 47,007C P C (Lanka) Limited - - 17,329 6,759Diana Biscuits Manufactures (Private) Limited - - 2,998 -Kotmale Dairy Products Limited - - 45,378 -- - 1,035,552 346,057Amounts due to other related companiesDialog Telekom PLC - 3,247 - 3,247Lanka Ceramics PLC 251 400 251 400Paragon 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

Annual Report 201155Notes to the financial statements contd...21 Stated capital Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Issued and fully paid :224,000,000 Ordinary shares 130,723 130,723 130,723 130,72322 Reserves Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Capital reservesRevaluation 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 3,598,018Revenue reserveGeneral reserve 485,500 385,500 485,500 385,5004,608,892 4,487,687 4,103,606 3,983,518Revaluation 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 Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Cash at bank and in hand 303,645 261,763 246,161 160,051For the purpose of the cash flow statement, the year endcash and cash equivalents comprise the following:Cash and bank balances 303,645 261,763 246,161 160,051Bank 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

56 Annual Report 2011Notes to the financial statements contd...24 Borrowings Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000CurrentCurrent portion of long term loan 127,427 130,399 - 49,999Commercial papers and short term loans 3,532,960 1,600,980 3,289,960 1,249,980Bank overdraft 2,574,088 1,068,192 2,182,882 979,2456,234,475 2,799,571 5,472,842 2,279,224Non-currentBank 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 currentAs at 1 April 328,898 1,030,235 49,999 600,000On acquisition of subsidiaries 326,472 - - -Repayments (143,776) (701,337) (49,999) (550,001)As at 31 March 511,594 328,898 - 49,999Falling 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:PrincipalInstitution & facility amount Repayment terms & interest rateRs. ‘ 000Cargills (Ceylon) PLCBank Overdrafts- Bank of Ceylon 94,000 Average interest rate of 14.17 %- Commercial Bank 200,000 Average interest rate of 8.8 %- Commercial Bank 500,000 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 LoansLong Term Loan- Sampath Bank 500,000 59 monthly installments of Rs. 8.33 Mn per month, commencing fromApril 2009 and final installment of Rs. 8.24 Mn, at average interest rateof 9.68 %Short Term Loans- Commercial Bank 400,000 Average interest rate of 8.78 %- 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 %- Standard Chartered Bank 465,000 Average interest rate of 8.48 %- Standard Chartered Bank 525,000 Average interest rate of 8.48 %

Annual Report 201157Notes to the financial statements contd...Institution & facility Principal amount Repayment term & interest rateRs. ‘ 000Cargills Retail (Private) LimitedBank Loan- DFCC Bank 150,000 60 monthly installments of Rs. 2.5 Mn per month, commencing fromMarch 2009 at average interest rate of 11.71 %Cargills Quality Foods LimitedBank 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 fromJuly 2007 and final installment of Rs. 1.8 Mn at average interest rate of9.58 % for the yearCargills Quality Dairies (Private) LimitedBank Overdraft- Seylan Bank 80,000 Average interest rate of 9.97%Cargills Agrifoods LimitedBank Overdraft- Commercial Bank 50,000 Average interest rate of 8.8%Cargills Food Processors (Private) LimitedBank Overdraft- Commercial Bank 50,000 Average interest rate of 8.8%Millers LimitedBank Overdrafts- Commercial Bank 165,000 Average interest rate of 8.83%- Hatton National Bank 175,000 Average interest rate of 10.38%- HSBC Bank 200,000 Average interest rate of 9.63%Bank LoanShort Term Loan- Standard Chartered Bank 250,000 Repayable on maturity at average interest rate of 9.15%Diana Biscuits Manufactures (Private) LimitedBank Overdrafts- Bank of Ceylon 176,450 Average interest rate of 9.5%- Bank of Ceylon 47,540 Average interest rate of 9.5%Bank Loans- Bank of Ceylon 11,115 54 monthly installments of Rs. 205,835 per month , commencing fromJuly 2011, at average interest rate of 6% for the year. Grace period of 6months available

58 Annual Report 2011Notes to the financial statements contd...Institution & facility Principal amount Repayment term & interest rateRs. ‘ 000- Bank of Ceylon 282,560 64 monthly installments of Rs. 4.42 Mn per month , commencing fromJuly 2011, at average interest rate of 7.67% for the year. Grace periodof 6 months available- Bank of Ceylon 7,482 72 monthly installments of Rs. 103,920 per month , commencing fromJanuary 2011, at average interest rate of 6.5% for the yearKotmale Dairy Products (Private) LimitedBank Overdraft- Bank of Ceylon 10,000 Average interest rate of 12.75%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 fromMarch 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 fromSeptember 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 fromAugust 2010, at average interest rate of 6.5 % for the yearKotmale Holdings PLCBank Overdraft- DFCC Vardana Bank 25,000 Average interest rate of 15%Kotmale Milk Products LimitedBank OverdraftPan Asia Bank 5,000 Average interest rate of 16%Bank LoanShort Term LoanPan Asia Bank 20,000 Average interest rate of 16.5%(c)The security offered to each loan are set out below:LoanSecurity offeredCargills (Ceylon) PLCBank of Ceylon- Overdraft facility of Rs. 94 Mn Trading stock of 15 locationsCommercial Bank- Overdraft facility of Rs. 200 Mn An agreement to mortgage land and building at Kandy for Rs. 100 Mn andCorporate guarantee from C T Holdings PLC for Rs. 50 MnMCB 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 ofRs. 535 Mn, imported and locally purchased. Undertaking to executemortgage bond for Rs. 100 Mn over equipments to be imported during2009 to a total value of Rs. 135 Mn.

Annual Report 201159Notes to the financial statements contd...LoanSecurity offeredSeylan Bank- Overdraft facility of Rs. 100 Mn Stock mortgage for Rs. 100 Mn and Demand promissory note for Rs. 100MnStandard 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 MnCargills Retail (Private) LimitedDFCC Bank- Long term loan facility of Rs. 150 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 150 MnCargills Quality Foods LimitedCommercial Bank- Long term loan facility of Rs. 400 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 425 MnPrimary mortgage for Rs. 300 Mn over leasehold land, building and projectassets at Bandigoda, Ja -ElaMillers LimitedCommercial Bank- Overdraft facility of Rs. 165 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 215 MnHatton National Bank- Overdraft facility of Rs. 175 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 335MnHSBC Bank- Overdraft facility of Rs. 200 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 200 MnStandard Chartered Bank- Short term loan facility of Rs. 250 Mn Corporate guarantee from Cargills (Ceylon) PLC for Rs. 250 MnDiana Biscuits Manufactures (Private) LimitedBank 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 MnKotmale Dairy Products (Private) LimitedBank of Ceylon- Overdraft facility of Rs. 10 Mn Corporate guarantee from Kotmale Holdings PLC over stocks and bookdebts.- Letter of credit facility of Rs. 40 Mn Corporate guarantee from Kotmale Holdings PLC over stocks and bookdebts.- Import loan facility of Rs. 40 Mn Corporate guarantee from Kotmale Holdings PLC over stocks and bookdebts.Lankaputhra Development Bank- Long term loan facility of Rs. 11.2 Mn Primary mortgage on project machinery along with relevant insurance coversand 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.

60 Annual Report 2011Notes to the financial statements contd...25 Deferred tax liability Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000As at 1 April 360,352 310,358 324,195 266,256On acquisition of subsidiaries 4,831 - - -On revaluation surplus of building (21,205) 96,465 (20,088) 93,003Release for the year (15,520) (46,471) (16,445) (35,064)As at 31 March 328,458 360,352 287,662 324,195Deferred tax provision as at the year end is made up as follows. Group Company2011 2010 2011 2010Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000Deferred 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)328,458 360,352 287,662 324,19526 Capital grant Group2011Rs. ‘ 000As at 1 April -On acquisition of subsidiaries 2,866Amortisation (477)As at 31 March 2,389Grant represents funds received in the form of plant. Grant is amortised on straight line basis over the useful life of such asset.27 Retirement benefit obligations Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000At 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 followsPresent value of unfunded obligations 192,761 163,360 164,553 150,270Present value of funded obligations - - - -Total present value of obligations 192,761 163,360 164,553 150,270Fair value of plan assets - - - -Recognised liability for defined benefit obligation 192,761 163,360 164,553 150,270

Annual Report 201161Notes to the financial statements contd...GroupCompany2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000(b)The movement in retirement benefit obligations over the year as followsAt beginning of year 163,360 91,555 150,270 81,763On acquisition of subsidiaries 12,175 - - -Current service cost 24,515 21,583 21,398 20,626Interest cost 17,137 10,988 16,530 9,812Benefit paid (11,228) (7,888) (10,470) (7,309)Actuarial (gain)/loss (13,198) 47,122 (13,175) 45,378Present value obligation as at the year end 192,761 163,360 164,553 150,270(c)The amount recognised in the income statement as followsCurrent service cost 24,515 21,583 21,398 20,626Interest cost 17,137 10,988 16,530 9,812Net actuarial (gain)/loss (13,198) 47,122 (13,175) 45,37828,454 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 todetermine the present value) 11 112. Future salary increase- Executives 10 12- Staff 10 8In addition to the above, demographic assumptions such as mortality, withdrawal and disability, and retirement age wereconsidered for the actuarial valuation. “A 67/70 mortality table” issued by the Institute of Actuaries London was used toestimate the gratuity liabilities of the Company.28 Trade and other payables Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Trade payables 3,560,049 3,022,209 3,143,698 2,744,763Other payables 718,404 607,090 513,520 438,295Accrued expenses 538,717 457,185 186,414 250,7694,817,170 4,086,484 3,843,632 3,433,82729 Dividend payable Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Unclaimed dividend 17,610 14,080 17,609 14,080

62 Annual Report 2011Notes to the financial statements contd...30 Segment information - GroupFood & Beverage Distribution Photo processing Leisure Total2011 2010 2011 2010 2011 2010 2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Assets 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 13,948,842Segment 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 7,807,687Capital expenditure 2,086,719 801,931 97,878 30,768 3,851 617 515 1,950 2,188,963 835,266Segment 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 851,291 772,852Non cash expenses otherthan depreciation 106,245 79,265 19,827 428 - - - - 126,072 79,69331 Commitments Group Company2011 2010 2011 2010Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Capital commitmentsApproved and contracted 395,553 - 168,254 -Financial commitmentsFuture 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 1,239,2223,840,534 2,654,204 2,743,345 2,015,16132 Contingent liabilitiesThe 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 subsidiarycompanies amounting to Rs. 109 Mn.The Directors do not expect any claim on these guarantees. Accordingly, no provision has beenmade 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.

Annual Report 201163Notes to the financial statements contd...33 Transfer of operations within the GroupWith 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 CargillsRetail (Private) Limited is now used by the Company for which a rent is paid to the subsidiary. The Company expects to purchase allthe 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 parentof Cargills Food Services (Private) Limited, with effect from 1 October 2010. Cargills Food Processors (Private) Limited expects topurchase all the assets and liabilities of Cargills Food Services (Private) Limited.34 Events after the balance sheet dateMillers Brewery Limited (MBL), wholly owned subsidiary of Cargills (Ceylon) PLC, finalised the sale and purchase agreement withMaCallum 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 ofabove 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 31March 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 theSolvency test, and has obtained a certificate from the auditors. In accordance with SLAS 12 (Revised 2005) - “Events after the BalanceSheet 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 thebalance 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 inthe financial statements.35 Transactions with group companiesThe Company has provided corporate guarantees for term loans and banking facilities obtained by its subsidiary companies, thedetails 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 relatedcompany 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 andnon - 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 hisoffice.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 paymentsmade to key management personnel apart from the disclosed amount.

64 Annual Report 2011Notes to the financial statements contd...(b) The Directorates of Directors of the group companiesThe Directors of the Company are also directors of the following companies with which the Company had regular business transactionsas 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 SA Page Page Edirisinghe Gardiner Mendis Page Perera Danapala Page Abdul Wahid Kodikara MathavanGroup 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 Holdings PLC 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 SA Page Page Edirisinghe Gardiner Mendis Page Perera Danapala Page Abdul Wahid Kodikara MathavanOther companiesCeylon Hotels Corporation PLCCeylon Printers PLCCeylon Theartres (Pvt) Ltd C T Holdings PLC C T Capital LtdC T Land Development PLC C T Properties Ltd Dialog Telekom PLCGalle Face Hotel Co. LtdKalamazoo Systems PLCKandy Hotels Co. (1938) PLCLanka Ceramics PLC Lanka Tiles PLCLanka Walltiles PLC Paragon Ceylon PLCUnidil Packaging Ltd Directors have no direct or indirect interest in any other contracts with the Company. The above interest in contracts have beendeclared at Board Meeting by the Directors concerned.

Annual Report 201165Notes to the financial statements contd...(c) Transactions with related companiesCompany 2011 2010Sales Other Purchases Other Sales Other Purchases Otherincome expenses income expensesRs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Transactions with subsidiariesCargills 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 18Diana Biscuits Manufactures (Pvt) Ltd 5,335 - 8,044 - - - - -Kotmale Dairy Products (Pvt) Ltd - - 50,499 - - - - -Transactions with holding companyC T Holdings PLC - - - - 72 - - -Transactions with other related companiesCeylon Hotels Corporation PLC 117 - - - 142 - - -Ceylon Printers PLC - - - 979 - - - 243Ceylon Theatres (Pvt) Ltd 31 - - - - - - -C T Capital Ltd - - - - - - - 347C T Land Development PLC - - - 23,846 16 - - 14,889Dialog Telekom PLC - 99,998 - - - 52,304 - 7,562Galle Face Hotel Co. Ltd 122 - - - 289 - - -Kalamazoo Systems PLC - - - - - - - 633Lanka Tiles PLC 714 - - 8,590 137 - - 2,000Lanka Walltile Meepe (Pvt) Ltd - - - 1,991 - - - 29Lanka Ceramics Ltd - - 1,258 22 - - 396 -Lanka Walltiles PLC - - - 704 - - - 4242011 2010Rs. ‘ 000 Rs. ‘ 000Dividend received from subsidiary companiesCargills Retail (Pvt) Ltd - 71,250Cargills Quality Foods Ltd 48,603 204,132Transfer of investmentCargills 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 subsidiaryCargills Quality Foods Limited. This transaction was done outside the trading floor of Colombo Stock Exchange consequent to aspecial approval from the Securities and Exchange Commission of Sri Lanka. The sales consideration amounted to Rs. 1,038 Mnand was accounted as intercompany receivable. As at the balance sheet date, the entire amount was due to the Company.Advance for funding investmentMillers 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. Thisamount 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. Thisamount is reflected as an intercompany receivable pending the issue of shares in Dawson Office Complex (Private) Limited.

66 Annual Report 2011Notes to the financial statements contd...Group 2011 2010Sales Other Purchases Other Sales Other Purchases Otherincome expenses income expensesRs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Transactions with holding companyC T Holdings PLC 497 - - - 632 - - 629Transactions with associateC T Properties Ltd - - - - 4 - - -Transactions with other related companiesCeylon Hotels Corporation PLC 928 - - - 890 - - -Ceylon Printers PLC 87 - - 979 23 - - 243Ceylon Theatres (Pvt) Ltd 395 - - - - - - -C T Capital Ltd - - - - - - - 347C T Land Development PLC - - - 48,521 80 - - 31,462Dialog Telekom PLC - 99,998 - 61 - 80,792 - 7,593Galle Face Hotel Co. Ltd 2,680 - - - 2,605 - - 10Kalamazoo Systems Ltd - - - - 139 - - 633Kandy Hotels Co. (1938) PLC 894 - - - 432 - - -Lanka Tiles PLC 714 - - 8,590 137 - - 2,230Lanka Walltile Meepe (Pvt) Ltd - - - 2,106 - - - 2,303Lanka Ceramics PLC - - 1,258 22 - - 396 -Lanka Walltiles PLC - - - 789 - - - 424Paragon Ceylon Ltd - - - - - - - 495Unidil Packaging (Pvt) Ltd - - 4,705 - - - 9,569 -Panadaria (Private) LimitedMrs. R Page, wife of the Deputy Chairman/CEO is a Director of the above company with which the Company had the followingtransaction 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 companiesAmounts due from and due to related companies as at the year end have been disclosed under note 20 to these financialstatements.

Annual Report 201167Statement of value addedGroup2011 2010% Rs. ‘ 000 % Rs. ‘ 000Creation of value addedGross 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 4,806,739Distribution of value addedTo 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 42,09836.19 2,070,086 35.50 1,706,318To governmentGovernment levies 17.97 1,027,511 18.68 898,024Corporate taxes 5.46 312,530 6.00 288,33423.43 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 3.73 179,200Retained for growthDepreciation 14.88 851,291 16.08 772,852Retained earnings 13.95 797,350 11.09 533,19228.83 1,648,641 27.17 1,306,044100.00 5,719,537 100.00 4,806,739Value addition for 2011 Value addition for 2010Retained for growth28.83%36.19%Retained for growthTo associates27.17%35.50%To associatesTo shareholdersTo lenders of capital5.09%6.46%23.43%To shareholdersTo lenders of capital3.73%8.92%24.68%To governmentTo government

68 Annual Report 2011Five year financial summary2007 2008 2009 2010 2011Group Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000 Rs. ‘ 000Financial 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 1,088,550Financial positionStated capital 130,723 130,723 130,723 130,723 130,723Reserves 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 7,049,433Current 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 6,959,710Key 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.

Annual Report 201169Group real estate portfolioLocation Land extent Building area Valuation / Costs Year of(Sq. ft.) Rs. ‘ 000 valuationCargills (Ceylon) PLCColombo 01 141 Perches 140,000 1,640,000 2010Colombo 02 82 Perches 12,450 473,000 2010Kandy 94 Perches 6,729 750,000 2010Maharagama 145 Perches 6,384 382,000 2010Nuwara Eliya 57 Perches 6,900 106,000 2010Mattakuliya 330 Perches 65,000 552,000 2010Park Road - 4,332 28,000 2010Boralasgamuwa 2.5 Acres - 167,500 2010Cargills Quality Foods LimitedMattakuliya 1.5 Acres 6,667 188,500 2010Ja - Ela 5.1 Acres 23,067 294,000 2010Cargills Agrifoods LimitedKatana 11.3 Acres 10,210 183,680 2010Millers LimitedBandarawela 85 Perches 6,345 100,000 2010Kelaniya 1.2 Acres 62,985 197,600 2010C P C (Lanka) LimitedKatoolaya estate, Thawalantenne 4 Acres 550 4,159 -Dawson Office Complex (Private) LimitedColombo 02 99 Perches - 249,599 -Kotmale Dairy Products (Private) LimitedMulleriyawa 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 andKotmale Dairy Products (Private) Limited are stated at their respective historical cost for which no valuation has been madeduring the financial year.

70 Annual Report 2011Investor relations supplement1. GeneralStated capital Rs. 130,723,000Issued shares 224,000,000Class of sharesOrdinary sharesVoting rightsOne vote per ordinary share2. Stock exchange listingThe issued ordinary shares of Cargills (Ceylon) PLC are listed in the Colombo Stock Exchange.3. Distribution of shareholders31 March 2011 31 March 2010Size of Shareholders Holding Shareholders HoldingNumber % Number % Number % Number %1 - 1,000 1,307 58.27 433,523 0.19 1,056 54.94 338,875 0.151,001 - 10,000 638 28.45 2,436,337 1.09 561 29.19 2,255,985 1.0110,001 - 100,000 242 10.79 6,885,808 3.07 254 13.22 7,347,258 3.28100,001 - 1,000,000 42 1.87 11,731,632 5.24 40 2.08 10,973,882 4.901,000,001 and over 14 0.62 202,512,700 90.41 11 0.57 203,084,000 90.662,243 100.00 224,000,000 100.00 1,922 100.00 224,000,000 100.004. Analysis of shareholders31 March 2011 31 March 2010Group of Shareholders Holding Shareholders HoldingNumber % Number % Number % Number %Institutions 177 7.89 185,265,631 82.71 111 5.78 184,952,040 82.57Individuals 2,066 92.11 38,734,369 17.29 1,811 94.22 39,047,960 17.43Total 2,243 100.00 224,000,000 100.00 1,922 100.00 224,000,000 100.00Residents 2,146 95.68 217,441,965 97.07 1,844 95.94 221,662,440 98.96Non residents 97 4.32 6,558,035 2.93 78 4.06 2,337,560 1.04Total 2,243 100.00 224,000,000 100.00 1,922 100.00 224,000,000 100.005. Group companiesDuring the year Company acquired majority shareholding of Kotmale Holdings PLC at a purchase consideration of Rs. 1,038Mn. Initially, the shareholding increased to 73.4% and subsequently with the mandatory offer closing on 30 December 2010, theshareholding was increased to 81.72%.As at 31 March 2011, Cargills (Ceylon) PLC transferred the ownership of Kotmale Holdings PLC to its wholly owned subsidiaryCargills Quality Foods Limited.During the year, Cargills Quality Foods Limited a wholly owned subsidiary of Cargills (Ceylon) PLC, acquired 100% ownershipof 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 businessin 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 anoffice complex to be utilised as head office of Cargills (Ceylon) PLC.

Annual Report 201171Investor relations supplement contd...6. Share ValuationThe market price per share recorded during the year ended 31 March 2011 2010Rs.Rs.Highest 253.00 73.50Lowest 70.00 23.00Last traded price 228.30 70.507. Top 20 shareholders31 March 2011 31 March 2010The holdings of the top 20 shareholders Number of Number ofShares % Shares %C T Holdings PLC 156,749,240 69.98 156,749,240 69.98Mr. V R Page 14,380,200 6.42 14,285,000 6.38Ceylon Guardian Investment Trust - A/C No.1 6,558,700 2.93 6,949,700 3.10Employees Provident Fund 6,263,600 2.80 - -Mr. Anthony A Page 5,050,000 2.25 4,838,500 2.16Odeon Holdings (Ceylon) Limited 4,622,920 2.06 4,622,920 2.06Ms. M M Page 2,648,400 1.18 2,280,400 1.02Mr. J C Page 1,705,500 0.76 1,705,500 0.76Est. of Mrs. M M Udeshi 1,536,640 0.69 1,536,640 0.69BNY - 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 0.71The Gilpin Fund Limited 864,000 0.39 864,000 0.39The Associated Newspapers of Ceylon Limited 799,840 0.36 799,840 0.36Bank 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 0.25National Savings Bank 548,300 0.24 - -Pictet & Cie 500,000 0.22 500,000 0.22Mr. P E Muttukumaru 393,500 0.18 356,040 0.16Sri Lanka Insurance Corporation Ltd - Life Fund 382,100 0.17 8,518,600 3.80Deutsche Bank -Employee Provident Fund - - 511,600 0.23Deutsche Bank AG - National Equity Fund - - 500,000 0.22Nikan (Private) Limited - - 466,800 0.21Mr. B N Shiner - - 492,000 0.22Mr. M M Udeshi - - 387,500 0.17Total 208,150,580 92.93 208,524,820 93.098. Public holdingThe percentage of shares held by the public as at 31 March 2011 was 18.38 % (2010 - 18.49%)

72 Annual Report 2011Notice 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 willbe:1 To consider and adopt the Annual Report of the Board and the Statements of Accounts for the year ended 31 March 2011, withthe Report of the Auditors thereon2. To declare a dividend as recommended by the Directors3. To re - elect Directorsa) A. T. P. Edirisinghe,b) E. A. D. Perera,c) Sanjeev Gardiner, who retire by rotation, andd) Jayantha Dhanapala, who retires in terms of Section 210 (2) (b) of the Companies Act No. 7 of 2007 having attainedthe age of seventy two years and offers himself for re-election in terms of Section 211 (1) and (2) of the Companies ActNo. 7 of 2007.Ordinary Resolution“Resolved that Jayantha Dhanapala, a retiring Director, who has attained the age of seventy-two years be and is herebyreappointed a Director of the Company and it is hereby declared that the age limit of seventy years referred to inSection 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 2011/125. To authorise the Directors to determine the remuneration of the Auditors, Messrs. KPMG Ford, Rhodes, Thornton & Co., who aredeemed reappointed as Auditors at the Annual General Meeting of the Company in terms of Section 158 of the Companies ActNo. 7 of 2007By Order of the BoardCargills (Ceylon) PLCS L W DissanayakeCompany Secretary17 August 2011Notes :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 amember 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 than48 hours before the time fixed for the meeting.

Annual Report 201173Proxy formFor use at the sixty fifth Annual General Meeting*I / We ………………………..................................................................................…………….......................................................………………of ……………………………………....................….........................………………………............................................................................. beinga *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 AnnualGeneral Meeting of the Company to be held on Thursday, 29 September 2011 and at any adjournment thereof and at every Poll whichmay be taken in consequent thereof in the manner indicated below:Ordinary resolutionsResolution number 1 2 3 (a) 3 (b) 3 (c) 3 (d) 4 5ForAgainst..............................................Date...............................................................Signature of member (s)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, inthe view of the Proxy holder, any doubt (by reason of the manner in which the instructions contained in the Proxy have beencompleted) as to the way in which the Proxy holder should vote, the Proxy holder in his/her discretion may vote as he/she thinksfit

74 Annual Report 2011Proxy form contd...Instructions as to completion of the proxy form1. To be valid, the completed Form of Proxy should be depositedat the Registered Office of the Company at No: 40, YorkStreet, Colombo 1, not less than 48 hours before the timeappointed for the holding of the Meeting.2. In perfecting the form, please ensure that all details are legible.If you wish to appoint a person other than the Chairmanas your proxy, please fill in your full name and address, thename and address of the proxy holder and sign in the spaceprovided and fill in the date of signature.3. The instrument appointing a Proxy shall, in the case of anindividual, be signed by the appointer or by his Attorneyand in the case of a Corporation must be executed underits Common Seal or in such other manner prescribed by itsArticles of Association or other constitutional documents.4. If the Proxy Form is signed by an Attorney, the relevantPower of Attorney or a notarially certified copy thereof,should also accompany the completed Form of Proxy, if ithas not already been registered with the Company.5. In the case of joint holders, only one need sign. The votes ofthe senior holder who tenders a vote will alone be counted.6. In the case of non-resident Shareholders, the stamping willbe attended to upon return of the completed form of proxyto Sri Lanka.