The Ceylon Brewery Limited - Carson Cumberbatch PLC

The Ceylon Brewery

LimitedA Carson Cumberbatch Company

Annual Report 2006/07

Chill-line 2489489

Just Call the Squad Line: 2465959

FINANCIAL CALENDAR

Financial Year - 31st March 2007

Announcement of Results

First Quarter 29th August 2006

Second Quarter 10th November 2006

Third Quarter 28th February 2007

96th Annual General Meeting 1st June 2007

CONTENTS

Chairman's Statement 2

Review of Operations 4

Report of the Directors 11

Statement of Directors’ Responsibilities 14

Financial Statements

Report of the Auditors 16

Income Statements 17

Balance Sheets 18

Statements of Changes in Equity 19

Cash Flow Statements 20

Significant Accounting Policies 22

Notes to the Financial Statements 30

Statement of Value Added - Group 44

Five Year Summary - Group 45

US $ Financials 47

Information to Shareholders & Investors 52

Glossary of Financial Terms 54

Corporate Information 55

Notice of Meeting 56

Form of Proxy Enclosed

The Ceylon Brewery LimitedAnnual Report 2006/07

2

Chairman’s Statement

It is with great pleasure that I welcome the

members to the 96th Annual General Meeting of

the Company and present, on behalf of the Board

of Directors, the audited Financial Statements for

the year ended 31st March 2007.

The performance of the Group in this financial

year was far from satisfactory as the profitability

fell way short in comparison to the previous year

and its potential. A detailed account of the Group’s

business activities is given in the Review of

Operations appearing in the following pages and

I shall therefore restrict my comments only to

those that are significant.

In the year under review, your Group earned a

pre-tax profit of Rs. 143.3 million on a turnover of

Rs. 4.0 billion, compared to the previous year’s

figures of Rs. 301.5 million and Rs. 3.8 billion

respectively, thus, registering a 52% decline in

profitability despite a marginal improvement in

turnover. Although turnover in value terms

increased, this was driven by tax increases. In the

meanwhile, industry as a whole experienced a

decline in volumes. While this was the case for

beer, spirits volumes registered a positive growth,

due to the advantage it had on price per millilitre

of alcohol, owing to favourable taxation in

comparison with soft alcohol.

In this context it was comforting to note that the

Government, in its budget of November 2006,

refrained from increasing the Excise Duty on beer.

However, this relief was to be momentary, as

immediately after the budget, the Provincial Councils

increased the turnover tax rate applicable for

Liquor Distributors to 5% from 1% and introduced

an additional 5% at the point of retailing of

alcohol. Ironically, tobacco products are now

exempt from turnover tax at the point of retailing

whilst beer is not.

The NATA (National Alcohol & Tobacco Authority

Act) came into force in December 2006. This act

bans advertising of alcohol products including

promotions and other trade related activities

normally carried out in the market place. Until the

time of its enactment and its immediate aftermath

the act was interpreted by various parties

including the authorities in different ways. The

resultant confusion caused in the market and in

the minds of the consumers contributed to a

decline in volumes during this period.

Pressure on the operating costs continued to

mount as price escalations were experienced

almost across all inputs. During the year, the price

revisions on fuel & electricity, the appreciation of

the Dollar and the Euro against the Rupee, the

increase in the world market prices of malt, the

salaries and overheads which rose in line with

inflation, the impact on the interest rates

collectively pushed up the production &

distribution costs. The gross and net profit

margins were squeezed as a result and hence

towards the very end of the financial year it was

decided that the prices of our product portfolio be

revised to recoup and restore profitability.

However, the impact of this price revision would

be seen only be in the ensuing year.

Looking ahead, the price revisions made on the

product portfolio of the Group would have a

favourable impact on its profits - bearing in mind

however, that beer is already priced higher than

the threshold point. The consumers too are


3Chairman’s Statement

burdened with increase in prices of most essential

goods thus reducing the amount of money

available for discretionary spending which is very

pertinent to beer as it is drunk in good times and

is non-addictive.

The subsidiary Lion Brewery, together with a

consortium of investors invested in a company in

Singapore which will wholly own a venture in

India set up to brew and market beer in its various

states. Carlsberg A/S being the lead investor will

own 45% of the stake whilst Lion Brewery will

hold 22.5% and the balance, the other consortium

members. Currently, a greenfield plant is being

built in the State of Rajsathan and as we write,

negotiations are underway to acquire another

brewery. In addition preliminary studies are also

underway on two further opportunities that the

company may wish to make use of.

The Group also embarked on some restructuring

projects mainly in the area of distribution which

benefits would be seen in the ensuing year. It must

also be cautioned that any change in taxation

would nullify in one day all the efforts made in

restructuring and reducing the cost base.

At the time of writing this, I learnt with much

sadness the horrendous accident involving one of

our outsourced trucks carrying beer which left 50

injured and 23 dead. The truck involved was not

owned by us and neither were the drivers our

employees. However, in order to provide financial

assistance to those affected and to their next-of-kin

the Group allocated Rs. 125,000/- for each person

deceased and Rs. 25,000/- each for those injured.

On behalf of the Group, I extend my deepest

sympathies for those who lost their lives and wish

everyone injured a speedy recovery.

My deep appreciation is extended to the

employees, as the year although filled with

obstacles and impediments bringing lots of

frustration, set about laying the foundation for a

stronger Group. I look forward to their persistent

support and commitment in the years to come.

Mr. Søren Ask Nielsen who was appointed to the

Board as a nominee of Carlsberg on the 6th of

April 2006 resigned with effect from 25th January

2007. On behalf of the Board, I wish Mr. Søren Ask

Nielsen the best in his future endeavours.

I welcome Mr. J.B. Madsen who has been

appointed to the Board as a nominee of Carlsberg

in place of Mr. Søren Ask Nielsen.

A big thank you is warranted to our valued

customers for their continued patronage as well as

our suppliers and distributors, local & foreign, for

their invaluable support, and last but not least,

financial institutions and all other trading partners

and our loyal shareholders for the confidence

placed in the Group.

Finally, a word of appreciation to the Board of

Directors for their co-operation and advice and

I look forward to their continued guidance in the

future.

L.C.R. de C. Wijetunge

Chairman

Colombo

4th May 2007


4

Review of Operations

The year under review has been the worst year

the Group has had to endure since inception.

From an industry perspective and as in the past,

authorities focused on the legal alcohol industry

more than it did on the illegal alcohol business to

curb consumption of liquor. We find three reasons

to disagree with this strategy; firstly, illicit alcohol

is so much more harmful than legal alcohol since

the former is manufactured under questionable

conditions. Secondly, illicit alcohol helps enrich a

few - albeit a powerful few - whilst the legal

alcohol industry contributes to the community as

a whole since it parts with a larger share of its

retail price as taxes to the Government. Thirdly,

the policy seeks to curb the consumption of

alcohol rather than the irresponsible consumption

of the beverage. The vast majority of people that

consume alcohol do so responsibly and have done

so for over 5,000 years. Its only a few that

consume alcohol irresponsibly. Thus, it would

seem logical to focus on the small minority that is

irresponsible. After all, if society were to prevent

the use of everything that if used irresponsibly

could cause damage, we would have to limit the

use of vehicles, sugar, fuels and many more. Yet

this is not the case. However, with alcohol it seems

fashionable and politically popular in Sri Lanka to

focus on consumption rather than on irresponsible

behaviour, the latter being by far the dangerous of

the two. These are facts that are well-known and

well documented; by the Excise Department, the

Police, the Politicians and the Media. Yet, they are

facts that are continued to be ignored for reasons

that defy logic.

From a group perspective, the year was not a good

one either. Being the market leader by far, issues

impacting the industry were felt first and most by

us. Government imposed outlet closures (during

festive seasons, on religious occasions etc.),

implementing the outdated Excise Ordinance to the

letter rather than in spirit, the cancelling of licences,

the implementation of the National Alcohol &

Tobacco Authority Bill (NATA Bill, to ban the

advertising and restrict the distribution of alcohol

and tobacco products) and the increasing of taxes, all

impacted on volumes. Lower volumes naturally

resulted in lower profits. Thus, we ended the year

with a pre-tax profit of Rs. 143.3 million in

comparison with Rs. 301.5 million for the previous

year. This on a higher turnover of Rs. 3,982.33

million as against the Rs. 3,845.76 million of the

previous year. It is important to note that the higher

turnover was solely the result of higher taxes.

ALCOHOL POLICY

The nation’s alcohol policy must be understood in

the context of an important factor, i.e. the alcohol

content in an alcoholic beverage. The alcohol

content in a beverage refers to the quantum of

pure alcohol in the drink and as common sense

would dictate, the more the pure alcohol, the

more the harm in the form of greater

drunkenness, addiction and health issues. Thus a

5% beer would mean that 100 ml of the product

contains 5 ml of pure alcohol. Similarly, a 35%

spirit would mean that 100 ml of the product

contains 35 ml of pure alcohol. Thus, it can be

clearly seen why a hard alcohol is considered so

much more harmful than a soft alcohol.


5Review of Operations

In this context it is interesting to note that during

the year under review - and for some years prior to

that as well - spirit volumes have grown at double

digit rates whilst beer volumes have declined. In

other words the alcohol policy of the authorities

has not been effective unless of course the intention

is to have the consumer consume more alcohol

than they did in the past. Since the stated intention

of the policy is the opposite, we can only surmise

that the present policy is flawed. Indeed, there are

some indications that a policy correction is taking

shape - albeit slowly - since excise related taxes on

beer were not increased during the year whilst

spirits related taxes were. However,

Provincial Councils increased Turnover Taxes at

wholesale level to 5% from the previous 1%. They

also introduced a further 5% Turnover Tax at retail

level. Both these factors helped increase price of

beer to consumers further decreasing value for

money in the category particularly to the less

affluent. Surprisingly, the 5% Turnover Tax at retail

level was not introduced to the tobacco sector

possibly reflecting policy-makers beliefs that

alcohol is more harmful than tobacco.

The recently introduced NATA Bill is also a

reflection of this belief. At best policy-makers

believe that alcohol and tobacco causes harm in

equal measure although medical evidence says

otherwise. If not, would the two product

categories be treated in the same manner via this

Bill whilst worldwide the two are treated very

differently? In fact, the world over, soft alcohols

are treated less stringently than hard alcohols in

terms of advertising and distribution restrictions

although in Sri Lanka this is not the case. The

effect of the Bill is to completely ban the

advertising of alcohol products and to restrict their

consumption to those 21 years and above.



Thus, an 18 year old can now make life changing

decisions concerning marriage, a Parliamentary

Representative and the country’s President but to

consume a beer a 3 year wait has been mandated!

We have no objections to a pragmatic alcohol policy

if the aim of the policy is to reduce consumption of

alcohol in the country. In fact, if this is the aim, we

support such a policy especially if the greater focus

is to prevent irresponsible consumption of

beverage alcohols. However, we do fault the

implementation process. The consumption statistics

as available with the Excise Department support

our line of thinking since the intake of pure alcohol

has increased over the years. To make the present

‘Mathata Thitha’ a successful programme the

authorities need to focus on three critical issues,

namely, eliminate illicit liquor, replace to the extent

possible consumption of hard alcohol with soft

alcohols and put in place realistic measures to

prevent abuse of alcohol. Many times in the past

we have discussed in detail the actions needed to

ensure success (and indeed have communicated

them to policy-makers at many a discussion) and

we don’t intend to repeat them now. Suffice to say,

none of the three strategies outlined above are

short-term measures; they are all long-term policy

initiatives with political courage the most needed

ingredient. However, the sooner the process starts

the sooner the objective will be reached and in the

meanwhile less harm will be caused particularly to

new entrants to the alcohol category.

THE BUSINESS ENVIRONMENT

The North-East conflict escalated during the year

under review and people in the affected areas

focused primarily on survival and not on rest and

relaxation. Transporting products to and within

these areas was also difficult with the North being

completely out of bounds with the A 9 closure.

The involvement of para military forces also

brought as added dimension to the business

environment in the East. All these factors reduced

opportunities for trade and as a result volumes

reduced. The escalation of the conflict also led

understandably to greater security in Colombo

restricting movement particularly in the evenings.

Restaurants, pubs and places of similar

entertainment, reported less custom again

resulting in lower volumes for our brands.

Tourism too suffered as a result of the conflict

affecting volumes further.

Unusual weather resulted in floods in many areas

during the year under review and here too the

result was a lower level of consumption firstly,

due to a natural lack of inclination to consume

considering the circumstances and secondly, due

to the difficulties in transportation as a result of

the conditions.

The year under review also saw rising inflation,

higher interest rates, a further devaluation of the

currency and a rise in cost of manufacturing

essentials such as fuel and electricity. As a result,

the cost of doing business including costs of

manufacturing inputs escalated. Inflation not only



increased costs of doing business but also reduced

purchasing power amongst the vast majority of

fixed income earners, our core consumer segment.

Thus beer - very much a ‘feel good’ factor product

- received low priority in comparison to local

spirits which are used amongst other things, to

forget life’s hardships.

THE STATE OF THE BUSINESS

Whilst operating conditions remained difficult

during the year under review, Group

fundamentals continued to remain strong. Our

premier brand, Lion was awarded Superbrand

status although this could not be publicised due to

the NATA Bill. Lion was also ranked the third most

powerful brand in the country by Brand Finance

in Business Todays annual review beating a

number of household Sri Lankan brands in the

process. Both awards are remarkable considering

that Lion cannot be advertised, priced and

distributed in accordance with the brand owners’

strategy as would other fast-moving consumer

goods since it is an alcoholic beverage. Lion was

the only beer to receive mention in either award.

Our distribution system remained strong and

efficient during the year under review and

ensured product availability across licensed outlets

in the country. The excellent field sales force

available to us both at Group and Distributor

level, ensured that core services at retail level set

the standards both within the industry and

outside. During the year under review, a Field

Force Automation system was fully implemented.

The entire field sales force now works off a state-

of-the-art hand held computer system which

provides the subsidiary on-line field information

and with it, the ability to react within a few short

hours to new developments. Together with the

Group’s strength at the strategic level, this ability

to react swiftly has brought tremendous

competitive advantage.

The manufacturing and logistics systems and

processes remain as strong as ever and have

ensured trouble free and efficient production

during the year. Product quality remains world-

class in support of our strong portfolio. In

recognition of product quality, we received a

Monde Gold for our brand Lion in 2006. During

the year under review, we were awarded ISO

22000 which includes the equivalent of HACCP,

the food safety standard, becoming the only

beverage producer in Sri Lanka alcoholic or

otherwise, to be certified thus.

During the year under review, we handed over

the premises of the old brewery in Nuwara Eliya

to the Health Ministry, so that they may develop

and extend the adjoining hospital premises. The

government had requested us for this property

some years back and since it was for a cause

beneficial to the community in Nuwara Eliya, our

old home, we did so with no hesitation.

Complementing and bringing together our strong

brand portfolio and efficient and effective systems

and processes are an excellent set of individuals

across all levels and disciplines that combine well

to form a fine team. As in the past, we continued

to invest in them during the year under review.



made via a special purpose JV company based in

Singapore. The JV partners will invest in the

Singapore entity which, in turn, will own a 100%

of the Indian Company, South Asia Breweries Pvt

Limited. The Lion Brewery owns 22.5% of the

equity of the Singapore JV whilst Carlsberg and

other investors own 45% and 32.5% respectively.

The Indian entity has moved quickly and has

commenced setting up of a greenfield brewery in

Rajasthan, north of the Indian capital of Delhi. It is

also in the process of finalising the acquisition of a

brewery further north of Rajasthan and is making

preliminary studies on two further opportunities

in India.

The Indian beer industry is on course for

significant growth backed by policy reforms

across a large number of states. India has realised

the importance of soft alcohols in the fight against

both illicit alcohol and excessive consumption of

liquor and the reform process that has

commenced across a number of states is a

reflection of this. The process of reforms has also

attracted many of the global beer giants to India

and in addition to our JV, recent entrants to the

market are Heineken and Budweiser. Brewers

such as Fosters and SAB Miller entered the market

some years previously. Thus, together with Indian

beer majors Kingfisher and Haywards, these

brands will provide intense competition to our

efforts in that country.

EXPORTS

Exports to our focus markets of the USA, UK &

Maldives grew at a satisfactory pace during the

year ending 31st March 2007. Focus markets are

those in which we invest behind our brands to the

extent possible since we believe there is adequate

volume potential to be had. We commenced

exports to Canada during the year and as of now,

progress has been satisfactory. Exports to non-

focused markets - i.e. those markets in which brand

investments are not made - have also grown at a

reasonable pace. During the year under review,

we achieved an export volume of 117 containers,

an average of just under 10 per month, a

satisfactory performance in a highly competitive

strongly branded global product category.

We will continue to focus our efforts on exports

even though in the short term the returns in terms

of profits would be negligible considering the

heavy brand investments that are required to

compete in highly competitive markets. Nor are

we following a ‘shot gun’ approach; instead we

are patiently and systematically building our brands

in focus markets since we believe this is the right

strategy for long-term success. We have set ourselves

ambitious export targets over the next few years

and are confident that we will achieve them.

INVESTMENT IN INDIA

During the year under review, the subsidiary, The

Lion Brewery Ceylon Limited, together with

Carlsberg A/S and others, invested in a brewery

business in India. Since the regulatory framework

in that country is strong, this investment was


9

CSR

In September 2006, we handed over 18 houses in

Kalutara to the victims of the 2004 tsunami. The

total cost of this project was Rs. 18 million and we

were assisted in our efforts by Carlsberg and

other business partners both local and overseas.

The houses are set in a 1.3 acre extent of land

provided at no cost by the Government. Each

house - built on 10 perches of land - includes two

rooms in addition to other necessities such as

sitting, dining, kitchen and toilet. The houses are

colourfully finished to generate hope and

optimism amongst the families to help them

overcome a terrible period in their lives. Together

with the Red Cross who are also building tsunami

houses in close proximity, we intend to complete a

community centre for the use of recipients during

the ensuing financial year.

During the year under review, we continued withour annual programme of gifting school books tothe children in the vicinity of the Brewery atBiyagama. This year we donated books to 1,000children. Each year we also provide three childrenof the village who have successfully completed theO’Level stage with scholarships to help them atthe A’Levels and thereafter through university. Inaddition, we continue to train children of theadjoining village in the use of computers, a facilitycurrently being made use of by 18 of them.

In 2006, we also embarked on an ambitiousproject to teach English to the children of ouremployees below the rank of middlemanagement. The project is conducted in multilocations in order to avoid inconvenience to theparticipants. So that the parents take responsibilityfor the education of their children, we ask them tobear 20% of the cost on an instalment basis.Nineteen children are enrolled in this programme.

Tsunami houses donated by the Lion Brewery



10

THE YEAR AHEAD

The year ahead will not be an easy one. We see no

respite in the conflict in the North-East and doing

business in those areas will remain extremely

difficult if not impossible. There are some signs that

inflation will ease but yet we expect it to remain

above double digit figures. Thus, interest rates too

will remain high. The first few months of the new

year have seen an acceleration in the depreciation

of the Rupee. We expect this trend to continue. Fuel

and electricity prices too would rise further thus

affecting the cost of production. The price of malt

too has increased in world markets thus bringing

margins under pressure. Compounding cost

related pressures would be the increased cost of

living as a result of inflation. These pressures will be

felt most amongst the average fixed income earner,

our primary consumer. Thus, volumes too will

come under pressure in the short term.

In this environment, we see little option but to

control costs with vigour. Since this is an on-going

and ingrained process within the Group, we are

confident of success. However, there is some

limitation to eliminating costs and long-term

prospects depend on the opportunities to improve

revenues and margins and on our ability to create

and grab those opportunities. We have already

commenced a number of initiatives internally to

create opportunities for our business and many of

these will see the light of day in the year ahead.

However, the most significant opportunity for the

industry - and hence, our Group - remains with

policy reform. Thus, we will continue to work

with those in authority to implement policies that

will bring sustainable growth to our business;

policies that will help reduce alcohol dependency

and irresponsible consumption whilst enhancing

Government revenue and our profitability.



11

Report of the Directors

The Directors are pleased to submit their Report

for the year ended 31st March 2007, together with

the audited Financial Statements of the Company

and the Consolidated Financial Statements of the

Group.

REVIEW FOR THE YEAR AND FUTURE

DEVELOPMENTS

The Chairman's Statement and the Review of

Operations describe in detail the performance

during the year together with comments on the

financial results and future developments of the

Group.

PRINCIPAL ACTIVITY OF THE GROUP

The principal activity of the Group continues to be

brewing of high quality beers for the local and

export markets. Consequent to the closure of the

Nuwara-Eliya Brewery, The Ceylon Brewery

Limited operates as an investment holding

company.

REVENUE

The revenue of the Group was Rs. 3,982.33 million

(2006 - Rs. 3,845.75 million), an analysis of which is

given in Note 1 to the Financial Statements.

RESERVES

After the above mentioned appropriations, the

total Group Reserves stand at Rs. 1,143.68 million

(2006 - Rs. 1,146.19 million) comprising Capital

Reserves of Rs. 449.41 million (2006 - Rs. 456.54

million) and Revenue Reserves of Rs. 694.27

million (2006 - Rs. 689.65 million). The movements

are shown in the Statement of Changes in Equity

and Notes 16 and 17 to the Financial Statements.

DIVIDEND

A 40% first and final dividend on the Issued and

Fully Paid Ordinary Shares for the year ended

31st March 2006, which was declared at the last

Annual General Meeting was paid during the year.

The Directors have recommended the payment of

a dividend of 30% on ordinary shares for the year

ended 31st March 2007, which will be declared at

the Annual General Meeting subject to approval

by shareholders. The details are shown in Note 7

to the Financial Statements.

FINANCIAL RESULTSCompany Group

For the period ended 31st March 2007 2006 2007 2006In Rs. ’000

The profit available for appropriation is:

- Current year 164,148 57,972 88,571 134,091

- Brought forward 218,861 223,853 505,473 434,346

383,009 281,825 594,044 568,437

From which the following appropriations have been made:

Dividends

Ordinary - 40% (2006 - 30%) 83,952 62,964 83,952 62,964

Leaving a balance to be carried forward of 299,057 218,861 510,092 505,473


12Report of the Directors

CAPITAL EXPENDITUREThe total expenditure on the purchase of capitalassets by the Group during the year amounted toRs. 125.44 million (2006 - Rs. 263.01 million). Themovements during the year are set out in Note 9to these Financial Statements.

VALUE OF PROPERTIES (LAND & BUILDINGS)Freehold properties of the Group are stated in thebooks at their revalued amounts. The valuationhas been carried out by an independentprofessional valuer, as further explained in Note 9to these Financial Statements.

STATUTORY PAYMENTSThe Directors to the best of their knowledge andbelief are satisfied that all statutory payments inrelation to the employees and the Governmenthave been made up to date or are provided for asat the Balance Sheet date.

DONATIONS

A sum of Rs. 12.1 million has been paid as

donations by the Group for the year ended

31st March 2007 (2006 - Rs. 0.77 million).

DIRECTORATESThe names of the Directors are disclosed on theinner back cover.

Mr. S.A. Nielsen resigned with effect from25th January 2007.

In terms of Article 101(b) of the Articles ofAssociation of the Company, Mr. J.B. Madsen wasappointed to the Board with effect from25th January 2007.

In terms of Articles 105 and 106 of the Articles ofAssociation of the Company, Mr. H. Selvanathanretires from the Board and being eligible offershimself for re-election as a Director.

DIRECTORS’ INTERESTS IN CONTRACTS

AND DIRECTORS’ SHAREHOLDINGSDirectors’ interests in contracts of the Companyare disclosed in Note 29 to these Financial Statementsand have been declared at the meetings of theDirectors. The Directors have no direct or indirectinterests in any other contracts or proposed contractsin relation to the business of the Company, whilethey had the following interests in the shares ofthe Company:

No. of No. ofShares Shares

As at 31st March 2007 2006

L.C.R. de C. Wijetunge (Chairman) – –H. Selvanathan (Deputy Chairman) 690 690M. Selvanathan 690 690S.K. Shah 2,632 2,632D.C.R. Gunawardena 15 15P.C.P. Tissera 15 15S.A. Nielsen (resigned w.e.f. 25th January 2007) – –J.B. Madsen (appointed w.e.f. 25th January 2007) – –

The Board convened 5 meetings during thefinancial year and the attendance of Directors wasas follows:

Meetings Attended (Out of 5)

L.C.R. de C. Wijetunge (Chairman) 5H. Selvanathan (Deputy Chairman) 4M. Selvanathan 3S.K. Shah 5D.C.R. Gunawardena 5P.C.P. Tissera 3S.A. Nielsen (resigned w.e.f. 25th January 2007) 2J.B. Madsen (appointed w.e.f. 25th January 2007) –


13

EVENTS OCCURRING AFTER THE BALANCE

SHEET DATE

Subsequent to the Balance Sheet date, no

circumstances have arisen which required

adjustments to or disclosure in these Financial

Statements, other than those disclosed in Note 25

to these Financial Statements.

CAPITAL COMMITMENTS

As at the Balance Sheet date, the Group has

entered into contracts for the following capital

expenditures:

Rs. 50 million to upgrade the waste water

treatment plant

Rs. 74 million for the modifications and

upgrading of the packaging line

Rs. 4.5 million for the installation of a missing

label detector

Out of the total commitments above,

Rs. 29.5 million has been paid as advances as at the

Balance Sheet date and are included under capital

work-in-progress.

SHARE INFORMATION

Information relating to dividends and market

price per share and information on share trading

is given on pages 52 and 53 of the Annual Report.

AUDITORS

Messrs. KPMG Ford, Rhodes, Thornton & Co.,

offer themselves for re-appointment.

(Sgd.)

D.C.R. Gunawardena

By Order of the Board,

Carsons Management Services (Pvt) Limited

Managers & Secretaries

Colombo

4th May 2007

Report of the Directors


14

Statement of Directors' Responsibilities

The responsibilities of the Directors, in relation to

the Financial Statements, are detailed in the

following paragraphs, while the responsibilities of

the Auditors are set out in the Report of the

Auditors.

According to the Companies Act No. 17 of 1982

and the Sri Lanka Accounting and Auditing

Standards Act No.15 of 1995, Directors are

required to prepare Financial Statements for each

financial year, giving a true and fair view of the

state of affairs of the Company and of the Group

as at the end of the financial year and of the profit

or loss for the said period.

In preparing these Financial Statements the

Directors are required to ensure that:

Appropriate Accounting Policies have been

selected and applied consistently while

material departures, if any, have been

disclosed and explained.

All applicable Accounting Standards have

been complied with and,

Reasonable and prudent judgments and

estimates have been made.

The Directors are responsible for ensuring that the

Company maintains sufficient accounting records

to disclose with reasonable accuracy, the financial

position of the Company and that of the Group in

order to ensure that the Financial Statements of

the Company and that of the Group meet with the

requirements of the Companies Act No. 17 of 1982

and the Sri Lanka Accounting and Auditing

Standards Act No.15 of 1995. They are also

responsible for taking reasonable measures to

safeguard the assets of the Company and of the

Group and in this regard to give proper

consideration to the establishment of appropriate

systems of internal controls with a view to

prevent, detect and rectify fraud and other

irregularities.

These Financial Statements have been prepared on

a going concern basis, since the Directors are of

the view that the Company has adequate

resources to continue in operation for a

foreseeable future from the date of signing these

Financial Statements.

The Directors are also of the view that they have

discharged their responsibilities as set out in this

statement.

(Sgd.)

D.C.R. Gunawardena



Managers & Secretaries

Colombo

4th May 2007

Report of the Auditors 16

Income Statements 17

Balance Sheets 18

Statements of Changes in Equity 19

Cash Flow Statements 20

Significant Accounting Policies 22

Notes to the Financial Statements 30

FINANCIAL HIGHLIGHTS - GROUP

In Rs. ’000s 2007 2006 % Change

(Restated)

Revenue 3,982,334 3,845,755 3.55

Profit from operations 201,608 424,178 (52.47)

Profit after taxation 51,665 283,540 (81.78)

Dividend 83,952 62,964 33.33

Shareholders' funds 1,353,555 1,356,067 (0.19)

Total assets 4,123,124 3,503,279 17.69

Earnings per ordinary share (Rs.) 3.33 6.39 (47.82)

Net assets per ordinary share (Rs.) 64.49 64.61 (0.19)

Market capitalisation 1,783,988 1,930,904 (7.61)

Financial Statements


16

Report of the Auditors

TO THE MEMBERS OF THECEYLON BREWERY LIMITEDWe have audited the balance sheet of The Ceylon

Brewery Limited as at 31st March 2007 and the

consolidated balance sheet of the Company and its

subsidiary as at that date and the related statements of

income, changes in equity and cash flows for the year

then ended, together with the accounting policies and

notes as set out on pages 17 to 43 of the Annual Report.

Respective Responsibilities of Directorsand Auditors

The directors are responsible for preparing and

presenting these financial statements in accordance

with the Sri Lanka Accounting Standards. Our

responsibility is to express an opinion on these

financial statements, based on our audit.

Basis of OpinionWe conducted our audit in accordance with the Sri Lanka

Auditing Standards, which require that we plan and

perform the audit to obtain reasonable assurance about

whether the said financial statements are free of

material misstatements. An audit includes examining, on

a test basis, evidence supporting the amounts and

disclosures in the said financial statements, assessing

the accounting principles used and significant estimates

made by the directors, evaluating the overall presentation

of the financial statements, and determining whether the

said financial statements are prepared and presented in

accordance with the Sri Lanka Accounting Standards. We

have obtained all the information and explanations which

to the best of our knowledge and belief were necessary

for the purposes of our audit. We, therefore, believe that

our audit provides a reasonable basis for our opinion.

OpinionIn our opinion, so far as appears from our examination,

the Company maintained proper books of account for

the year ended 31st March 2007 and to the best of our

information and according to the explanations given to

us, the said balance sheet and related statements of

income, changes in equity, cash flows and accounting

policies and notes thereto, which are in agreement with

the said books, have been prepared and presented in

accordance with the Sri Lanka Accounting Standards,

and provide the information required by the Companies

Act No. 17 of 1982 and give a true and fair view of the

Company’s state of affairs as at 31st March 2007,

and of its profit and cash flows for the year then ended.

In our opinion, the consolidated balance sheet,

statements of income, changes in equity, cash flows and

the accounting policies and notes thereto have been

properly prepared and presented in accordance with the

Sri Lanka Accounting Standards, and provide the

information required by the Companies Act No. 17 of

1982 and give a true and fair view of the state of affairs

as at 31st March 2007, and of its profit, changes in

equity and cash flows for the year then ended of the

Company and its subsidiary dealt with thereby, so far as

concerns the members of the Company.

Directors’ interest in contracts with theCompanyAccording to the information made available to us, the

directors of the Company were not directly or indirectly

interested in contracts with the Company during the year

ended 31st March 2007 except as stated in Note 29 to

these financial statements.

(Sgd.)

KPMG Ford, Rhodes, Thornton & Company

Chartered Accountants

Colombo

4th May 2007


17

Company GroupFor the year ended 31st March 2007 2006 2007 2006In Rs. ’000s Note

Revenue 1 186,945 182,759 3,982,334 3,845,755

Cost of sales – – (2,763,163) (2,438,150)

Gross profit 186,945 182,759 1,219,171 1,407,605

Other income 2 25,825 604 33,204 9,589

212,770 183,363 1,252,375 1,417,194

Distribution expenses – – (697,079) (629,750)

Administrative expenses (22,393) (17,694) (250,074) (243,934)

Other expenses – – (103,614) (119,332)

Profit from operations 3 190,377 165,669 201,608 424,178

Provision for the diminution in value of

investment/advances 11/14 – (89,357) – (89,357)

Finance expenses 4 (274) (110) (58,345) (33,298)

Profit before taxation 190,103 76,202 143,263 301,523

Income tax expenses 5 (25,955) (18,230) (91,598) (17,983)

Profit for the period 164,148 57,972 51,665 283,540

Profit Attributable to

- Equity holders of the company 164,148 57,972 69,947 134,060

- Minority Shareholders – – (18,282) 149,480

164,148 57,972 51,665 283,540

Earnings per ordinary share (Rs.) 8 7.82 2.76 3.33 6.39

Dividend per ordinary share (Rs.) 4.00 3.00 4.00 3.00

The Accounting Policies and Notes on pages 22 to 43 form an integral part of these Financial Statements.

Figures in brackets indicate deductions.

Income Statements


18

Company GroupAs at 31st March 2007 2006 2007 2006In Rs. ’000s Note (Restated) (Restated)

ASSETS

Non-Current Assets

Property, plant & equipment 9 7,857 18,966 2,296,186 2,315,165

Intangible assets 10 – – 14,725 –

Investment in subsidiary 11 854,362 854,362 – –

Investment in associates 11 – – 319,541 –

Other investments 11 – – – –

Total Non-Current Assets 862,219 873,328 2,630,452 2,315,165

Current Assets

Inventories 12 – – 512,750 362,670

Trade and other receivables 13 6,261 2,113 646,452 630,432

Amounts due from related companies 14 – – – 4,751

Cash and cash equivalents 199,354 93,586 333,470 190,261

Total Current Assets 205,615 95,699 1,492,672 1,188,114

Total Assets 1,067,834 969,027 4,123,124 3,503,279

EQUITY AND LIABILITIES

Equity

Share capital 15 209,881 209,881 209,881 209,881

Capital reserves 16 332,366 339,572 449,408 456,539

Revenue reserves 17 483,231 403,035 694,266 689,647

Equity Attributable to Equity Holders of the Company 1,025,478 952,488 1,353,555 1,356,067

Minority interest – – 818,900 911,493

Total Equity 1,025,478 952,488 2,172,455 2,267,560

Non-Current Liabilities

Payables due after one year 19 – – 493,654 360,190

Retirement benefit obligations 20 – – 21,730 18,768

Deferred tax liability 21 2,418 5,985 426,061 376,698

Total Non-Current Liabilities 2,418 5,985 941,445 755,656

Current Liabilities

Trade and other payables 22 6,952 5,374 202,203 235,259

Amounts due to related companies 23 – – 357 –

Current tax payable 24 18,281 5,180 245,496 221,979

Long-term loans repayable within one year 19 – – 58,777 –

Short-term loans – – 100,000 –

Bank overdrafts (unsecured) 14,705 – 402,391 22,825

Total Current Liabilities 39,938 10,554 1,009,224 480,063

Total Liabilities 42,356 16,539 1,950,669 1,235,719

Total Equity and Liabilities 1,067,834 969,027 4,123,124 3,503,279

Net assets per ordinary share (Rs.) 48.86 45.38 64.49 64.61

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.

Approved and signed on behalf of the Managers, Approved and signed on behalf of the Board,

(Sgd.) (Sgd.) (Sgd.)

D.C.R. Gunawardena M. Selvanathan Suresh K. Shah

Director Director Director


Colombo

4th May 2007


Balance Sheets


19

Attributable to Equity Holders of the Parent Minority TotalShareholders’ Equity

InterestShare Share Revaluation Capital General Revenue Retained Total

Capital Premium Reserve Redemption Capital Reserve ProfitIn Rs. ’000s Note Reserve Reserve

Company

Balance as at 1st April 2005 209,881 323,503 18,351 – 5,776 184,174 223,853 965,538 – 965,538

Revaluation of property – – (3,646) – – – – (3,646) – (3,646)

Profit for the period – – – – – – 57,972 57,972 – 57,972

Dividend 7 – – – – – – (62,964) (62,964) – (62,964)

Balance as at 31st March 2006

as previously reported 209,881 323,503 14,705 – 5,776 184,174 218,861 956,900 – 956,900

Deferred tax on revaluation 21 – – (4,412) – – – – (4,412) – (4,412)


as restated 209,881 323,503 10,293 – 5,776 184,174 218,861 952,488 – 952,488

Disposal of property – – (10,452) – – – – (10,452) – (10,452)

Adjustment for deferred tax liability 21 – – 3,246 – – – – 3,246 – 3,246

Profit for the period – – – – – – 164,148 164,148 – 164,148

Dividend 7 – – – – – – (83,952) (83,952) – (83,952)

Balance as at 31st March 2007 209,881 323,503 3,087 – 5,776 184,174 299,057 1,025,478 – 1,025,478

Group

Balance as at 1st April 2005 209,881 323,503 35,894 35,280 5,776 184,174 434,346 1,228,854 773,463 2,002,317

Revaluation of property – – 63,734 – – – – 63,734 66,283 130,017

Profit for the period – – – – – – 134,060 134,060 149,480 283,540

Dividend 7 – – – – – – (62,964) (62,964) (74,400) (137,364)

Changes in effective holding

of subsidiary – – 3 7 – – 31 41 (140) (99)


as previously reported 209,881 323,503 99,631 35,287 5,776 184,174 505,473 1,363,725 914,686 2,278,411

Deferred tax on revaluation 21 – – (7,658) – – – – (7,658) (3,193) (10,851)


as restated 209,881 323,503 91,973 35,287 5,776 184,174 505,473 1,356,067 911,493 2,267,560

Disposal of property – – (10,452) – – – – (10,452) – (10,452)

Adjustment for deferred tax liability 21 – – 3,321 – – – – 3,321 74 3,395

Profit for the period – – – – – – 69,947 69,947 (18,282) 51,665

Dividend 7 – – – – – – (83,952) (83,952) (74,385) (158,337)

Inter-Company unrealised profit – – – – – – 18,624 18,624 – 18,624

Balance as at 31st March 2007 209,881 323,503 84,842 35,287 5,776 184,174 510,092 1,353,555 818,900 2,172,455

Note

In accordance with the Sri Lanka Accounting Standard 14, Income Taxes, deferred tax lliability on revaluation surplus has been charged directly to

Statement of Changes in Equity. The increase of the opening balance of deferred tax liability due to the above has been treated as a prior year adjustment. Accordingly,

Statement of Changes in Equity and the Balance Sheet have been restated for the year ended 31st March 2006.

The Accounting Policies and Notes from pages 22 to 43 form an integral part of these Financial Statements.


Statements of Changes in Equity


20


Cash Flows from Operating Activities

Profit before taxation 190,103 76,202 143,263 301,523

Adjustments for:

Finance expenses 4 274 110 58,345 33,298

Depreciation on property, plant & equipment 9 384 523 116,993 101,453

Amortisation of intangible assets 10 – – 785 –

Gratuity provision 20 – – 4,446 4,739

Interest income 2 – – (4,815) (6,150)


investment/advances 11/14 – 89,357 – 89,357

Unrealised profit on diposal of

bottles and crates – – 18,624 –

Amortisation of goodwill on consolidation – – – 264

Profit on disposal of property,

plant & equipment 2 (25,434) – (24,519) (234)

Operating cash flow before

working capital changes 165,327 166,192 313,122 524,250

Increase in inventories – – (150,080) (24,056)

(Increase)/Decrease in trade and other receivables (4,148) 251 (16,020) (105,633)

(Increase)/Decrease in amounts due from

related companies – (6,000) 4,751 (8,447)

Increase in amounts due to related companies – – 357 –

Increase/(Decrease) in trade and other payables 1,035 1,435 (28,911) 131,662

Cash generated from operations 162,214 161,878 123,219 517,776

Finance expenses paid (274) (110) (58,345) (33,298)

Income tax paid (13,118) (18,615) (13,186) (19,055)

Economic service charge paid – – (6,884) (7,849)

Gratuity paid 20 – – (1,484) (1,486)

Net cash inflows from operating activities 148,822 143,153 43,320 456,088

Cash Flows from Investing Activities

Purchase and construction of

property, plant & equipment 9 – (188) (125,439) (263,010)

Proceeds from sale of property, plant & equipment 2 25,707 – 25,982 1,741

Customer deposits received 19.3 – – 56,817 61,464

Customer deposits refunded 19.3 – – (1,722) (7,315)

Interest received 2 – – 4,815 6,150

Purchase of investments 11 – (363) (319,541) (363)

Net cash (used in)/generated from

investing activities 25,707 (551) (359,088) (201,333)

Cash Flow Statements


21


Cash Flows from Financing Activities

Long-term loan received 19.1 – – 146,942 –

Repayment of long-term borrowings 19.1 – – (9,796) –

Dividend paid to ordinary shareholders (83,466) (62,848) (83,466) (62,848)

Dividend paid to minority shareholders – – (74,269) (74,331)

Net cash used in financing activities (83,466) (62,848) (20,589) (137,179)

Net increase/(decrease) in cash & cash equivalents 91,063 79,754 (336,357) 117,576

Cash & cash equivalents at the beginning of the year 93,586 13,832 167,436 49,860

Cash & cash equivalents at the end of the year 184,649 93,586 (168,921) 167,436

Analysis of Cash & Cash Equivalents

Cash and cash equivalent 199,354 93,586 333,470 190,261

199,354 93,586 333,470 190,261

Short-term loan – – (100,000) –

Bank overdrafts (14,705) – (402,391) (22,825)

184,649 93,586 (168,921) 167,436



Cash Flow Statements


22

1. GENERAL1.1 The Ceylon Brewery Limited is a public

limited liability company incorporated and

domiciled in Sri Lanka and listed on the

Colombo Stock Exchange.

1.2 The principal activity of the Group continues

to be brewing of high quality beers for the

local and export markets. Consequent to the

closure of the Nuwara Eliya Brewery,

The Ceylon Brewery Limited operates as an

investment holding Company.

1.3 Accounting Convention

The Financial Statements of The Ceylon

Brewery Limited and its subsidiary (Group)

comprise the Balance Sheets, Income

Statements, Statements of Changes in

Equity, Cash Flow Statements, Significant

Accounting Policies and Notes to the

Financial Statements. These statements are

prepared in accordance with the Accounting

Standards laid down by the Institute of

Chartered Accountants of Sri Lanka.

The Accounting Policies have been applied

by the Company and its subsidiary

consistent with the previous year’s except

those mentioned in 1.4 below. The previous

year figures and phrases have been

rearranged wherever necessary to conform

to the current year's presentation.

The Financial Statements of the Group have

been prepared on a historical cost convention

except for revaluation of freehold land and

buildings as stated in the Notes to these


All values presented in the Financial

Statements are in Sri Lankan Rupees

Thousands (Rs. ’000s) unless otherwise

indicated.

The Financial Statements were authorised

for issue by the Directors on 4th May 2007.

1.4 Impact of Changes in Sri LankaAccounting Standards (SLAS)

As part of the movement to harmonise

Financial Statement reporting under a

common International Financial Reporting

Standards (IFRS) framework, several

existing Sri Lanka Accounting Standards

were revised during the year. The Group has

adopted the revised SLAS that are

applicable in the current financial year. The

current Financial Statements have been

prepared in accordance with the relevant

transitional provisions in the respective

SLAS. The following are the SLAS relevant to

the Financial Statements.

SLAS 3 (Revised) Presentation ofFinacial Statements

The Financial Statements are presented in

accordance with the SLAS 3, to ensure

comparability both with the entity's Financial

statements of previous periods and with the

financial statements of other entities.

SLAS 10 (Revised) Accounting Policies,Changes in Accounting Estimates andErrors

Please note the change in estimated useful

life of property, plant & equipment and

deferred taxation adjustment on revaluation

of properties as mentioned below.

SLAS 14 (Revised) Income Taxes

The deferred tax disclosure and the

adjustment in respect of revaluation of

properties have been incorporated in

accordance with the requirements of the

new standard.

SLAS 18 (Revised) Property, Plant &Equipment

In accordance with the new SLAS, all assets

(excluding land) are depreciated from the

month the asset is available for use.

Significant Accounting Policies


23

The estimated useful lives of property,

plant & equipment of the subsidiary have

also been revised as follows:

Asset Category Previous Revised

Rate (%) Rate (%)

Furniture and Fittings 8 10

Office Equipment

(specific items) 10 33 1/3

Computer Equipment -

Software 33 1/3 20

SLAS 30 (Revised) Related PartyDisclosures

As per the revised standard, the definition of

related parties has been expanded.

Disclosure requirements have also been

enhanced to cover compensation of key

management personnel, transactions and

outstanding balances with related parties

etc. The relevant disclosures are included in

Note 29 to the Financial Statements.

SLAS 41 Impairment of Assets

As per SLAS, impairment is required to be

determined for identifiable assets. The

policy adopted by the Group is given in Note

2.7 on page 27.

1.5 Group Consolidation Policy(i) Subsidiaries

The Financial Statements of the

Group represent the consolidation of

the Financial Statements of the

Company and its subsidiary, The

Lion Brewery Ceylon Limited, in

accordance with Section 150 (1) (a)

of the Companies Act No. 17 of

1982, and Sri Lanka Accounting

Standard 26.

(ii) Financial Period

The Company and its subsidiary have

a common financial year which ends

on 31st March.

(iii) Minority Interest

The total profit or loss for the year of

the Company and of its subsidiary

included in consolidation are shown

in the Consolidated Income

Statement while the proportion of

profit or loss after taxation

pertaining to minority shareholders

of the subsidiary has been deducted

and shown as ‘Minority Interest’.

All assets and liabilities of the

Company and its subsidiary are

included in the Consolidated Balance

Sheet. The proportionate interest of

the non-group shareholders in the net

assets employed, is stated

separately in the Consolidated

Balance Sheet as "Minority Interest".

(iv) Intra-Group Transactions

Intra-group balances, intra-group

transactions and resulting unrealised

profits are eliminated in full in the

Financial Statements. Unrealised

losses resulting from intra-group

transactions are eliminated unless

the cost cannot be recovered.

(v) GoodwillGoodwill reflects the excess of the

purchase price over the fair value of

the net assets as at the date of

purchase.

Upon transition to revised SLAS 25

‘Business Combinations’ goodwill will

no longer be amortised. Instead

goodwill will be tested for impairment

annually and assesed for that any

indication impaired at each Balance

Sheet date to ensure its carrying



24

amount does not exceed its

recoverable amount. If an impairment

loss is identified, it will be recognised

immediately in the Income Statement.

(vi) Consolidation of Subsidiaries inthe Pre-Production StageThe Financial Statements of a

subsidiary in its pre-production stage

is not consolidated with the Group and

will be recognised as a subsidiary for

consolidation only on commencement

of commercial operations.

(vii) AssociatesAssociates are those investments

over which the Group has significant

influence and that is neither a

subsidiary nor an interest in a joint

venture.

The Income Statement reflects the

Group's share of the results of the

operations of the associates.The

related investment appear in the

Balance Sheet at values adjusted to

reflect the Group's share of the fair

value of net assets of the associates,

net of any dividends paid.

Group will be recongnised its

investment in associates at cost and

will be adjust thereafter for the post-

acquisition changes at the

commencement of commercial

operations.

1.6 Conversion of Foreign CurrenciesAll foreign currency transactions are

converted at the rates of exchange

prevailing at the time the transactions were

effected. Monetary assets and liabilities

denominated in foreign currencies have been

translated to Sri Lankan Ruppees at the rates

of exchange prevailing at the Balance Sheet

date.

The exchange differences arising therefrom

are dealt with in the Income Statements.

1.7 Taxes on IncomeThe Group liability to taxation has been

computed in accordance with the provisions

of the Inland Revenue Act No. 10 of 2006

and amendments thereto and amendments

to the Finance Act, taking into consideration

the maximum relief available. The relevant

details are disclosed in the respective Notes

to the Financial Statements.

1.8 Deferred TaxationDeferred Taxation is provided on the liability

method for all temporary differences as at the

Balance Sheet date between the tax bases of

assets and liabilities and their carrying

amounts for financial reporting purposes. The

balance in the deferred taxation account

represents income tax applicable to the

difference between the written down values for

tax purpose of the assets on which tax

depreciation has been claimed and the net

book values of such assets, offset by the

provision for retirement benefit which is

deductible for tax purposes only on payment.

Deferred tax assets, including those related

to temporary tax effects of income tax losses

and credits available to be carried forward are

recognised only to the extent that it is probable

that future taxable profits will be available

against which the asset can be utilised.

Deferred tax assets are reviewed at each

reporting date and are reduced to the extent

that it is no longer probable that the related

tax benefit will be realised.

1.9 Borrowing CostsAll borrowing costs are recognised as an

expense in the period in which they are

incurred, except those that are directly

attributable to the purchase/construction of

property, plant & equipment which are

capitalised as a part of the cost of the asset

during the period of construction/development.



25

1.10 Events occurring after the BalanceSheet dateThe materiality of events occurring after the

Balance Sheet date has been considered and

appropriate adjustments to or disclosures

are made in these Financial Statements

where necessary.

2. ASSETS AND BASES OF THEIRVALUATIONAssets classified as current assets in the Balance

Sheet are cash and those which are expected to

be realised in cash during the normal operating

cycle of the Company's business or within one

year from the Balance Sheet date, whichever is

shorter. Assets other than current assets are

those which the Company intends to hold beyond a

period of one year from the Balance Sheet date.

2.1 Property, Plant & Equipment andDepreciation(i) Valuation

Valuation of property, plant &

equipment is at cost or valuation

less accumulated depreciation and

accumulated impairment, if any,

provided on the basis stated in (iii)

below.

The Group applies the revaluation

model for freehold land and buildings

while cost model is applied for other

property, plant & equipment.

(ii) CostCost of capital assets is the cost of

acquisition or construction together

with any expenses incurred in

bringing the asset to its working

condition for its intended use.

Expenditure incurred for the purpose

of acquiring, extending or improving

assets of a permanent nature by

means of which to carry on the

business or to increase the earning

capacity of the business is treated

as capital expenditure.

(iii) Depreciation

Depreciation is provided for on a

straight-line basis over periods

appropriate to the estimated useful

lives of different types of assets, at

varying rates specified on their costs

or revalued amounts as follows:

The Ceylon The Lion BreweryBrewery Ltd. Ceylon Ltd.

per annum (%) per annum (%)

Freehold buildings 2.5 2

Plant & machinery 10 5-10

Furniture & fittings 10 10

Office equipment 25 10-33 1/3

Computer equipment 25 33 1/3

Computer equipment - Software 25 20

Motor vehicles 20-25 20-25

Laboratory equipment – 25

Assets are depreciated from the

month of purchase to the month of

disposal.

No depreciation is provided on

freehold land.

(iv) Revaluation of Land andBuildings

The freehold land and buildings of

the Company and the subsidiary have

been revalued and revaluation of

these assets are carried out at least

once every five years in order to

ensure that the book values reflect

the realisable values. Any surplus or

deficit arising therefrom is adjusted

in the revaluation reserve.

(v) Subsequent Expenditure

Expenditure incurred to replace a

component of an item of property,

plant & equipment that is accounted

for separately is capitalised. Other

subsequent expenditure is capitalised

only if it is probable that the future

economic benefits embodied with the



26

item will flow to the Group and the

cost of the item can be measured

reliable. All other expenditure is

recognised in the income statement as

an expense as incurr.

(vi) Capital Work-in-Progress

Capital work-in-progress is

transferred to the respective asset

accounts at the time of first utilisation

of the asset or on commissioning.

(vii) Impairment of Property, Plant &Equipment

The carrying value of property, plant

& equipment is reviewed for

impairment when events or changes

in circumstances indicate the carrying

value may not be recoverable. If any

such indication exists and where the

carrying value exceed the estimated

recoverable amount the assets are

written down to their recoverable

amount. Impairment losses are

recognised in the Income Statement

unless it reverses a previous

revaluation surplus for the same asset.

2.2 Intangible Assets - ComputerApplication Software

All software licensed for use by the Group,

not constituting an integral part of related

hardware are included in balance sheet

under the category intangible assets and

carried at cost less accumulated

amortisation and accumulated impairment

losses, if any.

The initial acquisition cost comprises

licence fee paid at the inception, import

duties, non-refundable taxes and levies, cost

of customising the software to meet the

specific requirements of the Group and

other directly attributable expenditure in

preparing the assets for its intended use.

The initial cost is enhanced by subsequent

expenditure incurred by further

customisation to meet ancillary transaction

processing and reporting requirements

tailor-made for the use of the Group

constituting an improvement to the

software.

The cost is amortised using the straight-line

method, at the rate of 20% per annum

commencing from the date the application

software is available for use. The amortised

amount is based on the best estimate of its

useful life and the amortisation cost is

recognised as an expense in the Income

Statement.

2.3 InvestmentsClassificationInvestments in subsidiaries and associate

companies of the Carsons Group are

classified as non-current investments, which

are stated in the Balance Sheet at cost.

(i) ValuationAll non-current investments are

stated in the Balance Sheet at cost

less any amounts written off to

reflect any permanent diminution in

the value of such investments.

(ii) CostCost of investments is the cost of

acquisitions inclusive of brokerage,

commission and fees.

2.4 InventoriesInventories are recognised at cost or net

realisable value whichever is lower after

making due allowance for obsolete items.

Actual breakages of bottles are removed

from inventory and charged against revenue.



27

(i) The cost of each category of inventory is

derived on the following bases:

Raw material and containers - cost of

purchase together with any incidental

expenses.

Work-in-progress - raw material cost and a

proportion of manufacturing expenses.

Finished goods - raw material cost and

manufacturing expenses in full.

Maintenance stock - on a weighted average

basis.

(ii) Net realisable value is the price at which

inventories can be sold in the normal course

of business after allowing for cost of

realisation and/or cost of conversion from

their existing state to a saleable condition.

2.5 Trade and Other Receivables

Trade and other receivables are stated at the

amounts estimated to be realised. Where

necessary, provision has been made for bad

and doubtful debts.

2.6 Cash & Cash Equivalents

Cash & cash equivalents are defined as a

cash in hand, bank demand deposits and

short-term highly liquid investments readily

convertible to known amounts of cash and

subject to insignificant risk of changes in

value.

For the purpose of the Cash Flow

Statements, cash & cash equivalents

comprise of cash in hand and deposits at

banks, net of bank overdrafts. Investments

with short maturities, i.e. three months or

less from the date of acquisition, are also

treated as cash equivalents.

The Cash Flow Statement has been

prepared using ‘Indirect Method’.

2.7 Impairment of Assets

Identifiable assets of the Group are reviewed

at each Balance Sheet date to determine

whether there is any indication of impairment.

If any such indication exists, the recoverable

amount of the asset is estimated and shown

in the Balance Sheet. The impairment loss

is charged to Income Statement.

3. LIABILITIES AND PROVISIONSLiabilities classified as current liabilities in the

Balance Sheet are those obligations payable on

demand or within one year from the Balance Sheet

date. Items classified as non-current liabilities are

those obligations which will be repaid after a

period of one year from the Balance Sheet date.

All known liabilities are accounted for in preparing

the Financial Statements. Liabilities are

recognised when the Company has a legal or

constructive obligation as a result of past events

and it is probable that an outflow of economic

benefits will be required to settle the obligation.

3.1 Distributor Deposits

Containers issued to distributors are secured

against a refundable deposit representing the

cost. Refunding of deposits could arise due

to a discontinuance of a distributorship or

due to a contraction in sales.

3.2 Retirement BenefitsDefined Benefit Plan - Gratuity

The Company and its subsidiary is liable to

pay gratuity in terms of the Payment of

Gratuity Act No. 12 of 1983.

Gratuity Provision for employees has been

made on the basis of an actuarial valuation

as at 31st March 2007 which was carried

out by Messrs. Actuarial and Management

Consultants (Pvt.) Limited. As recommended



28

by the related Sri Lanka Accounting

Standard, the 'Projected Unit Credit' (PUC)

method has been used in this valuation and

the premium for the year is charged as an

expenses to the Income Statement in the

period to which it relates. The principal

assumptions are given below:

– Rate of discount 11% p.a.

– Rate of pay increase 10% p.a.

– Retirement age 55 years

The Company will continue in business as a

going concern.

The liability is not externally funded.

3.3 Defined Contribution Plans -Employees' Provident Fund andEmployees' Trust Fund

All employees who are eligible for

Employees' Provident Fund contributions

and Employees' Trust Fund contributions are

covered by relevant contribution funds in line

with the respective statutes. Contributions

to the defined contribution plans are

recognised as an expense in the Statements

of Income when incurred.

3.4 Capital Commitments and ContingentLiabilities

All material capital commitments and

contingencies which exist as at the Balance

Sheet date are disclosed in the respective

Notes to the Financial Statements.

3.5 Trade and Other Payables

Trade and other payables are stated at their

cost.

4. INCOME STATEMENT4.1 Revenue

Revenue represents the amounts derived:

– from customers outside the Company, on

the provision of goods and services which

fall within the ordinary activities net of

rebates and trade discounts. Value Added

Tax is excluded in arriving at the revenue.

– as royalty income arising from the use of

the Company’s brands based on volume

sold.

– Dividend

Income is recognised upon its receipt.

– Interest

Income is recognised on an accrual basis.

4.2 Revenue Recognition

Revenue is principally accrued and matched

with the related expenditure and is

recognised in accordance with the Sri Lanka

Accounting Standard 29.

4.2.1 Sale of Goods

Revenue from sale are recognised

upon delivery of products and

customer acceptance, if any,

whereby significant risks and

rewards of ownership are passed on

to the buyer, or performance of

services, net of sales taxes and

discounts.



29

4.2.2 Other Income

– Gains or loss on disposal of


Net Gains and Losses of a revenue

nature resulting from disposal of

property, plant & equipment are

accounted as other income in the

Income Statement.

Where the gain is on immovable

property, such gain is appropriated

to capital accretion reserve.

4.3 Expenditure Recognition(i) Operating Expenses

All expenses incurred in day-to-day

operations of the business and in

maintaining the property, plant &

equipment in a state of efficiency

has been charged to revenue in

arriving at the profit or loss for the

year. Provision has also been made

for bad and doubtful debts, all known

liabilities and depreciation on


(ii) Finance Costs

Interest expenses are recognised on

an accrual basis.

5. DIVIDEND DISTRIBUTIONDividend distribution to the Company’s

shareholders is recognised as a liability in the

period in which the dividends are approved by the

Company’s shareholders.

6. RELATED PARTY TRANSACTIONSDisclosures are made in respect of transactions in

which one party has the ability to control or exercise

significant influence over the financial and operating

decisions/policies of the other, irrespective of

whether a price is being charged or not.

7. DIRECTORS' RESPONSIBILITIESSTATEMENTThe Board of Directors takes responsibiity for the

preparation and presentation of these Financial

Statements. Please refer page 14 for the

Statement of Directors' Responsibilities.



30

Company GroupFor the year ended 31st March 2007 2006 2007 2006In Rs. ’000s

1. REVENUE

(A ) Dividend income 126,366 126,350 – –

Royalty income 48,054 52,364 – –

Interest income 12,525 4,045 9,101 4,045

Brewery – – 3,973,233 3,841,710

186,945 182,759 3,982,334 3,845,755

(B) Local/Export Revenue

Local revenue 186,945 182,759 3,893,004 3,771,776

Export revenue – – 89,330 73,979

186,945 182,759 3,982,334 3,845,755

2. OTHER INCOME

Surplus on revaluation of foreign

currency deposits – – 3,086 1,208

Interest income - FCBU deposits – – 44 29

Interest income - Others – – 4,771 6,121

Profit on disposal of property,

plant & equipment 25,434 – 24,519 234

Rent income 391 180 391 180

Other income – 424 393 1,817

25,825 604 33,204 9,589

3. PROFIT FROM OPERATIONS Profit from operations is stated after charging all expenses including the following:

Directors’ fees and emoluments 160 160 15,971 12,206

Auditors' fee 176 160 616 560

Internal audit fee 123 – 5,614 5,259

Audit Committee fees – – 200 300

Depreciation (Note 9) 384 523 116,993 101,453

Amortisation (Note 10) – – 785 –

Management and secretarial fees – – 62,390 63,131

Research & development – – 7,145 8,911

Breakages - bottles and crates – – 66,420 56,363

Personnel costs - (Note 3.1) – – 194,739 170,197

Donations – – 12,179 773

Notes to the Finiancial Statements


31


3. PROFIT FROM OPERATIONS (Contd.)

3.1 Personnel Costs

Salaries, wages and other related expenses – – 176,601 154,128

Defined benefit plan costs - gratuity – – 4,446 4,739

Defined contribution plan costs - EPF & ETF – – 13,692 11,330

– – 194,739 170,197

4. FINANCE EXPENSES

Interest expenses - financial institutions 274 110 58,345 33,298

274 110 58,345 33,298

5. INCOME TAX EXPENSES

Current tax expense (Note 5.1) 26,276 16,657 30,390 17,455

Economic service charge – – 8,450 8,360

Net deferred tax expense/(income) (Note 21) (321) 1,573 52,758 (7,832)

25,955 18,230 91,598 17,983

5.1 Reconciliation of the AccountingProfit and Tax Expenses

Accounting profits 190,103 76,202 143,263 301,523

Aggregate of disallowable expenses 10,692 105,512 162,697 204,606

Aggregate of allowable claims (126,464) (126,395) (92,046) (70,606)

Adjustment on consolidation – – – 264

Tax adjusted profit 74,331 55,319 213,914 435,787

Less: Exempt operational profit (Note 5.2d) – – (121,634) (374,317)

Exempt interest income (Note 5.2f) – – (44) (29)

Utilisation of tax losses (Note 5.2h) – – (6,267) (2,142)

Taxable income 74,331 55,319 85,969 59,299

Current tax (Note 5.2a/5.2e) 26,016 16,596 30,089 17,392

Under provision in respect of prior years – 20 – 20

Total income tax expenses 26,016 16,616 30,089 17,412

Social responsibility levy (Note 5.2b/g) 260 41 301 43

Total income tax expense 26,276 16,657 30,390 17,455

Notes to the Financial Statements


32

5. TAXATION (Contd.)5.2 Income Tax

Company

(a) In terms of the provisions of the Inland Revenue Act No. 10 of 2006 and amendments thereto,

the Company is liable to income tax at the rate of 35% (2006 - 30%).

(b) The Company is liable to pay 1% of income tax as a Social Responsibility Levy (2006 - 0.25%).

(c) During the year, the Company paid Economic Service Charge (ESC) amounting to Rs. 943,577/-

(2006 - Rs. 871,785/-). Payment made hereunder is available as income tax credit.

Subsidiary - The Lion Brewery Ceylon Limited (LBCL)

(d) The operating profit and income accruing to LBCL is exempt from income tax for a period of

twelve years, commencing from the 1st of June 1998, in terms of the agreement with the

Board of Investment of Sri Lanka.

(e) However, in terms of the Inland Revenue Act No. 10 of 2006, the profits and income from other

sources are liable to income tax at the rate of 35% (2006 - 20%).

( f ) No tax liability arises on interest earned on FCBU deposits as such is exempt from income tax.

(g) The subsidiary is liable to pay 1% of income tax as a Social Responsibility Levy (2006 - 0.25%).

(h) LBCL has a tax loss of Rs. 10,599,374/- as at 31st March 2007. Utilisation of same is

restricted to 35% of the statutory income of the year. Any part of loss that cannot be deducted,

can be carried forward indefinitely.

(i) LBCL is liable to pay Economic Service Charge at 0.25% of operational turnover and payments

made/provided for during the year amount to Rs. 8,449,815/- (2006 - Rs. 8,360,258/-). Payment

made hereunder is available as income tax credit for a period of 3 years.

6. DIVIDEND - PREFERENCEA dividend of 14.5% per annum amounting to Rs. 50,750,000/- (2006 - Rs. 50,750,000/-) was received by

the Company for the year from The Lion Brewery Ceylon Limited on the investment of Rs. 350,000,000/- in

preference shares.

7. DIVIDEND - ORDINARYCompany Group

For the year ended 31st March 2007 2006 2007 2006In Rs. ’000s

First and final - 40% (2006 - 30%) 83,952 62,964 83,952 62,964

83,952 62,964 83,952 62,964

(a) Dividends distributed out of the taxable profits of the Company are subject to a dividend tax of 10%.



33

7. DIVIDEND - ORDINARY (Contd.)(b) A first and final dividend of 40% on Ordinary Shares amounting to Rs. 83,952,360/-, which was declared

at the last Annual General Meeting, was paid during the year. This dividend was paid out of tax free

profits received from The Lion Brewery Ceylon Limited. Directors have recommended the payment of a

first and final dividend of 30% on Ordinary Shares amounting to Rs. 62,964,270/- for the year ended

31st March 2007, which will be declared at the Annual General Meeting subject to approval by

shareholders. This dividend is to be paid out of tax free profits received from The Lion Brewery Ceylon

Limited and will be exempt in the hands of shareholders. In accordance with Sri Lanka Accounting

Standard No. 12 (Revised), Events after the Balance Sheet date, this proposed final dividend has not been

recognised as a liability as at 31st March 2007.

8. EARNINGS PER ORDINARY SHAREThe calculation of Group Earnings per Ordinary Share of Rs. 3.33 (Company - Rs. 7.82) is based on profit for the

year attributable to the ordinary shareholders and weighted average number of ordinary shares outstanding

during the year.

The following reflects the income and share data used for the computation of earnings per ordinary share:


Amount used as the Numerator

Profit after taxation 164,148 57,972 51,665 283,540

Minority interest – – 18,282 (149,480)

Net profit attributable to

equity holders of the Company 164,148 57,972 69,947 134,060

Number of ordinary shares used as

denominator (’000) 20,988 20,988 20,988 20,988

Earnings per ordinary share (Rs.) 7.82 2.76 3.33 6.39

9. PROPERTY, PLANT & EQUIPMENT(a) Company

Freehold Freehold Plant & Furniture & Office Computer Motor Laboratory Capital 31st March 31st MarchLand Buildings Machinery Fittings Equipment Equipment Vehicles Equipment Work-in- 2007 2006

In Rs. ’000s Progress

Cost/Valuation

Beginning of the year 4,076 15,355 – – – – – – – 19,431 24,951

Revaluation – – – – – – – – – – (5,708)

Additions – – – – – – – – – – 188

Disposals – (11,000) – – – – – – – (11,000) –

End of the year 4,076 4,355 – – – – – – – 8,431 19,431

Depreciation

Beginning of the year – 465 – – – – – – – 465 2,005

Charge for the year – 384 – – – – – – – 384 523

Transfers to Revaluation – – – – – – – – – – (2,062)

Disposal – (275) – – – – – – – (275) –

End of the year – 574 – – – – – – – 574 465

Net Book Value

As at 31st March 2007 4,076 3,781 – – – – – – – 7,857

As at 31st March 2006 4,076 14,890 – – – – – – – 18,966



34

(c) Freehold properties of the Company were revalued and incorporated in the books to conform to the market

values as at 31st March 2006 which were assessed on a going concern basis by a firm of independent

professional valuers, and the resultant surplus/impairment arising therefrom has been transferred to the

revaluation reserve and included under capital reserves.

(d) The factory building and leasehold land of the Company were handed over to the Government for the expansion

of the Nuwara-Eliya Hospital. Net book value of the building amounting to Rs. 10,725,000/- has been written

off. Certain items of plant and machinery which had written off previously were sold for the consideration of

Rs. 13,102,668/-.

(e) Freehold land and buildings of the subsidiary were revalued and incorporated in the books to conform with the

market values as at 31st March 2006 which were assessed on a going concern basis by a firm of independent

professional valuers, and the resultant surplus arising therefrom has been transferred to the revaluation reserve

included under capital reserves.

(f) An amount of Rs. 123,178,220/- incurred by the subsidiary for the purchase and subsequent improvements

of the land adjacent to the factory is included under capital work-in-progress as further improvements are

being done to bring this land to usable condition.

(g) The subsidiary has revised its depreciation rates of furniture and fittings, office equipments and computer

equipment - software during the year. The resultant impact amounting to Rs. 3,595,537/- has been treated as

a change in accounting estimate, and adjusted accordingly, in the current year Financial Statements in

accordance with the Sri Lanka Accounting Standard 10, Accounting Policies, Changes in Accounting Estimates

and Errors (Revised 2005).

9. PROPERTY, PLANT & EQUIPMENT (Contd.)(b) Group

Freehold Freehold Plant & Furniture & Office Computer Motor Laboratory Capital 31st March 31st MarchLand Buildings Machinery Fittings Equipment Equipment Vehicles Equipment Work-in- 2007 2006

In Rs. ’000s Progress

Cost/Valuation

Beginning of the year 341,162 560,499 1,661,112 14,397 8,008 46,940 20,016 22,928 172,415 2,847,477 2,514,344

Revaluation – – – – – – – – – – 74,454

Additions – – 9,618 281 624 3,797 – 5,131 105,988 125,439 263,010

Transfers – 12,647 37,555 730 – 46,370 – – (97,302) – –

Transfer to intangible

assets – – – – – (7,974) – – (7,536) (15,510) –

Disposals – (11,000) (148) (2,186) (130) (5,049) – – – (18,513) (4,331)

End of the year 341,162 562,146 1,708,137 13,222 8,502 84,084 20,016 28,059 173,565 2,938,893 2,847,477

Depreciation

Beginning of the year – 466 454,642 6,080 3,498 34,826 11,304 21,496 – 532,312 489,245

Charge for the year – 11,223 84,569 2,706 3,404 11,133 3,067 891 – 116,993 101,453

Transfers to revaluation – – – – – – – – – – (55,562)

Disposals – (275) (15) (1,180) (79) (5,049) – – – (6,598) (2,824)

End of the year – 11,414 539,196 7,606 6,823 40,910 14,371 22,387 – 642,707 532,312

Net Book Value

As at 31st March 2007 341,162 550,732 1,168,941 5,616 1,679 43,174 5,645 5,672 173,565 2,296,186

As at 31st March 2006 341,162 560,033 1,206,470 8,318 4,510 12,113 8,712 1,432 172,415 2,315,165



35

(h) Carrying value of the revalued assets of the Group as at 31st March 2007, if carried at cost are given below:

Company SubsidiaryIn Rs. ’000s Land Buildings Land Buildings

Cost 141 9,158 211,764 574,514

Additions during the year – – – 12,647

Disposals during the year – (5,092) – –

Accumulated depreciation – (490) – (83,783)

Carrying value of revalued assets if carried at cost 141 3,576 211,764 503,378

2007 2006

10. INTANGIBLE ASSETS - SUBSIDIARYCost

Opening balance – –

Transferred from property, plant & equipment 7,974 –

Additions for the year 7,536 –

Cost as at 31st March 15,510 –

Amortisation

Opening balance – –

Amortisation for the year 785 –

Accumulated amortisation as at 31st March 785 –

Net Book value as at 31st March 14,725 –

The application software was included under Property, Plant & Equipment and the transfer to intangible assets

was made on 1st April 2006.

No. of Cost as at Market No. of Cost as at MarketShares 31st March Value as at Shares 31st March Value as at

2007 31st March 2007 2006 31st March 2006In Rs. ’000s (’000) (’000)

11. (a) Investment inSubsidiary

The Lion Brewery Ceylon Limited

- Ordinary shares* 25,205 504,362 1,575,340 25,205 504,362 1,758,079

- Preference shares** 35,000 350,000 350,000 35,000 350,000 350,000

854,362 1,925,340 854,362 2,108,079

*The percentage holding of The Lion Brewery Ceylon Limited is 50.41% (2006 - 50.41%). The principle activity of the subsidiary is

brewing and bottling of high quality beers, under licence, for local and export markets.

**The preference shares are unquoted, and hence valued at cost.



36

Cost as at Directors’ Cost as at Directors’31st March Value as at 31st March Value as at

2007 31st March 2007 2006 31st March 2006In Rs. ’000s

The Lion Brewery Ceylon Limited

(b) Investment in AssociatesSouth Asian Breweries (Pte) Limited 319,541 319,541 – –

319,541 319,541 – –

A consortium consisting of Carlsberg A/S, The Industrialisation Fund for Developing Nations, SA Lion Holdings (Pte)

Limited and The Lion Brewery Ceylon Limited incorporated a Company based in Singapore namely, South Asian

Breweries (Pte) Limited (SABL). SABL will wholly own South Asia Breweries (Pvt) Limited based in New Delhi, which

was formed for the purpose of investing in breweries across the various states of India. The subsidiary will own

22.5% of the share capital of SABL. The subsidiary has recognised the investment at cost and will be adjusted

thereafter for the post-acquisition changes at the commencement of commercial operations.

No. of Cost as at Directors’ No. of Cost as at Directors’Shares 31st March Value as at Shares 31st March Value as at

2007 31st March 2007 2006 31st March 2006In Rs. ’000s (’000) (’000)

(c) Other InvestmentInternational Grocers Alliance

(Pvt) Limited

- Ordinary shares 6,120 61,200 61,200 6,120 61,200 61,200

Provision for the diminution in

value of investment (61,200) (61,200) (61,200) (61,200)

– – – –

Company GroupAs at 31st March 2007 2006 2007 2006In Rs. ’000s

12. INVENTORIES Raw materials – – 77,639 58,402

Work-in-progress – – 26,034 22,387

Finished goods – – 52,239 36,130

Bottles and crates – – 219,175 112,977

Maintenance spares – – 91,582 91,296

Others – – 46,081 41,478

– – 512,750 362,670

13. TRADE AND OTHER RECEIVABLESTrade receivables – – 47,206 74,628

Provision for doubtful debts (Note 13.1) – – (1,079) (11,081)

Containers with distributors – – 541,644 513,799

Advances, prepayments and other receivables 6,261 2,113 58,669 53,005

Loans to Company employees (Note 13.2) – – 12 81

6,261 2,113 646,452 630,432



37


13.1 Provision for doubtful debtsBalance as at the beginning of the year – – 11,081 1,079

Provisions during the year – – – 10,002

Write-offs during the year – – (10,002) –

Balance as at the end of the year – – 1,079 11,081

13.2 Loans to Company EmployeesBalance as at the beginning of the year – – 81 273

Advanced during the year – – 365 291

Recovered during the year – – (434) (483)

Balance as at the end of the year – – 12 81

Out of the above balance no employee of the subsidiary (2006 - 1) had an individual loan balance in

excess of Rs. 20,000/-.

14. AMOUNTS DUE FROM

RELATED COMPANIESInternational Grocers Alliance (Pvt) Limited 28,157 28,157 28,157 28,157

Provision for the diminution in value of advances (28,157) (28,157) (28,157) (28,157)

Carlsberg A/S – – – 4,751

– – – 4,751

15. SHARE CAPITALAuthorised

50,000,000 Ordinary Shares of Rs. 10/- each 500,000 500,000 500,000 500,000

10,000,000 Cumulative Redeemable

Preference Shares of Rs. 10/- each 100,000 100,000 100,000 100,000

600,000 600,000 600,000 600,000

Issued and Fully Paid

Ordinary Shares

20,988,090 Ordinary Shares of

Rs. 10/- each (Note 15a) 209,881 209,881 209,881 209,881

15(a) The holders of ordinary shares are entitled to receive dividends as declared from time to time and are

entitled to one vote per share at shareholder meetings of the Company. All ordinary shares rank equally

with regard to the right to the Company's residual assets, at the point of distribution.



38

Company GroupAs at 31st March 2007 2006 2007 2006In Rs. ’000s (Restated) (Restated)

16. CAPITAL RESERVESBalance as at beginning of the year 339,572 347,630 456,539 400,453

Revaluation surplus/impairment – (3,646) – 63,734

Disposal of property (10,452) – (10,452) –

Deferred tax on revaluation of property 3,246 (4,412) 3,321 (7,658)

Changes in effective holding of subsidiary – – – 10

Balance as at end of the year 332,366 339,572 449,408 456,539

Represented by:

Share premium (Note 16a) 323,503 323,503 323,503 323,503

Revaluation reserve (Note 16b) 3,087 10,293 84,842 91,973

General capital reserve (Note 16c) 5,776 5,776 5,776 5,776

Capital redemption reserve (Note 16d) – – 35,287 35,287

332,366 339,572 449,408 456,539

16(a)The share premium reserve can be used for the following purposes:

– issue of bonus shares

– to meet expenses incurred in connection with the issue of shares

– to meet the value of the share premium when shares are redeemed at a premium

16(b)The revaluation reserve relates to revaluation of land and buildings and comprises of the increase in the

fair value of land and buildings at the date of revaluation.

16(c)General capital reserve consists of such amounts that have been transferred from time to time from

retained earnings.

16(d)The capital redemption reserve is for the purpose of redeeming the non-voting 14.5% redeemable

cumulative preference shares of the subsidiary.


17. REVENUE RESERVES

Total Revenue Reserves

Balance as at beginning of the year 184,174 184,174 184,174 184,174

Appropriations – – – –

Balance as at end of the year 184,174 184,174 184,174 184,174

Retained Profits

Balance as at the end of the year 299,057 218,861 510,092 505,473

Total revenue reserves 483,231 403,035 694,266 689,647

Represented by:

General reserve (Note 17a) 184,174 184,174 184,174 184,174

Retained profits – Company 299,057 218,861 299,057 218,861

– Subsidiary – – 211,035 305,236

Inter-Company unrealised profits – – – (18,624)

483,231 403,035 694,266 689,647



39

17(a)General reserve consists of such amounts that have been transferred from retained earnings from time

to time as resolved at general meetings.

GroupAs at 31st March 2007 2006In Rs. ’000s

18. PREFERENCE SHARE CAPITAL

Authorised

50,000,000 Redeemable Cumulative Preference Shares of Rs. 10/- each 500,000 500,000

Issued and Fully Paid

35,000,000 Redeemable Cumulative Preference Shares of Rs. 10/- each 350,000 350,000


19. PAYABLES DUE AFTER ONE YEARLong-term loans repayable after one year (Note 19.1) – – 78,369 –

Customer deposits (Note 19.3) – – 415,285 360,190

– – 493,654 360,190

19.1 Long-Term Loans Repayable after one year

Balance as at the beginning of the year – – – –

Loans obtained during the year – – 146,942 –

Repayments during the year – – (9,796) –

Balance as at the end of the year – – 137,146 –

Less:

Repayable within one year – – (58,777) –

Repayable after one year – – 78,369 –

During the year the susbsidiary obtained a loan of Rs. 146,941,671/- from the DFCC Bank at an interest

rate of 10.5% per annum for funding its capital expenditure.

19.2 Details of Long-Term BorrowingsName of the Lender Interest Rate p.a. 31st March 2007 31st March 2006 Repayment Terms Security Offered

Long-Term Loan Rs. 146.9 million

DFCC 10.50% 137,146 – 6 months grace and Unsecured

payable in 30 equal

monthly instalments

commencing from

February 2007

137,146 –



40


19.3 Customer DepositsBalance as at the beginning of the year – – 360,190 306,041

Deposits received during the year – – 56,817 61,464

Deposits refunded during the year – – (1,722) (7,315)


Refundable deposits are taken from distributors as security against the containers held with them.

20. RETIREMENT BENEFIT OBLIGATIONSGratuity

Balance as at the beginning of the year – – 18,768 15,515

Provision for the year – – 3,823 3,265

Under provision for the year based

on actuarial valuation – – 623 1,474

Payments during the year – – (1,484) (1,486)


20.1 The requirement for the Company to provide for gratuity payments does not arise as it had no employees

on its payroll as at the Balance Sheet date.

20.2 The gratuity liability of the subsidiary as at 31st March 2007 amounting to Rs. 21,729,966/- is based

on an Actuarial Valuation carried out by Messrs. Actuarial Management Consultants ( Pvt) Limited. If the

subsidiary had provided for gratuity for employees on the basis of a half month salary for each

completed year of service, the liability would have been Rs. 27,686,250/-. A contingent liability of

Rs. 3,606,605/- would arise if the subsidiary ceases to be a going concern; as in that event the amount

payable as per the Payment of Gratuity Act would be Rs. 25,336,571/-. The principal assumptions

made are given under 3.2 in Significant Accounting Policies.

20.3 The above provisions are not externally funded.

21. DEFERRED TAX LIABILITYCompany Group

As at 31st March 2007 2006 2007 2006In Rs. ’000s (Restated) (Restated)

Deferred tax liability (Note 21.1) 2,418 5,985 429,771 381,830

Deferred tax asset (Note 21.2) – – (3,710) (5,132)


21.1 Deferred Tax Liability

Balance as at the beginning of the year 5,985 – 381,830 379,454

Provision made/(released) during the year (583) 1,573 (10,494) (8,475)

Impact on income tax rate increase 262 – 61,830 –

Impact on revaluation of property (3,246) 4,412 (3,395) 10,851




41


21.2 Deferred Tax Asset

Balance as at the beginning of the year – – 5,132 5,775

Revesal during the year – – (2,277) (643)

Impact on income tax rate increase – – 855 –


Deferred tax assets and liabilities have been computed taking into consideration the revised tax rates

effective from 1st April 2006.

22. TRADE AND OTHER PAYABLESTrade creditors – – 61,026 69,702

Others,including accrued expenses 4,874 3,783 138,706 163,689

Unclaimed dividends 2,078 1,591 2,471 1,868

6,952 5,374 202,203 235,259

23. AMOUNTS DUE TO RELATED COMPANIESCarlsberg A/S – – 357 –

– – 357 –

24. CURRENT TAX PAYABLEExcise duty – – 178,301 163,065

Value added tax 684 741 41,077 51,723

Income tax 17,597 4,439 22,013 5,048

Social responsibility levy – – 1,790 1,632

Economic service charge – – 2,315 511

18,281 5,180 245,496 221,979

25. EVENTS OCCURRING AFTER THE BALANCE SHEET DATECompany

Subsequent to the Balance Sheet date, no circumstances have arisen which required adjustments to or disclosure

in these Financial Statements, other than those disclosed in Note 7 to these Financial Statements.

Subsidiary

Subsequent to the Balance Sheet date the following events took place which although did not require adjustments

to the Financial Statements is noteworthy

(a) The subsidiary changed its distribution method from a Trading Type Distributor operation to that of a

Consignment Agent. Accordingly, the existing Distributor agreements were terminated during the period

1st to 7th of April 2007 and new agreements signed with the Consignment Agents. The resultant

accounting entries were dealt within the books of the subsidiary for the period ended 31st March 2007

and hence no adjustments are carried forward to the future periods.



42

(b) An outsourced lorry transporting beer was involved in an accident on the 10th of April 2007 in which 23

people lost their lives and 50 more injured. There were no legal nor financial implications on the

subsidiary as the lorry belonged to the outsourced party and the crew its employees. However, as a

humanitarian gesture an amount of Rs. 3,925,000/- was paid out to the families of the affected on the

basis of Rs. 125,000/- for every person deceased and Rs. 25,000/- for each for those injured.

26. COMPARATIVE FIGURES

Previous year's figures and phrases have been rearranged wherever necessary to conform to the current year's

presentation.

27. CONTINGENT LIABILITIES

(a) The subsidiary's contingent liabilities as at 31st March 2007 amount to Rs. 5,759,000/-, being bank

guarantees given to government bodies for operational purposes.

(b) In the event the subsidiary ceases to be a going concern a contingent liability arises amounting to

Rs. 3,606,605/- in respect of gratuity as outlined in Note 20.2.

Apart from the above there were no other material contingent liabilities which would require adjustments to or

disclosure in the Financial Statements.

28. CONTRACTS FOR CAPITAL EXPENDITURE

As at the Balance Sheet date, the Group has entered into contracts for the following capital expenditures,

- Rs. 50 million to upgrade the waste water treatment plant

- Rs. 74 million for the modifications and upgrading of the packaging line

- Rs. 4.5 million for the installation of a missing label detector

Out of the total commitments above, Rs. 29.5 million has been paid as advances as at the Balance Sheet date

and are included under capital work-in-progress.

29. DIRECTORS' INTEREST IN CONTRACTS/RELATED PARTY TRANSACTIONS

29.1 Messrs. L.C.R.de C. Wijetunge (Chairman), H. Selvanathan, M. Selvanathan, S.K. Shah, D.C.R. Gunawardena,

S.A. Nielsen (resigned w.e.f. 25th January 2007) and J.B. Madsen (appointed w.e.f. 25th January 2007), Directors

of the Company, are also Directors of The Lion Brewery Ceylon Limited, with which the following contracts/

transactions have been entered into during the year by the Company in the normal course of business:

The Lion Brewery Ceylon Limited (LBCL)

(a) was charged Rs. 48,054,017/- (2006 - Rs. 52,364,424/-) as royalty in accordance with the

licensed brewing agreement with the Company.

(b) paid interest of 15% p.a. amounting to Rs. 3,424,109/- on advance of Rs. 122,000,000/- made

by the Company. This amount has been settled in full during the year.

(c) paid the dividend of 14.5% per annum amounting to Rs. 50,750,000/- on redeemable cumulative

preference shares (2006 - Rs. 50,750,000/-).

(d) charged Rs. 12,604,102/- as technology consultancy charges for the disposal of plant machineries.



43

29.2 Messrs. H. Selvanathan, M. Selvanathan, S. K. Shah, D.C.R. Gunawardena and P.C.P. Tissera, Directors of

the Company, are also Directors of Carsons Management Services (Pvt) Limited, which provides

management and secretarial services to the Company and to its subsidiary. During the year management

& secretarial fees amounting to Rs. 62,389,861/- (2006 - Rs. 63,131,285/-) was paid by the Group to

Carsons Management Services (Pvt) Limited.

29.3 S.A. Nielsen (resinged w.e.f. 25th January 2007) and J.B. Madsen (appointed w.e.f. 25th January 2007)

Directors of the Company also represent Carlsberg A/S and Carlsberg Brewery Malaysia Berhad, with

which the following contracts/transactions have been entered into during the year by the Group in the

normal course of business:

(a) As per the licensed brewing agreement, a sum of Rs. 53,498,455/- (2006 - Rs. 42,900,846/-)

was paid as royalty during the year to Carlsberg A/S.

(b) The subsidiary purchased Carlsberg beer cans from Carlsberg Brewery Malaysia Berhad for the

purpose of resale for a total value of Rs. 43,906,127/- (2006 - Rs. 37,426,200/-)

(c) An amount of Rs. 356,701/- is payable to Carlsberg A/S as at 31st March 2007.

29.4 Messrs. H. Selvanathan (resinged w.e.f. 1st April 2007), D.C.R. Gunawardena (appointed as deputy

Chariman w.e.f. 1st April 2007) and P.C.P. Tissera, Directors of the Group are also Deputy Chairman and

Directors respectively of Union Assurance Limited, from which the Company obtained insurance policies

at a total premium of Rs. 235,747/- (2006 - Rs. 270,193/-) during the year, while the subsidiary has

obtained insurance policies at a total premium of Rs. 65,684,965/- (2006 - Rs. 57,236,885/-) during

the year.

29.5 The Group has identified the Board of Directors as key management personnel. The compensation paid

to key management personnel is disclosed in aggregate in Note 3 to the Financial Statements.

The Directors have no direct or indirect interest in any other contracts or proposed contracts of the

Company and its subsidiary other than the above.

30. SEGMENTAL ANALYSIS

The Group does not distinguish its products into significant components for different Geographical/Business

segments as the differentiations are insignificant.

31. FOREIGN CURRENCY TRANSACTIONS

The principal exchange rates used for conversion of foreign currency transactions/balances are as follows:

Closing Rate Average Rate31st March 2007 2006 2007 2006

Rs. Rs. Rs. Rs.

U.S.Dollar 110.01 103.65 105.64 102.08

Euro 147.22 126.63 135.71 124.22



44

For the year ended 31st March 2007 2006In Rs. ’000s

Value Added

Revenue 3,982,334 3,845,755

Other income 33,204 9,589

4,015,538 3,855,344

Cost of materials and services bought

from outside (1,604,688) (1,553,034)

2,410,850 2,302,310

Distributed as follows: % %

To Employees

as remuneration 209,815 8.70 181,693 7.89

To Government

as excise duty 1,779,497 73.81 1,606,263 69.77

as income tax/deferred tax 83,148 3.45 17,455 0.76

as economic service charge 8,450 0.35 8,360 0.36

as social responsibility levy 18,200 0.75 7,284 0.32

To Providers of Capital

as dividends to shareholders 83,952 3.48 62,964 2.73

as finance expenses 58,345 2.42 33,298 1.45

Retained in the Business

as depreciation/amortisation 117,778 4.89 101,453 4.41

as minority interest (18,282) (0.76) 149,480 6.49

as profit for the year 69,947 2.90 134,060 5.82

2,410,850 100.00 2,302,310 100.00

Notes

1. The Statement of Value Added shows the quantum of wealth generated by the activities of the Group and its

applications.

2. Value Added Tax is excluded in arriving at the above Turnover. Therefore, total tax liability/payment made to the

Government during the year include the following:

2007 2006In Rs. ’000s

Value added tax (paid but not included

under net sales) 807,458 752,595

Excise duty (Included under net sales) 1,779,497 1,606,263

Income tax 30,390 17,455

Economic service charge 8,450 8,360

Social responsibility levy 18,200 7,284

Total taxes paid to the Government 2,643,995 2,391,957

Statement of Value Added - Group


45

Year ended 31st March 2007 2006 2005 2004 2003In Rs. ‘000s

Operating Results

Net revenue 3,982,334 3,845,755 3,080,468 2,699,548 2,179,555

Other income 33,204 9,589 4,952 2,296 2,923

4,015,538 3,855,344 3,085,420 2,701,844 2,182,478

Total expenditure (3,813,930) (3,431,166) (2,664,931) (2,201,333) (1,773,209)

Profit from operating activities before

finance expenses 201,608 424,178 420,489 500,511 409,269

Provision for the diminution in

value of investment/advances – (89,357) – – –

Finance expenses (58,345) (33,298) (35,911) (42,240) (56,157)

Profit from ordinary activities before tax 143,263 301,523 384,578 458,271 353,112

Income tax expenses (91,598) (17,983) (21,538) (11,995) (2,398)

Profit for the period 51,665 283,540 363,040 446,276 350,714

Dividends - Ordinary 83,952 62,964 83,952 20,988 83,952

- Preference – – – – 13,563

As at 31st March 2007 2006 2005 2004 2003In Rs. ‘000s (Restated)

Balance Sheet

Share capital 209,881 209,881 209,881 209,881 209,881

Capital reserve 449,408 456,539 400,453 396,250 396,250

Revenue reserve 694,266 689,647 618,520 665,949 423,681

1,353,555 1,356,067 1,228,854 1,272,080 1,029,812

Minority interest 818,900 911,493 773,463 889,981 781,362

2,172,455 2,267,560 2,002,317 2,162,061 1,811,174

Long-term loans repayable after one year 78,369 – – – 227,500

Capital employed 2,250,824 2,267,560 2,002,317 2,162,061 2,038,674

Represented by:

Non-current assets 2,630,452 2,315,165 2,086,299 2,124,398 1,880,359

Current assets 1,492,672 1,188,114 963,670 787,288 740,629

Current liabilities (1,009,224) (480,063) (352,417) (491,549) (352,522)

Customer deposits (415,285) (360,190) (306,041) (249,776) (220,228)

Retirement benefit obligations (21,730) (18,768) (15,515) (8,300) (9,564)

Deferred tax liabilities (426,061) (376,698) (373,679) – –

2,250,824 2,267,560 2,002,317 2,162,061 2,038,674

Year ended 31st March 2007 2006 2005 2004 2003In Rs. ‘000s

Cash Flow Statistics

Net cash inflows

from operating activities 43,320 456,088 318,460 694,233 333,101

Net cash inflows/(outflows)

from investing activities (359,088) (201,333) 3,235 (313,065) (436,702)

Net cash inflows/(outflows)

from financing activities (20,589) (137,179) (226,137) (324,617) 102,723

Net cash movement for the year (336,357) 117,576 95,558 56,551 (878)


Five Year Summary - Group


46Five Year Summary - Group

2007 2006 2005 2004 2003

Ratios & Statistics

Operational Ratios

Return on shareholders' funds (%) 3.82 20.91 29.54 35.08 32.74

Assets turnover (times) 0.97 1.10 1.01 0.93 0.83

Equity to total assets (%) 304.61 258.34 248.20 228.89 254.51

Debt equity (%) 29.73 1.68 2.11 11.89 42.91

Gearing ratio (%) 5.79 – – – 22.09

Interest cover (times) 3.46 12.74 11.71 11.85 5.87

Borrowings to total assets (%) 9.76 0.65 0.85 5.19 0.09

Current ratio (times) 1.48 2.47 2.73 1.60 2.10

Quick ratio (times) 0.97 1.72 1.77 0.96 1.42

Earnings per share (Rs.) 3.33 6.39 10.59 12.54 9.58

Price earnings ratio (times) 25.50 14.40 7.58 7.57 7.41

Earnings yield (%) 3.92 6.94 13.20 13.20 13.49

Market price per share (Rs.) 85.00 92.00 80.25 95.00 71.00

Dividends per share (Rs.) 4.00 3.00 4.00 1.00 4.00

Dividend cover (times) 0.62 4.50 4.32 21.26 4.02

Net assets per share (Rs.) 64.49 64.61 58.55 60.61 49.07

Market capitalisation (Rs.'000) 1,783,988 1,930,904 1,684,294 1,993,869 1,490,154

US $Financials

PREPARATION OF US DOLLAR FINANCIALS

The translation of the Sri Lankan Rupee amounts

into US Dollar amounts is included solely for the

convenience of Shareholders, Investors, Bankers

and other users of Financial Statements.


48

Company GroupFor the year ended 31st March 2007 2006 2007 2006In US$ ’000s

Revenue 2 1,770 1,790 37,697 37,674

Cost of sales – – (26,156) (23,885)

Gross profit 1,770 1,790 11,541 13,789

Other income 244 6 314 94

2,014 1,796 11,855 13,883

Distribution expenses – – (6,599) (6,169)

Administrative expenses (212) (173) (2,367) (2,390)

Other expenses – – (981) (1,169)

Profit from operations 1,802 1,623 1,908 4,155


investment/advances – (875) – (875)

Finance expenses (2) (1) (552) (326)

Profit before taxation 1,800 747 1,356 2,954

Income tax expenses (246) (179) (867) (176)

Profit for the period 1,554 568 489 2,778

Profit attributable to

- Equity holders of the Company 1,554 568 662 1,314

- Minority shareholders – – (173) 1,464

Profit available for appropriation 1,554 568 489 2,778

Income Statements


49

Company GroupAs at 31st March 2007 2006 2007 2006In US$ ’000s (Restated) (Restated)

ASSETS

Non-Current Assets

Property, plant & equipment 71 183 20,873 22,336

Intangible assets – – 134 –

Investment in subsidiary 7,767 8,243 – –

Investment in associates – – 2,905 –

Other investments – – – –

Total Non-Current Assets 7,838 8,426 23,912 22,336

Current Assets

Inventories – – 4,661 3,499

Trade & other receivables 57 20 5,876 6,082

Amounts due from related companies – – – 46

Cash and cash equivalents 1,812 903 3,031 1,836

Total Current Assets 1,869 923 13,568 11,463

Total Assets 9,707 9,349 37,480 33,799

EQUITY AND LIABILITIES

Equity

Share capital 3,619 3,619 3,619 3,619

Capital reserves 3,021 3,276 4,085 4,405

Currency fluctuations (1,711) (1,594) (1,711) (1,594)

Revenue reserves 4,393 3,888 6,311 6,654

Equity Attributable to Equity Holders

of the Company 9,322 9,189 12,304 13,084

Minority interest – – 7,444 8,794

Total Equity 9,322 9,189 19,748 21,878

Non-Current Liabilities

Creditors due after one year – – 4,487 3,475

Retirement benefit obligations – – 198 181

Deferred tax liabilities 22 58 3,873 3,634

Total Non-Current Liabilities 22 58 8,558 7,290

Current Liabilities

Trade and other liabilities 63 52 1,838 2,270

Amounts due to related companies – – 3 –

Current tax payable 166 50 2,232 2,141

Long-term loans repayable within one year – – 534 –

Short-term loan – – 909 –

Bank overdrafts (unsecured) 134 – 3,658 220

Total Current Liabilities 363 102 9,174 4,631

Total Liabilities 385 160 17,732 11,921

Total Equity and Liabilities 9,707 9,349 37,480 33,799

* Gains or losses on conversion are accounted under “capital and reserves” in the Balance Sheet.

Balance Sheets


50

Year ended 31st March 2007 2006 2005 2004 2003In US$ ’000s

Operating Results

Revenue 37,697 37,674 30,015 27,713 22,624

Other income 314 94 48 24 30

38,011 37,768 30,063 27,737 22,654

Total expenditure (36,103) (33,613) (25,966) (22,599) (18,406)

Profit from operating activities before

finance expenses 1,908 4,155 4,097 5,138 4,248


investment/advances – (875) – – –

Finance expenses (552) (326) (350) (434) (583)

Profit from ordinary activities before tax 1,356 2,954 3,747 4,704 3,665

Income tax expenses (867) (176) (210) (123) (25)

Profit for the period 489 2,778 3,537 4,581 3,640

Dividends - Ordinary 795 617 818 215 871

- Preference – – – – 141

As at 31st March 2007 2006 2005 2004 2003In US$ ’000s (Restated)

Balance Sheet

Share capital 3,619 3,619 3,619 3,619 3,619

Capital reserves 4,085 4,405 3,993 4,035 4,113

Currency fluctuations (1,711) (1,594) (1,527) (1,482) (1,441)

Revenue reserves 6,311 6,654 6,167 6,782 4,397

12,304 13,084 12,252 12,954 10,688

Minority interest 7,444 8,794 7,711 9,063 8,110

19,748 21,878 19,963 22,017 18,798

Long-term loans repayable after one year 712 – – – 2,361

Capital employed 20,460 21,878 19,963 22,017 21,159

Represented by

Non-current assets 23,911 22,336 20,801 21,633 19,516

Current assets 13,569 11,463 9,608 8,019 7,687

Current liabilities (9,174) (4,631) (3,514) (5,006) (3,659)

Customer deposits (3,775) (3,475) (3,051) (2,544) (2,286)

Retirement benefit obligations (198) (181) (155) (85) (99)

Deferred tax liabilities (3,873) (3,634) (3,726) – –

20,460 21,878 19,963 22,017 21,159

Five Year Summary - Group


51

1. BASIS OF CONVERSION

The translation of Sri Lankan Rupee amounts into US Dollar amounts is solely for the convenience of the

shareholders, investors, bankers and other users of Financial Statements.

The translation of the Financial Statements into US Dollars were effected based on the following

exchange rates:

2007 2006

Income statement Average rate 105.64 102.08

Monetary assets and liabilities Closing rate 110.01 103.65

Non-current assets and liabilities Closing rate 110.01 103.65

Ordinary share capital Historical rate 57.99 57.99

Company GroupFor the year ended 31st March 2007 2006 2007 2006In US$ ’000s

2. REVENUE

(A ) Dividend income 1,196 1,238 – –

Royalty income 455 512 – –

Interest income 119 40 86 40

Brewery – – 37,611 37,634

1,770 1,790 37,697 37,674

(B) Local/Export Revenue

Local revenue 1,770 1,790 36,852 36,949

Export revenue – – 845 725

1,770 1,790 37,697 37,674



52

1. STOCK EXCHANGE LISTING

The Ceylon Brewery Limited is a Public Quoted Company, the issued ordinary shares of which are listed with

the Colombo Stock Exchange of Sri Lanka.

2. SHARE VALUATION

The market value of the Company's shares as 30th March 2007 was Rs. 85.00 per share (2006 – Rs. 92.00).

3. ORDINARY SHAREHOLDERSAs at As at

31st March 31st March2007 2006

Number of shareholders 1,014 975

(a) Frequency Distribution of Shareholdings as at 31st March 2007:

Resident Non-Resident TotalDistribution No. of No. of % No. of No. of % No. of No. of %of Shares Share- Shares Share- Shares Share- Shares

holders holders holders

1 - 1,000 775 137,151 0.65 66 18,386 0.09 841 155,537 0.74

1,001 - 5,000 101 223,310 1.06 32 75,185 0.36 133 298,495 1.42

5,001 - 10,000 21 145,082 0.69 3 25,386 0.12 24 170,468 0.81

10,001 - 50,000 4 73,500 0.35 4 126,218 0.60 8 199,718 0.95

50,001 - 100,000 – – – – – – – – –

100,001 - 500,000 1 283,400 1.35 1 135,000 0.64 2 418,400 1.99

500, 001 - 1,000,000 2 1,742,900 8.31 – – – 2 1,742,900 8.31

Above 1,000,000 1 13,984,012 66.63 3 4,018,560 19.15 4 18,002,572 85.78

Total 905 16,589,355 79.04 109 4,398,735 20.96 1,014 20,988,090 100.00

Categories of No. of No. of %Shareholders Shareholders Shares

Individuals 947 686,588 3.27

Institutions 67 20,301,502 96.73

Total 1,014 20,988,090 100.00

(b) The number of shares held by non-residents as at 31st March 2007 was 4,398,735 which amounts to 20.96% of

the issued share capital.

(c) Public Holding

The precentage of issued ordinary share capital of the Company held by the public as at 31st March 2007 was

17.03%.

(d) The Carson Cumberbatch Group holds 74.93% of the issued ordinary share capital of The Ceylon Brewery Limited.

Information to Shareholders & Investors


53Information to Shareholders & Investors

4. MAJOR SHAREHOLDINGSAs at 31st March 2007 2006

Name of the Shareholders No. of Shares % No. of Shares %

Carson Cumberbatch &

Company Limited A/C No. 01 13,984,012 66.63 13,966,540 66.54

Carlsberg A/S 1,676,440 7.99 1,676,440 7.99

The Gilpin Fund Limited 1,320,220 6.29 1,320,220 6.29

HSBC Intl Nom Limited - SNFE-Arisaig India Fund Limited 1,021,900 4.87 1,021,900 4.87

The Ceylon Guardian Investment Trust Limited 934,900 4.45 934,900 4.45

The Ceylon Investment Company Limited 808,000 3.85 808,000 3.85

Sri Lanka Insurance Corporation Limited - Life Fund 283,400 1.35 257,600 1.23

HSBC International Nominees Limited -

SSBT - Deustche Bank 135,000 0.64 135,000 0.64

Madam. J. Kaur 37,400 0.18 37,400 0.18

Elgin Investments Limited 34,900 0.17 34,900 0.17

Mrs. E.E.M. Woodward 32,965 0.16 32,965 0.16

Mr. H.A. Pieris 24,500 0.12 24,500 0.12

Mr. M. Radhakrishnan 24,400 0.12 24,400 0.12

Guinness Morison International Limited 20,953 0.10 20,953 0.10

Freudenberg Shipping Agencies Limited 12,500 0.06 12,500 0.06

Secretarial Services Limited 12,100 0.06 12,100 0.06

Mrs. N.S. Senewiratne 10,000 0.05 10,000 0.05

Mrs. L.A.S. Moldrich 9,900 0.05 9,900 0.05

Mr. M. Lightbown 9,100 0.04 9,100 0.04

Mr. N.J. Gamadia 8,786 0.04 8,786 0.04

5. MARKET PERFORMANCE - ORDINARY SHARESFor the year ended 31st March 2007 2006

Highest (Rs.) 100.00 159.00

Lowest (Rs.) 72.00 66.25

Value of shares traded (Rs. ’000) 5,817 42,955

6. MARKET CAPITALISATION

The market capitalisation of the Company, which is the number of ordinary shares in issue mulitiplied by the

market value of a share was Rs. 1,783,987,650/- as at 31st March 2007 (2006 - Rs. 1,930,904,280/-).

7. DIVIDENDS

A first and final dividend of 40% on ordinary shares for the year ended 31st March 2006, which was declared at the

last Annual General Meeting, was paid during the year. Directors have recommended the payment of a first and final

dividend of 30% on ordinary shares for the year ended 31st March 2007, which will be declared at the

Annual General Meeting, subject to approval by the shareholders. The details are shown in Note 7 to the


8. NUMBER OF EMPLOYEES

There were no employees as at the Balance Sheet date.


54

APPROPRIATIONS

Apportioning of earnings as dividends, capital and

revenue reserves.

CAPITAL RESERVES

Reserves identified for specified purposes and

considered not available for distribution.

CASH EQUIVALENTS

Liquid investments with original maturities of six

months or less.

CONTINGENT LIABILITIES

Conditions or situations at the Balance Sheet date, the

financial effects of which are to be determined by

future events which may or may not occur.

CURRENT RATIO

Current assets divided by current liabilities.

DEBT

Total borrowings.

DIVIDEND COVER

Post tax profit after preference dividend, divided by

gross dividend. It measures the number of times

dividends are covered by distributable profits.

DIVIDEND PER ORDINARY SHARE

Dividends paid and proposed, divided by the number of

ordinary shares in issue which ranked for those

dividends.

EARNINGS PER ORDINARY SHARE

Profits attributable to ordinary shareholders divided by

the number of ordinary shares in issue and ranking for

dividend.

EQUITY

Ordinary share capital plus reserves.

EVENTS OCCURRING AFTER THE BALANCE

SHEET DATE

Significant events that occur between the Balance

Sheet date and the date on which Financial Statements

are authorised for issue.

GEARING

Ratio of borrowings to capital employed. Borrowings

include all interest bearing long-term liabilities.

INTEREST COVER

Profits before tax and interest charges divided by

interest charges.

MARKET CAPITALISATION

The market value of a company at a given date

obtained by multiplying the market price of a share by

the number of issued ordinary shares.

NET ASSETS PER ORDINARY SHARE

Total assets less liabilities excluding preference share

capital divided by the number of ordinary shares in

issue. This represents the theoretical value per share

if the Company is broken up.

PRICE EARNINGS RATIO (P/E)

Market price of a share divided by earnings per share.

RELATED PARTIES

Parties who could control or significantly influence the

financial and operating decisions/policies of the

business.

REVENUE RESERVES

Reserves considered as being available for future

distribution and appropriations.

VALUE ADDITION

The quantum of wealth generated by the activities of

the Company.

WORKING CAPITAL

Capital required to finance the day-to-day operations

(current assets less current liabilities).

Glossary of Financial Terms


55

NAME OF THE COMPANYThe Ceylon Brewery Limited

(A Carson Cumberbatch Company)

LEGAL FORMA Public Quoted Company with Limited Liability,

Incorporated in Sri Lanka in 1910

SUBSIDIARY COMPANYThe Lion Brewery Ceylon Limited

(Holding of 50.41%)

PARENT COMPANYCarson Cumberbatch & Company Limited

DIRECTORSL.C.R. de C. Wijetunge (Chairman)

Hari Selvanathan (Deputy Chairman)

Mano Selvanathan

Suresh K. Shah (Chief Executive Officer)

D.C.R. Gunawardena

P.C.P. Tissera

S.A. Nielsen (resigned w.e.f. 25th January 2007)

J.B. Madsen (appointed w.e.f. 25th January 2007)

ALTERNATE DIRECTORSN. Ramaiah

for Hari Selvanathan

BANKERSCitibank

Commercial Bank

Deutsche Bank

Hatton National Bank

HSBC

Nations Trust Bank

Standard Chartered Bank

LEGAL ADVISERSMessrs. F.J. & G. De Saram

No. 216, De Saram Place

Colombo 10

Tel: + 94 11 4718200

Fax: + 94 11 4718220

AUDITORSMessrs. KPMG Ford, Rhodes, Thornton

& Company

Chartered Accountants

No. 32A, Sir Mohamed Macan Markar Mawatha

Colombo 3

Tel: + 94 11 2426426

Fax: + 94 11 2445872

MANAGERS & SECRETARIESCarsons Management Services (Pvt) Limited

No. 61, Janadhipathi Mawatha

Colombo 1

Tel: + 94 11 2337665, + 94 11 4739200

Fax: + 94 11 2337685, + 94 11 4739300

REGISTERED OFFICENo. 61, Janadhipathi Mawatha

Colombo 1

Tel: + 94 11 2337665, + 94 11 4739200

Fax: + 94 11 2337685, + 94 11 4739300

CORPORATE OFFICE AND BREWERY254, Colombo Road, Biyagama

Tel: +94 11 2465900 (10 Lines)

Fax: +94 11 2465901

CORPORATE WEBSITEwww.lionbeer.com

GROUP WEBSITEwww.carsoncumberbatch.com

Corporate Information


56

NOTICE IS HEREBY GIVEN that the Ninety-Sixth Annual General Meeting of the Company will be held on

Friday the 1st day of June 2007 at 10.30 a.m. at the "Sapphire Ballroom" of Ceylon Continental Hotel, No. 48,

Janadhipathi Mawatha, Colombo 1, for the following purposes:

1. To receive and adopt the Report of the Directors and the Financial Statements for the year ended

31st March 2007 together with the Report of the Auditors thereon.

2. To declare a First and Final Dividend of 30% as recommended by the Board of Directors.

3. To re-elect Mr. H. Selvanathan who retires in terms of Articles 105 and 106 of the Articles of Association of

the Company, as a Director.

4. To re-appoint KPMG Ford, Rhodes, Thornton & Company as Auditors and authorise the Directors to determine

their remuneration.



Secretaries

Colombo

4th May 2007

Notes

1. A member is entitled to appoint a Proxy to attend and vote instead of him/herself. A Proxy need not be a

member of the Company. A Form of Proxy is enclosed with this Annual Report.

2. To be valid, this Form of Proxy must be deposited at the Registered Office of the Company,

No. 61, Janadhipathi Mawatha, Colombo 1, not later than 10.30 a.m. on Wednesday the 30th May 2007.

3. A person representing a Corporation is required to carry a certified copy of the resolution authorising him/her

to act as the representative of the Corporation. A representative need not be a member.

4. The transfer books of the Company will be kept open.

5. Security Check

We shall be obliged if the shareholders attending the Annual General Meeting produce their National Identity

Card to the Security personnel at the entrance lobby.

Notice of Meeting


57

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

of .............................................................................................................................................................................................

being *a Member/Members of THE CEYLON BREWERY LIMITED hereby appoint:

LIONEL CUTHBERT READ DE CABRAAL WIJETUNGE or failing him,

HARIHARAN SELVANATHAN or failing him,

MANOHARAN SELVANATHAN or failing him,

SURESH KUMAR SHAH or failing him,

DON CHANDIMA RAJAKARUNA GUNAWARDENA or failing him,

PALEHENALAGE CHANDANA PRIYANKARA TISSERA or failing him,

JESPER BJORN MADSEN or failing him,

...................................................................................................................................................................................................

of …………………………………………………………………….......................................……………….......……………………........................

as *my/our proxy to **....................................... vote as indicated hereunder for *me/us on *my/our behalf at the

Annual General Meeting of the Company to be held on Friday the 1st day of June 2007 at 10.30 a.m. at the

"Sapphire Ballroom", Ceylon Continental Hotel, No. 48, Janadhipathi Mawatha, Colombo 1, and at any adjournment

thereof and at every poll which may be taken in consequence thereof.

For Against

1. To adopt the Report of the Directors and the Financial Statements for the

year ended 31st March 2007, together with the Report of the Auditors thereon.

2. To declare a First and Final Dividend of 30% for the financial year ended

31st March 2007 as recommended by the Board of Directors.

3. To re-elect Mr. H. Selvanathan who retires in terms of Articles 105 and 106 of the

Articles of Association of the Company, as a Director.

4. To re-appoint Messrs. KPMG Ford, Rhodes, Thornton & Co., as Auditors

and to authorise the Directors to determine their remuneration.

In witness *my/our hands this ................................................... day of .................................. Two Thousand and Seven.

....................................................

Signature of Shareholder/s

Note (a) *Please delete the inappropriate words.

(b) **If you wish your Proxy to speak at the meeting you should

interpolate the words “Speak and” in the place indicated

with ** and initial such interpolation.

(c) Instructions as to completion are noted on the reverse hereof.

Form of Proxy Share Folio No.


58Form of Proxy

INSTRUCTIONS AS TO COMPLETION

1. In terms of Article 93 of the Article of Association of the Company:

“93 Every instrument appointing a Proxy shall be in writing under the hand of the appointer or his attorney duly

authorised in writing or if such appointer is a corporation under the common seal or under the hand of some

attorney of such corporation duly authorised in writing in that behalf.”

2. Kindly perfect the Form of Proxy by filling in legibly your full name and address and sign in the space provided.

Please fill in the date of signature and indicate with an “x” in the space provided how your Proxy is to vote on

each resolution. If no indication is given, the Proxy in his/her discretion will vote as he/she thinks fit.

3. In terms of Article 19 of the Articles of Association of the Company, only one of the joint holders shall be

entitled to the right of voting and or appointing proxies and exercising the other rights and powers conferred on

a sole holder and if the joint holders cannot arrange amongst themselves as to who shall vote or appoint

proxies and exercise such other rights and powers conferred on a sole holder, the member whose name stands

first on the register of shares in respect of such joint holding shall vote or appoint proxies and exercise those

rights and powers.

4. To be valid, the completed Form of Proxy should be deposited at the Registered Office of the Company

situated at No. 61, Janadhipathi Mawatha, Colombo 1, not later than 10.30 a.m. on 30th May 2007.

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No. 254

Colombo Road

Biyagama

www.lionbeer.com

No. 254

Colombo Road

Biyagama

www.lionbeer.com

The Ceylon Brewery Limited - Carson Cumberbatch PLC

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