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Contents

Operational Highlights 2009 01 Chairman's Statement 02 Managing Director's Review 06 Board of Directors 08 Divisional Heads 10 Corporate Governance 11 Corporate Governance Compliance Table 14 Report of the Audit Committee 15 Report of The Remuneration Committee 16 Directors' Responsibility for Financial Reporting 17 Annual Report of the Board of Directors on the Affairs of the Company 18 Financial Report 23 Independent Auditor's Report 24 Income Statement 25 Balance Sheet 26 Statement of Changes in Equity 27 Cash Flow Statement 28 Notes to the Financial Statement 29 Value Added Statement 45 Ten Year Summary 46 Share Information 47 Notice of Meeting 48 Notes 49 Form of Proxy Enclosed Attendance Form Enclosed

Nestlé: A household name in Sri Lanka

The Nestlé brand has been familiar to Sri Lankans for over a century. The origins of today's company, Nestlé Lanka PLC, were as an importer of milk products. Other products such as NESPRAY and a variety of infant formulae were added to the Company's product range with time. Today your company is responsible for making available your favourite household products including NESPRAY, NESTOMALT, MILO, NESCAFÉ, MAGGI and the most recent introduction--NESTEA. With a state-of-the-art factory in Kurunegala, your Company is one of Sri Lanka's foremost food and beverage manufacturers, as well as the largest private sector buyer of fresh milk. Your Company is, in fact, an integral part of the national community, one that has a profound and positive impact on rural economic growth. Your Company consciously identifies areas of focus, where, shareholders' interest and society's interest strongly intersect and where value creation can be optimized for both. Your Company's philosophy of Creating Shared Value focuses on specific areas of water, nutrition, and rural development.

Good Food, Good Life

Nestlé's four-pillar strategy of operational efficiency, innovation and renovation, consumer communications and product availability is evident in all your Company's activities, at every point along the value chain from the raw materials supplier to the consumer. At its heart is the marriage of complementary but opposed factors: cost and quality, complexity and efficiency, volume growth and profitability. Worldwide, Nestlé is transforming into a respected, trustworthy Nutrition, Health and Wellness company. In 2009, your Company continued to extend and defend its core businesses while nurturing and strengthening emerging ones to secure future leadership in the field of nutrition and wellbeing. Your Company's promise of ensuring Good Food, Good Life to all its stakeholders and consumers will remain its focus in 2010.

Operational Highlights 2009

Nestlé Lanka has recorded a turnover growth of 1.7% during the fiscal year. A contribution of approximately 57% of the Company's value added has been made to the Government of Sri Lanka as taxes/duties while more than 22% was paid to shareholders as dividends. Nestlé Lanka continues to renovate existing products in keeping with the Group's direction of Nutrition, Health and Wellness. The Company expanded its dairy development initiative to the under developed Northern & Eastern parts of the Island: o With dairy development expansions in the North and East, Nestlé Lanka now collects milk from around 13,000 dairy farmers . o The Company has contributed Rs.1.16 Bn to the livelihoods of dairy farmers by way of milk purchases.

Milk payment to farmers (Rs. Mn.)

1062

1200

Purchase of Coconuts (Mn.)

60

1161

1000

50

803

47

53 42

715

41 37

600

659

800

40

30

400

20

200

10

0

05 06 07 08 09

0

05 06 07 08 09

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Nestlé Lanka PLC

Annual Report 2009

Chairman's Statement

Dear Shareholders, On behalf of the Board of Directors, I have the honour of introducing the Annual Report and Audited Statement of Accounts for the year ended 31st December 2009. 2009 was a year of monumental change for Sri Lanka. With the ending of the long conflict, peace has brought about fresh hope and with it renewed opportunities. Coupled with inflation of 3.4%, the lowest in the recent past, the sociopolitical and economic environment shows promising signs of stability. Your Company has planned an investment of LKR 1 Bio in expanding capacities at its Pannala factory and to install infrastructure to further encourage and foster fresh milk

collection. This underlines our firm commitment to the future of our business on the island. In line with our Group's direction, Nutrition, Health and Wellness will remain a key focus area for your Company. All new launches and renovation of existing products are conducted keeping the above in mind. Your Company has also embarked on a LEAN journey to eliminate all waste and inefficiencies in the value chain. These initiatives will ensure that your Company retains its competitive position in the future.

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Nestlé Lanka PLC

Annual Report 2009

Chairman's Statement

Whilst the local economy showed some resilience, 2009 ended with a modest GDP growth of 3.5%. This was also reflected in household spending patterns. Despite these external pressures your Company achieved a turnover of LKR 19.4 Billion which translates to growth of 1.7%. Whilst gross profit grew by about 12% due to favorable product mix, efficient sourcing and prudent cost control measures, the profit after tax declined marginally due to imposition of the Nation Building tax (NBT). Your Directors were therefore pleased to declare the first interim dividend of Rs. 9/- per share which was paid in October 2009, a second interim dividend of Rs.10/- per share which was paid in April 2010 and are recommending a final dividend of Rs. 11/- per share, for your approval. On behalf of the Board, I thank the entire Nestlé Lanka team for their hard work, commitment and loyalty, to drive your Company's performance despite challenging market conditions. I would also like to take this opportunity to sincerely thank our important stakeholder groups and business partners who significantly contributed to your Company's achievements in 2009: our valued distributors, trusted suppliers, communication partners, bankers and auditors.

Finally, the Board and I thank you, our shareholders, for your continued confidence and trust placed on us to steer your Company in this challenging environment.

Antonio Helio Waszyk Chairman

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Nestlé Lanka PLC

Annual Report 2009

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4

fkiaf,a ,xld PLC

jdr®Isl jdr®;dj 2009

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md;ghh;e;j gq;Fjhuh;fNs> 2009 brk;gh; 31Me; jpfjpAld; Kbtile;j Xuhz;Lf;fhd tUlhe;j mwpf;ifiaAk;> fzf;fha;T nra;ag;gl;l fzf;fwpf;ifiaAk; gzpg;ghsh; rigapd; rhHgpy; rkh;g;gpg;gjpy; ehd; kfpo;r;rpailfpd;Nwd;. 2009 Mk; Mz;L> gyjug;gl;l JiwfspYk; khw;wq;fisf; fz;l xU Mz;lhFk;. gy tUlfhy gpur;rpidfSf;Fj; jPHT fhzg;gl;L> ehl;by; rkhjhdk; Vw;gLj;jg;gl;lij mLj;J Gjpa ek;gpf;ifAk;> mjd; fhuzkhf NkYk; Gjpa re;jh;g;gq;fSk; cUthfpAs;sd. rkPg fhyj;jpy; kpff;Fiwe;j gztPf;fk; vdf; fUjg;gLk; 3.4% gztPf;fj;NjhL> r%f> nghUshjhu> murpay; #oy; ehl;by; ];jpu epiy Vw;gLk; vd;gijf; fhz;gpj;Js;sd. gd;dy njhopw;rhiyapYs;s rf;jptsq;fis tp];jhpg;gjpYk;> gRk;ghy; Nrfhpg;ig NkYk; Cf;Ftpf;fntd Njitahd cl;fl;likg;G trjpfis Vw;gLj;JtjpYk; xU gpy;ypad; &ghit KjyPL nra;a cq;fsJ epWtdk; jpl;lkpl;Ls;sJ. ,yq;ifapy; vkJ tHj;jf eltbf;ifapd; vjph;fhyk; rk;ge;jkhd vkJ mh;g;gzpg;ig ,J fhz;gpf;fpwJ. FOkj;jpd; gzpg;Giuf;F mika> Ngh\hf;F> Rfhjhuk;> NjfhNuhf;fpak; vd;gd cq;fsJ epWtdj;jpd; Kf;fpa ,yf;fhf njhlh;e;Jk; mike;jpUf;Fk;. ,jidf; fUj;jpw; nfhz;Nl jw;Nghija cw;gj;jpg; nghUl;fspd; kPsikg;Gk;> Gjpa nghUl;fspd; cw;gj;jpAk; ,lk;ngWfpd;wd. njhopw;rhiy eltbf;iffspd; NghJ Vw;gLk; fopTfisAk;> jpwikapd;ikiaAk; ePf;Ftjw;Fk; cq;fsJ epWtdk; eltbf;iffis Muk;gpj;Js;sJ. ,tw;wpd; mbg;gilapy; vjph;fhyj;jpYk; cq;fsJ epWtdk; mjd; cd;dj epiyia njhlh;e;Jk; epr;rapf;Fk;. ehl;bd; nghUshjhuk; XusT ghjpf;fg;gl;l NghjpYk;> 2009 Mk; Mz;bd; vjph;ghHf;fg;gl;l nkhj;j cs;ehl;L cw;gj;jp tsh;r;rp 3.5% cs;sJ. tPl;Lj; Njitf;nfd kf;fs; nrytpLk; topKiwfspYk; ,J gpujpgypj;jJ. ,t;thwhd ntspthhp jhf;fq;fs; ,Ue;j NghjpYk;> cq;fsJ epWtdj;jpd; nkhj;j cw;gj;jp 19.4 gpy;ypad; &ghthfTk; tsh;r;rp 1.7% MfTk; ,Ue;jd. cw;gj;jpg; nghUs; jahhpg;G> jpwikahd tsq;fs;> Gj;jprhJhpakhd nrytpdf; flLg;ghl;L topKiwfs; vd;gd fhuzkhf> epWtdj;jpd; nkhj;j ,yhgk; 12% jpdhy; mjpfhpj;j mNjrkaj;jpy;> Njr epHkhz thp (NBT) fhuzkhf> Njwpa ,yhgk; XusT Fiwtile;jpUe;jJ.

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md;NuhdpNah n`ypNah tRa;f; jiyth;

5

e];Ny yq;fh PLC

Mz;lwpf;if 2009

Managing Director's Review

Dear Shareholders, Upon the completion of my first full year in office in Sri Lanka, I am privileged to present to you an overview of your Company's performance for 2009. At the beginning of what proved to be a year of tough economic and market challenges, while remaining fully aligned with the directions of the Nestlé model, we committed ourselves to focus on restoring volume growth. To that purpose, we devised an uncomplicated and proven five point strategy. We agreed to sharpen our approach of putting the consumers at the core of all what we do, to innovate and renovate faster, to strengthen our brand communication, to improve our execution in the field and to reward success based on growth. Noteworthy is our rapid progress in milk collection. In our continuous endeavour to develop the country's dairy industry and to assist in economic development at grass roots level, in a record time of six months from June to December, we opened nine new chilling centres and sixty two new collection points in the areas of the East. In these areas, a large number of farmers have started to work with us and many more are expected to join with each passing day. It is with considerable pride that we advise that Nestlé Lanka remains the island's largest private sector collector of fresh milk. Most of our dairy products use local fresh milk. MILKMAID Sweetened Condensed Milk, Ready-to-Drink Beverages under various brands are all produced using fresh milk collected from approximately 13,000 local dairy farmers. In June we were also able to launch our new NESPRAY Everyday, an affordable milk powder that has promising potential. In the beverages category, facing intense competition our NESTOMALT brand strengthened its leadership position in the market. Also noteworthy is that our re-launched NESTOMALT

6

Nestlé Lanka PLC

Annual Report 2009

Managing Director's Review

has grown through continuous efforts aimed at improving the brand's availability and visibility in rural areas. Our re-launched NESTOMALT, with more milk, more malt and more energy has achieved an overall preference versus other products amongst local consumers. Our popular chocolate flavoured malted food drink, MILO Ready-To-Drink showed yet another year of strong growth, satisfying the need for on-the-go consumption. Under the banner of MILO, your Company has continued to contribute towards promoting sports activities at the school level thus ensuring continued high top-of-mind awareness of this brand as the energy drink of choice. NESCAFÉ ­ the Nestlé Group's `flagship' global brand continues to expand its consumer base driven by increasing availability through a more focussed vending operation, which gives many consumers their first opportunity to savour the world's most popular coffee brand at an affordable price on-the-go. Our new NESTEA Milk Tea reached the shelves during the last quarter of the year and is yet another initiative that demonstrates our ability to understand the consumers and innovate in this market. Under the MAGGI banner, your Company produces and distributes a range of tasty and convenient products in the Noodles, Bouillon and Coconut Milk Powder categories. During the year, we brought a nutritional dimension to our culinary range. The fortification of the MAGGI noodle range with Calcium and the launch of MAGGI Karapincha soup are some of the key initiatives undertaken in 2009. In line with our stated intent to accelerate the demand generation efforts, MAGGI noodles have achieved a taste preference in the market thereby setting an optimistic future for this product range. Your Company's exports to the Maldives enjoyed another good year in 2009 with a strong turnover growth. In addition, we have also made good progress in developing new overseas customers for our MAGGI Coconut milk powder, in spite of the difficult economic situation faced by many countries around the world. A big milestone in our export business in 2009 was the launch of liquid coconut milk in cans under the MAGGI brand. Other achievements demonstrating our firm commitment towards Creating Shared Value were the completion of the four year project of constructing 21 Pre-Schools and Fishing Anchorage Community Centres in Tsunami affected coastal parts of Sri Lanka. The entire project was handed over to the Government of Sri Lanka during a ceremony attended by a wide representation of the national media, at our Head Office premises. We also supported the Government of Sri Lanka in its rehabilitation efforts for the people affected by war in the Northern and Eastern regions

7

of the Island through various product donations and by giving on loan a bowser to provide clean drinking water to people living in the Internally Displaced Persons Camps. Providing clean and safe drinking water being a focus, your Company complemented its Rural Development initiatives in the North Eastern districts by setting up two purified drinking water facilities in rural schools. In addition to the ISO 14001 : 2004 Environment Management System Standard and the OHSAS 18001 : 2007 Occupational Health and Safety Assessment Series certifications already received, your Company's Kurunegala Factory, was also assessed and certified for ISO 22000 : 2005 Food Safety Management System in November. The Company has also instituted focused programs for safety at the workplace. Your Company is also very conscious of conservation of natural resources. Whilst almost doubling production in the last ten years, the Kurunegala factory has reduced its water consumption by 12 % and its energy consumption by 45 %, per ton of manufactured product. This has not only contributed towards lowering the cost of production but also helped in improving the factory's environmental impact. Your Company is privileged to have talented, skilled and committed people who stretch themselves to add value to the Company. This was especially evident in the year under review when the team delivered strong results despite the recession hitting the global economy which in turn affected the local economy compounded by the additional tax burden linked to the new Nation Building Tax. Your Company's approach to Human Resources management is distinctive in the degree of involvement by people from different levels of the organisation as well as the emphasis on developing both soft skills and technical competence. For the year, your Company has, in addition to the thousands of man hours spent in local training programs, sent 29 people on overseas training programs. 7 people were working in overseas assignments whilst 3 returned to Sri Lanka to impart the knowledge and experience gained back to the local business. In conclusion, the above achievements are a testimony that even in demanding market conditions, with the right approach your Company can do well. With renewed energy and a clear focus on growth, I have no doubt that 2010 will be yet another successful year for your Company.

David Saudan Managing Director

Nestlé Lanka PLC

Annual Report 2009

Board of Directors

1. Mr. Martial Rolland

2. Mr. Antonio Helio Waszyk

3. Mr. David Saudan

4. Mr. Mandeep Singh Chhatwal

1. Mr. Martial Rolland

Mr. Martial Rolland who was the Market Head of the South Asia Region, resigned from the Board of Nestlé Lanka, with effect from 15 October 2009. He was also the Chairman and Managing Director-Nestlé India, and Director-Nestlé Bangladesh. Mr. Rolland joined the Group in November 1988 as a Marketing Trainee in Vevey. Since then he followed a career beginning in India before moving into Thailand, Pakistan and Turkey. In Turkey, he was the Market Head of Turkey and Central Asia Region prior to moving to India as Market Head of the South Asia Region. Mr. Rolland has moved as Zone Regional Manager for Zone AOA and subsequently as Market Head of France.

3. Mr. David Saudan

Mr. David Saudan, the Managing Director Nestlé Lanka joined the Group in 1990 as Management Trainee at the Nestlé Centre in Vevey, Switzerland and subsequently worked at Carnation Company, a Division of Nestlé USA in Glendale, California. In 1991 he moved to Nestlé Malaysia as Marketing Specialist. After a five year period in Korea as Group Product Manager for the Company's Coffee businesses including Marketing Services, he moved to Beijing, China as Project Manager. Mr. Saudan was then promoted to the position of Regional Sales Manager ­ Grocery, East Region. After a short assignment as Head of Infant Nutrition for Mainland China, in January 2001 he was promoted as Head of Coffee & Beverages for Mainland China and then as Business Unit Head, Greater China Region ­ Coffee & Beverages.

2. Mr. Antonio Helio Waszyk

Mr. Antonio Helio Waszyk, the successor to Mr. Martial Rolland was appointed Chairman to the Board of Nestlé Lanka with effect from 15 October 2009. He joined the Nestlé Group in Brazil in November 1977 and developed his earlier career in the technical and R&D functions, highlights being in 1988 as Technical Manager- Nutritional Products in USA, Head of Francereco - Lisieux from February 1994 to April 1996, Technical Manager for Nestlé Philippines from May 1996 to October 1998, and Head of PTC and R&D Centers in Vevey from November 1998 to August 2002. In September 2002, he was appointed Deputy Managing Director and Technical Head for OSEM Israel, until his promotion to his previous position as Head of Food SBU in November 2004.

4. Mr. Mandeep Singh Chhatwal

Mr. Mandeep Singh Chhatwal, who was the Senior Vice President for Finance & Control resigned from the Board with effect from 15.04.2010. He graduated as an Engineer with an MBA from the Indian Institute of Management and joined Nestlé India as a Management Trainee in 1989. Mr. Chhatwal was Head of Finance & Control in a number of units: Ponda, Bicholim, Moga Factories and also in the Kolkata Sales Branch. He was transferred to Nestlé Lanka in January 2005 and assumed duties as the Vice President Finance & Control. He was also appointed as Finance Director in July 2005. Mr. Chhatwal has moved to the Global Headquarters in Switzerland end April as the Head of Financial Services in GNBS (Global Nestlé Business Services).

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Nestlé Lanka PLC

Annual Report 2009

5. Mr. Alfred Kaelin

6. Mr. Pierre Schaufelberger 7. Mr. Ranjan Seevaratnam

8. Mr. Mahen Dayananda

5. Mr. Alfred Kaelin

Mr. Alfred Kaelin who resigned from the Board of Nestlé Lanka with effect from 29 April 2009, was the Zone Regional Manager for the Oceania, South Asia, Japan, Israel and Korea Markets, and has been with the Group for 35 years. Mr. Kaelin has had a long and successful career which has taken him to markets in all 3 Zones.

8. Mr. Mahen Dayananda

Mr. Mahen Dayananda, who is an Independent Non Executive Director, was appointed Chairman of the Remuneration Committee in February 2009. An expert in economic issues, Mr. Dayananda is Chairman of several organizations: B.P. de Silva Investments Ltd, Lewis Brown & Co. Limited, Total Tea Concepts (Pvt.) Ltd., and Indo Asia Teas (Pvt) Ltd.

6. Mr. Pierre Schaufelberger

Mr. Pierre Shaufelberger who is the Zone Regional Manager appointed with effect from 29th April 2009 to succeed Mr. Alfred Kaelin, started his career with the Group in January 1980 in Vevey. Thereafter he moved to his international career which was mostly in Asia, and started off with Sri Lanka being his first assignment. Over a period of 28 years with the Group he occupied different positions of increasing responsibilities in the Generating Demand functions.

Mr. Syed Saiful Islam

Mr. Syed Saiful Islam who was the Country Controller Nestlé Bangladesh, has moved to Sri Lanka with effect from 15.04.2010, to take over from Mr. Mandeep Singh Chhatwal as Finance Director of Nestlé Lanka. Mr. Islam, with prior experience in Ericsson and Citibank, joined Nestlé Bangladesh as Financial Accounting Manager in November 1999. Commencing May 2000 to December 2005 he worked at Nestlé India in the areas of financial planning and sales control. In December 2005, he moved back to Bangladesh as the Corporate Controller, before taking over as the Country Controller in August 2006.

7. Mr. Ranjan Seevaratnam

Mr. Ranjeevan Seevaratnam, who is an Independent Non Executive Director and the Chairman of the Audit Committee, is well versed in fiscal matters and has enjoyed a long distinguished tenure as former Partner of KPMG Ford, Rhodes, Thornton & Company and he is currently on the Boards of several prominent local companies.

9

Nestlé Lanka PLC

Annual Report 2009

Divisional Heads

From left to right 1. Mr. Surenn de Chickera Vice President ­ Human Resources & Corporate Communication 2. Mr. Suren Jacob Vice President ­ Supply Chain 3. Mr. David Saudan Managing Director 4. Mr. Muhammed Hamza Senior Vice President ­ Commercial 5. Mr. Mandeep Singh Chhatwal Senior Vice President ­ Finance & Control 6. Mr. Sant-Lal Girdhar Vice President ­ Technical

10

Nestlé Lanka PLC

Annual Report 2009

Corporate Governance

"Governance schemes must be based on principles, not detailed rules"-

Peter Brabeck, Chairman, Nestlé S.A.

give directions for long-term strategy, seeking and contributing views and opinions on strategic options proposed by the senior management of the Company. The Directors also ensure that the Company is compliant with the provisions of the Companies Act.

The basic principles of Good Corporate Governance are now recognised as fundamental to improving economic efficiency of the Company and enhancing its reputation as well. Governance provides the structure through which the objectives of the Company are met and also provides an ethical balance for the Board and the Management to pursue objectives that are in the best interests of the shareholders in particular and the Company in general. Your Company being a part of the Nestlé Group worldwide has over the years committed to the best practices of Corporate Governance. Nestlé Lanka's business objective and that of the management and employees is to manufacture and market the Company's products in such a way as to create value that can be sustained over a long period for customers, shareholders, employees, business partners and the local economy. Nestlé Lanka does not favor short-term profit and is conscious of the fact that the success of a corporation is a reflection of the professionalism, conduct and ethical values of its management and employees.

Directors' involvement or interest in the Company is detailed in the Annual Report of the Directors of the Company.

Company Secretary

The Company Secretary, Mr. Lioshon Rajapakshe is qualified to act in this role as per the provisions of the Companies Act. No. 07 of 2007.

Management Committee

The Management Committee, comprising of thirteen members, is led by the Managing Director. The Board of Directors has entrusted certain responsibilities, including the day-to-day running of the business to the Committee. Every member of the Management Committee is responsible for the operations and delivery of objectives with respect to his/her particular Division.

Auditors

Board of Directors

The Board of Directors of Nestlé Lanka Plc comprises Six Directors; two Executive Directors, two Independent Non Executive Directors, one non-resident-non-Executive Director, and one being the Chairman of the Board. An Alternate Director represents the non-resident Director. The Managing Director of the Company also acts as the Chief Executive Officer of the Company and the Board has entrusted the Managing Director to manage all the affairs of the Company. The Directors act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of Nestlé Lanka. They are well aware of your Company's activities and

At the 28th Annual General Meeting of Nestlé Lanka held on 12th June 2009, the shareholders reappointed the Auditors M/s. KPMG Ford, Rhodes, Thornton & Company and authorised the Directors to fix their remuneration. The independent auditors conduct the annual audit in order to provide an external and objective assurance on the way in which the financial statements have been prepared and presented.

Audit Committee

The Audit Committee consists of two Non-Executive Directors and the Company Secretary acts as the secretary to the Audit Committee. The Audit Committee supports the Board of Directors in its supervision of financial control, and reports

11

Nestlé Lanka PLC

Annual Report 2009

Corporate Governance

regularly to the Board on its findings and appropriate actions. The responsibility for approving the financial statements remains with the Board, however on recommendation of the Audit Committee. The Report of the Audit Committee on page 15 explains in brief the functions and responsibilities of the Audit Committee.

Risk Management

Nestlé has always recognised its obligation towards the occupational health and safety of its employees as well as of community members directly or indirectly involved in the

Company's operations. Equally important is your Company's obligation to protect your interests as a shareholder by managing risks to minimise potential financial loss.

Remuneration Committee

The Remuneration Committee consists of two Non-Executive Directors and the Company Secretary acts as the secretary to the Remuneration Committee. The Remuneration Committee overseas the remuneration principals of the Company and supports the Board in the compliances. The Committee also works towards attracting and retaining the best professional and managerial talent to the Company. The Report of the Remuneration Committee on page 16 explains in brief the functions and responsibilities of the Remuneration Committee.

Relationship with Shareholders

Nestlé Lanka aims to ensure that shareholders have access to relevant, up-to-date and consistent financial and non-financial information pertaining to the Company. The Annual Report and quarterly financial statements provide the shareholders as well as prospective investors with the required information to assess the Company's past performance and analyse its future prospects.

Internal Controls

In our business environment where corporate governance is considered vital, the requirement of internal control is significant. The Business Analyst of your Company who reports to the Finance Director and is accountable to the Managing Director conducts regular reviews. To ensure conformity to the best practices as laid down by the Nestlé Group, multi-tiered audits, with the Group's international and regional audit are conducted from time to time as deemed appropriate.

12

Nestlé Lanka PLC

Annual Report 2009

Corporate Governance Reporting

DISCLOSURE REGARDING THE BOARD OF DIRECTORS Rule No. 7.10.1(a) to (c) 7.10.2 (a) Subject Non Executive Directors Independent Directors Declaration of Independence (Directors) Disclosure relating to Directors Brief Resume of each director in the annual report Directors do not qualify as independent but specified by the Board as independent Applicable Requirement Two or at least one third of the total number of Directors should be Non- Executive Directors Two or one third of Non-Executive Directors, whichever is higher should be independent Each Non-Executive Director should submit a declaration of independence / nonindependence in the prescribed format Names of Independent Directors should be disclosed in the Annual Report A brief resumé of each Director should be included in the Annual Report including the area of Expertise Compliance Status Compliant Details Four out of six Directors are Non- Executive Directors Two of the Four Non- Executive Directors are independent The two Non Executive Independent Directors have submitted to the Company a declaration in the prescribed format. Please Refer Page 09 of the Annual Report 2009 Please Refer Page 8/9 of the Annual Report 2009

Compliant

7.10.2(b)

Compliant

7.10.3(a)

Compliant

7.10.3(c)

Compliant

7.10.4

Should be as outlined in section 7.10.3 (c) of the listing rules.

NA

NA

DISCLOSURE REGARDING THE REMUNERATION & REMUNERATION COMMITTEE Rule No. Subject Composition of Remuneration Committee Applicable Requirement l Shall Comprise of Non ­Executive Directors a Majority of whom can be independent. l The Chairman of the Committee shall be a Non-Executive director. A Listed Company may be permitted to have the same Remuneration Committee, if the Parent Company is also listed. The Remuneration Committee shall recommend the remuneration payable to the board and the executive officers. l The names of Directors comprising of the Remuneration Committee. l A statement of Remuneration Policy. l The aggregate remuneration paid to executive and non executive directors. Annual Report 2009 Compliance Status Compliant Compliant Please Refer Page 16 of the Annual Report 2009 Details

7.10.5(a)

7.10.5 (a)

Remuneration Committee Disclosure of the functions of Remuneration Committee Disclosure in the Annual Report

NA

Parent Company is not listed in Sri Lanka, as such; separate remuneration committee has been formed. Please Refer Page 16 of the Annual Report 2009

7.10.5(b)

Compliant

Compliant Compliant Compliant

7.10.5 (c)

Please Refer Page 16 of the Annual Report 2009 Please Refer Page 33, Note 04 of the Annual Report 2009

13

Nestlé Lanka PLC

Corporate Governance Compliance Table

CONTENTS UNDER THE AUDIT COMMITTEE Rule No. Subject Applicable Requirement l Shall Comprise of Non ­Executive Directors a Majority of whom can be independent. l The Chairman of the Committee shall be a Non-Executive director. l The Chairman or a member should be a member of a recognized professional accounting body. A Listed Company may be permitted to have the same Audit Committee, if the parent company is also listed. Compliance Status Compliant Compliant Please Refer Page 15 of the Annual Report 2009 Details

7.10.6.( a)

Composition of Audit Committee

7.10.6(a) & ( c)

AuditCommittee

NA

Parent Company is not listed in Sri Lanka, as such; separate Audit Committee has been formed. Please Refer Page 15 of the Annual Report 2009

7.10.6. (b)

Functions of the Audit Committee

Should be as outlined in section 7.10.6 (b) of the listing rules.

Compliant

7.10.6.(c)

Disclosure in the Annual Report

l The names of the directors comprising in the Audit Committee. l The basis of determination of Auditors' independence. l A report of the Audit Committee as outlined in section 7.10.6 (c) of the Listing Rules. l Whether the CEO and the CFO attend Audit Committee meetings

Complaint. Compliant Compliant Compliant Please Refer Page 15 of the Annual Report 2009

14

Nestlé Lanka PLC

Annual Report 2009

Report of the Audit Committee

The Audit Committee appointed by and responsible to the Board of Directors, comprises of two members namely, Mr. R. Seevaratnam, and Mr. M. Dayananda, both being NonExecutive Independent Directors of the Company. The

Committee is chaired by Mr. R. Seevaratnam, who is a fellow member of the Institute of Chartered Accountants of Sri Lanka, and the Institute of Chartered Accountants in England and Wales and a former Partner of KPMG Ford Rhodes Thornton and Company. The Committee is responsible and reports to the Board of Directors. The Managing Director, and the Finance Director of the Company attend Committee meetings by invitation and the Company Secretary of the Company, acts as the Secretary to the Committee. The Management Team will be invited when required. The Business Analyst/ Internal Auditor is invited to be present at deliberation of the Committee, where appropriate. Please refer Page 09 of this Annual Report for the profiles of the members of the Audit Committee. The members have the requisite financial knowledge and business acumen to carry out their roles effectively and to discuss matters that come within their purview independently and professionally. The Audit Committee assisted the Board in discharge of its duties by ensuring the existence of adequate systems on internal control, review on the interim and annual financial reports, and strict adherence to the prevailing laws in the country and also the directors with guidance on regulatory authorities.

During the financial year ended 31 December 2009, the Committee met once in every quarter and the members of the Committee attended all these meetings. The Managing Director and the Finance Director of the Company were also present at these meetings.

The proceedings of the Audit Committee meeting are regularly reported to the Board of Directors. The Committee as part of their functional responsibilities, reviewed the interim and annual Financial Statements,

and made recommendations to the Board, regarding its deliberations and issuance. The Committee also focused its attention to ensure that the business and operational risks were identified, assessed, and managed on acceptable levels. The Audit Committee has also recommended to the Board of Directors that M/s. KPMG Ford Rhodes Thornton & Company be re-appointed as Auditors for the financial year 31.12.2010.

Mr. Ranjeevan Seevaratnam Chairman Audit Committee 25th March 2010

Audit Committee also recommends the appointment of External Auditors of the Company and the fees payable. The independence of the External Auditors is assessed by the Audit Committee.

15

Nestlé Lanka PLC

Annual Report 2009

Report of The Remuneration Committee

The Remuneration Committee comprises of two NonExecutive Directors, Mr. M. Dayananda and Mr. R. Seevaratnam both of whom are independent. The Committee is chaired by Mr. M. Dayananda, and reports to the Board of

Directors. The Managing Director, and the Finance Director of the Company attend Committee meetings by invitation and the Company Secretary of the Company, acts as the Secretary to the Committee. The Committee is responsible for maintaining the Company's performance and remuneration policy for its staff. The Finance Director, together with the Vice President Human Resources, assisted the Committee by providing relevant information such as summaries of salary survey, data analysis and other data for deliberations. The Remuneration Policy of the Company is to attract the best professional and managerial talent to the Company and also to motivate and encourage staff to perform at the highest possible level. The Company has a structured methodology in evaluating the performance of employees annually. The committee will also be responsible for reviewing of the remuneration of staff and also ensure that an effective succession plan is in place and that appropriate processes are cascaded to other staff levels.

Primary focus of the Company's remuneration package is to motivate our workforce and to reward their performance. Revision of remuneration is based on two distinct categories, viz. fixed and variable. The variable increment is aligned to the company's performance as well as individual performance.

The members of the Committee met once in the year under review to evaluate the Remuneration Policy. The Managing Director, Finance Director and the Vice President Human Resources were also present at this meeting.

Mahen Dayananda Chairman Remuneration Committee 25th March 2010

16

Nestlé Lanka PLC

Annual Report 2009

Directors' Reponsibility for Financial Reporting

The Company's Financial Statements presented in this report for the year 2009 conform to the requirements of the Sri Lanka Accounting Standards and the Companies Act No. 7 of 2007. They also confirm that the Financial Statement presented by them gives a true and fair view of the Company activities as at that date. The Financial information is consistent with that in the Financial Statements.

M/s KPMG Ford Rhodes Thornton & Co., are the Auditors appointed by the shareholders. They have inspected the Financial Statements submitted by the Board of Directors as well as all supporting financial records, minutes from

the shareholders meetings & the Directors' meetings and have expressed their opinion which is published under the Independent Auditor's Report on page 24.

The Board of Directors has initiated an efficient and concise system of Internal Control. This includes Internal Checks, Internal Audits, along with financial and other controls required to carry on the business smoothly, whilst safeguarding its assets in a secure, practical, accurate and reliable manner. The Company's Auditors, M/s KPMG Ford Rhodes Thornton & Company review and carry out random checks on the internal controls wherever considered necessary towards endorsing their opinion on the Financial Statements. The management's responsibilities on financial reporting is overseen by the Board of Directors through regular review meetings and approving of financial information contained in the Annual Report along with the preparation and presentation of financial statements.

By Order of the Board Nestlé Lanka PLC

Lioshon Rajapakshe Company Secretary Colombo

25th March 2010

17

Nestlé Lanka PLC

Annual Report 2009

Annual Report of the Board of Directors on the Affairs of the Company

The Directors of Nestlé Lanka PLC take pleasure in presenting to the shareholders their Report together with the Audited Accounts for the year ended 31 December 2009 and the Auditors' Report thereon.

appropriation was Rs. 1,727 million which is obtained by also adding the profit of Rs.147 million brought forward from the past year. The Income Statement for the year 2009 is given on page 25. The Directors of Nestlé Lanka PLC were pleased

Directors

Mr. M. Rolland (resigned w.e.f.15.10.2009), Mr. A. H. Waszyk (appointed w.e.f. 15.10.2009) Mr. D. Saudan, Mr. M. S. Chhatwal (resignation w.e.f. 15.04.2010), Mr. Syed Saiful Islam (appointment with effect from 15.04.2010) Mr. A. Kaelin (resigned with effect from 29.04.2009), Mr. P. Schaufelberger (appointed w.e.f. 29.04.2009), Mr. M.Dayananda, Mr. R. Seevaratnam. In terms of Article 56, 57 & 58 of the Articles of Association, Mr. M.Dayananda, and Mr. R. Seevaratnam retire and being eligible, offer themselves for re-election. In terms of Article 64 of the Articles of Association, Mr. Syed Saiful Islam retires and being eligible offers himself for reelection.

to recommend a First Interim Dividend of Rs 9/- per share which was paid on 1 October 2009, and a Second Interim Dividend of Rs. 10/- per share payable on 20 April 2010 and also a Final Dividend of Rs 11/- per share proposed to be paid on 22 June 2010.

Stated Capital

The Stated Capital of the Company as at 31 December 2009 amounts to Rs. 537, 254, 630.

Activity

Review for the Year

The Company manufactures a variety of quality products at its factory situated in Kurunagala, under the exclusive permission of the Trademark owner, Societe de Produits Nestlé S.A. Vevey, Switzerland. Internationally renowned brands such as NESPRAY, NESTOMALT, CERELAC, MILO and the MAGGI range of products namely, MAGGI Bouillon Cubes and MAGGI Noodles are manufactured in Sri Lanka. Other products manufactured by the Nestlé Group worldwide are also imported into Sri Lanka.

The Chairman's and Managing Director's statement highlights the Company's affairs and the performance of the period under review.

Results & Dividends

The Profits achieved by the Company on a net turnover of Rs. 19.4 billion after provisioning for all known liabilities and depreciation on Fixed Assets, but before taxation amounts to Rs 2,428 million. After deducting a sum of Rs 848 million as taxation, the profit was Rs 1,580 million. The profit available for

18

Nestlé Lanka PLC

Annual Report 2009

Annual Report of the Board of Directors on the Affairs of the Company

Directors Interest A) In Contracts

Details of Directors interest in contracts of the Company are disclosed below. The Directors have no direct or indirect interest or proposed contract other than those disclosed.

The Directors have at the meeting disclosed all material interests in contracts if any involving the Company and have refrained from participating when decisions are taken.

Interest Register

M. Rolland­ (resignation w.e.f.15.10.2009) Transactions with Affiliates or related parties.

Company Nestlé India Limited Nestlé Bangladesh Limited Position Chairman/Managing Director Director Amount Involved Disclosed in note 14,20,& 22 of Pages 38,41 & 42 to the Financial Statement. Disclosed in note 20 of Page 41 to the Financial Statement.

A. H. Waszyk ­ (appointment w.e.f.15.10.2009) Transactions with Affiliates or related parties.

Company Nestlé India Limited Nestlé Bangladesh Limited Osem Investments Ltd. D. Saudan M. S. Chhatwal S. S. Islam Position Chairman/Managing Director Director Director Amount Involved Disclosed in note 14, 20, & 22 of Pages 38, 41 & 42 to the Financial Statement. Disclosed in note 20 of Page 41 to the Financial Statement Disclosed in note 20 of Page 41 to the Financial Statement

No Transactions with Affiliates or related parties. (resignation w.e.f.15.04.2010) No Transactions with Affiliates or related parties. (appointment w.e.f.15.04.2010) No Transactions with Affiliates or related parties

P. Schaufelberger ­ (appointment w.e.f. 29.04.2009) Transactions with Affiliates or related parties.

Company Nestlé Products (Mauritius) Limited. Position Chairman/Managing Director Amount Involved Disclosed in note 20 & 22 of Pages 41 & 42 to the Financial Statement.

19

Nestlé Lanka PLC

Annual Report 2009

Annual Report of the Board of Directors on the Affairs of the Company

M. Dayananda ­ No Transaction with Affiliates.

Directorships in other Companies Name of Company B.P. de Silva Investments (Private) Ltd Lewis Brown & Co. Ltd. Tea Tang (Private) Ltd. B.P. de Silva Holdings Pte Ltd Sri Lanka Export Development Board Newburgh Green Teas (Private) Ltd Total Tea Concepts (Private) Ltd. CS Asia Teas (Private) Ltd. Indo Asia Teas (Pvt) Ltd Delmege Teas (Pvt) Ltd Position Chairman Chairman Director Group Director Director Director Chairman Board Member Chairman Director

R. Seevaratnam - No Transaction with Affiliates.

Directorships in other Companies Company Haycarb PLC Dipped Products PLC Diesel & Motor Engineering PLC Acme Printing & Packaging PLC Metroof (Pvt) Limited Classic Teas (Pvt) Limited Tea Small Holders Factories Limited Green Farms Limited Hatton National Bank PLC Tokyo Cement (Lanka) PLC Hayleys MGT PLC Lanka Aluminium PLC Shaw Wallace and Hedges PLC Shaw Wallace Marketing PLC Colombo Fort Land and Building Co. Position Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Non Executive Director Transactions No No Procurement. No No No No No Banking No No No No Procurement No Amounts due as at 31.12.2009 (LKR) 15,993.60 441,119.59 1,355,984.00 -

20

Nestlé Lanka PLC

Annual Report 2009

Annual Report of the Board of Directors on the Affairs of the Company

B) In Shares of The Company

Director Mr. D. Saudan Executive Mr. M. S. Chhatwal (Director up to 15.04.2010) Mr. S. S. Islam (Director w.e.f. 15.04.2010) Mr. M. Rolland (Chairman up to 15.10.2009) Non-Executive Mr. A. H. Waszyk (Chairman w.e.f.15.10.2009) Mr. A. Kaelin (Director up to 29.04.2009) Mr. P. Schaufelbeger (Director w.e.f. 29.04.2009) Independent Non-Executive Mr. M. Dayananda Mr. R. Seevaratnam Shareholding 2009 01/01 No No No No No No 31/12 No No Management Yes Yes No No No No No No

No

No No No

Corporate Governance

The Company's Corporate Governance Practices are set out in detail in page 11.

Post Balance Sheet Events

There were no notable events that occurred subsequent to the date of the Balance Sheet which required adjustment or disclosure in the financial statements.

Property, Plant & Equipment

Details of property, plant and equipment, additions made during the year and depreciation thereof for the year are shown in Note 9 to the financial statements in page 35.

Conclusion

The Directors of Nestlé Lanka PLC wish to convey their gratitude and appreciation to the Management and staff of the Company, for their dedicated and untiring co-operation during the year under review. For & on behalf of the Board Nestlé Lanka PLC

Donations

Total donations made by the Company amounted to a sum of Rs. 2,009,398/=.

Auditors

M/s KPMG Ford Rhodes Thornton & Company, Chartered Accountants have been the Company's Auditors in the past and being eligible, offer themselves for re-appointment for the ensuing year. Auditors fees are disclosed in note 4, to the Financial Statement in page 33. As far as the Directors are aware, the Auditors do not have any relationship (other than that of an Auditor), with the Company or other than those are disclosed in note 4 to the Financial Statement in page 33. The Auditors also do not have any interest in the Company. Nestlé Lanka PLC Annual Report 2009 David Saudan Managing Director M. S. Chhatwal Snr. Vice President Finance & Control

Lioshon Rajapakshe Company Secretary 25 March 2010

21

22

Nestlé Lanka PLC

Annual Report 2009

Financial Report

Independent Auditor's Report Income Statement Balance Sheet Statement of Changes in Equity Cash Flow Statement Accounting Policies Notes to the Financial Statement 24 25 26 27 28 29 33

Company Highlights

In thousands of Rupees Net Revenue Profit before taxation As a % of Net Revenue Profit after Taxation Return on Capital employed Capital expenditure Shareholders funds Key Ratios Earnings per share Net Assets per share Dividend per share Dividend Cover Dividend Payout Ratio Current Ratio Market value per share - Highest - Lowest - Average - Last traded Number of Personnel 29.41 33.14** 30.00 0.98 102% 1.01 440.00 251.00 345.64 415.00 973 30.96 32.73 30.00 1.03 97% 1.07 291.73 265.75 278.74 260.00 940 2009 19,427,135 2,427,850 12% 1,580,315 89% 1,780,582* 323,555 2008 19,098,565 2,483,987 13% 1,663,093 95% 450,285 1,758,306

* After paying an Interim dividend of Rs. 483.53 Mn (2008 - 537.255 Mn). ** Net Assets per Share (including Interim dividend) is Rs. 42.14 (2008 - Rs. 42.73).

23

Nestlé Lanka PLC

Annual Report 2009

Independent Auditor's Report

KPMG Ford, Rhodes, Thornton & Co.

(Chartered Accountants) 32A, Sir Mohamed Macan Markar Mawatha, P. O. Box 186, Colombo 00300, Sri Lanka.

TO THE SHAREHOLDERS OF NESTLE LANKA PLC

Report on the Financial Statements We have audited the accompanying financial statements of Nestle Lanka PLC, which comprise the balance sheet as at 31st December 2009, and the income statement, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes; designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Scope of Audit and Basis of Opinion Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An Audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

: +94 - 11 242 6426 +94 - 11 542 6426 Fax : +94 - 11 244 5872 +94 - 11 244 6058 +94 - 11 254 1249 +94 - 11 230 7345 Internet : www.lk.kpmg.com

Tel

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit. We therefore believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 December 2009 and the financial statements give a true and fair view of the Company's state of affairs as at 31 December 2009 and its profits and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory Requirements

These financial statements also comply with the requirements of Section 151(2) of the Companies Act No. 07 of 2007.

Chartered Accountants Colombo 25th March 2010

KPMG Ford, Rhodes, Thornton & Co, a Sri Lankan Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International cooperative ("KPMG International"), a Swiss entity.

A. N. Fernando FCA Ms. M. P. Perera FCA T. J. S. Rajakarier FCA Ms. S. M. B. Jayasekara ACA

S. Sirikananathan FCA P. Y. S. Perera FCA W. W. J. C. Perera FCA W. K. D. C. Abeyrathne ACA

M. R. Mihular FCA C. P. Jayatilake FCA Ms. S. Joseph ACA S. T. D. L. Perera FCA

24

Nestlé Lanka PLC

Annual Report 2009

Income Statement

For the Year Ended 31st December Note Revenue Turnover Related Taxes Net Revenue Cost of Sales Gross Profit Other Operating Income Marketing, Selling and Distribution Expenses Administrative Expenses Results from Operating Activities Finance Income Finance Expenses Net Finance (Expense)/Income Profit before Taxation Income Tax Expense Profit for the period 6 5 4 3 2 2009 Rs.`000s 19,439,934 (12,799) 19,427,135 (12,686,576) 6,740,559 12,712 (3,003,725) (1,278,497) 2,471,049 34,490 (77,689) (43,199) 2,427,850 (847,535) 1,580,315 2008 Rs.`000s 19,111,985 (13,420) 19,098,565 (13,059,387) 6,039,178 13,565 (2,423,526) (1,196,980) 2,432,237 86,138 (34,388) 51,750 2,483,987 (820,894) 1,663,093

Basic Earnings per Share Dividend per Share

7 8

29.41 30.00

30.96 30.00

The accounting policies and notes on pages 29 to 44 form an integral part of the financial statements. Figures in brackets indicate deductions.

25

Nestlé Lanka PLC

Annual Report 2009

Balance Sheet

As at 31st December Note Assets Non-Current Assets Property Plant & Equipment Capital Work-in-Progress Intangible Assets Current Assets Inventories Trade & Other Receivables Amount due from Related Parties Cash & Cash Equivalents Total Assets Equity Stated Capital Revenue Reserves Non-Current Liabilities Employee Benefits Deferred Tax Liability Current Liabilities Trade & Other Payables Amount due to Related Parties Income Tax Payable Dividends Payable Bank Overdraft Total Equity & Liabilities 21 19 20 1,889,302 474,817 714,949 52,172 64,695 3,195,935 5,407,482 1,632,224 624,477 627,257 38,711 30,551 2,953,219 5,083,175 17 18 326,665 104,300 430,965 202,950 168,700 371,650 16 537,255 1,243,327 1,780,582 537,255 1,221,051 1,758,306 12 13 14 15 1,479,679 657,989 131,510 969,184 3,238,362 5,407,482 2,095,281 646,835 186,986 228,499 3,157,602 5,083,175 9 10 11 1,839,724 217,802 111,594 2,169,120 1,753,166 27,335 145,072 1,925,573 2009 Rs.`000s 2008 Rs.`000s

The accounting policies and notes on pages 29 to 44 form an integral part of the financial statements. I certify that the financial statements have been prepared in compliance with the requirements of the Companies Act No. 07 0f 2007.

M.S. Chhatwal Chief Financial Officer The Board of Directors is responsible for the preparation and presentation of these financial statements. Signed for and on behalf of the Board.

David Saudan Managing Director Colombo 25th March 2010.

26

Mr. Ranjan Seevaratnam Director

Nestlé Lanka PLC

Annual Report 2009

Statement of Changes in Equity

For the year ended 31st December 2009

Stated Capital Rs.`000s 537,255 537,255 537,255

Revenue Reserves Rs.`000s 954,821 (859,608) 1,663,093 (537,255) 1,221,051 (537,255) (537,255) 1,580,315 (483,529) 1,243,327

Total Rs.`000s 1,492,076 (859,608) 1,663,093 (537,255) 1,758,306 (537,255) (537,255) 1,580,315 (483,529) 1,780,582

Balance as at 01.01.2008 Final Dividend for 2007 Net Profit for the year ended 31.12.2008 Interim Dividend for 2008 Balance as at 31.12.2008 2nd Interim Dividend for 2008 Final Dividend for 2008 Net Profit for the year ended 31.12.2009 Interim Dividend for 2009 Balance as at 31.12.2009

The accounting policies and notes on pages 29 to 44 form an integral part of the financial statements. Figures in brackets indicate deductions.

27

Nestlé Lanka PLC

Annual Report 2009

Cash Flow Statement

For the year ended 31st December Cash Flows from Operating Activities Profit before Taxation Depreciation Amortisation (Reversal of) Impairment losses on Property, Plant & Equipment - net Gain on sale of Property, Plant & Equipment Interest Expense Interest Income 2009 Rs.`000s 2,427,850 208,444 33,478 27,515 2008 Rs.`000s 2,483,987 196,549 22,319 1,113

(2,712) (44,629) (10,139)

8,161

(13,565) (93,910)

24,583

Unrealized Exchange (Gain)/Loss Provision for Inventory Inventory Write Off

Provision for Doubtful Debts Bad Debts Write Off

39,855

8,654 4,554 1,497 (710)

(7,772) 35,397

5,952 9,611 -

Write off from Bad debts Provision (Reversal of) / Provision for Retiring Gratuity Working Capital Changes Change in Inventories Change in Trade & Other Receivables Change in Trade Payables Interest Paid Cash Generated from Operations Income Tax paid Gratuity paid Net Cash from Operating Activities Cash Flows from Investing Activities Purchase of Property, Plant & Equipment Investment in Intangible Assets Interest Received

Operating Profit before Working Capital Changes

2,882,259 567,094 107,419

180,441

2,841,840 (228,101) (557,600)

171,309

6,267

38,981

(332,411)

3,595,753 (824,243) (8,161)

1,723,728 (636,175) (24,583) -

2,706,623 (323,555) (190,467) -

(56,726)

1,062,970 (274,284)

(Additions) / Utilised- Capital Work In Progress Proceeds from Sale of Property, Plant & Equipment Net Cash used in Investing Activities Cash Flows from Financing Activities Dividends Paid Net Cash used in Financing Activities Net Increase in Cash & Cash Equivalents Cash & Cash Equivalents at the Beginning of the Year Cash & Cash Equivalents at the End of the Year Analysis of Cash & Cash Equivalents at the End of the Year Cash in hand and balances with Bank (Note 15) Bank Overdraft (Note 15)

(27,335) (38,403) 17,332 93,910

(465,643)

44,629

3,750

(228,780)

(1,544,578) (1,544,578) 696,402 197,948 894,350 969,184 904,489 894,350

(1,388,103) (1,388,103) (553,913) 744,089 190,176 228,499 197,948

(64,695) (10,139)

(30,551)

Unrealized Exchange Gain The accounting policies and notes on pages 29 to 44 form an integral part of the financial statements. Figures in brackets indicate deductions. 28 Nestlé Lanka PLC Annual Report 2009

190,176

(7,772)

Notes to the Financial Statements

1. 1.1 Accounting Policies Reporting Entity

Nestlé Lanka PLC., is a Company incorporated and domiciled in Sri Lanka and listed in Colombo Stock Exchange. The registered office and the principle place of business is at the 440, T.B. Jayah Mawatha, Colombo 10. The Company is in the Food & Beverage Industry. The Financial Statements were authorized for issue by the directors on 25th March 2010. The ultimate holding Company is Nestlé S A. 1.3.1 Foreign Currency Transactions Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are translated to Sri Lankan Rupees at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Income Statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Sri Lankan Rupees at foreign exchange rates ruling at the dates the fair value was determined. 1.3.2 Property, Plant and Equipment a) Recognition and Measurement Property, plant and equipment other than land, are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognized net within "other income" in Income Statement.

1.3

Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by the Company.

1.2

a)

Basis of Preparation

Statement of Compliance The Financial Statements of Nestlé Lanka PLC have been prepared in accordance with the Sri Lanka Accounting Standards issued by the Institute of Chartered Accountants of Sri Lanka (ICASL), and the requirements of the Companies Act. No. 07 of 2007.

b)

Basis of Measurement The financial statements are presented in rupees, rounded to the nearest thousand. The Financial Statements are prepared on the historical cost basis.

c)

Use of Estimates and Judgments The preparation of Financial Statements in conformity with SLASs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

29

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

Accounting Policies

b) Subsequent Expenditure The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognized in Income Statement as incurred. c) Depreciation Depreciation is recognized in income statement on a straight-line basis over the estimated useful lives of items of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows: Freehold Buildings Leasehold BuildingsFactory Plant & Machinery Tools, Furniture & Office equipment Motor Vehicles Information Systems (IS) equipment 2009 35 years 25-35 years 10-25 years 5 years 5 years 3 -5 years 2008 35 years 25-35 years 10-25 years 5 years 5 years 3 -5 years b) a) Subsequent Expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in Income Statement as incurred. Amortisation Amortisation is recognised in Income Statement on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows: Globe Project 1.3.4 Impairment The carrying amounts of the Company's assets are reviewed at each Balance Sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. (See Accounting Policy 1.3.4 (i)) An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in income statement. (i) Calculation of recoverable amount The recoverable amount of assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs. (ii) Reversal of impairment Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the Annual Report 2009 5 years

Depreciation is provided proportionately on assets in the year of purchase or construction and in the year of disposal. The residual value, if significant is reassessed annually, at the reporting date. d) Capital Work in Progress Capital expenses incurred during the year which are not completed as at the Balance Sheet date are shown as Capital Work-in-Progress, whilst the capital assets which have been completed during the year and put to use have been transferred to property, plant and equipment. e) Leased Assets Buildings constructed by the Company on leasehold land are capitalised and included under the category leasehold building. 1.3.3 Intangible Assets Intangible assets that are acquired by the Company, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.

30

Nestlé Lanka PLC

Notes to the Financial Statements

Accounting Policies

carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 1.3.5 Trade and other receivables Trade and other receivables are stated at the amount estimated to be realised. Provision has been made in the financial statements for bad and doubtful debts. 1.3.6 Inventories Inventories are stated at the lower of cost and net realisable value. In general, cost is determined on a first-in-first-out basis and includes expenditure incurred in acquiring the inventories and bringing them to their existing condition and location. In the case of manufactured inventories and work-in-progress, cost includes all direct expenditure and production overheads based on the normal level of activity. Net realisable value is the price at which stocks can be sold in the normal course of business after allowing for the cost of realisation and, where appropriate, the cost of conversion from their existing state to a finished condition. Provision is made where necessary, for obsolescence, slow-moving and defective stocks. 1.3.7 Cash and cash equivalents Cash and cash equivalents comprise of cash balances and call deposits with a maturity period of less than three months. For the purpose of the Statement of Cash Flows, cash and cash equivalents are presented net of bank overdrafts, short term borrowings and short term investments. Cash Flow Statement. Cash Flow Statement has been prepared using the Indirect Method. 1.3.8 Employee Benefits (i) Defined Benefit Plan The liability to Retirement Benefit Obligation under the payment of Gratuity Act No. 12 of 1983 is a defined benefit plan covering 655 employees of the Company. The pre1996 liability is unfunded and provided for by way of an accounting provision in the books of the Company in accordance with Sri Lanka Accounting Standards No.16. (Revised 2006) The liability subsequent to this date is funded by way of an insurance policy. (ii) An annual valuation of the fund at Aviva NDB Insurance PLC (formally known as Eagle Insurance PLC) is carried out by a certified actuary using the "Projected Unit Credit Method" and the premium for the year is charged as an expense to the Income Statement in the period to which it relates. The actuarial valuation of the defined benefit obligation is carried out by a qualified actuary Mr. Poopalanathan (Actuarial and Management Consultants (Pvt) Ltd. every two years. The Projected Unit Credit Method is used to determine the present value of the defined benefit obligation. The movement of the obligation during the year and assumptions used for actuarial valuation are disclosed in Note 17 to the financial statements. Defined Contribution Plans ­ Mercantile Services A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in Income Statement when they are due. All employees of the Company are members of Mercantile Service Provident Society and Employees' Trust Fund to which the Company contributes 12% and 3% respectively of such employees' wages or salary. 1.3.9 Liabilities and Provisions Liabilities and provisions are recognised in the Balance Sheet when there is a present legal/constructive obligation as a result of the past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits. Obligations payable at the demand of the creditor or within one year of the Balance Sheet date are treated as current liabilities in the Balance Sheet. Liabilities payable after one year from the Balance Sheet date are treated as non-current liabilities in the Balance Sheet. 1.3.10 Dividends Dividends are recognised as a liability in the period in which they are declared and approved for distribution.

Provident Society and Trust Fund

31

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

Accounting Policies

1.3.11 Trade and other payables Trade and other payables are stated at their cost. 1.3.12 Revenue Sale of Goods Revenue from the sale of goods is measured at fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated cost and possible return of goods can be estimated reliably and there is no continuing management involvement with goods. Transfer of risks and rewards vary depending on the individual terms of the contract of sale. 1.3.13 Expenses (i) Operating Lease Payments Payments made under operating leases are recognised in the Income Statement on a straight ­ line basis over the term of the lease. (ii) Net Financing costs Net financing costs comprise interest payable on borrowings, interest receivable on funds invested and foreign exchange gains and losses that are recognised in the Income Statement. Interest income is recognised in the Income Statement as it accrues. All interest and other costs incurred in connection with borrowings are expensed as incurred as part of net finance costs. 1.3.14 Taxation (i) Income Tax Expense Income tax expense for the year comprises current and deferred tax. Income tax and deferred tax are recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the Balance Sheet date as per the provisions of the Inland Revenue Act 10 of 2006 and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the Balance Sheet liability method as per Sri Lanka Accounting Standard 14, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purpose and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the Balance Sheet date. 1.3.15 Segment Reporting A segment is a distinguishable component of the Company that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and returns that are different from those of other segments. 1.3.16 Borrowing Costs Borrowing costs are recognised as an expense in the year in which they are incurred. 1.3.17 Comparative Information Comparative information has been reclassified where necessary, to conform to current year's presentation. 1.3.18 Commitments and Contingencies Contingencies are possible assets or obligations that arise from a past event and would be confirmed only on the occurrence or non-occurrence of uncertain future events, which are beyond the Company's control. Commitments are disclosed in Note 24 to the financial statements. Contingent liabilities are disclosed in Note 25 to the financial statements. 1.3.19 Events Occurring After the Balance Sheet Date All material post balance sheet events have been considered, disclosed and adjusted where applicable.

32

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

For the year ended 31st December 2009 Rs.`000s 2008 Rs.`000s 16,922,267 2,189,718 19,111,985

2.

Revenue

- Local - Exports

17,211,333 2,228,601 19,439,934

3.

Other Operating Income

Gain on Sale of Property, Plant & Equipment Export Subsidy 2,712 10,000 12,712 13,565 13,565

4.

Results from Operating Activities is stated after charging

Depreciation Amortisation Impairment (loss) / Reversal Inventory Provision Inventory Write Off Royalty Lease Payment Auditors Remuneration - Audit & Audit Related - Non Audit Provision for Doubtful Debts Bad Debts Write Off Legal Fees Director's Fees Staff Cost (includes the following) Contribution to EPF & ETF (Provision)/Reversal on Retiring Gratuity Premium paid- Gratuity policy (208,444) (33,478) (27,515) (8,654) (39,855) (696,298) (360) (2,700) (600) (4,554) (1,497) (11,250) (400) (1,046,737) (79,622) (180,441) (14,752) (196,549) (22,319) (1,113) (5,952) (35,397) (681,036) (360) (2,100) (630) (9,611) (6,267) (8,349) (400) (839,121) (48,451) (171,309) (4,612)

5.

Net Finance (Expense)/Income

Finance Income Interest on Call Deposits/Others Finance Expenses Interest on Short-Term & Overdrafts Bank Charges Gain/(Loss) on Foreign Exchange Rate Fluctuations Debit Tax Net Finance (Expense) Income (8,161) (4,373) (51,358) (13,797) (77,689) (43,199) (24,583) (3,874) 5,741 (11,672) (34,388) 51,750 34,490 86,138

6.

Income tax expense

Tax on Current year Profit Deferred Tax (Expenses)/ Reversal Total Income Tax Expenses in Income Statement

33

(911,935) 64,400 (847,535)

(827,094) 6,200 (820,894)

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

For the year ended 31st December 6.1 (a) The Corporate Income Tax rate applicable to Nestlé Lanka PLC. is 35%, while qualifying export profits are taxed at a concessionary rate of 15%. Profits with respect to off-shore business earned in foreign currency and Ready to Drink milk business are exempt from income tax. The full benefit of Capital Allowances arising in terms of section 25 of the Inland Revenue Act No. 10 of 2006 has been taken into account in determining Income Tax Expense on profits for the year.

(b) 6.2

Reconciliation of effective tax rate. 2009 Profit for the period Total income tax expense Profit excluding income tax expense Income tax using the corporate income tax rate Disallowable expenses Tax exempt income Effect of profits taxed at lower rate Change in temporary difference 35.00% 7.56% -4.19% -0.81% -2.65% 34.91% 2009 Rs.'000 1,580,315 847,535 2,427,850 849,748 183,637 (101,783) (19,667) (64,400) 847,535 35.00% 4.03% -3.59% -2.15% -0.24% 33.05% 2008 2008 Rs.'000 1,663,093 820,894 2,483,987 869,395 100,478 (89,372) (53,407) (6,200) 820,894

7.

Basic Earnings Per Share (EPS)

The calculation of basic earnings per share is based on the net profits attributable to ordinary shareholders divided by the weighted average number of ordinary shares as at the Balance Sheet date. Net profit attributable to ordinary shareholders and weighted average number of ordinary shares is given below 2009 Net Profit for the current year attributable to Ordinary Shareholders (Rs'000) Weighted Average Number of Ordinary Shares Outstanding Basic Earnings Per Share (Rs.) 1,580,315 53,725,463 29.41 2008 1,663,093 53,725,463 30.96

8.

Dividend per Share

(a) Directors have recommended the final dividend of Rs. 11.00 per share for the year ended 31.12.2009, which will be declared at the Annual General Meeting to be held on 11th June 2010. In accordance with Sri Lanka Accounting Standards 12 (Revised) Events After the Balance Sheet date, this proposed final dividend has not been recognised as a liability as at 31st December 2009. However for the purpose of computing Dividend per Share, the final dividend to be approved has been taken into consideration, for both years and the First Interim Dividend of Rs. 483,529,167 paid on 1st October 2009 and the second Interim Dividend of Rs. 537,254,630 which will be paid on 20th April 2010. Calculation of Dividend per share is based on the total dividend attributable to ordinary shareholders of Rs.1,611,763,890 (2008 ­ Rs. 1,611,763,890) divided by the weighted average number of ordinary shares as at Balance Sheet date.

(b)

(c)

34

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

As at 31st December

9.

Property, Plant & Equipment

Free hold Land Freehold Buildings Leasehold Buildings Plant & Machinery Tools, Furniture & office Equipment Rs.`000s Motor Vehicles Computers Total 2009 Total 2008

Rs.`000s Cost Balance as at 01st January Additions Disposals Balance as at 31st December Depreciation Balance as at 01st January Charge for the year Impairment loss On Disposals Balance as at 31st December Written Down Value As at 31st December 2009 As at 31st December 2008 17,925 17,925 17,925 17,925

Rs.`000s

Rs.`000s

Rs.`000s

Rs.`000s

Rs.`000s

Rs.`000s

Rs.`000s

45,169 45,169

553,123 40,065 (701) 592,487

2,393,286 145,535 (6,423) 2,532,398

577,928 91,450 (9,270) 660,108

254,614 22,638 (6,942) 270,310

158,003 23,867 (1,174) 180,696

4,000,048 323,555 (24,510) 4,299,093

3,857,573 282,888 (140,413) 4,000,048

(19,698) (1,389) (21,087)

(135,350) (15,516) (2,012) 347 (152,531)

(1,354,110) (97,367) (25,428) 6,035 (1,470,870)

(452,293) (39,974) (75) 9,065 (483,277)

(159,266) (37,108) 6,851 (189,523)

(126,165) (17,090) 1,174 (142,081)

(2,246,882) (208,444) (27,515) 23,472 (2,459,369)

(2,185,865) (196,549) (1,113) 136,645 (2,246,882)

24,082 25,471

439,956 417,773

1,061,528 1,039,176

176,831 125,635

80,787 95,348

38,615 31,838

1,839,724 1,753,166

The Property situated at No.440, T.B. Jayah Mawatha, Colombo 10 was valued on 31st July 2009 by Mr. S. N. Wijepala, a chartered valuer. The carrying amounts of Free hold Land and Building had it been at revalued amount is: - Free hold land Rs. 669,200,000 - Free hold Buildings Rs. 68,800,000 However, the effect on revaluation has not been taken to the books; the said properties are stated at cost. Impairment loss and subsequent reversal Impairment loss The Company tested its assets for impairment during the year. The recoverable amounts of these assets were estimated based on its realizable value. The carrying amounts of these assets were Rs. 27,514,807 higher than its recoverable amount and an impairment loss was recognised. The Impairment Loss charged in 2009 for each class of asset is as follows. Impairment in 2009 Asset Category Buildings Plant & Machinery Tools & Equipment IS Equipment Total The impairment loss was recognized in cost of sales. Rs.'000 2,012 25,428 75 27,515 Impairment in 2008 Rs.'000 288 767 58 1,113

35

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

As at 31st December (a) Operating Leases The land in which the Nestlé Lanka's factory building is constructed was leased out from the Sri Lankan Government. As per lease agreement the land in Mahayaya Estate was leased for 50 years from 25th March 1981. The annual amount payable under lease agreement is Rs. 359,693. 2009 Rs.`000s 360 1,439 6,115 2008 Rs.`000s 360 1,439 6,474

Non cancellable operating lease rental payable are as follows Not later than one year Later than one year and not later than Five years Later than Five years

2009 Rs.`000s

2008 Rs.`000s

10.

Capital Work-in-Progress

Balance as at the beginning of the year Capitalised during the year Additions during the year Balance as at the end of the year

27,335 (27,335) 217,802 217,802

137,592 (137,592) 27,335 27,335

11.

Intangible Assets - Comprises of cost incurred for the implementation of the Globe Project

Cost Balance as at 1st January Additions Balance as at 31st December Amortization Balance as at 1st January Charge for the Year Balance as at 31st December Carrying Amount 167,391 167,391 (22,319) (33,478) (55,797) 111,594 167,391 167,391 (22,319) (22,319) 145,072

36

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

As at 31st December 2009 2008

Rs.`000s

Rs.`000s

12.

Raw Materials

Inventories

Packing Materials Finished Goods Energy

609,594 425,469

74,801 10,872 64,684

510,954

1,151,227

77,412 13,314 87,579 81,706

Technical Materials Work-in-Progress Goods-in-Transit Less: Provision for Finished Goods Stocks

124,711 1,310,131 1,494,285 1,479,679 184,154

1,922,192 2,101,233 2,095,281 179,041

(14,606)

(5,952)

13.

Trade & Other Receivables

13.1 Trade Receivables Trade Receivables 392,751 419,281

Provision for Bad debts Opening Balance Less:Write offs from the provision Net Movement during the year Closing Balance

(41,520) (40,810) (45,364) 347,387

710

(31,909) (31,909) (41,520) 377,761

-

(4,554)

(9,611)

13.2 Other Receivables.

Deposits & Prepayments Non Trade Receivables Loans to Employees [13.3]

51,290 214,935 73,477

51,413 197,471 49,290

Provision for Non Trade Receivables Opening Balance Net Movement during the year Closing Balance

(29,100) (29,100) 310,602 657,989 197,471 274,936 214,935

-

(29,100) (29,100) 269,074 646,835 147,876 260,137 197,471 112,261

-

13.3 Loans to Employees (over Rs. 20,000) Granted During the Year Repaid During the Year

Balance as at the Beginning of the Year

77,465

Balance as at the end of the Year

(60,001)

(62,666)

Loans to employees are disbursed to officers of the Company excluding Directors. The quantum of each loan in excess of Rs. 20,000. has been granted to 388 officers (2008 - 378 officers). The aggregate value of the loans granted amounts to Rs. 214,935,139 (2008 - Rs. 197,471,156).

37

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

As at 31st December 2009 Rs.`000s 2008 Rs.`000s 15,204 42,887 5,493 14,476 148 4,215 304 2,121 943 3,391 3,071 43,891 50,579 263 186,986

14.

Amount due from Related Parties

Osem UK Nestlé Italiana S.P.A. Nestrade-Nestlé World Trade Corporation Nestlé Middle East FZE Nestlé Taiwan Ltd Nestlé India Ltd Nestlé Japan Ltd Nestlé Singapore (pte) Ltd Nestlé Australia Ltd Globe Centre AOA Nestlé (Png) Pte Ltd Nestlé New Zealand Ltd Nestlé Canada Inc Nestlé USA Inc Nestlé Jamaica Ltd Nestlé Trinidad and Tobago Ltd Nestlé Venezuela S A Nestlé Panama S.A 7,792 4,075 9,354 31,408 4,074 9,661 2,415 349 3,188 24,681 31,712 2,801 131,510

15.

Cash & Cash Equivalents

Balances with Banks Cash in Hand Short Term Investments Cash & Cash Equivalents Bank Overdraft 20,929 100 948,155 969,184 (64,695) (64,695) Cash & Cash Equivalents in the Statement of Cash Flow 904,489 46,861 200 181,438 228,499 (30,551) (30,551) 197,948

16.

Stated Capital

53,725,463 Ordinary Shares 537,255 537,255

Stated Capital 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 meetings of the Company. Revenue Reserves Revenue reserves consist only of retained earnings.

38

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

As at 31st December

17. Employee Benefits

In thousand of rupees PV of Unfunded Obligation Active Employees Pensioners Total present value of obligations Fair value of plan assets Recognised liability for defined benefit obligations Unrecognized past service cost Total employee benefits 385,978 82,044 468,022 468,022 2009 PV of Funded Obiligation 296,691 296,691 (348,038) (51,357) Total 682,659 82,044 764,703 (348,038) 416,665 (90,000) 326,665 PV of Unfunded Obligation 356,315 77,105 433,420 433,420 2008 PV of Funded Obligation 278,076 278,076 (328,546) (50,470) Total 634,391 77,105 711,496 (328,546) 382,950 (180,000) 202,950

The Company makes contributions to a non contributory defined benefit plan that provides gratuity to employees upon retirement. The plan entitles a retired employee to receive a payment equal to 1/2 of final salary multiplied by the number of completed years of service. The portion of the unrecognized obligation relating to past service which is not vested is recognized in the income statement over 3 years on a straight line basis. Employees who joined prior to 2006 and who have 10 years of service and attain the age of 55 years are entitled for pension in their retirement. Further 26 employees who retired are drawing monthly pension. The plan is partially funded by a policy obtained from AVIVA NDB Insurance PLC (formaly known as Eagle Insurance PLC) on 31st December 1996 and covers 655 employees attached to Nestlé Lanka PLC. AVIVA NDB Insurance PLC (Formaly known as Eagle Insurance PLC) has confirmed that the features of the policy satisfies the definition of a "qualifying insurance policy". The fund assets (Rs.348 Mn) and the defined benefit obligations (765Mn) have been netted off in Note 17 above. Movement in the present value of the defined benefit obligations Defined benefit obligations as at 1st January Benefits paid by the plan Current service cost Interest Actuarial (gains)/losses Defined benefit obligations as at 31st December Movement in the present value of plan assets Fair value of plan assets as at 1st January Contributions paid into the plan Benefits paid by the plan Expected return on plan assets Actuarial (gains)/losses Fair value of plan assets as at 31st December The expense is recognised in the following line items in the income statement: Cost of sales Administrative expenses 2009 Rs.'000 711,496 (77,520) 34,619 99,604 (3,496) 764,703 2008 Rs.'000 368,041 (41,976) 35,313 32,386 317,732 711,496

328,546 14,752 (19,523) 29,569 (5,306) 348,038

328,200 4,612 (41,976) 37,710 328,546

80,191 115,002 195,193

67,100 108,821 175,921

39

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

As at 31st December Actuarial assumptions Principal actuarial assumptions at the reporting date (expressed as weighted averages): 2009 (1) Rate of Discount (2) Expected Return on plan assets as at 31st December (3) Future Salary Increases (4) Future Pension Increase 10% 9% 8% 5% 2008 14% 9% 11% 9%

Assumptions regarding future mortality are based on published statistics and mortality tables. The retirement age is assumed as 55 years. Composition of Insurance Plan Asset is as follows. 1. Reporting entity's own financial instruments - 85,800 shares. 2. Property occupied by, or other asets used by the reporting entity ­ Nil.

18.

Deferred tax

2009 Rs.'000 Balance at the beginning of the year Charge/(Reversal) for the year Balance at the end of the year 168,700 (64,400) 104,300 2008 Rs.'000 174,900 (6,200) 168,700

Recognized deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following : Assets 2009 Rs.'000 Property, plant and equipment Employee benefits Other provisions Net tax (assets)/liabilities (144,971) (25,751) (170,722) 2008 Rs.'000 (71,032) (9,925) (80,957) 2009 Rs.'000 (275,022) (275,022) Liabilities 2008 Rs.'000 (249,657) (249,657) 2009 Rs.'000 275,022 (144,971) (25,751) 104,300 Net 2008 Rs.'000 249,657 (71,032) (9,925) 168,700

Movement in temporary differences during the year :

Balance as at 01 Jan 2008 Rs.'000 Property, plant and equipment Employee benefits Other provisions 190,217 (11,075) (4,242) 174,900 Recognized in Income Statement Rs.'000 59,440 (59,957) (5,683) (6,200) Balance as at 31 Dec. 2008 Rs.'000 249,657 (71,032) (9,925) 168,700 Recognized in Income Statement Rs.'000 25,365 (73,939) (15,826) (64,400) Balance as at 31 Dec. 2009 Rs.'000 275,022 (144,971) (25,751) 104,300

40

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

As at 31st December

19. Trade & Other Payables

2009 Rs.'000 Trade Payables Other Payables 1,599,909 289,393 1,889,302 2008 Rs.'000 1,446,613 185,611 1,632,224

20.

Amount due to Related Parties

Nestlé Deutchland AG Nestlé Waters France Nestlé UK Ltd Nestlé Nederland B.V. Nestrade-Nestlé World Trade Corporation Nestec S.A. Servcom S.A. Societe des Produits Nestlé S.A. Nestlé Suisse S.A. Nestlé Shanghai Ltd N.P. (Mauritius) Nestlé Tianjin Ltd Nestlé China Ltd Nestlé India Ltd P T Nestlé Indonesia Nestlé Products Sdn Bhd Nestlé Asean (Malaysia) Sdn Bhd Nestlé Manufacturing (Mal) Sdn Bhd Nestlé Phillippines, Inc CPW SA Makti Branch Nestlé Singapore (pte) Ltd NTC Asia-Pacific Singapore Ltd Nestlé R & D Centre (Pte) Ltd Nestlé Foods (Thailand) Ltd Nestlé Vietnam Ltd. Nestlé Australia Ltd. Globe Centre AOA Nestlé (Png) Pte Ltd Nestlé Qingdao Ltd. 2,633 3,655 5,872 576 1,489 175,269 3,125 528 25,974 3,002 50,282 66,946 1,750 58,694 24,621 1,309 3,631 6,312 39,095 54 474,817 841 3,492 1,635 13,032 10,074 6,553 107 159,676 18,939 21 20 711 73,028 3,408 13,324 2,156 101,204 2,998 7,890 180,258 15,388 3,747 555 422 3,126 1,872 624,477

21.

Dividends Payable

Unclaimed Dividend 52,172 38,711

41

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

22. Related Party Transactions

Mr. M. Rolland (resigned w.e.f 15.10.2009), Mr H. Waszyk (appointed w.e.f 15.10.2009) the Chairman of the Company is also the Chairman and Director of Nestlé Bangladesh Ltd and Chairman and Managing Director of Nestlé India Ltd. Name of the Company Osem UK Nature of the Relationship Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Nature of the Transactions Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Exports Imports Imports Imports Imports Imports Imports Imports Imports Imports Imports Imports Imports Imports Imports Imports Service Charges Technical Assistance Fees 2009 Rs.`000s 73,554 2008 Rs.`000s 42,569 43,320

Nestlé Middle East FZE Nestlé Korea Ltd. Nestlé India Ltd. Nestlé Malaysia

Nestrade - Nestlé world Trade Corporation Nestlé Taiwan Ltd Nestlé Japan Holding Ltd. Nestlé Singapore (Pte) Ltd. Nestlé Australia Ltd Nestlé (Png) Pty Ltd Nestlé Canada, Inc. Nestlé USA,Inc.

281,569 128,681

355,438

61,441 19,452

7,102

383

146,726

15,110

438

9,023 2,372

28,847

9,961 1,522 8,411

43,875 11,812

69,864

Nestlé New Zealand Ltd

2,160 5,076 2,800 -

3,522 9,817 7,938 83,965 5,485

Nestlé Panama S.A. Nestlé Jamaica Ltd. Nestlé Dominicana Nestlé Gautemala Nestlé Italy Nestlé Venezuela Nestlé Trinidad And Tobago Ltd

80,699 80,806

-

118,411 527

6,719 5,237

91,548 (696,298) (354,621) (828,488) (123,500)

Societe des produits Nestlé.S.A Nestlé Australia Ltd. Nestlé Suisse S.A.

Nestlé Manufacturing (Mal) Sdn Bhd Nestlé Singapore (Pte) Ltd Nestlé Foods Thailand (Pvt) Ltd P.T. Nestlé Indonesia Nestlé India ltd.

(681,036) (395,486) (806,646) (140,372)

98

(20,978)

(3,511)

(10,781)

Nestlé Waters France Nestlé Phillipines Inc Nestlé China Ltd Nestlé Brazil Ltd Nestlé UK Ltd Nestlé Nederlands B.V. CPW Phillipines Inc

(208,564) (213,391)

(8,312) (8,273)

(344,467)

(18,054) (19,668) (18,063) (63,938) (23,870)

(8,056)

(67,041) (21,769)

(4,641) (354) (528)

(1,261) (324)

Nestlé's Products (Mauritius) Ltd Nestlé World Trade Center Nestlé Korea Ltd.

Service Charges

(6,655) (4,076) -

(2,373) (2,754) (30,487) (114)

42

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

Name of the Company Nestlé R & D Centre (Pte) Ltd Nestlé Deutschaland Nestlé Shanghai Ltd Nestlé Fiji Ltd Nestlé Tianjin Ltd Nestlé Espana S.A. Nestlé Vietnam Ltd Nestlé TC Asia Pacific (Pte) Ltd Nestec SA Nestlé S A Nestlé (Png) Pte.Ltd. Globe Center AOA Nestlé Quingdao Nestlé Egypt Nestlé France Nestlé Middle East FZE Nature of the Relationship Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Affiliates Nature of the Transactions Technical Technical Service Charges Service Charges Service Charges Imports Service Charges Imports Service Charges Dividend Payment Service Charges Professional Charges Imports Service Charges Technical Service Charges 2009 Rs.`000s (10,355) (3,717) (9,017) (2,886) (1,415,019) (166,085) (75) (298) (148) (143) 2008 Rs.`000s (9,846) (4,732) (21) (2,049) (363) (659) (425) (43,091) (6,491) (1,285,277) (1,872) (193,619) -

Transaction with Key Management Personnel Key Management Personnel include all the members of the Board of Directors of the Company having authority & responsibility for planning, directing and controlling the activities of the Company.. i ii In addition to the emoluments of Rs. 21,363,859 (2008 - Rs.18,933,390), the Company provided non-cash benefits amounting to Rs. 18,949,086 (2008 - Rs.17,408,514) The Company has not incurred any amount as termination benefits or post employment benefits on account of key management personnel during the year..

iii The Company made a provision of Rs. 75,507,529 on account of a share based payment to its Managing Director Mr D. Saudan (appointed w.e.f 1.1.2009. (2008 - Rs. 19, 587,016 - Mr S. Young (retired w.e.f 30.10.2008)). (Also refer Note No. 14 and 20 for Amount due from Related Parties and Amount due to Related Parties) 23. Segmental Analysis Company does not follow a differential pricing policy on grounds of equity and in line with the government vision on equity to consumers of all districts. Thus the different geographical sales regions do not attract a significant different risk nor command differing returns. Thus in fact they do not qualify for segmental reporting. Consequently management believes that it is not practical to provide segment disclosure relating to total assets since a realistic analysis among the various operating segments is not possible. 24. Commitments Capital Commitments The Capital commitment for the year 2009 which has been approved by the Board, but has not been contracted for, is Rs. 79 Mn. (2008 - Rs. 77 Mn) Other Commitments As at the Balance Sheet date the Company had Rs. 2,170 Mn (2008 - Rs.1,133 Mn) as commitment on purchase orders raised on raw and other materials.

43

Nestlé Lanka PLC

Annual Report 2009

Notes to the Financial Statements

25. Contingent Liabilities The Company's distributors are provided with a financing facility with Company's bankers. The bank would accept the liability, only upto the full recourse provided by them to the Company's customers. As at the end of the year, amount of Rs. 319 Mn (2008 - Rs. 176 Mn) had been granted to the distributors by the bankers, which in the event where distributors default, the Company would be liable. 26. Number of Employees The total number of permanent employees of the Company as at 31st December 2009 amounted to 667 (2008 ­ 656) 27. Events Occurring after Balance Sheet Date Subsequent to the date of the Balance Sheet, no circumstances have arisen except the following:As disclosed under Note 8 to the Financial Statements no adjustment has been made on proposed dividends as well as on the second interim dividend paid after the balance sheet date in accordance with SLAS 12 (Revised) ­ Event after balance sheet date. Directors' Responsibility The Board of Directors is responsibility for the preparation and presentation of the Financial Statements. The Directors responsibility Statement is in page 17 of this annual report. Dividend Declaration

28.

44

Nestlé Lanka PLC

Annual Report 2009

Value Added Statement

2009 Rs.'000s Turnover Bought out Goods and Services Value added % To Government as Taxes / Duties To Employees as Remuneration To Lenders as Interest To Shareholders as Dividends Retained with business (including depreciation) 57.3 12.1 0.1 22.4 8.1 100.00 19,439,934 (12,250,161) 7,189,773 Rs 000s 4,119,464 868,101 8,161 1,611,765 582,282 7,189,773 % 50.5 13.3 0.4 26.8 9.0 100.0 2008 Rs.'000s 19,111,985 (13,086,407) 6,025,578 Rs 000s 3,044,059 803,930 24,583 1,611,764 541,242 6,025,578

8.1%

9.0%

22.4%

57.3%

26.8%

50.5%

2009

0.1% 12.1% 0.4% 13.3%

2008

To Government as Taxes / Duties To Employees as Remuneration To Lenders as Interest To Shareholders as Dividends

Retained with business (including depreciation)

45

Nestlé Lanka PLC

Annual Report 2009

Ten Year Summary

Group Results Statement of Income Net Revenue Profit before tax Taxation Profit after tax Retained profits/ (Loss) brought Forward Interim Dividend Final Dividend Retained Profits carried forward Balance Sheet Share capital Reserves Deferred Liability 537,255 41,258 87,071 665,584 Represented by: Tangible Fixed Assets 810,360 907,286 1,171,199 1,111,698 1,311,233 1,373,806 1,263,724 1,809,300 1,780,501 145,072 1,473,327 1,673,087 1,690,595 (2,016,665) (326,070) 845,129 1,805,690 (1,600,366) 205,324 1,317,022 1,609,603 (1,490,002) 119,601 1,430,834 1,959,706 (1,439,969) 519,737 1,893,543 2,441,960 (2,102,086) 339,874 1,603,598 3,196,200 (3,306,883) (110,683) 1,698,617 3,157,602 (2,953,219) 204,383 2,129,956 2,057,526 111,594 3,238,362 (3,195,935) 42,427 2,211,547 537,255 22,056 107,379 666,690 537,255 197,389 110,485 845,129 537,255 504,595 275,172 1,317,022 537,255 622,510 271,069 1,430,834 537,255 1,082,653 273,635 1,893,543 537,255 852,640 213,703 1,603,598 537,255 954,821 206,541 1,698,617 537,255 1,221,051 371,650 2,129,956 537,255 1,243,327 430,965 2,211,547 5,025,221 547,157 (82,602) 464,555 11,541 476,096 (456,667) 19,429 6,647,416 92,104 (14,600) 77,504 19,429 96,933 (96,706) 227 7,467,048 239,551 (64,218) 175,333 227 175,560 (174,608) 952 8,079,136 908,669 (426,855) 481,814 952 482,766 (478,157) 4,609 9,897,372 12,779,555 14,128,658 16,255,216 908,775 (312,703) 596,072 4,609 600,681 1,599,678 (548,554) 1,051,124 144,014 1,195,138 (134,314) 2,043,874 (688,988) 1,354,886 35,009 1,389,895 (537,255) (805,882) 46,758 2,046,975 (655,383) 1,391,592 46,758 1,438,350 (483,529) (859,608) 95,213 19,111,985 2,483,987 (820,894) 1,663,093 95,213 1,758,306 (537,255) (1,074,510) 146,541 19,427,135 2,427,850 (847,535) 1,580,315 146,541 1,726,856 (483,529) 1,243,327 2000 Rs.`000 2001 Rs.`000 2002 Rs.`000 2003 Rs.`000 2004 Rs.`000 2005 Rs.`000 2006 Rs.`000 2007 Rs.`000 2008 Rs.`000 2009 Rs.`000

Profit available for distribution

(456,667) (1,047,644) 144,014 13,180

Intangible Assets Current Assets Less: Current Liabilities

(1,623,890) (1,913,683) (150,563) 665,584 (240,596) 666,690

Net Current Assets

Average Market price per share (Rs) Earnings per Share (Rs) Dividend paid / proposed (Rs. 000s)

63.25

58.02

51.15

66.02

83.90

101.55

180.15

262.85

278.74

345.64

8.65

1.44

3.26

8.97

11.09

19.56

25.22

25.90

30.96

29.41

456,667

96,706

174,608

478,157

456,667

1,181,961

1,343,137

1,343,137

1,611,764

1,611,764

46

Nestlé Lanka PLC

Annual Report 2009

Share Information

Analysis of Shareholders according to the Number of Shares as at 31st December 2009

Resident

Shareholdings No. of Shareholders No. of Percentage Shares (%)

Non Resident

Number of Shareholders No. of Percentage Shares (%) Number of Shareholders

Total

No of Shares Percentage (%)

1 to 1001 to 10,001 to

1000 10,000 100,000

Shares Shares Shares Shares Shares

5,175 489 31 4 0 5,699

835,406 1,375,867 794,983 450,420 0 3,456,676

1.55 2.56 1.48 0.84 0.00 6.43

59 19 9 5 1 93

18,242 83,199 262,600 1,111,000 48,793,746 50,268,787

0.03 0.15 0.49 2.07 90.82 93.56

5,234 508 40 9 1 5,792

853,648 1,459,066 1,057,583 1,561,420 48,793,746 53,725,463

1.58 2.71 1.97 2.91 90.82 100.00

100,001 to 1,000,000 Over 1,000,000

Categories of Shareholders Individual Institutional

No. of shareholders 5,657 135 5,792

No. of shares 2,906,818 50,818,645 53,725,463

High/Low market prices Highest Market value Lowest Market value Market value as at 31.12.2009 Public holding as at 31.12.2009

: : : =

Rs. 440.00 Rs. 251.00 Rs. 415.00 8.99%

List of 20 Major shareholders based on their shareholdings as at 31st December 2009.

Name Nestlé S.A BNY - J.P. Morgan Clearing Corporation Mellon - Frontaura Global Frontier Fund LLC Miss. Harnam Neesha HSBC International Nominees Ltd ­SSBT-Deustche Bank Ag Singapore Employees Provident Fund Pershing LLC S/A Averbach Grauson & Co. Mr. Aloysius Kattar Mr. Radhakrishnan Mariapillai Ceylon Nutritional Foods Ltd Trust HSBC Intl Nom Ltd ­ UBS Ag Singapore Branch Eagle Insurance Company Limited A/C No. 3 Ceylon Investment Plc A/C No. 1 Freudenberg Shipping Agencies Limited Eagle Insurance Company Limited A/C No. 7 Colombo Investment Trust PLC Mr. Bandaranayake Jayampathi Divale Mr. Hirdaramani Anil Kumar Lalchand Dr. Chawla Subash HSBC Intl Nom Ltd-SSBT-Russell Trust Company Commingled Employee Benefit Fund Trust Russell Frontie % 90.82 0.73 0.47 0.37 0.29 0.23 0.21 0.21 0.20 0.19 0.17 0.16 0.14 0.11 0.10 0.09 0.09 0.08 0.07 0.06 No. of shares end 2009 48,793,746 391,300 251,500 200,100 155,600 125,000 112,500 111,419 110,000 104,001 90,000 85,800 76,000 60,000 51,400 50,904 49,750 40,500 40,000 33,400 No. of shares end 2008 48,793,746 100,700 200,100 155,600 134,800 641,500 111,419 110,000 104,001 90,000 52,000 60,000 50,904 40,500 40,000 -

47

Nestlé Lanka PLC

Annual Report 2009

Notice of Meeting

Notice is hereby given that the Twenty Ninth Annual General Meeting of Nestlé Lanka PLC will be held at the Mihilaka Medura of the S. W. R. D. Bandaranaike Memorial International Conference Hall, No. 07, Bauddhaloka Mawatha, Colombo 07, on Friday, 11th June, 2010, at 9.30 am for the following purposes; Note:

1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote instead of him/her. A proxy need not be a member of the Company. A form of proxy accompanies this notice. Shareholders attending the meeting are requested to complete the Attendance Form as instructed. Shareholders/ Proxy holders are requested to bring their National Identity Cards and the envelop containing the Name / Folio No., and hand over at the entrance to the meeting hall for registration. 6. As requested by BMICH, due to security reasons, parcels and other belongings will be checked by the Police and briefcases and bags will not be permitted to be taken into any halls. 7. Only the shareholder will be permitted to enter the meeting room and shareholders are kindly requested to refrain from bringing children in order to avoid any inconvenience. Kindly note that No complimentary gift parcels will be issued at the AGM.

2. 3. 4.

Agenda

1. To receive and consider the Annual Report of the Board of Directors on the affairs of the Company, Independent Auditor's Report and the Audited Accounts for the year ended 31 December 2009. 2. To declare a final dividend as proposed by the Directors. 3. To Re- elect Directors. 4. To reappoint the auditors and authorise the Directors to fix their remuneration.

5.

8.

By Order of the Board Nestlé Lanka PLC.

Lioshon Rajapakshe Company Secretary 25th March, 2010

48

Nestlé Lanka PLC

Annual Report 2009

Notes

49

Nestlé Lanka PLC

Annual Report 2009

Notes

50

Nestlé Lanka PLC

Annual Report 2009

Form of Proxy

Nestlé Lanka PLC I / we ...................................................................................................................................................................... of ............................................................................................................................................................................ Being a member/ members of the above named Company hereby appoint : ............................................................................................................................................................................ of .................................................................................................................................................................. or failing ............................................................................................... of ............................................................................. ...................................................................................................................................................................or failing ........................................................................................................ as my proxy to represent me and vote for me on my behalf at the Twenty Ninth Annual General Meeting to be held on Friday 11th June 2010 at 9.30 a.m. and at any adjournment thereof.

Signed this ................................. Day of ......................................... 2010

Signature : .................................................................

INSTRUCTIONS AS TO COMPLETION 1. 2. 3. 4. Kindly perfect the form of proxy legibly by filling in your full name and address, in the spaces provided along with the date and your signature. If the proxy form is signed by an Attorney, the related Power of Attorney should also accompany the completed form of proxy registration, if it has not been already registered with the Company. If the shareholder is a Company or Corporate Body, the proxy form should be executed under its common seal in accordance with its Articles of Association or Constitution. The completed form of proxy should be deposited at the Office of the Registrars of the Company at No: 101, Inner Flower Road, Colombo 03, not less than 48 hours before the time appointed for holding of the Meeting, to be held at the Mihilaka Medura of the Bandaranaike Memorial International Conference Hall, No: 07, Bauddhaloka Mawatha, Colombo 07 on Friday 11th June 2010 at 09.30 a.m

51

Nestlé Lanka PLC

Annual Report 2009

52

Nestlé Lanka PLC

Annual Report 2009

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epug;Gtjw;fhd topKiwfs;: 1. 2. jaTnra;J gpujpepjpf;fhd gbtj;jpy; cq;fs; ngaiuAk;> tpyhrj;ijAk; Fwpg;gpl;l ,lj;jpy; njspthf vOjp> jpfjpapl;L ifnahg;gkplTk;. gpujpepjpf;fhd gbtk;> epWtdj;jpy; Vw;fdNt gjpT ngw;wpuhtpl;lhy;> rl;lg+Ht gpujpepjpapdhy; ifr;rhj;jplg;gl;L> rk;ge;jg;gl;l rl;lg+Htg; gpujpepjp mjpfhug; gj;jpuKk;> gpujpepjpf;fhd gbtg; gjpTf;nfd rkHg;gpf;fg;gLk; Mtzq;fSld; ,izf;fg;gly; Ntz;Lk;. 3. gq;Filikahsh; xU jdp epWtdkhfNth> $l;likg;ghfNth ,Ug;gpd; mjd; mikg;Gr; rl;ljpl;lq;fSf;F mika gpujpepjpf;fhd gbtk; nghJ Kj;jpiu ,lg;gl;L mDg;gp itj;jy; Ntz;Lk;. 4. ,t;thW g+uzg;gLj;jg;gl;l gpujpepjpf;fhd gbtk; nfhOk;G 7> ngsj;jhNyhf khtj;ijapy; mike;Js;s gz;lhuehaf;f rh;tNjr Qhgfhj;j kz;lgj;jpd; kp`pyf;f nkJu tstpy;> 2010 [{d; 11Mk; jpfjp nts;spf;fpoik fhiy 09.30 vd;w $l;lj;ij elj;Jtjw;F Fwpg;gpl;l Neuj;jpy; 48 kzpj;jpahyq;fSf;F Kd;duhf nfhOk;G 3> ,d;dh; gpsth; tPjp> 101 Mk; ,yf;fj;jpYs;s fk;gdpfs; gjpthsh; mYtyfj;jpy; xg;gilf;fg;gl Ntz;Lk;. ne];Ny yq;fh gPvy;rP Mz;lwpf;if

54

ne];Ny yq;fh PLC

Mz;lwpf;if 2009

Attendance Form / meñKSfï igyka m; / tuTj; jhs;

Full Name of the Shareholder / fldgialref.a iïmQr®K ku / gq;Fjhuhpd; KOg; ngah;: ......................................................................................................................................................... Folio No. / m;abre wxlh / Nfhit ,yf;fk;: ......................................................................................................................................................... NIC No. / cd;sl yekqïm;a wxlh / Nj.m.m ,yf;fk;: ......................................................................................................................................................... No. of Shares Held / ysñ fldgia ixLHdj / ngw;wpUf;Fk; gq;Ffspd; vz;zpf;if: ......................................................................................................................................................... Signature / w;aik / ifnahg;gk;: .........................................................................................................................................................

Notes: 1. Shareholders are kindly requested to bring this Attendance Form to the Twenty Ninth Annual General Meeting of Nestlé Lanka PLC to be held at the Mihilaka Medura of the S.W.R.D. Bandaranaike Memorial International Conference Hall, No. 07, Bauddhaloka Mawatha, Colombo 07, on Friday, 11th June 2010. Kindly note that there will be No complimentary gift parcels issued at the AGM.

2.

igyka( 1' fkiaf,a ,xld iud.fï 29 jk jdr®Isl uy iNd /iaùu 2010 cqks 11 jk isl=rdod nKavdrkdhl cd;Hka;r iïuka;%K Yd,dfõ" ñys,l uer Yd,dfõoS ^fkd' 07" fn!oaOdf,dal udj;" fld<U 07& meje;afõ' tu /iaùug meñfKk úg fuu meñKSfï igyka m;%h /f.k meñfKk f,i ish¨u fldgialrejkaf.ka ldreKslj b,a,d isákq ,efí' fu;k ia;=;smQr®jl ;E.s mdr®i,a ksl=;a ls¯ula fyda ix.%y ls¯ula is fkdjk nj ldreKslj okajd isákq ,efí'

2'

Fwpg;Gf;fs;: 1. ,y. 07> ngsj;jhNyhf khtj;ijapy; mike;Js;s S.W.R.D. gz;lhudhaf;fh Qhgfhuj;j khehl;Lkd;w kp`pyf;f nkJu tstpy; eilngwTs;s ne];Ny yq;fh gPvy;rp epWtdj;jpd; ,Ugj;J xd;gjhtJ nghJf; $l;lj;jpw;Fr; r%fkspf;Fk; xt;nthU gq;FjhuUk; Nkw;gb tuTj;jhisg; g+Hj;jp nra;J jk;Kld; nfhz;L tu Ntz;Lk;. ,f;$l;lj;jpd;NghJ vJtpj ghpRg; nghjpfSk; rpw;Wz;bfSk; toq;fg;gl khl;lhnjd;gij jho;ikAld; Fwpg;gpLfpNwhk;.

2.

55

Nestlé Lanka PLC

Annual Report 2009

56

Nestlé Lanka PLC

Annual Report 2009

CORPORATE INFORMATION Name of Company: Nestlé Lanka PLC Registered Office & Head Office: No.440, T.B. Jayah Mawatha, Colombo 10, Sri Lanka Tel: (+94 11) 2696304, 2697821, 2699991 Fax: (+94 11) 2699437 E-mail: [email protected] Legal Form: A public quoted company with limited liability, incorporated in Sri Lanka on 29th January 1981 under the Companies Act, and listed on the Main Board of the Colombo Stock Exchange. Re-registered on 25th June 2007 under the Companies Act No. 7 of 2007. Company Registration Number: PQ20 Company Secretary: Lioshon Rajapakshe Attorney-at-Law Registrars: M/s. SSP Corporate Services (Pvt) Ltd No. 101, Inner Flower Road, Colombo 3, Sri Lanka Tel: (+94 11) 2573894 Legal Advisors: M/s DL & F De Saram (Attorneys-at-Law) M/s Julius & Creasy (Attorneys-at-Law) Auditors: M/s. KPMG Ford, Rhodes, Thornton & Company (Chartered Accountants) Bankers: Bank of Ceylon Hatton National Bank The Hong Kong & Shanghai Banking Corporation Limited Standard Chartered Bank Financial Year: 1st January to 31st December

Information

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