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Lever Brother Pakistan Limited

Annual Report 1999

Contents

Company Information

Board of Directors

Mr. Jean-Marc Delpon de Vaux - Chairman & Chief Executive

Mr. Robert Zoon

Mr. Perwaiz Hasan Khan

Mr. Syed Baber Ali

Mr. Fatehali W. Vellani

Mr. Irtiza Husain

Mr. Rai Ijaz Ali Zaigham

Mr. Soomro Mohammad Ibrahim

Mr. Omar H. Karim

Company Secretary

Mr. Aamer Aziz Saiyid

Auditors

Messrs A.F. Ferguson & Co

State Life Building No.

I.I. Chundrigar Road

Karachi.

Registered Office

Avari Plaza

Miss Fatima Jinnah Road

Karachi

Share Registration Office

c/o Ferguson Associates (Pvt) Ltd

State Life Building No. 1-A

I.I. Chundrigar Road

Karachi.

LEVER BROTHERS

PAKISTAN LIMITED

Notice of Annual General Meeting

Notice is hereby given that the 51st Annual General Meeting of Lever Brothers Pakistan Limited will be held

at Darbar Hall 'C' Hotel Sheraton, Club Road, Karachi, on Monday, 15th May 2000 at 11.00 a.m. to transact

the following business:

Ordinary Business

1. To receive and consider the Company's Accounts for the financial year January - December 1999,

together with the Reports of the Auditors and Directors.

2. To declare the final dividend on the ordinary shares of the Company.

The Directors recommend a final dividend of 50'70 (or Rs. 25 per share). With the interim dividend of

50% (or Rs. 25.00 per share) already paid, the total dividend for 1999 will thus amount to 100% (or

Rs. 50 per share).

3. To appoint Auditors for the ensuing year, and fix their remuneration.

(Messrs. A. F. Ferguson & Co., Chartered Accountants, retire, and being eligible, offer themselves for

re-appointment).

Special Business*

4. To approve the remuneration of Executive 'Directors including the Chief Executive.

[A Statement in respect of the Special Business to be transacted at the AGM is attached].

Any other business, with the permission of the Chair.

By order of the Board

Karachi

AAMER AZIZ SAIYID

28 March 2000

Company Secretary

Notes:

1. Share Transfer Books will be closed from 8 to 15 May 2000 (both days inclusive).

2. All Members (whether holding preference or Ordinary Shares) are entitled to attend and vote at the

meeting. A Member may appoint a proxy who need not be a Member of the Company.

3. The instrument appointing the proxy and the other authority under which it is signed, or a notarially

certified copy thereof, must be lodged at the Company's Registered Office at least 48 hours before the

time of the Meeting.

4. Any change of address should be notified immediately to the Company's Share Registrars, Fergusons

Associates (Pvt) Ltd, State Life Building l-A, I.I. Chundrigar Road, Karachi.

CDC Account Holders will further have to follow the undermentioned guidelines as laid down by the

Securities and Exchange Commission of Pakistan:

A. For Attending the Meeting:

i) In case of individuals, the account holder or sub-account holder and/or the person whose securities

are in group and their registration details are uploaded as per the Regulations, shall authenticate his

identity by showing his original national Identity Card (NIC) or original passport at the time of

attending the meeting.

ii) In case of corporate entity, the Board of Directors' resolution/power of attorney with specimen

signature of the nominee shall be produced (unless it has been provided earlier) at the time of the

meeting.

B. For Appointing Proxies:

i) In case of individuals, the account holder or sub-account holder and/or the person whose securities

are in group account and their registration details are uploaded as per the Regulations, shall submit

the proxy form as per the above requirement.

ii) The proxy form shall be witness by two persons whose names, addresses and NIC numbers shall be

mentioned on the form.

iii) Attested copies on NIC or the passport of the beneficial owners and the proxy shall be furnished with

the proxy form.

iv) The proxy shall produce his original NIC or original passport at the time of the meeting.

v) In case of corporate entity, the Board of Director's resolution/power of attorney with specimen

signature shall be submitted (unless it has been provided earlier) alongwith proxy form to the

Company.

Statement in respect of Special Business

and related Draft Resolution

Material facts concerning the Special Business to be transacted at the Annual General Meeting and

the proposed Resolutions related thereto are given below.

Item 4 of the Agenda - Remuneration of Executive Directors

According to law, it is necessary to obtain Shareholders' approval for the holding of office of profit

by any of the Directors as well as of their remuneration. It is therefore proposed to pass the

following as an Ordinary Resolution.

Resolved that approval is hereby granted for the holding of office of profit with the Company

by the Executive Directors including the Chief Executive, and for the payment of remuneration to

them for their respective periods of service in accordance with their individual contracts and the

rules of the Company, amounting in the aggregate to Rs. 26.1 million actuals for the year January

- December 1999, and Rs. 29.3 million estimated for 1 January to 31 December 2000.

[The Executive Directors, namely, Messrs. Jean-Marc Delpon de Vaux, Robert Zoon and Perwaiz

Hasan Khan, are interested to the extent of the remuneration payable to them individually].

Report of the Directors

The Directors have pleasure in presenting their Annual Report together with the Company's

audited accounts for the year ended December 31, 1999.

Results and Dividends

Jan. 1999-

July 1997-

Dec. 1999

Dec. 1998

(12 months)

(18 months)

Rs' 000

Profit after taxation

763,960

738,329

Unappropriated profit brought forward

259,044

332,110

1,023,004

1,070,439

Appropriations:

Dividends:

On 5% Cumulative Preference Shares

239

On Ordinary Shares

- First Interim Dividend on Ordinary Shares @ Rs 25 per Share

(1998: Rs 12.50 per Share on 12,768,223 Shares)

332,347

159,603

- Second interim Dividend on Ordinary Shares Rs NIL

(1998: Rs 25 per Share on 12,768,223 Shares)

319,206

- Final Dividend @ Rs 25 per Share

(1998: Rs 25 per Share)

332,347

-----------

664,933

811,395

-----------

Unappropriated profit carried forward

358,071

259,044

-----------

Operating profit grew by 47% over the previous period on an annualised basis. This was achieved

by a modest sales value growth of 5% (because of price reduction of Tea and Edible Oils) and

margin improvements as a result of focussed attention on cost reduction. Stocks were reduced by

over Rs 1 billion resulting in a strong cash flow which in turn reduced the running finance.

Earning per share improved from Rs. 50.52 (annualised Rs 37) to Rs 57.45.

In accordance with International Accounting Standard 27 in addition to the accounts of the

Company and subsidiaries, consolidated accounts are also included as part of the Annual Report.

The Directors propose a final dividend of Rs 25 per share. The Company has already paid an

interim dividend of Rs 25 per share for the year 1999.

Detergents and Personal Products

Enhanced value to the consumer was achieved through innovative offerings and product

formulation changes. Packaging was further improved to minimise the effect of outside

conditions on the product. Cost effectiveness program enabled the Company to manufacture

improved quality products without a corresponding increase in price enabling them to remain

competitive. The sales value increased by 19'~/o over the previous period on an annualised basis.

Personal Products grew by 55°/,, in volume with healthy margin improvement. To support

innovation, investment in brand strength was considerably enhanced through increased

advertising expenditure. Operating profit i~ absolute terms increased by 7%.

Beverages

Restructuring of Tea manufacturing facilities in the first quarter of 1999 led to significant savings.

Based on the findings of the market and quality research undertaken by the Tea business, many

blends were modified. We were able to reduce the cost of many blends without lowering the

standard of the end product. As a result of all these activities the Gross and Operating margins

were brought up to desired levels, which in the previous period were allowed to deteriorate in an

attempt to quickly regain the market share lost due to smuggling. Letters of Credit relating to

importation of finished products arc subject to 35% cash margin. The Government is treating the

import of raw tea as a finished product. This added cost pressure will have an adverse impact on

Tea profitability.

Foods

Significant fall in international oil prices led to a sharp decline in loose Banaspati prices, adversely

affecting the Cooking Oils and Banaspati during the first half of the current year. During the

second half continued trade activities helped regain the market share but the volume lost during

the first half was not recovered.

Ice Cream sales have improved and margins grew as a result of restructuring of the business.

Operational integration of Walls and Polka is almost complete.

Expansion and Finance

The Company has invested Rs 259 million in capital assets during the current year, which includes

expenditure on IT. Safety and Environment protection. It continues the policy of utilising the most

appropriate technology. Further capital investment is dependent on existence of new avenues

and expected volume growth of existing product lines.

The Company contributed Rs 6.4 billion to Government Revenue during the period under review,

which is 2.07°/,, of total Revenue earned by the State. In spite of this very good performance as one

of the best tax payers in the country, determined and finalised tax refunds remain unpaid.

Prospects

The Company maintains its commitment to product improvement and internal efficiency through

innovation. Exploitation of latest Information Technology continues to be a priority. The

Company is embarking upon an ambitious project designed to improve the efficiency of the entire

supply chain. It will span over two to three years and is expected to achieve significant cost

savings. This will give additional competitive advantage enabling us to provide better value to

the customer and improving profitability.

Staff Relations

The Company continues to benefit from the efforts and dedication of all its employees. The

Directors are once more pleased to record their appreciation. Development of management and

staff has a high priority in the Company.

Directors

Since the last election of Directors, the following changes have taken place on the Board.

Mr Mashkoor Alam resigned and was replaced by Mr Perwaiz Hasan Khan,

Mr Mukhtar Ahmed Aziz, the Sindh Government nominee, was replaced by Mr Soomro

Mohammad Ibrahim.

Holding Company

Through its wholly-owned subsidiary, Unilever Overseas Holdings, UK, Unilever PLC, a

company incorporated in the United Kingdom, is the ultimate holding company of Lever Brothers

Pakistan Limited.

Auditors

The Auditors, Messrs A. F. Ferguson & Co., Chartered Accountants, retire at the conclusion of the

Annual General Meeting. Being eligible, they have offered themselves for re-appointment.

On behalf of tile Board

Karachi:

Jean-Marc Delpon de Vaux

28 March 2000

Chairman & Chief Executive

Auditors' Report to the Members

We have audited the annexed balance sheet of Lever Brothers Pakistan Limited as at December 31,

1999 and the related profit and loss account. statement of changes in equity and cash flow

statement, together with the notes forming part thereof, for the year then ended and we state that

we have obtained all the information and explanations which to the best of our knowledge and

belief were necessary for the purposes of our audit and, after due verification thereof, we report

that:

(a) in our opinion, proper books of account have been kept by the Company as required by the

Companies Ordinance, 1984;

(b) in our opinion:

(i) the balance sheet and profit and loss account together with the notes thereon have

been drawn up in conformity with the Companies Ordinance, 1984 and are in

agreement with the books of account and are further in accordance with accounting

policies consistently applied:

(ii) the expenditure incurred during the year was for the purpose of the Company's

business; and

(iii) the business conducted, investments made and the expenditure incurred during the

year were in accordance with the objects of the Company;

to us, the balance sheet, profit and loss account, statement of changes in equity and the cash

flow statement, together with the notes forming part thereof, give the information required

by the Companies Ordinance, 1984 in the manner so required and respectively give a true

and fair view of the state of the Company's affairs as at December 31, 1999 and of the profit,

changes in equity and cash flows for the year then ended; and

(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance. [980 was

deducted by the Company and deposited in the Central Zakat Fund established under

section 7 of that Ordinance.

A. F. FERGUSON & CO.

Chartered Accountants

Karachi: 28 March 2000

Balance Sheet

as at December 31, 1999

Note

1999

1998

(Rupees in thousand)

SHARE CAPITAL AND RESERVES

Share capital

Authorised

800,000

==========

Issued, subscribed and paid up capital

669,477

Reserves

433,124

428,913

Unappropriated profit

358,071

259,044

-----------

1,460,672

1,357,434

SURPLUS ON REVALUATION OF FIXED ASSETS

104,708

108,919

LONG TERM LOAN - secured

300,000

LIABILITIES AGAINST ASSETS SUBJECT TO

FINANCE LEASE

2,870

6,205

DEFERRED LIABILITIES

Deferred taxation

65,394

76,252

Staff retirement benefits

89,164

97,918

-----------

154,558

174,170

CURRENT LIABILITIES

Short term loan

68,000

Finance under mark-up arrangements

626,399

2,072,099

Current maturity of liabilities against assets

subject to finance lease

3,796

3,037

Creditors, accrued and other liabilities

3,526,319

3,166,736

Dividends

355,438

549,224

-----------

4,511,952

5,859,096

CONTINGENCY & COMMITMENTS

-----------

6,534,760

7,505,824

==========

TANGIBLE FIXED ASSETS

Operating assets

1,726,334

1,725,128

Capital work-in-progress- at cost

101,209

69,021

1,827,543

1,794,149

INTANGIBLE FIXED ASSETS

Trade marks

LONG-TERM INVESTMENTS - at cost

95,202

LONG TERM LOANS

32,800

26,285

LONG-TERM DEPOSITS AND PREPAYMENTS

81,031

101,162

CURRENT ASSETS

Stores and spares

187,486

153,353

Stock-in-trade

3,088,685

4,203,468

Trade debts

217,501

242,715

Loans and advances

89,914

119,022

Trade deposits and short-term prepayments

67,720

54,664

Other receivables

157,954

94,074

Taxation - payments less provisions

619,381

540,856

Cash and bank balances

69,509

80,840

----------

4,498,150

5,488,992

----------

6,534,760

7,505,824

==========

The annexed notes form an integral part of these accounts.

JEAN-MARC DELPON DE VAUX

SYED BABAR ALI

Chairman & Chief Executive

Director

Profit and Loss Account

for the year ended December 31, 1999

Eighteen months

ended

December 31,

Note

1999

1998

(Rupees in thousand)

Sales

19,366,254

27,656,139

Cost of goods sold

15,001,028

22,744,507

----------

Trading profit

4,365,226

4,911,632

Administration and selling expenses

2,705,767

3,221,540

----------

Operating profit

1,659,459

1,690,092

Other income

35,885

91,560

----------

1,695,344

1,781,652

Financial expenses

247,135

300,218

Auditors' remuneration

6,230

13,527

Workers' welfare fund

23,322

25,212

Workers' profits participation fund

62,816

62,385

----------

339,503

401,342

----------

Profit before taxation and restructuring costs

1,355.,841

1,380,310

Restructuring costs

190,000

231,317

----------

Profit before taxation and after restructuring costs

1,165,841

1,148,993

Taxation

401,881

410,664

----------

Profit after taxation

763,960

738,329

Unappropriated profit brought forward

259,044

332,110

----------

1,023,004

1,070,439