Fueling Growth With Our Brands

Transcription

1 Fueling Growth With Our Brands Annual Report 2011 Zambian Breweries Plc

2 Contents Performance Highlights 1 Mission, Vision & Values 2 Chairman s Statement 3 Managing Director s Statement 5 Board of Directors 10 Directors Report 11 Corporate Governance Report 13 Statement of Director s Responsibilities 19 Report of the Independent Auditor 20 21

3 Revenue 27% K781.9 billion Operating Profit 159% K137.5 billion Key Figures Operating profit increased by 159 per cent, the best performance for the past five years Consolidated beer volume grew by 29 per cent Consolidated soft drink volume grew by 4 per cent K million Company turnover (Incl. excise duty) 516, , , , ,181 Performance Highlights Company revenue (Excl. excise duty) 373, , , , ,913 Operating profit 69,526 98,208 93,314 53, ,594 Profit before taxation 63,713 89,298 73,476 3,820 67,511 Profit/(loss) after taxation 44,259 56,228 44,092 (720) 45,309 Total assets 381, , , , ,717 Current liabilities 151, , , , ,472 Shareholder s funds 190, , , , ,057 Fueling Growth With Our Brands 1

4 Mission, Vision & Values Our Mission To be the most admired and respected company in Zambia as judged by our stakeholders The investment of choice The employer of choice The partner of choice Our Values OUR PEOPLE ARE OUR ENDURING ADVANTAGE The calibre and commitment of our people set us apart We value and encourage diversity We select and develop people for the long term Performance is what counts ACCOUNTABILITY IS CLEAR AND PERSONAL We favour decentralised management and a practical maximum of local autonomy Goals and objectives are aligned and clearly articulated We prize both intellectual rigour and emotional engagement We are honest about performance We require and enable selfmanagement 2 Our Vision To own and nurture local and international brands which are the first choice of the consumer WE WORK AND WIN IN TEAMS We actively develop and share knowledge within the group We consciously balance local and group interests We foster trust and integrity in internal relations We encourage camaraderie and a sense of fun WE UNDERSTAND AND RESPECT OUR CUSTOMERS AND CONSUMERS We are endlessly concerned with our customers needs and perceptions We build lasting relationships, based on trust We aspire to offer the preferred choices of product and service We innovate and lead in a changing world OUR REPUTATION IS INDIVISIBLE Our reputation relies on the actions and statements of every employee We build reputation for the long term We are fair and ethical in all our dealings We benefit the local communities in which we operate

5 we anticipate the broadening of our product offering to our most cherished consumers through research, innovation and brandawareness Dear Shareholders, Trading conditions improved during the last half of the year owing to the lowering of excise duty applicable to clear beer. The business also experienced some improvement in operating costs following the implementation of a cost management programme in Management remained up-front in attending to variables that were critical to the profitability of the company. As a result, the business has been able to maintain its market leadership position in the beverage industry while at the same time offering extensive opportunities to other market players in its value-chain. The healthy relationship the company has with the government and other stakeholders remains the bedrock upon which Zambian Breweries Plc will continue to invest in the Zambian economy. All things remaining equal, we anticipate the broadening of our product offering to our most cherished consumers through research, innovation and brand-awareness initiatives in the years to come. Chairman s Statement Market Overview The general economic environment remained stable over the year with the key macro-economic variables such as the growth rate, exchange rate, inflation, and interest rates recovering to the pre-global credit crunch period. Interest rates softened a bit as Treasury bill rates hovered around 6.8 percent and inflation stood at 9 percent on average. Copper production and agriculture output continued to expand and with the copper prices projected to rise from the current US$9000 per tone to about US$12,000 in 2012, Zambia s economy will continue to show positive gains. Though the Kwacha remained generally stable against the South African Rand, The United States Dollar and the Euro, the negative impact of the exchange rate volatility arising from the 2008/2009 global economic crisis still affected the overall economic performance of the business. However, the reduction in excise granted towards the last quarter of the 2010 financial year enabled the Company to maintain pricing for beer. This has resulted in significant positive growth in beer volumes when compared to the previous year. Soft drink sales remained somewhat sluggish and despite investment in production capacity only a very slight growth in soft drink sales was recorded. 3 STRATEGIC REVIEW Even though significant strides have been made by government in ensuring the overall economic environment was conducive for business profitability, the company still experienced challenges that subsequently impacted operational and administrative performance. The cost of doing business has been exacerbated by the plethora of regulatory bodies that require licensing fees for us to carry out our business. The company is not opposed to any forms of fees as this is the only way of ensuring operational and product standards are maintained. The concern, however, is the number of licences that have to be paid to various regulatory and statutory bodies. Worse still, there has been lack of consistency in the charging structures as some licence fees are frequently adjusted upwards without any reasonable justification. In the interest of business sustainability and overall reputation of the investment climate, I implore government to ensure the legal environment is restructured so that it is predictable and competitive. As a business, we will be happy to pay various license and professional fees to statutory bodies as long we there is value-addition.

6 Notwithstanding, I am happy to report the company s improved contribution to the Zambian economy in the form of tax payments, employment generation and business support through supplier networks. Our overall contribution to the economy has always been measured by expanding capital-to-gdp ratios, wider local value chain network through local sourcing, high capital-to-employment ratios as our employees remain among the best remunerated in the country as well as value addition in our manufacturing business. Through the business-linkages programme, we have been able to help companies associated with us adopt internationally accepted business performance standards. Chairman s Statement (contd) SUSTAINABLE DEVELOPMENT: The Company is committed to operating in a responsible and accountable manner, in a way that reduces its environmental footprint and enhances the communities it touches. It is important for a company of this size to understand the social and environmental impact in the markets in which it operates. The Company, together with other industrial players, is spearheading the formation of the Producer Responsibility Organisation (PRO) for waste management. It has also led to initiatives targeting alcohol abuse, especially by those under the legal drinking age and motorists, through joint efforts with various stakeholders such as local government authorities, the Zambia Police, the Road Transport and Safety Agency, Lusaka Liquor Traders Association, some non-governmental organisations and agencies. The Company is particularly concerned about the reckless distribution of alcohol in plastic sachets through unlicensed channels giving minors uncontrolled access to alcohol. After the successful barley cultivation pilot project launched in 2009, the Company has deepened its local sourcing initiative both in the downstream and upstream value chain. In January this year, it signed a business-linkage Memorandum of Understanding with the Zambia Development Agency to support SMEs linked to Zambian Breweries Plc. The Company also experienced a significant drop in the incidences of HIV/ AIDS to levels below the national average. This was achieved through internally managed initiatives aimed at combating the spread of the disease. CORPORATE GOVERNANCE: The Company continues, through the Board, to place great emphasis on the maintenance of sound corporate governance and continues to insist on compliance to a strict set of governance codes by all employees as well as all suppliers of goods and services to the Company. It is with some gratification that I report that no significant breaches of ethics were reported during the year under review. 4 PROSPECTS FOR THE FUTURE: The stable macroeconomic environment has created a basis for sustainable economic growth and the company intends to take full advantage of the increasing consumer spend. Our focus will continue to be on top line growth and containment of costs so as to enhance earnings over the long term. We will make the necessary investments to support our growth ambitions. We urge government to continue to adopt policies that encourage the growth of the manufacturing sector and the use of local raw materials as this creates jobs across the entire value chain. The Company s results demonstrate the positive impact on all stakeholders when progressive policies are implemented. Valentine Chitalu Chairman

7 Lager beer sales for the year were extremely buoyant and the Company recorded a sales volume growth of 29% above prior year. Our aim is to be a total beverage company and as such we seek to own and nurture both local and international brands which are the first choice of the consumer. We continue to focus on building the equity of our brands, ensuring affordability through pricing and operational efficiency. Key strategic objectives for the year were to strengthen our portfolio of mainstream brands, revitalise our soft drink business, and enhance profitability by optimising operational efficiency and managing down costs. In order to maximise volume potential, management also focused on improving in-trade execution, driving a high performance culture and the pragmatic rehabilitation of infrastructure. Clear Beer Lager beer sales for the year were extremely buoyant and the Company recorded a sales volume growth of 29% above prior year. This performance is attributed to improved affordability, more effective distribution and increased capacity as a result of the Ndola brewery upgrade. Mosi Lager, Eagle Lager and Castle Lite have been the star performers in this category, while Castle Lager has continued to show strong growth. Key initiatives in ensuring there was significant growth in our clear beer brands included the penetration of major provincial centres, an increase in draught beer outlets, enhanced brand propositions in our marketing strategies and attractive packaging. In doing all this, we ensured that the quality of our beer brands met the SABMiller global manufacturing standards. Managing Director s Statement Soft Drinks Growth in soft drinks sales volume has been disappointing and has lagged behind expectations despite the introduction, in the third quarter, of Oasis, a Coca-Cola Company mineral water brand. Part of the problem is that soft drinks are relatively expensive in Zambia due to heavy taxation; about a third of the recommended retail price for Coca-Cola products constitutes taxes. The price differential with neighbouring countries has provided a lucrative opportunity for smugglers to exploit. A significant point of pride for us is the quality of our soft drink brands which are produced under license to The Coca-Cola Company and meet the very highest international quality standards. It is with grave concern that we have recently become aware of criminal elements producing counterfeits of our products. This development will require aggressive management and close cooperation with the authorities to eliminate. Also of concern is the misleading advertising practiced by some competitors in the market place. Advertising copy and labelling appear deliberately designed to mislead consumers in respect to the ingredients of the products and this is being ignored by the regulatory authorities. 5 Human Resources We have always believed that our people are an enduring advantage in a competitive market place. We invest in extensive learning and development programmes at all levels of the business to ensure that we remain efficient, effective and competitive. The learning and development programmes implemented during the year have focussed on the development of competencies in the areas of manufacturing, marketing, sales and distribution. The Coca-Cola Company has continuously provided specialised training and know-how in all areas of the soft drinks business. We are grateful for this additional support. Our reputation for training and developing people continues to attract high calibre people to our business. We are very proud of the fact

8 that, as a consequence of our talent management process, the Company has been in a position to expatriate three Zambian employees to senior positions within SABMiller Africa companies in Malawi, Ghana and Mozambique. These employees will bring back valuable experience to Zambia in the future. We have ensured that the work environment is conducive to meaningful employee engagement and good industrial relations by maintaining open two-way internal communication processes. Negotiations with Unions for terms and conditions of service are managed in line with the requirements of the law and this has promoted industrial harmony. HIV / AIDS and its effective management remain key concerns of the Company and significant time and effort are expended in ensuring that activities in this area are effective. In the year under review, 70% of our employees were re-tested for HIV/AIDS and it was shown that the prevalence rate had declined. The Company offers free ART treatment for all those infected including spouses of employees and their children under the age of 21. Managing Director s Statement (contd) STRATEGIC REVIEW: Our strategic priorities of investing in our brands, investing ahead of demand and sustainable development remain relevant and appropriate as evidenced by the Company s performance for the year under review. Investment in brands: The Company remains committed to offering the consumer a wide range of high quality brands and to constantly invest in the equity of those brands. Efforts during the year under review have focussed on improving product availability through enhanced production and distribution capacity. We want our brands to be the consumer s first choice at point of purchase; to that end we continued to invest in coolers and other point of purchase materials. 6 Contributing to enterprise development through our brands. The availability and affordability of our products has been significantly improved through better operational efficiency and stable pricing. We continue to improve in-trade execution in order to maximise sales opportunities. Our mainstream brand portfolio has been strengthened to meet a wide range of local tastes and marketing investment will be further enhanced through the continued sponsorship of the Zambian National Football Team, the Castle 7 s and other high profile activities. The Copa Coca-Cola for schools has continued as a vehicle for nurturing talent. Local and international worth-more markets have been further developed with ongoing investment in and support for Mosi Gold as well as Peroni and Miller Genuine Draft. These brands have strengthened our brand portfolio significantly and enhanced both volume growth and profitability. The Economy segment of the beer market grew by over 50%. Our economy brand Eagle, did not only contribute to the growth and profitability of the company but also contributed to the economic well being of the thousands of small scale farmers engaged in growing sorghum, a major ingredient for the brand. In addition, Oasis water, a Coca Cola Company brand, was launched during the year to widen the range of products offered to consumers.

9 Sustainable Development: The SABMiller Company has identified ten priorities for Sustainable Development which every subsidiary is obliged to implement and measure progress. The company s progress against these 10 sustainable development priorities improved substantially over the course of the year under review. Areas in which the business made particularly good progress were in human rights issues, alcohol responsibility, HIV/AIDS and enterprise development. In this latter area our local sourcing initiatives have shown particular success with all barley required for lager beer production now being grown in Zambia for the first time. Unfortunately despite focussed attention being paid to understanding our water, energy and carbon footprints progress was slow and will require additional attention in the year ahead. In March, 2011, Oxfam America, SABMiller and The Coca-Cola Company released a report on an ambitious study into the economic and social impacts of the value chains of both SABMiller and the Coca- Cola Company on communities in El Salvador and Zambia. This study puts people at the centre of the process and reflects a commitment by the parties to collaborate strategically in forging a new partnership between the private sector and civil society in order to broaden the concept of corporate social responsibility and develop a shared agenda through dialogue. In response to the recommendations contained in the report, Zambian Breweries has prepared a series of specific actions around the focus areas of macro-economic impacts; business linkages; livelihoods; empowerment; water; diversity and gender equality. Capital Investment Programme: The Company s strategy of investing in capacity ahead of demand is on track with capital investment for the year being K62bn. During the year the Ndola plant was upgraded to enable it to produce our leading brand Castle which was only being brewed and packaged in Lusaka in order to meet increasing demand in the Copperbelt. A bottled mineral water production capability was established in Lusaka with the purchase and installation of a new packaging line. Several smaller investments were made in Lusaka and Ndola to improve production efficiency. Due to expectations of ongoing growth of the beverage market, additional investment in infrastructure will be made in the future to further enhance manufacturing and distribution capacity and capability. LOOKING AHEAD Against the backdrop of a successful trading year, we can now look forward to an exciting and challenging year ahead. We are positive that the government will continue to align its fiscal and monetary policies to benchmarks stipulated in the current national budget. The development of new roads and the rehabilitation of old ones are particularly positive for our business as we move all our products by road. New roads will give us all year access to most parts of the country allowing us to take our quality products to all corners of the country. The general economic outlook for the country remains upbeat on the back of increasing private and public sector investment and high copper prices. The relatively stable Kwacha has reduced volatility in the pricing of our products thereby making them more affordable. We are taking steps to position ourselves so that we can effectively take advantage of the opportunities presented by the country s strong economic fundamentals. Our vision is to remain the number one beverage company in Zambia as measured by volume, profitability, market share and reputation. Our investment programme will continue unabated with increased focus on the mordernisation and expansion of our facilities in the Copperbelt. We will further enhance the profitability of the business by improving our production efficiency, keeping a close eye on costs and by defending and growing our market whilst being responsive to the needs of our customers and consumers. 7 Pearson Gowero Managing Director

10 Brands that grow with Zambia! Fueling happy moments with our brands 8 Empowering local smallscale farmers through innovative brands

11 Open Happiness Left: THE WINNING COMBINATION Award winning Mosi has been a long standing partner with the Zambia National Soccer Team 9 Our brands are fueling growth of the future generation

12 Board of Directors 1 Valentine Chitalu*** Board Chairman - Zambian Breweries Plc Valentine (47) is an entrepreneur in Zambia and Southern Africa specializing in private equity and local private sector development. Until December 2003, Valentine worked for CDC/Actis in London and Lusaka specializing in deals origination throughout Southern Africa and portfolio management in Zambia and Malawi. Valentine was previously Chief Executive Officer at the Zambia Privatisation Agency where he was responsible for the divestiture of over 240 enterprises. He also worked for KPMG Peat Marwick in the United Kingdom in the early part of his career. Valentine holds several board positions in Zambia South Africa and the United Kingdom and is Chairman of several corporate organizations. Valentine is a qualified Accountant and holds a Masters Degree in Development Economics. 2 Pearson Gowero* Managing Director - Zambian Breweries Plc Pearson (52) joined Delta Corporation of Zimbabwe (a subsidiary of SABMiller) in 1997, holding a variety of positions in Marketing and general management before being promoted in 2003 to the position of Executive Director of the Beverages Division where he had responsibility for the clear beer, soft drinks and opaque beer. Pearson holds a BSc (Econ) from the University of Zimbabwe and an MBL from UNISA. He joined Zambian Breweries Plc as Managing Director on 1st September, George Sokota*** Non-Executive Director - Zambian Breweries Plc George (63) is a professional accountant and financial consultant in private practice. He is a Fellow of the Institute of Chartered Accountants in England and Wales. He is also a Fellow of the Association of Certified Accountants, United Kingdom and Fellow of the Zambia Institute of Certified Accountants. He sits on a number of notable boards, several of which he chairs. 4 David Kvalsvig** Financial Director - Zambian Breweries Plc 10 Dave (49) joined SABMiller in 1989 where he has held several senior financial positions within the Africa and Asia Divisions of the Company. Prior to joining Zambian Breweries on 1st July, 2008, he was Financial Director at Swaziland Beverages Limited. 5 Gerard Besson** Company Secretary - SABMiller Africa & Asia Gerard (63) joined the South African Breweries Company in 1971 and has worked in several of the SAB subsidiaries including Lion Match, OK Bazaars and South African Breweries International where he was Company Secretary. He is currently Company Secretary of SABMiller Africa and Asia. He is a member of the Institute of Chartered Secretaries and Administrators and of the South African Institute of Professional Accountants. 6 Wesley John Tiedt** Managing Director - National Breweries Plc Wes (59) joined SABMiller in 1998 in Botswana as General Manager of Botswana Breweries Limited. He joined National Breweries in Lusaka in May 2003 as Managing Director of National Breweries Plc as well a Director of Zambian Breweries Plc. and was appointed a Director of Chibuku Products Limited of Malawi from May Wes has over 30 years experience in opaque beer and related products. Wes is also a member of the Institute of Brewing & Distilling and a Fellow of the Chartered Management Institute (CMI) FCMI of the United Kingdom. Executive Management Committee Pearson Gowero Managing Director Dave Kvalsvig Financial Director Patrick Lead Marketing Director Andrew Ross Sales & Distribution Director Ian Mackintosh Technical Director Nyangu Kayamba Human Resource Director Chibamba Kanyama Corporate Affairs Director ***Zambian, **South African, *Zimbabwean.

13 The Directors submit their report together with the audited financial statements for the year ended 31 March 2011, which disclose the state of affairs of the Zambian Breweries Plc ( the Company ). Principal activities The principal activities of the Company are the production and distribution of clear beer and soft drinks. In the opinion of the Directors, all the activities of the Company substantially fall within the beverage industry. Share capital There were no changes in share capital during the year. Operating results and dividends On 1 April 2010, the assets and liabilities and operations of Copperbelt Bottling Ltd, Zambia Bottlers Ltd and Northern Breweries Plc were merged into Zambian Breweries Plc. The impact on the Company s Reserves of this consolidation was nil and these three companies have since been wound up. The group of four companies referred to as the Company in the prior year financial statements now operates as one company, Zambian Breweries Plc. The financial results of Zambian Breweries Plc, the Company, presented in this year s financial statements are therefore comparable to the financial results of the Company presented in the prior year. K million Revenue 781, ,558 (Loss)/profit for the year after tax 45,308 (720) Directors Report The Directors do not recommend the payment of a dividend. Directors The Directors who held office during the year and to the date of this report were: Valentine Chitalu - Chairman Pearson Gowero - Managing Director David Kvalsvig - Financial Director Wesley Tiedt - Non-Executive Director Gerard Besson - Non-Executive Director George Sokota - Non-Executive Director Number of employees and remuneration The total remuneration of employees during the year amounted to K70,828 million (2010: K65,664 million) and the average number of employees was as follows: 11 Month Number Month Number Month Number Month Number April 910 July 943 October 1,009 January 963 May 926 August 953 November 952 February 945 June 941 September 957 December 966 March 955 The Company recognises its responsibility regarding the occupational health, safety, and welfare of its employees and has put in place measures to safeguard them. Gifts and donations During the year the Company made charitable donations totalling K86 million (2010: K179 million). Exports Beer to the value of K125 million (2010 K nil) was exported to Malawi, and barley to Tanzania with a value of K 2,316 million (2010 K nil) during the year.

14 Property plant and equipment The Company purchased property, plant and equipment amounting to K61,780 million (2010: K309,627 million) during the year. In the opinion of the Directors, the carrying value of property, plant and equipment is not more than its market value. Research and development No research and development costs were incurred by the Company during the year (2010: nil). Auditors The Company s auditors, PricewaterhouseCoopers, have indicated their willingness to continue in office. In accordance with section 171(3) of the Companies Act, a resolution for their reappointment will be proposed at the annual general meeting. Directors Report (contd) By order of the Board M. Mutimushi Company Secretary 13 May

15 At Zambian Breweries Plc, we are committed to sustained high performance, supported by good governance. We want to run our business in a manner which is responsible and consistent with our belief in honesty, transparency and accountability. For us, good governance means managing our business well and engaging effectively with our stakeholders. It is never simply an exercise in compliance, but a key element underpinning the long-term growth of our business. As such, maintaining a track record of sound Corporate Governance principles is the hallmark of our achievements. We believe that a corporate culture of compliance with applicable laws, regulations, internal policies and procedures is a core component of good Corporate Governance. Consequently the Company adheres to the laws applicable to it, to include among others, the Company s Act, Employment Act and Factories Act. We continually draw guidance from the Securities and Exchange Commission, Lusaka Stock Exchange and its Listing Rules, the UK Combined Code on Corporate Governance, now updated by the Financial Reporting Council and renamed the UK Corporate Governance Code and the Turnbull guidance report on internal controls. We also continue to enforce and foster the Declaration of Gifts and Ethics policies which are in place. FRAMEWORK Zambian Breweries Plc has established a formal governance framework by way of adopting comprehensive Board Procedures on Corporate Governance. This framework provides detailed guidance for effective governance of the Company which includes formal policies, procedures and relevant management reporting requirements. We are zealous at improving our governance practices to suit the changing needs and review the governance practices from time to time, This report therefore aims to provide an overview of the Company s governance practices. It is comprehensive, albeit to avoid duplicity of information the other relevant information will be contained in the other reports and financial statements that form part of the Annual Report for the year. THE BOARD OF DIRECTORS The Board is elected by the shareholders of the Company in accordance with the provisions of the Articles of Association of the Company. It is responsible for the Company s direction, policies and strategies and all investment and divestment decisions. The Board ensures that the Company meets responsibilities to all its stakeholders and is prudently managed against the major risks inherent in general business dynamics. Corporate Governance Statement COMPOSITION AND ROLE OF THE BOARD The Board consists of six directors. Two independent members, one of whom is the Chairman, two executive Directors; the Managing Director, and the Financial Director, and two non-independent and non-executive members Directors. The Board has a majority of non-executive Directors. The Executive Directors propose strategy and implement operational decisions concerning the Company s businesses. Non-executive Directors compliment the skills and experience of the executive directors, by contributing to the formulation of strategy, policy and decision making through their knowledge and experience of other businesses and sectors. There is a clear division of responsibilities between the Chairman and the Managing Director. The Chairman of the Board is responsible for the leadership of the Board, ensuring its effectiveness in all aspects of its role and setting its agenda, taking into account the issues relevant to the Company and the concerns of all Board Members. The Chairman also maintains effective communication with the shareholders and ensures that all Directors receive sufficient, timely and accurate information on all issues to be dealt with by the Board. The Managing Director is responsible for the executive leadership and day-to-day management of the Company. He is accountable to the Board for the development, recommendation and implementation of strategies, policies and the framework of controls. The Managing Director is assisted by a team of Directors for each function within the business. The Board believes that its overall composition in the year under review continued to remain appropriate, having regard in particular to the independence and integrity of all of its Directors and experience and skills which they bring to their duties. 13

16 BOARD MEETINGS AND ATTENDANCE The Board met three (3) times during the year and in addition held the Annual General Meeting (AGM) on 8th July, The Audit Committee also met three times during the year. The external auditors, the Chief Executive and Financial Director were in attendance but only by invitation. Other members of the Board attended as required. Individual directors attendance at board and committee meetings and at the AGM is set out in the table below Directors attendance (1 April 2010 to March 2011) and Committee Membership Name Board Attended Possible Audit Committee Attended Possible Corporate Governance Statement (contd) V. Chitalu 3 3 G. Sokota G. Besson P. Gowero W. Tiedt 3 3 D. Kvalsvig Alternate member: *B. Hirsch 1 1 *Mr. Hirsh was appointed as Alternate Director during the year. BOARD COMMITTEES Whilst significant matters are dealt with by the Board, the Board Committees have been delegated with the responsibility of assisting the Board carry out its duties and to enhance effectiveness. To this end, the Executive Committee meets weekly and serves to assist the Board to co-ordinate, guide and monitor the management and performance of the Company. The Audit Committee supports the Board in fulfilling its oversight responsibility with regard to financial reporting, the system of internal controls and the process for monitoring compliance with laws and regulations. It is composed of three members, all of whom are independent of management. The head of the Internal Audit reports at the Audit committee meetings and has unrestricted access to the chairperson of the Audit committee. The department has a robust and continuing training program. As a consequence of the foregoing, the Board has satisfied itself of the effectiveness of the Audit Committees input to the business and therefore deems appropriate the composition of the Audit committee. 14 BOARD EVALUATION The Board performs a self evaluation assessment to assess the effectiveness of their functioning. This is against set benchmark parameters alongside which performance is evaluated. Appraisal is led by the Chairman with input from both the executive and non-executive Directors. RETIREMENT AND ELECTION OF DIRECTORS It is the Board s policy that new Directors are subject to election at the first opportunity following their appointment. Non-executive Directors are subject to retirement and re-election on annual basis, in accordance with the Articles of Association. COMPANY SECRETARY The Company Secretary is appointed by the Board of Directors. All Board members have access to the secretarial services provided by the secretarial office. In liaison with the Chairman, the Company Secretary ensures timely communication and circulation of all matters relating to the Board. The Company Secretary ensures the following:- That the annual calendar is prepared, approved and circulated to all members after approval

17 Adequate information is provided and circulated to all members prior to board or sub-committee meetings Culture of good corporate governance is promoted Liaison with statutory regulators of listed Companies Compliance with listing rules Maintaining statutory register STAKEHOLDER RELATIONS Zambian Breweries Plc places considerable importance in maintaining active investor relations through open, fair and transparent communications. The Company ensures timely dissemination of information to its investors and other stakeholders through various media. A dedicated shareholders unit through transfer secretaries is responsible for active interaction with the shareholders. The Company went beyond the unit and organized a shareholders day during the year to augment and harness the relationship with the shareholders. The Board considers the AGM key in providing shareholders with the opportunity to ask the Board and Chairperson of the Audit Committee questions concerning the affairs of the Company. It is held within three (3) months of the close of the financial year or longer with the necessary permissions from regulators, if required. Accordingly, all legal and regulatory requirements, notices and information is released well in advance to shareholders, regulators, stock exchange and Company and LuSE websites. To this end, the Company ensures copies of the Annual Report and Accounts are made available well before the AGM as this ensures the shareholders have insight of the business performance. STAKEHOLDER ENGAGEMENT AND ENTERPRISE DEVELOPMENT In the year under review, we engaged the Government in an advisory role on youth employment issues and this culminated in a youth conference held in Kitwe on January 24, An International Labour Organisation-initiated agreement for a business linkages programme was signed which is meant to support local entrepreneurs within Zambian Breweries value chain. It involves offering training and guaranteeing market for the entrepreneurs. This was jointly arranged by the Ministry of Commerce, Trade and Industry; the Zambia Development Agency and Zambian Breweries. The Republican President, Mr. Rupiah Banda officiated as Guest of Honour at the opening ceremony. We have also continued to be the leading sponsor of the Teen Vision Trust annual mentorship programme which hosts over 2,000 young people. The Company provides materials and information on under-age drinking, entrepreneurship development, HIV/AIDS and waste management Through DMI St Eugene, a Catholic Church organization, Zambian Breweries Plc has recently forged links with women clubs in residential compounds around its locality. The company has pledged to provide market for the various items produced by the women. The items will in turn be donated to needy organizations and individuals identified by Zambian Breweries as part of its Corporate Social Responsibility activities. External stakeholders should be able to access information easily to enable them to assess our performance against stated values and to make informed judgements about the business. We also aim to improve our reporting in response to stakeholder needs. Through the RADAR corporate survey approach, Zambian Breweries has subjected itself to an assessment which measures performance. Feedback is later given on the importance and impact of the overall country reputation to the global reputation of the company. This has been taking place since RADAR results released in 2011 indicate that Zambian Breweries is still top as the most reputable alcohol beverage company in Zambia. This is mainly attributed to the company s high quality products and standards having been around for a long time in Zambia and because it is seen to be the market leader in its sector. In addition, there is a strong correlation between the reputation of the Mosi brand and the company reputation, with the former having an impact on the latter. When it comes to alcohol related issues, the main concerns are underage drinking and selling to minors. Drinking and driving is now the number one concern for Government, which is significantly different to 2008, when it was not a top of mind concern. Perception of CSR driver performance has improved across all stakeholder Companies. There has been great improvement particularly with regard to Responsible Consumption, Social Investment and 15

18 16 Corporate Governance Statement (contd) Women groups from communities around our operational sites are benefiting from the Company s vibrant CSR programmes Environmental Management. The significant increase is shown particularly for Responsible Consumption. Generally speaking, Employees, Government, Media and the General Public have indicated that performance has improved across all reputation drivers. Notable improvements are for Trusted Company, Social Investment, Responsible Consumption, Environmental Management, Quality Products and Fairly Priced Products. SUSTAINABLE DEVELOPMENT AND CORPORATE SOCIAL RESPONSIBILITY In view of the enactment of the Environmental Management law which will compel all persons who produce waste to take measures of managing it, the Company has seen it fit to be proactive and immediately take on in the registration process of the Producer Responsibility Organisation (PRO). Funding for consultancy services has been sourced from the British High Commission while industry players are expected to contribute the remaining 50%. A consultant, and an environmental lawyer, has been engaged to carry out consultancy services. Zambian Breweries currently chairs the PRO. Alcohol Issues Being responsible for manufacturing clear beer, we continue to take an active role as Government advisor toward the establishment of the National Alcohol Policy. A series of meetings led by the Ministry of Health with participants drawn from various non-governmental organizations and government departments started in March and are expected to progress until August. Self auditing has continued with the Sales & Marketing Compliance Committee sitting in the last quarter to review company s adherence to responsible commercial communication as outlined in the Marketing and Research Policies of the SABMiller Alcohol Framework. Alcohol Behaviour & Communication (ABC) training for members of staff continued. This has now been compressed and made part of the induction programme for new employees. New employees, however, still have to undergo the full AB & C training at a later stage. Reputation Management We at Zambian Breweries have the highest regard for our reputation. To this end, we took up sponsorship of a radio programme under the auspices of the Institute of Directors (IoD). The programme is aimed at enhancing corporate governance values in Zambian companies, both small and large. Zambian Breweries is represented on the IoD board and chairs the Corporate Governance and Training committee.

19 The Company has continued measuring its progress against the ten sustainable development priorities through the Sustainability Assessment Matrix (SAM). Zambian Breweries Plc and all other SABMiller subsidiaries submit data twice a year after which results are reviewed by senior management and these contribute to the company s public reporting. The ten sustainable development priorities are as follows:- 1. Responsible drinking - as one of the world s largest brewers, we believe our beer adds to the enjoyment of life for the overwhelming majority of our consumers, who drink responsibly. We care, however, about the harmful effects of irresponsible alcohol consumption on individuals and society. 2. Water - water quality and availability are under threat in some parts of the world. We aim to be more efficient in our water use, understand our watersheds and engage with our suppliers. We aim to make more beer but using less water. This will cut costs, reduce risks and benefit local communities. 3. Energy & Carbon - We are beginning to understand which parts of our value chain create the most emissions, helping to target our reduction programmes. We use energy to produce and transport our products. We must become more efficient, manage our carbon footprint and explore cleaner sources of energy. This will save money and resources and reduce our greenhouse gas emissions. 4. Packaging - Packaging protects our products but has wider environmental impacts. We are reducing the weight of our packaging, reusing bottles and encouraging recycling, thereby saving money and raw materials and reducing pressure on local waste services. 5. Waste - Zero-waste from our breweries is now becoming a possibility. Much of our waste can be a valuable resource for farmers and food producers, as well as be a potential energy source. We aim to minimise the amount of waste we send to landfill, so saving money and reducing its environmental impact. 6. Enterprise development - Building supply chains that reflect our own values and commitment is a prime focus for us. We recognise that our influence extends beyond our own immediate operations to include those of our value chain partners for example, suppliers of raw materials and distributors of our products. Encouraging enterprise development in our value chains is one of our global focus areas. 7. Communities We aim to bring benefits to the communities we serve. The prosperity of the communities in which we work and of our operations are co-dependent. Our corporate social investment (CSI) activities aim to improve the quality of life for local people, helping to build strong relationships with suppliers, consumers and our employees. 8. HIV/Aids - We are working to contribute to the reduction of HIV/Aids within our sphere of influence. We have programmes in place for our employees, their families, local communities and suppliers and we share our experiences with our operations around the country. This helps us to ensure the wellbeing of our staff and the stability of our workforce. 9. Human rights We aim to respect human rights in all we do. We conduct our business with respect for national cultures and different local laws, norms and traditions. We promote the values of the international community, notably the Universal Declaration of Human Rights. 10. Transparency & ethics We are committed both to transparent Sustainable Development reporting and to high ethical standards in general. 17 We believe in reporting our sustainable development progress and performance to our stakeholders, knowing there is demand greater transparency in our dealings. Internally, the Board and Management are aware that communication is not only critical, but that it also contributes to the success of the business. To this end, it ensures that communication is both timely and effective. EXTERNAL AUDITORS The external auditors are responsible for reporting on whether the financial statements are fairly presented in line with the International Financial Reporting Standards and the manner required by the Companies Act. STAFF DEVELOPMENT, TRAINING AND INFORMATION TECHNOLOGY The Company is committed to staff development and training as this is critical to the continued sustainability of our operational capability.

20 In the area of Information Technology, the company continued to invest in key areas that included upgrade of the Financial and Management operational systems and acquisition of additional Hardware and IT equipment. With the opening of the Depots in Mansa, Mpika, Mongu and Chipata the company had to electronically link the depots to the main head office in Lusaka. Appropriate IT equipment was procured and installed by the close of the financial year. By automating and linking the depots to the main head office, this will improve on information processing and decision making. Corporate Governance Statement (contd) ORGANIZATIONAL INTEGRITY In its continued efforts to foster integrity within the organisation, the Company continues to enforce the Ethics policy and encourages all employees to make a declaration of their assets and/or business involvements every year. Employees are also encouraged to declare all the gifts received in the course of employment by way of a gift register. LEGAL AND COMPLIANCE The company, as part of its management structure, has a Legal Counsel who deals with all matters pertaining to monitoring compliance with laws and regulations. The board and senior management are briefed, by the Legal Counsel, of any changes to the laws that are seen to impact on the business 18

21 The Zambia Companies Act requires the directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Company as at the end of the financial year and of its profit or loss. It also requires the directors to ensure that the Company keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Company. They are also responsible for safeguarding the assets of the Company. The directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable estimates, in conformity with International Financial Reporting Standards and the requirements of the Zambia Companies Act. The directors are of the opinion that the financial statements give a true and fair view of the state of financial affairs of the Company and of its profit in accordance with International Financial Reporting Standards. The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement. Nothing has come to the attention of the directors to indicate that the Company will not remain a going concern for at least twelve months from the date of this statement. Signed on their behalf by: Statement of Directors Responsibilities Valentine Chitalu Chairman Pearson Gowero Managing Director 13 May

22 Report on the financial statements We have audited the accompanying financial statements of Zambia Breweries Plc set out on pages 6 to 35. These financial statements comprise the balance sheet as at 31 March 2011 and the profit and loss account, statements of comprehensive income, statements of changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Directors responsibility for the financial statements Report of the Independent Auditor To the Members of Zambian Breweries Plc The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and with the requirements of the Zambia Companies Act and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion 20 In our opinion the financial statements give a true and fair view of the financial position of Zambia Breweries Plc at 31 March 2011, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and with the requirements of the Zambia Companies Act. Report on other legal requirements The Zambia Companies Act requires that in carrying out our audit we consider whether the company has kept proper accounting record and other registers required by this Act. In our opinion, based on our examination of those records, the company has maintained proper accounting records and other records and registers as required by the Zambia Companies Act. Chartered Accountants 2011 Lusaka Mark Libakeni Partner, signing for and on behalf of the firm PricewaterhouseCoopers, PwC Place, Stand No 2374, Thabo Mbeki Road, P.O. Box 30942, Lusaka, Zambia T: +260 (211) /2, F: +260(211) , A list of Partners is available from the address above

23 Profit and Loss Account 22 Statement of Comprehensive Income 23 Balance Sheet 24 Statement of Changes in Equity 25 Statement of Cash Flows 26 Notes

24 Profit and loss account Year ended 31 March Notes Turnover 996, ,256 Excise duty (214,268) (221,689) Profit and Loss Account Revenue 5 781, ,558 Cost of sales (415,651) (362,442) Gross Profit 5 366, ,11 Other income 6 9,829 5,660 Distribution costs (113,372) (91,368) Administrative expenses (105,268) (97,416) Other operating costs (19,857) (16,956) Operating profit 7 137,594 53,036 Finance costs 9 (70,083) (49,216) Profit before income tax 67,511 3,820 Income tax expense 10 (22,202) (4,540) Profit/ (loss) for the year 45,309 (720) 22 Earnings/(loss) per share for profits attributable to the equity holders of the Company - Basic and diluted (Kwacha per share) (1.98)

25 Statement of comprehensive income Year ended 31 March Profit/(loss) for the year 45,309 (720) Other comprehensive income for the year - - Total comprehensive income for the year 45,309 (720) Statement of Comprehensive Income 23

26 Balance sheet N otes At 31 March Equity Share capital Share premium 13 99,474 99,474 Retained earnings 137,219 91,887 Total equity 237, ,725 Balance Sheet Non-current liabilities Borrowings , ,200 Deferred income tax 15 90,188 68,552 Total non-current liabilities 490, ,752 Total equity and non-current liabilities 727, ,477 Non-current assets Property, plant and equipment Intangible assets Current assets Inventories Trade and other receivables Current income tax Cash and bank balances ,640 73, , ,089 51,786 20,297 22, ,634 73, , ,733 49,039 20, Current liabilities Trade and other payables Borrowings , , , ,811 75, , , , Net current liabilities (18,598) (234,054) Net assets 727, ,477 The financial statements on pages 22 to 51 were approved for issue by the Board of Directors on 13 May2011 and signed on its behalf by: Valentine Chitalu Chairman Pearson Gowero Managing Director

27 Statement of changes in equity Note Share Share Retained capital premium earnings Total Year ended 31 March 2010 At start of year , , ,558 Comprehensive income Total comprehensive income for the year - - (720) (720) Total comprehensive income - - (720) (720) Transactions with owners Dividends - Final for (18,113) (18,113) Total transactions with owners (18,113) (18,113) At end of year ,474 91, ,725 Year ended 31 March 2011 Statement of Changes in Equity At start of year ,474 91, ,725 Comprehensive income Total comprehensive income for the year ,309 45,309 Total comprehensive income ,309 45,309 At end of year , , ,057 25

28 Statement of cash flows Year ended 31 March Notes Statement of Cash Flows Cash flows from operating activities Cash generated from operations 22 29, ,951 Interest received 1, Interest paid (61,251) (42,987) Income tax paid 10 (114) (11,532) Net cash (used in) /generated from operating activities (30,871) 93,181 Cash flow from investing activities Purchase of property, plant and equipment 16 (54,304) (307,587) Purchase of software licenses 17 - (2,084) Proceeds from sale of property, plant and equipment 9,956 1,201 Proceeds from disposal of investment property - 9,325 Net cash used in investing activities (44,348) (299,145) Cash flow from financing activities Repayments of other borrowings (7,626) (7,500) Proceeds from bank loans 157, ,200 Repayment of bank loans (15,000) - Dividends paid to shareholders (15,180) (18,113) Net cash generated from/ (used in) financing activities 119,994 (231,587) Increase in cash and cash equivalents 44,775 25, Movement in cash and cash equivalents At start of year (97,138) (122,761) Increase/ (decrease) in cash and cash equivalents 44,775 25,623 At end of year 20 (52,363) (97,138)

29 NOTES 1 General information Zambian Breweries Plc is incorporated in Zambia under the Zambia Companies Act as a public company, listed on the Lusaka Stock Exchange and is domiciled in Zambia. The address of the registered office of Zambian Breweries Plc is: Plot Number 6438, Mungwi Road Heavy Industrial Area Lusaka Zambia. 2 Summary of significant accounting policies Notes The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. a) Basis of preparation The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). The measurement basis applied is the historical cost basis, unless otherwise stated in the accounting policies below. The financial statements are presented in Zambian Kwacha (K), rounded to the nearest million. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires directors to exercise its judgement in the process of applying the company s accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in note 4. Adoption of new and revised standards In 2010, the following new and revised standards and interpretations became effective for the first time and have been adopted by the Company. The adoption of these new and revised standards and interpretations had no material effect on the Company s accounting policies or disclosures. 27 IFRS 8 Operating segments effective for financial years beginning on/ after 1 January 2010 IFRIC 17 Distribution of non-cash assets to owner effective for financial years beginning on/ after 1 July 2009

30 NOTES (continued) 2. Summary of significant accounting policies (continued) New and amended standards, and interpretations mandatory for the financial year beginning 1 January 2010 but not relevant to the Company: Standard/ Interpretation IFRS 1 IFRS 2 (amended) IFRS 2 Title First-time Adoption of International Financial Reporting Standards - Additional exemptions for first-time adopters Share-based payment Group cash-settled share-based payment transaction Share-based Payment (part of Annual Improvement Project 2009) - Scope of IFRS 2 and revised IFRS 3 Applicable for financial years beginning on/after 1 July January July 2009 IFRS 3 Business combinations 1 July 2009 IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (part of Annual Improvement Project 2009) Disclosures of non-current assets (or disposal groups) classified as held for sale or discontinued operations 1 January 2010 IAS 27 (revised) IAS 38 Consolidated and Separate Financial Statements Intangible assets (part of Annual Improvement Project 2009) Additional consequential amendments arising from revised IFRS 3 1 July July IAS 39 Financial Instruments: Recognition and Measurement (part of Annual Improvement Project 2009) 1 January 2010 (i) Treating loan prepayment penalties as closely related embedded derivatives (ii) Scope exemption for business combination contracts IFRIC 9 & IAS 39 Reassessment of embedded derivatives & 30 June 2009 Financial Instruments: Recognition and Measurement IFRIC 18 Transfers of assets from customers 1 July 2009

31 NOTES (continued) 2. Summary of significant accounting policies (continued) Standards and interpretations issued but not yet effective The following new standards, amendments to existing standards and interpretations have been issued and are mandatory for the Company's accounting periods beginning on or after 1 January 2011 or later periods and are not expected to be relevant to the Company. Standard/ Interpretation IFRS 1 (amended) IFRS 9 Title First-time Adoption of International Financial Reporting Standards Limited exemption from comparative IFRS 7 disclosures for first-time adopters Financial instruments part 1: Classification and measurement Applicable for financial years beginning on/after 1 July January 2013 IAS 24 (amended) Related party disclosures 1 January 2011 IAS 32 (amended) Financial instruments: Presentation 1 February 2010 Classification of rights issue IFRIC 14 (amended) IAS 19 The limit on a defined benefit asset, minimum funding requirement and their 1 January 2011 IFRIC 19 Improvements to IFRS interaction Extinguishing Financial Liabilities with Equity Instruments 1 July 2010 Improvements to IFRS were issued in May The amendments that are relevant to the Company s operations relate to IAS 1, Presentation of financial statements and IFRS 7 Financial Instruments: Disclosures. Most of the amendments are effective for annual periods beginning on or after 1 January 2011 with early application permitted. IFRS 7, Financial Instruments: Disclosures. The amendment emphasises the interaction between quantitative and qualitative disclosures about the nature and extent of risks associated with financial instruments. IAS 1, Presentation of financial statements. The amendment clarifies that an entity must present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements. 29 Early adoption of standards The Company did not early-adopt new or amended standards in 2010/11 b) Functional currency and translation of foreign currencies Functional and presentation currency Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ).

32 NOTES (continued) 2 Summary of significant accounting policies continued b) Functional currency and translation of foreign currencies (continued) Transactions and balances Foreign currency transactions are translated into the functional currency of the Company using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the profit and loss account within finance income or cost. All other foreign exchange gains and losses are presented in the profit and loss account within other (losses)/gains net. c) Trade and other receivables Trade and other receivables are amounts due from customers for merchandise sold or services rendered in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non current assets. Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. A provision for impairment of receivables is established when there is objective evidence that the Company will not be able to collect all the amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the profit and loss account within administrative expenses. d) Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within borrowings under current liabilities on the balance sheet. 30 e) Trade and other payables Trade and other payables are obligations to pay for goods and services that have been acquired in the ordinary course of the business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. f) Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method; any differences between proceeds (net of transaction costs) and the redemption value are recognised in the profit and loss account over the period of the borrowings. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

33 NOTES (continued) 2. Summary of significant accounting policies continued g) Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Company s activities. Revenue is shown net of excise duty, value-added tax (VAT), returns, rebates and discounts. The company recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the company and when specific criteria have been met for each of the company s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The company bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Revenue is recognised as follows: (i) (ii) Sales of goods are recognised in the period in which the company delivers products to the customer, the customer has accepted the products and collectability of the related receivables is reasonably assured. Interest income is recognised using the effective interest method. Dividends are recognised as income in the period in which the right to receive payment is established. h) Property plant and equipment All categories of property, plant and equipment are initially recorded at cost and are subsequently stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated using the straight line method to write down their cost to their residual values over their estimated useful lives, as follows: Buildings Plant and equipment Returnable containers Motor vehicles years 3 20 years years 5 years The residual values and useful lives of the assets are reviewed, and adjusted if appropriate, at each balance sheet date. 31 Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell, and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are included in the profit and loss account.

34 NOTES (continued) 2. Summary of significant accounting policies continued i) Intangible assets (i) Goodwill represents the excess of the cost of an acquisition over the fair value of the company's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units represents the company s investment in each reporting segment. (ii) Computer software is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. The computer software is amortised over its useful life of 3 years. j) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined by the Company s standard costing method. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct cost and related production overheads (based on normal operating capacity), but excludes borrowing costs. Net realisable value is the estimate of the selling price in the ordinary course of business, less the cost of completion and selling expenses. k) Employee benefits (i) Retirement benefit obligations 32 The Company operates defined contribution retirement benefit schemes for its employees. The Company and all its employees also contribute to the National Pension Scheme Fund, which is a defined contribution scheme. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The assets of all schemes are held in separate trustee administered funds, which are funded by contributions from both the Company and employees. The Company s contributions to the defined contribution schemes are charged to the profit and loss account in the year in which they fall due. (ii) Other entitlements The estimated monetary liability for employees accrued annual leave entitlement at the balance sheet date is recognised as an expense accrual.

35 NOTES (continued) 2 Summary of significant accounting policies continued l) Income tax Income tax expense is the aggregate of the charge to the profit and loss account in respect of current income tax and deferred income tax. Tax is recognised in the profit and loss account unless it relates to items recognised directly in equity, in which case it is also recognised directly in equity. Current income tax is the amount of income tax payable on the taxable profit for the year determined in accordance with the relevant tax legislation. Deferred income tax is recognised, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. However, if the deferred income tax is not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. m) Dividends Dividends payable to the Company s shareholders are charged to equity in the period in which they are declared. n) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Committee that makes strategic decisions. o) Share capital 33 Ordinary shares are classified as share capital in equity. Any premium received over and above the par value of the shares is classified as share premium in equity. p) Derivative financial instruments Derivatives, mainly forward foreign exchange contracts, are initially recognised at fair value on the date the derivative contract is entered into and are subsequently measured at fair value. The fair value is determined using forward exchange market rates at the balance sheet date.the derivatives do not qualify for hedge accounting. Changes in the fair value of derivatives are recognised immediately in the profit and loss account.

36 NOTES (continued) 3 Financial risk management The Company s activities expose it to a variety of financial risks: market risk (including price risk, foreign exchange risk, interest rate risk), credit risk and liquidity risk. The Company's risk management framework and governance structures are intended to provide comprehensive controls and ongoing management of its major risks. The Board of Directors exercises oversight through delegation from the Board to various sub-committees, notably the Audit Committee and the Executive Committee, which are organised in line with risk management policies of SABMiller Plc, the ultimate parent company. An overview of the key aspects of risk management and use of financial instruments is provided below. a) Market risk The significant market risks to which the company is exposed are foreign exchange risk and interest rate risk. i) Foreign exchange risk The Company s functional currency is Zambian kwacha ( ZMK ). As virtually all of the company s revenues are derived in ZMK and the majority of its business is conducted in ZMK, foreign exchange risk arises from transactions denominated in currencies other than ZMK. Sales are denominated in ZMK and the majority of operating expenses are denominated in ZMK. The company s primary foreign exchange exposures are to the US Dollar ( USD ) and South African rand ( ZAR ); to the local currencies of suppliers who provide raw materials and capital equipment for project development, principally the US dollar ( USD ) and South African rand ( ZAR ) and foreign currency denominated cash balances. As at 31 March 2011, with other variables unchanged, if the Kwacha had weakened/strengthened by 10% (2010: 10%) against the US dollar, with all other variables held constant, post tax profit for the year would have been K4,788 million lower/higher (2010: post tax loss K4,216 million lower/higher), mainly as a result of the revaluation of US dollar denominated supplier and cash balances. Equity would have been K4,788 million lower/higher (2010: K4,216 million lower/higher). 34 At 31 March 2011, with other variables unchanged, if the Kwacha had weakened/strengthened by 10% (2010: 10%) against the South African Rand, with all other variables held constant, post tax profit for the year would have been K1,595 million lower/higher (2009: post tax loss K7,409 million lower/higher), mainly as a result of the revaluation of Rand denominated supplier and cash balances. Equity would have been K1,595 million lower/higher (2010: K7,409 million lower/higher) ii) Interest rate risk The Company s interest rate risk arises primarily from interest paid on floating rate borrowings. The floating rate borrowings expose the Company to cash flow interest rate risk. As at 31 March 2011, with other variables unchanged, a 1% decrease / increase in the base interest rate (2010: 1%) would result in post tax profit for the year being K3,088 million higher/lower (2010: K3,621 million higher/lower). Equity would have been K3,088 million higher/lower (2010: K3,621 million higher/lower).

37 NOTES (continued) 3 Financial risk management (continued) b) Price risk The company does not hold any financial instruments subject to price risk. c) Credit risk The Company does occasionally have funds on deposit at various banks but on those occasions when the amounts involved are material, the length of time that the funds are being held, is short. The Company s main credit risk therefore comes from its exposure to trade and other receivables but the Company does not have significant concentrations of credit risk in these areas. Trade receivables are managed by the Credit Control Manager. The Credit Control Manager assesses the credit quality of each customer, taking into account its financial position, past experience and other factors. Individual credit limits and terms are set based on limits set by the Board. The utilisation of credit limits and the adherence to settlement terms are constantly monitored. Bank guarantees are obtained for the vast majority of credit customers. The Company s maximum exposure to credit risk at 31 March 2011 was as follows: Cash and cash equivalents 22, Trade receivables 23,341 21,849 Amounts due from related parties ,926 Other receivables 25,462 11,184 71,921 44,066 All receivables that are neither past due nor impaired are within their approved credit limits, and no receivables have had their terms renegotiated. The company does not use external credit ratings for the purposes of assessing credit quality. None of the above assets are past due or impaired except for the following amounts in trade receivables (which are due within 30 days of the end of the month in which they are invoiced): Past due but not impaired: - by up to 30 days 2,449 1,643 - by more than 31 days Total past due but not impaired 3,166 1,965 Bank guarantees/title deeds 1,876 1,965 Receivables impaired in full 3,126 2,425 All receivables subject to litigation or past due by more than 60 days are considered to be impaired, and are carried at their estimated recoverable value.

38 NOTES (continued) 3 Financial risk management (continued) e) Liquidity risk The Company manages liquidity risk by maintaining cash and cash equivalent balances and available credit facilities to ensure that it is able to meet its short term and long term obligations as and when they fall due. Company-wide cash projections are managed centrally and regularly updated to reflect the dynamic nature of the business and fluctuations caused by exchange rate movements. The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash flows. Less than 1 year Between 1 and 2 years Total At 31 March 2011: - borrowings 75, , ,065 - trade and other payables 187, , , , ,472 At 31 March 2010: - borrowings 118, , ,852 - trade and other payables 358, , , , ,663 Fair value estimation Effective 1 January 2009, the Company adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value. The company holds the following financial instruments at fair value. The notional amounts of these forward exchange contracts in Kwacha equivalent are shown below: Forward exchange contracts 76,344 - f) Capital management The company s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new capital or sell assets to reduce debt. Consistent with others in the industry, the company monitors capital on the basis of a gearing ratio. This ratio is calculated as net debt divided by the total capital of the company in Zambia. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity plus net debt.

39 NOTES (continued) 3 Financial risk management (continued) During the year, the Company s strategy was to maintain a gearing ratio less than 75%. The gearing ratio at 31 March 2011 was 66% (2010: 65%) Total borrowings 475, ,071 Less: cash and cash equivalents (22,702) (107) Net debt 452, ,964 Total equity 237, ,725 Total capital 689, ,689 Gearing ratio 66% 65% 4 Critical accounting estimates and judgements (i) Critical judgements in applying the Company s accounting policies Estimates and judgements are continually evaluated and are based on historical experience and other factors, including experience of future events that are believed to be reasonable under the circumstances. (ii) Critical accounting estimates and assumptions The directors make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. Impairment of goodwill The Company tests annually whether goodwill has suffered any impairment, in accordance with accounting policy (i). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. The assumptions used in the calculations are set out in Note Income taxes The Company is subject to income tax. Significant judgment is required in determining the Company s provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current income tax and deferred tax provisions in the period in which such determination is made.

40 NOTES (continued) 5 Segment information Management has determined the operating segments based on the reports reviewed by the Executive Committee for strategic decision making. The committee considers the business from a product perspective. The reportable operating segments derive their revenue primarily from the manufacture and sale of Alcoholic and Non-alcoholic beverages respectively. The segment information provided to the Executive Committee for the reportable segments for the year ended 31 March 2011 is as follows: Year ended 31 March 2011 Alcoholic beverages Nonalcoholic beverages Total Revenues from external customers 525, , ,913 Gross profit 254, , ,262 Depreciation of property plant and equipment (19,639) (16,578) (36,217) Amortisation of intangible assets (496) (198) (694) Interest income ,166 Finance costs (49,762) (19,862) (69,624) Other operating expenses (130,022) (63,360) (193,382) Income tax expense (18,337) (3,865) (22,202) Profit for the year 37,419 7,890 45,309 Total assets 686, , , Total assets include: Property, plant and equipments 511, , ,640 Intangible assets 18,277 54,926 73,203 Inventories 105,853 43, ,089 Trade and other receivables 51,179 20,904 72,083 Total assets 686, , ,015 Total liabilities 133,944 53, ,407

41 NOTES (continued) 5 Segment information (continued) The segment information for the year ended 31 March 2010 is as follows: Year ended 31 March 2010 Alcoholic beverages Nonalcoholic beverages Total Revenues from external customers 364, , ,558 Gross profit 142, , ,116 Depreciation of property, plant and equipment (36,425) (33,968) (70,393) Amortisation of intangible assets (174) - (174) Interest income Finance costs (28,550) (20,666) (49,216) Other operating expenses (74,681) (55,581) (130,262) Income tax expense 3,016 (7,556) (4,540) Profit for the year 6,277 (6,997) (720) Total assets 733, , ,303 Total assets include: Property, plant and equipments 548, , ,634 Intangible assets 18,971 54,926 73,897 Inventories 127,111 32, ,733 Trade and other receivables 39,020 10,019 49,039 Total assets 733, , ,303 Total liabilities 276,744 82, ,811 The amounts provided to the Executive Committee with respect to total assets and liabilities are measured in a manner consistent with that of the financial statements. These assets and liabilities are allocated based on the operations of the segment. The Company's interest-bearing liabilities are not considered to be segment liabilities but rather are managed by the treasury function. 39 Reportable segments liabilities are reconciled to total liabilities as follows: Segment liabilities for reportable segments 187, ,811 Unallocated: - Deferred income tax liabilities 90,188 68,552 - Current borrowings 75, ,871 - Non-current borrowings 400, ,200 Total liabilities per the balance sheet 752, ,434

42 NOTES (continued) 5 Segment information (continued) Revenues of approximately K 435,963 million (2010: K 219,496 million) are derived from the company s top 7 customers and are derived from Alcoholic beverages (K 333,988 million) and Nonalcoholic beverages (K 101,975 million). 6 Other income Interest income 1, Investment property- rental income 241 1,196 Profit on disposal of investment property - 9,105 Profit on disposal property, plant and equipment Loss on derivative financial instrument 7,963 (335) Net foreign exchange gain/( loss) other than on borrowings and cash and cash equivalents 794 (5,601) 9,829 5,660 7 Expenses by nature Operating profit was arrived at after charging: Employee benefits expense (Note 8) 70,828 65,664 Depreciation on property, plant and equipment (Note 16) 79,962 70,393 Amortisation of intangible assets (Note 17) Receivables-provision for impairment losses Write-down of inventories 11, Auditor s remuneration Employee benefits expense The following are included within the employee benefits expense: Salaries and wages 59,183 54,782 Other non-cash benefits 6,132 6,904 Retirement benefits cost - Defined contribution scheme 4,197 2,200 - National Pension Scheme Authority 1,316 1,778 70,828 65,664

43 NOTES (continued) 9 Finance costs Interest expense: - Bank borrowings 61,251 42,987 61,251 42,987 Net foreign exchange loss arising on borrowings 8,832 6,229 70,083 49, Income tax Current income tax Deferred income tax (Note 15) 21,636 3,843 Income tax expense 22,202 4,540 The tax on the company s profit before income tax differs from the theoretical amount that would arise using the statutory income tax rate as follows: Profit before income tax 67,511 3,820 Tax calculated at the statutory income tax rate of 35% (2010: 35%) 23,629 1,337 Tax effect of: - Expenses not deductible for tax purposes (1,427) 3,203 Income tax expense 22,202 4,540 Current income tax movement in the balance sheet At start of the year (20,749) (9,914) Charge for the year Paid during the year (114) (11,532) 41 At end of the year (20,297) (20,749) Income tax assessments have been agreed with the Zambia Revenue Authority (ZRA) up to and including the year ended 31 March A self-assessment system for income tax was introduced for periods subsequent to 31 March Income tax returns have been filed with the ZRA for subsequent years. Quarterly tax payments were made on the due dates.

44 NOTES (continued) 11 Earnings per share Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. There were no potentially dilutive shares outstanding at 31 March 2011 or Diluted earnings per share are therefore the same as basic earnings per share Profit/(loss) attributable to equity holders of the Company 45,308 (720) Weighted average number of ordinary shares in issue (millions) Basic earnings/(loss) per share (in Kwacha) (1.98) 12 Share capital Authorised 400,000,000 ordinary shares of K1 each Issued and fully paid 364,000,000 ordinary shares of K1 each Share premium At start and at end of year 99,474 99, Borrowings The borrowings are made up as follows: Non-current: Bank loans 400, , , , Current: Bank overdrafts 75,065 97,245 Other borrowings - 7,626 75, ,871 Total borrowings 475, ,071

45 NOTES (continued) 14 Borrowings (continued) Weighted average effective interest rates at the year end were: % % - Bank overdrafts Bank loans Other borrowings - 12 The Company has the following undrawn borrowing facilities: Floating rate expiring within one year 51,593 9,740 Floating rate expiring in more than one year - 157,800 The bank loan is denominated in Zambia Kwacha, is secured by guarantee by the Company s parent company and is repayable in Balance at Balance at 1/4/2010 Drawdown Repayment 31/3/2011 Bank loans 257, ,800 (22,500) 400,000 Other borrowings 7,626 - (7,626) - 15 Deferred income tax Deferred income tax is calculated using the enacted income tax rate of 35% (2010: 35%). The movement on the deferred income tax account is as follows: At start of year 68,552 64,709 Charge for the year 21,636 3,843 At end of year 90,188 68,552 43

46 NOTES (continued) 15 Deferred income tax (continued) Deferred income tax assets and liabilities, and deferred income tax charge/(credit) in the profit and loss account are attributable to the following items: Balance at Charged/ (credited) to P&L Balance at Year ended 31 March Deferred income tax liabilities Property, plant and equipment 131,156 57, ,873 Deferred income tax assets Other deductible temporary differences 1,401 (1,444) (43) Tax losses carried forward 61,203 37,525 98,728 62,604 36,081 98,685 Net deferred income tax liability 68,552 21,636 90,188 Year ended 31 March 2010 Deferred income tax liabilities Property, plant and equipment 66,169 64, ,156 Deferred income tax assets Other deductible temporary differences 1,460 (59) 1,401 Tax losses carried forward - 61,203 61,203 1,460 61,144 62,604 Net deferred income tax liability 64,709 3,843 68,552 The accumulated tax losses will expire as follows: 44 Loss available Year of expiry At 31 March ,867, At 31 March ,212,

47 NOTES (continued) 16 Property, plant and equipment Company Plant, Capital containers work in Buildings &vehicles progress Total At 1 April 2009 Cost 30, , , ,046 Accumulated depreciation (4,311) (159,305) - (163,616) Net book amount 26, , , ,430 Year ended 31 March 2010 At start of year 26, , , ,430 Additions 51 91, , ,587 Disposals - (990) - (990) Transfers 36, ,362 (308,886) - Depreciation charge (1,332) (69,061) - (70,393) At end of year 61, ,839 40, ,634 At 31 March 2010 Cost 67, ,604 40, ,042 Accumulated depreciation (5,643) (152,765) - (158,408) Net book amount 61, ,839 40, ,634 Year ended 31 March 2011 As previously stated 61, ,839 40, ,634 Prior year adjustment 27-15,181-15,181 As restated 61, ,020 40, ,815 Additions - 20,114 41,666 61,780 Disposals (832) (1,161) - (1,993) Transfers ,192 (70,123) - Depreciation charge (1,691) (78,271) - (79,962) At end of year 60, ,894 12, , At 31 March 2011 Cost 67, ,116 12, ,091 Accumulated depreciation (7,229) (234,222) - (241,451) Net book amount 60, ,894 12, ,640

48 NOTES (continued) 16. Property, plant and equipment (continued) Cash used in the purchase of property, plant and equipment Total additions 61, ,587 Credit purchases (7,476) - Cash used in the purchase of property, plant and equipment 54, , Intangible assets Goodwill Software licences Total At 31 March 2010 Cost 71,987 2,084 74,071 Accumulated amortisation - (174) (174) Net book amount 71,987 1,910 73,897 At start of year 71,897-71,897 Additions - 2,084 2,084 Amortisation charge - (174) (174) At end of year 71,987 1,910 73,897 At 31 March 2011 Cost 71,987 2,084 74,071 Accumulated amortisation - (868) (868) Net book amount 71,987 1,216 73,203 At start of year 71,987 1,910 73, Amortisation charge - (694) (694) At end of year 71,987 1,216 73,203 Goodwill is allocated to the Company s cash-generating units (CGUs) identified according to the operating segment. A segment-level summary of the goodwill allocation is presented below Alcoholic beverages Non-alcoholic Alcoholic Non-alcoholic beverages Total beverages beverages Total Goodwill 17,061 54,926 71,987 17,061 54,926 71,987

49 NOTES (continued) 17 Intangible assets (continued) The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using estimated growth rates. The growth rates do not exceed the long-term average growth rates for the respective businesses in which the CGU s operate. In calculating the value in use for the alcoholic and non alcoholic CGU s the company made the following assumptions: a weighted average annual growth rate of 3% (2010: 3%) to extrapolate cash flows beyond the budget period a pre-tax discount rate of 9.74% (2010: 11.99%) to the cash flow projections a forecasted gross margin of 36% (2010: 35%). Management determined budgeted gross margins based on past performance and its expectations for the market development. The discount rates used are pre-tax and reflect specific risks relating to the relevant segments. 18 Inventories Raw materials 111,928 99,200 Work in progress 5,906 6,115 Finished goods 13,088 37,033 General stores and consumables 18,167 17, , ,733 The cost of inventories recognised as an expense and included in the cost of sales amounted to K million (2010:K208,658 million). 19 Trade and other receivables Trade receivables 26,467 24,274 Less: Provision for impairment losses (3,126) (2,425) 47 23,341 21,849 Amount due from related companies (Note 23) ,926 Prepayments and other receivables 28,029 16,264 51,786 49,039

50 NOTES (continued) 19 Trade and other receivables (continued) Movements on the provision for impairment of trade receivables are as follows: At start of year 2,425 2,175 Provision in the year Written off during the year (59) (160) At end of year 3,126 2, Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise the following: Cash and bank balances Bank overdrafts (Note 14) 22, (75,065) (97,245) (52,363) (97,138) 21 (a) Trade and other payables Trade payables 20,311 15,356 Amounts due to related companies (Note 23) Derivative financial instrument (Note 21b) 70, ,828 - Other payables and accrued expenses 95, , , , b) Derivative financial instrument Forward exchange contracts The notional principal amounts of the outstanding forward contracts at 31 March 2011 were K76.3billion (2010; nil).

51 NOTES (continued) 22 Cash generated from operations Reconciliation of profit before income tax to cash generated from operations: Profit before income tax 67,511 3,820 Adjustments for: Interest income (Note 6) (1,166) (749) Profit on disposal of investment property (Note 6) - (9,105) Profit on sale of property, plant and equipment (Note 6) (7,963) (211) Interest expense (Note 9) 61,251 42,987 Depreciation property, plant and equipment (Note 16) 79,962 70,393 Amortisation of intangible assets (Note 18) Changes in working capital - trade and other receivables (2,746) (17,478) - inventories 10,644 (28,829) - trade and other payables (178,860) 85,949 Cash generated from operations 29, , Related party transactions The Company is controlled by SABMiller Africa and Asia BV incorporated in the Netherlands. The ultimate parent of the Company is SABMiller plc, incorporated in the England and Wales. There are other companies that are related to Zambian Breweries Plc through common shareholdings or common directorships. i) Purchase of goods and services: From fellow subsidiaries: - SABMiller Africa Asia (Pty) 40, ,926 - South African Breweries Limited 4,549 5,538 - Sabmark International - a division of SABMiller Finance BV - Royalties 31,307 26,258 - Bevman Services AG (Management fees) 19,857 16,956 - Swaziland Breweries Limited 4,112 6,519 - Kgalagadi Breweries Limited 12,642 20,095 - Mubex 44, , , ,025

52 NOTES (continued) 23 Related party transactions (continued) ii) Outstanding balances from purchase of goods/services Due to fellow subsidiaries: - SABMiller Africa Asia (Pty) 35,336 51,213 - South African Breweries Limited 1, Sabmark International - a division of SABMiller Finance BV Royalties 11,842 20,743 - SABMiller PLC 3, Swaziland Breweries Limited 1, Kgalagadi Breweries Limited 1, Mubex 17, ,931 70, ,828 Trade with related entities are carried out on commercial terms Due from fellow subsidiary: - Heinrich s Syndicate Limited (sale of investment property) - 10,926 - Accra Breweries Limited ,926 ii) Directors' remuneration and key management compensation Non-executive directors fees Other emoluments (included in Key management compensation below) 1,112 1,258 Total remuneration of directors 1,207 1, Key management compensation Salaries and short term emoluments 3,628 3,580 Retirement benefits cost ,774 3, Contingent liabilities The Company had several pending legal proceedings at 31 March The directors having obtained appropriate legal advice are of the opinion that there will be no material losses arising from the pending legal proceedings. The value of the potential claims against the company are ZMK45,429 million (2010 Nil).

53 NOTES (continued) 25 Capital Commitments Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements is as follows: Property, plant and equipment - 2, Prior year adjustment A prior year adjustment of K15,181 million relates to the reclassification of containers from inventory to property, plant and equipment. This adjustment had no effect on the profit for the year and there was no implication for tax purposes. 27 Business re-organisation and dividend in specie On 1 April 2010, the assets and liabilities and operations of Copperbelt Bottling Ltd, Zambia Bottlers Ltd and Northern Breweries Plc were merged into Zambian Breweries Plc. The impact on the Group s Reserves of this consolidation was nil and these three companies have since been wound up. The net assets of the subsidiaries were transferred to Zambian Breweries Plc in form of "dividend in specie", effectively distributing the post acquisition reserves in the subsidiaries to Zambian Breweries Plc on 1 April The group of four companies referred to as the Group in the prior year financial statements now operate as one company, Zambian Breweries Plc. The financial results of Zambian Breweries Plc, the company, presented in this year s financial statements are therefore comparable to the financial results of the Group presented in the prior year. 28 Comparatives Where necessary, prior year comparatives have been reclassified in line with current year presentation. 29 Financial instruments by category Financial assets Trade and other receivables 51,786 49,039 Cash and bank balances 22, ,488 49,146 Financial liabilities Trade and other payables 187, ,811 Derivative financial instruments Borrowings 475, , , ,882

54 52 Notes

55 Founded : 1952 Listed : 1994 Year end : March 31 Sector Consumer goods (Beverage Industry) Profile Nature of business Production and distribution of clear beer and soft drinks Managing Director Pearson Gowero Finance Director David Kvalsvig Company Secretary Mwansa Mulumba-Mutimushi Registered address Plot 6438, Mungwi Rd, Heavy Industrial Area, Lusaka Telephone: +260 (211) / Postal address Box 31293, Lusaka Zambia Website Auditors PricewaterhouseCoopers Transfer Secretaries Corpserve Transfer Agents

56 Fueling Growth With Our Brands Zambian Breweries Plc Head Office P O Box Lusaka, Zambia Tel: (+260) , Cell: (+260) Fax: (+260) , Mungwi Road, Lusaka Regional Office P O Box Ndola, Zambia Tel: (+260) , /4 Cell: (+260) Fax: (+260) Misundu Road, Ndola