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Lever Brothers Pakistan Limited

Report and Accounts

January 1995 - June 1996

Contents

Page No.

Company Information

Board of Directors

Mr. Iain Strachan Sangster

(Chairman & Chief Executive)

Mr. Syed Babar Ali

Mr. Fatehali W. Vellani

Mr. Mujib ur Rahman

Mr. Perwaiz Hasan Khan

Mr. Jeffery Arthur Lea

Mr. Clive David Welland

Dr. Aruna Dias Bandaranayake

Mr. S. N. Patel

Mr. M. Asadullah Sheikh

Mr. Abdul Ghani Bachani

Mr. Azim Azmat Osman

Company Secretary

Mr. Aamer Aziz Saiyid

Auditors

Messrs. A. F. Ferguson & Co.

State Life Building No. l-C,

I.I. Chundrigar Road, Karachi.

Registered Office

Avari Plaza

Miss Fatima Jinnah Road,

Karachi.

Share Registration Office

c/o Ferguson Associates (Pvt) Ltd.

State Life Building No. l-A,

I.I. Chundrigar Road, Karachi.

Notice of Annual General Meeting

Notice is hereby given that the 48th Annual General Meeting of Lever Brothers Pakistan

Limited will be held at Dinshaw Mahal, Avari Towers Hotel, Miss Fatima Jinnah Road, Karachi,

on Tuesday, October 8, 1996 at 11.00 a.m. to transact the following business:

Ordinary Business

To receive and consider the Company's Accounts for the period January 1995 - June

1996, together with the Reports of the Auditors and Directors.

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

(The Directors have recommended a final dividend of 60% i.e. Rs. 30 per ordinary

share issued, in addition to 40% or Rs. 20 already paid as 1st and 2nd Interim Dividends,

thus making a total cash distribution of 100% for January 1995 - June 1996).

To approve the Auditors' remuneration for January 1995 - June 1996, to appoint Auditors

for the ensuing year, and to fix their remuneration.

(Messrs A.F. Ferguson & Co., Chartered Accountants, retire, and being eligible, have

offered themselves for re-appointment).

Special Business

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

(Statement attached).

Any other business, with the permission of the Chair.

Karachi

By Order of the Board

September 15, 1996

AAMER AZIZ SAIY1D

Company Secretary

Notes:

Share Transfer Books will be closed from September 30 to October 8, 1996 (both days

inclusive).

All Members (whether holding Preference or Ordinary Shares) are entitled to attend

and vote at the Meeting. A Member may appoint a proxy who need not be a Member

of the Company.

The instrument appointing the proxy (form attached) and the Power of Attorney or

other authority under which it is signed, or a notarially certified copy thereof, must

be lodged at the Company's Registered Office not later than 48 hours before the time

of the Meeting.

Any change of address should be notified immediately to the Company's Share Registration

Office.

Statement in respect of Special Business

and Related Draft Resolution

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

and the proposed Resolution related thereto are given below.

Item 4 of Agenda - Remuneration of Executive Directors

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

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

the following as an Ordinary Resolution.

Resolved

That approval is hereby given for the holding of office of profit with the Company by all the

Executive Directors including the Chief Executive, namely, Messrs. I.S. Sangster, Mujib ur Rahman,

A.T. Crouch, C. de Jong, P.H. Khan, J. A. Lea, S.N. Patel and Dr. A.D. Bandaranayake, and

for payment of remuneration to the Executive Directors amounting in the aggregate to Rs. 24.7

million actual for the period January 1995 to June 1996, and Rs. 24.8 million estimated for July

1996 - June 1997, in accordance with their respective contracts of service and the rules of the

Company.

(The Executive Directors are interested to the extent of the remuneration payable to them

individually).

Report of the Directors

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

accounts for the 18 months to June 30, 1996. The extended period arises from the change in the Company's

accounting year.

All year on year comparisons in the text of this report correct for the difference in the lengths of the

respective periods of comparison.

Results and Dividends

Jan. 1995

Jan. - Dec.

- June 96

1994

(Rupees in thousand)

Profit after taxation

523,210

225,610

Unappropriated profit

232,988

207,387

--------

756,198

432,997

Appropriations:

Dividends:

On 5% Cumulative Preference Shares

239

On Ordinary Shares

- First Interim of Rs. 10 already paid (1994: Rs.10)

99,885

- Second Interim of Rs. 10 already paid (1994: Rs. Nil)

99,885

- Final of Rs. 30 now proposed (1994: Rs. 10)

299,655

99,885

--------

499,664

200,009

--------

Unappropriated profit carried forward

256,534

232,988

========

We are pleased to report that the Company has recovered from the difficult trading conditions of 1994.

All affected product groups responded well to the Government's curbs on smuggling and to the

reductions enacted late 1994. The profit after tax has increased to Rs. 523 million, equivalent to a

improvement over 1994. This also includes the expected, heavy trading losses of the new ice cream business.

Operating cash flows showed a healthy improvement over 1994. The change in the year-end date

has introduced a different working capital pattern into the business. The year-end date now coincides

with a peak selling period for most of our businesses. All major current asset categories thus show

an increase. This is mostly offset by a corresponding increase in our creditors.

The Directors propose a final dividend of Rs. 30 per share which, together with the Rs. 20 already paid,

brings the total dividend to Rs. 50 per share.

Expansion and Finance

The Company has financed capital expenditure of Rs. 391 million from its strong cash flow stream in

the period. This expenditure includes further ice cream expansion, and general modernisation and

replacement of old plant at all our facilities.

As we commented in our last Report, the Company has been made cautious in its investment plans by

the experience of smuggling and high government duties. It remains committed to the development of

its business in Pakistan, however, which will be financed through retained earnings and debt.

Detergents and Personal Products

The Detergents and Personal Products business has recovered strongly from its low 1994 levels. The

performance of our toilet soap brands has been particularly encouraging following the curtailment of

the Afghan Transit Trade through Karachi at the end of 1994. This further permitted us to invest significantly

in the advertising and promotion of our key brands. Overall sales have thus grown a massive 35% over

the period.

Operating margins have jumped also from 5% to 12%. This reflects the absence in 1995/1996 of the

exceptional charges for stock write-downs that beset the 1994 results. And it also reflects efforts to hold

constant the fixed cost base in the face of sharply increased volumes of sales.

The Company is greatly encouraged by this return to form of a major part of its business.

Foods

Trading performance in Foods has not been uniform across its product groups. There has been a modest

5%, improvement to total sales, and operating margins have remained steady but at a low level of 4.4%.

The Tea business has stemmed the volumes losses encountered in 1994 but remains vulnerable to smuggling.

Margin reductions have been reversed resulting in a significant increase to operating profits.

The oils and banaspati business has suffered a disastrous fall-off in volumes and margins resulting in

a collapse in operating profits. It has been unable to recover in its selling prices the sharp increases in

oil, tinplate and utility costs. A plan to restore profitability is currently being implemented.

Ice cream contributes to our figures for the first time. Wall's was launched in Lahore in March 1995, and

has been extended to several major cities since. This has been a remarkable success, with a first year sales

performance that has set new records in the Unilever group. Heavy initial outlays on the factory and

the distribution system result in trading losses in the early years, but these have been well within target

levels and are showing a strong improving trend.

Prospects

The improved trading conditions have encouraged the Company to pursue its programme of innovation

and improvement to its products and its service to its customers. The commitment to the productive use

of modern information technology has also been confirmed and extended to the most modern techniques

of data communication and open systems.

But trading prospects have once again been made uncertain by the enactment of a harsh 1996 Budget

and the failure to repeal the regulatory duties imposed on imports in October 1995. The duty and tax

load on many of our core products has reached again the levels experienced in 1993 and 1994 when rampant

smuggling ensued.

The Company has learned the lessons of the difficult 1994 conditions and will be better prepared to defend

its markets if smuggling does resume at high levels. Measures taken include the extension of our reach

into rural areas, the removal of unnecessary cost to permit lower consumer prices, and frequent com-

munication with the relevant Government authorities.

Nevertheless, a resumption of high levels of smuggling would certainly reduce volumes and profit, and

inhibit seriously the growth plans of the business.

Brooke Bond Pakistan Limited

The Company is currently planning to merge its operations with those of Brooke Bond Pakistan Ltd. The

proposal is before the Monopoly Control Authority and a Scheme of Arrangement will be set before the

Sindh High Court in due course.

Staff Relations

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

once more pleased to record their appreciation. Development of management and staff has a high priority

in the Company.

A Total Quality (TQ) programme has been implemented over the period of this report with early and

encouraging results.

Directors

The following changes have taken place on the Company's Board of Directors since the last Annual Report.

Mr. Abdul Karim Shaikh was appointed as nominee of the Sindh Government in place of Mr. Aftab Ahmed

Memon, who was subsequently replaced by Mr. Abdul Ghani Bachani.

Mr. Azim Asmat Osman replaced Mr. Anwar Ahmad Khan as nominee of the Punjab Government.

As nominees of Unilever, Mr. Clive David Welland replaced Mr. C. de Jong and Dr. Aruna Dias Bandaranayake

has replaced Mr. Anthony Travis Crouch.

The Board wishes to record its appreciation of the valuable services rendered to the Company by all the

outgoing Directors.

Holding Company

Through its wholly owned subsidiary, Unilever Overseas Holdings Limited, U.K., Unilever plc, a company

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

Auditors

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

General meeting, and being eligible, offer themselves for reappointment.

On behalf of the Board

Karachi:

I. S. SANGSTER

August 25, 1996

Chairman & Chief Executive

Auditors' Report to the Members

We have audited the annexed balance sheet of Lever Brothers Pakistan Limited as at June

30, 1996 and the related profit and loss account and cash flow statement, together with

the notes forming part thereof, for the eighteen months then ended and we state that we

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

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

report that:

(a)

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

by the Companies Ordinance, 1984;

(b) in our opinion:

(i)

the balance sheet and profit and loss account together with the notes thereon

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

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

policies consistently applied;

(ii)

the expenditure incurred during the period was for the purpose of the Company's

business; and

(iii)

the business conducted, investments made and the expenditure incurred during

the period were in accordance with the objects of the Company;

(c)

in our opinion and to the best of our information and according to the explanations

given to us, the balance sheet, profit and loss account and the cash flow statement,

together with the notes forming part thereof, give the information required by the Companies

Ordinance, 1984 in the manner so required and respectively give a true and fair view

of the state of the Company's affairs as at June 30, 1996 and of the profit and cash

flows for the eighteen months then ended; and

(d)

in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980

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

under section 7 of that Ordinance.

A. F. FERGUSON & CO.

Chartered Accountants

Karachi: August 25, 1996

Accounts

LEVER BROTHERS PAKISTAN LIMITED

Balance Sheet

as at June 30, 1996

June 30,

December 31,

Note

1996

1994

(Rupees in thousand)

Share Capital and Reserves

Share capital

Authorised

800,000

650,000

========

Issued, subscribed and paid-up

504,208

Reserves

106,883

Unappropriated profit

256,534

232,988

--------

867,625

844,079

Surplus on Revaluation of Fixed Assets

126,228

Redeemable Capital

294,666

459,667

Deferred Liabilities

Deferred taxation

65,320

23,024

Staff retirement benefits

251,184

218,263

Current Liabilities

Current maturity of redeemable capital

167,334

135,333

Short-term loan

178,250

Finance under mark-up arrangements

411,736

371,064

Creditors, accrued and other liabilities 10

1,924,966

1,573,774

Taxation

59,477

Dividends

303,756

104,178

--------

2,986,042

2,243,826

Contingencies and Commitments

--------

4,591,065

3,915,087

========

June 30,

December 31,

Note

1996

1994

(Rupees in thousand)

Tangible Fixed Assets

Operating assets

1,326,884

766,535

Capital work-in-progress - at cost

103,700

473,847

--------

1,430,584

1,240,382

Long-Term Investments

95,202

Long-Term Deposits and Prepayments

21,648

33,262

Current Assets

Stores and spares

132,139

86,558

Stock-in-trade

2,190,806

2,076,439

Trade debts

2O6,243

159,345

Loans and advances

72,335

57,919

Trade deposits and short-term prepayments 21

33,089

38,783

Other receivables

66,833

49,76O

Taxation - payments less provisions

140,582

Cash and bank balances

201,604

77,437

--------

3,043,631

2,546,241

--------

4,591,065

3,915,087

========

The annexed notes form an integral part of these accounts.

1. S. SANGSTER

SYED BABAR ALl

Chairman & Chief Executive

Director

Profit and Loss Account

for the eighteen months ended June 30, 1996

Year ended

Note

June 30,

December 31,

1996

1994

(Rupees in thousand)

Sales

17,297,793

10,132,551

Cost of goods sold

14,226,435

8,628,123

---------

Trading profit

3,071,358

1,504,428

Administration and selling expenses

1,851,339

1,019,696

---------

Operating profit

1,220,019

484,732

Other income

45,381

29,732

---------

1,265,400

514,464

350,006

120,858

Financial expenses

4,484

1,442

Auditors' remuneration

17,301

7,398

Workers' welfare fund

45,578

19,661

Workers' profits participation fund

417,369

149,359

---------

Profit before taxation

848,031

365,105

Taxation

324,821

139,495

---------

Profit after taxation

523,210

225,610

Unappropriated profit brought forward

232,988

207,387

---------

756,198

432,997

Appropriations