United Breweries Holdings

1.  UB City Project:
 
 Out of 556,503 sft of super built up area obtained in exchange for
 transfer of 137,844.13 sft of undivided share in land in UB City, the
 Company has sold 32,222.25 sft of super built-up area along with
 proportionate undivided share in land to Group Companies.  In view of
 the slowdown in global economy, there has been considerable delay in
 receipt of rent even after offering discounts to retail lessees, in
 tune with market conditions. Some leasable area is lying vacant.
 
 2.  Estimated amount of contracts remaining to be executed on capital
 account as at 31.03.09 and not provided for is Rs. 328.782 million (net
 of advances) (Pr year Rs.359.300 million).
 
 3.  Secured Loans:
 
 i) Details of the securities provided for loans availed from banks :
 
 a) Working capital loan from banks, amounting to Rs. 50.284 million (Pr
 year Rs. 58.881 million), are secured by the hypothecation of stocks,
 by a charge on supply advances and book debts.
 
 b) Loan from The Lakshmi Vilas Bank Limited amounting to Rs. 396.965
 million, is secured by assignment of future receivables for use of
 Pegasus logo by United Spirits Limited and Mangalore Chemicals and
 Fertilizers Limited. An amount of Rs.34.649 million is repayable within
 one year.
 
 c) Loan from State Bank of Indore amounting to Rs. 125.757 million is
 secured by the pledge of 395,000 shares in United Spirits Limited
 having a carrying value of Rs. 11.609 million. Entire amount of Rs.
 125.757 million is repayable within one year.
 
 d) Vehicle loans from banks, amounting to Rs. 0.718 million (Pryear Rs.
 4.204 million), are secured by the hypothecation of vehicles. Entire
 amount of Rs. 0.718 million is repayable within one year.
 
 ii) Details of securities provided for loans availed from others:
 
 a) Loans from HDFC, amounting to Rs. 4,675.015 million (Pr year Rs.
 4,627.938 million) are secured by the pledge of 1,585,154 shares in
 United Spirits Ltd, having a carrying amount of Rs. 46.588 million,
 pledge of shares held by a subsidiary company, mortgage by deposit of
 title deeds of the Companys land in Bangalore, the super structure
 thereon and assignment of the rent receivable from the property let
 out. An amount of Rs.3,225.142 million is repayable within one year.
 
 b) Vehicle loans from others amounting to Rs. 0.483 million (Pr year
 Rs. 2.513 million) are secured by hypothecation of vehicles. An amount
 of Rs.0.401 million is repayable within one year.
 
 c) Loan from IL&FS Financial Services Limited amounting to Rs. 1,500
 million (Pr year Rs.1,500 million) is secured by the pledge of
 2,223,000 equity shares in United Spirits Limited having a carrying
 value of Rs. 65.335 million and a cash collateral security of Rs. 200
 million.
 
 d) Loan from IFCI Limited amounting to Rs.1,006.124 million is secured
 by the pledge of 937,477 shares in United Spirits Limited having
 carrying value of Rs. 27.553 million and 7,673,422 shares in United
 Breweries Limited having a carrying value of Rs. 295.134 million and a
 cash collateral security of Rs. 200 million. An amount of Rs. 250
 million is repayable within one year.
 
 e) Loan from SICOM Limited amounting to Rs. 440 million is secured by
 the pledge of 400,000 shares in Kingfisher Airlines Limited having a
 carrying value of Rs. 9.332 million, 5,069,728 shares in UB Engineering
 Limited having a carrying value of Rs. 339.493 million, 6,566,057
 shares in Mangalore Chemicals and Fertilisers Limited having a carrying
 value of Rs.75.637 million and pledge of shares held by a subsidiary
 company. Entire amount of Rs. 440 million is repayable within one year.
 
 f) Loan from L&T Finance Limited amounting to Rs.49.985 million (Pr
 year Rs. 48.993 million) is secured by the fixed assets on which the
 loan was taken. An amount of Rs. 7.345 million is repayable within one
 year.
 
 4.  Events occurring after the Balance Sheet date
 
 i) After the Balance sheet date, the Company has issued the following
 corporate guarantees:
 
 a) Guarantees for Rs. 23,805 million in favour of banks on behalf of a
 subsidiary.
 
 b) Guarantees for Rs. 504 million in favour of other lenders on behalf
 of a subsidiary.
 
 ii) Due to non exercise of option within the stipulated time by a
 promoter group company to convert 4,415,899 equity warrants into equity
 shares the sum of Rs. 490.165 million representing 10% advance amount
 received from the promoter group company was forfeited on July 28, 2009
 by the Board of Directors on cancellation of warrants and the said
 amount was credited to Capital Reserve Account, in accordance with the
 Generally Accepted Accounting Principle.
 
 iii) The Company has made an application to the Ministry of Finance,
 Government of India for post-facto approval for having issued 6,387,117
 nos. fully convertible equity warrants in December 2007 to a non
 resident promoter group company and allotment of 1,971,218 equity
 shares on conversion of a portion of the above warrants in January 2008
 and such approval is awaited.
 
 5.  Fixed Assets
 
 i) The Companys land in Bangalore was revalued during August 2001,
 based on an independent valuers report. Accordingly, the value of the
 land was restated at Rs.1,707 million, with a corresponding adjustment
 to the Fixed Assets Revaluation Reserve.
 
 ii) The Company owns certain valuable trademarks which are carried at
 nil value. Some of these trademarks have been licenced to Group
 Companies for a fee.
 
 iii) Capital Work-in- progress includes advance payments made for
 assets for UB City project.
 
 iv) The Companys UB City property is under charge in favour of a
 Financial Institution for facility granted to the Company and its
 wholly owned subsidiary.
 
 v) The Companys property in Goa is under charge in favour of a bank
 for facilities granted to a subsidiary.
 
 6.  Investments:
 
 i) The Company has pledged 6,734,000 shares held in United Breweries
 Limited, 12,779,140 shares held in United Spirits Limited, 10,000,000
 snares held in Mangalore Chemicals and Fertilisers Limited, 50,000
 shares held in Aventis Pharma Limited, 1,275,826 shares held in UB
 Engineering Limited, 59,150,000 shares in Kingfisher Airlines Limited
 and 1,605,030 shares held in McDowell Holdings Limited to secure the
 borrowings of subsidiary companies.
 
 In addition to the above, the Company has given negative lien of shares
 of United Breweries Limited amounting Rs. 1,250 million in favour of
 ICICI Bank Limited to secure the borrowings of a subsidiary company.
 
 ii) The Company has pledged 5,560,000 shares in United Spirits Limited
 to secure the borrowings of associate companies.
 
 iii) Under a composite scheme of arrangement, between Deccan Aviation
 Limited, Kingfisher Airlines Limited and Deccan Charters Limited
 sanctioned by the High Court of Karnataka, the Company has received
 86,385,156 equity shares of Rs. 10 /- each and 9,700,000-6% Redeemable
 Non Cumulative Preference Shares of Rs. 100/- each of Deccan Aviation
 Limited. The number of shares held in Kingfisher Airlines Limited got
 reduced to 33,216. Kingfisher Airlines Limited is since renamed as
 Kingfisher Training and Aviation Services Limited. Deccan Aviation
 Limited is since renamed as Kingfisher Airlines Limited.
 
 iv) The Company has given a letter of undertaking in favour of ICICI
 Bank Limited, undertaking not to dispose of its investments in
 Kingfisher Airlines Limited, till such time as there are borrowings
 from ICICI Bank Limited to Kingfisher Airlines Limited.
 
 v) The Company has subscribed to 3,029,591 equity shares of face value
 of Re 1 each in United Breweries Limited at a premium of Rs. 175/- per
 share under rights issue.
 
 vi) Consequent to execution of the Shareholders Agreement dated 30th
 October 2008 and subsequent Supplementary Agreement dated 25th November
 2008 with Captain G.R. Gopinath Group, Deccan Charters Limited ceased
 to be a subsidiary of the Company from 25th November 2008 and DCL
 Holdings Private Limited became an Associate Company of the Company.
 
 vii) The investment in subsidiaries (including step down subsidiaries)
 have been considered as long term strategic investments and diminution
 in their market value / net worth, though significant, is considered
 temporary and hence no provision is considered necessary.
 
 7.  Confirmation of balances from certain Sundry Debtors and Sundry
 Creditors are awaited. Adjustment for differences, if any, arising out
 of confirmation and reconciliation thereof would be made in the current
 year. The Management is of the opinion that the impact of adjustments,
 if any, is not likely to be significant.
 
 8.  The Company had advanced to subsidiaries (including overseas
 subsidiaries) amounts aggregating to Rs. 12,899.522 million which in
 many cases do not bear interest. Considering, the income stream of
 those companies, the repayment of loans could possibly take protracted
 period of time beyond those stipulated in the Loan Agreements. The
 Directors are of the view that all the amounts are ultimately
 recoverable with interest wherever applicable taking into consideration
 their business plans and growth strategies.  Accordingly the advances
 to subsidiaries are good and recoverable.
 
 9.  Cash in hand includes foreign currency notes.
 
 10 As required under Section 205C of the Companies Act, 1956, the
 Company has transferred Rs. 1.129 million (Pr year Rs. 1.198 million)
 to the Investor Education and Protection Fund (IEPF) during the year.
 On March 31, 2009, no amount was due to be transferred to the IEPF.
 
 11. Guarantee Commission represents the commission charged by the
 Company for the corporate guarantees provided on behalf of subsidiaries
 and certain associate companies. Security Commission represents the
 commission charged by the Company for the securities pledged on behalf
 of a subsidiary and an associate company.
 
 The Company has significant guarantee exposure on behalf of
 subsidiaries and other associated companies. Certain corporate
 guarantees have been invoked and the guaranteed amounts have been paid
 by the beneficiaries. The Management is reasonably confident that none
 of the guarantees would eventually devolve upon the Company.
 
 12.  Lease rentals to be received in future, in respect of office space
 let out in UB CITY have been assigned in favour of HDFC to secure the
 repayment of their loans.
 
 13 Due to global economic meltdown, certain lessees of retail space in
 UB CITY are negotiating for discounted rentals and pending mutual
 agreement, no rental accruals have been considered in the accounts of
 the contingent rentals.
 
 14.  Licence fees to be received in future, in respect of the trademark
 licenced to two of the associate companies have been assigned in favour
 of The Lakshmi Vilas Bank Limited to secure the repayment of the loan.
 
 15.  Remuneration to Chairman, Managing Director and Managerial
 Personnel
 
 i) The Chairman of the Company has received remuneration from two
 subsidiaries, amounting to USD 120,000 (Pr year USD 120,000) and GBP
 89,600 (Pr year GBP 70,000) for the year 2008-09.
 
 ii) The Company has not paid any remuneration to the Managing Director.
 However, he has received remuneration of Rs. 3.861 million (Pr year
 2.974) as an executive of an associate company. The Managing Director
 of the Company has not received sitting fees from any subsidiary
 company.
 
 iii) Subsidiaries have paid sitting fees of Rs.0.240 million (Pr year
 Rs. 0.140 million) to Directors other than the Managing Director.
 
 16.  Details of outstanding to Micro, Small and Medium Enterprises and
 Small Scale Industries.
 
 Based on the response received by the Company, there are no disclosures
 relating to amounts remaining unpaid as at the year end together with
 interest to such suppliers, as defined under the Micro, Small and
 Medium Enterprises Development Act, 2006.
 
 Amount due to Small Scale Industries (SSI) is nil to the extent of
 information disclosed by creditors.
 
 17.  The Company has recognized the rent from cancellable operating
 leases in accordance with the terms of the lease deed.
 
 In respect of the non- cancellable operating leases, the Company has
 recognized the rent on a straight line basis over the non- cancellable
 lease term.
 
 18 Related Party Transactions:
 
 Key Management Personnel: Mr. R N Pillai - Managing Director i) Name of
 the Related Parties and description of relationship
 
 Subsidiaries
 
 UB Electronic Instruments Limited *
 
 UB Infrastructure Projects Limited *
 
 UB International Trading Limited *
 
 Kingfisher Finvest India Limited (Formerly known as Kingfisher
 
 Radio Limited) *
 
 Kingfisher Airlines Limited (Formerly known as Deccan Aviation
 
 Limited)*
 
 Kingfisher Training and Aviation Services Limited (Formerly
 
 known as Kingfisher Airlines Limited )*
 
 Kingfisher Aviation Training Limited (Formerly known as
 
 Kingfisher Training Academy Limited) *
 
 City Properties Maintenance Company Bangalore Limited*
 
 Bangalore Beverages Limited *
 
 Vitae India Spirits Limited
 
 Associates
 
 United Spirits Limited * Mangalore Chemicals and Fertilizers Limited *
 United Racing and Bloodstock Breeders Limited * UB Engineering Limited*
 
 WIE Engineering Limited (Under Liquidation)
 
 H. Parsons Pvt. Limited *
 
 McDowell Holdings Limited *
 
 Pixray India Limited
 
 UB Pharma (Kenya) Limited
 
 DCL Holdings Private Limited
 
 Subsidiaries
 
 Rigby International Corp.  United Breweries of America Inc, Delaware
 Inversiones Mirabel, S.A Mendocino Brewing Co. Inc United Breweries
 International [UK] Limited UBSN Limited Rubic Technologies, Inc.
 Releta Brewing Company LLC UB Overseas Limited * UBHL(BVI) Limited * *
 with which there have been transactions during the year
 
 b) Contingent liabilities: Rs. in million
 
                                          2008-09       2007-08
 
 i) Guarantees given by the Company on behalf of subsidiaries to banks
 and financial                         50,045.380      24,803.676
 institutions
 
 ii) Guarantees given by the Company on behalf of associates to banks.
                                        1,628.400       1,068.400
 
 iii) Claims against the Company not 
 acknowledged as debt                      23.329          23.329
 
 iv)  Export obligation on import of 
 capital goods                              Nil              Nil
 
 v) Demands raised by Income Tax authorities against which the Company
 has preferred                            32.997            7.862
 appeals
 
 19. With a view to facilitating the smooth business operation of its
 subsidiary, Kingfisher Airlines Limited, the Company, as part of its
 obligation as Holding Company has expressed its intention to honour the
 financial obligations to the lending institutions on the due dates.
 
 20. The Central Government vide notification dated March 31, 2009 has
 amended Accounting Standard (AS-11), the effects of changes in Foreign
 Exchange Rates notified under the Companys (Accounting Standard)
 Rules, 2006. The Company has exercised the option stated in paragraph
 46 of AS -11 retrospectively from April 1, 2007.
 
 As a result, the Company has changed its accounting policy for
 recognition of Exchange differences arising on reporting of long term
 foreign currency monetary items, at rates different from those at which
 they were initially recorded during the period or reported in previous
 financial statements, which hitherto were charged to the Profit or Loss
 Account, as below:
 
 The said exchange differences are accumulated in a Foreign Currency
 Monetary Item Translation Differences Account and amortised over the
 balance period of such long term asset/liability but not beyond March
 31, 2011.  Exchange difference recognised in the Profit and Loss
 Account up to last financial year ending March 31, 2008 relating to
 said long term liabilities in foreign currency aggregating to Rs. 2.264
 million has been adjusted against opening revenue reserve as provided
 in the rules. As a result of this change in accounting for exchange
 difference, net profit for year ended March 31, 2009 is lower by Rs.
 57.192 million. The amount remaining to be amortized in the financial
 statement as on March 31, 2009 is Rs. 54.929 million.
 
 21.  All amounts are in Rupees million, unless otherwise stated.
 
 22.  Previous years figures have been regrouped wherever necessary to
 conform with the current years classification.