We, the Action Committee of the Minority Shareholders of Coca-Cola Beverages Sri Lanka (CCBSL)- formerly Pure Beverages Company, representing about 500 small shareholders of the company, wish to state the following facts to focus on the real situation pertaining to what has been said in "We are here to stay - Coca-Cola", in a Sunday paper of Oct. 7. This article focuses on the following three main areas: Selling soft drinks produced locally to the Sri Lankan consumer, the legitimacy and conduct of the forty fifth AGM and appointment of a chairman for the meeting (in response to a Sunday paper story of Sept. 23) and questions regarding the accounts in the annual report (AR),

CCBSL believes in providing locally produced soft drinks to the Sri Lankan consumer. This was true prior to 1994. They had a 70% share of the local soft drinks market, made profits, and paid dividends. However, the track record since the take-over by foreigners - Fraser & Neave Coca-Cola (FNCC) Singapore in November 1994 shows something else: Discontinued production of the local Lion Brand range (L/B) after the take-over (objected to by minority shareholders at an AGM), but reintroduced a few years later after local managers realized the mistake. But, the essences required for bottling L/B was supplied directly by the Coca-Cola Company, similar to that of the Coke, Fanta, and Sprite range. (Keeping a margin on the essences supplied!).

Imports 330ml cans from Singapore; taking, part of the local glass bottle market, imports 1.5 litre PET from FNCC Singapore having scrapped a plan to produce locally in the mid 90s. (The cost to the S. L. consumer is Rs. 5 per bottle more), invests Rs. 500 million on a bottling plant, when sales are on a decline. Scraps an operating plant and leads to an industrial dispute in 1997. 370 lose their jobs. Market share drops to below 40%. Further 390 sent home with compensation.

Coke range concentrate prices increased substantially within the first four years, suggesting their return being looked after. Couple of hundred million taken out as reimbursable expenses. Local, small shareholder ignored. No dividends from 1994 onwards. Accumulated losses upto December 31, 2000, Rs. 1,084 million.

To add insult to injury, over 1,000 small shareholders, the middle/lower-middle class people of Sri Lanka pressed to sell their shares to Coca-Cola at Rs. 34 per share, making a loss of Rs. 5 a share, in spite of appeals made at negotiations.

It is correct, FNCC held over 98% of the shares. About 850 smallholders hold the balance shares, with an average of 1,000 shares or less per person. At this AGM, the goodness of the minority shareholders prevailed, in that if they walked out there would not have been a quorum for the meeting according to Article 78 of the Articles of Association (AOA). Seven foreign and four local directors make up the board. They say the foreigners had travel restrictions placed on them. But there were no travel restrictions on local directors? One person who purported to be a director, but as per page 16 the AR had retired from the company.

A Director of CCBSL has to be appointed and act in conformity with the article of the company. There was evidence in the AR and it was also stated at the meeting, that A. W. Wickremasinghe had retired. There was no notice given in the AR or elsewhere, in accordance with the articles that Wickremasinghe continued a director after retiring.

As such, the members present expressed serious doubts about the directorship of Wickremasinghe, and with no other director present, proposed and seconded the retiring Chairman W. D. M. Fernando (who was present in person), to chair and conduct the meeting in accordance with Article 80. In addition. Section 181 of the Companies Act provides for the retiring chairman on attaining the age of 70 to vacate his office at the conclusion of the AGM. Since Fernando was the founder chairman of the company, and his taking the chair was in harmony with the articles of association and the Companies Act. And if this was not acceptable to Wickremasinghe or FNCC, the shareholders present proposed to adjourn the meeting and a proper meeting be held another day with foreign directors present to answer questions.

Thirdly, very serious issues raised regarding the accounts were not answered. Working capital a minus Rs. 498 million, accumulated losses Rs. 1,084 million share capital Rs. 756 million, and total equity a low Rs. 217 million as at December 31, 2000. The first half of this year has a further loss of Rs. 104 million, reducing the total equity to Rs. 113 million. It was pointed out that the second half of this year would result in a loss in excess of this, and that there will be a total capital erosion. It was questioned as to how the company could be called a "going concern" by end of this year? It was strongly stressed that the meeting be adjourned and the entire board of directors explain, how they plan to continue. The response saying Coca-Cola will give their full backing was a silly answer and not an adequate answer by any means in these ‘very serious’ circumstances.

We, the minority shareholders would like to point out that we have not only been deprived of any return as dividends for seven years since FNCC took over 30% of the shares in 1994, but have been marginalized and subjected to hostile buy-ups in 1996, 1998/99 and presently going upto 98%. We have given a factual picture of how things have turned out and how Coca-Cola conducts their business, and continue to sell their products here, through local production or importation. (Action Committee of the Shareholders Group)