building brands, delivering value

Annual Report 2011

Building brands,delivering value

التقريـر السنـوي 2011

Agthia A

nnual Report 2011

20م 11

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بـنـاء العـالمــة،تقديم األفضل

Financial Highlights 2

Market Share Highlights 3

Our Journey 4

Chairman’s Message 6

Board of Directors 8

CEO’s Message 10

Executive Committee 12

Operational Review 14 Agri Business Division, UAE Consumer Business Division, UAE Egypt Turkey

Corporate Social Responsibility 22

Corporate Governance Report 24

Directors’ Report 31

Consolidated Financial Statements 33

BankersHSBC Middle EastBNP ParibasUnion National BankAbu Dhabi Commercial BankAbu Dhabi Islamic BankJ.P. Morgan

External AuditorsPricewaterhouseCoopers

Legal AdvisorsAl Tamimi & CoDLA Piper

Corporate Office AddressP.O. Box 3772517th Floor, Sky TowerAl Reem IslandAbu DhabiUnited Arab EmiratesPhone: +971 2 596 0600Website: www.agthia.com

Contents

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Agthia Annual Report 2011 1

For Wholehearted Living.

Everything we do at Agthia is wholehearted.

Catering for people from all nationalities and walks of life, we produce food and drink that help families grow strong and lead lives full of vitality.

This wholehearted commitment drives what we do at every stage of the food chain – from field to fork. It also guides our attitude to sustainability and our relationships with the people we work with.

Wholeheartedly we embrace our position at the heart of the region and work towards helping it grow stronger every day.

We’re for wholehearted living; because it’s only when you live life to the full that you have a life worth living for.

2 Agthia Annual Report 2011

Financial Highlights

2006 Revenues – AED 434 Mn

Consumer Business Division

Agri Business Division

2011 Revenues – AED 1.14 Bn



Net sales AED 1.14 billion Net profit AED 86.3 million Return on assets 6.2% Return on equity 8.3% Return on capital 14.4%

08 09 10 11 08 09 10 11 08 09 10 11 08 09 10 11 08 09 10 11

Net Sales (AED million)

Net Profit (AED million)

Return on Assets Return on Capital Return on Equity

83%

17%33%

67%

Agthia’s strategy is to accelerate diversification to sustainable higher-margin consumer products.

8%

9% 9%

6%

12%

12%

9%

8%

12%

18%

19%

14%

1006

854

921

1144

116

74

106

86


Market Share Highlights

WOW vitamin water combines Al Ain water with vitamins, minerals, fruits, and herbs. It comes in three flavors: apple and kiwi; peach and raspberry; and orange, starfruit, and passionfruit.

Egypt operations entered the domestic retail market by launching Pure Natural brand tomato and chilli paste in glass jars.

The launch of the Al Ain Fresh brand marked entry into processed fresh fruits and vegetables, targeting the UAE’s hospitality and catering industry.

The launch of fresh dairy products under Yoplait brand, with exclusive rights to manufacture and distribute in the GCC.

Entry into the broader beverage segment, with the launch of Chiquita Tropicals range 100 percent natural fruit juices, with exclusive rights to manufacture and distribute in the GCC, Levant, and Egypt.

100 percent acquisition of Pelit Su, the Turkey- based natural spring water company, giving direct access to a natural source of high-quality spring water and expansion into a premium segment.


UAE Volume Market Share


2011 Initiatives

Total Flour• Number1inUAEat40%volume

market share.

• Number1inAbuDhabiat88% volume market share.

(Source: Internal estimate)

Flour B2C• Number1inUAEat39%volume

market share.


(Source: MEMRB)

Feed• Number1inUAEat48%volume

market share.



Bottled Water – Al Ain• Number2inUAEat26%volume

market share.

• Number1inAbuDhabiat43%volume market share.


5-Gallon Bulk Water – Ice Crystal and Al Ain• 5%UAEvolumemarketshare.

• 14%AbuDhabivolumemarketshare. (Source: Internal estimate)

Capri-Sun• Number4inUAEat9%volumemarket

share of still juice drink segment.

• Number1inAbuDhabiinCVSat26%volumemarketshareofstill juice drink segment.

(Source: AC Nielsen)

Tomato Paste• Number1inUAEat16%volume

market share.



FrozenVegetables• Number6inUAEat6%volume

market share.



40%26%

Bottled Water

16%

Tomato PasteTotal Flour

48%

9% 6%

Frozen VegetablesStill Juice DrinkFeed

Grand Mills Others Al Ain water and Capri-Sun Others Al Ain Others


Steady geographic expansion has seen Agthia and its products extending far beyond the traditional homebaseofAbuDhabiandtheUAE.Expansionbegan with production operations established in Egyptin2009,followedbytheacquisitionofanatural spring water company in Turkey in 2011.

Agthia products are now well-established in territories ranging from the GCC, North Africa, and the wider MENA region.

Assets

Egypt sourced products

UAE sourced products

Our Journey

Turkey

Egypt

Libya

Sudan

Lebanon

Jordan

Germany

Czech Republic

Kuwait

Bahrain

Oman

PalestineAfghanistan

Qatar

United Arab Emirates

Kingdom of Saudi Arabia

Geographic expansion now means that Agthia products are sold in 17 countries

Algeria


Brand portfolio growth over the past six years

2007 2008 2009 2010 20112004/2006


Chairman’s Message

The ‘sustainable growth’ phase of our strategy gathered momentum during 2011, through entry into new product categories, further diversification of the product portfolio, and geographic expansion.

2011 performance is consistent with our long-term growth model. Business fundamentals remain strong, as is evident from the Company’s strong sales growth across all categories. The successful launch of fresh dairy products, 100 percent natural fruit juices, and 100 percent fresh juices were other milestones of the year. We partnered with global brands Chiquita and Yoplait, thus further growing our portfolio of global brands. The acquisition of a natural spring water company in Turkey is a strategic venture providing fresh impetus to our well-established bottled water business. This will facilitate our entry into higher-margin premium ‘natural spring’ drinking water in the UAE and wider geography.

Our investments remain focused on the five key strategic drivers for delivering long-term sustainable growth: brand building, product portfolio expansion, regional expansion, entering new synergistic categories, andmarginexpansion.Despiteatrulychallenging environment, we remain optimistic about the prospects for future revenue and profit growth as the Company successfully pursues its strategy. Foremost, we are able to attract, develop, and retain the best talent; this is the basis of our long-term confidence.

On behalf of the Board, I thank our people for their commitment, dedication, and hard work. We also express our thanks to our shareholders, consumers, and customers for their continued trust.

Rashed Mubarak Al HajeriChairman


Board of Directors

HE Rashed Mubarak Al HajeriChairman

Chairman of Al Foa’h Company

BoardMemberofAbuDhabiFoodControlAuthority

MemberofAuditCommitteeofEnvironmentalAgencyAbuDhabi

Member of the GCC Supreme Council Advisors

HE Majed Salem Al Romaithi Vice-Chairman

ExecutiveDirectorofRealEstate, AbuDhabiInvestmentAuthority

HE Abu Bakr Siddiq Khouri Member

ManagingDirectorandBoardMember of Sorouh Real Estate PJSC


HE Jumma K. Al KhailiMember

ExecutiveDirector, AbuDhabiInvestmentAuthority

HE Mohammed Thani Murshed Al Rumaithi Member

Chairman,AbuDhabiChamber of Commerce and Industry

HE Tareq Al MasaoodMember

DeputyManagingDirector, Al Masaood Group

HE Suhail M. Al AmeriMember

Chief Executive Officer, General Holding Corporation


CEO's Message

Agthia delivered a strong 14 percent year-on-year net sales growth, reaching AED 1.14 billion, driven by volume gains, leading market shares, and distribution expansions across the food and beverage categories.

NetprofitsofAED86.3millionrepresenta 25 percent decline year-on-year, mainly attributed to the increased input cost of raw materials (grains and PET) and the absence of higher margins that arose in the first half of 2010, when wheat prices dropped while the market selling price of flour remained unchanged. The profitability achieved during the year is commendable, given the exceptional circumstances that prevailed due to rising input cost, coupled with regional unrest.

In line with our strategy to gradually reduce the Company’s reliance on the Agri Business Division(flourandanimalfeed)bydiversifying into higher-margin products, in 2011 its contribution to total revenue fellto67percent(2006:83percent),while the contribution to total Company revenues of the Consumer Business Division(water,beverages,andfood)increasedto33percent(2006:17percent).

Meanwhile, we have progressed well along our strategic roadmap in line with our vision of becoming the UAE’s best food and beverage company, as defined by best performance, best products, best brands, best people, and best business practices. As we work towards a five-year time horizon, 2011 represented an important step along the way – building for the future and securing sustainable growth. Major advances were achieved in pursuing five key strategic drivers for delivering long-term sustainable growth. These are:

Brand building and brand equity: We continued investing in our brands and grew our portfolio of global brands further through strategic partnerships with pre-eminent global brands, Yoplait and Chiquita.

Product portfolio expansion: We invested in new product developments such as WOW vitamin water, Al Ain glass water bottles, and a new range of Pure Natural tomato and chilli paste targeting the Egyptian retail market.

Regional expansion: We have further consolidated our product portfolio expansion in neighboring GCC states and North Africa, and also through the acquisition of a natural bottled water business in Turkey; expanding our water business footprint, facilitating growth into higher-margin premium spring bottled water, and opening up new domestic and export markets.

Entering new synergistic categories: We entered three synergistic categories: fresh dairy products under the Yoplait brand, 100 percent natural fruit juices under the Chiquita brand, and fresh short-life juices under the Al Ain Fresh brand. Entry into the frozen baked products category is now plannedforQ2,2013.

Margin expansion: We have made good progress towards our strategy of margin expansion. Continuous cost reduction programs, price increases of bottled water and Capri-Sun juice drink in the later part of 2011, and flour and feed production capacityexpansioninQ3,2011will help in enhancing our margins. Competitive and efficient procurement of raw and packaging materials is a key focus area.

In 2011 we completed our new organizational structure, now comprising two divisions in the UAE: Agri Business, which manages the flour and animal feed categories; and Consumer Business, which includes the water and beverages, processed fruits and vegetables, and dairy categories. Our Egypt business operates as a separate entity.

The business has embarked on an ambitious growth strategy in the face of challenging operating conditions. As we enter the New Year, our focus will be to continue growing the base business, and consolidate the advances we have made with new product launches, margin improvement, capacity increases, geographic expansion, and integration of the newly acquired Turkish operation.

We take pride in our people, who continue to grow the business and deliver ambitioustargets.Diversityisembeddedin our values, and is crucial to the growth of a vibrant organization that caters to a wide array of consumers and customers.

In closing, I thank our shareholders for their investment in Agthia and our Board of Directorsfortheircontinuedsupportandconfidence in our management. I also acknowledge the contribution of each and every employee of the Company, and express my thanks to our consumers and customers for the trust shown in our products.

Ilias AssimakopoulosChief Executive Officer


Executive Committee


Greek,49years

JoinedAgthiaGroupinJuly2006asfirstCEO.

Previous posts include: Regional General Manager, Reckitt Benckiser, Middle East & North Africa;

General Manager, The Gillette Company, Czech & Slovak Republics.

Iqbal HamzahChief Financial Officer & Company Secretary

Pakistani, 51 years

JoinedAgthiaGroupinAugust2006.

Previouspostsinclude:RegionalFinancialDirector, The Gillette Company/P&G, Russia, Republics & Baltics; RegionalFinancialDirector,TheGilletteCompany, Middle East & Africa.

Fasahat BegGeneralManager,ConsumerBusinessDivision

Canadian,54years

JoinedAgthiaGroupinJuly2006.

Previouspostsinclude:CommercialDirector,SEAsiaFood&Snacks, PepsiCo International;

Marketing&SalesDirector,JTInternationalSA, Czech & Slovak Republics.

Manolis TrigkonisGeneralManager,AgriBusinessDivision

Greek,48years

JoinedAgthiaGroupinSeptember2009.

Previouspostsinclude:GeneralManager,Vivartia, Central & Eastern Europe; General Manager, Mars, Greece.

Mohammed Salah AtwiaGeneralManager,Egypt(RetiredDecember,2011)

Egyptian,58years

JoinedAgthiaGroupinDecember2006asGroup ManufacturingDirector.

Previouspostsinclude:ManufacturingDirector, The Gillette Company, Russia.


Khalid Sulaiman AhmedGroupPublicAffairsDirector

Emirati,42years

JoinedAgthiaGroupinMay2004.

Previous posts include: Group Training & DevelopmentManager,AgthiaGroup;

Human Resource & Admin Manager, Grand Mills PJSC.

Tariq AzizGroupProjects&BusinessSolutionsDirector

British,48years

JoinedAgthiaGroupinFebruary2007.

Previouspostsinclude:AssociateFinanceDirector,P&G,UK;

GroupFinanceManager,TheGilletteCompany,UK,Africa,Middle East & Eastern Regions.

Toufic El ChaarGroupHumanResourcesDirector

Lebanese, 55 years

JoinedAgthiaGroupinJanuary2008.

Previouspostsinclude:VicePresidentHR&OrganizationDevelopment,AlHomaiziGroup,Kuwait; GroupHRDirector,SITA,Europe,MiddleEast&Africa based in Rome & Geneva.

Fady ElassaadGroupR&DandQualityDirector

American/Lebanese,49years

JoinedAgthiaGroupinJuly2009.

Previouspostsinclude:ManufacturingandR&DManager,Mars,Dubai&Cairo; Production Manager, PepsiCo/Tropicana, USA.

Daniel MarieGroupManufacturingOperationsDirector

French,54years

Joined Agthia Group in January 2010.

Previouspostsinclude:ManagingDirector,AgralysGroup,France; ManufacturingDirector,Yoplait-SodiaalGroup, FranceandUK.


Operational Review – Agri Business Division, UAE

Agri Business Division achieved sales growth of 12 percent, reaching AED 767.4 million.

Agri Business Division consists of the flour and animal feed businesses – Grand Mills brand.


Agthia’sAgriBusinessDivision(ABD)consists of the flour and animal feed businesses (Grand Mills brand), which achieved sales growth of 12 percent, reachingAED767.4millionandvolumegrowthof4percentin2011,focusingprimarily on flour B2B channels such as bakeries, food service, poultry farms, and municipality outlets.

Floursalesgrewby3percentandvolumeby 2 percent, in line with market growth, maintaining Grand Mills’ No.1 position intotalflourat40percentvolumemarketshareintheUAEand88percentinAbuDhabi.IntheB2Cvolumemarket,GrandMills leads with volume market share of39percentintheUAEand84percent inAbuDhabi.Animalfeedsalesgrew by19percentandvolumeby5percent,maintaining Grand Mills’ leadership witha48percentUAEmarketsharebyvolume,and82percentinAbuDhabi.Grand Mills is the No.1 player in all UAE feed segments, such as professional farms, open market, and municipalities.

Overall profitability for the business declinedby24percentin2011,attributable to gross margin contraction of 5.1 percentage points due to a significant increase in grain prices, not fully offset by the subsidy. The second important factor affecting comparative figures was a higher one-off profit margin in the flour segment in 2010 resulting from a decline in grain costs that outpaced the adjustment in market selling price. Improving animal feed profitability was a key priority in 2011 and this was achieved, despite surges in commodity prices, through pricing initiatives and tighter cost controls. As a result, animal feed business delivered a net profit margin of4percentin2011versus2010’sloss.

ProductportfolioexpansionsinABDflourbusiness include the reformulated paratha flourlaunchtoB2BchannelsinAbuDhabiand the rigag, wholemeal, and chapatti flourstoB2CcustomersinAbuDhabi.Further efforts are under way to list these in the Northern Emirates. In animal feed, the reformulations of certain recipes were well accepted by customers and are expected to help sustain growth and further improve margins in this business.

Production capacity expansion of the existing flour mill has been completed, allowing for previously outsourced volumes to now be produced in-house. Similarly, expansion plans were also completed for the animal feed mill.

Further expansion in poultry feed capacity is planned for 2012, including the restructuring of the feed mill with the aim of reducing cost and improving efficiencies. In the later part of 2011, the Company secured a contract to manage stocks of wheatfortheAbuDhabiGovernment, in return for a management fee. The Company is also playing an important role in Government initiatives aiming at reducing hay waste and water-intensive hay cultivation by replacing this with hay and concentrate pallet feed.

Lookingahead,theAgriBusinessDivision’saim is to improve profitable business growth ahead of market growth with focus on domestic geographic expansion, while the full effects of increased production capacity of flour and animal feed will also help to improve profitability.

Furthermore, entering the frozen-baked segment in Q2 next year will bring the latest technology to the Middle East and fits with the strategy of diversification to value-added flour based products, capitalizing on synergies. The product range willincludecroissantsandDanishpastries,bread, muffins, brownies, and cookies.


Operational Review – Consumer Business Division, UAE

Consumer Business Division comprises three business categories: water and beverages, processed fruits and vegetables, and dairy. Brands include: Al Ain water, Ice Crystal, Capri-Sun, Chiquita, Al Ain tomato paste and frozen vegetables, Al Ain Fresh juices, and Yoplait.

Consumer Business Division achieved sales growth of 18 percent, reaching AED 376.9 million, driven by the water and beverages category.


Agthia’sConsumerBusinessDivision(CBD)comprises three business categories: water and beverages, processed fruits andvegetables,anddairy.CBDbrandsinclude: Al Ain water, Ice Crystal, Capri-Sun, Chiquita, Al Ain tomato paste and frozen vegetables, Al Ain Fresh juices, andYoplait.CBDachievedsalesgrowthof18percent,reachingAED376.9million,driven by the water and beverages category. NetprofitatAED33.3millionwasmarginally behind last year due to higher PET cost. Price increases were implemented in both bottled water and Capri-Sun in the later part of 2011, partially helping to offset the impact of higher PET cost.

In water and beverages, the 2011 strategy focused on growing the core business (bottled Al Ain water, five-gallon Al Ain and Ice Crystal, and Capri-Sun juice drinks), expanding the product portfolio through new products and entering new synergistic margin-enhancing segments, while broadening UAE distribution and export reach.

Water and beverages recorded 21 percent salesgrowth,drivenbyasolid19percentvolumeincreaseinwateranda23percentincrease in Capri-Sun juice drink. Al Ain maintaineditsNo.2positionat26percentvolume share in the UAE bottled water market. Exclusive water supply contracts weresecuredfortheAlAinandAbuDhabimunicipalities, while the company further expanded its institutional customer base with new customer additions such as Atlantis The Palm. Al Ain water was again awarded ‘Superbrand’ status in the UAE for the second year running. Capri-Sun maintained volume market share at 9percentintheUAEofthestilljuicedrink segment. The dual-brand strategy in the five-gallon segment – Al Ain and Ice Crystal – achieved sales growth of 9percent,maintainingoverallvolumemarket share at 5 percent.

Product portfolio expansion in the water and beverages category included the launch of WOW vitamin water, and the introduction of Al Ain still and sparkling water in a glass bottle format. In 2011, Agthia entered into partnership with global brand Chiquita USA, for exclusive rights to manufacture and distribute Chiquita 100 percent natural fruit juice products in the UAE, GCC, Levant, and Egypt. These were successfully introduced intheUAEinDecember2011inatetrapak format.

Sales of Al Ain brand tomato paste and frozen vegetables grew 11 percent as a strategy of moving away from low-margin, private label exports to a more branded, consumer-oriented business was successfully implemented.

Al Ain tomato paste remains the UAE leaderwith16percentvolumemarketshare, while Al Ain frozen vegetables maintained volume market share at 6percentintheUAE.

Product diversification in the processed fruits and vegetables category included the launch of fresh fruit juices under the Al Ain FreshbrandinQ32011.Anew,modernprocessingfacilitywasbuiltinAbuDhabito service initially the hospitality and cateringsectorintheEmirateofAbuDhabi.Following the 2010 signing of a franchise agreement with Sodima France, a new state-of-the-art dairy manufacturing facility was built and commissioned, alsoinAbuDhabi.DistributionofYoplaitfresh dairy products to the UAE market commenced in November 2011.

Looking ahead, the Consumer Business Divisionwillfocusonconsolidatingthenew product launches and segment diversification initiatives, growing core water and beverages and processed fruit and vegetable categories, while continuing with geographic expansion and growing GCCexports.TheDivision’sstructure,processes, and procedures will continue to be improved to ensure the organization is ready and fit for expected future growth.


Operational Review – Egypt

Egypt operations focused on developing the business by establishing a client base in Egypt and North Africa.

This included extended supply agreements with high-profile multinational companies for high-quality tomato paste. A consumer range of glass-jar tomato and hot chili paste with four variants was also launched under the Pure Natural brand. However, a number of challenges were encountered during the year that impacted the overall business performance – unrest in key export markets, instability in the domestic market, a soft tomato harvest resulting in lower output and higher input cost, and low-priced Chinese tomato paste.

Management is rationalizing and stabilizing the business for a sustained profitable growth through enhancing organizational and operational capabilities, improving production efficiencies, reducing costs, securing new customers, expanding geographically, and developing Egypt as a manufacturing hub for tomato paste products (bulk, jars, and cans), fruit concentrates, and selected frozen vegetables.

Ahmed Siddiq has been appointed as the country manager of Egypt operations following the retirement of Mohammed Salah Atwia. Ahmed is an Egyptian national with more than 25 years experience in management, finance, and business planning for multi-national and private equity organizations. Before joining Agthia, he was CEO and managing director of Gozour Agro Egypt, the agriculture and investment subsidiary of Citadel Capital.


Operational Review – Turkey

The 100 percent acquisition of a Turkey-based natural spring water company marks Agthia’s second international expansion.

The company is situated in the southern Turkish province of Adana on the slopes of the Toros Mountains, with motorway access to the port of Mersin, and has access to natural water spring source.

The company’s site includes water bottling plants and additional space for future capacity expansion.

This acquisition expands Agthia’s bottled water operations beyond the UAE and complements the existing bottled water business, a strategic move that enables entry into the higher-margin premium ‘natural spring’ drinking water in the UAE and the wider geography. Agthia also plans to expand its regional distribution footprint in Turkey.

Ozgur Serin has been appointed as the country manager of Turkey operations. Ozgur, a Turkish national, has 20 years of diversified corporate experience in finance, sales, and strategy development with Procter & Gamble in various markets around the world. Before joining Agthia, hewasVice-PresidentInternationalMarketsfor ETi Biscuits, Turkey’s second largest confectionery company.


Portfolio of Trusted Power Brands

Agthia’s well-established high quality local and regional brands combined with newly launched, leading global brands characterize Agthia’s attractive product portfolio; one that is trusted by customers and consumers.


Our focus is on continued marketing investment aimed at building and consolidating brand equity while driving sales and volume growth, geographic expansion and enhanced profitability.


Corporate Social Responsibility

Four areas – health and wellness, food safety and security, people, and the environment – form the pillars of Agthia’s ongoing commitment to corporate social responsibility. During 2011, the Company expanded the program of corporate responsibility initiatives, externally and within the Company.


Externally, the Company engaged in community activities and support, from sponsoring social, cultural and sporting events to providing professional help and guidance to charitable and welfare organizations.

HEAlTH AnD WEllnESSAs Agthia’s name stands for nutrition, health and wellness are at the heart of the Company’s business culture, with employee health an abiding priority. The Company continued to support its employee Workplace Wellness Program, encouraging healthy eating and an active lifestyle while building awareness about a varietyofhealthconcerns.During2011,theAgthiaSportsDayfocusedonthebenefits of physical activity, bringing employees and their families together for a day of competition and fun.

FooD SAFETy AnD SECuRITyAll production units continue to hold ISO 22000 accreditation in food safety management, certified by Lloyd’s Register Quality Assurance, as well as HACCP (Hazard Analysis Critical Control Point) approval. All facilities also remain certified to Health, Safety, and Environmental Standards OHSAS18000,ISO14001certificationby Lloyd’s Register Quality Assurance.

The Company is actively involved in Government food security initiatives, it has started managing strategic stocks ofwheatfortheAbuDhabiGovernment.TheCompany’sAgriBusinessDivisionsupports local farmers by providing veterinary services and support, and also holds technical seminars on animal nutrition and health. The Company is also playing an important role in Government initiatives aiming at reducing hay waste and water-intensive hay cultivation by replacing this with hay and concentrate pallet feed.

During2011theCompanycontinuedtosupport the World Food Programme (WFP) in its worldwide campaign “Fight Against Hunger,” by initiating a donation drive to provide food aid and famine relief to the people in the Horn of Africa region.

PEoPlEInvesting in people, promoting Emiratization, and providing equal opportunities are central toAgthiapolicy.Diversityisembedded in our values and is crucial to the growth of a vibrant organization that caters to a wide array of consumers and customers.

The Agthia Academy transfers knowledge and skills among colleagues, with experts from different functions providing structured courses and training for fellow staff members wishing to advance their skills. In 2011, the Academy’s strategy was to introduce new tools and initiatives in leadership and in operational and administrative excellence. The Academy tripled the number of training programs offered across the Company throughout the year. Such learning experiences allow high potential talent at all levels of the organization to grow within their current roles and work towards their future career enhancement.

The Company’s National Talent Program (NTP) has intensified Emiratization efforts over the years. Emirati employees now work in a variety of functions such as manufacturing, laboratories, supply chain, human resources, sales, and finance. The NTP contributes to developing intellectual, practical, creative, and leadership skills through career-oriented and aspiration-tailored mentoring and coaching. The Company more than tripled its UAE national talent pool. The Company continues to recruit national talent, supports ongoing professional development, and offers scholarships to Emirati graduates.

EnVIRonMEnTAmong the environmental initiatives undertaken during 2011, Lloyd’s Register Quality Assurance certification of the ISO14001environmentalmanagementsystem was reviewed and renewed across all operations.

As one of the leading bottled water manufacturers in the UAE, the Company’s commitment to reducing the level of PET used to produce water bottles, and increasing the level of PET recycling continued.During2011,short-neckPETbottles were introduced and the closure cap weight was reduced.

With the introduction of ThermoShape lightweight hot-fill technology, PET usage willbereducedby30percentversusexisting hot-fill bottling lines in the market.

The Company maintained partnerships with local recycling companies to ensure that all operational waste, such as PET, papers, cardboard, and wooden pallets did not enter the waste stream but were moved to a recycling stream.

Energy reduction initiatives during 2011 included the integration of automatic off-switches (or eco-efficient lighting) and wind-operated cooling/ventilation systems in certain warehouses and buildings across the organization; the reduction in the number of trips made by the Company’s distribution fleet, made possible by increasing the pallet layers and using double-decker logistic trucks for better load efficiency; and the construction of the Company’s new corporate offices in adherence to international energy conservation standards:LEED(LeadershipinEnergyandEnvironmentalDesign)silverrating.

oTHER InITIATIVESMake-A-Wish Foundation

The Company is pleased to support the Make-A-Wish Foundation UAE to make wishes come true for children in the UAE. Through this agreement the Company supports the charitable activities of Make-A-Wish by providing funds, complimentary products, and other resources. Al Ain water collaborated with Make-A-Wish in numerous activities during 2011, including inviting children to attend the Al Ain Aerobatic Show and participatingintheMake-A-Wish31stanniversary, when a check was presented to the Foundation. The Company also made it possible for two teenage sisters to beflowntotheKingdomofSaudiArabiato perform Umrah, accompanied by their parents. Al Ain water and Make-A-Wish also granted a number of wishes during Eid when laptops, iPads, and iPhones were given out to a number of children.


Corporate Governance Report

The Board of Agthia Group (the Company”) is fully committed to consistently protecting the interests of all shareholders through the application of high standards of Corporate Governance. Effectively applied corporate governance guidelines are the foundation of business integrity and ultimately lead to robust and sustainable business results. The Company aims to continue to implement the highest standards of professionalism, corporate performance, and accountability to ensure shareholder value is preserved and enhanced.

This report reflects the Company’s corporate governance systems and procedures as of 31st December 2011 and has been filed with ESCA, posted on the ADX website, Company’s website www.agthia.com and published in the Company’s 2011 Annual Report, in line with the Corporate Governance and Institutional Discipline Ministerial Resolution no. (518) for the year 2009.

CoMPAny’S PHIloSoPHyThe Company acknowledges its responsibilities to its multiple stakeholders. The Company believes that good corporate governance stimulates management commitment to delivering value to shareholders through setting and achieving appropriate business objectives. Good corporate governance provides an appropriate framework for the Board, its Committees, and the management to most effectively represent the interests of the Company and its stakeholders. The Company maintains high levels of transparency, accountability and good management practices. This includes adopting and monitoring appropriate corporate strategies, objectives and procedures that comply with its legal and ethical responsibilities. A rigorously applied code of conduct ensures good corporate governance in business practices and activities throughout the organization.

CoRPoRATE GoVERnAnCE MAnuAlThe Corporate Governance manual as approved by the Board of Directors covers the following topics:

Board of Directors•RoleoftheBoard

• BoardResponsibilities

• PersonalLiability

• DirectorAccesstoOfficersandEmployees

• IndependentAdviceandJudgment

• BoardComposition

• TermofDirectors

• NominationofDirectors

• OutsideBoardMemberships

• BoardMeetings

• BoardroomPapers

• BoardroomMinutesandActionItems

•Voting

• DirectorOrientation,DevelopmentandContinuing Education

•DirectorRemuneration

• PerformanceEvaluation

• MeasurementandAccountability

• DisclosurePertainingtoBoardofDirectors

Board Committees•NominationandRemuneration

Committee and Charter

•AuditCommitteeandCharter

Internal Control Framework•InternalControlsDefinition

• InternalAuditandCharter

• RiskManagement

• ResponsibilityforPolicyAdministration

• StandardsandBestPractices

• CommunicationandCompliance

General Assembly and Shareholders•AnnualGeneralMeeting

• DisclosureandCommunication

• Board’sInteractionwithShareholders

• DesignatedSpokespersons

• RoleofBoardandAuditCommittee in Communication and Disclosures

•InternalandElectronicCommunication

• CommunicationwithRegulatoryAuthorities

•PolicyonReportingonPerformance

• ContactPersonforQuestionsaboutthis Disclosure Policy

Code of Conduct•BusinessEthicsandConflictofInterest

External Audit•AppointmentofExternalAuditor

• TermofExternalAuditor

• RequirementsfromExternalAuditor

Corporate Social Responsibiltiy•HealthandWellness

• FoodSafetyandFoodSecurity

• People

• Environment

BoARD oF DIRECToRSRoles and ResponsibilitiesThe Board of Directors’ role is to represent the shareholders and be accountable to them for creating and delivering value through the effective governance of the business.

The Board of Directors issues an annual Corporate Governance Report. This is a statement of the practices and processes the Board has adopted to discharge its responsibilities. It includes the processes the Board has implemented to undertake its own tasks and activities; the matters it has reserved for its own consideration and decision making; the authority it has delegated to the CEO, including the limits in which the CEO can execute that authority; and guidance on the relationship between the Board and the CEO.

Once appointed, every Director shall disclose to the Company the nature of relations he/she has with other listed companies, including positions, investments, and other significant obligations, through signing a Declaration of Independence Form.

Additionally, the Board of Directors has the following roles and responsibilities:

•Providingentrepreneurialleadership to the Company within a framework of prudent and effective controls that enable risk to be assessed and managed.

•SettingtheCompany’svaluesandstandards and ensuring obligations to its stakeholders and others are understood and met.


• Responsibilityforensuringtheeffectiveness of the internal controls system in the organization.

• Actingingoodfaithandwithcareanddiligence in the best interests of the Company, and avoiding conflicts from any personal interests in the role of being aDirector.

• Constructivelychallengingandhelpingdevelop proposals on strategy.

• Makingreasonableinquiriestoensurethat the Company is operating efficiently, effectively, and legally towards achieving its goals.

• Undertakingdiligentanalysisofallproposals placed before the Board.

• EncouragingconstructivedebateintheBoardroom and ensuring all relevant issues are given due consideration before a decision is made.

• Scrutinizingtheperformanceofmanagement in meeting agreed goals and objectives and monitoring the reporting of performance.

• Ensuringthattheattainmentofcorporategoals achieved through measured risk-taking is in line with the corporate risk appetite. Furthermore, that the integrity of financial information and financial controls and systems of risk management are effective.

• MakingdecisionsconcerningtheCompany’s capital structure and dividend policy.

• Reviewing,approving,andmonitoringmajor investments and strategic commitments.

• Reviewingandapprovingannualandinterim Financial Statements.

• Ensuringcompliancewithapplicablelaws, regulations, and all appropriate accounting standards.

• Ensuringthatanadequateriskmanagement framework is in place to identify, assess, and mitigate risks.

• Ensuringappropriatepoliciesanddelegations are in place to effectively govern the Company.

• AdoptaGovernanceStructurethatisaligned with the Company’s values and strategies and ensures the following:

– Enhancing the Company’s reputation

– Maintaining high standards of behavior

– Promoting ethical and responsible decision-making

– Communicating clear expectations andDelegationofAuthority

– Complying with applicable Governance Regulations

• AppointmentofCEOandevaluation of his ongoing performance and remuneration (and that of senior management) through the Nomination and Remuneration Committee.

• Ensuringthatanappropriatesuccessionplan for senior management is in place.

• Recognizethelegitimateinterestsofallstakeholders, being the shareholders, business partners, employees, and the communities in which the Company operates.

• SetwrittenrulesforthedealingsoftheCompany’sDirectorsandemployeesinthe securities of the Company.

• Ensuretheintegrityofexternalreportingto stakeholders including:

– Review and monitor controls, processes, and procedures in place to maintain the integrity of the Company’s financial and accounting records and statements, with the guidance of the Audit Committee.

– Ensure accurate, objective, and comprehensive information and disclosure is conveyed to the shareholders to ensure that they are fully informed of material developments.

– Review the reports of the Audit Committee in relation to risk, internal controls, and internal and external audit reports.

• Makedecisionsthroughcircularresolutions, provided the following are taken into consideration:

– That the instances of issuing decisions by passing circular resolution does not exceed four during a year.

– The agreement of the majority of the membersoftheBoardofDirectorsthatthe concerned matter is an exception and urgent.

– Circular resolution for Board approval should be supported with relevant documents.

– The written consent of the majority shall be attained on any decision of theBoardofDirectorsthatisissuedthrough passing circular resolution and provided that the same is presented to the subsequent meeting of the Board ofDirectorsforratification.

Composition of Board of DirectorsThepresentBoardofDirectorswaselected at the Annual General Meeting heldonApril27,2011foratermofthreeyears. The Board currently has seven members, comprising an Independent Non-Executive Chairman and six IndependentNon-ExecutiveDirectors. The office term of current Board Members willexpireonApril27,2014.

Composition of the current BoardofDirectors:

HE Rashed Mubarak Al HajeriChairmanNon-Executive, Independent

DirectorSince:October2004

Qualification:Bachelor of Public Administration and Law

Current Positions:Chairman of Al Foa’h Company

BoardMemberofAbuDhabiFood Control Authority

Member of Audit Committee of EnvironmentalAgencyAbuDhabi

Member of the GCC Supreme Council Advisors

HE Majed Salem Al RomaithiVice ChairmanNon-Executive, Independent


Qualifications:Bachelor of Science in Financial Management (USA)

Certified Chartered Financial Analyst (CFA)

Member of Society of HR Management

Current Position:ExecutiveDirectorofRealEstate, AbuDhabiInvestmentAuthority

HE Abu Bakr Siddiq KhouriMemberNon-Executive, Independent


Qualifications:BachelorDegreeinFinance(USA)

Certified Chartered Financial Analyst (CFA)

Member of AIMR

Current Positions:ManagingDirectorandBoardMember of Sorouh Real Estate PJSC

Board Member of Al Waha Capital PJSC

ViceChairmanoftheBoard,GeneralHolding Corporation

BoardMemberofAbuDhabi Securities Exchange

BoardMemberofKhalifaFund

BoardMemberofAbuDhabiChamber of Commerce and Industry

BoardMemberofAbuDhabiBasicIndustries

BoardMemberofDubaiCableCompany

Board Member of Al Foa’h Company


Corporate Governance Report continued

HE Jumma K. Al KhailiMemberNon-Executive, Independent

DirectorSince:February2005

Qualification:Bachelor of Business Administration (USA)

Current Positions:ExecutiveDirectorAbuDhabi Investment Authority

BoardMemberofAbuDhabi Islamic Bank PJSC

HE Mohammed Thani Murshed Al RumaithiMemberNon-Executive, Independent


Qualification:Bachelor of Science (USA)

Current Positions:Chairman,AbuDhabiChamber of Commerce and Industry

President, Federation of UAE Chamber of Commerce and Industry

Chairman of Thani Murshed Establishment

Chairman of Thani Murshed Unilever

Chairman of National Marine DredgingCompany

Board Member of Emirates Competitiveness Council

BoardMemberofAbuDhabiCouncil ofEconomicDevelopment

Board Member of Federal Credit Bureau of United Arab Emirates

HE Tareq Al MasaoodMemberNon-Executive, Independent

DirectorSince:April2006

Qualification:Bachelor of Science in Business Administration

Current Position:DeputyManagingDirector, Al Masaood Group

HE Suhail M. Al AmeriMemberNon-Executive, Independent

DirectorSince:April2008

Qualification:BachelorDegreeinElectronic Engineering (USA)

Current Positions:Chief Executive Officer, General Holding Corporation

Chairman of Arkan Building Material Company PJSC

Chairman, Emirates Steel Industries

Board Member of Al Foa’h Company

Directors’ RemunerationAccording to the Company’s Articles of Association, remuneration of the Company’s DirectorsisdeterminedbytheGeneralHolding Corporation.

RemunerationpaidtoDirectorsin2011amountedtoAED1.05million.

Board and Annual General MeetingsDuring 2011, nine Board of Directors meetings were held. Below is the attendance by member:

Date of Meeting

HE Rashed Mubarak Al Hajeri

(Chairman)

HE Majed Salem Al Romaithi

(Vice-Chairman)

HE Abu Bakr Siddiq Khouri

(Member)

HE Jumma K. Al Khaili (Member)

HE Mohammed

Thani Murshed

Al Rumaithi(Member)

HE Tareq Al Masaood(Member)

HE Suhail M. Al Ameri(Member)

Jan 25 P P P P P P PFeb 22 P A P A P P AMar 22 P A P P A P PApr 27 P A A P A P PMay 18 P A A P A P PAug 8 P A P P A P PSep 27 P P A A A P POct 25 P A P P A A PDec13 P P P A P P P

Fees Paid to Members in 2011 150,000 150,000 150,000 150,000 150,000 150,000 150,000

P: Present A: Apologies sent/Board granted leave of absence to the members absent.

The Company’s last Annual General Meeting washeldonApril27,2011andwasattended by the following Board Members:

HE Rashed Mubarak Al Hajeri (Chairman)

HEJummaK.AlKhaili(Member)

HE Tareq Al Masaood (Member)

HE Suhail M. Al Ameri (Member)

HEAbuBakrSiddiqKhouri(Member)

Related Party Transactions1. General Holding Corporation (GHC)(GHCholds51%ofAgthiaGroup PJSC Shares)

AED ‘000

Directors’andCommittee Members Fees Paid (Last Year) 1,400

Other Expenses 133

Total 1,533

2. Sorouh Real Estate PJSC (HEAbuBakrSiddiqKhouri–BoardMember of Agthia Group and Managing DirectorandBoardMemberofSorouhReal Estate PJSC)

AED ‘000

Payment for Sky Tower Office 28,735

Service Charges 392

Total 29,127

Dealing in Company SecuritiesNone of the Board Members or their direct family members (wife and/or children) has traded in the Company’s shares during 2011.

Responsibilities Delegated to Executive ManagementDuring2011,therewerenoadditionalroles and responsibilities delegated to the Executive Management.


ConFlICT oF InTEREST AnD DISCloSuREIn performing their duties, the Board of Directorsandemployeesarerequiredtobe fully aware of, clearly understand, and comply with all applicable laws, rules, and regulations. Any monetary and non-monetary benefits presented to employees in addition to the normal compensation paid by the Company should be in line with the conflict of interest policy. Employees should perform their duties with the principles of integrity, fairness, and in conformity to professional standards.

• TheCompanyhasformulatedapolicyfortrading in the Company’s securities by its employees and Board members. The policyensurescompliancewithADX/SCAregulations relating to insider trading.

• Employeesarenotallowedtoreceivegiftsor benefits of any kind from third parties. This is to prevent any influence on the employees’ independence and objectivity.

• Employeesinmanagementpositionsand employees involved in procurement are required to sign “Conflict of Interest” and “Code of Conduct” statements.

• DirectorsshouldnotifytheCompanySecretary if a material personal interest relating to the affairs of the Company arises. In this context, a material personal interest would refer to a financial transaction with a related party of the CompanyexceedingAED5million.

• DirectorsshouldabstainfromattendanceatameetingofDirectorswhereamatterin which they have a material personal interest is being discussed, unless the otherDirectorsvoteotherwise.

• Ifoneofthemajorshareholders(represented by a Board Member) has a conflict of interest in an issue which can affect the price or volume of trading of the Company’s securities, the Board ofDirectorsshouldconductameetingand issue a decision in the presence of all its members, excluding the concerned shareholders/Board Member. In extraordinary cases, such issues can be resolved through a special committee formed for that purpose.

• EachDirectorshalloncommencementof his/her term disclose to the Company the nature of the positions he/she occupies in other companies, public establishments, and other important commitments, and specify the time allocated thereto, and any changes to the abovementioned upon occurrence.

• Additionally,eachDirectorshalldiscloseon an annual basis, the nature of positions he/she occupies in the company’s securities, the parent company, and subsidiary or affiliate companies.

• Directorsshouldcomplywiththedisclosure policy and take remedial action where necessary.

Compliance with Conflict of Interest and Disclosure PolicyTheBoardofDirectorsherebydeclaresthateach member of the Board has complied with the disclosure requirements as per the laws and regulations issued by the Ministry of Economy and the Securities and Commodities Authority. There is no indication of non-compliance by any of themembersoftheBoardofDirectors.

CHIEF ExECuTIVE oFFICERThe Chief Executive Officer (CEO) is appointed by the Board. The primary role of the CEO is to define and execute the business vision, mission, strategy and organization. He is responsible for the Company’s overall operations, profitability, and the delivery of sustained growth, and must direct the Company towards the achievement of its objectives.

The CEO is expected to achieve business objectives, forecasts, and targets as defined by the Board, and to ensure that all operations are managed efficiently in terms of allocating resources appropriately and profitably.

Roles and ResponsibilitiesThe CEO’s key responsibilities include:

Strategic Performance• DefiningandadvocatingtheCompany’s

organization, values, and culture.

• ExecutingtheCompany’soverallstrategicplans and ensuring that objectives set by the Board are met.

• Providinginputandensuringthedevelopment of an effective and dynamic organizational structure that is well suited to the Company’s strategic goals.

• Leadingcriticalnegotiationsandagreements that have a strategic/crucial impact on the Company’s continuity, success, or development.

• Reviewingtheproposedacquisitionsofany new business ventures, in conjunction with the Board.

• PromotingandprotectingtheCompany’simage and business objectives to the external community, and to establish and maintain relations with the market and third parties.

• Coordinatingwithseniormanagementin the formulation of goals and objectives for their respective functions as well as the development of budgets.

• Reviewingoperatingresults,comparingresults to established objectives, and ensuring appropriate measures are taken to correct deviations, if any.

• Overseeingtheadequacyandsoundnessof the Company’s financial structure.

Reporting• Endorsingthemonthly,quarterly,

and year-end financial statements and management reports.

• Reviewingthereports,recommendations,and issues presented by senior management and providing feedback and direction as required.

• Managingaregularreportingprocess to the Board on the Company’s plans, performance, issues, and other important matters.

• Performingperiodicevaluationofdirectreports and ensuring the existence of a continuous self-development program for senior management.

Internal Audit and Risk Management• Ensuringtheexistenceofproper

corporate-wide risk management activities.

• SupportingtheAuditCommitteetoensure the effectiveness and adequacy of implemented internal audit programs.

legal Requirements• Ensuringtheappropriatenessofthe

legal status of the Company and its subsidiaries and adherence to all applicable laws and regulations.

Communication and Performance Evaluation

• PerformingthedutiesofthePrimarySpokesperson for the Company.

• Communicatingbusinessprogress to the Board, shareholders, and employees on a regular basis.

• Encouragingandregulatinginternaland external communication and creating a transparent and collaborative working environment. Ensuring the existence of proper and effective communication across the Company.

• Decidingontherecruitmentofseniormanagement in consultation with the Nomination and Remuneration Committee.

• Establishingperformance measures for senior management. Managing the performance of senior management and assuming responsibility for their development, including regular performance reviews and development plans.

• Ensuringtheexistenceofsuccessionplans for all key managerial positions not within the remit of the Nomination and Remuneration Committee.



AuDIT CoMMITTEEThe Audit Committee is appointed by the BoardofDirectorsandconsistsoffourmembers as at the date of this report. Three members are Independent Non- ExecutiveDirectors,andtheCommitteeincludes a fourth member with relevant financial and accounting expertise.

During the year, four Audit Committee meetings were held:

Date of Meeting

HE Jumma K. Al Khaili (Chairman)

HE Mohammed

Thani Murshed Al Rumaithi (Member)

HE Tareq Al Masaood (Member)

Hassan Murad Agha

– Financial Expert

(Member)

Jan 25 P A P PMar 22 P A P PApr 27 P A P POct 25 P A A P

Fees Paid to Members in 2011 50,000 50,000 50,000 50,000

P: Present A: Apologies.

Roles and ResponsibilitiesThe Audit Committee maintains free and open communication between the external auditors, internal auditors, and senior management. The objectives of the Audit Committee include:

•Monitoringtheintegrityofthefinancialstatements of the Company and any formal announcements relating to the Company’s financial performance, as well as reviewing significant financial reporting judgments that they contain.

•ReviewingtheCompany’sinternalcontrols, risk management, and compliance with the relevant regulations.

•Monitoringandreviewingtheeffectiveness of the Company’s Internal Audit and Control function.

•Reviewingofanyinsideraffiliated or related party transactions and reviewing compliance with such rules for the conduct and approval of such transactions.

•Makingrecommendationstothe Board in relation to the appointment, re-appointment, removal, and remuneration of the external auditor and ensuring a timely response by the Board on the matters contained in the external auditor’s letter.

•Reviewingandmonitoringtheexternalauditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant professionalandregulatoryrequirements.

• Developingandimplementingpoliciesonthe engagement of the external auditor to supply non-audit services, taking into account relevant ethical guidance regarding the provision of non-audit services by the external audit firm.

•ReportingtotheBoardonmatters that in the Committee’s opinion requireactionorimprovement,and to provide recommendations on the necessarystepsrequiredtoachievesuch improvement.

• Establishingasystemwherebyemployees can anonymously notify their doubts on potential abnormalities in the financial report or internal controls or any other matter, and ensuring proper arrangements for independent and fair investigations of such matters.

noMInATIon AnD REMunERATIon CoMMITTEETheNominationandRemunerationCommittee is responsible for the review oftheCompany’sHRframeworkandcompensation programs. The Committee makes recommendations to the Board on the remuneration, allowances, and terms of service of the Company executives to ensure they are fairly rewarded for their individual contribution to the Company.

All the Committee members are IndependentNon-ExecutiveDirectors of the Board.

Duringtheyear,fiveNominationandRemuneration Committee meetings were held:

Date of Meeting

HE Abu Bakr Siddiq Khouri (Chairman)

HE Majed Salem

Al Romaithi (Member)

HE Suhail M. Al Ameri (Member)

Apr 5 P P P

Apr 11 P A P

May 11 P P P

Jun 7 P P P

Dec18 P A P

Fees Paid to Members in 2011 50,000 50,000 50,000

P: Present A: Apologies.

Roles and ResponsibilitiesThekeyobjectiveoftheNominationandRemuneration Committee is to assist the Board in fulfilling its responsibilities regarding the:

•Formulationandannualreviewofremuneration, benefits, incentives to the CEO and Company’s executives, and that the remuneration and benefits given to senior management are reasonable and in line with the Company’s performance.

•DeterminationoftheCompany’sneedsforqualifiedstaffatthelevelofseniorexecutives and the basis of selection.

•AnnualperformancereviewoftheCompany’s senior executives.

• Managingtheprocessforthenominationand appointment of directors in line with applicable laws and regulations.

•Verificationofongoingindependence of independent Board members. If the Committee discovers that any of the members do not meet the independence criteria, it shall present this matter to the Company’s Board of Directors.

SEnIoR ExECuTIVESSenior Executives of the Company are:


Date of Joining: July 2006

Qualifications:Bachelor of Arts (Economics) (Canada)

Master of Business Administration (USA)

AED ‘000

2011 Remuneration and Allowances 2,446

Iqbal HamzahChief Financial Officer and Company Secretary

Date of Joining: August 2006

Qualifications:Chartered Accountant

Chartered Corporate Secretary

Bachelor of Commerce

AED ‘000

2011 Remuneration and Allowances 1,685


ExTERnAl AuDIToRSThe Board nominates the Company’s external auditors based on the recommendations of the Audit Committee. The appointment and remuneration of external auditors is approved by the general assembly of shareholders.

At the Annual General Meeting held on April 27,2011,theshareholdersreappointedPricewaterhouseCoopers (PwC) as the external auditors for the year 2011.PwC is one of the leading international audit firms with extensive experience in the field of audit services. It is certified by the Ministry of Economy and operates independently from the Company's Board ofDirectors,ChiefExecutiveOfficer,andChief Financial Officer. PwC has offices in the Americas, Europe, Asia/Asia Pacific, Africa and the Middle East including UnitedArabEmirates(AbuDhabi,Dubaiand Sharjah). PwC has been established intheregionforover40yearsandemploys more than 2,500 professionals.

Audit and non-audit related fees and costs of the services provided by the external auditors PwC during 2011 were AED477,000.

AED

Quarterly Reviews 94,500

Year End Audit 345,500

Others 37,000

Total fees 477,000

No other external audit services were utilized during 2011.

InTERnAl ConTRol DEPARTMEnTTheBoardofDirectorshasdelegatedresponsibility for oversight of the Internal ControlDepartment(ICD)totheAuditCommittee. The Head of Internal Control acts as the Head of Internal Audit and Compliance and is appointed by the Audit Committee.

The objective of the function is to provide independent assurance and consulting services using a disciplined systematic approach to improve the effectiveness of risk management, internal control, compliance and governance process, and the integrity of the Company’s operations. The function is also responsible for monitoring the compliance of the Company and its employees with the law, regulations, and resolutions, as well as internal policies and procedures. A Charter sets out the purpose, authority, and responsibility of the function.

ReportspreparedbyICDaresubmitted to the Audit Committee and copied to the senior management of the Company for action. On an ongoing basis, the Audit Committee monitors the progress that management has made with respect to remedial actions taken on issues and findingsraisedbyICD.TheAuditCommitteereviewstheeffectivenessofICD.

Gurvinder Singh was appointed as Head of Internal Audit and Control and Compliance Officer in September 2011 (acting also as Compliance Officer).

Qualifications:Fellow, Association of Chartered Certified Accountants (FCCA)

MasterofBusinessAdministration(UK)

BachelorofScienceinEconomics(UK)

InTERnAl ConTRol FRAMEWoRKThe Company’s system of internal control aims to ensure that the Board and management are able to fulfill the Company’s business objectives. An effective internal control framework contributes to safeguarding the shareholders’ investment and the Company’s assets.

The objective of the Company’s internal control framework is to ensure that internal controls are established, that policies and procedures are properly documented, maintained, and adhered to, and are incorporated by the Company within its normal management and governance processes.

The Company’s policy and procedure are considered to be adequate and effective, while recognizing that such a system is designed to mitigate rather than eliminate the risk of failure to achieve business objectives and can provide reasonable but not absolute assurance against material misstatement or loss. There is an ongoing process for identifying, evaluating, and managing the risks faced by the Company. The management is responsible for identifying key risks and assessing their probable impact through formal defined processes.

TheBoardofDirectors,tothebestoftheirknowledge, believe that the system of internal control is sound and has been effectively implemented and monitored.

RISK MAnAGEMEnTTheBoardofDirectors,inassistancewithRisk Management Committee is responsible for establishing and overseeing the Company’s risk management policy. Management adheres to defined processes to conduct risk management activities, i.e. identifying key risks, initiating mitigation actions, and monitoring progress. In 2011, the Company appointed a Risk Officer to head the function.

The Audit Committee, in assistance with theInternalControlDepartment,overseesmanagement’s compliance with risk management processes and the adequacy of risk management activities related to the Company’soperations.TheICDundertakesboth regular and ad-hoc reviews of risk management activities.

Note3oftheFinancialStatementsoutlines the Financial and Capital Risk Management covering:

•Marketrisk

•Creditrisk

•Liquidityrisk

•Operationalrisk

•Capitalrisk

Other risk areas the Company focuses on are:

Commodity and Price RiskThe bulk of the Company’s input cost consists of soft commodities (grains, PET, sugar, milk powder) which are exposed to volatile global prices. Soft commodities’ prices may vary due to various factors including crop performance, Government policies, demand versus supply, oil price, and weather conditions. The Company’s Commodity Risk Management Committee oversees the procurement strategy and its execution.Variouscommodityintelligencereports and forecasting tools are used to identify international trends and facilitate competitive buying. The Company procures materials only for planned internal use and occasional trades and does not enter into derivative contracts.

A limited range of the Company’s products fall under price controls exercised by relevant Government regulators, with whom the Company maintains open communication. Input costs of such products are regularly monitored and, in the case of sharp cost increases, the matter is taken up with the relevant authority seeking approval for partially passing the cost increase to consumers/customers.

Quality and Food SafetyThe Company adheres to a strict quality and food safety management system withcertificationtoISO9001(QualityManagement System), ISO 22000 (Food Safety Management System) and HACCP (Food Safety System). Certifications are awarded by Lloyd’s Register Quality Assurance (LRQA), with a recurring six-month audit review program.

Strict and high-standard quality control and assurance processes and systems are followed to ensure all raw materials procured and finished goods produced meet the set standards.


Environmental, Food Safety and Health and Safety lawsIn order to ensure compliance to laws and regulations, the Company proactively works closely with local and regional regulatory authorities to understand changes to existing regulations and collaborate in complying with new regulations. The Company also invites and encourages regulators’ visits to its facilities at all times.

Product recallsThe Company has a defined process for product recalls and also maintains product liability insurance coverage. There were no instances of product recall during 2011.

loss of operational capacityThe Company maintains a Business Continuity/Business Resumption Plan across all operations which are tested at regular intervals.

In 2011, there were no major business interruptions; some minor interruptions were observed and managed effectively.

Human CapitalThe Company utilizes a variety of talent attraction and retention tools to minimize regrettable losses, and conducts a yearly succession planning review.

InsuranceThe Company maintains adequate insurance covering all relevant perils for the following risks:

•Property•Marine•ProductLiability•ThirdPartyLiability•BusinessInterruption•StevedoreLiability•GroupLifeInsurance

CoRPoRATE SoCIAl RESPonSIBIlITy (CSR)In 2010, the Company formed a CSR program with four pillars: Health and Wellness, Food Safety and Food Security, People, and Environment. More details can be found in the CSR section of the Annual Report.

In 2011, the Company held a sports day focused on the benefits of physical activity in leading a healthy life, bringing employees and their families together.

Focus on Emiratization allowed for the appointment of young talent within the administration, manufacturing, and supply chain. As a result, the Company more than tripled its UAE national talent pool in 2011.


In conjunction with the World Food Programme (WFP), the Company and staff members participated in a donation drive converted to food aid for the less fortunate in Africa.

The Company’s new corporate offices adhered to the international energy conservationstandardsLEEDsilverrating.

SHARE PERFoRMAnCEMonth end share price (AED)Date Open High Low Close

January 2011 1.95 1.99 1.94 1.95

February 2011 1.89 1.89 1.71 1.87

March 2011 2.03 2.10 2.03 2.04

April 2011 2.02 2.05 2.02 2.05

May 2011 2.09 2.12 2.09 2.10

June 2011 2.00 2.00 2.00 2.00

July 2011 2.00 2.05 2.00 2.03

August 2011 1.77 1.87 1.77 1.85

September 2011 1.77 1.77 1.70 1.72

October 2011 1.65 1.65 1.63 1.64

November 2011 1.67 1.80 1.67 1.75

December2011 1.63 1.75 1.63 1.72

Share movement versus ADI and ADCM Index 2011(Base:December31,2008)

120

100

80

60

40

20

0

-20

-40

% M

ovem

ent

27%18%

12%

33%

16% 23% 7% 13% 15% 11% 15%8% 2%

31% 19% 27%

-7% -3% -3% -6% -16%

-28%

-27%

94%

69% 76%76%

109%89%

85%

59%59%

9%6%

-2%

99%

Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11

Agthia (Agthia share price movement / fluctuation) ADI (ADX market index) ADCM (Sector index (Consumer sector))

SHAREHolDER CATEGoRy (no. oF SHARES)AsatDecember31,2011

Category Government Individuals Corporations Total Percentage

Local 30,000,000 151,617,090 369,630,508 551,247,598 91.9

GCC 9,592,880 164,410 10,210,604 19,967,894 3.3

Arabs - 1,504,815 10,000 1,514,815 0.3

Foreign - 6,417,485 20,852,208 27,269,693 4.5

Total 39,592,880 159,703,800 400,703,320 600,000,000 100

Percentage 7 27 67 100

SHAREHolDERS oWnInG 5% oR MoREAsatDecember31,2011

Shareholders No. of Shares Percent

General Holding Corporation 306,000,000 51.0%

AbuDhabiRetirementPensionsandBenefitsFund 30,000,000 5.0%

CoMPlIAnCE STATEMEnTDuringtheyear2011,theCompanywasnotsubject to any fines or penalties imposed by SCA or any statutory authority on any matter related to capital market. Additionally, there have been no cases of non-compliance with any applicable rules and regulations. No major incidents occurred in 2011.


The Board of Directors of Agthia Group PJSC is pleased to present to its shareholders the Company’s Annual Report and audited Financial Statements for the year ended December 31, 2011.

Overall, Company performance for the year was satisfactory in light of the challenging environment for food and beverage manufacturers of increasing input costsandregionalunrest.Nevertheless,business fundamentals remain strong as evident by the Company’s strong sales and volume growth across all categories during 2011, this performance is consistent with our long-term growth model.

Our investments remained focused on growth opportunities, while we continued addressing the challenge of higher input costs by pursuing cost-saving initiatives, pricing opportunities, and by accelerating entry into new categories.

In line with our strategy to gradually reduce reliance on the flour and animal feed business by diversifying into higher-margin businesses, the contribution of this business to total Group revenue was further reduced by 160 basis points in 2011 to 67 percent (2006: 83 percent).

Wearepleasedtostatethatasplanned,in the later part of Q4 the Company launched fresh dairy products, under the Yoplait brand, long shelf life 100 percent naturalfruitjuiceundertheChiquitabrand, and fresh fruit juices under the Al Ain Fresh brand. Entries into these new segments are strategic growth drivers and contribute to our ambition of becoming the UAE’s leading food and beverage group. The launch of frozen baked products has been delayed to Q2, 2013 due to technical reasons.

In December 2011, the Company announcedtheacquisitionofPelitSu,theTurkey-based natural spring water bottling plant with direct access to a natural spring water source. The Company has taken over management control of the Turkish entity and has completed 100 percent equityacquisitioninMarch2012.TheCompany plans to expand its regional distribution footprint in Turkey. This strategic venture will also facilitate the Company’s entry into higher-margin premium ‘natural spring’ drinking water in the UAE and wider geography.

SAlESThe Company has delivered strong 14 percent year-on-year net sales growth, reaching AED 1.14 billion. This is attributable to solid performance of water and beverages business delivering 21 percent sales growth, and the flour and animal feed business achieving 12 percent sales growth. This rise in sales was primarily driven by volume increases, pricing and distribution expansion.

Over a period of five years (2007-2011), the Company has achieved impressive CAGR of 21.4 percent in sales revenue.

PRoFITABIlITyAlthough total year net profit at 86.3 million declined by 25 percent versus last year, it is encouraging to see profit recovery in Q4, 2011.NetprofitforQ4,2011reflectsa33 percent growth over the average of the precedingthreequarters.Thisimprovementarose from the price increase in water and beverages, which took effect during Q4, 2011, in-house production of previously outsourced flour and feed volumes following the capacity increases, and lower grain input cost. Further expansion in poultry feed capacity is planned for Q4, 2012 including restructuring of the feed mill with the aim of reducing cost and improving efficiency.

Decline in total year 2011 net profit resulted mainly from a 4 percentage point drop in gross profit margin attributed to two factors:

(a) the continued increase in input cost of raw materials (grains and PET); and

(b) during last year, the Company’s flour business benefited from a decline in wheat prices which outpaced the drop in the market selling price of flour resulting in higher one-off profit margins.

Measured on five-year period (2007-2011), the company achieved net profit CAGR of 24.3 percent.

oTHER InCoMEThe Company realized AED 13.6 million of other income. This includes the settlement of AED 4.2 million in business interruption insurance claims relating to a fire incident in one of our flour mills in mid-2010, reversalofnotrequiredprovisions,andgain on sales of raw materials.

SEllInG & GEnERAl ADMIn ExPEnSES (SG&A)SG&A as a percentage of sales has declined to 14.3 percent from 15.3 percent last year. Overall SG&A at AED 163 million has increased by 5.7 percent compared to the same period last year, basically reflecting the higher distribution costs, full-year impact of last year’s hiring, and other inflationary increases.

CASH FloWAt AED 94.7 million, net cash from operations is AED 51.7 million less than last year due to lower profits and increased inventory level (higher grain cost plus forward cover).

CashandcashequivalentsasofDecember 31, 2011 amounted to AED 259.7 million.

To ensure availability of funds, the Company maintains sufficient bank credit lines to cover short-term working capital requirementsatverycompetitivepricing.

unAlloCATED CoRPoRATE ITEMSUnder segment reporting, unallocated assets of AED 394.6 million mainly includes goodwill of AED 93 million, and cash and bank balance of AED 268.7 million as Company’s fund management is centralized at the corporate level. Unallocated liabilities of AED 247.3 million mainly include bank borrowings of AED 223 million.

CAPITAl CoMMITMEnT AnD ConTInGEnCIESCapital commitments of AED 94 million reflect amount relating to the Turkish WaterCompanyacquisition,thedairyplant, frozen baked project, warehouse rackingequipment,investmentsindelivery trucks, and other capital items.

Bank guarantees and letters of credit of AED 52 million have primarily been issued in favor of Company’s vendors for the supply of materials and spare parts.

Directors’ Report


DIVISIonAl PERFoRMAnCEAgri Business Division (ABD)Flour and Animal FeedABDnetsalesatAED767.4millionin2011reflect a growth of 12 percent year-on-year driven by pricing, and volume increase of4percent.ThedivisionmaintaineditsNo.1 market position in both flour and animal feed in the UAE.

NetprofitofthisdivisionatAED87milliondeclinedby24percentyear-on-year.Thisis mainly attributable to the gross margin contraction of 5.1 percentage points due to a significant increase in grain prices, as well as for the fact that the flour segment during the same period last year benefited from a decline in grain prices which outpaced the adjustment in market selling price resulting in a higher one-off profit margin.

Actions initiated during 2011 to address the profitability of this segment are delivering results.Q4,2011grossprofitmarginimproved by 2 percentage points compared to first nine months of 2011. Production capacity expansion of existing flour and animal feed mills has been completed, and previously outsourced volumes are now beingproducedin-house(effectiveQ4,2011); feed profitability has improved; and the recent drop in grain prices has helped. Further expansion in poultry feed capacity is plannedforQ4,2012includingrestructuringof the feed mill with the aim to reduce cost and improve efficiency. In the later part of 2011, the Company secured a contract to managestockofwheatfortheAbuDhabiGovernment, in return for a management fee.

Consumer Business Division (CBD)Onceagain,theCBDdeliveredastrongand consistent performance. Net sales atAED376.9millionreflectssolid 18percentgrowth,drivenbyWaterandBeverages segment. The contribution of CBDdivisiontototalCompanysaleshasreached33percent(2006:17percent),reflecting the Company’s strategy to accelerate diversification to sustainable higher-margin products.

NetprofitatAED33.3millionismarginallybehind last year due to higher PET cost. A price increase of around 10 percent was implemented on bottled water and Capri-SunjuiceduringQ4,2011.Thiswillpartially offset the increased PET cost and will improve the profit margin going forward.

Water and BeveragesThe water and beverages segment, despite a challenging and competitive market, has continued its strong performance with sales growing by 21 percent year-on-year drivenbyasolid19percentvolumeincreaseinwateranda23percentincrease in Capri-Sun juice drink. Al Ain water brand has maintained its leading marketpositioninAbuDhabiEmirateandstrong No. 2 position in the UAE.

InDecember2011,theCompanylaunched100 percent natural juice under the Chiquita brand and acquired a Turkey-based natural spring water bottling plant with direct access to a natural spring water source. The Company plans to expand its regional distribution footprint in Turkey, this strategic move will also enable us to enter the higher-margin premium ‘natural spring’ drinking water segment in the UAE and the wider geography.

FoodFoodsegmentsalesatAED55.6millionare3percenthigherthan2010whiletheAl Ain branded business in the UAE grew by 11 percent. Al Ain tomato paste brand has further consolidated its leading market position in the UAE and is continuing to grow its presence in the frozen vegetable segment.

FoodsegmentlossofAED10.6million is attributed to the newly-launched fresh dairy and fresh juice products’ losses of AED2.4million,EgyptoperationlossesofAED3.6millionduetodomestic/regionalunrest and low-priced Chinese tomato paste, while the loss for the UAE branded tomato paste and frozen vegetables has significantlydroppedtoAED4.6millionagainstlastyear’sAED10.2million.TheCompany remains focused on turning the Egypt operation and UAE tomato paste and frozen vegetable business to profitability.

FuTuRE ouTlooKIt is quite clear that food and beverage manufacturers will have to contend with the volatile input cost (soft commodities and PET) and may not be able to pass on the full input cost increase to its consumers and customers, while the repercussions of the regional unrest remain a concern. Despiteatrulychallengingenvironment,we remain optimistic about the prospects for future revenue and profit growth as the Company pursues its strategy of introducing new and value-added products, continued geographical expansion, and high operating efficiencies.

SuBSEQuEnT EVEnTSThe first quarter of 2012 has seen no major events which may have significant impact on the 2011 Financial Statements.

DIRECToRSThepresentBoardofDirectorswasre-elected at the Annual General Meeting onApril27,2011foratermofthreeyears.

Directors’feesofAED1.05millionrelatingto 2010 were paid in 2011 to Board members. Remuneration for 2011 was AED1.05million.

DIVIDEnDTheBoardofDirectorsispleasedtorecommend 5 percent cash dividend for the year 2011.

AuDIToRSThe present auditors, Pricewaterhouse-Coopers, retire, and being eligible, offer themselves for re-appointment at the Annual General Meeting.

CoDE oF CoRPoRATE GoVERnAnCETheBoardofDirectorsandmanagementof the Company are committed to the principles of good governance. A full report on the Company’s corporate governance activities has been provided in the Corporate Governance section of the Annual Report.

InCEnTIVIzATIon/REMunERATIonTheBoardofDirectorsrecognizestheimportance of aligning the management interest with those of the Company’s shareholders. To support this strategy, Agthia’s stock incentivization scheme includes a number of senior executives and managers across the Group. The program complements the performance bonus incentives that reward individuals based on their ability to achieve annual financial targets. The stock scheme rewards management with Agthia stock based on the overall performance of the Company, measured on the basis of a three-year compounded EPS growth target and the performance of the individual. Specific financial, operational, and development goals are set each year.

FInAnCIAl REPoRTInG FRAMEWoRKTheDirectorsofAgthiaGroupPJSC,tothe best of their knowledge, believe that:

a. The financial statements, prepared by the management of the Company, fairly present its state of affairs, the results of its operation, cash flows, and change in equity.

b. The Company has maintained proper books of accounts.

c. Appropriate accounting policies have been consistently applied in preparation of financial statements, and accounting estimates are based on reasonable and prudent judgment.

d. International Financial Reporting Standards (IFRS), as applicable in the UAE, have been followed in the preparation of these financial statements.

e. The system of internal control is sound in design and has been effectively implemented and monitored.

f. There is no doubt about the Company’s ability to continue as a going concern.

The Board takes this opportunity to thank our shareholders, employees, and business partners for their continued support, and recognizes their vital role in making all our efforts successful.

On behalf of the Board

HE Rashed Mubarak Al HajeriChairmanMarch28,2012

Directors’ Report continued

Consolidated Financial Statements

Contents Independent Report on the Audit of the Consolidated Financial Statements 34Consolidated Statement of Income 35Consolidated Statement of Comprehensive Income 36Consolidated Statement of Financial Position 37Consolidated Statement of Changes in Equity 38Consolidated Statement of Cash Flows 39Notes to the Consolidated Financial Statements 40 – 59

Report on the consolidated financial statements to the Shareholders of Agthia Group PJSCWe have audited the accompanying consolidated financial statements of Agthia Group PJSC and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position as at 31 December 2011 and the consolidated statement of income, consolidated statement of comprehensive income, changes in equity and cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes.

Management’s responsibility for the consolidated financial statementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to entity’s preparation and fair presentation of the consolidated financial statements 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 principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respect, the financial position of the Group as at 31 December 2011 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on other legal and regulatory requirementsFurther, as required by the UAE Federal Law No. (8) of 1984, as amended, we report that:

(i) we have obtained all the information we considered necessary for the purposes of our audit;

(ii) the financial statements comply, in all material respects, with the applicable provisions of the UAE Federal Law No. (8) of 1984, as amended and the Articles of Association of the Group;

(iii) the Group has maintained proper books of accounts and has carried out physical verification of inventories in accordance with properly established procedures;

(iv) the financial information included in the report of the directors is consistent with the books of account of the Group; and

(v) nothing has come to our attention which causes us to believe that the Group has breached any of the applicable provisions of the UAE Federal Law No. (8) of 1984, as amended, or of its Articles of Association which would materially affect its activities or its financial position for the year ended 31 December 2011.

PricewaterhouseCoopers

28 March 2012

Jacques E. FakhouryRegistered Auditor Number 379Abu Dhabi, United Arab Emirates

PricewaterhouseCoopers

Level 9, East Tower, Abu Dhabi Trade Centre, PO Box 45263, Abu Dhabi,United Arab Emirates T: +971 (0)2 694 6800,F: +971 (0)2 645 6610, www.pwc.com/middle-east


Note2011

AED’0002010

AED’000

Revenue 1,144,312 1,006,134

Cost of sales 6 (907,562) (753,794)

Gross profit 236,750 252,340

Other income, net 7 13,594 14,186

Selling and distribution expenses 8 (99,661) (89,476)

General and administrative expenses 9 (61,377) (64,943)

Research and development 10 (2,169) –

Operating profit 87,137 112,107

Finance income 6,226 7,743

Finance expense (6,974) (4,527)

Profit before income tax 86,389 115,323

Income tax (expense)/credit 11 (66) 340

Profit for the year attributable to equity holders of the Group 86,323 115,663

Basic and diluted earnings per share (AED) 12 0.144 0.193

Consolidated Statement of Income For the year ended 31 December

The notes on pages 40 to 59 form an integral part of these consolidated financial statements.


Consolidated Statement of Comprehensive IncomeFor the year ended 31 December

2011AED’000

2010AED’000

Profit for the year attributable to equity holders of the Group 86,323 115,663

Other comprehensive income

Foreign currency translation difference on foreign operations (3,779) 769

Board of directors and committee members fees (1,300) (1,200)

Other comprehensive income (5,079) (431)

Total comprehensive income for the year attributable to equity holders of the Group 81,244 115,232



Consolidated Statement of Financial PositionAs at 31 December

Note2011

AED’0002010

AED’000

Assets

Non-current assets

Property, plant and equipment 13 598,137 479,853

Advance for property, plant and equipment 2,164 25,403

Goodwill 14 92,986 92,986

Total non-current assets 693,287 598,242

Current assets

Inventories 15 253,893 214,228

Trade and other receivables 16 141,883 134,881

Government compensation receivable 17 74,110 114,998

Cash and bank balances 18 268,657 268,973

Total current assets 738,543 733,080

Current liabilities

Bank overdraft 18 – 6,193

Bank borrowings (current portion) 19 214,733 128,955

Trade and other payables 20 149,672 179,774

Due to related party 21 1,839 306

Total current liabilities 366,244 315,228

Net current assets 372,299 417,852

Provision for end of services benefits 22 20,521 16,702

Bank borrowings (non-current portion) 19 8,500 13,851

Other liability 1,098 1,318

Total non-current liabilities 30,119 31,871

Net assets 1,035,467 984,223

Equity

Share capital 23 600,000 600,000

Legal reserve 24 50,477 41,845

Translation reserve (3,809) (30)

Retained earnings 388,799 342,408

Total equity 1,035,467 984,223

The consolidated financial statements were approved and authorised by the Board of Directors on 28 March 2012 and were signed on their behalf by:

Chairman Chief Executive Officer Chief Financial Officer



Consolidated Statement of Changes in EquityFor the year ended 31 December

Sharecapital

AED’000

Legalreserve

AED’000

RetainedearningsAED’000

Translationreserve

AED’000Total

AED’000

Balance at 1 January 2010 600,000 30,279 269,511 (799) 898,991

Total comprehensive income for the year

Profit for the year – – 115,663 – 115,663

Other comprehensive income:

Foreign currency translation difference on foreign operations – – – 769 769

Board of directors and committee members fees – – (1,200) – (1,200)

Total comprehensive income – – 114,463 769 115,232

Transaction with owners

Dividend for the year 2009 – – (30,000) – (30,000)

Owners’ changes directly in equity

Transfer to legal reserve – 11,566 (11,566) – –

Balance at 31 December 2010 600,000 41,845 342,408 (30) 984,223

Total comprehensive income for the year

Profit for the year – – 86,323 – 86,323

Other comprehensive income:

Foreign currency translation difference on foreign operations – – – (3,779) (3,779)

Board of directors and committee members fees – – (1,300) – (1,300)

Total comprehensive income – – 85,023 (3,779) 81,244

Transaction with owners

Dividend for the year 2010 – – (30,000) – (30,000)

Owners’ changes directly in equity

Transfer to legal reserve – 8,632 (8,632) – –

Balance at 31 December 2011 600,000 50,477 388,799 (3,809) 1,035,467



Consolidated Statement of Cash Flows For the year ended 31 December

Note2011

AED’0002010

AED’000

Cash flows from operating activities

Profit for the year 86,323 115,663

Adjustments for:

Depreciation 13 45,082 39,812

Finance expense 6,974 4,527

Finance income (6,226) (7,743)

Loss on sale of property, plant and equipment 7 164 192

Impairment of inventory (2,707) (2,393)

(Release of provision)/provision for bad debts (1,243) 3,470

Provision for end of service benefits 22 5,087 5,132

Income tax expense/(credit) 66 (340)

Operating cash flows before payment for employees’ end of service benefits and changes in working capital 133,520 158,320

(Increase)/Decrease in inventories (36,958) 22,628

Increase in trade and other receivables (5,686) (4,608)

Decrease/(Increase) in government compensation receivable 40,888 (27,779)

(Decrease)/Increase in trade and other payables (37,114) 1,249

Increase/(Decrease) in due to related parties 1,533 (1,706)

Payment of end of service benefits 22 (1,268) (1,273)

Decrease in long term payable (220) (451)

Net cash generated from operating activities 94,695 146,380

Cash flows from investing activities

Acquisition of property, plant and equipment 13 (144,334) (93,968)

Proceeds from sale of property, plant and equipment 479 618

Finance income received 6,153 7,535

Net cash used in investing activities (137,702) (85,815)

Cash flows from financing activities

Bank borrowings, net 80,427 47,273

Dividend paid (30,000) (30,000)

Finance expense paid (6,660) (4,026)

Net cash from financing activities 43,767 13,247

Increase in cash and cash equivalents 760 73,812

Cash and cash equivalents as at 1 January 258,966 185,154

Cash and cash equivalents as at 31 December 18 259,726 258,966



Notes to the Consolidated Financial Statements For the year ended 31 December 2011

1 Legal status and principal activitiesAgthia Group PJSC (the “Company”) was incorporated as a Public Joint Stock Company pursuant to the Ministerial Resolution No. 324 for 2004. General Holding Corporation PJSC owns 51% of the Company’s shares. The principal activities of the Company are to establish, invest, trade and operate companies and businesses that are involved in the food and beverage sector.

The consolidated financial statements of the Company as at and for the year ended 31 December 2011 comprise the Company and it’s below mentioned subsidiaries (collectively referred to as the “Group”).

Subsidiary

Country ofIncorporation

and Operation

Share of equity (%)

Principal Activity2011 2010

Grand Mills Company PJSC (formerly Grand Mills for Flour and Feed Company PJSC)

UAE 100 100 Production and sale of flour and animal feed

Al Ain Food and Beverages PJSC (AAFB-UAE) (formerly Al Ain Mineral Water Company PJSC)

UAE 100 100 Production, bottling and sale of bottled water, flavored water, juices, yogurt, tomato paste and frozen vegetables

Al Ain Vegetable Processing and Canning Factory (AAV)

UAE 0 100 Processing and sale of tomato paste and frozen vegetables

Al Ain Food and Beverages LLC (AAF&B-Egypt)

Egypt 100 100 Processing and sale of tomato paste, chilli paste, fruit concentrate and frozen vegetables

As of 1st July, 2011, the assets and liabilities of Al Ain Vegetable Processing and Canning Factory (AAV) were transferred to Al Ain Food and Beverages PJSC (AAFB-UAE) as per the approval of Board of Directors. The above restructuring has brought synergies in production process, supply chain and selling and distribution expenses.

2 Summary of significant accounting policiesThe principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparationThe consolidated financial statements of Agthia Group PJSC have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations and complying wherever applicable with the UAE Federal Law no.8. The consolidated financial statements have been prepared under the historical cost convention.

The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management 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 areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

2.1.1 Changes in accounting policy and disclosures(a) New and amended standards and interpretations adopted by the GroupThe following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2011:

• IAS1(amendment),‘Presentationoffinancialinstruments’(effectiveforperiodsbeginningonorafter1January2011);

• IAS24,‘Relatedpartydisclosures’(revised2009),(effectiveforperiodsbeginningonorafter1January2011);

• IFRS1(amendment),‘Firsttimeadoption’,onfinancialinstrumentdisclosures(effectiveforperiodsbeginningonorafter1January2011);

• IFRS7(amendment),‘Financialinstruments’(effectiveforperiodsbeginningonorafter1January2011).



2 Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

2.1.1 Changes in accounting policy and disclosures (continued)(b) Standards and interpretations in issue not yet effective

New Standards and amendments to Standards:

Effective for annual periods beginning on or after

Amendments to IAS 1, Presentation of Financial Statements – Revise the way other comprehensive income is presented, with grouping of items on the basis of whether they are potentially reclassifiable to profit and loss subsequently.

July 1, 2012

The amendments to IFRS 7, Financial Instruments: Disclosures – The amendment to IFRS 7 introduces disclosure requirements for financial assets and liabilities that are offset in statement of financial position or are subject to master netting arrangements or similar agreements.

January 1, 2013

Amendments to IAS 12, Income Taxes – Limited scope amendment on recovery of underlying assets. January 1, 2012

Amendments to IAS 19, Employee Benefits – Amended Standard resulting from the Post-Employment Benefits and Termination Benefits projects, requiring recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, with all actuarial gains and losses recognized immediately through other comprehensive income.

January 1, 2013

IAS 27, Separate Financial Statements (revised 2011) and IAS 28, Investments in Associates and Joint Ventures (revised 2011) – Revision as required by IFRS 10, IFRS 11 and IFRS 12.

January 1, 2013

The amendments to IAS 32, Financial Instruments: Presentation – The amendments clarify the offsetting criteria in IAS 32 to address inconsistencies in their application. An entity will have a legally enforceable right to set off only if it is non-contingent in nature and is enforceable in the normal course of business and in the event of default, insolvency or bankruptcy.

January 1, 2014

IFRS 10, Consolidated Financial Statements – Replaces the part of IAS 27 Consolidated and Separate Financial Statements related to consolidated financial statements and replaces SIC 12 Consolidation – Special Purpose Entities. Under IFRS 10 there is only one basis of consolidation, that is control, for which a new definition has been included.

January 1, 2013

IFRS 11, Joint Arrangements – Replaces IAS 31 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers. It deals with how a joint arrangement of which two or more parties have joint control should be classified and requires that joint ventures are accounted for using the equity method of accounting.

January 1, 2013

IFRS 12, Disclosure of Interests in Other Entities – Replaces the requirements previously included in IAS 27 – Consolidated and Separate Financial Statements, IAS 31 – Interests in Joint Ventures and IAS 28 – Investments in Associates. In general, the disclosure requirements are more extensive than the current standards.

January 1, 2013

IFRS 13, Fair Value Measurement – Represents the completion of the joint project to establish a single source for the requirements on how to measure fair value under IFRS. The Standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and improving disclosure requirements for use across IFRSs.

January 1, 2013

IFRS 9, Financial Instruments – Classification and Measurement (intended as complete replacement for IAS 39) January 1, 2013

2.2 ConsolidationSubsidiariesSubsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income (note 2.6).

Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Changes in ownership interests in subsidiaries without change of controlTransactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. Gains or losses on disposals of non-controlling interests are also recorded in equity.




2.3 Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s CEO to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available (see note 5).

2.4 Foreign currency translation(a) Functional and presentation currencyItems included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environmentinwhichtheentityoperates(‘thefunctionalcurrency’).Theconsolidatedfinancialstatementsarepresentedin‘UnitedArabEmirates Dirham’ (AED), which is the Group’s presentation currency.

(b) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. 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 consolidated statement of income within “Finance income or expenses”.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the consolidated statement of income within “Finance income or expenses”.

(c) Group companiesThe results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii) income and expenses for each consolidated statement of income are translated at the rate prevailing on the date of the transaction; and

(iii) all resulting exchange differences are recognised in other comprehensive income.

2.5 Property, plant and equipmentItems of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditure that is directly attributable to the acquisition or construction of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated statement of income during the financial period in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:

Buildings 20-40 years

Plant and Equipment 4-20 years

Other Equipment 2-3 years

Vehicles 4-8 years

Furniture and Fixtures 4-5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 2.7).

Gainsandlossesondisposalsaredeterminedbycomparingtheproceedswiththecarryingamountandarerecognisedwithin‘OtherIncome’in the consolidated statement of income.




2.5 Property, plant and equipment (continued)Capital work in progressThe Group capitalises all costs relating to the construction of property, plant and equipment as capital work in progress, up to the date of completion and commissioning of the assets.

These costs are then transferred from capital work in progress to the appropriate asset classification upon completion and commissioning, and are depreciated over their useful economic lives from the date of such completion and commissioning.

2.6 GoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segment.

2.7 Impairment of non-financial assetsAssets that have an indefinite useful life – for example, goodwill or intangible assets not ready to use – are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation 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). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

2.8 Financial assets

2.8.1 ClassificationThe Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(a) Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current. There are no financial assets been recorded at fair value through statement of income as of reporting date.

(b) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified asnon-currentassets.TheGroup’sloansandreceivablescomprise‘tradeandotherreceivables’and‘cashandcashequivalents’intheconsolidated statement of financial position (notes 2.12 and 2.13).

(c) Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period. There are no financial assets available for sale as of reporting date.

2.9 Impairment of financial assetsFinancial assets are assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset that can be measured reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor or indications that a debtor will enter bankruptcy.

An impairment loss in respect of financial assets measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the consolidated statement of income.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in the consolidated statement of income.




2.10 Financial instrumentsFinancial instruments comprise trade and other receivables, cash and bank balances, trade and other payables, amount due from/due to related parties and bank loans. A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument.

Financial instruments are recognised initially at fair value plus, any directly attributable transaction costs. Subsequent to initial recognition instruments are measured at amortised cost using the effective interest method, less impairment losses if any.

Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire, or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

Cash and cash equivalents comprise cash balances and term deposits with original maturity dates of not more than one year.

Other non-derivative financial instruments are measured at cost using the effective interest method, less any impairment losses. Accounting for finance income and expense is discussed in note 2.21.

However, the fair values of the financial instruments are not materially different from the carrying amount.

Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

2.11 InventoriesInventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. Cost of inventories includes expenditures incurred in acquiring the inventories, production or conversion cost and other costs incurred in bringing them to their existing location and condition. In case of manufactured inventories cost includes an appropriate share of production overheads based on normal operating capacity. It excludes borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

2.12 Trade receivablesTrade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

The fair value of trade and other receivables is estimated to be not materially different from their carrying amounts.

2.13 Cash and cash equivalentsIn the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of not more than one year and bank overdrafts. In the consolidated statement of financial position, bank overdrafts are shown within current liabilities.

2.14 Share capitalOrdinary shares are classified as equity.

2.15 Trade payablesTrade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

The fair value of trade and other payable is estimated to be not materially different from their carrying amount.

2.16 BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated statement of income over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is recognised in the consolidated statement of income over the period of loan.




2.17 Current and deferred income taxDeferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

2.18 Employee benefits(a) Bonus and long-term incentive plansThe Group recognises the liability for bonuses and long-term incentives in consolidated statement of income and as per the Group’s policy and procedure. The benefits are subject to board’s approval and are linked to business performance.

(b) Staff terminal benefitsProvision for employees’ end of service benefits is calculated in accordance with the UAE Federal Labour Law and is determined on the basis of the liability that would arise if the employment of all staff was terminated at the reporting date.

Monthly pension contributions are made in respect of UAE National employees, who are covered by law No. 2 of 2000. The pension fund is administered by the government of Abu Dhabi, Finance Department, represented by Abu Dhabi Retirement Pensions and Benefits Fund.

2.19 ProvisionsProvisions for legal claims are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required and settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

2.20 Revenue recognitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured when the significant risks and rewards of ownership have been transferred to the buyer, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group’s activities as described below. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue will only be recognised when title has effectively passed to the customer or on delivery to carrier for onward shipment to the customer, whichever is earlier.

2.21 Finance income and finance expensesFinance income comprises interest income on call deposits. Interest income is recognised as it accrues, using the effective interest method.

Finance expenses comprise interest expenses on borrowings. All borrowing costs are recognised in the consolidated statement of income using effective interest method.

2.22 LeasesLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of income on a straight-line basis over the period of the lease. The Group leases certain properties and vehicles.

Leases where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the consolidated statement of income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term. The Group does not have any assets on financial leases.

2.23 Dividend distributionDividend distribution to the Group’s shareholders is recognized as a liability in the Group’s consolidated financial statements in the period in which the dividends are approved by the Group’s shareholders.




2.24 Government compensation and grantFunds that compensate the Group for selling flour and animal feed at subsidised prices in the Emirates of Abu Dhabi are recognised in the consolidated statement of income, as a deduction from the cost of sales, on a systematic basis in the same period in which the sales transaction is affected. Grants that compensate the Group for the cost of an asset are recognised in consolidated statement of income on a systematic basis over the useful life of the asset.

2.25 Earnings per shareThe Group presents earning per share data for its shares. Earning per share is calculated by dividing the profit or loss attributable to shareholders of the Group by the weighted average number of shares outstanding during the period.

2.26 Research and development costIn accordance with IAS 38 Intangible Assets, expenditure incurred on research and development, excluding known recoverable amounts on contracts, and contributions to shared engineering programmes, is distinguished as relating either to a research phase or to a development phase. All research phase expenditure is charged to the consolidated statement of income. For development expenditure, this is capitalised as an internally generated intangible asset only if it meets strict criteria, relating in particular to technical feasibility and generation of future economic benefits. Expenditure that cannot be classified into these two categories is treated as being incurred in the research phase.

3 Financial risk management

3.1 Financial risk factorsThe Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk, liquidity risk and operating risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

Risk managementThe Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management activities.

Through Group’s risk management process, risks faced by the Group are identified and analysed to set appropriate actions to mitigate risk, and to monitor risks and adherence to the process. Risk management activities are reviewed when appropriate to reflect changes in market conditions and the Group’s activities.

The Group Audit Committee oversees how management manages the Group’s risk management process, and reviews the adequacy of the risk management activities in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management activities, the results of which are reported to the Audit Committee.

(a) Market risk(i) Foreign exchange riskThe Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar, Euro, Egyptian Pound, UK Pound and Swiss Francs. In respect of the Group’s transactions denominated in the US Dollar the Group is not exposed to the foreign exchange risk as AED is pegged to the US Dollar. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. (Note 25)

(ii) Price riskThe Group does not have investment in securities and is not exposed to equity price risk. The Group does not enter into commodity contracts other than to meet the Group’s expected usage and sale requirements, and is not exposed to commodities price risk.

(iii) Interest rate riskThe effective rates of interest on the Group’s bank liabilities are linked to the prevailing bank rates. The Group does not hedge its interest rate exposure.

(b) Credit riskCredit risk is managed on Group basis, except for credit risk relating to accounts receivable balances. Each local entity is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered.

The Group, in the ordinary course of business, accepts letters of credit/guarantee as well as post dated cheques from major customers. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets and as per Group policy.

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, is managed by making deposits taking in account banks/financial institutions financial position, past experiences and other relevant factors.



3 Financial risk management (continued)

3.1 Financial risk factors (continued)(c) Liquidity riskCash flow forecasting is performed at Group level, Group finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities (note 25) at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, and, if applicable external regulatory or legal requirements – for example, currency restrictions.

Surplus cash held by the operating entities are transferred to the Group treasury as per the Group’s cash pooling arrangements with a bank. Group treasury invests surplus cash in time deposits, with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts. At the reporting date, the Group held time deposit of AED 220,043 thousand (2010: AED 244,849 thousand) that are expected to readily generate cash inflows.

Typically the Group ensures that it has sufficient cash on demand to meet expected operational and capital expenditures in accordance with the Group’s working capital requirement, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

In addition, the Group maintains the following lines of credit:

• AED399,701thousandfacilities,whichincludesoverdraft,guaranteelineandimportline.Thesefacilitiescarryinterest of EIBOR/ADIBOR/LIBOR/mid corridor rate plus margin.

• AED93,218thousand,shorttermloanswhichcarriesinterestrateofADIBOR/LIBOR/midcorridorrateplusmargin.

(d) Operational riskOperational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group’s operations.

The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each business unit. This responsibility is supported by the practicing and managing key operational risks, for example:

• Adequateinternalcontrols

• Reconciliationsandmonitoringoftransactions

• Compliancewithregulatoryandotherlegalrequirements

• Policiesandprocedurescompliance

• BusinessresumptionandITdisasterrecoveryplans

• Codeofbusinessconduct

• Adequateinsurancecoverage

• CommodityRiskManagementCommittee

• QAcompliancefunctionindependentofmanufacturing

• EnterpriseRiskManagement

• Monthlyandquarterlybusinessreviews

• Trainingandprofessionaldevelopmentoftalents

Compliance with Group standards is supported by a programme of periodic reviews undertaken by Internal Audit. The results of Internal Audit reviews are discussed with the management of the business unit to which they relate, with summaries submitted to the Audit Committee and senior management of the Group.

3.2 Capital risks managementThe Management’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.

The Board seeks to maintain a balance between the higher returns that might be possible with higher level of borrowings and the advantages and security afforded by a sound capital position.

There were no changes in the Group’s approach to capital management during the year.

Neither the Group nor any of its subsidiaries are subject to externally imposed capital requirements.



4 Accounting estimates and judgementsEstimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of the future events that are believed to be reasonable under the circumstances. In the process of applying the Group’s accounting policies, which are described in note 2, management has made the following judgements which have a significant effect on the amounts of the assets and liabilities recognised in the consolidated financial statements.

Impairment losses on receivablesManagement reviews its receivables and related ageing reports to assess impairment at each reporting date. In determining whether an impairment loss should be recorded in the consolidated statement of income, management makes judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows.

Accordingly, an allowance for impairment is made where there is an identified loss event or condition which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.

Provision for obsolescence on inventoriesThe Management reviews the ageing and movements of its inventory items to assess loss on account of obsolescence on a regular basis. In determining whether provision for obsolescence should be recorded in the consolidated statement of income, management makes judgements as to whether there is any observable data indicating that there is any future saleability of the product and the net realisable value for such product and expired or close to expiry raw material and finished goods.

Useful lives of property, plant and equipmentManagement assigns useful lives and residual values to items of property and equipment based on the intended use of the assets and the expected economic lives of those assets. Subsequent changes in circumstances such as technological advances or prospective utilisation of the assets concerned could result in the actual useful lives or residual values differing from the initial estimates.

Impairment of other assetsAt each balance sheet date, management assesses whether there is any indication that its assets may be impaired. The determination of allowance for impairment loss requires considerable judgment and involves evaluating factors including industry and market conditions.

Income tax provisionManagement has taken into consideration the requirements for a tax provision. Management has estimated the tax provision based on the year’s performance after adjustment of non taxable items. The tax provision was calculated based on the tax rate of the country where operations were performed taking into consideration the exemptions that could be claimed by conventions either locally or internationally as at the balance sheet date.

5 Segment reportingInformation about reportable segment for the year ended 31 DecemberDue to reorganization the Group has reclassified its reporting segment effective 1 July, 2011. The Group has two reportable segments, as described below. The reportable segments offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Board of Directors review internal management reports on at least quarterly basis.

The following summary describes the operations in each of the Group’s reportable segment:

• AgriBusinessDivision(ABD) - Flour and Animal Feed, includes manufacturing and distribution of flour and animal feed.

• ConsumerBusinessDivision(CBD) - Bottled Water and Beverages includes manufacturing and distribution of drinking water, water based drinks and juices.

- Food include manufacturing and distribution of tomato and chilli paste, fruit concentrate, frozen vegetables and fresh dairy products.

Business operation in Egypt is reported under CBD.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit, as included in the internal management reports data reviewed by the Group’s CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm’s length basis.



5 Segment reporting (continued)Segment wise operating results of the Group, for the year are as follows:

Agri Business Division(ABD)

Consumer Business Division(CBD)

TotalFlour and Animal FeedBottled Water and

Beverages Food CBD Total

31 December 31 December 31 December 31 December 31 December

2011AED’000

2010AED’000

2011AED’000

2010AED’000

2011AED’000

2010AED’000

2011AED’000

2010AED’000

2011AED’000

2010AED’000

External revenues 767,436 687,422 321,231 264,806 55,645 53,906 376,876 318,712 1,144,312 1,006,134

Inter-segment revenue – – – – – – – – – –

Gross profit 119,973 142,225 119,472 113,546 2,079 1,580 121,551 115,126 241,524 257,351

Finance income 14 20 30 33 1 2 31 35 45 55

Finance expense – – – – (88) (7) (88) (7) (88) (7)

Depreciation expense 19,222 18,282 19,966 15,792 3,866 3,907 23,832 19,699 43,054 37,981

Income tax (expense)/credit – – – – (66) 340 (66) 340 (66) 340

Reportable segment profit/(loss) after tax 86,933 113,935 43,955 46,709 (10,637) (12,123) 33,318 34,586 120,251 148,521

Material non cash items:

Impairment losses on trade receivables (net) (1,713) (9,369) 25 537 445 894 470 1,431 (1,243) (7,938)

Agri Business Division Consumer Business Division Total

31 December 31 December 31 December

2011AED’000

2010AED’000

2011AED’000

2010AED’000

2011AED’000

2010AED’000

Others:

Segment assets 566,899 588,015 470,324 381,874 1,037,223 969,889

Segment liabilities 75,891 125,252 73,195 49,669 149,086 174,921

Capital expenditure 25,196 11,699 86,533 55,602 111,729 67,301

Reconciliations of reportable segments’ gross profit, finance income and expense, depreciation, capital expenditure, revenues, profit or loss, assets and liabilities.

2011 2010

Reportablesegment totals

AED’000Unallocated

AED’000Consolidated totals

AED’000

Reportablesegment totals

AED’000Unallocated

AED’000Consolidated totals

AED’000

Gross profit 241,524 (4,774) 236,750 257,351 (5,011) 252,340

Finance income 45 6,181 6,226 55 7,688 7,743

Finance expense (88) (5,083) (5,171) (7) (4,645) (4,652)

Depreciation 43,054 2,028 45,082 37,981 1,831 39,812

Capital expenditure 111,729 55,844 167,573 67,301 1,264 68,565



5 Segment reporting (continued)

Reconciliations of reportable segments’ gross profit, finance income and expense, depreciation, capital expenditure, revenues, profit or loss, assets and liabilities (continued)

31 December

2011AED’000

2010AED’000

Profit for the yearTotal profit for reportable segments 120,251 148,521

Unallocated amounts

Other operating expenses (34,945) (36,630)

Net finance income 1,017 3,772

Consolidated profit for the period after income tax 86,323 115,663

AssetsTotal assets for reportable segments 1,037,223 969,889

Other unallocated amounts 394,607 361,433

Consolidated total assets 1,431,830 1,331,322

LiabilitiesTotal liabilities for reportable segments 149,086 174,921

Other unallocated amounts 247,277 172,178

Consolidated total liabilities 396,363 347,099

6 Cost of sales

31 December

2011AED’000

2010AED’000

Raw materials 737,578 604,524

Salaries and benefits 70,076 60,864

Depreciation 41,090 36,089

Maintenance 14,004 14,377

Utilities 21,086 15,880

Rent expense 6,584 5,585

Others 17,144 16,475

907,562 753,794

Cost of raw materials for flour and feed products is stated after the deduction of the Abu Dhabi Government compensation amounting to AED 271 million (2010: AED 152 million). The purpose of the compensation is to partially reduce the impact of increased and volatile global grain prices on food retail prices for the consumers in the Abu Dhabi Emirate.

7 Other income, net

31 December

2011AED’000

2010AED’000

Commission income – 6,289

Income from filling/storage etc 1,202 3,014

Income on sale of raw material/scrap 3,101 2,125

Loss on sale of fixed assets (164) (192)

Insurance claim 4,209 –

Others 5,246 2,950

13,594 14,186



7 Other income, net (continued)

In the second quarter of 2011, the Group received an amount of AED 5.3 million from an insurance company pertaining to business interruption and damage to plant and equipment, incurred due to a fire in one of its flour milling production lines in 2010.

The amount related to business interruption of AED 4.2 million has been recognised in the consolidated statement of income as other income and the balance amount has been offset against the cost incurred to repair the damaged plant and equipment.

8 Selling and distribution expenses

31 December

2011AED’000

2010AED’000


Marketing expenses 15,213 14,890


Depreciation 907 826

Transportation 28,231 22,629

Royalty fees 2,742 1,653


Others 6,319 6,292

99,661 89,476

9 General and administrative expenses

31 December

2011AED’000

2010AED’000



Depreciation 3,085 2,897

Legal, consulting and audit fees 6,620 7,648


Provision for doubtful debts (171) 3,470

Others 8,525 7,932

61,377 64,943

10 Research and development

31 December

2011AED’000

2010AED’000

Salaries and benefits 1,933 –

Others 236 –

2,169 –

11 Income taxThe Group’s operations in Egypt are subject to taxation. Income tax for the current year is provided on the basis of estimated taxable income computed by the Group for its operations in Egypt.

12 Basic and diluted earnings per shareThe calculation of basic and diluted earnings per share at 31 December 2011 was based on the profit attributable to shareholders of AED 86,323 thousand (2010: AED 115,663 thousand) and the weighted average number of shares outstanding of 600,000 thousand (2010: 600,000 thousand).



13 Property, plant and equipment

Land andBuildingsAED’000

Plant andEquipment

AED’000

Furniture andFixtures

AED’000Motor Vehicles

AED’000

Capital Workin Progress

AED’000Total

AED’000

Cost

At 1 January 2010 325,780 512,220 30,864 26,597 17,059 912,520

Reclassification (1,408) 7,749 (10,734) 17 1,949 (2,427)

Additions 4,118 18,777 1,664 5,113 38,893 68,565

Disposals (11) (4,041) (1,309) (601) – (5,962)

Transfers 2,405 41,490 236 1,170 (45,301) –

At 31 December 2010 330,884 576,195 20,721 32,296 12,600 972,696

Additions 41,879 15,706 2,486 185 107,317 167,573

Transfers 7,510 39,677 6,877 3,483 (57,547) –

Disposals – (1,803) (320) (1,635) – (3,758)

Impairment adjustment (5,620) (480) (93) (38) – (6,231)

Currency retranslation (2,324) (1,366) (66) (83) 65 (3,774)

At 31 December 2011 372,329 627,929 29,605 34,208 62,435 1,126,506

Depreciation

At 1 January 2010 152,223 256,207 19,034 24,485 – 451,949

Reclassification 242 6,468 (7,160) 70 – (380)

Charge for the year 7,658 27,403 3,266 1,485 – 39,812

Disposals (9) (3,364) (953) (443) – (4,769)

At 31 December 2010 160,114 286,714 14,187 25,597 – 486,612

Charge for the year 7,549 32,454 3,516 1,563 – 45,082

Disposals – (1,517) (100) (1,498) – (3,115)

Currency retranslation (77) (101) (11) (21) – (210)

At 31 December 2011 167,586 317,550 17,592 25,641 – 528,369

Impairment provision for the book value

At 1 January 2010 5,620 527 342 125 – 6,614

Disposals – (47) (249) (87) – (383)

At 31 December 2010 5,620 480 93 38 – 6,231

Impairment adjustment (5,620) (480) (93) (38) – (6,231)

At 31 December 2011 – – – – – –

Net book amount

31 December 2011 204,743 310,379 12,013 8,567 62,435 598,137

31 December 2010 165,150 289,001 6,441 6,661 12,600 479,853



13 Property, plant and equipment (continued)

31 December

2011AED’000

2010AED’000

Acquisition of property plant and equipment 167,573 68,565

(Transfer from)/Addition to advance for property, plant and equipment (23,239) 25,403

Acquisition of property, plant and equipment in the statement of cash flows 144,334 93,968

The buildings of subsidiaries, except Al Ain Food and Beverages, Egypt, have been constructed on plots of land granted by the Government of Abu Dhabi for no consideration.

In 2011 assets of Al Ain Vegetable Processing and Canning Factory were transferred to Al Ain Food and Beverages (AAFB-UAE) and impairment was adjusted with cost at time of transfer.

14 GoodwillFor the purpose of impairment testing, goodwill is allocated to the Group’s operating segments where the goodwill is monitored for internal management purposes. The aggregate carrying amount of goodwill allocated to each unit is as follows:

2011AED’000

2010AED’000

Agri Business Division 61,855 61,855

Consumer Business Division (UAE operations) 31,131 31,131

92,986 92,986

The recoverable amounts of Agri Business Division and Consumer Business Division (UAE operations) cash-generating units were based on their values in use determined by management. The carrying amounts of both units were determined to be lower than their recoverable amounts.

Values in use were determined by discounting the future cash flows generated from the continuing use of the units.

Cash flows were projected based on past experience and the five year business plan and were based on the following key assumptions:

Agri BusinessDivision

Consumer BusinessDivision (UAE

operations)

Anticipated annual revenue growth (%) 3% – 5% 10% – 15%

Discount rate (%) 12.5% 12.5%

The values assigned to the key assumptions represent management’s assessment of future trends in the food and beverage industry and are based on both external and internal sources.

15 Inventories

31 December

2011AED’000

2010AED’000

Raw and packing materials 108,822 78,014

Work in progress 13,632 10,818

Finished goods 43,893 23,031

Goods in transit 62,971 84,014

Spare parts and consumables 30,034 26,517

259,352 222,394

Provision for obsolescence (5,459) (8,166)

253,893 214,228



16 Trade and other receivables

31 December

2011AED’000

2010AED’000

Trade receivable 109,813 104,136

Prepayments 21,635 18,224

Other receivables 10,435 12,521

141,883 134,881

Trade receivables are stated net of provision for doubtful debts of AED 8,806 thousand (2010: AED 10,049 thousand).

The Group’s exposure to credit and currency risk, and impairment loss related to trade and other receivables is disclosed in note 25.

17 Government compensation receivable

2011AED’000

2010AED’000

Receivable at beginning of the year from Abu Dhabi government 114,998 87,219

Compensation for the year 271,438 152,032

Received during the year (312,326) (124,253)

Balance as at 31 December 74,110 114,998

18 Cash and bank balances

31 December

2011AED’000

2010AED’000

Cash in hand 680 76

Cash at banks:

Current and savings account 47,934 24,048

Fixed deposits 220,043 244,849

Cash and bank balances 268,657 268,973

Bank overdraft – (6,193)

Escrow account (for dividend distribution 2009 and 2010) (8,931) (3,814)

Cash and cash equivalents in the statement of cash flows 259,726 258,966

Fixed deposit are for period not more than one year (2010: up to 3 months) carrying interest rates varying from 3.25% – 4.00% (2010: 3.25%-4.00%).

Escrow represents amount set aside for payment of dividend. Equivalent amount has been recorded as liability in trade and other payables. This restricted cash balance has not been included in the cash and cash equivalents for the purpose of cash flow statements.



19 Bank borrowingsThis note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost.

31 December

2011AED’000

2010AED’000

Current liabilities

Short term loan 83,863 105,662

Credit facility 125,826 18,150

Term loan 5,044 5,143

214,733 128,955

Non-current liabilities

Term loan 8,500 13,851

Terms and repayment schedule

Currency Interest RateYear of

maturity

31 December 2011 31 December 2010

Face value/limitAED’000

Carrying amountAED’000

Face value/limitAED’000

Carrying amountAED’000

Short term loan USD/AED/EGP

LIBOR/mid corridor rate/ADIBOR + margin*

2012 93,218 81,198 110,000 105,662

Credit facility USD/AED/ EGP

LIBOR/EIBOR/mid corridor rate + margin *

2012 309,701 128,491 175,000 18,150

Credit facility (Capex)

USD/AED LIBOR/EIBOR + margin *

2012 70,000 – – –

Term loan EURO EURIBOR + margin*

2014/2015 27,339 13,544 27,339 18,994

Total 500,258 223,233 312,339 142,806

*Margin on the above loans and facilities varies from 1.10% – 1.45%. (2010: 1.25% – 1.45%)

Credit facility and credit facility (Capex) are secured against following:

• Thirdpartyindemnitytomakeavailableguarantees,documentarycredit,billsdrawn,loantofinanceimport/openaccountsettlementin the name of any of the subsidiary of the Group in favour of the bank.

20 Trade and other payables

31 December

2011AED’000

2010AED’000

Trade payables 98,988 129,832

Accruals 36,758 43,640

Other payables 13,926 6,302

149,672 179,774



21 Transactions with related partiesThe Group, in the ordinary course of business, enters into transactions at agreed terms and conditions, with other business enterprises or individuals that fall within the definition of a related party contained in International Accounting Standard 24. The Company has a related party relationship with the Group entities, its executive officers and business entities over which they can exercise significant influence or which can exercise significant influence over the Group.

The volume of related party transactions, outstanding balances and related expenses and income for the year are as follows:

Amount due to and transactions with related parties during the year

2011AED’000

2010AED’000

General Holding Corporation (GHC)

Opening balance 1 January 306 2,012

Directors and committee members’ fees charged (last year) 1,400 1,200

Paid to GHC – (1,621)

Reimbursement of consulting fees – (975)

Others 133 (310)

Balance as at 31 December 1,839 306

Sorouh Real Estate

Opening balance 1 January – –

Purchase cost and service charges for Sky Tower Office 29,127 12,315

Paid to Sorouh Real Estate (29,127) (12,315)

Balance as at 31 December – –

A net accrual of AED 1,400 thousand is made for the board of directors and committee members fees for the year 2011 (2010: AED 1,500 thousand).

Transactions with key management personnelKey management personnel compensation are as follows:

31 December

2011AED’000

2010AED’000

Short term benefits 12,620 14,142

Long term benefits 4,571 3,973

17,191 18,115

22 Provision for end of service benefits

2011AED’000

2010AED’000

Balance at 1 January 16,702 12,843

Charge for the year 5,087 5,132

Paid during the year (1,268) (1,273)


23 Share capitalThe share capital includes 526,650 thousand shares of a par value of AED 1 each, which have been issued for in-kind contribution.

31 December

2011AED’000

2010AED’000

Authorised, issued and fully paid (600,000 thousand ordinary shares of AED 1 each) 600,000 600,000



24 Legal reserveIn accordance with the Federal Law No. 8 of 1984 (as amended) and the Company’s Articles of Association, 10% of the profit for each year is transferred to the legal reserve until this reserve equals 50% of the paid up share capital. The legal reserve is not available for distribution.

25 Financial instruments

Credit riskThe carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

31 December

2011AED’000

2010AED’000

Trade receivables 109,813 104,136

Other receivables 10,435 12,521

Cash at banks 267,977 268,897

388,225 385,554

The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the consolidated statement of financial position are net of allowances for doubtful receivables as estimated by the Group’s management based on prior experience and the current economic environment.

There is no significant concentration of credit risk, with overall exposure being spread over a large number of customers.

Impairment lossesThe ageing of trade receivables at the reporting date was:

31 December

2011AED’000

2010AED’000

Trade receivables not impaired:

Not due 86,432 77,414

Past due 0 – 60 days 16,435 19,308

Past due 61 – 120 days 3,036 2,321

Past due 121 – 180 days 1,518 1,174

Past due 181 – 240 days 304 936

Past due 241 – 300 days 258 577

301 days and above 1,699 1,943

Trade receivable past due and provided for impairment:

Past due 181 – 240 days 251 1,353

Past due 241 – 300 days 48 435

301 days and above 8,638 8,724

118,619 114,185

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

2011AED’000

2010AED’000

Balance at 1 January 10,049 17,986

(Release of provision)/provision for receivable (171) 3,470

Write offs/release (1,072) (11,407)




25 Financial instruments (continued)

Liquidity riskThe following are the contractual maturities of financial liabilities:

Carrying valueAED’000

Contractualcash flowsAED’000

Up to 1 yearAED’000

1-2 yearsAED’000

2-5 yearsAED’000

More than5 years

AED’000

31 December 2011Trade and other payables 151,511 (151,511) (151,511) – – –Bank overdraft – – – – – –Bank loans 223,233 (224,801) (216,116) (5,639) (3,046) –Long term liability 1,098 (1,516) (253) (505) (758) –

31 December 2010

Trade and other payables 180,080 (180,080) (180,080) – – –

Bank overdraft 6,193 (6,205) (6,205) – – –

Bank loans 142,806 (144,838) (129,722) (10,542) (4,574) –

Long term liability 1,318 (1,769) (253) (505) (758) (253)

Foreign currency riskThe Group’s exposure to foreign currency risk was as follows based on notional amounts:

2011 2010

Euro’000 SAR’000 CHF’000 Euro’000 CHF’000

Forecast purchases 9,125 7 296 1,843 151

Long term loan 2,879 – – 3,943 –

The following exchange rates were applicable during the year:

Average rate Reporting date rate

2011AED

2010AED

2011AED

2010AED

Euro 5.117 4.878 4.708 4.867

CHF 4.159 3.532 3.917 3.903

EGP 0.615 0.658 0.609 0.637

A strengthening/weakening of the AED, as indicated below, against the Euro, CHF and EGP at 31 December would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2010, albeit that the reasonably possible foreign exchange rate variances were different, as indicated below.

EquityAED’000

Profit/(loss)AED’000

31 December 2011Euro (strengthening by 5%) – (2,767)CHF (strengthening by 5%) – (53)EGP (weakening by 2%) (447) –

(447) (2,820)

31 December 2010

Euro (strengthening by 3%) – (845)

CHF (strengthening by 4%) – (23)

EGP (weakening by 3%) (769) –

(769) (868)

The above analysis is based on currency fluctuations during January and February 2012.



25 Financial instruments (continued)

Interest rate riskAt the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

31 December

2011AED’000

2010AED’000

Fixed rates instruments

Financial assets 220,043 244,849

Financial liabilities (1,098) (1,318)

218,945 243,531

Variable rates instruments

Financial liabilities 223,233 148,998

Fair valueThe fair value of the Group’s financial instruments is not materially different from their carrying amount.

26 Contingent liabilities and capital commitments

31 December

2011AED’000

2010AED’000

Bank guarantees and letters of credit 52,058 30,798

Capital commitments 94,055 153,990

The capital commitment includes the cost of acquisition of Pelit Su, a Turkey based spring water company. The transaction is expected to close during first half of 2012. Although Agthia Group takes management control effective 1st January 2012.

At 31 December 2011 guarantees of AED 12,337 thousand were outstanding (2010: AED 4,100 thousand).

The above bank guarantees and letters of credits were issued in the normal course of business.

Non cancellable operating lease rentals are payable as follows:

2011AED’000

2010AED’000

Less than one year 10,398 4,760

Between one and five years 10,615 7,075

More than five years 40 44

21,053 11,879

The Group has leasehold land, building and vehicles under operating leases. The lease terms are with option to renew the lease at the time of expiry.

Lease expense charged for the year is AED 10,908 thousand (2010: AED 4,330 thousand)


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