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C o n t e n t s STYEAR ENDED 31 DECEMBER, 2013

FAN MILK PLC ANNUAL REPORT & ACCOUNTS 2013

C o r p o r a t e I n f o r m a t i o n

DIRECTORS Chairman - Mr. Kodjo Aziagbe (Togolese)Managing Director - Mr. Steen Flemming Hadsbjerg (Danish) Directors - Dr. Oba Otudeko, CFR Resigned W.E.F. 27.11.2013 - Mr. E. M. Christensen (Danish)Resigned W.E.F. 26.11.2013 - Mr. J. J. Kollerup (Danish) - Mr. O. O. Akinkugbe - Dr. B. A. M. Ajibade, SAN - Mr. Ravi Sharma (British) Appointed W.E.F. 26.11.2013 - Mr. Mario Reis (British) Appointed W.E.F. 26.11.2013 - Mr. Jacob Kholi (Ghanaian) Appointed W.E.F. 26.11.2013

Secretaries:Lennap Services Limited Rc 13406

Theodolite House, 306, Ikorodu Road, Anthony, PMB 2047, Lagos.,

Auditors:PricewaterhouseCoopers(Chartered Accountants)Plot 252E Muri Okunola StreetVictoria Island, Lagos - Nigeria

Bankers:First Bank Of Nigeria PlcStanbic IBTC Bank PlcEcobank Nigeria PlcGuaranty Trust Bank Plc

Registered Office:Plot 1C, IbadanTel: +234 (2) 2412032, 02-2411021, 02-2413264, 02-2413265Fax: +234 (0) 8034040727

Eleyele industrial layout – Nigeria

02

B o a r d o f D i r e c t o r s

Mission Statement

It is our mission to be a leading manufacturer and marketer of healthy, nutritious and safe frozen dairy and non-dairy food products at affordable prices to the benefit of all stakeholders.

Kodjo Aziagbe (Chairman)

STYEAR ENDED 31 DECEMBER, 2013

Mr. Steen Flemming Hadsbjerg(Managing Director)

Mr. Ravi Sharma (Member)

Mr. Jacob Kholi (Member)

Mr. J. J. Kollerup(Member)

Mr. O. O. Akinkugbe (Member)

Dr. B. A. M. Ajibade, SAN (Member)

Mr. Mario Reis (Member)


F i n a n c i a l H i g h l i g h t s

03

Revenue 9,408,633 8,918,641

Profit beforetaxation 313,536 224,586

Income Tax Expense (139,615) (25,812)

Profit after taxation 173,921 198,774

Earnings per ordinary shares (Kobo) 32 36

Shareholders' funds 2,632,962 1,375,906

2012 N'000

2013 N'000



NOTICE is hereby given that the 49thAnnual General Meeting of the Company will be held at Lafia Hotel, Abeokuta Road, Ibadan on Monday, 4th August, 2014 at 12.00 p.m. for the following purposes:

1. To lay before the meeting, the audited accounts of the Company for the year ended 31st December, 2013 and the Reports of the Directors, Auditors and Audit Committee thereon.

2. To declare a dividend.

3. To elect/re-elect retiring Directors.

4. To authorise the Directors to determine the remuneration of the Auditors.

5. To elect Members of the Audit Committee..

6. To fix the remuneration of the Directors.

BY ORDER OF THE BOARD

KOFO BADEJO ESQ, LLB, BL, IOD.FRC/2013/NBA/00000003746LENNAP SERVICES LIMITED(Company Secretaries) Rc 13406Lagos, Nigeria

Dated this 24th day of March, 2014

To be valid, the attached proxy form must be executed and deposited with the Secretaries, Lennap Services Limited, Theodolite House, 306 Ikorodu Road, Anthony, Lagos, PMB 2047, Lagos, to reach them not less than 48 hours before the time of the meeting.

If the dividend of 10 kobo per share recommended by the Directors is approved, dividend warrants will be posted on 18th August, 2014 to the shareholders whose names are registered in the Company's Register of Members at the close of business on 18th July 2014.

Notice is therefore hereby given that the Register of Members and Transfer Books of the Company will be closed from 21st July2014 to 25th July 2014 both dates inclusive to enable the preparation and payment of dividend.

The Audit Committee consists of 3 Shareholders and 3 Directors. In accordance with section 359 (5) of the Companies and Allied Matters Act2004 any member may nominate a shareholder for election as a member of the Audit committee by giving in writing, notice of such nomination to the Company Secretary at least 21 days before the Annual General Meeting.

In accordance with the code of Corporate Governance and Best Practice, it would be preferable if norminees have basic accounting knowledge in order to ensure best practice.

ORDINARY BUSINESS

SPECIAL BUSINESS

Notes:(a) A member entitled to attend the General Meeting is also entitled to appoint a proxy to attend and to act on his behalf

and proxy need not be a member of the Company.

(b) Dividend warrants and Closure of Register of Members

(c) Nominations for the audit committee

N o t i c e O f A n n u a l G e n e r a l M e e t i n g

04



Distinguished Shareholders, Members of the Board, Global inflation fell from 3.7 per cent in 2012 to 3.0 per Ladies and Gentlemen. It gives me great pleasure and cent in 2013, but is expected to marginally increase honour to welcome you to the 49th Annual General again in 2014.Food and fuel prices contributed to the Meeting (AGM) Fan Milk Plc. It my greatest pleasure to reduced increase of the inflation in 2013.present to you, the Annual Report and Financial Statements of our Company for the year ended 31st December, 2013. The domestic business environment continued to face

substantial negative challenges from several factors In 2011, we celebrated 50 years of existence as a though there are signs that the on-going reforms in corporate entity, which has matured, indeed, over the various sectors of the Nigerian economy are trying times with mixed results. Between that time gradually yielding positive results. This has and now, we have improved on our previous manifested by Nigeria being classified among the achievements and my address to you today will give fastest growing economies in the world in 2013. testament to some of the positive strides we have made. According to Nigeria National Bureau of Statistics

estimates, the country's GDP grew 7.67 percent year-I will begin with a brief review of the global and on-year in the last quarter of 2013, higher than the domestic economic environment within which our revised figure of 6.81 and 6.99 percent recorded in the company operated and thus provide a background as third quarter and the corresponding period of 2012, to how the definitive events impacted our operational respectively. For 2013, growth rate was estimated at and financial performance. 6.87 percent, up from 6.58 percent in 2012.

The non-oil sector remained the major driver of The global economy continued its structural growth, recording 8.73 per cent in the fourth quarter of adjustment to the evolving growth dynamics in the 2013. The growth drivers in the non-oil sector remained advanced and emerging market economies. While agriculture; wholesale and retail trade; and services, growth in the advanced economies in most areas have which contributed 1.64, 2.34, and 2.66 percent, resumed, growth in the emerging economies slowed respectively. down considerably during 2013.

The relatively robust growth performance despite Global growth averaged 2.5 per cent in the first half of sluggish global recovery reflected the continuing 2013, which was the same as in the second half of 2012 favourable climatic conditions for increased and development in second half of 2013 showed a agricultural production, sustained outcome of banking downward trend. sector reforms and macroeconomic stability.

The United States, Japan and a few European countries The moderation in consumer price inflation reflected a just emerging from recession were the major drivers trend that began in the fourth quarter of 2012. The behind the recovery and the growth in 2013. anticipated bumper agricultural output is expected to

lead to further decline in inflation and contribute to a Improvement in the United States was anchored by sustained macroeconomic stability. However, the enhanced industrial production buoyed largely by threat of a spending “blow-out” in the run-up to the strong private demand and extra-ordinary 2015 elections poses potential risks to inflation.accommodative monetary policy.

The conducive investment climate brought about by The political standoff over fiscal sustainability in the predictable macroeconomic environment continued to United States, which led to a shutdown of the secure a sustained inflow of foreign capital into the Government payments in October 2013, was economy. moderated by subsequent discretionary spending.

The Nigerian economy is expected to experience Strong signs of growth resumption emerged from stronger growth in 2014 than in 2013 with the growth some Euro area economies, but a general to be driven mainly by oil prices and increased domestic improvement is yet to be seen. demand.

Nigerian Economic Environment

Global Economic Environment

C h a i r m a n ’ s S t a t e m e n t

05



06

Fan Milk's Performance

Acquisition of Fan Milk International A/S

these do not spill over to the Operating Profit, which Distinguished shareholders. The challenging operating grew by 3.06% only. This is mainly due to increased environment also took its tolls on your Company; but distribution expenses caused by the fact that more despite a difficult operating environment, your products were sold in the East and the North compared Company continued its positive development from the to the past where Lagos and the West have been the previous years. major markets. Further, a reduction in operating

income from new Franchise Takers also contributed The Company increased its turnover in 2013 to NGN negatively. 9.408 billion which is an increase of 5,49% compared to 2012's turnover .Gross Profit (GP) grew by 9.13%, The increase in Profit Before Tax (PBT) is mainly whereas Operating Profit (OP) and Profit Before attributed to reduced finance costs due to improved Tax(PBT) grew by 3.06% and 39.61% respectively. financial management.

The increase in turnover can be attributed to the Profit After Tax (PAT) for the Year is reduced by 12.5% followings: compared to that of 2012 which can be explained by - increased production capacity, increased corporate tax paid. This result in Earnings - increase in new franchisees and customers, Per Share reducing from 36 kobo per Share in 2012 to 32 - Improved customer account management kobo per Share in 2013.and improved distribution of products– especially in the East and in the North - thereby increasing the Your Company continues to increase its footprint footprint of the company. across the Nation, and embarked on a number of new

investments in 2013 in accordance with the objectives It is important to note that the growth in turnover was laid out in the Business Plan:negatively impacted by legislation in Lagos that P New Hygiene stations to improve hygiene in the prevented the company from distributing its products working environment at the Factoryusing tricycles and the road construction projects in P Implementation of a gas-driven Independent Power Ibadan, which eliminated a substantial amount of Plant (IPP)street sales opportunities along the road, which P Upgrade of the Company's Effluent Treatment Plant traditionally has been the biggest market for your including installation of biological effluent treatmentCompany. P Development of a new PET bottling line

P Development of a dedicated water line from Eleyele Moreover, the deteriorating security situation in the Dam to the Factory.North and North East also affected many of your Company's customers and agents' ability to operate in In continuation of the introduction of cashless sales in these territories. Lagos and the West in 2012, your Company completed

the transition to modern order management and And finally, the power situation continued to affect distribution processes for the East and the North in the your Company's Agents and Franchise Takers with the second half of 2013.cost of running generator-based cold rooms or freezer surmounting their financial capabilities, which unfortunately resulted in a number of Agents and The owners of Fan Milk International A/S, the majority Franchise Takers leaving the business during the year. shareholder of Fan Milk Nigeria PLC through Danish

Dairy Services (DDS) initiated in 2012 a process with The increase in Gross Profit can be attributed to the objective of selling Fan Milk International A/S to improved cost management in the Company. However, new investors. In June 2013, The Abraaj Group, a many other factors affected negatively GP's growth. leading private equity investor based in Dubai and These include: increased costs of water, increased raw operating in growth markets, announced its material prices and an increased energy cost due to agreement to acquire a 100 percent stake in Fan Milk reduction of power from the grid to the factory, which International A/S.led to the need to run production on generators more than 50% of the time during the year. In November 2013, DANONE, the world's biggest

yogurt maker, joined the Abraaj Group in the Despite the improvements made in Turnover and GP, acquisition of Fan Milk International A/S.

C h a i r m a n ’ s S t a t e m e n t (Continued)FAN MILK PLC ANNUAL REPORT & ACCOUNTS 2013


Abraaj and Danone respectively acquired 51% and 49% stake in Fan Milk International A/S. While we see progressive improvements in the global

macro-economy, Nigeria is improving its standing Following completion of the acquisition in November within the African macroeconomic environment.2013, a process of developing a new Business Plan for In 2014, we will be aiming at consolidating the business your Company was initiated. This plan is expected to be and preparing for future growth in close cooperation completed within 2014. with the Abraaj Group and DANONE.

Focus will also be on further expansion of the franchise Our Company operates in a rapidly changing and and agent network – especially in Lagos and in the chal lenging env i ronment and the market West - and on improving distribution to ensure that opportunities continue to grow, and for the Company the Company consistently produces, distributes and to position itself in the market to meet customers' sells quality products. demands for product, continued substantial Our plans for 2014 include:investments are required both in production * Introduction of more than 4,000 new sales points infrastructure (water, power, cooling expansion of across the nation in the Outdoor Sales Channel production capacity) and in sales and distribution and in the Modern Retail Channel.equipment. This calls for retention of cash in the * Expansion of the distribution capacity and Company to fund these much-required investments. commitment to on-time delivery of products in Therefore, the Board of Directors has decided to the East and in the Lagosrecommend a dividend of 10 kobo per share for every * Introduction of a new “Franchise and Vendor 50 kobo share held. Training Academy”

* Development of innovative and sustainable sales point driven by renewable energy

In the year under review our Company has embarked * Energy-efficient product storage solutions that upon a number of new and innovative projects: will reduce the operational costs for our Agents

and Franchise TakersWith the objective of improving the customer's experience from buying a Fan Milk ice cream product on We are confident that these investments, alongside the street, your Company has developed and deployed other on-going growth initiatives, will be positively the new “On the Go” Kiosk. So far, more than eighty reflected in future financial results of the Company.kiosks have been deployed in Lagos and Ibadan with more to follow in 2014 in all major cities in Nigeria.

I wish to express my sincere gratitude to our numerous Your company continues on working on developing customers across the country, business partners, innovative solutions that create new market shareholders, management and to every staff of Fan opportunities or improve the way your company Milk Plc. for the results delivered in 2013. operates. Amongst projects embarked upon in 2013 are: the implementation of a gas-driven Independent I assure you that the Board and Management would, in Power Plant (IPP), upgrade of the Company's Effluent 2014, continue to diligently debate on key policies and Treatment Plant including installation of biological make informed decisions on strategic actions effluent treatment and development and installation designed to ensure further improvements that will, in of a dedicated water supply line from Eleyele Dam to turn, result in increased shareholder value.the Factory.

Further, your company in 2013 started the development of a series of training videos that will be distributed to franchise takers, agents and vendors aiming at improving hygiene and handling of sales equipment.

The Company also continues on the development and optimization of our internal business processes and on the implementation of process automation where this provides an opportunity for cost savings.

Future Outlook

Dividends

Business Development and Product Innovation

Appreciation

C h a i r m a n ’ s S t a t e m e n t

07

(Continued)

Kodjo Aziagbe, CHAIRMAN



Fan Milk Plc

AUDIT COMMITTEE

is committed to the principles and practice that promote good Corporate Governance. We recognize that sound corporate governance practices are necessary for effective management and control of the Company's business with a view to maximizing the shareholders' value and meeting the expectations of other Stakeholders. In furtherance of the commitment to high ethical conduct, we regularly review our processes and practices to ensure compliance with the legislative and best practice changes in the global corporate governance environment.

The Board of Directors have the ultimate responsibility for the overall functioning of the Company. The responsibilities of the Board include setting the Company's strategic objectives, providing leadership to put them into effect, supervising the management of the business etc. At the moment, the Board is composed of eight members including a Non-Executive Chairman, one Executive Director and six Non-Executive Directors. The Directors are experienced stakeholders with diverse professional backgrounds in Accounting, Commerce, Management, legal and Information Technology, etc. The Directors are men of impeccable character and integrity. The Company is indeed delighted to have a versatile Board with understanding of its responsibilities to Shareholders, Regulatory Authorities and Government.

The meetings of the Board are scheduled well in advance and the Board meets regularly. The record of attendance of Directors at Board meetings during 2013 is available for inspection at the Annual General Meeting.

The Board met four times during the financial year under review.

The Company established an Audit Committee in compliance with Section 359 (6) of the Companies and Allied Matters Act, CAP C20, Laws of the Federation of Nigeria, 2004. The Committee is comprised of three representatives of Shareholders (elected annually at the AGM), and three Non-Executive Directors. Mr. Adekunle Odesanya chaired the Committee during the year under review. The Audit Committee met two times during the financial year under review.

S/ N NAMES MEETING ATTENDANCE

1 Dr. Oba Otudeko, CFR -Resigned W. E. F. 27.11.2013 4 4

2 Mr. S. F. Hadsbjerg 4 4

3 Mr. O. O. Akinkugbe 4 4

4 Mr. J. J. Kollerup 4 4

5 Mr. E. Mark Christensen -Resigned W. E. F. 26.11.2013 4 4

6 Mr. K.Aziagbe 4 4

7 Dr. B. A. M. Ajibade, SAN 4 4

8 Mr. Ravi Sharma Appointed W.E.F. 26.11.2013 - -

9 Mr. Mario Reis Appointed W.E.F. 26.11.2013 - -

10 Mr. Jacob Kholi Appointed W.E.F. 26.11.2013 - -

Details of attendance by the Directors at the Board meetings held are as follows:

S/ N NAMES MEETING ATTENDANCE

1 Mr. O. Adekunle Odesanya 2 2

2 Mr. Oyetunde O. Olaitan 2 2

3 Miss. Efunremi A. Shopeju 2 2

4 Mr. O. O. Akinkugbe 2 2

5 Mr. E. M. Christensen. -Resigned W. E. F. 26.11.2013 2 1

6 Dr. B. A. M. Ajibade, SAN 2 2

Details of attendance at Audit Committee meetings held are as follows:

C o r p o r a t e G o v e r n a n c e

08



Fan Milk Plc ENVIRONMENT

ETHICS

SOCIAL RESPONSIBILITY TOWARDS EMPLOYEES

HEALTH AND SAFETY

Fan Milk Plc

TRAINING

is committed to conducting its business in a transparent, socially and environmentally The company's environmental activities and plans responsible manner. forms an integrated part of your company's overall

strategies and business plans. Further your company The Fan Milk Group joined the UN Global Compact in has developed detailed plans for proper effluent 2010. As part of the Fan Milk Group your company is treatment, which has been approved by relevant constantly working on introducing the UN Global authorities.Compact charter to all business partners. In 2013, Fan Milk Plc,commenced planning for and

construction of three major environmental projects:

Fan Milk Plc prides itself as an ethical corporate citizen Implementation of a gas-driven Independent and operates in accordance with the Laws of Nigeria. Power Plant (IPP) Fan Milk Plc also complies with all relevant regulations Upgrade of the Company's Effluent Treatment Plant and tax laws. including installation of biological effluent

treatment

Fan Milk Plc constantly strives towards offering fair The IPP project is split into two projects:and market conform compensation and benefit ¶ Phase 1: Replacing existing diesel burners on packages to all staff based on benchmarks received boilers with gas-driven multi-fuel burners. from various sources. As for previous years your This project will eliminate the use of diesel to company continues to provide staff amenities at all provide pressurized steam for production. major sites as well as free canteen facilities at the Instead natural gas will be used to reduce factory in Ibadan and in Lagos. emissions and cost of production

The company runs two health clinics in Lagos and ¶ Phase 2: Installation of two gas-powered Ibadan respectively. generators to replace existing diesel

generators at the factory.Your company is committed to the development of a good working environment and has in 2013carried out The gas-driven generators are expected to provide the the following projects: factory with stable and environmental friendly power

at a cost lower than the cost of the existing combined Hygiene stations to improve hygiene in the working power from PHCN and diesel generators. The gas-environment at the Factory. generators are also expected to provide the stable

power that is required by the factory to improve Training of staff in maintaining improved internal quality of the products and reduce wear and tear on working environment production equipment that have been the result from

frequent un-scheduled power cuts in the past.

Fan Milk Plc offers an Employee Health Care Scheme The Effluent Treatment Plant project is also split into in which both employees and their registered spouses two projects:and children benefits from Company paid health and Phase 1: Increase capacity of existing medical care. chemical treatment plant to meet demand in

the future due to increased production Your Company continuously assesses the safety, health and environmental impact of its operation on Phase 2: Construction of an aerobic both employees and the general public. Members of biological treatment plant where oxygen is staff are regularly screed in conformity with the used to break down organic material in the Nigerian health regulations. effluent water.

continues to emphasise on safety at the Both projects will be completed in early 2014 and workplace by setting and enforcing high standards of ensure that the Factory is in full compliance with the working environment within factory, distribution international standards and Nigerian Environment centres and offices. Safety inductions have been Law.carried out regularly for newly employed staff introducing them to the safety procedures of the company. This has been coupled with health and Fan Milk Plc actively and systematically trains safety training cutting across departments within the franchise takers, agents and vendors to ensure that organisation. they understand the key handling requirements of the

company's products, hereunder hygiene, handling of The Safety Committee has throughout the year under sales equipment and maintaining the cold-chain.review worked through participation from the various departments to respond to safety needs and to carry The company in 2013 started the development of a out monthly safety enlightenments and safety series of training videos that will be distributed to awareness training within the organisation. franchise takers, agents and vendors aiming at

improving hygiene and handling of sales equipment.

09

Corporate Social Responsibility Activities For 2013FAN MILK PLC ANNUAL REPORT & ACCOUNTS 2013


The Directors submit their report together with the audited financial statements for the year ended 31 December, 2013, which disclose the state of affairs of the company.

Fan Milk Plc was incorporated as a Limited Liability Company on 4, November 1961 and was converted on 5th October, 1995 to a Public Limited Liability. The Company has a factory located in Ibadan and is engaged in the production and distribution of dairy, juice and food products. Fan Milk Plc is a subsidiary of Danish Dairy Services (A/S), Denmark (Fan Milk International) 94.71% of the share capital of the Company is owned by Danish. Dairy Services A/S Denmark and 5.29% owned by Nigerian individual and corporate investors.

The principal activities of the Company continue to be the production and distribution of dairy and food products.

The profit for the year of N93,939million (2012: profit N246,586million)has been transferred to retained earnings.

Revenue 9,408,633 8,918,641Profit before taxation 313,536 224,586Income Tax Expense (139,615) (25,812)Profit After Taxation 173,921 198,774Total comprehensive income 93,939 246,586

During the course of the year, Danish Dairy Services A/s (Fan Milk Int'l) acquired Fan Milk Plc ordinary shares of 126,368,005 from Investment fund for Developing Countries (IFU) and 146,155,805 ordinary shares from Springwater Limited.

The Securities and Exchange Commission has been duly notified of this development.

The Directors at the date of this report and those who held office during the year are as follows:-Dr. Oba Otudeko, CFR - Resigned (27th November 2013) (Chairman)Mr. S. F. Hadsbjerg (Danish) - Managing Director Mr. E. M. Christensen (Danish) - Resigned (26th November 2013)Mr. J. J. Kollerup (Danish)Mr. O. O. AkinkugbeMr. K. Aziagbe (Togolese) Dr. B. A. M. Ajibade, SANMr. Ravi Sharma (British) - Appointed (26th November 2013)Mr. Mario Reis (British) - Appointed (26th November 2013)Mr. Jacob Kholi (Ghanaian) - Appointed(26th November 2013)

In accordance with Article 96 of the Company's Articles of Association, Mr. Ravi Sharma, Mr. Mario Reis and Mr. Jacob Kholi who were appointed as Directors after the last Annual General Meeting retire while Mr. KodjoAziagbe and Mr. Olayinka O. Akinkugbe retire by rotation, and all the Directors being eligible, offer themselves for election/re-election.

The Directors' interests in the capital of the Company are as follows:-

Dr. Oba Otudeko, CFR Resigned (27th November 2013) - - - 77,422,346Mr. S. F. Hadsbjerg 126,163 - 69,390 -Mr. E. M. Christensen -Resigned (26th November 2013) 10,000 - 10,000 -Mr. K. Aziagbe - - - -Mr. J. J. Kollerup - - - -Mr. O. O. Akinkugbe - 4,882,352 - 4,882,352Dr. B. A. M. Ajibade, SAN - 14,732,260 - 12,151,194Mr. Ravi Sharma - - - -Mr. Mario Reis - - - -Mr. Jacob Kholi - - - -

INCORPORATION AND ADDRESS

PRINCIPAL ACTIVITIES

RESULTS

2013 2012 N'000 N'000

SIGNIFICANT CHANGE IN SHAREHOLDINGS

DIRECTORS

DIRECTORS' INTERESTS

Name 31st December, 2013 31st December, 2012No. of 50k shares No. of 50k sharesDirect Indirect Direct Indirect

Repor t Of The Directors

10



Repor t Of The Directors (Continued)

11

The Diretors recommend the payment of dividend of 10 kobo per ordinary share on the issued share capital subject to the appropriate statutory deductionThe following Directors have indirect shareholding totaling through the under listed entities.

Mr. O. O. Akinkugbe Linkup Investments Ltd. 4,882,352 Dr. B. A. M. Ajibade, SAN Verifax Ltd. &Spaaco Holdings Ltd 14,732,260

19,614,612 Name Entity Holdings

TRADEMARK LICENSE AND MANAGEMENT SERVICES AGREEMENT

MAJOR SHAREHOLDERS

Shares of 50k each %

EMPLOYMENT OF DISABLED PERSONS

HEALTH, SAFETY AND WELFARE OF EMPLOYEES

ENVIRONMENTAL COMMITMENT

CORPORATE SOCIAL RESPONSIBILITY

AUDITORS

A Trademark License and Management Services Agreement exists between the Company and Messrs Fan Milk International A/S Denmark. Renewal of these agreements are still pending with the National Office for Technology Acquisition and Promotion.

As at the date of this report no person or Company has more than 5% of the capital except:-

Danish Dairy Services A/(Fan Milk Int'l) 946,972,754 94.71

It is the Company's policy to consider disabled persons for employment, bearing in mind the aptitude and abilities of the applicants. This policy will continue.

The Company provides free medical services for the staff at the Company's clinic at the factory premises in Ibadan and in Lagos under the supervision of experienced staff nurses and part-time doctors. The Company also maintains canteens where staff has free meals. Safety and occupational health regulations are strictly adhered to.

It is the Company's policy to protect the environment and the Company strives to adopt appropriate measures of international standards and operate in accordance with Nigeria Law in order to minimize the environmental impact of its activities.

It is the Company's policy to conduct business in a socially responsible manner and embrace the principles and tenets of ISO 26000, thereby contributing as a corporate organization to socially beneficial projects across the country.

The Auditors, Messrs PricewaterhouseCoopers, Chartered Accountants, have signified their willingness to be re-appointed under Section 357(2) of the Companies and Allied Matters Act, 2004.

BY ORDER OF THE BOARD

KOFO BADEJO ESQ,

FRC/2013/NBA/00000003746LENNAP SERVICES LIMITED Rc 13406(Company Secretaries) Lagos, Nigeria.

LLB, BL, IOD.



To the Shareholders of Fan Milk Plc In accordance with the provisions of Section 359 (6) of the Companies And Allied Matters Act CAP C20, Laws of the Federation of Nigeria, 2004, we have reviewed the audited financial statements of the Company for the year ended 31st December, 2013 and report as follows:

(a) The accounting and reporting policies of the Company are consistent with legal requirements and agreed ethical practices.

(b) The scope and planning of the external audit was adequate.

© The Company maintained effective systems of accounting and internal controls during the year.

(d) Having reviewed the External Auditors' findings and recommendations on management matters, we are satisfied with management responses thereon.

Dated this 28th day of February, 2014

MR. O. ADEKUNLE ODESANYAChairman, Audit Committee FRC/2014/NIM/00000007270

1. Mr. O. AdekunleOdesanya2. Mr. Oyetunde O. Olaitan3. Miss. Efunremi A. Shopeju4. Mr. O. O. Akinkugbe5. Mr. E. M. Christensen -Resigned W.E.F. 26. 11. 20136. Dr. Babatunde A. M. Ajibade, SAN.

MEMBERS OF THE AUDIT COMMITTEE

Repor t Of The Audit Committee

12



STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2013

The Directors of Fan Milk Plc are responsible for the preparation of the financial statements that present fairly the financial position of the company as at 31st December 2013, and the results of its operations, cash flows and changes in equity for the year then ended, in compliance with International Financial Reporting Standards (IFRS), and in the manner required by the Companies and Allied Matters Act and the Financial Reporting Council of Nigeria Act, 2011.In preparing the financial statements, the Directors are responsible for:

a. Properly selecting and applying accounting policies in a manner that provides relevant, reliable, comparable and understandable;b. Providing additional disclosures when compliance with the specific requirements in IFRSs are insufficient, to enable users understand the impact of particular transactions and conditions on the Company's financial position and financial performance;c. Making an assessment of the Company's ability to continue as a going concern; The Directors are responsible for:

? Designing, implementing and maintaining an effective and sound system of internal controls throughout the Company;?· Maintaining adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company, and which enable them to ensure that the statements of the company comply with IFRS;? Maintaining statutory accounting records in compliance with the legislation of Nigeria and IFRS;? Taking such steps as are reasonably available to them to safeguard the assets of the company; and? Preventing and detecting fraud and other irregularities.The financial statements were approved by management on 24th March 2014.

Mr. Steen Flemming Hadsbjerg(Managing Director)FRC/2014/IODN/00000007621

Statement Of Directors' Responsibilities

13

Mr. Kodjo Aziagbe Chairman



Repor t Of The Auditors

REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF FAN MILK PLC

Report on the financial statements

We have audited the accompanying financial statements of Fan Milk Plc (“the company”). These financial statements comprise the statement of financial position as at 31 December 2013 and the statements 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.

Directors' responsibility for the financial statements

The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and with the requirements of the Companies and Allied Matters Act and for such internal control, as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement.

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

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

Opinion

In our opinion the accompanying financial statements give a true and fair view of the state of the company's financial affairs at 31 December 2013 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies and Allied Matters Act and the Financial Reporting Council of Nigeria Act.

14



Report on other legal requirements

The Companies and Allied Matters Act requires that in carrying out our audit we consider and report to you on the following matters. We confirm that: i. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii. the company has kept proper books of account, so far appears from our examination of those books and returns adequate for our audit have been received from branches not visited by us;

ii. the company's statements of financial position and comprehensive income are in agreement with the books of account.

Repor t Of The Auditors (Continued)

For: PricewaterhouseCoopersChartered AccountantsLagos, Nigeria

Engagement Partner: Edafe ErhieFRC/2013/ICAN/0000001143

27 June 2014

15



2012 N '000 N '000

Continuing operationsRevenue 6 9,408,633 8,918,641 Cost of sales 7 (5,155,667) (5,021,456)

4,252,966 3,897,185 Distributions expenses 7 (2,036,653) (1,857,228)Admin expenses 7 (1,515,179) (1,549,055)Other income 9 36,908 225,209

738,042 716,111 Finance income 10 4,994 - Finance costs 10 (429,500) (491,525)

(424,506) (491,525)

313,536 224,586 Income tax expense 11 (139,615) (25,812)

173,921 198,774

Items that will not be reclassified subsequently to profit or lossActuarial gain on post employment benefit obligations (net of tax) 19 (79,982) 47,812

(79,982) 47,812

93,939 246,586

Owners of the parent 173,921 198,774 173,921 198,774

Owners of the parent 93,939 246,586 93,939 246,586

Basic 32 36 Diluted 32 36

The accounting policies and notes on pages 16 to 54 form an integral part of these financial statements.

Note 2013

Gross profit

Operating profit

Finance costs-net

Profit before tax

PROFIT FOR THE YEAR

Other comprehensive income:

Other comprehensive income for the year, net of tax

TOTAL COMPREHENSIVE INCOME FOR THE YEARProfit attributable to:

Total comprehensive income attributable to:

Earnings per share attributable to owners of the parent

Statement Of Comprehensive Income

16



Mr. Kodjo AziagbeChairman

Mr. Steen Flemming HadsbjergFRC/2014/IODN/00000007621(Managing Director)

N '000 N '000 N '000

Property, plant and equipment 12.1 5,623,412 5,793,265 4,923,332 Intangible assets 12.2 12,022 12,027 5,605

5,635,434 5,805,292 4,928,937

Inventories 13 1,586,210 1,341,428 1,505,270 Trade and other receivables 14 1,081,597 2,476,300 86,461 Cash and cash equivalents (excluding bank overdrafts) 15 2,641,141 129,776 93,534 Inventories 13 1,586,210 1,341,428 1,505,270

5,308,948 3,947,504 2,685,265 Total assets 10,944,382 9,752,796 7,614,202

Ordinary share capital 16 499,908 274,949 274,949 Share premium 17 1,098,865 59,492 59,492 Revaluation reserve 17 362,276 362,276 362,276 General reserves 17 671,913 679,189 513,469

2,632,962 1,375,906 1,210,186 Non current liabilitiesDeferred income tax liability 18 486,963 412,828 416,423 Post employment benefit obligation 19 470,896 381,236 457,259 Borrowings 20 2,567,862 1,439,047 1,213,714

3,525,721 2,233,111 2,087,396 Current liabilitiesBorrowings 20 3,356,633 3,134,101 3,073,926 Trade and other payables 21 1,423,132 2,955,701 1,200,311 Dividend payable 22 3,979 3,629 8,951 Current income tax payable 11 1,955 50,348 33,432

4,785,699 6,143,779 4,316,620 Total liabilities 8,311,420 8,376,890 6,404,016 Total equity and liabilities 10,944,382 9,752,796 7,614,202

The financial statements and notes on pages 16 to 54 were approved for issue by the Board of Directors on 24th March, 2041 and signed on its behalf by:

The accounting policies and notes on pages 16 to 54 from an integral part of these financial statements.

Note 31 December 31 December 1 January 2013 2012 2012

ASSETSNon current assets

Current assets

EQUITY AND LIABILITIESEquity attributable to owners of the parent

Total equity

Statement Of Financial Position

17



2012 N '000

Cash generated from operations 23 1,329,980 2,138,385 Income taxes paid (79,593) (32,983)

1,250,387 2,105,402

Purchase of property, plant and equipment (1,033,448) (2,083,928)Interest received 4,994 - Proceeds from disposal of property, plant and equipment 1,722 3,073 Purchase of intangible assets (3,361) (8,562)

(1,030,093) (2,089,417)

Interest paid (223,392) (379,067)Proceeds from borrowings 2,935,554 1,222,359 Repayment of borrowings (1,176,858) (362,961)Redemption of Preference Shares (1,094,398) - Finance Lease paid (1,247) - Dividend paid (101,213) (86,187)Proceeds from share issue 1,264,332 -

Net cash generated from financing activities 1,602,779 394,143

Increase in cash and cash equivalents 1,823,072 410,128

Cash and cash equivalents at start of year 15 (457,833) (867,962)

Cash and cash equivalents at end of year 15 1,365,239 (457,833)

The accounting policies and notes on pages 16 to 54 from an integral part of these financial statements.

Note 2013N '000

Cash flows from operating activities

Net cashflows from operating activities

Cash flows from investing activities

Net cash used in investing activities

Cash flows from financing activities

Statement Of Cash Flows

18



`

Ordinary Share Share Revaluation General Totalcapital premium reserve reserve Equity

274,949 59,492 362,276 513,469 1,210,186 Profit or loss for the year - - - 198,774 198,774 Other Comprehensive Income or loss - - - 47,812 47,812

- - - 246,586 246,586 Dividend paid (ordinary shares) - - - (65,988) (65,988)Dividend paid (preference shares) - - - (14,878) (14,878)

274,949 59,492 362,276 679,189 1,375,906

Profit or loss for the year - - - 173,921 173,921 Other Comprehensive Income or loss - - - (79,982) (79,982)

- - - 93,939 93,939 Issue of new shares 224,959 1,039,373 - - 1,264,332 Dividend declared/paid - - - (101,213) (101,213)Audit fee provision no longer required - - - - -

499,908 1,098,865 362,276 671,913 2,632,966

Attributable to equity holdersof the parent

Balance at 1 January 2012

Total comprehensive income or loss

At 31 December 2012

Total comprehensive income or loss

At 31 December 2013

Statement Of Changes In Equity

19



1. General informationFan Milk Plc was incorporated as a Limited Liability Company on 4 November 1961 and was converted on 5 October 1995 to a Public Limited Liability. The Company has a factory located in Ibadan and is engaged in the production and distribution of dairy, juice and food products. Fan Milk Plc is a subsidiary of Danish Dairy Services A/S Denmark(Fan Milk International(A/S). 94.71% of the share capital of the Company is owned by Danish Dairy Services A/S Denmark and 5.29% owned by Nigerian individual and corporate investors.

2. Summary of significant accounting policiesThe principal accounting policies applied in the preparation of these 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 financial statements have been prepared on the historical cost basis. They have been prepared in accordance with International Financial Reporting Standards (IFRS) for the first time.The management of Fan Milk considers the following to be the most important accounting policies for the Company. In applying these accounting policies, management makes certain judgements and estimates that affect the reported amounts of assets and liabilities at the year end date and the reported revenues and expenses during the financial year. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 5The financial statements have been prepared in accordance with the Company’s accounting policies described below. The financial statements are presented in Nigerian Naira, rounded to the nearest thousand. These are the first set of IFRS financial statement(refer to page 28) for details on the IFRS exceptions and exemption taken.

(a) Standards, amendments and interpretations effective on or after 1 January 2013

The following standards, amendments and interpretations, which became effective in 2013 are relevant to the Company:ai) IAS 19, ‘Employee benefits’ was amended in June 2011. The impact on the Company was as follows: it eliminates the corridor approach and recognise all actuarial gains and losses in OCI as they occur; immediately recognise all past service costs; and replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability (asset).

(aii) IFRS 10, Consolidated financial statements’ builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. There was no impact on these financial statements on the application of this standard.

aiii) IFRS 12, ‘Disclosures of interests in other entities’, includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. There was no impact on these financial statements on the application of this standard.

aiv) IFRS 13, ‘Fair value measurement’, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs. There was no impact on these financial statements on the application of this standard

Notes To The Annual Financial Statements

20



(b) Standards and interpretations issued but not yet effective

The following standards and interpretations have been issued and are mandatory for the Company’s accounting years beginning on or after 1 January 2013 or later years and are expected to be relevant to the Company:

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The company is yet to assess IFRS 9’s full impact. The company will also consider the impact of the remaining phases of IFRS 9 when completed by the Board.

(c) Early adoption of standards

The Company did not early adopt new or amended standards in 2013.

2.2 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the functional currency).

The financial statements are presented in thousands (Naira), which is the Company’s presentation currency.(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.

Monetary items denominated in foreign currency are translated with the closing rate as at the reporting date. If several exchange rates are available, the forward rate is used at which the future cash flows represented by the transaction or balance could have been settled if those cash flows had occurred. Non-monetary items measured at historical cost denominated in a foreign currency are translated with the exchange rate as at the date of initial recognition; non-monetary items in a foreign currency that are measured at fair value are translated using the exchange rates at the date when the fair value was determined.

Notes To The Annual Financial Statements(Continued)

21



Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

All foreign exchange gains and losses recognised in the income statement are presented net in the income statement within the corresponding item. Foreign exchange gains and losses on other comprehensive income items are presented in other comprehensive income within the corresponding item.

2.4 Property, Plant and Equipment

Land and buildings compries mainly of factories and offices. Property, plant and equipment held for use in the production or supply of goods, or for administrative purposes are stated in the balance sheet at historical cost or deemed cost less depreciation. Historical cost includes the expenditure that is directly attributable to the acquisition of the items. Deemed cost includes surpluses arising on the revaluation of certain properties to their fair values prior to the date of transition to IFRS. 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 can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Assets in the course of construction are carried at cost less any recognised impairment loss. Cost includes professional fees which are capitalised in accordance with the company’s accounting policy. Depreciation of these assets commences when the assets are ready for their intended use.Land is not depreciated. Depreciation is calculated using the straight line method to write off the cost or deemed cost of each asset over their estimated useful lives as follows:

%Leasehold land and buildings Over the lease periodPlant and machinery 10 Furniture and fittings 20 Milk crates, containers, bicycles and boxes 50 Motor vehicles 25 Spare parts 50

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. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other (losses)/gains – net’ in the income statement.”

2.5 Intangible assetsAcquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three to five years.

2.6 Impairment of non financial assetsAt each balance sheet date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).Where the asset does not generate cash flows that are independent from other assets, the company estimates the recoverable amount of the cash generating unit (CGU) to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use.


22

(Continued)



In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or CGU) is estimated to be less than the carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

2.7 InventoriesInventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related 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 all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

2.8 Investments and financial assetsFinancial assets are classified as either financial assets at fair value through profit or loss, loans and receivables, held to maturity investments, and available for sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus in the case of investments not at fair value through profit or loss, directly attributable costs. The Company determines the classification of itsfinancial assets upon initial recognition and, where allowed and appropriate, reevaluates this designation at each financial year end.All regular purchases and sales of financial assets are recognised on the date on which the Company commits to purchase or sell the asset.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in income when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

2.9 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.

2.10 Cash and cash equivalentsIn the 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 three months or less and bank overdrafts. In the state of financial position, bank overdrafts are shown within borrowings in current liabilities.

2.11 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.

Statement Of Significant Accounting PoliciesNotes To The Annual Financial Statements(Continued)

23



2.12 Impairment of financial assetsThe Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets measured at amortised cost is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or Company of financial assets that can be reliably estimated.

2.13 Borrowings"Borrowings 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 income statement 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 deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The dividends on these preference shares are recognised in the income statement as interest expense."

2.14 Borrowing costsGeneral and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

2.15 Income tax(a) Current income taxIncome tax is calculated on the basis of the applicable tax laws enacted or substantially enacted in Nigeria by the date of the statement of financial position and is recognised as an expense/(income) for the period except to the extent that current tax related to items that are charged or credited in other comprehensive income or directly to equity. In these circumstances, current tax is charged or credited to other comprehensive income or to equity (for example, current tax on of available-for-sale investment).

Where the Company has tax losses that can be relieved against a tax liability for a previous year, it recognises those losses as an asset, because the tax relief is recoverable by refund of tax previously paid. This asset is offset against an existing current tax balance.

Where tax losses can be relieved only by carry-forward against taxable profits of future periods, a deductible temporary difference arises. Those losses carried forward are set off against deferred tax liabilities carried in the statement of financial position.

The Company does not offset income tax liabilities and current income tax assets.

(b) Deferred taxDeferred 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 (and laws) that have been enacted or substantially enacted by the date of the statement of financial position and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.


24

(Continued)



The principal temporary differences arise from depreciation of property, plant and equipment, revaluation of certain financial assets and liabilities, provisions for pensions and other post-retirement benefits and carry-forwards and, in relation to acquisitions, on the difference between the fair values of the net assets acquired and their tax base. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

The tax effects of carry-forwards of unused losses, unused tax credits and other deferred tax assets are recognised to the extenet that it is probable that future taxable profit will be available against which these losses and other temporary differences can be utilised.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of the asset or liability and is not discounted. Deferred tax assets are reviewed at each balance sheet date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax is provided on temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the difference will not reverse in the foreseeable future.

Deferred tax related to fair value re-measurement of equity instruments, which are recognised in other comprehensive income, is also recognised in other comprehensive income and subsequently in the income statement together with the deferred gain or loss.

2.16 Employee benefitsThe Company operates two retirement benefit schemes in the form of pension costs and gratuity benefits. The Company has both defined benefit and defined contribution plans. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

(a) Pension costsIn line with the Pension Reform Act 2004, the Company operates a defined contribution scheme; employees are entitled to join the scheme on confirmation of their employment. The employee and the Company contributes 7.5% and 7.5% of the employee's basic, transport and rent allowances respectively. The Company has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(b) Gratuity benefitsThe Company operates a non-contributory defined benefits scheme. The employees' entitlement to retirement benefits under the service gratuity scheme depends on the individual years of service, terminal salary and conditions of service. The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the financial reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity that approximate the terms of the related pension obligation. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in income.


16 25

(Continued)



(c) Long service awardThe company provides employees with two (2) Long Service Award Benefits – a flat cash award expressed as a proportion of Basic Salary together with a gift award. The liability recognised in the balance sheet in respect of the awards is the present value of the long service award at the end of the financial reporting period less the fair value of the long service award's assets, together with adjustments for unrecognised actuarial gains or losses and past service costs. The long service award obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the long service award is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity that approximate the terms of the related long service award liability.

2.17 LeasesLeases in which significant portion of the risks and reward of ownership are retained by the lessor are classified as operating lease. Payments made under operating leases(net of any incentive received from lessor) are charged to the income statement on a straight line basis over the period of the lease .Leases are classified as finance leases whenever the terms of the lease involve the substantial transfer of all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets of the company at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between financing charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the company’s policy on borrowing costs. Property, plant and equipment acquired under finance leases are depreciated over the useful life of such assets. Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease.

2.18 Provisions, contingent liabilities and assetsProvisions are liabilities that are uncertain in amount and timing. Provision are recognised when the Company has a present legal or constructive obligation as a result of past events and it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Where there is a number of similar obligations, the likelihood that an outflow will be required in 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.

A contingent liability is a possible obligation that arises from past event and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or the Company has a present obligation as a result of a past event. It is not recognised because it is not likely that an outflow of resources will be required to settle the obligation or the amount can not be reliably estimated. Contingent liabilities normally comprise of legal claims under arbitration or court process in respect of which a liability is not likely to occur.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. Contingent assets are not recognised but they are disclosed in the financial statement when they arise.


16 26

(Continued)



2.19 Share capitalOrdinary shares are classified as equity. Redeemable preference shares have been classified as debt.

(a) Share issue costs Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a

business are shown in equity as a deduction, net of tax, from the proceeds.

(b) Dividends

Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Company’s shareholders. Dividends for the year that are declared after the date of the statement of financial position are dealt with in the subsequent events note. Dividends proposed by the Directors’ but not yet approved by members are disclosed in the financial statements in accordance with the requirements of the Company and Allied Matters Act.Dividend on preference shares are recognised in equity as distribution of reserves.

2.20 RevenueRevenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. The Company recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when risks and rewards have passed to the customer which is at the invoice date.

2.21 ComparativesExcept when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with comparative information. Where IAS 8 applies, comparative figures have been adjusted to conform with changes in presentation in the current year.

3. Financial risk management

3.1 Introduction and overviewThe Company’s activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise the potential adverse effects on its financial statements. Risk management is carried out by management of the Company under policies approved by the board of directors. Management identifies, evaluates and hedges financial risks.All of the company's financial assets and liabilities are carried at amortised cost.

3.2 Credit risk

3.2.1 Management of credit riskFinancial instruments that potentially subject the Company to credit risk are primarily cash and cash equivalents and accounts receivables. Accounts receivable are mainly derived from sales to customers. Trade receivables consist of invoiced amounts from normal trading activities. The Company has customers throughout Nigeria. Strict credit control is exercised through monitoring of cash received from customers and, when necessary, impairment is made following the company's impairment policy explained in note 2.9. As at December 31, 2013 management was unaware of any significant unprovided credit risk.

3.2.2 Maximum exposure to credit risk before collateral held or other credit enhancementsThe Company's maximum exposure to credit risk at 31 December 2013, 31 December 2012 and 1 January 2012 respectively, is represented by the net carrying amounts in the Statement of Financial Position.

27




3.2.3 Credit concentrationsThere is no concentration of credit risk with respect to trade and other receivables as the Company has a large number of customers which are dispersed within Nigeria.

3.2.4 Credit qualityFor the majority of customers, there is no independent rating. As such, the credit team assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash .Below is a breakdown of financial assets nether past due nor impaired, past due but not impaired and fully impaired:

Neither past due nor impaired 161,483 84,369 33,297 Past due but not impaired 22,617 51,205 24,428 Impaired 47,832 44,150 69,404

231,932 179,724 127,129 Specific impairment (47,832) (42,894) (68,774)

184,100 136,829 58,355

3.2.4.1 Credit quality of financial assets that are neither past due nor impairedThe credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates as described below

Group 1: Customers with no history of default 118,823 6,558 15,309 Group 2; Customers with a history of default 42,661 77,811 17,987

161,483 84,369 33,297

Credit quality derived using external credit ratingA+ 282,668 25,083 52,517 AA- 2,206,750 11,587 9,326 A- - - 10,086 AAA 31,594 16,138 381 Non- rated 120,129 76,968 221,225

2,641,141 129,776 293,534

The credit rating for cash and cash equivalent balances are based on national long-term rating of Fitch Ratings-London-08 July 2013.

31 Dec 2013 31 Dec 2012 1 Jan 2012Trade receivables

Gross

Net

Trade receivables 31 December 31 December 1 January 2013 2012 2012

Cash and cash equivalents 31 December 31 December 1 January2013 2012 2012


28

(Continued)



The ageing analysis of financial assets that are past due but not impaired is as follows

1-3 months 10,938 43,572 17,037 3-6 months 1,150 4,529 4,199 6-9 months 9,335 1,610 1,968 9-12 months 1,194 396 79 More than 12 months 1,098 1,145

3.2.4.2 Financial assets that are individually impairedAs of 31 December 2013, trade receivables of N47,832 (2012: N44,150, 2011: N69,404) were impaired. The amount of the provision was N47,832 as of 31 December 2013 (2012: N42,894, 2011: N68,774). The individually impaired receivables mainly relate to customers, which are in unexpectedly difficult economic situations. It was assessed that a portion of the receivables is expected to be recovered. The ageing of these receivables is as follows:

3-6 months - 7,114 761 6-9 months 2,936 3,998 674 9-12 months 3,221 4,219 373 More than 12 months 41,675 28,819 67,597

3.3 Liquidity risk

3.3.1 Management of liquidity risk"The Company has incurred indebtedness in the form of overdrafts but also has significant cash balances. The Company evaluates its ability to meet its obligations on an ongoing basis. Based on these evaluations, the Company devises strategies to manage its liquidity risk."Prudent liquidity risk management implies that sufficient cash is maintained and that sufficient funding is available through an adequate amount of committed credit facilities. The company has no limitation placed on its borrowing capability.

3.3.2 Maturity analysisThe table below analyses financial liabilities of the Company into relevant maturity groupings based on the remaining period at date of the statement of financial position to the contractual maturity date.

Financial Liabilities-Bank borrowings - 2,080,731 2,567,862 4,648,593 -Bank overdraft 1,275,902 - - 1,275,902 Trade and other payables - 1,423,132 - 1,423,132

Total financial Liabilities 1,275,902 3,503,863 2,567,862 7,347,627

31 Dec 2013 31 Dec 2012 1 Jan 2012

Total 22,617 51,205 24,428

N'000 N'000 N'00031 Dec 2013 31 Dec 2012 1 Jan 2012

Total 47,832 44,150 69,404

Over 1 year but

31 - 90 days 181 - 365 days less than 5 yrs Total31 December 2013

29




3Financial liabilitiesBorrowings-Bank borrowings - 1,450,846 1,439,047 2,889,893 -Finance lease liabilities - - 1,247 1,247 -Bank overdraft 587,609 - - 587,609 Trade and other payables - 2,955,701 - 2,955,701 Total financial liabilities 587,609 4,406,547 1,440,294 6,434,450

Financial liabilitiesBorrowings-Bank borrowings - 818,030 1,212,467 2,030,497 -Finance lease liabilities - - 1,247 1,247 -Bank overdraft 1,161,496 - - 1,161,496 -Trade and other payables - 1,200,311 - 1,200,311 Total financial liabilities 1,161,496 2,018,341 1,213,714 4,393,552

3.4 Market riskThe Company takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices such as interest rates and foreign exchange rates

3.4.1 Interest rate riskThe Company’s exposure to the risk for changes in market interest rates relates primarily to the Company’s long-term obligations with a floating interest rate. To manage this risk, the Company’s policy is to contract for best interest rate borrowings when terms offered are attractive.The sensitivity analysis for interest rate risk shows how changes in the fair value or future cash flows of a financial instrument will fluctuate because of changes in market rates at the reporting date.

AssetsTrade and other receivables 1,081,597 - - 1,081,597 Cash and cash equivalents 2,641,141 2,641,141 - -

3,722,738 2,641,141 - 1,081,597 LiabilitiesBorrowings-Bank borrowings 4,648,593 546,304 4,102,289 - -Bank overdraft 1,275,902 1,275,902 - - Trade and other payables 1,423,132 - - 1,423,132

7,347,627 1,822,206 4,102,289 1,423,132

Over 1 year but 31 - 90 days 181 - 365 days less than 5 yrs Total

1 December 2012

Over 1 year but 31 - 90 days 181 - 365 days less than 5 yrs Total

1 January 2012

Carrying Variable Fixed Non interest-31 December 2013 (N'000) amount interest interest bearing


30

(Continued)



AssetsTrade and other receivables 2,476,300 - - 2,476,300 Cash and cash equivalents 129,776 129,776 - -

2,606,076 129,776 - 2,476,300

LiabilitiesBorrowings-Bank borrowings 2,889,893 743,743 2,146,150 - -Finance lease liabilities 1,247 - 1,247 - -Bank overdraft 587,609 587,609 - - Trade and other payables 2,955,701 - - 2,955,701

6,434,450 1,331,352 2,147,397 2,955,701

AssetsTrade and other receivables 886,461 - - 886,461 Cash and cash equivalents 293,534 293,534 - -

LiabilitiesBorrowings-Bank borrowings 2,030,497 317,398 1,713,099 - -Redeemable preference shares - - - - -Finance lease liabilities 1,247 - 1,247 - -Bank overdraft 1,161,496 1,161,496 - - Trade and other payables 1,200,311 - - 1,200,311

4,393,552 1,478,894 1,714,346 1,200,311

The table below shows the impact on the Company's profit before tax if interest rates on financial instruments held at amortised cost had increased or decreased by 100 basis points, with all other variables held constant.

31 December 31 December 1 January 2013 2012 2012

Effect of 50 basis points movement on profit before tax (N'000) 29,622 17,388 15,960

3.4.2 Foreign exchange riskThe Company seeks to reduce its foreign currency exposure through a policy of matching, as far as possible, assets and liabilities denominated in foreign currencies.

The Company imports raw materials, spare parts and equipment from overseas and therefore is exposed to foreign exchange risk arising from Euro and USD exposures. Management is responsible for minimising the effect of the currency exposure by buying foreign currencies when rates are relatively low and using them to settle bills when due.

Carrying Variable Fixed Non interest-31 December 2012 (N'000) amount interest interest bearing

Carrying Variable Fixed Non interest-1 January 2012 (N'000) amount interest interest bearing

1,179,995 293,534 - 886,461

31




AssetsTrade and other receivables 1,081,597 - 1,081,597 Cash and cash equivalents 2,641,141 - 2,641,141 Total 3,722,738 - 3,722,738

LiabilitiesBorrowings-Bank borrowings 4,102,289 546,304 4,648,593 -Bank overdraft 1,275,902 - 1,275,902 Trade and other payables 1,423,132 - 1,423,132

Total 6,801,323 546,304 7,347,627

AssetsTrade and other receivables 2,476,300 - 2,476,300 Cash and cash equivalents 129,776 - 129,776 Total 2,606,076 - 2,606,076

LiabilitiesBorrowings-Bank borrowings 2,146,150 743,743 2,889,893 -Redeemable preference shares 1,094,398 - 1,094,398 -Finance lease liabilities 1,247 - 1,247 -Bank overdraft 587,609 - 587,609 Trade and other payables 2,955,701 - 2,955,701 Total 6,785,105 743,743 7,528,848

AssetsTrade and other receivables 886,461 - 886,461 Cash and cash equivalents 293,534 - 293,534 Total 1,179,995 1,179,995

LiabilitiesBorrowings -Bank borrowings 1,713,099 317,398 2,030,497 -Redeemable preference shares 1,094,398 - 1,094,398 -Finance lease liabilities 1,247 - 1,247 -Bank overdraft 1,161,496 - 1,161,496 Trade and other payables 1,200,311 - 1,200,311 Total 5,170,551 317,398 5,487,949

31 December 2013 (N'000) Naira Dollar Total

31 December 2012 (N'000) Naira Dollar Total

1 January 2012 (N'000) Naira Dollar Total

Naira Dollar Total


32

(Continued)



4.1 Gearing ratioThe gearing ratio at the end of the reporting period is as follows:

Debt (note I) 5,924,495 4,573,148 4,287,640 Cash and bank balances (2,641,141) (129,776) (293,534)Net debt 3,283,354 4,443,372 3,994,106 Equity (note ii) 2,632,962 1,375,906 1,210,186 Net debt to equity 125% 323% 330%

Note i: Debt is defined as long and short term borrowingsNote ii: Capital includes all capital and reserves of the Company

5 Critical accounting estimates and judgementsThe preparation of 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 financial statements are disclosed herein.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.

5.1 ImpairmentThe company reviews other non-financial assets for possible impairment if there are events or changes in circumstances that indicate that the carrying values of the assets may not be recoverable, or at least at every reporting date, when there is any indication that the asset might be impaired. The Company is of the opinion that there is no impairment indicator on its non-financial assets as at the reporting date.

5.2 Income taxesTaxes are paid by the Company under a number of different regulations and laws, which are subject to varying interpretations. In this environment, it is possible for the tax authorities to review transactions and activities that have not been reviewed in the past and scrutinize these in greater detail, with additional taxes being assessed based on new interpretations of the applicable tax law and regulations. Accordingly, management’s interpretation of the applicable tax law and regulations as applied to the transactions and activities of the Company may be challenged by the relevant taxation authorities. The Company’s management believes that its interpretation of the relevant tax law and regulations is appropriate and that the tax position included in these financial statements will be sustained.

5.3 Retirement benefit The present value of the defined benefit obligation depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining net cost for the retirement benefit obligation include the discount rate, Any change in these assumptions will impact the carrying amount of the obligations. Other key assumptions for retirement obligations are based in part on current market conditions. Additional information is disclosed in note 17.

31 December 2013 31 December 2012 1 January 2012


34

(Continued)



6. Turnover 31 December 31 December 2013 2012 N'000 N'000

Sale of goods (all within Nigeria) 9,408,633 8,918,641

7. Expenses by NatureRaw materials and consumables used 3,394,794 3,512,929 Employee benefit expense(note 26) 1,246,393 1,288,683 Directors fees 18,000 1,800 Depreciation and Amortisation 1,205,089 1,213,873 Office expenses 549,937 553,028 Repairs and maintenance 1,015,955 698,292 Rent and rates 1,096,996 974,027 Audit fees 11,000 9,000 Other expenses 169,335 176,108

8,707,499 8,427,740

Expense by nature have been disclosed in the statement ofcomprehensive income as follows

Cost of sales 5,155,667 5,021,456 Distribution costs 2,036,653 1,857,228 Administration expenses 1,515,179 1,549,055

8,707,499 8,427,740 8 Employee benefit expense

Wages, salaries and allowances 4,001,876 4,071,419 Pension costs- defined contribution plans 35,319 32,360 Pension costs- defined benefit plans 112,573 190,985

4,149,768 4,294,764 9 Other income

Insurance claims received 8,801 21,861 Miscellanouse income 13,420 14,873 Franchise fee income 30,160 178,504 Profit on sale of fixed assets 142 814 (Loss)/Gain on foreign exchange (15,614) 9,157

36,908 225,209

10 Finance costsInterest income:-Cash received from rights issue 4,994 0 -Interest expense:-Bank borrowing (223,392) (379,067)-Overdrafts (186,138) (195,999)-Bank Charges (40,637) --Interest on staff loans - (3,736)Finance costs (450,167) (578,803)Less: amounts capitalised on qualifying assets 20,667 87,277 Total finance costs (429,500) (491,525)

Net Finance costs (424,506) (491,525)

35




11 Income tax expense 31 December 31 December 2013 2012 N'000 N'000

Current Income tax charge - -Education tax 31,200 49,899 Total current tax charge 31,200 49,899

Deferred tax (note 16)Origination and reversal of temporary differences 108,415 (24,087)Total deferred tax 108,415 (24,087)

Income tax expense 139,615 25,812 Further information about deferred income tax is presented below. The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the basic tax rate of the parent as follows:

Profit before tax: 313,536 224,586 Income tax using the domestic corporation tax rate 94,061 67,376 Education tax 30,531 49,899 Effect of permanent differences 15,601 (91,462)Prior year over provision (578) - Total income tax expense in income statement 139,615 25,812

The tax (charge)/credit relating to components of other comprehensive income is as follows:

Actuarial loss on post employment benefit obligation (114,265) 34,284 (79,982)Other comprehensive income (114,265) 34,284 (79,982)

Actuarial gain on post employment benefit obligation 68,305 (20,494) 47,812 Other comprehensive income

The current tax charge has been computed at the applicable rate of 30% (31 December 2012: 30%) plus education levy of 2% (31 December 2012: 2%) on the profit for the year after adjusting for certain items of expenditure and income which are not deductible or chargeble for tax purposes. Non-deductable expenses include items such as donations, public relations expenses and certain provisions which are not allowed as a deduction by the tax authorities. Tax exempt income include income such as dividend income and income from government bonds which are not taxable.The movement in the current income tax liability is as follows:

At start of the year 50,348 33,432 Tax paid (79,593) (32,983)Income tax charge 31,200 49,899 At end of the year 1,955 50,348 Current 1,955 50,348 Non-current - -

1,955 50,348

31st December, 2013 Before tax Tax credit After tax

31 December 2012 Before tax Tax charge After tax

31 December 31 December 2013 2012 N'000 N'000

68,305 (20,494) 47,812

36




37


12.1 Property, Plant and Equipment

Costs N'000 N'000 N'000 N'000 N'000 N'000 N'000 At 1 January 2013 1,001,040 5,951,358 1,012,511 928,608 1,288,689 58,700 10,240,906

Additions 69,636 251,117 193,511 357,610 66,208 95,367 1,033,448 Disposals - (5,136) (8,068) (49,962) (16,643) - (79,809)At 31 December 2013 1,070,676 6,197,339 1,197,954 1,236,256 1,338,253 154,067 11,194,545

Accumulated depreciation At 1 January 2013 (197,324) (2,352,760) (475,118) (592,119) (830,168) - (4,447,489)Charge for the year (24,316) (501,772) (175,267) (173,350) (327,169) - (1,201,874)Disposals - 4,991 7,983 48,613 16,643 - 78,230 At 31 December 2013 (221,640) (2,849,541) (642,402) (716,856) (1,140,694) - (5,571,133)

Net book amount at 31 December 2013 849,036 3,347,798 555,552 519,400 197,559 154,067 5,623,412

CostsAt 1 January 2012 920,212 4,631,242 730,868 744,301 804,362 333,600 8,164,586 Additions 80,828 951,505 276,870 239,255 483,350 52,120 2,083,928 Reclassifications - 371,554 6,077 (53,354) 2,743 (327,020) - Disposals - (2,944) (1,304) (1,594) (1,766) - (7,608)At 31 December 2012 1,001,040 5,951,358 1,012,511 928,608 1,288,689 58,700 10,240,906

Accumulated depreciationAt 1 January 2012 (178,063) (1,687,992) (333,720) (469,203) (572,276) - (3,241,254)Charge for the year (19,412) (665,533) (142,641) (124,489) (259,657) - (1,211,733)Disposals - 765 1,243 1,572 1,765 - 5,345 At 31 December 2012 (197,476) (2,352,760) (475,118) (592,119) (830,168) - (4,447,641)

Net book amount at 31 December 2012 803,564 3,598,598 537,393 336,489 458,521 58,700 5,793,265

Plant & Machinery

& equipment

Furniture & Fittings

Motor Vehicles

Milk Crates & Containers,

Bicycles & boxes

Construction work in

progress

Total LeaseholdLand

& Building



12.2 Intangible assets Computer software Total

Cost

At 1st January 2013 39,271 39,271

Additions 3,361 3,361

At 31st December 2013 42,632 42,632

Accumulated amortisationAt 1st January 2013 27,244 27,244

Amortisation charge 3,366 3,366

At 31st December 2013 30,610 30,610

Net book amount at 31st December 2013 12,022 12,022

Cost

At 1st January 2012 30,709 30,709

Disposals -

Additions 8,562 8,562

At 31st December 2012 39,271 39,271

Accumulated amortisationAt 1st January 2012 25,104 25,104

Amortisation charge 2,140 2,140

At 31st December 2012 27,244 27,244

Net book amount at 31st December 2012 12,027 12,027

At 1st January 2012

Cost 30,709 30,709

Accumulated amortisation (25,104) (25,104)

Net book amount 5,605 5,605

The amortisation charge for the year is included in Other operating expenses in the Statement of

comprehensive income.

13. Inventories 31 st December 31st December 1 st January2013 2012 2012

N'000 N'000 N'000Finished goods 150,774 123,004 128,962

Raw and packing materials 940,411 895,544 726,199

Non trade stock 28,651 29,554 30,669

Goods in transit 466,373 293,326 619,440

1,586,210 1,341,428 1,505,270

38




14 Trade and other receivables 31 December 31 December 1 January

2013 2012 2012 N'000 N'000 N'000

Trade receivables(Note 1) 184,100 136,830 58,355 Intercompany Receivable 4,815 7,070 - Deposit for imports 19,914 20,079 - Staff debtors 63,785 139,129 81,609 Receivables from issuing house (See note 2 - 1,357,785 - Insurance claims/receivables 4,760 5,490 2,448 Other receivables 202,924 74,733 48,063 Prepayments 601,298 735,185 695,986

1,081,597 2,476,300 886,461

Note 1The impairment charge on trade receivables is N47,832.(31 December 2012..N42,894,1 January 2012 N68,774)

Note 2This represents the monies paid to FBN capital by existing shareholders with respect to the rights issue of 449,917,132 ordinary shares of N50k at N3.00 per share. This amount was subsequently remitted to the company by FBN capital on Januaray 11, 2013.

14.1 Impairment of trade receivablesMovements in the provision for impairment of trade receivables are as follows:


At 1st January 42,894 68,774 Impairment charge for the year 7,143 20,984 Receivables written off during the year - (46,864)Recoverables during the year (2,205) -At 31 December 47,832 42,894

15 Cash and cash equivalents 31 December 31 December 1 January 2013 2012 2012

N'000 N'000 N'000Cash at hand 26,890 58,796 205,787 Cash in bank 2,614,251 70,980 87,747 Cash and cash equivalents exlc bank overdraft 2,641,141 129,776 293,534

Cash and cash equivalents include the following for the purposes of the statement of cash flows:

31 December 31 December 1 January2013 2012 2012

N'000 N'000 N'000Cash and cash equivalents 2,641,141 129,776 293,534 Bank overdrafts (see borrowings note) (1,275,902) (587,609) (1,161,496)Cash and cash equivalents 1,365,239 (457,833) (867,962)

39




16 Share capital 31 December 31 December 1 January2013 2012 2012

Authorised share capital N'000 N'000 N'000Ordinary shares1,000,000,000 Ordinary shares of 50k each 500,000 275,000 275,000

500,000 275,000 275,000 Issued and fully paid Ordinary shares 999,815,848 Ordinary shares of 50k each 499,908 274,949 274,949 At 31 December 499,908 274,949 274,949

17 Share premium and reservesThe nature and purpose of the reserves in equity are as follows:Share premium: Premiums from the issue of shares are reported in share premium.

General reserve/Retained earnings: Retained earnings comprise the undistributed profits from previous years, which have not been reclassified to the other reserves noted below.

Revaluation reserve: The revaluation reserve shows the effects from the fair value measurement of financial instruments of the category available for sale after deduction of deferred taxes. Any gains or losses are not recognised in the income statement until the asset has been sold or impaired.

18 Deferred taxDeferred income taxes are calculated on all temporary differences under the liability method using an effective tax rate of 30% (2012: 30 %).Deferred income tax assets and liabilities are attributable to the following items:

31 December 31 December 1 January 2013 2012 2012

Deferred tax liabilities N'000 N'000 N'000Deferred tax liability to be recovered after more than 12 months. 685,911 676,722 733,894 Deferred tax liability to be recovered within 12 months - - -

685,911 676,722 733,894 Deferred tax assets Deferred tax asset to be recovered after more than 12 months. 198,948 263,894 317,471 Deferred tax asset to be recovered within 12 months - - -

198,948 263,894 317,471

Net (486,963) (412,828) (416,423)

The movement in deferred income tax assets and liabilities during the year is as followsDeferred income tax assets 1 January Recognised Recognised in 31 December

2013 in Profit and loss OCI 2013 N'000 N'000 N'000 N'000

Employee loans 5,316 2,507 7,823 Post employment benefit scheme 192,808 (85,819) 34,280 141,268 Provisions 65,770 (15,913) 49,857

263,894 (99,225) 34,280 198,948

40




Deferred income tax assets 1 January Recognised Recognised in 31 December 2012 in Profit and loss OCI 2012 N'000 N'000 N'000 N'000

Employee loans 2,821 2,495 5,316 Post employment benefit scheme 225,856 (12,556) (20,492) 192,808 Provisions 88,795 (23,025) 65,770

317,471 (33,086) (20,492) 263,894

Deferred income tax liabilities 1 January Recognised Recognised in 31 December 2013 in Profit and loss OCI 2013

N'000 N'000 N'000 N'000Accumulated tax depreciation 595,522 87,850 - 683,372 Post employment benefit obligation 78,437 (78,437) - (0)Employee loans 2,763 (223) - 2,540

676,722 9,189 - 685,911

Deferred income tax liabilities 1 January Recognised Recognised in 31 December 2012 in Profit and loss OCI 2012 N'000 N'000 N'000 N'000

Accumulated tax depreciation 641,333 (45,811) - 595,522 Post employment benefit obligation 88,677 (10,240) - 78,437 Employee loans 3,884 (1,121) - 2,763

733,894 (57,173) - 676,722

19 Post employment benefit obligationDefined contribution schemeThe Company and its employees make a joint contribution of 15% basic salaray, housing and transport allowance to each employee's retirement savings account maintained with their nominated pension fund administrators.

Defined benefit scheme(a) Staff Gratuity PlanThe Company operates an unfunded defined benefit staff gratuity plan where qualifying employees receive a lump sum payment based on the number of years served after an initial qualifying period of five years and gross salary on date of retirement.

(b) Long service awardThe company provides employees with two (2) Long Service Award Benefits – a flat cash award expressed as a proportion of Basic Salary together with a gift award based on year of service. The company’s mandatory retirement age is 60years for all staff.

31 December 31 December 1 JanuaryStatement of financial position liability for: 2013 2012 2012

N'000 N'000 N'000Staff Gratuity Plan 414,482 333,261 388,862 Long service award 56,414 47,975 68,397

470,896 381,236 457,259

41




a Staff Gratuity Plan

The amount included in the statement of financial position arising from the entity's obligation in respect of the gratuity scheme is as follows:

31 December 31 December 1 January 2013 2012 2012 N'000 N'000 N'000

Present value of unfunded obligations 414,482 333,261 388,862 Liability in the balance sheet 414,482 333,261 388,862

Movement in the present value of the gratuity scheme in the current year were as follows: 31 December 31 December 2013 2012 N'000 N'000

Opening defined benefit obligation 333,261 388,862

Current service cost 69,629 84,944 Interest cost 40,311 43,663 -Actuarial gains or losses arising from change in assumption (20,604) - -Actuarial gains and losses arising from experience adjustments 129,064 (57,157)Past service cost including curtailment gains and losses - 71,653 Benefits paid (137,179) (198,704)

Closing defined benefit obligation 414,482 333,261

The amount recognised in comprehensive income in respect of the gratuity scheme is as follows: 2013 2012

N'000 N'000 Current service cost 69,629 84,944 Past service cost including curtailment gains and losses - 71,653 Net interest expense 40,311 43,663

Components of defined benefit costs recognised in profit or loss 109,940 200,260

Remeasurement of the defined benefit obligation-Actuarial gains or losses arising from experience adjustments 129,064 (57,157)-Actuarial gains or losses arising from change in assumption (20,604) 0 Components of defined benefit costs recognised in

other comprehensive income 108,460 (57,157)

Total 218,400 143,103

The current service cost and the net interest expense for the year are included in the employee benefit expense in profit/loss. The entire net interest expense for the year has been included in administration costs. The remeasurement of the net defined benefit liability is included in other comprehensive income.

42




The principal actuarial assumptions were as follows: 31 December 31 December 1 January 2013 2012 2012

Average long term discount rate (p.a.) 14% 13% 13%Average long term pay increase (p.a.) 13% 12% 12%

Significant actuarial assumptions for the determination of the defined obligation are discount rate and expected salary increase. The sensitivity analyses below has been determined based on reasonable possible changes of the respective assumptions occuring at the end of the reporting period, while holding all other assumptions constant

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised the the statement of financial position

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

b Long service award

The amounts recognised in the statement of financial position are recognised as follows: 31 December 31 December 1 January

2013 2012 2012 N'000 N'000 N'000

Present value of unfunded obligations 56,414 47,975 68,397

Movement in the present value of the long service award in the current year were as follows: 31 December 31 December

2013 2012 N'000 N'000

Opening long service award obligation 47,975 68,397

Current service cost 4,589 6,617 Interest cost 4,412 6,104 -Actuarial gains or losses arising from change in assumption 8,186 - -Actuarial gains and losses arising from experience adjustments (2,381) (11,148)Past service costs (including losses/(gains) on curtailments) - (19,727)Benefits paid (6,367) (2,268)Closing long service award obligation 56,414 47,975

Base See above 414,482 Discount rate +1% 381,696

-1% 451,948 Salary increase +1% 431,281

-1% 400,023 Mortality experience Improves by 1 year 416,247

Worsens by 1 year 412,727

43




The amount recognised in comprehensive income in respect of the long service award is as follows: 2013 2012 N'000 N'000

Current service cost 4,589 6,617 Past service costs (including losses/(gains) on curtailments) - (19,727)Net interest expense 4,412 6,104

Components of defined benefit costs recognised in profit or loss 9,001 (7,006)

Remeasurement of the defined benefit obligation-Actuarial gains or losses arising from experience adjustments (2,381) (11,148)-Actuarial gains or losses arising from change in assumption 8,186 Components of defined benefit costs recognised in

other comprehensive income 5,805 (11,148)

Total 14,806 (18,154)

The principal methods and assumptions are the same as the defined benefit schemeThe sensitivity analysis for the long service award is detailed below:

20 Borrowings 31 December 31 December 1 January

2013 2012 2012 N'000 N'000 N'000

Non-currentBank borrowings (Note a) 2,567,862 1,439,047 1,212,467 Finance lease liabilities (Note c) - - 1,247

2,567,862 1,439,047 1,213,714 CurrentBank borrowings 2,080,731 1,450,846 818,030 Finance lease liabilities - 1,247 -Redeemable Preference shares (Note b) - 1,094,398 1,094,398 Bank overdraft 1,275,902 587,609 1,161,496

3,134,100 3,073,924 3,356,633

Total borrowings 5,924,495 4,573,147 4,287,638

Base See above 56,414 Discount rate +1% 53,655

-1% 59,437 Salary increase +1% 58,451

-1% 54,530 Mortality experience Improves by 1 year 57,126

Worsens by 1 year 55,571

44




This is further analysed 31 December 31 December 1 January 2013 2012 2012

Term Loans N'000 N'000 N'000Guaranty Trust Bank (Note 20.1) 380,118 522,583 242,608 IFU Loans (Note 20.2) 461,486 576,440 73,686 Fan Milk International (FMI) loans (Note 20.3) 80,704 161,481 243,672 Bankers import finance facilities (Note 20.4) 826,474 807,927 487,164 First Bank (Note 20.5) 899,809 821,462 983,366 Zenith Bank (Note 20.6) 2,000,000 - -

4,648,592 2,889,893 2,030,497 Other borrowingsRedeemable pref. shares(20.7) - 1,094,398 1,094,398 Finance lease(20.8) - 1,247 1,247 Bank overdraft 1,275,902 587,609 1,161,496

1,275,902 1,683,254 2,257,141 Total Borrowings 5,924,494 4,573,147 4,287,638

20.1 Guaranty Trust Bank PlcThe amount of N380,118,000 represents the drawn down portion of the N1,000,000,000 term loan granted to the Company by Guaranty Trust bank under a loan agreement dated 21 September 2011. The loan is interest bearing accruable on monthly basis at 16% per annum. The loan is repayable over 5 years with 1 year moratorium. This is secured by a negative pledge over the assets of the company.

20.2 Industrial Fund for Developing Contries (IFU) LoansThe amount of N461,486,000 (USD3,000,000), (2012: [N576,439,875 (USD3,750,000) represents outstanding balance on the loan granted to the Company by the Industrial Fund for Developing

Countries (IFU) under a loan agreement dated 22 November 2011. The loan is interest bearing, accruable on quarterly basis of libor plus 4.5% per annum and payable on quarterly basis at the exchange rate applicable on the day of remittance. The loan is repayable over five (5) years with effect from 31 December 2012 in ten (10) equal half-yearly instalments basis at the exchange rate applicable on the day of remittance. This is secured by a negative pledge over the assets of the company.

20.3 Fan Milk InternationalThe amount of N80,704,000 (USD520,000) (2012: [N161,480,800 (USD1,040,000) represent loan granted to the Company by the Fan Milk International A/S (FMI) under a loan agreement agreement dated 2 February 2010.The loan is interest bearing accruable on semi annual basis of libor plus 5% per annum and payable on semi annually basis at the exchange rate applicable on the day of remittance. The loan is repayable over five (5) years with effect from 30 June 2010 in ten (10) equal half-yearly instalments basis at the exchange rate applicable on the day of remittance. This is secured by a negative pledge over the assets of the company.

20.4 Banker Import Finance FacilitiesThe amount relates to import finance facilities obtained from Zenith bank Plc (N453M) ,EcoBank(N5.9m) and GTB(N366.9m)to finance importation with an average interest rate of 16%. This is secured by a negative pledge over the assets of the company.

20.5 First Bank of Nigeria PlcThe amount of N900,000,000 represents the fully drawn down value of the N1,000,000,000 BOI loan granted to the Company by First bank Plc under a loan agreement dated 29 July 2013. The loan is interest bearing, accruable on monthly basis at 7% per annum. The loan is repayable over 5 years on quarterly basis with 6 months moratorium from the date of drawdown. This is secured by a negative pledge over the assets of the company.

45




22 Dividend payable 31 December 31 December 1 January2013 2012 2012

N'000 N'000 N'000At 1 January 3,630 8,951 3,145 Declared during the year 121,298 80,865 33,694 Provision no longer required (20,085) - - Payment in the year (100,864) (86,187) (27,888)At 31 December 3,979 3,629 8,951

23 Reconciliation of profit before tax to cash generated from operations 31 December 31 December

2013 2012 N'000 N'000

Profit before income tax including discontinued operations 313,536 224,586 Adjustments for:-Depreciation of PPE 1,201,723 1,211,733 -Amortisation of intangible assets 3,366 2,140 -Increase in staff gratuity provisions (24,605) (7,718)Interest paid 223,392 379,067 -Loss on disposal of fixed assets (142) (814)-Interest received (4,994) - (increase)/decrease in inventories (244,781) 163,841 Decrease/(increase) in trade and other receivables 1,395,054 (1,589,839)(Decrease) /increase in trade and other payables (1,532,569) 1,755,390 Cash generated from operations 1,329,980 2,138,385

24 Contingent liabilities and commitments

24(a) Legal proceedings

The Company has litigation and claims which arose in the normal course of business and they are being contested by the Company. The directors, having sought professional legal counsel, are of the opinion that no significant liability will crystallise from these litigation and therefore no provision is deemed necessary for these legal claims. There were no other contingent liabilities not disclosed in these financial statements.

(b) Capital commitmentsNon-cancellable operating lease rentals are payable as follows:

31 December 31 December 1 January 2013 2012 2012 N'000 N'000 N'000

Not later than 1 year 21,513 16,399 34,727 Later than 1 year but not later than 5 years 390,807 219,762 345,692 Later than 5 years 123,174 112,000 127,825

46




25 Related party transactionsFan Milk is a subsidiary of Danish Dairy Services A/S Demnark. 94.7% of the share capital of the Company is owned by the Danish Dairy Services A/S Demnark and 5.29% is owned by Nigerian individual corporate investors.The following transactions were carried out with related parties

(a) Transactions with related parties

Purchase of goods and services 31 December 31 December 2013 2012 N'000 N'000

Fan Milk International 106,495 104,169 Emidan A/S 2,938,912 3,463,089 Honeywell Nigeria 14,477 46,244

3,059,884 3,613,502

Goods and services are bought from associates and relate entities on normal commercial terms and conditions

(b) Key management compensationKey management includes directors (executive and non-executive), members of the Executive Committee and the Company Secretary. The compensation paid or payable to key management for employee services is shown below:


Salaries and other short-term employee benefits 16,012 16,012 Post-employment benefits (Gratuity & pension) 2,122 2,060

18,134 18,072

(c) Year end balances from sales/purchases of goods and services

Payables to relates parties 31 December 31 December

Fan Milk International 121,164 738,899 Emidan A/S 585,436 105,924 Honeywell Plc 1,138 910 707,738 845,733

The payables to related parties arise mainly from purchase transactions and are due two months after the date of purchase. The payables bear no interest.

47




(d) Loans from related parties 2013 2012N'000 N'000

Loans from Industrial Funds for Developing CountriesAt 1 January 582,263 73,726 Forex exchange difference 3,019 (17,263)Loans advanced during the year - 600,375 Loan repayments made (119,681) (74,576)Interest charged (accrual) 11,683 52,328 At 31 December 477,284 634,590

Loans from Fan Milk International

At 1 January 161,481 243,672 Forex exchange difference 3,281 1,425 Loan repayments made (84,058) (83,616)Interest accrued - 38,792 At 31 December 80,704 200,272

Loans from First Bank of Nigeria Plc

At 1 January 826,326 992,993 Loans advanced during the year 909,000 - Loan repayments made (826,326) (166,667)Interest charged 7,845 156,327 At 31 December 916,845 982,654

26 Staff numbers and costsThe average number of persons, excluding directors, employed by the company during the year were as follows:

Number Number Senior Staff Production 43 47 Administrative 48 63

91 110 Supervisory/Junior Staff Production 153 170 Administrative 26 26

179 196

Total 270 306

The total employee benefits expense in the year comprise the following:

2013 2012 N'000 N'000

Salaries and Wages (1,190,313) (1,187,248)Medical, Welfare and Training (56,080) (101,435)

(1,246,393) (1,288,683)

48




The table below shows the numbers of employees, other than employees who discharged their duties wholly or mainly outside Nigeria, who earned over N300,000 in the year.

Number Number N300,001 - N500,000 8 46 N500,001 - N700,000 92 127 N700,001 - N900,000 92 67 N900,001 - N1,000,000 12 3

Above N1,000,000 66 63 270 306

2013 2012 N'000 N'000

Directors emolumentsFees paid to Non-executive Directors 18,000 1,800 Emoluments paid to Executive Directors 13,451 13,451 Fees of the Chairman - 360 Emolument of the highest paid Director 13,451 13,451

The number of Directors whose emoluments fell within the following range are as follows Number Number

N100,001 - N300,000 - 5N300,001 - N500,000 - 1N500,001 - N1,000,000 - -N1,000,001 - N5,000,000 6 -Above N5,000,000 1 1 7 7

27 Compliance with regulatory bodiesThe Company did not contravene any regulation of the Financial Reporting Council Act or any act issued by any other relevant bodies.

28 Events after statement of financial position date

No events after the reporting date.

49




Reconciliation of profit for the year

Revenue 8,918,641 - 8,918,641 Cost of sales a, k (5,035,049) 13,593 (5,021,456)Gross profit 3,883,592 13,593 3,897,185 Distribution expenses (1,857,228) - (1,857,228)Admin expenses b,g, d, k (1,397,493) (151,562) (1,549,055)Other income k 216,052 9,157 225,209 Operating profit 844,923 (128,813) 716,110 Finance costs d (521,359) 29,834 (491,525)Finance costs-net (521,359) 29,834 491,525)

Profit before tax 323,564 (98,979) 224,585 Income tax expense j (75,275) 49,463 (25,812)PROFIT FOR THE YEAR 248,289 (49,516) 198,773

Reconciliation of equity for the year

ASSETSNon current assetsProperty, plant and equipment a,b 5,553,683 239,582 5,793,265 4,692,468 230,864 4,923,332 Intangible assets b - 12,027 12,027 - 5,605 5,605 Current assetsCash and cash equivalents

(excluding bank overdrafts) c 129,776 - 129,776 189,136 104,398 293,534 Trade and other receivables d 2,472,197 4,103 2,476,300 880,398 6,063 886,461 Inventories e 1,671,762 (330,336) 1,341,427 1,834,056 (328,786) 1,505,270 Total assets 9,827,418 (74,622) 9,752,796 7,596,058 18,143 7,614,202

EQUITY AND LIABILITIESEquity attributable to owners of the parentOrdinary share capital 274,949 - 274,949 274,949 - 274,949 Preference share capital k - - - 61,990 (61,990) - Share premium k 59,492 - 59,492 998,915 (939,423) 59,492 Revaluation reserve 362,276 - 362,276 362,276 - 362,276 Preference share

redemption reserve k - - - 92,985 (92,985) - General reserve 537,818 141,371 679,189 370,395 143,074 513,469

Total equity 1,234,535 141,371 1,375,906 2,161,510 (951,324) ,210,186 Non current liabilitiesBorowings f 1,455,480 (16,434) 1,439,047 1,230,773 (17,059) 1,213,714 Post employment benefit obligation g 594,718 (213,483) 381,236 684,455 (227,196) 457,259

Deferred taxation j 426,876 (14,048) 412,828 401,500 14,923 416,423

Current liabilitiesTrade and other payables h 4,023,377 (1,067,676) 2,955,701 1,095,911 104,398 1,200,311 Borrowings 2,038,455 1,095,646 3,134,101 1,979,526 1,094,400 3,073,926 Current income tax liability 50,348 - 50,348 33,432 - 33,432 Dividend payable 3,629 - 3,629 8,951 - 8,951

Total liabilities 8,592,883 (215,993) 8,376,890 5,434,548 969,467 6,404,016 Total equity and liabilities 9,827,418 (74,622) 9,752,796 7,596,058 18,143 7,614,202

31 December 2012 Note N-GAAP Adjustments IFRS

31 December 2012 1 January 2012 Note N-GAAP Adjustments IFRS N-GAAP Adjustments IFRS

50




29 Transition to IFRSExplanation of transition to IFRS

As stated in note 2.1, these are the Company's first financial statements prepared in accordance with IFRS. The Company has applied IFRS 1 in preparing these financial statements and the accounting policies set out in note 2 have been applied in preparing the financial statements for the year ended 31 December 2013, the comparative information presented in these financial statements for the year ended 31 December 2012, and in the preparation of an opening IFRS balance sheet at 1 January 2012 (the date of the Company's transition to IFRS).

In preparing its opening IFRS balance sheet, the Company has adjusted amounts reported previously in financial statements prepared in accordance with Statements of Accounting Standards issued by the Nigerian Accounting Standards Board (“Nigerian GAAP”). An explanation of how the transition from Nigerian GAAP to IFRS has affected the Company's financial position, financial performance and cash flows is set out in the following tables and the notes that accompany the tables.

The most significant IFRS impact for the Company resulted from the implementation of IAS 16 (Property, Plant and Equipment) which requires to Company to apply componentisation and ensure useful lives and residual values are appropriate. The application of IAS 39 Financial Instruments: Recognition and Measurement, which requires financial assets to be measured at fair value or at amortised cost (using the effective interest method) if certain criteria are met also had a significant impact on the Company due to the Company's domestic and foreign borrowings.

In preparing these financial statements in accordance with IFRS 1, the Company has applied the mandatory exceptions from full retrospective application of IFRS. The optional exemptions from full retrospective application selected by the Company are summarised below.

Exceptions from full retrospective application - followed by the Company

The Company applied the following mandatory exceptions from retrospective application:

1) Derecognition of financial assets and liabilities exceptionFinancial assets and liabilities derecognised before 1 January 2004 are not re-recognised under IFRS.

2) Estimates exceptionEstimates under IFRS at 1 January 2012 are consistent with estimates made for the same date under Nigerian GAAP, unless there is evidence that those estimates were in error.

The Company applied the following optional exemptions from retrospective application:

1) LeasesFan Milk has elected to consider the facts and circumstances on transition date, rather than at inception of the agreement, in order to determine whether an arrangement contains a lease

2) IFRS 7 DisclosureFan Milk has elected to apply the exemption in respect of the disclosure of information on the transfer of financial assets in the opening as well as the comparative financial statements.

3) Borrowing costsFan Milk has elected to apply the exemption in respect of borrowing costs. As such, borrowing costs will be capitalised from the transition date..

51




4) Reconciliation of profit for the year As indicated on the next page

5) Reconciliation of equity for the yearAs indicated in the next page

6) Reconciliation of cash flow statementThere were no significant adjustments between the cash flow under previous GAAP and the cash flow under IFRS

Notes to the reconciliation of equity and profit

a Under IFRS, Property plant and equipment increased by N239.58 million (2011: 230.86 million). This was as a result of the reclassification of engineering spares and intangible assets, including new depreciation charges computed for the periods under review. These changes are in accordance with the requirements of IAS 16 Property plant and equipment and IAS 38 Intangible assets .

b Under IFRS , Intangible assets were recognised amounting to N12.03 million (2011: 5.61 million). Software classified under NGAAP as Property, plant and equipment has been reclassified to intangible assets as required by IFRS.

c Cash and cash equivalent increased by Nil (2011: N104.39 million). This was as a result of unpresented cheques reclassified from trade payables.

d Under IFRS, trade and other receivables increased by N4.10 million (2011: N6.06 million) . This is accounted for by; the recognition of interest on staff debtors using market rate as against the below market rate used under NGAAP, the recognition of loans at fair value under IFRS and the impairment of trade receivables.

e The reduction in inventories by N330.34 million ( 2011: 328.79 million) was due to the reclassification of engineering spares into Property, plant and equipment. IFRS provides that spare parts qualify as Property, plant and equipment if they are used for more than one period and also if they can be used only in connection to an item of property, plant and equipment.

f In both comparative and opening years, non- current borrowing reduced by N 15.12 million (2011: 17.05 million). This is due to the recognition of borrowings at amortised costs as borrowings are now classified as 'financial liabilities at amortised cost'

g Under IFRS, Post employment benefit obligation decreased by N213.48 million ( 2011: N227.19 million). This decrease was due to the recognition of the difference between the liability recognised in the Nigerian financial statements and the actuarial liability calculated by the actuaries using the projected unit credit method

h Trade and other payables increased by N26.72 million ( 2011: N104, 39 million) . The change in 2012 was as a result of holiday pay accrued for. While in 2011 the change was due to the reversal of unpresented cheques.

i Under NGAAP, reedemable preference shares were classified under equity but under IFRS, these shares met the definition of debt. Furthermore, the holders of the preference shares called for redemption on 17th June 2011 and as such, the shares were classified under current borrowings

j These relate to the tax adjustments from the conversion to International Financial Reporting Standards

52




k Retained EarningsReconciliation of NGAAP retained earnings to IFRS retained earnings

N'000 N'000 Note 31 December 2012 1 January 2012

Retained earnings as reported under Nigerian GAAP 537,818 370,395

Fair value of prepaid loan f (9,402) (9,402)Interest income on staff debtors d 9,209 12,945 Post employee benefit obligation: staff gratuity g 186,760 227,194 Depreciation of plant and machinery a (186,982) (200,574)Interest on bank borrowings f 15,186 17,059 Impariment of trade receivables d 12,614 2,520 Salaries and wages d (8,317) -Provision for obsolete stocks e 108,255 108,255 Deferred tax impact of ifrs adjustments j 14,049 (14,922)Retained earnings as reported under IFRS 679,189 513,469

53




Turnover 9,408,633 8,918,641

Other Income 35,859 225,209

9,444,491 9,143,850

Cost of Goods and Services -Local (1,490,556) (1,397,768) -Imported (4,524,533) (4,606,529)

Distributed as follows:

To Pay Employees - Salaries and Allowances, Pension and Welfare 1,246,393 36 1,288,683 41

To Pay Government - Company Taxation 31,200 1 49,899 2

To Pay Finance Houses and Overseas Suppliers - Interests and Bank Charges 478,397 14 521,359 17

To Pay Providers of Capital - Dividend declared 121,298 4 80,865 3

Retained Maintenance of Assetsand Future Expansion of Business - Deferred Taxation 108,415 3 (24,087) (1) - Depreciation of Fixed Assets 1,270,826 38 1,024,061 33 - Retained Profit for the year 172,873 5 198,773 6

Value added represents the additional wealth which the company has been able to create by its own and its employees’ efforts. This statement shows the allocation of that wealth between employees, government, providers of capital and that retained for the future creation of more wealth.

Twenty Thirteen Twenty TwelveN'000 % N'000 %

Value Added 3,429,401 100 3,139,553 100

Value Added 3,429,401 100 3,139,553 100

54

Value Added StatementsFAN MILK PLC ANNUAL REPORT & ACCOUNTS 2013


2013 2012 2011 2010 2009 STATEMENT OF N'000 N'000 N'000 N'000 N'000FINANCIAL POSITION IFRS 'NGAAP

Tangible Fixed Assets 5,623,411 5,793,265 4,923,332 2,917,170 2,406,736 Assets Under Finance Leases - - - 155,402 162,648 Intangible Assets 12,022 12,027 5,605 - -

Net Current assets/ (Liabilities) 523,247 (2,196,275) (1,631,354) 212,050 (99,307)

Deferred Taxation (486,963) (412,828) (416,423) (351,257) (334,623)Creditors: Amount due after one year (3,038,758) (1,820,283) (1,670,973) (980,496) (697,420)

Net Assets 2,632,960 1,375,905 1,210,185 1,952,869 1,438,034

Ordinary Share Capital 499,907.92 274,949 274,949 274,949 274,949 Preference Share Capital - - - 61,990 61,990 Share Premium Reserve 1,098,865.28 59,492.00 59,492.00 862,068 744,414 Revaluation Reserve 362,276.00 362,276.00 362,276.00 402,529 402,529 Preference Share Redemption Reserve - - - 92,985 92,985 General Reserve 671,912.59 679,189.41 513,468.98 258,348 (138,833)Shareholders' Funds 2,632,960 1,375,905 1,210,185 1,952,869 1,438,034

Profit and Loss AccountsTurnover 9,408,633 8,918,641 7,753,496 6,934,959 6,365,567 Profit Before Taxation 313,536 224,586 325,562 545,113 414,882 Taxation (139,615) (25,812) (42,974) (30,279) (157,092)Profit After Taxation 173,921 198,774 282,588 514,834 257,790

Earnings Per Ordinary Share (kobo) - Basic 31.44 36.15 50 94 47

Earnings Per Ordinary Share (kobo) -Diluted 31.44 36.15 50 94 47

Earnings per ordinary share have been computed respectively for each year on the profit /(loss) after tax after deducting dividend attributable to the preference shareholders; and divided by the weighted average number of issued N0.50 ordinary shares during each year.

Five Year Financial Summary FAN MILK PLC ANNUAL REPORT & ACCOUNTS 2013

55


1 - 5,000 154 293,979 0.03 5,001 - 50,000 127 3,130,835 0.31 50,001 - 100,000 15 978,939 0.10 100,001 - 500,000 32 8,896,707 0.89 500,001 - 1,000,000 10 7,488,798 0.75 1,000,001 - 5,000,000 5 17,321,576 1.75 5,000,001 - 100,000,000 2 14,732,260 1.47Above - 1 00,000,001 1 946,972,754 94.71

Total 346 999,815,848 100.00

Share Ranges %

of shares heldNo of

ShareholdersNo of Shares

of 50 kobo

Type Analysis of members:

Shareholder Type No of Shareholders No of Shares %

Nigerians 344 52,769,970 5.28

Foreign (with foreign address) 2 947,045,878 94.72

Total 346 999,815,848 100.00

Statistical Analysis Of Share HoldingsFAN MILK PLC ANNUAL REPORT & ACCOUNTS 2013

56


t i 6Fan astic Cho ces Since 19 1

PERFECT!PERFECT!JUST JUST PERFECT!PERFECT!JUST JUST

49th Annual General Meeting to be held at 12.00 p.m.onMonday 4th August,2014 at Lafia Hotel,Abeokuta Road, Ibadan, Oyo State.

I/We* …………………………………………being a member/members of FAN MILK PLChereby appoint

**………………………………………………or failing him, the Chairman of the Meeting as my/our proxy to act and vote for me/us on my/ourbehalf at the Annual General Meeting of the Company to be held on 4thAugust, 2014. and at any Adjournment thereof.

Dated this ……..…. Day of………………2014.

Shareholder's Signature:……………….…………..(Corporation must execute under its common seal)..

*Delete as necessary*

Resolutions Against For

Please indicate “X” in the appropriate square how you wish your votes to be cast on the resolutions set out above. Unless otherwise instructed, the proxy will use his discretion to vote or abstain from voting.

To declare a dividend.

To elect/re-elect the following Directors:·Mr. Ravi Sharma·Mr. Mario Reis·Mr. Jacob Kholi·Mr. KodjoAziagbe·Mr. O. O. Akinkugbe

Special BusinessTo approve Directors' remuneration

NOTES:I. A member entitled to attend and vote at the General Meeting, is entitled to appoint a proxy in his stead. A proxy need not be a member of the Company.

ii. To be valid, all proxies, when completed should be deposited with the Secretaries, Lennap Services Limited, Theodolite House, 306, Ikorodu Road, Anthony, PMB 2047, Lagos, to reach them not less than 48 hours before the time of holding the meeting.

iii. If the shareholder is a Corporation, this Form must be under its seal or under the hand of some officers or attorney duly authorized in that behalf.

Before posting the above form, please tear off this part and retain it for admission to the meeting.

FAN MILK PLC RC 2761

ANNUAL GENERAL MEETINGADMISSION CARD

Please admit …………………………………..........………………........... To the 49th Annual General Meeting of FAN Milk PLC which will be held at Lafia Hotel, Abeokuta Road, Ibadan on Monday 4th August, 2014 at 12.00pm

Name of shareholder………………………………...........................…Signature of person attending……………………………………..

NOTE:(a)This admission card must be produced by the shareholder or his proxy to obtain entrance to the Annual General Meeting.

(b)Shareholders or their proxies are requested to sign the admission cards at the entrance on the day before attending the meeting.. Lennap Services Limited -RC 13406 (Company Secretaries)Number of Shares ………………….. Full name and address of shareholder …………………………............................................................ .............…………………………………...............................…….. ............……………………………...............................………….. .........……...……………………...............................……………..

Proxy Form

To authorize the Directors to fix the Auditors' remunerationTo elect members of the Audit Committee.


To receive the financial statements


Lennap Services Limited Anthony, lagos PMB 2047,

Theodolite House, 306, Ikorodu Road,

Affix postage stamp here

FANMILK PLC ANNUAL REPORT & ACCOUNTS 2013

FAN MILK PLC.Eleyele Industrial Layout,Ibadan,NigeriaTel.:+234 (2) 2412032Fax:+234 (0) 8034040727www.fanmilk-nig.net

fanmilk annual report 2014 inner - fan milk nigeriafanmilk-nig.net/userfiles/file/fanmilk_annual...

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