The rebranded Mr Biggs Restaurant at Maryland Ikeja, Lagos Variants of New Supreme Ice Cream and Lollies in pouches contents 4 Our Vision 45 Salient Performance Graphs 6 Mission Statement 46 Report of the Independent Auditors 8 Corporate Strategy 48 Report of the Audit Committee 10 Company Profile 50 Statement of Significant Accounting Policies 11 Financial Highlights 52 Group Value Added Statement 12 Chairman's Statement 53 Group Profit And Loss Account 15 Notice of Meeting 54 Group Balance Sheet 17 Board of Directors, Professional Advisers, etc. 55 Group Statement of Cash Flows 19 Statement of Directors’ Responsibility 56 Notes to the Financial Statements 20 Board of Directors 76 Group Five-Year Financial Summary 25 Directors' Report 77 Shareholders' Information 39 Human Resource Report 78 Unclaimed Dividends 41 Corporate Social Responsibility Report 44 Financial Report 2010 ANNUAL REPORT & ACCOUNTS 3 our vision To be number one in our chosen markets, providing exceptional value to our customers. A Library donated by CAP Plc to St Peters Anglican Primary School, Alausa, Ikeja, Lagos. Pix shows the Principal of the School flanked by the EDCS UACN, Mr JID Dada and the MD CAP Plc, Mrs Omolara Elemide Mission statement To experience the thrill of adding value to lives and businesses by being a superior convenience provider. Variants of New Gala Crunchies from UAC Foods our strategy To be a food-focused business with emphasis on business and market segments that offer the highest potentials. Investment will be targeted at profitable growth and creation of shareholders’ value. Victoria Mall Plaza Residential Apartments on Aboyade Cole Street, Victoria Island, owned by UPDC company profile UAC of Nigeria Plc (UAC), with over a century of operations in Nigeria, is a leading diversified, food-focused company, operating in the manufacturing, services, logistics and warehousing and real estate sectors of the economy. The Company's business portfolio includes the following Companies: UACN Property Development Company Plc (UPDC), the first Company in the real estate sector to be quoted on the Nigerian Stock Exchange; Warm Spring Waters Nigeria Limited, manufacturer of “GOSSY” Spring Water. The bottling plant is located in Ikogosi-Ekiti, Ekiti State. The Company (UACN) has majority stakes in Grand Cereals Limited, Spring Waters Nigeria Limited (SWAN) and Opticom Leasing Company Limited. UAC's interests also include Chemical and Allied Products PLC (CAP), UAC Registrars Limited and GM Nigeria Limited, a joint venture with General Motors Corporation of Detroit, USA. Following the recent pensions reforms in the country, UAC currently operates UNICO CPFA Limited, a subsidiary of the Company as a Closed Pension Fund Administrator. As a food-focused conglomerate, UAC's growth strategy envisages the building of strong regional and international corporate partnerships in order to realize sustainable growth and business transformation. To this end, UAC has partnered with Tiger Brands of South Africa to form a new Company, UAC Foods Limited with Tiger Brands Limited holding 49% of the equity and UAC controlling 51%. The move involves UAC interests in snacks, dairies and water operations (UAC Foods, UAC Dairies and Spring Waters Nigeria Limited) being transferred to UAC Foods Limited. The Company has re-aligned its food business architecture to unlock value in the business. The re-launch of Mr Bigg's, the leading Quick Service Restaurant chain in the country, has been well-received with trendy settings, tastier meals and a general improvement in the total offerings. The merger of UAC Franchising Division with UAC Restaurants to create a new UAC Restaurants Division has proved to be both strategic and profitable. UAC Restaurants operate leading Quick Service Restaurant brands including Mr. Bigg's, Village Kitchen, Chicken Inn, Pizza Inn, Creamy Inn and Dial-a- Delivery. UAC also operates Nando's, the Casual Dining Restaurants, in Nigeria. Under the current leadership, UAC has demonstrated renewed resolve and drive to move from incremental business improvements to true transformation. To this end, UAC pays a great premium to its human capital and capacity development programmes through the exploration of both international and local opportunities for the employees' learning and training. The Company's Corporate Social Responsibility programme, the Goodness League has spearheaded the move to boost education in the country through its infrastructural intervention and support for Legacy Schools across the country and the organization of the Free Weekend Classes for final year students in secondary schools. UAC's performance has continued to be driven by its vision “To be number one in 2010 our chosen markets, providing exceptional value to the customers.” ANNUAL REPORT & ACCOUNTS 10 financial highlights Group Company 2010 2009 2010 2009 =N='000 =N='000 =N='000 =N='000 Turnover 52,313,682 56,604,958 19,326,151 20,134,638 Net operating profit 7,037,725 7,568,029 1,869,226 2,068,851 Profit before taxation 7,093,521 8,076,451 1,920,423 2,614,797 Taxation (1,642,719) (1,899,343) (323,031) (725,781) Profit after taxation 5,450,802 6,177,108 1,597,392 1,889,016 Non-controlling interest (2,259,935) (2,157,981) - - Profit attributable to Ordinary Shareholders 3,190,867 4,019,127 1,597,392 1,889,016 Capital expenditure 3,972,143 6,577,629 1,718,381 2,136,202 Shareholders funds 36,406,000 37,486,708 11,832,973 11,900,331 Earnings per share before N-CI- basic 341 482 100 148 Earnings per share before N-CI - adjusted 341 386 100 118 Earnings per share after N-CI - basic 199 314 100 148 Earnings per share after N-CI - adjusted 199 251 100 118 Proposed dividend per share (kobo) 110 130 110 130 Proposed dividend per share (kobo) - adjusted 110 104 110 104 Net assets per share (kobo) 2,848 3,511 739 929 Market price per share (kobo) - daily official listing as at 31 December 3,751 3,700 3,751 3,700 2010 ANNUAL REPORT & ACCOUNTS 11 chairman’s statement Distinguished shareholders, invited guests, ladies and gentlemen, I am delighted to welcome you all to the 2011 Annual General Meeting of our company, UAC of Nigeria Plc. At this meeting, I will lay before you the Annual Report and Accounts for the financial year ended 31st December 2010. Please permit me to highlight the significant developments in the political and economic environment in which the company operated during the year. OPERATING ENVIRONMENT The first half of the year was characterised by political uncertainty arising from the Late President Yar'Adua's ill-health and attendant issues of power transfer to President Goodluck Jonathan. The situation was compounded by the Boko Haram insurgence in the North-East, the Jos crises and the spate of kidnapping in the South- East and some parts of the South-South zone of the country. These developments raised security concerns in the investment community. Capital market activities continued to be at low-key with the Securities and Exchange Commission taking measures to sanitise the market and position the Stock Exchange for a sustained future performance. There was no significant improvement in infrastructure including power during the year. Despite huge resource allocation, the public power supply situation remains disappointing. The cost of self-generated power continued to rise in response to global crude oil prices and rising generator maintenance costs. Overall GDP growth of 7.85% was impressive in the face of continuing global economic crisis. However, it is instructive to note that whereas Agriculture, Wholesale and Retail Trade and Crude Oil and Gas Exports account for 75% of the GDP, Manufacturing accounts for below 4%. Inflation rose to as high as 15% during the year before declining to 11.8% by December. Manufacturing capacity utilisation, however, continues to decline. Credit to the private sector shrank by 5% against a benchmark target of 31.54% growth. Against this negative trend in private sector lending, credit to the Federal Government, States and Local Governments rose thereby crowding out private sector borrowing. 2010 was generally a challenging year for business in Nigeria. Let me illustrate the operational challenges faced by our businesses with the case of our UAC Restaurants Division, home to Mr. Biggs, the widest network of retail food outlets in Nigeria. Operations in the South-East, South-South and Plateau States were hampered by threats to life, general insecurity and subdued social life leading to delayed daily opening and early closing (and some days of complete shutdown) of restaurant operations. The credit crunch, insecurity and declining purchasing power led to the business failure of a number of our franchisees and a significant rise in the incidence of bad debts. Increasing power outages led to greater dependence on self-generated power. The increased costs of reduced business volumes could not be passed on to over-burdened consumers. In the face of these challenges, your Board and Management are taking various 2010 restructuring steps to reposition the business. The impact of these measures is ANNUAL REPORT & already being felt. ACCOUNTS 12 chairman’s statement contd. Delite Fruit Juice was introduced in the middle of the year to join the new Supreme Flavoured Milk. As these brands are entering the market at a challenging time, Management will ensure that they are adequately supported to gain market acceptance so that our investment in this area will yield appropriate returns in due course. Our Real Estate business struggled through another year of tepid demand given the associated macro-economic issues of the environment. Our paint business, however, had a spectacular year as volumes held given the differentiated quality offering of the premium Dulux brand. Our Jos-based businesses of Grand Cereals Limited and Spring Waters Nigeria Limited suffered business disruptions on account of the insecurity situation in Plateau State.