Annual Report. for the year ended. 31 December 2011

1 MARGARINE INDUSTRIES LIMITED Annual Report for the year ended 31 December 2011 2 CORPORATE INFORMATION Directors of the Company Chairman Mr. Ba...
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MARGARINE INDUSTRIES LIMITED

Annual Report for the year ended 31 December 2011

2

CORPORATE INFORMATION Directors of the Company Chairman Mr. Bashirally A Currimjee, G.O.S.K

-

Also alternate to Mr. Anil C Currimjee

Executive Mr. Azim F Currimjee

-

Mr. Raffi Currimjee

-

Chief Executive Officer /Managing Director/ Also alternate to Mr. Currimjee J Currimjee Chief Operating Officer

Non-Executive Mr. Fakhruddin J Currimjee, G.O.S.K Mr. Mustanshir A Currimjee Mr. Currimjee J Currimjee, G.O.S.K

-

Mr. Anil C Currimjee Mr. Ashraf M Currimjee Mr. Mazahir F E Adamjee Mr. Saliah Mohamed Sait

-

Also alternate to Mr. Ashraf M Currimjee Also alternate to Messrs. Azim F Currimjee Fakhruddin J Currimjee Also alternate to Mr. Bashirally A Currimjee Also alternate to Mr. Mustanshir A Currimjee Also alternate to Mr. Raffi Currimjee Also alternate to Mr. Mazahir F E Adamjee

&

Independent Non-Executive Mr. Hassam Vayid, G.O.S.K Mr. Uday K Gujadhur Directors of the Company’s Subsidiary

Mr. Currimjee J Currimjee Mr Mustanshir A Currimjee Mr Azim F Currimjee Mr Raffi Currimjee Mr Ashraf M Currimjee The Company Secretary Currimjee Limited 6, Sir William Newton Street, Port-Louis Mauritius Registered Office 6, Sir William Newton Street, Port-Louis Mauritius Registry Currimjee Limited 6, Sir William Newton Street Port Louis Mauritius Principal Place of Business

Central Distributors Company Limited (‘CDCO’) √ √ √ √ Alternate to Mr. Mustanshir A Currimjee

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New Trunk Road, Trianon Mauritius Auditors Deloitte 7th Floor, Raffles Tower 19, Cybercity Ebene Mauritius Bankers 

The Mauritius Commercial Bank Ltd.



State Bank of Mauritius Ltd



Barclays Bank Plc



Standard Bank (Mauritius) Limited



Afrasia Bank Limited

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REPORT FROM THE BOARD OF DIRECTORS Dear Shareholder The Board of Directors is pleased to present the Annual Report of MARGARINE INDUSTRIES LIMITED for the year ended 31 December 2011.

LEGAL FORM AND PRINCIPAL ACTIVITY

The Company was incorporated on 20th April 1966 as a private company and was converted into a public company on 29th June 1982. The Company was admitted to the Development & Enterprise Market of the Stock Exchange of Mauritius in August 2006. Its principal activity consists of manufacturing and sale of margarine and has remained unchanged during the year. The wholly-owned subsidiary of the Company, Central Distributors Company Limited [“CDCO”], is engaged in the trading of consumer goods and its activity has also remained unchanged during the year.

RESULTS Group turnover increased by 12.3% compared to last year and profit after tax in the year has increased from Rs 20.2M to Rs 30.3M. A gain on revaluation of plant and machinery of Rs 30.4M is included in the other comprehensive income. The assets were valued by Independent professional valuer in accordance with the group accounting policy. In the prevailing competitive environment and with the rising commodity prices, 2012 will be a challenging year. However, the Company expects the results to be sustained given various measures undertaken.

STATEMENT

OF

DIRECTORS’

RESPONSIBILITIES

IN

RESPECT

OF

THE

FINANCIAL

STATEMENTS Company law requires the Directors to prepare financial statements for each financial year, which present fairly the financial positions, financial performances and cash flows of the Company. In preparing those financial statements, the Directors are required to:

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select suitable accounting policies and then apply them consistently;



make judgements and estimates that are reasonable and prudent;



state whether applicable Accounting Standards have been followed and complied with, subject to any material departures disclosed and explained in the financial statements; and



prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the financial statements. The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time, the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2001. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

DONATIONS From the Company 2011 2010 (Rs) (Rs) Nil Nil 32,500 47,500 32,500 47,500

Political donations Non-political / charitable donations TOTAL

From Subsidiaries 2011 2010 (Rs) (Rs) Nil Nil Nil Nil Nil Nil

AUDITORS The Auditors, Messrs. Deloitte have expressed their willingness to continue in the office and a resolution proposing their re-appointment will be submitted to the Annual Meeting. The fees paid to the Auditors were: The Company

Audit fees Other Services

The Group

2011

2010

2011

2010

Rs.

Rs.

Rs.

Rs.

300,000

300,000

375,000

375,000

10,000

10,000

20,000

20,000

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Corporate Governance Report The Company is committed to high standards of Corporate Governance and the Board uses its best endeavours to ensure compliance with the provisions of the Mauritius Code of Corporate Governance.

The Holding Structure The holding structure of the Company as at 31 December 2011is as follows:

Fakhary Limited (“FL”)

100%

Currimjee Industries Limited (“CIND”) Others 75.0% 25.0%

Margarine Industries Limited (“the Company”)

100%

Central Distributors Company Limited (“CDCO”)

Substantial Shareholding With the exception of CIND, no other Shareholder holds more than 5% of the share capital of the Company.

Board of Directors For the year under review, the Board consisted of twelve Directors with a mix of two Executives, eight Non-Executives and two Independent Directors. The Independent and Non-Executive Directors bring a wide range of experience and skills to the Board. Independent Directors are free from any business or other relationships which would materially affect their ability to exercise independence of mind and judgement.

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Where necessary in the discharge of their duties, Directors may seek independent professional advice at the Company’s expense.

Directors’ Profiles The profile of each member of the Board of Directors is set out hereafter:

Mr. Bashirally A Currimjee G.O.S.K - Chairman Mr. Bashirally A Currimjee is the Chairman of the Company since 1 January 2011. He is also the Chairman and Managing Director of Currimjee Jeewanjee and Company Limited and the Chariman of the following Development Enterprise Market (DEM) listed companies: -

Compagnie Immobiliere Limitee, Soap & Allied Industries Limited Margarine Industries Limited, Quality Beverages Limited and Vital Water Bottling Co Ltd.

He is presently Director of Fincorp Limited, a company listed on the Official Market of the Stock Exchange of Mauritius (“SEM”).

Mr. Azim F Currimjee Mr. Azim F Currimjee was appointed Director of the Company in September 2001. In August 2008 and July 2009, he was respectively appointed as Chief Executive Officer and Managing Director of the Company. He is also Director of the following DEM listed companies: -

Compagnie Immobiliere Limitee, Quality Beverages Limited, Soap & Allied Industries Limited, and Vital Water Bottling Co Ltd.

Mr. Raffi Currimjee Mr. Raffi Currimjee was appointed as Executive Director and Chief Operating Officer of the Company in August 2008. He is also Director of the following DEM listed companies: -

Compagnie Immobiliere Limitee, Quality Beverages Limited and Vital Water Bottling Co Ltd.

Mr. Fakhruddin J Currimjee G.O.S.K Mr. Fakhruddin J Currimjee was appointed Director of the Company in April 1966. He is also a Director of the following DEM listed companies: -

Quality Beverages Limited and Vital Water Bottling Co Ltd.

Mr. Mustanshir A Currimjee Mr. Mustanshir A Currimjee was appointed Director of the Company in August 1976. He is also a Director of the following DEM listed companies: -

Quality Beverages Limited, Soap & Allied Industries Limited and Vital Water Bottling Co Ltd.

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Mr. Currimjee J Currimjee G.O.S.K Mr. Currimjee J Currimjee has acted as Chairman of the Company from 15 November 1978 to 31 December 2010. He is also Director of the following DEM listed companies: -

Quality Beverages Limited, Soap & Allied Industries Limited and Vital Water Bottling Co Ltd

Mr. Anil C Currimjee Mr. Anil C Currimjee was appointed Director of the Company in July 2005. He is presently a Director of the following DEM listed companies: -

Compagnie Immobiliere Limitee, Quality Beverages Limited, Soap & Allied Industries Limited and Vital Water Bottling Co Ltd.

He also a Director of the Mauritius Commercial Bank Limited, a company listed on the Official Market of the SEM.

Mr. Ashraf M Currimjee Mr. Ashraf M Currimjee was appointed Director of the Company in June 2007 and is Director of the following DEM listed companies: -

Compagnie Immobiliere Limitee, Quality Beverages Limited, Soap & Allied Industries Limited and Vital Water Bottling Co Ltd.

He is also a Director of Mauritius Oil Refineries Limited, a company listed on the Official Market of the SEM.

Mr. Mazahir F E Adamjee Mr. Mazahir F E Adamjee was appointed Director of the Company in July 2005. He is a Director of the following listed companies: -

Compagnie Immobiliere Limitee, Quality Beverages Limited, Soap & Allied Industries Limited and Vital Water Bottling Co Ltd.

He also a Director of National Investment Trust Ltd, a company listed on the Official Market of the SEM.

Mr. Saliah Mohamed Sait Mr. Saliah Mohamed Sait was appointed as Director of the Company in June 2006. He is the Managing Director of some companies of the Currimjee Group. He is also a Director of the following DEM listed companies: -

Quality Beverages Limited, Soap & Allied Industries Limited and Vital Water Bottling Co Ltd.

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Mr. Hassam Vayid Mr. Hassam Vayid was appointed as an Independent Director of the Company in July 2005. He is the Chairman of Bramer Banking Corporation Ltd and Director of the following DEM listed companies: -

Quality Beverages Limited, Soap & Allied Industries Limited and Vital Water Bottling Co Ltd.

Mr. Uday K Gujadhur Mr Uday K Gujadhur was appointed as an Independent Director and Chairman of the Company’s Audit Committee in July 2010. He is Director of the following DEM listed companies: -

Quality Beverages Limited, Soap & Allied Industries Limited and Vital Water Bottling Co Ltd.

Board Meeting The Board of Directors meets every quarter to review the overall management and performance of the Company. Additional Board Meetings are held as and when required and decisions are also taken by way of resolutions in writing, assented and signed by all Directors. The Board of Directors met five times during the year under review.

Board Committees In line with Corporate Governance best practices, the Board has established the following subcommittees to assist it in the decision-making process and in the performance of its duties and responsibilities: 

Corporate Governance Committee



Audit Committee

Ad-hoc committees are also set up to assess and review major investments and new projects.

Corporate Governance Committee The Corporate Governance Committee is chaired by Mr Hassam Vayid, an Independent Director, and the other members as at 31 December 2011 were Messrs Bashirally A Currimjee, Ashraf M Currimjee, Azim F Currimjee and Mazahir Adamjee. Mr Anil C Currimjee stepped down as Committee Member and Mr Mazahir Adamjee was appointed as a Member of the Committee in July 2011. The Committee operates under a Committee Charter approved by the Board and its main attribution is to make recommendations to the Board of Directors on all corporate governance provisions to be adopted so that the Board remains effective and complies with prevailing corporate governance principles.

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The Committee met twice during the year under review.

Audit Committee The Audit Committee is chaired by Mr Uday Kumar Gujadhur, an independent Director. Mr Uday K Gujadhur is a Fellow Member of the Association of Chartered Certified Accountants, United Kingdom. The other members of the Audit Committee as at 31 December 2011 were Messrs Saliah Mohamed Sait, Ashraf M Currimjee and Hassam Vayid. The Audit Committee operates under the Terms of Reference set by the Board of Directors and a formally approved Audit Committee Charter. The role of the Audit Committee has continually been pre-dominant in assisting the Board in carrying out its responsibilities relating to accounting policies, internal control procedures, financial reporting practices and audit process. The Audit Committee oversees the financial reporting process and in particular, it reviews the annual and quarterly financial statements before being submitted to the Board of Directors for approval. It also reviews and monitors the following: 

the effectiveness of the internal audit function;



the qualifications, assessment of external auditors independence, performance and remuneration;



the compliance of the Company with laws and regulations.

The Audit Committee met four times for the year under review. Currimjee Limited acts as Secretary to all the above Committees.

Board and Committee Attendance The following table gives the records of attendance at meetings of the Company’s Board and its Committees for the year under review:

Directors

Board Meeting

Audit Committee

Mr Bashirally A Currimjee Mr Azim F Currimjee Mr Raffi Currimjee

5/5 5/5 4/5

n/a n/a n/a

Corporate Governance Committee 2/2 2/2 n/a

Mr Fakhruddin J Currimjee Mr Mustanshir A Currimjee Mr Currimjee J Currimjee Mr Anil C Currimjee

2/5 3/5 5/5 4/5

n/a n/a n/a n/a

n/a n/a n/a n/a

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Directors Mr Ashraf M Currimjee Mr Mazahir F E Adamjee Mr Saliah Mohamed Sait Mr Hassam Vayid Mr Uday K Gujadhur

Board Meeting

Audit Committee

4/5 4/5 5/5 4/5 3/5

3/4 n/a 4/4 4/4 4/4

Corporate Governance Committee 2/2 n/a n/a 2/2 n/a

Common Directors within the Holding Structure Company

Fakhary

Currimjee

Central

Limited

Industries

Distributors

Limited

Company Limited

Mr Bashirally A Currimjee







Mr Azim F Currimjee







Mr Raffi Currimjee







Mr Fakhruddin J Currimjee







Mr Mustanshir A Currimjee





A*



Mr Currimjee J Currimjee









Mr Anil C Currimjee



Mr Ashraf M Currimjee



A*



Mr Mazahir F E Adamjee







Mr Hassam Vayid



√ A*



A* stands for Alternate Director Internal control The Board is responsible for the maintenance of an internal control system. The Board of Directors is conscious of its role of withholding the highest standard of corporate governance and has established a sensible framework of valuable controls which enables risks to be assessed and managed. The Board regularly reviews processes and procedures to ensure effectiveness of the Company’s internal control systems. The internal control activities are carried out in line with an approved internal audit plan. The Internal Audit Service for the Company is outsourced to Currimjee Jeewanjee and Company Limited who delivers the service through its Internal Audit Department with clear reporting structure between the Internal Auditor and the Company. The internal Auditor reports to the Audit Committee. The internal Auditor has unrestricted access to the Company’s accounting records, to management and employees.

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Risks Management Senior Management assumes responsibility for identifying and monitoring the risks as appropriate to their position in the organisation. Therefore, the objective of risk management is to reduce risk to an acceptable level. The Board is, nevertheless responsible for the total process of risk management, including the identification and evaluation of risks and putting in place appropriate systems and controls to mitigate the impact of risks.

Statement of the Company’s remuneration philosophy The Nomination and Remuneration Committee is set up at the level of Currimjee Limited and is chaired by Mr Carrim A Currimjee. The other members as at 31 December 2011 were Messrs Bashirally A Currimjee, Fakhruddin J Currimjee.

Sir Hamid Moollan Q.C. and Mr Jean Paul de Chazal have been

nominated as co-opted Members on the Committee for their independent expert advice. The Committee’s main responsibility is for making recommendations to the Board for determining, developing and agreeing the Company’s general policy on remuneration for Directors and pension for Retired Directors and on the appointment of new Directors. All decision taken at the Nomination and Remuneration committee level are submitted for approval by the Board of the Company. The Committee met once during the year under review. The Company’s remuneration philosophy concerning Directors follow the guidelines proposed by the Nomination and Remuneration Committee, which solicits the expert advice of a Consultant to assist in determining the remuneration of Executive Directors. Independent Directors who are Members of the Board’s sub-committees are paid committee fees, in addition to their Directors’ fees. Independent Directors are also remunerated for attendance at Board Meetings. The Company’s policy for determining remuneration for Management and Staff follow the guidelines below: 

Ensure that remuneration is commensurate with qualifications, skills and experience;



Ensure that pay levels are internally consistent and align with market rates;

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Provide a remuneration package that attracts, retains and motivates staff;



Reward managers according to their performance and their responsibilities.

Remuneration and benefits received by Directors during the financial year were as follows

From the Company Rs Total - Executive Directors

542,410

Total - Non-Executive Directors

135,603

Total - Independent Directors

147,500 TOTAL

825,513

Directors did not receive any remuneration and benefits from the Company’s subsidiaries for the year under review. Remuneration of Directors has not been disclosed on an individual basis due to commercial sensitivity.

Directors’ service contracts No Director holds any service contract with the Company.

Directors’ Interest and Dealings in Shares The Directors are aware of the principles of the model code on securities transactions by Directors as detailed in Appendix 6 of the Mauritius Stock Exchange Listing rules. The Company Secretary maintains a Register of Interests, which is updated with every transaction entered into by the Directors and their closely related parties. All new Directors are required to notify in writing to the Company Secretary their holdings in the Company’s shares as well as those in related companies. None of the Directors traded in the Company’s shares throughout the year under review.

The following table details the interests of the Directors in the share capital of the Company as at 31 December 2011:

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Interests in the Company’s shares as at 31 December 2010 Number of shares

Direct

Indirect

4,482

-

500

2,000

Mr Raffi Currimjee

1,556

-

Mr Fakhruddin J Currimjee

5,558

2,281

Mr Mustanshir A Currimjee

4,482

-

Mr Currimjee J Currimjee

5, 608

-

Mr Anil C Currimjee

-

-

Mr Ashraf M Currimjee

-

-

Mr Mazahir F E Adamjee

1,000

-

Mr Saliah Mohamed Sait

-

-

Mr Hassam Vayid

-

-

Mr Uday K Gujadhur

-

-

Mr Bashirally A Currimjee Mr Azim F Currimjee

Constitution The main highlights of the Constitution are as follows: 

The main objects inter alia of the Company are to carry on the business of manufacturers of Margarine, Vegetable Ghee, cooking fats and other similar products;



The Shareholders can freely transfer fully paid up shares of the Company; and



The quorum for a Shareholders’ meeting is two Shareholders present or represented by proxy.

Shareholders’ Agreement To the knowledge of the Company, there was no such agreement with any of its Shareholders for the year under review.

Share Registry and Transfer Office The share registry is managed by Currimjee Limited and as at 31 December 2011, the Company had 131 registered Shareholders.

Shareholding Profile The share ownership and the category of Shareholders as at 31 December 2011 are set out below:

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Number of

Size of Shareholding

Shareholders

Number of

% of Total Issued

Shares Owned

Shares

112

1-500 shares

5,921

1.972

4

501-1,000 shares

4,000

1.332

9

1,001-5,000 shares

26,702

8.894

4

5,001-10,000 shares

25,888

8.622

1

10,001-50,000 shares

12,550

4.180

-

50,001-100,000 shares

-

-

1

100,001-250,000 shares

225, 178

75.000

-

250,001-500,000 shares

-

-

-

Over 500,000 shares

-

-

131

Total

300,239

100%

Number of

Category of Shareholders

Shareholders

Number of

% of Total

Shares Owned

Shares Issued

4

Other Corporate Bodies

229,664

76.49

126

Individuals

58,025

19.33

1

Pension & Provident Funds

12,550

4.18

131

Total

300,239

100%

Share Price Information The share of the Company has a nominal value of Rs 100 and the Company’s share price evolution for the year 2011 was as follows:

250 Market Price (Rs.)

200 150 Price (Rs.)

100 50 0 Year 2011

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Shareholders’ Communication and Calendar of Events The Board of Directors of the Company understands that communication to Shareholders about matters pertaining to the Company is of great importance and ensures that information is delivered in an open, transparent and meaningful manner. Press communiqués, disclosures in the Annual Report and the Annual Meeting of Shareholders are means available to the Board in keeping the communication line with Shareholders open. The calendar of key events is as follows: Publication of Abridged Audited Accounts for the year ended 31 December 2011March Publication of 1st Quarter Results

May

Annual Report to Shareholders

June

Annual Meeting of Shareholders

June

nd

Publication of 2

Quarter Results

August

Publication of 3rd Quarter Results

November

Projection for Declaration/Payment of Final Dividend

November/December

Financial Year End

December

Employee Share Scheme There is no Employee Share Option Plan in place at Company or Group level.

Dividend Policy Payment of dividends is subject to the profitability of the Company, its cash flow and its capitalexpenditure requirements. For the year under review, the Company declared a dividend of Rs 60.00 per share [2010: Rs 50.00 per share].

70 60 50 40 30 20 10 0

Final Dividend % on Nominal Value of Ordinary Shares

20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11

%

The trend in dividend declaration or the previous 10 years is illustrated below:

Year

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Senior Management’s Profiles

Rafic Sulliman is the General Manager. He joined the Company in 1990. Abed Atchia is the Human Resources IT & Admin Manager and he is responsible for Human Resources, Health & Safety and Security, business information systems, hardware and internal infrastructure of the Company. He joined the Company in January 1970. Sivapragassen Rengasamy is the Factory Manager and he is responsible for the production, maintenance and technical operations of the Company. He joined the Company in May 1972. Zabeer Abbas is the Accounts Manager and he is responsible for the financial management of the business, including production of financial reports, periodic review packs and forecasts. He joined the Company in August 2010. Zeenat Mungloo Peyrye is the Production Manager & R & D Manager and she is responsible for day to day management of Production department and for product improvement and development. She joined the Company on 1st August 2008. Choaib Moreea is the Operations Manager in the Commercial Division. He joined the Company on 1st November 2009. Senior Management’s Interests in Shares The following table details the interests of Senior Management in the share capital of the Company as at 31 December 2011

Number of shares Number of shares in the

Direct

Indirect

1,100

2,000

Abed Atchia

100

-

Sivapragassen Rengasamy

100

-

Company as at 31st December 2010 Rafic Sulliman

Related Party Transactions All the transactions of the Company are carried out at arm’s length. Please refer to note 27 of the accounts.

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Company Secretary All the Directors have access to the services of the Company Secretary, Currimjee Limited. It ensures that the Company complies with its constitution and all relevant statutory and regulatory requirements. It plays a key role in the application of corporate governance and is a central source of guidance and advice to the Board on matters of ethics and good governance. It ensures proper notification and conduct of the Board of Directors, Board Committees and Shareholders’ meetings and recording of proceedings.

Management Agreement Currimjee Limited offers secretarial and management services to the Company and the main scope of its services comprise, among others, Consultancy and Advisory and Management Services. A Secretariat Service Agreement & a Management Agreement between Currimjee Limited and the Company have been signed in that respect.

Health, Safety & Environment Practices The Company ensures that its operations are compliant with the Occupational Safety and Health Act 2005. A Health & Safety consultant assesses, reviews and ensures that the Company adheres to the best practices in this respect. The Company is committed to sustainable development and ensures that its operations are conducted in a way that minimises their impact on the environment and on the society at large.

Corporate Social Responsibility The Company channels a percentage of its CSR contribution to the “Currimjee Foundation”. The funds are utilised primarily towards poverty alleviation together with support to education, sports, health and environment. The Company has contributed an amount of MUR 509,970 to the Currimjee Foundation for the year 2011. Major projects undertaken by the Currimjee Foundation in the year 2011 were as follows: 

Poverty Alleviation: Six EAP (Eradication of Absolute Poverty program) families of Vallee Pitot have been taken in charge and empowered. The major activities undertaken by the Currimjee Foundation in Vallee Pitot were, among others, the financing of pre-primary schools, the rehabilitation and empowerment of drug abusers through the Idriss Goomany Centre, the provision of equipment for starting a small business and the contribution to a Credit Union for 117 families.

24 MARGARINE INDUSTRIES LIMITED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011 THE GROUP

THE COMPANY 2011 2010 Rs Rs

Note

2011 Rs

2010 Rs

19

362,754,756

322,883,200

296,298,091

256,875,825

(255,177,918)

(231,173,867)

(202,636,095)

(173,535,333)

107,576,838

91,709,333

93,661,996

83,340,492

1,266,709

2,323,402

3,270,300

4,114,342

Selling and distribution expenses

(17,179,032)

(15,045,034)

(10,708,231)

(9,321,483)

Marketing expenses

(12,589,876)

(8,007,644)

(12,589,876)

(8,007,644)

Administrative expenses

(35,554,445)

(36,208,808)

(33,954,419)

(33,743,824)

(7,522,884)

(9,718,770)

(6,163,410)

(7,850,490)

35,997,310

25,052,479

33,516,358

28,531,393

Revenue Cost of sales Gross profit Other income

Finance costs

20

21

Profit before taxation Taxation

15

(5,693,681)

(4,772,136)

(5,693,681)

(4,772,136)

Profit for the year

22

30,303,629

20,280,343

27,822,677

23,759,257

Other comprehensive income Net value gain(loss) on cash flow hedges Gain on revaluation of land and buildings and Plant and Machinery Deferred tax on revaluation of land and buildings and Plant and Machinery

1,461,903 5

30,407,712

(580,722) 4,700,000

1,461,903 30,407,712

(580,722) 4,700,000

826,177

(5,867,333)

826,177

(5,867,333)

Other comprehensive income/(loss) for the year

32,695,792

(1,748,055)

32,695,792

(1,748,055)

Total comprehensive income for the year

62,999,421

18,532,288

60,518,469

22,011,202

Owners of the company

30,303,629

20,280,343

27,822,677

23,759,257

Total comprehensive income attributable to owners of the company

62,999,421

18,532,288

60,518,469

22,011,202

100.93

67.55

Profit attributable to:

Earnings per share

23

25 MARGARINE INDUSTRIES LIMITED STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 THE GROUP Attributable to owners

Note

At 1 January 2010

30,023,900

Profit for the year Other comprehensive income Total comprehensive income for the year Dividend payable

26

At 31 December 2010

26

45,715,266

Other reserves Rs

Retained earnings Rs

3,810,342

24,038,998

Total Rs 103,588,506

(1,167,333)

(580,722)

20,280,343 -

20,280,343 (1,748,055)

-

(1,167,333) -

(580,722) -

20,280,343 (15,011,950)

18,532,288 (15,011,950)

44,547,933

3,229,620

29,307,391

107,108,844

-

31,233,889

1,461,903

30,303,629 -

30,303,629 32,695,792

-

31,233,889 -

1,461,903 -

30,303,629 (18,014,340)

62,999,421 (18,014,340)

75,781,822

4,691,523

41,596,680

152,093,925

Other reserves Rs

Retained earnings Rs

3,810,342

24,184,255

30,023,900

At 31 December 2011

Revaluation reserves Rs

-

30,023,900

Profit for the year Other comprehensive income Total comprehensive income for the year Dividend

Stated capital Rs

THE COMPANY

Note

Stated capital Rs 30,023,900

At 1 January 2010

Revaluation reserves Rs 45,715,266

Total Rs 103,733,763

Profit for the year Other comprehensive income

-

(1,167,333)

(580,722)

23,759,257 -

23,759,257 (1,748,055)

Total comprehensive income for the year Revaluation surplus realised on depreciation Dividend payable

-

(1,167,333)

(580,722) -

23,759,257 (15,011,950)

22,011,202 (15,011,950)

26

30,023,900

At 31 December 2010 Profit for the year Other comprehensive income Total comprehensive income for the year Dividend At 31 December 2011

26

44,547,933

3,229,620

32,931,562

110,733,015

-

31,233,889

1,461,903

27,822,677 -

27,822,677 32,695,792

-

31,233,889 -

1,461,903 -

27,822,677 (18,014,340)

60,518,469 (18,014,340)

75,781,822

4,691,523

42,739,899

153,237,144

30,023,900

26

MARGARINE INDUSTRIES LIMITED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011

Note

2011 Rs

THE GROUP 2010 Rs

THE COMPANY 2011 2010 Rs Rs

CASH FLOWS FROM OPERATING ACTIVITIES 30,303,629

Profit for the year Adjustments for:Taxation recognised in profit or loss Depreciation and amortisation Profit on disposal of property, plant and equipment Retirement benefit obligations Interest income Interest expense

15 5 20 20 21

OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES

5,693,681 8,382,254 1,170,500 (472,017) 7,522,884

20,280,343 4,772,136 7,121,734 (552,220) 2,255,187 (148,486) 9,718,770

27,822,677 5,693,681 8,382,254 779,000 (675,607) 6,163,410

23,759,257 4,772,136 7,055,889 (552,220) 1,706,250 (139,425) 7,850,490

52,600,931

43,447,464

48,165,415

44,452,377

(30,960,113) (13,225,564) 7,823,873

9,371,672 (5,070,422) (384,877)

(26,004,904) (9,591,886) 3,077,726

1,819,321 (2,484,990) 935,787

(36,361,804)

3,916,373

(32,519,064)

16,239,127 (6,293,977) (7,522,884) -

47,363,837 (2,319,845) (9,718,770) (15,011,950)

15,646,351 (6,293,977) (6,163,410) -

44,722,494 (2,319,845) (7,850,490) (15,011,950)

2,422,266

20,313,271

3,188,964

19,540,209

472,017 (3,421,018) (2,656,533) -

148,486 (2,830,726) (2,802,143) 568,570

675,607 (3,421,018) (2,656,533) -

139,425 (2,830,726) (2,802,143) 568,570

(5,605,534)

(4,915,813)

(5,401,944)

(4,924,874)

44,460,119 (19,000,000) (8,199,842)

32,138,620 15,900,000 (30,899,818) (14,492,123)

35,000,000 (14,000,000) (8,199,842)

32,138,620 14,000,000 (23,965,800) (14,492,123)

NET CASH GENERATED FROM FINANCING ACTIVITIES

17,260,277

2,646,679

12,800,158

7,680,697

NET INCREASE IN CASH AND CASH EQUIVALENTS

14,077,009

18,044,138

10,587,178

22,296,032

(Increase)/Decrease in inventories (Increase)/Decrease in trade and other receivables Increase/(decrease) in trade and other payables

CASH GENERATED FROM OPERATIONS Tax paid Interest paid Dividend paid NET CASH GENERATED FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Interest received Purchase of property, plant and equipment Purchase of intangible assets Proceeds from sale of property, plant and equipment

25 6

NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Leases received Loans received Repayment of loans Repayment of finance leases

CASH AND CASH EQUIVALENTS AT 1 JANUARY

24

(8,108,224)

(26,152,362)

350,030

CASH AND CASH EQUIVALENTS AT 31 DECEMBER

24

5,968,785

(8,108,224)

10,937,208

270,117

(21,946,002) 350,030

27 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 1.

GENERAL INFORMATION The Company is a public company incorporated in Mauritius with its registered office at 6, Sir William Newton Street, Port Louis and principal place of business at Trianon. It is listed on the Development and Enterprise Market (DEM) of the Stock Exchange of Mauritius. Its main activities are the manufacture and sale of margarine and its related products while the subsidiary is a private company which trades on consumer goods.

2.

APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS In the current year, the group and the Company have applied all of the new and revised standard and interpretations issued by the International Accounting Standards Board (the "IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") of the IASB that are relevant to its operations and effective for accounting periods beginning on 1 January 2011. New and revised IFRS applied with no material effect on the financial statements The following relevant new and revised Standards and Interpretations have been adopted in these financial statements. Their application has not had any material impact on the amounts reported for the current and prior years but may impact the accounting for future transactions or arrangements. IAS 1 IAS 24 IAS 27 IAS 32 IAS 34 IFRS 7 IFRIC 14

Presentation of Financial Statements - Amendments resulting from May 2010 Annual Improvements to IFRSs. Related Party Disclosures - Revised definition of related parties. Consolidated and Separate Financial Statements - Amendments resulting from May 2010 Annual Improvements to IFRSs

Financial Instruments: Presentation - amendments relating to classification of rights issues Interim Financial Reporting - Amendments resulting from May 2010 Annual Improvements to IFRSs. Financial Instruments: Disclosures - Amendments resulting from May 2010 Annual Improvements to IFRSs. IAS 19 - The limit of a defined benefit asset, minimum funding requirements and their interaction November 2009 amendments with respect to voluntary prepaid contributions

New and revised IFRS in issue but not yet applied At the date of authorisation of these financial statements, the following relevant standards and Interpretations were in issue but effective on annual periods beginning on or after the respective dates as indicated. IAS 1

Presentation of Financial Statements - Amendments to revise the way other comprehensive income is presented (effective 1 July 2012)

IAS 12

Income Taxes - Limited scope amendment (recovery of underlying assets) (effective 1 January 2012)

IAS 19

Employee Benefits-Amended standard resulting from the Post Employment Benefits and Termination Benefits Projects (effective 1 January 2013).

IAS 27

Consolidated and Separate Financial Statements - Reissued as IAS 27 Separate Financial Statements (effective 1 January 2013)

IAS 32

Financial Instruments-presentation and amendments to application guidance on the offsetting of financial assets and financial liabilities (effective 1 January 2014) Financial Instruments: Disclosures - Amendments enhancing disclosures about transfers of financial assets (effective 1 July 2011) Financial Instruments: Disclosures - Amendments about offsetting financial assets and financial liabilities (effective 1 January 2013) Financial Instruments: Disclosures - Amendments requiring the disclosures about the initial application of IFRS 9 (effective 1 January 2015)

IFRS 7 IFRS 7 IFRS 7 IFRS 9

Financial Instruments - Classification and Measurement (effective 1 January 2015)

IFRS 9

Financial Instruments - accounting for financial liabilities and de-recognition (effective 1 January 2015) Consolidated Financial Statements (effective 1 January 2013) Disclosure of interest in other entities (effective 1 January 2013) Fair Value Measurement (effective 1 January 2013)

IFRS 10 IFRS 12 IFRS 13

The directors anticipate that these amendments will be adopted in the financial statements of the Group and the Company at the above effective dates in future periods. The directors have not yet had an opportunity to consider the potential impact of the adoption of these amendments.

28 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 3.

ACCOUNTING POLICIES The principal accounting policies adopted by the group and the Company are as follows:(a)

Basis of preparation The financial statements are prepared under the historical cost convention as modified by the revaluation of certain property, plant and equipment and financial instruments and in accordance with International Financial Reporting Standards (IFRS).

(b)

Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. (c)

Investment in subsidiary In the Company's financial statements, investments in subsidiaries are stated at cost, unless in the opinion of the directors, there has been a permanent diminution in value, in which event they are written down to the net asset value.

(d)

Revenue recognition Turnover Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business net of Value Added Tax, discounts, allowances and returns. Sale of goods are recognised when goods are delivered and title has passed. Other income

(e)

Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable. Management fee is recognised on an accrual basis.

Property, plant and equipment - depreciation Freehold land and buildings are stated at their revalued amounts being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed such that the carrying amount does not differ materially from that which would be determined using fair values at the reporting date. Revaluation of land and buildings is being done every three years by an independent valuer.

29 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 3.

ACCOUNTING POLICIES (CONT'D) (e)

Property, plant and equipment - depreciation (Cont'd) Any revaluation increase arising on the revaluation of such land and buildings is credited in equity to the properties revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in statement of comprehensive income, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in the carrying amount arising on the revaluation of such land and buildings is charged to statement of comprehensive income to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset. Depreciation on revalued buildings is charged to profit or loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. Plant and machinery are stated at their revalued amounts being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluation adjustments are recognised on the same basis as for land and buildings. Plant and equipment are stated at cost or valuation less accumulated depreciation and any accumulated impairment losses. Depreciation is not provided for on freehold land. On other items of fixed assets, it is calculated to write off the cost or revalued amount of assets over the expected useful lives of such assets. The annual depreciation rates used are as follows: Plant and machinery Factory building Motor vehicles Computer equipment Office furniture and equipment

-

6.5% - 12% p.a. straight line 2% p.a. straight line 10% - 14.28% p.a. straight line 20% - 33⅓% p.a. straight line 12.5% - 50% p.a. straight line

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in statement of comprehensive income. (f)

Government grants Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in profit or loss in the period in which they become receivable. The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates.

30 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 3.

ACCOUNTING POLICIES (CONT'D) (g)

Intangible assets Software costs Expenditure incurred on the development of new computer software programmes is recognised as asset and is amortised at 25% p.a on a straight line basis over their estimated useful lives. Cost associated with maintaining computer software programmes are recognised as an expense as incurred.

(h)

Foreign currency balances Transactions is foreign currencies are converted at the exchange rate at the date of the transactions. Monetary assets and liabilities in foreign currencies outstanding at year end are translated to Mauritian Rupees at the rates of exchange ruling at end of the reporting period, or at the amounts settled, where known. Exchange differences arising on transaction of monetary assets and liabilities are dealt with in the statement of comprehensive income.

(i)

Inventories Inventories are valued at the lower of cost and net realisable value. Cost is determined on Average Cost (AVCO) method. Cost is based on the invoiced value of materials plus in the case of finished goods, a proportion of labour and factory overheads, based on a normal level of production. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

(j)

Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis.

31 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 3.

ACCOUNTING POLICIES (CONT'D) (k)

Cash and cash equivalents Cash comprises cash at bank and in hand and demand deposits net of bank overdrafts. Cash equivalents are shortterm highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

(l)

Leased assets Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the group’s general policy on borrowing costs.

(m)

Retirement benefits (i) Defined benefit obligation The present value of funded obligation is recognised in the statement of financial position as a non-current liability after adjusting for the fair value of plan assets, any unrecognised actuarial gains and losses and any unrecognised past service cost. A firm of actuaries carries out the valuation of the funded obligation triennially. The current service cost and any recognised past service cost are included as an expense together with the associated interest cost, net of expected return on plan assets. A portion of the actuarial gains and losses is recognised as income or expense if the net cumulative unrecognised actuarial gains and losses at the end of the previous accounting period exceeded at that date: - 10% of the present value of defined benefit obligation at that date; and - 10% of the fair values of plan assets at that date. (ii) Other retirement benefits The present value of other retirement benefits as provided under the Employment Rights Act 2008 is recognised in the statement of financial position as a non-current liability. The Company is a party to a contractual arrangement with related companies with respect to an unfunded pension plan. When there is a contractual arrangement or stated policy for charging the net benefit costs for the plan as a whole measured in accordance with IAS 19 to related companies, each related company recognised in its individual financial statements, the net defined benefit so charged. The present value of the unfunded obligation is recognised in the statement of financial position as a noncurrent liability based on the the valuation carried out by a firm of actuaries annually. If there is a contractual agreement or stated policy for charging the net defined benefit cost for the plan as a whole measured in accordance with IAS 19 to related companies, each related company recognises in its individual financial statements, the net defined benefit cost so charged. (iii) State plan Contributions to the National Pension Scheme are expensed to the statement of comprehensive income in the period in which they fall due.

32 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 3.

ACCOUNTING POLICIES (CONT'D) (n)

Financial instruments Financial assets and liabilities are recognised on the statement of financial position when the Company has become party to the contractual provisions of the financial instruments. Financial instruments are initially measured at cost, which includes transaction costs. Subsequent to initial recognition these instruments are measured as set out below:(i)

Accounts receivable Accounts receivable originated by the Company are stated at cost less provision for doubtful debts. An estimate of doubtful debts is made based on a review of all outstanding amounts at the reporting date. Debts are written off during the period in which they are identified.

(ii)

Loans receivable from related companies Loans receivable from related companies are stated at their principal value.

(iii)

Cash and cash equivalents Cash and cash equivalents are measured at fair value, based on the relevant exchange rates at the reporting date.

(iv)

Accounts payable Accounts payable are stated at amortised cost.

(v)

Borrowings Interest bearing loans and bank overdrafts are initially recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of the instalment to the extent that they are not settled in the period in which they arise. Borrowings are subsequently measured at amortised cost.

(o)

Related parties For the purposes of these financial statements, parties are considered to be related to the group if they have the ability, directly or indirectly, to control the group or exercise significant influence over the group in making financial and operating decisions, or vice versa, or if they and the group are subject to common control. Related parties may be individuals or other entities.

(p)

Impairment At each reporting date, the Company reviews the carrying amounts of its 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. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is higher of an asset's net selling price and value in use, that is the present value of estimated future cash flows expected to arise from continuing to use the asset and from its disposal at the end of its useful life. For the purpose of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows. An impairment loss is recognised as an expense in the statement of comprehensive income immediately, unless the asset is carried at revalued amount in which case the impairment loss is recognised against the fair value reserve for the asset to the extent that the impairment loss does not exceed the amount held in the fair value reserve for that same asset. Any excess is recognised immediately in the statement of comprehensive income.

33 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 3.

ACCOUNTING POLICIES (CONT'D) (p)

Provision Provisions are recognised when the group and the company have a present obligation as a result of a past event, and it is probable that the group and the company will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the reporting date. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

(q)

Goodwill Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the fair value of the group's share of the Net identifiable assets of the acquired subsidiary/Associate at the date of acquisition. Goodwill on acquisition of subsidies is shown in a separate line in the statement of financial position. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairement loss. Gain and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allotted to CGU for the purpose of impairment testing. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the limit. An impairment less recognised for goodwill is not reversed in a subsequent period.

4.

ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The preparation of financial statements in accordance with IFRS requires the directors and management to exercise judgement in the process of applying the accounting policies. It also requires the use of accounting estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Judgements and estimates are continuously evaluated and are based on historical experience and other factors, including expectations and assumptions concerning future events that are believed to be reasonable under the circumstances. The actual results could, by definition therefore, often differ from the related accounting estimates.

Where applicable, the notes to the financial statements set out areas where management has applied a higher degree of judgement that have a significant effect on the amounts recognised in the financial statements, or estimations and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. (i)

Impairment of assets Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset or a cash generating unit is determined based on the higher of its fair value less cost to sell and value in use, calculated on the basis of management' s assumptions and estimates. Changing the key assumptions, including the discount rates or the growth rate assumptions in the cash flow projections, could materially affect the value-in-use calculations.

34 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 4.

ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONT'D) (ii)

Property valuation In arriving at the fair value of the properties, which is determined by on an open market value basis, the independent valuers have to make assumptions that are mainly based on market conditions existing at the reporting date. Should these assumptions and estimates change, or not be met, the valuation as adopted in the financial statements will be affected.

(iii)

Property, plant and equipment and depreciation Freehold land and buildings, and the building component of owner-occupied leasehold properties are valued every three years by independent valuers. In the intervening years the group reviews the carrying values and adjustment is made where there has been a material change. In arriving at the valuation of land and buildings, assumptions and economic estimates have to be made. Management determines the estimated useful lives and related depreciation charges for the group's property, plant and equipment. Management will revise the depreciation charge where useful lives are different to previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

(iv)

Deferred tax assets Recognition of deferred tax assets, which principally relate to tax losses, depends on the management's expectation of future taxable profit that will be available against which the tax losses can be utilized. The outcome of their actual utilization may be different.

(v)

Pension obligations The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the expected long-term rate of return on the relevant plan assets and the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations. The expected return on plan assets assumption is determined on a uniform basis, taking into consideration long-term historical returns, asset allocation and future estimates of long-term investment returns. The group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the group considers the interest rates of high-quality corporate bonds that have terms to maturity approximating the terms of the related pension liability. Other key assumptions for pension obligations are based in part on current market conditions.

(vi)

Allowances for bad debts Allowances for bad debts for the group and the company is determined using a combination of factors to ensure that the trade receivables are not overstated due to non-recoverability. The allowance for bad debts for all customers is based on a variety of factors, including the overall quality and ageing of the receivables, continuing credit evaluation of the customer`s financial conditions. Also, specific provisions for individual accounts are recorded when the group and the company become aware of the customer`s inability to meet its financial obligations such as in the case of deterioration in the customer`s operating results or financial position.

35 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 5.

PROPERTY, PLANT AND EQUIPMENT Office furniture and equipment Rs

Freehold land Rs

Factory building Rs

Plant and machinery Rs

Motor vehicles Rs

Computer equipment Rs

At 1 January 2010 Additions Disposals Revaluation adjustments

35,000,000 1,500,000

46,800,000 3,200,000

132,218,377 2,052,799 -

20,608,801 825,000 (2,224,000) -

10,653,306 413,951 (32,700) -

11,641,539 262,308 -

256,922,023 3,554,058 (2,256,700) 4,700,000

At 31 December 2010 Additions Write off Revaluation adjustments

36,500,000 -

50,000,000 -

134,271,176 1,995,816 (12,953,668) (41,000,470)

19,209,801 11,574,755 -

11,034,557 520,759 -

11,903,847 8,500 -

262,919,381 14,099,830 (12,953,668) (41,000,470)

At 31 December 2011

36,500,000

50,000,000

82,312,854

30,784,556

11,555,316

11,912,347

223,065,073

75,067,635 4,517,367 -

11,141,007 1,576,073 (2,224,000)

9,156,286 699,733 (16,350)

10,440,361 328,561 -

105,805,289 7,121,734 (2,240,350)

79,585,002 4,776,848 (12,953,668) (71,408,182)

10,493,080 1,398,418 -

9,839,669 473,517 -

10,768,922 280,218 -

110,686,673 7,943,079 (12,953,668) (71,408,182)

11,891,498

10,313,186

11,049,140

34,267,902

THE GROUP

Total Rs

COST OR VALUATION

DEPRECIATION At 1 January 2010 Charge for the year Disposals

-

-

At 31 December 2010 Charge for the year Write off Revaluation adjustments

-

1,014,078 -

At 31 December 2011

-

1,014,078

-

NET BOOK VALUE At 31 December 2011

36,500,000

48,985,922

82,312,854

18,893,058

1,242,130

863,207

188,797,171

At 31 December 2010

36,500,000

50,000,000

54,686,174

8,716,720

1,194,889

1,134,925

152,232,708

36 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 5.

PROPERTY, PLANT AND EQUIPMENT (CONT'D) THE COMPANY

Freehold land Rs

Factory building Rs

Plant and machinery Rs

Motor vehicles Rs

Computer equipment Rs

Office furniture and equipment Rs

Total Rs

COST OR VALUATION At 1 January 2010 Additions Disposals Revaluation adjustments

35,000,000 1,500,000

46,800,000 3,200,000

132,218,377 2,052,799 -

20,608,801 825,000 (2,224,000) -

10,653,306 413,951 (32,700) -

9,881,101 262,308 -

255,161,585 3,554,058 (2,256,700) 4,700,000

At 31 December 2010 Additions Write off Revaluation adjustments

36,500,000 -

50,000,000 -

134,271,176 1,995,816 (12,953,668) (41,000,470)

19,209,801 11,574,755

11,034,557 520,759

10,143,409 8,500

261,158,943 14,099,830 (12,953,668) (41,000,470)

At 31 December 2011

36,500,000

82,312,854

30,784,556

75,067,635 4,517,367 -

11,141,007 1,576,073 (2,224,000)

79,585,002 4,776,848 (12,953,668) (71,408,182)

-

50,000,000

-

11,555,316

10,151,909

221,304,635

9,156,286 699,733 (16,350)

8,745,768 262,716 -

104,110,696 7,055,889 (2,240,350)

10,493,080 1,398,418

9,839,669 473,517

9,008,484 280,218

108,926,235 7,943,079 (12,953,668) (71,408,182)

11,891,498

10,313,186

9,288,702

32,507,464

DEPRECIATION At 1 January 2010 Charge for the year Disposals

-

-

At 31 December 2010 Charge for the year Write off Revaluation adjustments

-

1,014,078

At 31 December 2011

-

1,014,078

-

NET BOOK VALUE At 31 December 2011

36,500,000

48,985,922

82,312,854

18,893,058

1,242,130

863,207

188,797,171

At 31 December 2010

36,500,000

50,000,000

54,686,174

8,716,720

1,194,889

1,134,925

152,232,708

37 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 5.

PROPERTY, PLANT AND EQUIPMENT (CONT'D) (a)

Property, plant and equipment include the following assets held under finance lease: THE GROUP AND THE COMPANY 2011 Cost Rs Plant and machinery Motor vehicles

2010 Net book value Rs

Cost Rs

Net book value Rs

52,030,919 15,899,755

44,299,592 14,273,162

52,937,853 4,325,000

48,605,728 3,183,036

67,930,674

58,572,754

57,262,853

51,788,764

The Group's and the Company's obligations under finance leases are secured by the lessors title to the leased assets. (b)

The Group and the Company have pledged all their property, plant and equipment having a carrying amount of Rs 167,798,775 (2010: Rs141,186,174) to secure banking facilities granted to them. The Group is not allowed to pledge these assets as security for other borrowings or to sell them to another entity.

(c)

The Company's Plant & Machinery were revalued by Alan Tinkler, Ramlackhan & Co., Chartered Valuation Surveyors in accordance with the RICS Red Book and the International Valuation Standards. The Plant & Machinery have been valued using the cost approach which takes into consideration the current prices of the different equipment as new and reduced to take into account physical, functional and economic obsolecence factors to arrive at their depreciated replacement cost. The revaluation surplus was credited to revaluation reserves.

Date

Basis of valuation

31 December 2011

Depreciated Replacement Cost

Assets revalued Plant and Machinery

Revalued amount Rs 82,312,854

If property, plant and equipment were stated at historical cost basis, their carrying amounts at 31 December would be as follows: 2011 THE GROUP AND THE COMPANY

Cost Accumulated depreciation Net book value

Plant and Machinery Rs

Freehold land Rs

Buildings Rs

Total Rs

119,557,296 73,388,524

83,491 -

26,021,075 8,472,029

145,661,862 81,860,553

46,168,772

83,491

17,549,046

63,801,309

2010 THE GROUP AND THE COMPANY

Cost Accumulated depreciation Net book value

Plant and Machinery Rs 6,871,820 6,871,820 -

Freehold land Rs

Buildings Rs

Total Rs

83,491 -

26,021,075 7,897,117

32,976,386 14,768,937

83,491

18,123,958

18,207,449

38 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 6.

INTANGIBLE ASSETS THE GROUP AND THE COMPANY 2011 Rs

Software costs

2010 Rs

COST At 1 January Additions At 31 December

Rs

2,802,143 2,656,533

2,802,143

5,458,676

2,802,143

AMORTISATION At 1 January Charge for the year At 31 December

439,175

-

Rs

439,175

-

Rs

5,019,501

CARRYING AMOUNT At 31 December

2,802,143

The directors consider that the carrying amount of the intangible assets approximate its fair value.

7.

GOODWILL 2011 and 2010 Rs COST Amount recognised on acquisition

651,218

IMPAIRMENT Impairment loss recognised in the year

-

CARRYING AMOUNT At 31 December

651,218

The goodwill arose from the full acquisition of the minority shares in Central Distributors Co. Ltd which is a wholly owned subsidiary. Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that busines combinations. Before recognition of impairment losses, the carrying amount of goodwill has been allocated wholly to the trading of consumer goods.

The group assesses the recoverable amount of goodwill annually or more frequently if there are indications of any impairment. The directors are of the opinion that no impairment has occured during the year. The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGU. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

39 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 8.

INVESTMENT IN SUBSIDIARY THE COMPANY 2011 and 2010 Rs

At cost At 1 January and 31 December

4,043,600

The company holds 100% (2010: 100%) of the issued share capital of Central Distributors Co Ltd, a company incorporated in Mauritius, which trades in consumer goods. The directors have valued the unquoted investment at book value which in their opinion reflects fairly the value of the investments.

9.

RETIREMENT BENEFIT ASSET (a) Retirement benefit asset Pension plan The pension plan is a final salary defined contribution plan for employees and is wholly funded. The assets of the plan are held and administered independently by The Mauritius Business and Management Limited. The plan provides for a pension at retirement and a benefit in death or disablement in service before retirement.

THE GROUP 2011

2010

THE COMPANY 2011

2010

Amounts recognised in the statement of financial positions: Present value of funded obligations

46,388,000

42,565,000

44,780,000

41,392,000

Fair value of plan assets

(80,871,000)

(82,002,000)

(74,181,000)

(75,584,000)

Surplus on funded obligations

(34,483,000)

(39,437,000)

(29,401,000)

(34,192,000)

Present value of unfunded obligations Unrecognised actuarial gains/(losses)

-

-

18,741,000

26,331,248

15,877,000

22,935,000

(15,742,000)

(13,105,752)

(13,524,000)

(11,257,000)

2,419,000

1,599,000

2,103,000

1,454,000

Interest on obligation Expected return on plan assets Net actuarial losses/(gains) recognised in period

4,155,000 (8,101,000) (1,067,000)

3,790,000 (7,713,000) (1,151,000)

3,925,000 (7,347,000) (905,000)

3,711,000 (7,093,000) (947,000)

Total, included in "employee benefits expense"

(2,594,000)

(3,475,000)

(2,224,000)

(2,875,000)

Net asset in statement of financial position Amounts recognised in statement of comprehensive income: Current service cost Contributions by employees

40 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 9.

RETIREMENT BENEFIT ASSET (CONT'D) (a) Retirement benefit asset (cont'd) THE GROUP 2011 2010 Movements in asset recognised in statement of financial position: Net asset at start of year Net expense recognised in the statement of comprehensive income Contributions and benefits paid

THE COMPANY 2011 2010

(13,105,752)

(9,629,689)

(11,257,752)

(8,382,752)

(2,594,000) (43,000)

(3,476,063) -

(2,224,000) (43,000)

(2,875,000) -

(15,742,752)

(13,105,752)

(13,524,752)

(11,257,752)

3,297,000

13,093,000

2,933,000

12,255,000

42,565,000 4,155,000

37,249,000 3,790,000

41,392,000 3,925,000

36,435,000 3,711,000

2,419,000 (4,471,000)

2,103,000 (4,379,000)

1,720,000

1,599,000 (2,363,000) 2,290,000

1,739,000

1,454,000 (2,245,000) 2,037,000

Present value of obligation at end of year

46,388,000

42,565,000

44,780,000

41,392,000

Changes in the Fair Value of the Plan Assets Fair value of plan assets at start of year Expected return on plan assets Contributions to plan assets Benefits paid out of plant assets Actuarial gain/(loss) on plan assets (balancing figure)

82,002,000 8,101,000 43,000 (4,471,000) (4,804,000)

71,272,000 7,713,000 (2,363,000) 5,380,000

75,584,000 7,347,000 43,000 (4,379,000) (4,414,000)

65,574,000 7,093,000 (2,245,000) 5,162,000

Fair value of plan assets at end of year

80,871,000

82,002,000

74,181,000

75,584,000

Net asset at end of year Actual return on plan assets Changes in the Present Value of the Obligation Present value of obligation at start of year Interest cost Current service cost Past service cost Benefits paid Curtailment/settlement (gain)/loss on obligation Actuarial (gain)/loss on obligation (balancing figure)

Major Asset Categories as Percentage of Plan Assets Local - Equities - Property - Debt maturity >=12 months - Cash & Debt maturity < 12 months Overseas (including direct holdings and related mutual funds) - Equities - Property - Debt maturity >=12 months - Cash & Debt maturity < 12 months Total Principal actuarial assumptions at end of year Discount rate Expected rate of return on plan assets Future salary increases Future pensions increases Actuarial table for employee mortality

54% 28% 4% 1%

58% 23% 4% 2%

54% 28% 4% 1%

58% 23% 4% 2%

4% 0% 0% 9%

4% 0% 0% 9%

4% 0% 0% 9%

4% 0% 0% 9%

100%

100%

100%

100%

10% 10% 8% 3%

10% 10% 8% 3% A1967/70(2)

10% 10% 8% 3%

10% 10% 8% 3% A1967/70(2)

41 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 9.

RETIREMENT BENEFIT ASSET (CONT'D) (a) Retirement benefit asset (cont'd) THE GROUP 2011 2010 Expected rate of return on plan assets at end of year Equities - Overseas Equities - Local Fixed interest securities - Overseas Fixed interest securities - Local Property Loan & Fixed deposits Cash & other

THE COMPANY 2011 2010

11.0% 11.0% 10.0% 10.0% 10.5% 10.0% 5.5%

11.0% 11.0% 10.0% 10.0% 10.5% 10.0% 5.5%

11.0% 11.0% 10.0% 10.0% 10.5% 10.0% 5.5%

11.0% 11.0% 10.0% 10.0% 10.5% 10.0% 5.5%

0.0% 0.0% 0.0%

0.0% 0.0% 0.0%

0.0% 0.0% 0.0%

0.0% 0.0% 0.0%

Additional disclosure on assets issued or used by reporting entity Percentage of assets at end of year Assets held in the entity's own financial Property occupied by the entity Other assets used by the entity History of obligations, assets and experience adjustments: 2011

2010

2009

2008

2007

THE GROUP Present value of defined benefit obligations Fair value of plan assets

80,871,000 (46,388,000)

82,002,000 (42,565,000)

71,272,216 (37,249,151)

62,015,044 (40,758,621)

65,615,868 (27,434,586)

Surplus

34,483,000

39,437,000

34,023,065

21,256,423

38,181,282

Experience adjustments on: Plan liabilities (defined benefit obligations) Plan assets

(1,720,000) (4,804,000)

1,883,000 5,380,000

1,908,422 3,897,161

(7,542,947) (9,064,583)

(3,246,816) 24,594,962

74,181,000 (44,780,000)

75,584,000 (41,392,000)

65,574,728 (36,434,557)

57,108,167 (39,175,029)

60,553,679 (26,602,974)

Surplus

29,401,000

34,192,000

29,140,171

17,933,138

33,950,705

Experience adjustments on: Plan liabilities (defined benefit obligations) Plan assets

(1,739,000) (4,414,000)

1,863,000 5,162,000

1,304,000 3,587,000

(7,167,382) (8,307,028)

(4,327,643) 22,638,106

THE COMPANY Present value of defined benefit obligations Fair value of plan assets

Year Expected employer contributions

46,000

42

MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 9.

RETIREMENT BENEFIT ASSET (CONT'D) (b) State pension plan THE GROUP 2011 2010 Rs Rs National Pension Scheme contribution expenses.

891,747

544,588

THE COMPANY 2011 2010 Rs Rs 671,495

478,622

10. INVENTORIES, AT COST THE GROUP 2011 2010 Rs Rs Raw materials Finished goods Goods in transit Others

THE COMPANY 2011 2010 Rs Rs

39,237,699 29,814,817 16,274,274 3,213,479

18,054,308 23,584,219 13,088,406 2,853,223

39,237,699 9,363,583 12,968,907 3,213,479

18,054,308 6,314,749 11,556,483 2,853,224

88,540,269

57,580,156

64,783,668

38,778,764

The inventories have been pledged for banking facilities.

11. TRADE AND OTHER RECEIVABLES THE GROUP 2011 2010 Rs Rs

THE COMPANY 2011 2010 Rs Rs

Trade receivables Allowance for doubtful debts

53,445,896 (1,065,430)

46,376,296 (1,303,682)

39,583,477 (700,145)

33,004,794 (515,791)

Other receivables and prepayments Amount due by subsidiary Amount due by related companies

52,380,466 17,921,964 5,218,685

45,072,614 10,759,667 5,001,368

38,883,332 12,386,636 7,082,042 5,218,685

32,489,003 8,605,954 6,421,949 5,000,000

75,521,115

60,833,649

63,570,695

52,516,906

43 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 11.

TRADE AND OTHER RECEIVABLES (CONT'D) The directors consider that the carrying amount of trade and other receivables approximates their fair value. The average credit period on sales of goods and services is 69 days (2010: 65 days) for the group and 72 days (2010: 73 days) for the Company. The group and the Company have recognised allowance for doubtful debts against trade receivables above 180 days by reference to past default experience. Before accepting any new customer, the group and the Company assess the potential customer’s credit quality and defines credit limits by customer and these are reviewed on a regular basis. Included in the group's and the Company's trade receivable balance are debtors with a carrying amount of Rs 6,991,029 (2010: Rs 5,638,279 ) for the group and Rs 5,046,114 (2010: Rs 2,777,660) for the Company, which are past due at the reporting date for which the group and the Company have not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The average age of these receivables is 75 days. Ageing of past due but not impaired THE GROUP 2011 2010 Rs Rs 60-90 days 90 days - 180 days

THE COMPANY 2011 2010 Rs Rs

4,548,309 2,442,720

2,943,879 2,694,400

3,163,988 1,882,126

1,110,950 1,666,710

6,991,029

5,638,279

5,046,114

2,777,660

Allowance for doubtful debts THE GROUP 2011 2010 Rs Rs

THE COMPANY 2011 2010 Rs Rs

At 1 January Impairment losses recognised on receivables Impairment losses written off as uncollectible

1,303,682 741,519 (979,771)

1,264,528 39,154 -

515,791 535,891 (351,537)

457,878 57,913 -

At 31 December

1,065,430

1,303,682

700,145

515,791

In determining the recoverability of a trade receivable, the group and the Company consider any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

12.

STATED CAPITAL THE GROUP AND THE COMPANY 2011 2010 Rs Rs Issued and fully paid 300,239 Ordinary shares of Rs100 each

30,023,900

Each of the above share confer to its holder the following rights: (a) The right to vote on poll for every share held at a meeting of the Company on any resolution; (b) The right to an equal share in dividend authorised by the Board; (c) The right to an equal share in the distribution of the surplus assets of the Company, on winding up.

30,023,900

44 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 13.

REVALUATION RESERVES THE GROUP AND THE COMPANY Rs

14.

At 1 January 2010 Other comprehensive income

45,715,266 (1,167,333)

At 31 December 2010 Other comprehensive income

44,547,933 31,233,889

At 31 December 2011

75,781,822

LOANS THE GROUP 2011 2010 Rs Rs Unsecured loans Secured bank loans

THE COMPANY 2011 2010 Rs Rs

1,000,000 62,944,185

1,000,000 37,484,067

45,000,000

24,000,000

63,944,185

38,484,067

45,000,000

24,000,000

The bank loans are secured by floating charges on the property, plant and equipment and inventories of the group and the Company and bear interest at Prime Lending Rate PLR-0.25% and PLR+0.75% p.a. The current weighted average effective interest rate on the bank loans is 7.93% p.a. (2010: 7.5%).

15.

TAXATION Income tax is calculated at the rate of 15% (2010: 15%) for the group and the company on the profit for the year as adjusted for income tax purposes. (a)

Tax charge THE GROUP 2011 2010 Rs Rs

THE COMPANY 2011 2010 Rs Rs

Provision for the year Underprovision in previous year Corporate Social Responsibility Deferred tax movement

3,983,673 132,776 509,970 1,067,262

2,741,613 2,030,523

3,983,673 132,776 509,970 1,067,262

2,741,613 2,030,523

Tax charge

5,693,681

4,772,136

5,693,681

4,772,136

45 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 15.

TAXATION (CONT'D) (b)

Tax reconciliation THE GROUP 2011 2010 Rs Rs Profit before tax

(c)

THE COMPANY 2011 2010 Rs Rs

35,997,310

25,052,479

33,516,358

28,531,393

Tax at 15% Effect of: Expenses not deductible for tax purposes Depreciation on assets not eligible for capital allowances Under provision in tax liability in previous years Deferred tax not recognised Net tax effect of non-taxable and other items Corporate Social Responsibility Consolidation adjustment

5,399,596

3,757,872

5,027,454

4,279,709

896,293

872,593

896,293

872,593

4,409

4,409

4,409

4,409

Tax charge

5,693,681

132,776 (557,344) 185,201 509,970 (877,221)

521,837 (384,574) 4,772,136

132,776 509,970 (877,221) 5,693,681

(384,574) 4,772,136

Deferred tax Deferred tax is calculated on all temporary differences under the liability method at the rate of 15% (2010: 15%). THE GROUP AND THE COMPANY 2011 2010 Rs Rs At 1 January Charge to Tax expense Charge to Other Comprehensive Income

17,263,800 1,067,262 (826,177)

9,365,944 2,030,523 5,867,333

At 31 December

17,504,885

17,263,800

46 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 15.

TAXATION (CONT'D) (c)

Deferred tax (Cont'd) Deferred tax liabilities/(assets) arise from the following: THE GROUP AND THE COMPANY At 1 January 2010 Rs

Charge to profit or loss Rs

Charge to other comprehensive income Rs

At 31 December 2010 Rs

Charge to profit or loss Rs

Charge to other comprehensive income Rs

At 31 December 2011 Rs

Deferred tax liabilities 6,909,674 (621,360) 1,820,218

2,286,460 (687,188) -

Retirement benefit obligations

1,257,412

431,251

Net deferred tax liabilities

9,365,944

2,030,523

Accelerated capital allowances Retirement benefit assets Revaluation reserves

5,867,333

9,196,134 (1,308,548) 7,687,551

1,184,112 (456,900) -

1,688,663

340,050

17,263,800

1,067,262

(826,177)

10,380,246 (1,765,448) 6,861,374

Deferred tax assets -

5,867,333

-

(826,177)

2,028,713

17,504,884

47

MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 16.

RETIREMENT BENEFIT PLANS Unfunded pensions Quality Beverages Limited ('QBL') a related company operates an unfunded defined benefit plan for some of the directors which provides for a pension at retirement. The company is a party to a contractual arrangement with ('QBL') whereby it bears a proportion of the retirement benefit obligations in respect of common directors/officers. THE GROUP 2011 Rs Proportion of the unfunded post retirement obligations Charge to the statement of comprehensive income

2010 Rs

THE COMPANY 2011 Rs

2010 Rs

14,716,750

10,909,250

11,769,650

8,723,650

3,807,500

5,731,250

3,046,000

4,581,250

2011

2010

The retirement benefit obligations information for the QBL plan as a whole as required by IAS 19 are as follows: Amount recognised in the statement of financial position:

Present value of unfunded obligation Unrecognised actuarial (loss)/gain

104,868,200 3,214,000

112,197,200 (4,040,000)

108,082,200

108,157,200

2011

2010

Amount recognised in the statement of comprehensive income: Current service cost Interest cost

2,714,000 12,516,000

12,581,000 10,344,000

15,230,000

22,925,000

Movement in liability recognised in the statement of financial position: 2011

2010

At 1 January Total expense as above Contributions paid

108,157,200 9,138,000 (9,213,000)

96,967,200 13,755,000 (2,565,000)

At 31 December

108,082,200

108,157,200

2011

2010

Movement in the present value of the defined benefit obligations were as follows:

At 1 January Current service cost Interest cost Benefits paid Liability (gain)/loss

129,652,000 2,714,000 12,516,000 (9,213,000) (7,254,000)

104,693,000 12,581,000 10,344,000 (2,565,000) 4,599,000

128,415,000

129,652,000

2011

2010

Movement in the present value of the plan assets were as follows:At 1 January Employer contributions Benefits paid At 31 December

9,213,000 (9,213,000) -

2,565,000 (2,565,000) -

48

MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 16.

RETIREMENT BENEFIT PLANS (CONT'D) The history of experience adjustments is as follows:2011

2010

2009

2008

2007

Rs

Rs

Rs

Rs

Rs

Present value of defined benefit obligation Fair value of plan assets

(128,415,000) -

(129,652,000) -

(104,693,000) -

(89,901,000) -

(71,154,000) -

Deficit

(128,415,000)

(129,652,000)

(104,693,000)

(89,901,000)

(71,154,000)

Liability experience (loss)/gain

7,254,000

(2,660,000)

3,289,000

(79,000)

283,000

Expected employer contributions for the year 2012 - Rs9,766,000. The principal actuarial assumptions used for accounting purposes are:-

Discount rate Future salary increases Future pension increases Medical benefit inflation Passage benefit inflation Car benefit inflation Driver's allowance inflation

2011 %

2010 %

10 6 3 10 6 6 6

10 6 3 10 6 6 6

Retirement benefit obligations (unfunded pensions) have been based on the report dated 12 December 2011 submitted by AON Hewitt, actuaries and consultants. 17.

OBLIGATIONS UNDER FINANCE LEASES Leasing arrangements Finance leases relate to plant and machinery and motor vehicles with lease terms ranging from 5 to 7 years. The group and the company have options to purchase the assets for a nominal amount at the conclusion of the lease agreements. The group's and the company's obligation under finance leases are secured by the lessors' title to the leased assets. Fair value The fair value of the finance lease liabilities is approximately equal to their carrying amount. Finance lease liabilities THE GROUP AND THE COMPANY Present value of minimum Minimum lease payment lease payment 2011 2010 2011 2010 Rs Rs Rs Rs Amounts payable under finance leases: Within one year Between two to five years

14,186,380 38,030,781

11,669,266 39,341,777

10,747,012 33,437,331

8,170,520 33,534,853

Less: Future finance charges

52,217,161 8,032,817

51,011,043 9,305,670

44,184,343 -

41,705,373 -

Present value of minimum lease payments

44,184,343

41,705,373

44,184,343

41,705,373

49

MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 17.

OBLIGATION UNDER FINANCE LEASES (CONT'D) THE GROUP AND THE COMPANY 2011 2010 Rs Rs Included in the financial statements as: Current liability Non-current liability

18.

10,747,012 33,437,331

8,170,520 33,534,853

44,184,343

41,705,373

TRADE AND OTHER PAYABLES THE GROUP 2011 2010 Rs Rs Trade payables Other payables and accruals Amount due to subsidiary Amount due to related company

THE COMPANY 2011 2010 Rs Rs

33,099,710 10,159,065 25,820,114

25,399,228 11,116,278 24,739,510

29,956,228 8,163,701 183,128 21,959,681

22,908,139 11,116,272 22,998 23,137,603

69,078,889

61,255,016

60,262,738

57,185,012

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period on purchases is 3 months. The group and the company have financial risk management policies to ensure that all payables are paid within the credit timeframe. 19.

REVENUE Sales of margarine products Sales of consumer goods

20.

THE GROUP 2011 2010 Rs Rs 296,298,091 256,875,825 66,456,665 66,007,375

THE COMPANY 2011 2010 Rs Rs 296,298,091 256,875,825 -

362,754,756

296,298,091

322,883,200

OTHER INCOME THE GROUP 2011 2010 Rs Rs Sundry receipts Interest Grant Income Profit on disposal of property, plant and equipment

712,758 472,017 81,934 1,266,709

21.

256,875,825

1,622,696 148,486 552,220 2,323,402

THE COMPANY 2011 2010 Rs Rs 2,512,759 675,607 81,934 3,270,300

3,422,697 139,425 552,220 4,114,342

FINANCE COSTS THE GROUP 2011 2010 Rs Rs Interest payable on: - Bank loans - Bank overdrafts - Finance leases

THE COMPANY 2011 2010 Rs Rs

2,867,232 1,331,948 3,323,704

1,982,478 3,107,199 4,629,093

1,848,597 991,109 3,323,704

1,128,253 2,093,144 4,629,093

7,522,884

9,718,770

6,163,410

7,850,490

50 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 22.

PROFIT FOR THE YEAR Profit for the year has been arrived at after (crediting)/charging: THE GROUP 2010 Rs

2011 Rs Cost of inventories recognised as an expense Staff costs Depreciation and amortisation Gain on foreign exchange Impairment losses recognised on trade receivables

23.

239,363,350 36,608,151 8,382,254 (455,330)

215,502,197 35,754,900 7,121,734 (399,990)

741,519

39,154

THE COMPANY 2011 2010 Rs Rs 183,772,693 32,657,606 8,382,254 (455,330) 535,891

157,863,663 31,258,224 7,055,889 (399,990) 57,913

EARNINGS PER SHARE The profit and number of ordinary shares used in the calculation of earnings per share are as follows: 2011 Rs Profit for the year attributable to owners of the company used in calculation of earnings per share Number of ordinary shares in issue

24.

2010 Rs

30,303,629

20,280,343

300,239

300,239

CASH AND CASH EQUIVALENTS THE GROUP 2011 Rs Cash in hand and at bank Bank overdrafts

2010 Rs

THE COMPANY 2011 2010 Rs Rs

14,568,934 (8,600,149)

11,911,302 (20,019,526)

13,550,013 (2,612,805)

5,968,785

(8,108,224)

10,937,208

11,083,365 (10,733,335) 350,030

The bank overdrafts are secured by floating charges over the property, plant and equipment of the group and the company

25.

PURCHASE OF PROPERTY, PLANT AND EQUIPMENT THE GROUP 2011 Rs

2010 Rs

THE COMPANY 2011 2010 Rs Rs

Property, plant and equipment purchased

14,099,830

3,554,058

14,099,830

3,554,058

Financed as follows: Cash disbursed Finance leases

3,421,018 10,678,812

2,830,726 723,332

3,421,018 10,678,812

2,830,726 723,332

14,099,830

3,554,058

14,099,830

3,554,058

51 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011

26.

DIVIDEND By a Board resolution dated 20 December 2011, the directors proposed that a dividend of Rs60 (2010: Rs50) will be paid to the shareholders in respect of the current year. The proposed dividend amounting to Rs18,014,340 was paid on 16 January 2012 (2010: Rs15,011,950).

27.

RELATED PARTY TRANSACTIONS The group and the Company are making the following disclosures in respect of related party transactions and balances. THE COMPANY THE GROUP 2011 2010 2011 2010 Rs Rs Rs Rs (i) Sales of goods and services Sales of goods: - Subsidiary - Fellow subsidiaries - Companies having same management

137,560 2,161

493,204

137,560 2,161

57,577 172,068

139,721

493,204

139,721

229,645

Sales of services: - Subsidiary

-

-

2,573,998

2,950,000

-

-

2,573,998

2,950,000

425,000

-

218,205 425,000

-

425,000

-

643,205

-

(ii) Interest received - Subsidiary - Fellow subsidiaries

(iii) Purchase of goods and services Purchase of goods: - Subsidiary - Fellow subsidiaries - Companies having same management

23,028,712 1,356,896

220,952 24,744,890

353,241 10,548,972 1,316,896

319,768 220,952 14,604,104

24,385,608

24,965,842

12,219,108

15,144,823

52 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 27.

RELATED PARTY TRANSACTIONS (CONT'D) THE GROUP 2011 2010 Rs Rs (iii)

THE COMPANY 2011 2010 Rs Rs

Outstanding balances Receivable from: - Subsidiary - Fellow subsidiaries - Companies having same management

Loans from: - Subsidiary - Fellow subsidiaries

Payables to: - Subsidiary - Fellow subsidiaries - Companies having same management

218,083 602

1,368 -

4,082,042 218,083 602

6,421,949 -

218,685

1,368

4,300,727

6,421,949

5,000,000

5,000,000

3,000,000 5,000,000

5,000,000

5,000,000

5,000,000

8,000,000

5,000,000

25,515,093 305,021

24,739,510

183,128 21,656,651 303,030

22,998 23,120,339 17,264

25,820,114

24,739,510

22,142,809

23,160,601

The amounts due by and to related companies are unsecured, interest free and repayable on demand. (iv)

Retirement benefit - group plan Retirement benefit cost Group companies having same management

(v)

14,716,750

10,909,250

11,769,650

8,723,650

Compensation paid to key management personnel There were no compensation paid to key management personnel for the year under review (2010: Nil).

28.

CONTINGENT LIABILITIES 2011 Rs Bank guarantees and performance bonds to third parties

Rs

20,777,467

2010 Rs 20,638,291

The directors consider that no liabilities will arise as the probability for default in respect of the guarantees is remote.

29.

FINANCIAL INSTRUMENTS In its ordinary operations, the group and the company are exposed to various risks such as capital risk, foreign currency risks, interest rate risks, credit risks and liquidity risks. The group and the company have devised on a central basis a set of specific policies for managing these exposures.

53 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 29.

FINANCIAL INSTRUMENTS (CONT'D) Capital risk management The group and the Company manage their capital to ensure that entities in the group and the Company will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The group's and the company's overall strategy remains unchanged from 2010. The capital structure of the group and the Company consists of debt, which includes the borrowings disclosed in notes 14 and 24, cash and cash equivalents and equity attributable to owners of the company, comprising issued capital, reserves and retained earnings as disclosed in the statements of changes in equity. Gearing Ratio The gearing ratio at the year end was as follows: 2011 Rs

THE GROUP 2010 Rs

THE COMPANY 2011 2010 Rs Rs

Debt (i) Cash and cash equivalents

116,728,677 (14,568,934)

100,208,965 (11,911,302)

91,797,148 (13,550,013)

76,438,708 (11,083,365)

Net Debt

102,159,743

88,297,663

78,247,135

65,355,343

Equity (ii)

152,093,925

107,108,844

153,237,144

110,733,015

67%

82%

51%

59%

Net debt to equity ratio (i) (ii)

Debt is defined as long and short term borrowings and bank overdrafts. Equity includes all capital and reserves of the group and the company.

Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability and equity instruments are disclosed in note 3 to the financial statements. Categories of financial instruments 2011 Rs

THE GROUP 2010 Rs

THE COMPANY 2011 2010 Rs Rs

Financial assets Trade and other receivables Cash and bank balances

65,338,286 14,568,934

55,586,364 11,911,302

57,742,540 13,550,013

49,262,932 11,083,365

79,907,220

67,497,666

71,292,553

60,346,297

203,006,030

161,463,981

169,500,689

133,623,720

Financial liabilities At amortised cost: Foreign currency risk management The group and the Company are exposed to the risk that the exchange rate of the Mauritian rupee relative to the currencies listed below may change in a manner which has a material effect on the reported values of the group's and the Company’s assets and liabilities.

54 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 29.

FINANCIAL INSTRUMENTS (CONT'D) Currency profile The currency profile of the group's and the Company’s financial assets and financial liabilities are summarised as follows: THE GROUP THE COMPANY 2011 2010 2011 2010 Financial assets Rs Rs Rs Rs Mauritian Rupees United States Dollars Euro South African Rand and others

Financial liabilities Mauritian Rupees United States dollars Euro South African Rand and others

71,874,359 4,585,103 1,293,377 2,154,381

55,628,235 5,545,078 5,517,783 806,570

63,962,542 4,495,747 1,293,377 1,540,887

49,297,933 5,524,885 5,517,702 5,777

79,907,220

67,497,666

71,292,553

60,346,297

171,415,041 13,580,690 17,433,088 577,210

135,773,597 12,257,694 13,048,455 384,235

144,164,342 8,628,463 16,130,674 577,210

110,715,635 9,930,544 12,593,306 384,235

203,006,030

161,463,981

169,500,689

133,623,720

Foreign currency sensitivity analysis The group and the Company are mainly exposed to the USD and the EURO. The following table details the group's and the Company's sensitivity to a 10% increase and decrease in the Mauritian Rupee against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit or a decrease in loss where the Mauritian Rupee strengthens 10% against the relevant currency. For a 10% weakening of the Mauritian against the relevant currency, there would be an equal and opposite impact on the profit or loss, and the balances below would be negative.

Impact of a 10% appreciation of the Mauritian Rupee:THE GROUP USD impact 2011 2010 Profit or loss

899,559

671,262

EURO impact 2011 2010 1,613,971

753,067

THE COMPANY USD impact 2011 2010 Rs Rs Profit or loss

413,272

440,566

EURO impact 2011 2010 Rs Rs 1,483,730

707,560

The profit or loss is mainly attributable to the exposure outstanding on USD and EURO receivables and payables at year end in the Company. Forward foreign exchange contract It is the policy of the group and the Company to enter into forward foreign exchange contracts to cover specific foreign currency payments and receipts. Forward foreign currency contracts outstanding at 31 December 2011 are as follows:

55 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 29.

FINANCIAL INSTRUMENTS (CONT'D) Forward foreign exchange contract (Cont'd) THE GROUP AND THE COMPANY Outstanding contracts

Buy EURO Less than 3 months

Average exchange Rs 38.56

Foreign currency

670,000

Notional Value Rs 25,831,950

Fair Value Rs (401,350)

The Company has entered into contracts to purchase raw materials from suppliers in Germany. The Company has enterred into forward exchange contracts (for terms of exceeding 3 months) to hedge against the exchange rate risk arising from these purchases. Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company. The group and the company have adopted a policy of only dealing with creditworthy counterparties, as a means of mitigating the risk of financial loss from defaults. Credit exposure is controlled by counterparty limits that are approved and reviewed by key management on a regular basis. The group's and the Company’s credit risk are primarily attributable to trade receivables which are unsecured. The amounts presented in the statement of financial position are net of allowances for doubtful receivables, estimated by management based on prior experience and represents the group's and the company’s maximum exposure to credit risk. The group and the Company do not have significant concentration of risk on the trade receivables due to their large number of customers, spread across diverse industries and geographical areas. Interest rate risk The group and the Company are exposed to interest rate risk as entities in the group borrow funds at both fixed and floating interest rates. The group and the Company managed the risk by maintaining an appropriate mix between fixed and floating rate borrowings. Interest rate sensitivity analysis The sensitivity analysis below have been determined based on the exposure to interest rates for the non-derivative instruments at the reporting date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the reporting date was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. If interest rates had been 50 basis points higher/lower and all other variables were held constant, the group's and the company’s profit for the year ended 31 December 2011 would decrease/increase by Rs583,643 and Rs458,986 (2010: the loss would increase/decrease by Rs501,045 and Rs382,194) respectively. This is mainly attributable to the group's and the company’s exposure to interest rates on its variable rate borrowings. Fair values Except where stated elsewhere, the carrying amounts of the company’s financial assets and financial liabilities approximate their fair values due to the short-term nature of the balances involved.

56 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 29.

FINANCIAL INSTRUMENTS (CONT'D) Liquidity risk management The group and the Company manage liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Liquidity and interest risk table The following tables detail the remaining contractual maturity for non-derivative financial liabilities. The table have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which they can be required to pay. The table includes both interest and principal cash flows. THE GROUP

Weighted Average effective interest rate 2011

Non-Interest bearing Finance lease liability Variable interest rates instruments

9.83% 7.93%

Weighted Average effective interest rate 2010

Non-Interest bearing Finance lease liability Variable interest rates instruments

THE COMPANY

9.93% 8.13%

Weighted Average effective interest rate 2011

Non-Interest bearing Finance lease liability Variable interest rates instruments

9.83% 7.93%

Weighted Average effective interest rate 2010

Non-Interest bearing Finance lease liability Variable interest rates instruments

9.93% 8.13%

Less than 1 month Rs

1 - 3 months Rs

3 months to 1 year Rs

1 - 5 years Rs

Total Rs

87,093,229 1,189,142 28,774,905

3,566,015 41,778,889

9,431,223 -

38,030,781 -

87,093,229 52,217,161 70,553,793

117,057,275

45,344,904

9,431,223

38,030,781

209,864,183

Less than 1 month Rs

1 - 3 months Rs

3 months to 1 year Rs

1 - 5 years Rs

Total Rs

61,255,016 972,439 14,636,943

2,917,317 24,290,959

7,779,511 -

39,341,777 -

61,255,016 51,011,043 38,927,902

76,864,398

27,208,276

7,779,511

39,341,777

151,193,962

Less than 1 month Rs

1 - 3 months Rs

3 months to 1 year Rs

1 - 5 years Rs

Total Rs

78,277,078 1,189,142 12,673,221

3,566,015 35,691,250

9,431,223 -

38,030,781 -

78,277,078 52,217,161 48,364,471

92,139,441

39,257,265

9,431,223

38,030,781

178,858,710

Less than 1 month Rs

1 - 3 months Rs

3 months to 1 year Rs

1 - 5 years Rs

Total Rs

57,185,012 972,439 152,877

2,917,317 24,290,959

7,779,511 -

39,341,777 -

57,185,012 51,011,043 24,443,836

58,310,328

27,208,276

7,779,511

39,341,777

132,639,891

The Group has access to unused financing facilities at the reporting date. The Group expects to meet its other obligations from operating cash flows. The Group expects to maintain current debt to equity ratio. Other price risks The company enters into forward contracts to purchase raw materials to cover specific requirements within 50% to 60% of the exposure generated. In the current year, the company has designated the forward contracts as cash flow hedging. The company utlilises a rollover hedging strategy, using contract with terms of up to 12 months. Upon the maturity of a forward contract, the company enters into a new contract designated as a separate hedging relationship.

57 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2011 29.

FINANCIAL INSTRUMENTS (CONT'D) The following table details the forward foreign currency (FC) contracts outstanding as at reporting date: THE GROUP AND THE COMPANY

Outstanding contracts Cash flow hedges Less than 1 year

Contract 2011 Rs 69,220,103

Fair value 2011 Rs 4,691,523

Contract 2010 Rs 18,166,870

Fair value 2010 Rs 3,229,620

The company has entered into forward contracts (for terms not exceeding 12 months) to purchase raw materials from suppliers in Germany and Malaysia. As at 31 December 2011 there has been no ineffectiveness recognised in profit or loss arising from the hedges.

30.

SEGMENT INFORMATION IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. Products and services from which reportable segments derive their revenues. The information reported to the group's chief operating decision maker for the purposes of resource allocation and assessment of segment performance is focussed on the operating divisions which are manufacturing and trading. The principal products and services of each of these divisions are as follows: Manufacturing - the manufacturing and sale of margarine and related products Trading - trading of consumer goods Segment revenue and segment results Segment revenue 2011 2010 Rs Rs

Segment result 2011 2010 Rs Rs

Manufacturing Trading

296,298,091 66,809,905

256,875,825 66,384,720

39,679,769 4,058,631

36,381,883 (1,610,634)

Total of all segments Eliminations

363,107,997 (353,241)

323,260,545 (377,345)

43,738,399 (218,206)

34,771,249 -

362,754,756

322,883,200

43,520,194

34,771,249

Finance costs

(7,522,884)

(9,718,770)

Profit before tax Taxation

35,997,310 (5,693,681)

25,052,479 (4,772,136)

Profit for the year

30,303,629

20,280,343

Intersegment sales amounted to Rs 353,241 (2010: Rs377,345) for the year ended 31 December 2011 The accounting policies of the reportable segments are the same as the group's accounting policies described in note 3. Segment profit represents the profit earned by each segment without allocation of investment revenue, finance costs and income taxes. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

58 MARGARINE INDUSTRIES LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONT'D) FOR THE YEAR ENDED 31 DECEMBER 2010 30.

SEGMENT INFORMATION (CONT'D) Segment assets and liabilities Assets 2011 Rs

Liabilities 2010 Rs

2011 Rs

2010 Rs

Manufacturing Trading

353,289,400 46,209,112

272,715,238 36,239,020

181,843,876 41,012,843

142,347,370 34,285,203

Total segment assets and liabilities Eliminations Unallocated

399,498,512 (10,657,552) -

308,954,258 (9,837,330) -

222,856,719 (4,318,064) 18,208,381

176,632,573 (4,259,342) 19,634,853

Consolidated assets and liabilities

388,840,960

299,116,928

236,747,036

192,008,084

Other segment information Depreciation and amortisation 2011 2010 Rs Rs Manufacturing Trading

Additions to non-current assets 2011 2010 Rs Rs

8,382,253 -

7,055,889 65,845

16,756,363 -

6,356,201 -

8,382,253

7,121,734

16,756,363

6,356,201

Revenue from major products and services 2011 Rs Margarine Foodstuffs

2010 Rs

296,298,091 66,456,665

256,818,248 66,064,952

362,754,756

322,883,200

Information about major customers The group has no major customers. Geographical segments The group's operations are located in Mauritius only.

31.

CAPITAL COMMITMENTS Authorised but not contracted 2011 Rs

Commitments for the acquisition of property, plant and equipment

32.

26,400,000

2010 Rs

13,300,000

ULTIMATE HOLDING AND HOLDING COMPANY The Company regards Currimjee Industries Limited, a company incorporated in Mauritius, as the holding company and Fakhary Ltd, a company incorporated in Mauritius, as the ultimate holding company.

APPENDIX I MARGARINE INDUSTRIES LIMITED TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2011

SALES

2011 Rs

2010 Rs

296,298,091

256,875,825

6,314,749

7,804,990

LESS: COST OF SALES Stock at 1 January ADD: COST OF PRODUCTION Raw materials used Wages and commissions Pension fund contribution Fuel, electricity and water Repairs and maintenance Laboratory expenses Depreciation on building, plant and machinery Insurance and Other Stock at 31 December

186,821,527 6,532,807 (551,781) 4,821,500 1,456,381 636,184 5,790,926 177,386

156,373,421 4,729,925 (669,165) 5,155,162 1,187,592 286,057 4,517,367 464,733

9,363,583

6,314,749

202,636,096

173,535,333

93,661,996

83,340,492

3,270,300

4,114,342

33,954,419 10,708,231 12,589,876

33,743,824 9,321,483 8,007,644

(57,252,527)

(51,072,951)

OPERATING PROFIT

39,679,769

36,381,883

FINANCE COSTS

(6,163,410)

(7,850,490)

PROFIT FOR THE YEAR BEFORE TAXATION

33,516,358

28,531,393

TAXATION

(5,693,681)

(4,772,136)

PROFIT FOR THE YEAR

27,822,677

23,759,257

GROSS PROFIT Other income LESS: EXPENSES Administrative expenses (Appendix II) Selling and distribution expenses (Appendix III) Marketing expenses (Appendix III)

APPENDIX II MARGARINE INDUSTRIES LIMITED TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2011 2011 Rs 1.

2010 Rs

ADMINISTRATIVE EXPENSES Administrative expenses Salaries and allowances Retirement benefit costs Pension fund contribution Travelling expenses Telecommunications Legal charges and professional charges Postage and stationery Depreciation - computer equipment Amortisation - Software Provision for bad debts Bad debts written off General expenses

Staff welfare expenses

19,265,014 3,046,000 (1,059,219) 1,631,656 999,001 1,930,250 899,844 473,517 439,175 535,891 1,855,490

19,933,075 4,581,250 (1,607,557) 1,789,240 512,412 1,850,674 452,886 699,734 57,913 8,025 1,960,616

30,016,619

30,238,267

2,799,680

1,358,855

185,175 280,218

711,153 262,716

465,393

973,869

672,727

1,172,832

672,727

1,172,832

33,954,419

33,743,824

Establishment expenses Rent and rates Depreciation - furniture and fittings Motor vehicle expenses Depreciation - motor vehicles

2.

SELLING AND DISTRIBUTION EXPENSES Salaries and allowances Salaries, wages and allowances Pension fund contribution

6,080,786 (656,000)

4,888,974 (598,278)

5,424,786

4,290,696

725,691 4,557,754

403,241 4,627,546

5,283,445

5,030,787

10,708,231

9,321,483

12,589,876

8,007,644

Selling and distribution costs Depreciation - Motor vehicle Motor vehicle running expenses

3.

MARKETING EXPENSES Advertising

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