Annual Report 2012 - Americana Group

Kuwait Food Company (Americana) S.A.K.48 th Annual ReportEstablished by the Amiri DecreeDated December 29, 1963Authorized CapitalKuwaiti Dinars 40,200,207Paid Up CapitalKuwaiti Dinars 40,200,207Commercial Register No.4369Auditors:Mr. Bader Abdullah Al-WazzanAl Fahad, Al Wazzan – Deloitte & ToucheMr. Abdullatif Hoshan Al-MajidParker Randall (Allied Accountants)Head Office: State of Kuwait - Shuwaikh Industrial AreaTel: 24815900

H.H. THE AMIR OF STATE OF KUWAITSHEIKH SABAH AL-AHMED AL-JABER AL-SABAHH.H. THE CROWN PRINCESHEIKH NAWAF AL-AHMED AL-JABER AL-SABAHH.H. THE PRIME MINISTERSHEIKH JABER MUBARAK AL-HAMAD AL-SABAH

Board of DirectorsMr. Marzouk Nasser Al-KharafiChairman and Managing DirectorMr. Bader Mohamed Abdul Wahab Al-JouanVice ChairmanMr. Abdullah Mohamed Al-SaadMemberMr. Mohanad Mohamed Abdul Mohsin Al-KharafiMemberSheikh, Abdullah Salem Sabah Al-SabahMemberMr. Mohamed Abdul Aziz Al-SudairawiMemberMr. Faisal Nasser Al-KharafiMember

Report of the Board of directorsfor 2012Esteemed Shareholders,The Board of Directors is pleased to present the forty eighth annual report of the company, in which we willhighlight the main developments and accomplishments of the company in the markets where it has been areckoning force in its domain of activities for almost five decades. It will also include the financial statements forthe fiscal year ended on 31/12/2012 and mention the course of direction it would take and its plans for thenear future. Despite difficult circumstances and socio-economic challenges faced during 2012, the Kuwait FoodCompany (Americana) never lost its sight on the way to achieve its strategic objectives. The main challengeit faced was to constantly maintain its leading position and reputation as a pioneering company in the foodretailing and processing sector.In 2012, the company achieved a record-high in sales at KD 809.6 million (equivalent to US $ 2.9 billion)as compared to KD 720.8 million achieved last year with a growth rate of 12%. However, the company’s netprofit marginally declined by 4% to KD 45.9 million (equivalent to US $ 165 million) as compared to KD 48million achieved during last year. Meantime, it is worth noting that the company achieved an excellent net profitsgrowth of 23% over previous year, if one were to exclude the results of financial portfolioThe four pillars of Americana so to achieve the aspirations of shareholders at lower cost and in the best possiblemeans are; the stability and solidity of the company financial position, the diversified income generating groupsof assets, the accumulated expertise and competences for facing challenges and lastly the strategic planning inaccordance to the vision of the board of directors.In achieving the tangible accomplishments, Americana relied on its seven core elements of distinction namely;Pioneering, Universality, Diversity, Development, Efficiency, Team spirit and Social responsibilityAnnual Report 20127

Distinct Elements of Americana:The previously indicated seven distinct elements of Americana form an integrated system which the companywas able to build and develop within all its operational units.It was also able to create homogeneity and harmony among these core elements for achieving its goals andencouraging better performance from employees to fulfill the aspirations of the shareholders. In addition,Americana’s world class management cadres enabled the company to build the seven distinct elements andkeep the momentum to develop and improve them in the future, thus to achieve the strategic goals and remainin the top tier global corporations.The success of Americana elements was due to three main factors which accompanied the company’s journeysince the sixties:• Thoughtful vision and wise strategies of the Company’s Board of Directors.• Implementation of modern management systems and methods by the Executive Management.• Diversification in activities and widening the geographical spread in the market.The following is an exhibition of the distinct elements namely:Pioneering - Universality - Diversity - Development - Efficiency - Team spirit - Social responsibilityWimpy Al-Shamiyah 1971

First:PioneeringThe Kuwait Food Company (Americana) is a leading company in the Arab& MENA Region in its domain of operation, whether be it in the field ofrestaurants or food processing industry and trading of food products.Americana is the Pioneer in the field of International restaurants:• Americana was the first to introduce the international restaurant chainsinto the region by opening Wimpy in the State of Kuwait in 1970.By the end of 2012, the total number of restaurants of the companyreached 1366 in the region spread over the area from Morocco nearthe Atlantic to Kazakhstan in Central Asia.Inauguratingthe firstwimpyOpening thefirst plant ofmeat19701973• The company opened the first Casual Dining restaurants chains, T.G.I.Friday’s in UAE in 1996. Currently, it has proliferated to 67 restaurants,out of which, 10 restaurants were launched in 2012.• The company inaugurated the restaurants business in Kuwait City in1970. By the end 2012, its restaurants are wide spread in 98 citiesacross 13 countries in Asia and Africa.• Americana obtained the franchise rights of the Red Lobster Restaurantchain from the well known American company “Darden” for the firsttime outside the US market (except for Japan). In 2011, Americanaopened the first restaurant of Red Lobster in UAE.Annual Report 20129

Americana is the Pioneer in the food industries• The company opened the first plant in Kuwait for meat and hamburger products in the Arab region andMiddle East in 1973 as backward facility for its restaurants. By the end of 2012, the number of industrial,trading, and agricultural units of the company reached 25 operational units which include a number of bigcompanies in its field in the Arab region.• Americana is a leading company in the agricultural field which provides the production material inputsfor its plants, such as potatoes, olives, and vegetables through reclamation and cultivation of thousands ofacres with agricultural crops and seeds development. This distinguishes the uniqueness of our products andprovides a competitive edge in the export market.• The company has been a pioneer in earning international certifications through its companies and plantssuch as “ISO 9001”, “ISO 14001”, “EURO GAP”, “HACCP”, etc. This confirms the commitment of thecompany to the quality of products, standards of production and preservation of the environment andstrengthen the capacity of the company to compete vigorously in the export markets.• In the poultry field, Americana entered the markets through Cairo Poultry Company - the leader of this fieldin Egypt. It is considered as one of the first and the largest companies in this region, having been establishedin 1977.

Second:UniversalityThe Universality of Americana was not only a result of the alliances withinternational brands, but also because of many other factors such as;quality of products, effectiveness and efficiency of the human resources,long experience of the management, trust and support of shareholdersand above all the loyalty of customers. Hence, Americana attained suchglobal reputation through its name and through its well known franchisorsand associates around the world.• The disposition of the company co-founders to build associations withinternational brands was essentially an instrument to benefit from thelatest technologies and the technical advancement of these worldclasscompanies in order to serve our customers the best. Americanacontinued to work in accordance with this strategy since obtainingWimpy chain in 1970 to the latest chains Olive Garden and TheCounter Burger in 2012.• In its Journey to universality, the Company has embraced two strategies,first to focus on analyzing the facts available in the markets, whereit operates and, second foster “Out of the box” way of thinking inorder to serve its customers with the latest products and services aswell as to achieve the growth and development expectations from itsactivities. These strategies guided the company in its journey to attainthe current international level and eventually shift it to a new era ofgeographical presence and well diversified business portfolio.• This vision was an open window to the developed world in the field ofcompany’s activities. The company, with all endeavor and intent wasable to meet the international requirements and standards. As a result,Kuwait Food Company (Americana) has become one of the majorArab companies having large number of international brands notonly in the field of restaurants but also in the field of food processingindustries.Annual Report 201211

Third:DiversityAmericana has been keen, from the beginning, to achieve the qualitative balance required for its activities in orderto safeguard the diversity of sources of income and the steadiness of sales and profits growth, either for restaurantsbusiness or food processing industries. The company is also keen to achieve more expansion and geographicdiversity of its activities, whether by having an effective presence in a number of large cities in all the countrieswhere it operates or by introducing its products to new markets in order to minimize the effect of any economicfluctuation in the markets it operates in.• The restaurants sector of the company include global fast food chains such as Kentucky, Hardee’s, Pizza Hutand casual dining restaurants such as T.G.I Friday’s, Red Lobster, and Olive Garden.• Americana Group operates a portfolio of food processing industries such as Farm Frites, California Garden,Senyorita and Green Land, as well as agricultural companies and land reclamation companies namelyAmericana for Land Reclamation and cultivation Company and Karwin for Land Reclamation Company inaddition to trading activities through the commercial agencies sector in Kuwait and an integrated PoultryIndustry known as Cairo Poultry Group(CPG) comprising Poultry breeding grandparents, and parent hens,hatcheries and fattening, as well as selling parent hen and feed, broiler chicks, slaughtered chickens andprocessed chicken products.

• Diversity of income extended to include investing the available cashsurpluses in financial portfolio by buying blue-chip stocks of leadingoperating companies for the purpose of long term investments. Thedividends received from these excellent stocks represent an additionalcurrent and long-term stream of income for the company.• The geographical aspect of diversity required the expansion andproliferation company activities for benefiting from the economic recoveryin the countries in which we operate while avoiding the negative effectby not limiting the activities to a certain geographic scope. Therefore,the restaurants of the company are distributed around 98 cities in 13countries between Asia and Africa.• The company is always keen to enter new markets. Following the recentsuccess of the company’s restaurants in Kazakhstan, the company iscurrently moving into Erbil in Iraq. The Food Processing products ofthe company are distributed in Arab countries in addition to manyother countries in Europe, Asia and America. The company alwayslooks forward promising markets in new regions, thereby achieving amore balanced position and gaining a new motive for more growth inrevenues and profits.Number ofrestaurantschainsNumber ofindustrial& tradingactivities2225Fourth:DevelopmentSince the beginning of the company, Americana has embraced the strategyof Evolutionary Change in managing the change task at all stages, as itis the most appropriate to fit the nature and culture of the company, givenits accumulated experience and high capabilities. This change alwayscoincides with the changes in behavior and customers’ needs. It aims atmastering expertise and continuous improvement of capabilities and toolsof the company. It aims also at improving the performance in the existingmarkets and raises the level of performance in all its operational units.• The company was established in December 1963 under the nameAmericana Food Manufacturing and Distribution Company with limitedactivities. It began expanding in the second half of 1965 and by theend of 1966, the company had established itself as a food and meattrading company in Kuwait.Annual Report 201213

• The company sales, at the end of 1966, reached KD 257 thousand and the losses reached KD 38 thousand.The major activities of the company from its inception until early 1969 was mainly focused to the traditionalmid-size commercial business of importing and selling food materials, fresh and frozen meat.• The company entered a new field of activities by opening Wimpy Al Ahmadi Restaurant in 1970, followedshortly afterwards by opening its first Tikka Restaurant in 1971. Next came a phase of regional expansionwith Wimpy branches in the Emirates and Bahrain by the end of 1972. The visionary efforts of the Board ofDirectors resulted in achieving the first profits of the company, amounting to KD 4 thousand as evidenced byits balance sheet of 1971.• The company achieved a surge of activity by launching wider and more global phases through the KentuckyRestaurants. The first Kentucky restaurant was opened in Al Salmiya in 1973 in order to keep abreast with theglobal food trends and introduce a new variety of international restaurants to the Arab region.• The company started its industrial activity in 1973 by establishing the first meat plant in the Arab regionhaving sophisticated quality of production and packaging. Then the company entered a large scale industrialproduction phase through the establishment of factories such as Farm Frites, California Gardens, and Meatand Cake plants in the KSA.

• The second phase of the development started with the introduction ofcasual dining restaurants through T.G.I Friday’s chain in 1996, whichwas a quick response from the company to the natural progress in theneed of the restaurants clients.• Americana continued its successful journey until the year 2000 whenthe sales revenues reached half a billion USD. The total number ofrestaurants of the company reached 500 in 50 cities where it servedaround 53 million meals. Meantime, the total number of its industrial,commercial, and agricultural activities reached 12.• In 2004, with the management’s keenness to achieve optimization fromthe massive financial and human capabilities and its large size, thecompany ventured into acquisition. Consequently, it acquired Pizza Hutin Bahrain and the Greenland Group in Egypt and it completed otheracquisitions such as the Senyorita group, the Egyptian company forStarch and Glucose and Pizza Hut in Jordan during the subsequentyears.• The continuous development process of the activities resulted in companytotal sales exceeding USD 2 billion by the year 2008. The total numberof restaurants owned by the company reached 1000 in which morethan 140 million meals were served. Meantime, the total number ofindustrial, commercial and agricultural activities of the company reached22 activities.• The development process in the scope and size of the operations of thecompany contributed for increasing its sales and profits especially in thefield of casual dining. During the last five years, 38 restaurants wereopened with an average of 8 restaurants per year. The latest restaurantsopened were the Red Lobster, Olive Garden, and The Counter Burgerin Kuwait by the end of 2012. It is also expected to open the firstrestaurant of Longhorn Steakhouse in the KSA during 2013.Sales of2000Sales of20120.5Billion dollar2.9Billion dollarAnnual Report 201215

Fifth:EfficiencyEfficiency is the foremost element which is needed for the success of any accomplishment. The company, withGod’s help, has a high level of management and world class professional efficiencies making it capable ofachieving what it aspires.• The company’s strategy for increasing its efficiency is based on drawing flexible plans that allow it to respondto different circumstances and changes in the work environment. It equally depends on developing contingencyplans for dealing with emergency situations while empowering and providing more resources and facilitiesto branches and subsidiaries key managers in order to enable them to interact more readily with the differentchanges in the work environment or those imposed by the nature of the competition.• In facing economic and political change in the past years, the company was keen on taking the precautionsand measures which can limit as much as possible the effects of the changes on its capabilities and its presencein the markets it operates. These measures include studying investment opportunities, adopting a conservativeapproach and efficient risk management by diversifying investments and funding sources. With time, it hasproven that these measures are successful in minimizing the negative effects and maintaining the performanceof the company in a balanced manner in line with the ambitions and aspirations of shareholders.

• The company was keen on achieving a steady increase of operationalefficiency at all units by ideally exploiting the available resources,offering quality products, keeping in mind the fact that quality in itsbroader sense is a core element of the company’s success.• The company reviews the financing structure periodically to achieve therequired balance between internal and external financing, based oncost – benefit analysis. The company is keen on linking borrowing tothe geographical presence of investments in order to mitigate the risk(natural hedge) and reduce financing costs.• The company continued to develop the human resources selection andtraining programs. In Americana, we consider The Human Capital is themain contributor to the intellectual capital of the company and one ofthe most critical elements in achieving goals. To this end, the companyadopted a number of effective programs for updating and developing itstraining strategies at all levels through continuous motivation for workersand instilling the spirit of challenge and to renew the motivation driversto face the continuous challenges, which eventually had positive impactin the improvement of sales and profits of the company.• The company is keen on improving the efficiency in managing theworking capital and access the best method of optimum capital Structurefor achieving the required balance between resources and uses.• The company focused on boosting its competitive advantages throughcontinuous communication with customers by choosing effective marketingprograms that communicate with different segments of customers inorder to ensure that the company’s products adequately satisfy theirpreferences. It gave special attention to the different electronic marketinginstruments including the company’s website and social networks Twitterand Facebook due to the importance of the modern communicationchannels that are widely used by customers especially for exchanginginformation and valuing their opinions regarding the products andservices of the company.Annual Report 201217

Sixth:Team SpiritAmericana has another not less important element than the foregoing elements, namely, the one family spirit, or inother words, Team Spirit. This makes Americana stand out amongst many other companies where team spirit resultsin everyone exerting every possible effort in facing the challenges and obstacles in the work environment, in pursuitof the best possible performance, and to achieve the company’s goals and ambitions of its employees.• Americana put emphasis on boosting the morale of the workers and involving them in the company’s objectivesand plans in order to strengthen their sense of contribution in achieving those plans. The company is furtherkeen on interacting with the ideas of the workers and employees and listening to their opinions on howbest to improve work and working on enhancing the feeling of being the real achievers of the company’saccomplishments and partners in its success. This is achieved by keeping the employees informed of andinvolved in the company’s priorities and goals at every stage of the work.• The company will continue to emphasize the importance of the participation of all workers and employees inenhancing the performance of the company Engage Your Employee. It is also aiming at providing adequatecommunication channels for ensuring fast communication, encouraging them to cooperate with the highermanagement levels collectively, sharing relevant information with management, contributing to the solving ofproblems and exchanging ideas about customers, customer service and the products and services offered.

• Conducting research and evaluating operations of the different processesof the company for determining the weaknesses and strengths does notonly require outsourced consultants, but also the loyalty of employeesthat encourage them to provide accurate and unique information ontheir day-to-day activities. At the same time, this leads to enhancedcoordination between senior management and other functional levels,including revealing hidden opportunities, and leads to improved growthprospects in the future.Seventh:Social ResponsibilityThe company constantly adopts the concept of Corporate SocialResponsibility that concerns with the ways in which the company exceedsits minimum obligation to stakeholders specified through regulations. Fromthis perspective, and among other things Americana focus on the theenvironmental issues and the adherence to official guidelines and laws andabove all focus on providing high quality products under the best hygienecontrol standards.• Americana performs its social role in countries where the companiesand their affiliates operate, in the form of charitable work in cooperationwith the charitable civil institutions, and in several fields such as socialservices, health care in addition to the fields of education, culture andsports.• The company continues to cooperate with official institutions of the Statewith regard to helping students at schools and colleges to graduate onthe best level of technical and professional training and qualified toprovide unique services in the different work fields in restaurants andhotels.• The social role is not limited to charity works, rather it extends to realcommitment to the communities that we take part in. Having said that,Americana is committed to create work opportunities in order to combatunemployment and promote economic growth as well as adhere to thelaws and customs of each society as main social responsibility in thecountries we exist.Annual Report 201219

Key Performance Indicators for 2012:The company succeeded in achieving the usual efficiency in directly dealingwith the circumstances and challenges during 2012 and benefiting from theexisting opportunities in the market. This was due to the constant keennessof the company to achieve the excellency compared to the competitorsand achieve remarkable performance during the year which will fulfill theaspirations of the company shareholders and customers.The following table shows the key performance indicators during the periodfrom 2000 to 2012:Profits of2012Shareholders’equity 2012165Million dollar1Billion dollar2000 2003 2006 2009 2012Sales (KD million) 149.6 158.6 323.9 616.4 809.6Net profit (KD million) 12.1 21.1 33.6 36.3 45.9Shareholders’ equity after dividends (KD million) 50.4 89.5 219.0 259.6 287.9Total assets (footing) (KD million) 118.0 166.6 416.3 589.8 603.0This table depicts the major growth in sales, and net profit as the majoroperational indicators of the company which represent the rising trend inthe performance of its operating activities .• Sales:During 2012, the company focused on expanding the customer baseby adding new production lines and opening new concept restaurantchains and entering new markets and cities. The company succeededin attracting new customers as well as improving the loyalty ofexisting customers by providing new products to meet their needs andpreferences with better quality at better prices which in turn contributedto a substantial impact on the company sales.Annual Report 201221

The sales of the company reached KD 809.6 million for the current year with a growth rate of 12% over last year.The sales in 2009 was KD 616.4 million indicating an average annual growth of 10% during the period from2009 to 2012.20002003149.6158.6Sales (KD Million)2006323.92009616.42012809.6• Net Profit:The company achieved a high growth in profits by maximizing sales along with constant review for all cost itemsand increasing the efficiency in managing the resources available at the operating units as well as maximizingthe benefit from the available production and distribution tools. It also focused on increasing revenues from theactivities and the investments in new projects that generate high returns.

The net profit for the current year reached KD 45.9 million compared to KD 48million for 2011, with a decline of 4%. By excluding the profit (loss) of the financialportfolio, the growth rate would be 23% compared to the previous year.200012.1Net Profit (KD Million)200321.1200633.6200936.3201245.9• Shareholders’ Equity:The company’s management is always keen on supporting Shareholders’equity and strengthening the financial position of the company. The boardgives a great importance to the equity on the long and short terms.300250Net Equity (KD Million)219.0259.6287.92001501005050.489.502000 2003 2006 2009 2012In 2012, shareholders’ equity (after the proposed dividends) reachedKD 287.9 million compared to KD 266 million in 2011 with a growth rateof 8%. The company distributed excellent cash dividends during the pastthree years; 60% in 2009, 65% in 2010, 2011 as well as 65% this yeartoo and those were highly appreciated by our esteemed shareholders.The activities of the Kuwait Food Company (Americana) can be mainlydivided into 3 streams of income; Restaurants, Industries & Trade, andInvestment in Financial Portfolio. The following is a profile description ofeach of these activities.Annual Report 201223

First:RestaurantsThe year 2012 witnessed a major development in the restaurant sector in terms of qualitative expansion andgeographic distribution, by increasing the opening of restaurants and introducing new chains to the market in theArab & MENA region. Americana thus maintained its leadership in the field of restaurant activity in the region.The company attained this leading role by adopting creative and innovative strategies which enable the managementto look forward to a better future full of accomplishments and new records. By having this spirit, the managementis always able to make the appropriate changes in response to the change in consumer behavior as well as theeconomic impacts in the society that could affect the needs and preferences of customers.Restaurants’ activity is divided based on the nature of the activity into two groups: Fast Food and Casual Diningrestaurants.

Fast Food Restaurants:The number of fast food restaurants at the end of 2012 reached 1,299restaurants and stores. The fast food chains are divided into four maingroups as follows:Number offast foodrestaurants1,299--Quick Service Restaurants (QSR) chains including Kentucky andHardee’s.Semi fast food chains such as Pizza Hut (in the UAE, Egypt, Bahrain,Number ofCasual Diningrestaurants67Jordan and Kazakhstan), Sbarro (in Kuwait) and Tikka.-Café Concept including Costa Café (in Egypt, Jordan, Lebanon andKazakhstan) and Grand Café (in Egypt and Morocco).-Pastries chains i.e. doughnuts, ice cream, eastern and western dessertssuch as Krispy Kreme, Baskin Robbins (in Kuwait, Egypt and Lebanon),Al Samadi Sweets (in Kuwait and Egypt) and Maestro (in Egypt).Casual Dining Restaurants:Casual dining restaurants of Americana include a selected group ofchoices for the company customers through a chain of internationallyknown restaurant chains and local chains which the company upgradedand developed and was widely accepted by the company customers.-The company operates the T.G.I Friday’s chain, the Red Lobster chainwhich serves sea food in American style, the Olive Garden which servesItalian cuisine in American style, Fusion chain which serves a mix ofJapanese and Chinese cuisine, Signor Sassi chain for Italian cuisine,Fish Market chain which serves a great selection for fish and sea foodlovers, and finally The Counter Burger chain which serves selectedgourmet burgers.Annual Report 201225

-The company successfully invested in the new franchise of Darden Company, the owner of Red Lobster, OliveGarden, Longhorn Steakhouse, by adding two new Red Lobster restaurants in Qatar and Kuwait and thefirst Olive Garden restaurant in Kuwait in 2012. It expects to open the first Longhorn Steakhouse restaurantin the Kingdom of Saudi Arabia during 2013.-At the end of 2011, the company signed franchise agreement with the Counter Burger Chain with anopening plan of 35 restaurants during the coming eight years in Kuwait, the UAE, Qatar, Bahrain, Oman,Egypt, Lebanon, Jordan, Algeria, Tunisia, Libya and Morocco as well as exclusive rights for the chain inLondon. The company opened its first restaurant in the State of Kuwait in December 2012.-The company believes in the importance of expanding and diversifying in the field of Casual Dining, thusadded 38 restaurants during the past five years. The number of casual dining restaurants at the end of 2012reached 67 due to the support and apprecication of our customers, which has had the best impact on salesand profits.

Performance Indicators of Restaurants in 2012:The following table and chart illustrate the development of the restaurantactivity in the company during the term from 2000 to 2012 :2000 2003 2006 2009 2012Number of outlets 510 606 769 1.157 1.366Number of chains 12 14 17 19 22Number of countries 9 11 13 14 13Number of cities 50 55 66 79 98Number of meals (million) 53 58 98 155 220The following charts illustrate the development in number of stores andrestaurants operated by the company and number of cities where therestaurants and stores are lacated:No. of Outlets1366No. of Cities981157796660676950555102000 2003 2006 2009 2012 2000 2003 2006 2009 2012The chart and table explains how the company was able to maintain itsleadership as the largest company in the field of its activity in the Arabregion while relying on the trust of its customers. The chart illustrates thatthe number of restaurants multiplied by 2.7 times compared to 2000. Inaddition, the number of restaurants increased by 18% compared to 2009.It is worth noting that the restaurant activity of the company is managedthrough four Managerial Clusters which are:Kuwait and Al Sham RestaurantsKSA RestaurantsUAE and South Gulf RestaurantsEgypt RestaurantsAnnual Report 201227

The said four clusters are supervised by regional management of the restaurants, which play a major role in buildingsynergy between the clusters, aiming at achieving savings and maximizing the expertise through exchanging theirbest practices. To achieve that, the company relies on its wealth of next level human resources capabilities.• The sales of the Restaurants’ Sector reached KD 451 million (i.e. US $ 1.6 billion) with a growth rate of 14%compared to last year.• In Egypt, the restaurants achieved 20% growth in sales in local currency over last year despite the unstablesocio-political situation in the country during 2012. The company continued its expansion by opening 33new restaurants during the year, underlining the role of management in turbulent times capitalizing from theavailable opportunities in the market under those circumstances which had a positive impact on the overallperformance of the company.• In light of of the success made by the first outlet of Red Lobster in Dubai Mall in the UAE, subsequently 2 moreRed Lobster restaurants were opened in Qatar and Kuwait in addition to the first Olive Garden outlet openedin Kuwait. Thank God, the results were promising.

• The company continued its expansion policy which aims at addingthe world renowned best chains in the restaurant field and succeededin obtaining the franchise rights for the USA based Counter Burgerchain. The first of its restaurant was opened in December 2012 in theState of Kuwait.Numberof meals2012220Million• During 2012, the first outlet of the Costa Café chain was opened inKazakhstan taking the total number of restaurants’ chains operated bythe company to 20 including Kentucky, Hardee’s, Pizza Hut, and CostaCafé stores. It is significant development that the company achievedgreat success in the Kazakhstan market by achieving splendid growth insales and profit. To substantiate the company’s ability to anticipate thewishes and expectations of customers, it served during the year 2012more than 220 million meals for its customers as compared to 195million meals last year with a growth rate of 13%.Sales ofrestaurantssector 20121.6Billion dollar• The number of restaurant chains of the company reached 22 , including13 global chains and 9 chains which have been developed andoperated by Americana itself. In addition, the company restaurants aredistributed in 13 countries in Asia and African continents.• The total number of restaurants of the company reached 1366 with anet increase of 65 restaurants during the last year, at an average of onenew restaurant added every 6 days.• During 2012, the company was able to increase the total number ofcities our restaurants operate to 98 as compared to 79 cities in the year2009. The company is always keen in launching the restaurant servicesand expanding the customer base by entering new cities.• In recognition of the success, Americana restaurants received manyawards during 2012 from leading companies including the “BestActivation Award”, “Champs Challenge 2012”, “The Most CIS KFCOpenings in 2012”, “Big Leap Forward - Building The YUM! DynastyAll Over the World” from YUM Company.Annual Report 201229

The company also obtained the “Franchisee of the Year Award”, “1 st Highest % Sales Increase”, “HighestAverage Unit Volume”, “Highest Average Unit Sales Increase 1 st Place”, “Developer of the Year Award” fromHardee’s International.• The company continued to launch all new products and render services satisfying the needs of customers. Duringthis year, our restaurants introduced many products that were well accepted by customers. The Kentucky served“Big Filler” sandwiches in two new tastes (Smokey and Buffalo) and the “Supreme Shrimpo” and “Ciabatta”.Hardee’s served “Angus Thick Burger”, “Big Hardee”, and “Spicy Chicken Tenders”. Pizza Hut served “CrownCrust Pizza” and “Cone Crust Pizza”. T.G.I Friday’s chain served a new group of meals including “ChopHouse T-bone”, “Triple Meat Burger”, and “American Cowboy Rib”. The Krispy Kreme chain also served twonew doughnut flavors, “Doughnut Holes” and “Doughnut Pops”.• The company continued developing its capabilities in dealing with customers and interacting with them throughthe social network means. The number of fans of the Arab Kentucky chain on Facebook reached one millionand a half. The chain celebrated this event with its fans and customers in all the Middle Eastern countries byserving one millionth meals which was admired by one and all. The number of fans of the electronic page ofthe Hardee’s chain reached one million fans.

• Given the political and security events in Syria, the company’smanagement decided to freeze all its activities there until the situationstabilizes. In view of the futility of operating, out of the 4 restaurantsoperating by the end of 2012, 3 were closed in January 2013 and onlyone is operating currently.• Americana’s management gives much attention to the human resourcessince it is the main element of success of the product or services &this makes Americana a unique company. It also plays a vital role inachieving the satisfaction of our customers. The number of workers inthe restaurant business reached 37 thousand of direct manpower frommore than twenty nationalities. The company consistently conductsadvance training programs which resulted in improved performanceand efficiency. This had a positive effect on the quality of the end productand the satisfaction of the clients and thus an increased contribution tothe revenues of the company.• The objective of the company’s management initiated since many yearsby linking the expenses to the revenues and preparing the business andannual savings plans had a very large impact in achieving reductionin expenses while maintaining the sale volume, the products qualityand services. By applying transparent operational, financial, andadministrative policies and expanding the outsourcing operation forproviding services through external specialized companies such as homedelivery services and delivery staff had a visible effect in decreasingcosts and enabled the company to focus on the core activities such asday-to-day operation of restaurants, providing necessary attention tothe product and services quality suitable for the company customers.• The company continued its social responsibity while providing aidto the concerned bodies in the countries in which its activities exist.It contributed in conducting training programs at the restaurants forschool and university students as well as hiring deaf and dumb to workin restaurants thus helping them to communicate with all segments of thesociety. It also participated in honoring winners in Quran memorizationcontests and supporting those excelling in different educational, culturaland sports fields.Number ofcountries2012Number ofcities20121398Annual Report 201231

Aspirations of the Company towards the Future in Restaurants business:• The company shall continue the horizontal expansion through geographical spread by opening new branchesand entering new markets for increasing the revenues and profits, and maintaining the diversity in restaurantchains by serving various cuisines to our customers. Following the success in Kazakhstan, it establishedbranches in Iraq’s Kurdistan region and it is expected that operation shall begin during the second half of theyear 2013, with God’s help. The company is also studying the possibility of entering the European marketsand at the same time is studying the possibility of entering the markets in Ukraine and Azerbaijan.• The company is keen on increasing investments in the restaurant sector and focusing on the projects withhigh cash revenue in a short term in order to improve the cash-flow & liquidity of the company. It continuouslyreviews the capital structure of the company for achieving the sought after balance between internal fundingand borrowing from banks for completing the required expansions• The company believes in the importance of launching new chains as well as expansion of predominant globalrestaurant chains. Therefore, the company is planning opening chains of Longhorn Steakhouse during 2013.God willing the management expects every success for this chain.• The company is keen on continuously developing key drivers and accountability that coincides with themanagement guidelines and plans at the beginning of each year to be the ruling aspects of performanceduring 2013 and the constitution that governs the work of executive managers in the company branches.

• The company always relies on its strategies for achieving additionalsavings in many expenditure aspects without compromising the qualityand safety standards set by the company.• The company shall continue striving for maximizing the revenues fromthe existing activity by increasing the number of transactions at ourrestaurants which shall lead to increasing the profits without the needfor significant additional investments.• The company shall focus on analyzing the specialized markets fordetermining the wishes and priorities of the customers and their opinionsabout the restaurants and products of the company. This shall helpbridge the gap, if any between the expectations of customers in termsof quality, price, value and what is being offered to them.• The company shall improve the efficiency of procurement and storageoperations (supply chain) and it shall take advantage from strategicpurchase operations of raw materials and reduce storage time to meetthe restaurant needs at the right time. It shall also develop online biddingused in the biddings of new sites and service contracts which shall helpachieve the desired savings during 2013.• The company shall continue updating the use of modern technologiesin all the different operational and administrative fields to cope withthe international level to safeguard the company’s leadership positionand promote the operational level of our restaurants. It shall alsoachieve strict supervision through direct communication between themand the Management to promote the expected levels of service to thecustomers.• The company shall adopt innovative and effective marketing andpromotional strategies to attract more customers through launchingattractive promotional prices and offer awards and gifts at companyrestaurants, which are considered one of the main means of attractingcustomers of different ages thus, achieve popularity, higher sales andprofit.• The company shall continue to perform its social responsibility byhiring people for its business activities thus reducing the unemploymentproblems in the markets where the company operates.Annual Report 201233

Second:Industries & Trade Sector:The Kuwait Food Company (Americana) is proud to own and manage the largest and most important processingplants working within the food processing activity in the Gulf and the Middle East. It is also proud of the excellenceand quality of its products and the use of the latest tools and equipment in production, storage and distribution.The total sales of the industrial and trade activities for 2012 reached KD 391.7 million (including the sales to therestaurants sector of the company amounting to KD 34.2 million, of which KD 12.8 million comes from the sales tothe restaurants sector in Egypt) as compared to KD 353.4 million last year with a growth rate of 11%.The Industrial, Trade, and Agricultural activities of the company are geographically distributed between 4 Arabcountries, namely the KSA, the UAE, Kuwait and Egypt. Their products are distributed in more than 25 countriesaround the world, including 17 Arab countries as well as the USA, Canada, and some European countries. Thetotal number of direct workers in the industrial, trade and agricultural sectors of the company is 22 thousand.

The following chart indicates the development of the number of mainindustrial, trade and agricultural activities of the company in the Gulf andEgypt during the period between year 2000 and 2012:Sales ofindustrialactivities1.4Billion dollar200020032006200920121213No. of Industrial, Trading& Agricultural Sectors172125Number ofindustrialmanagerialclusters6The activities of the food processing, agricultural, and poultry industry of thecompany are divided into Six Managerial Clusters:Industrial activities in the Gulf which includes two Managerial Clusters:Meat Processing & Distribution in the KSA and Kuwait.Group of Activities comprising California Garden, Gulfa MineralWater in UAE and Cake and Pastry products in KSA and Kuwait.Industrial, agricultural, and poultry activities in Egypt which include fourmanagerial clusters:Senyorita group for manufacturing potato and corn chips.Greenland for producing dairy products and cheese.Food Processing Group of agricultural products (Farm Frites, PotatoCultivation, Vegetable and Olive products).Cairo Poultry Group and the Egyptian Company for Starch andGlucose.The following is a brief summary of each group.Annual Report 201235

Industrial activities in the Gulf:The total sales of the industrial and trade activities in the Gulf reached KD 166.1 million for the year 2012compared to KD 145.3 million last year, with a growth of 14%.Meat Processing & Distribution in the KSA and Kuwait:The meat sector of the National Food Industries company continued its consecutive successes year after year inbecoming one of the major and largest meat, poultry and fish products producers and distributors in the Arabworld. Despite strong competition, the sector continued achieving positive results with good growth rates in salesand profits due to the efforts exerted by the sector’s management in a continuous attempt to reach the highestpossible level of success in its markets.The main markets of the sector in addition to the KSA market are Kuwait, Bahrain and UAE markets. Its productsenjoys more than 41% of the KSA market share while it is more than 48% in the Kuwaiti market, 18% in theBahrain market, and 15% in the UAE market. The sector is planning on entering new markets next year such as theMorocco, which is one of the promising markets in North Africa.

During 2012, the sector offered some new products that were acceptedand well received by the customers of the company. It was able to obtainthe “Qualified” certificate from the international restaurant company YUMcertifying that the sector follows the required quality system for supplying itsproducts to the international YUM chains. It was also able to maintain thecertificates obtained previously, mainly “ISO 9001”, “ISO 14001”,“BS-OHSAS 18001”, “NS-EN ISO 22000”, “Global Standard for FoodSafety-BRC”, as well as the halal product license “License of Halal Mark”which it obtained last year from the Public Authority for Standards andQuality of the Ministry of Commerce and Industry in Egypt.Share of thefrozen meatmarket inKuwaitShare ofthe cannedbeans marketin UAE48%80%The regional management for the meat sector in the Gulf looked after themeat production and distribution in Kuwait as well. This year, the meatsector in Kuwait was able to achieve excellent sales and profits growthrates as compared to last year. It also succeeded in providing a new rangeof products such as “Arais” regular and spicy meat sandwiches as well astrading products such as frozen fruits, artichokes and strawberries.The sector maintained leadership in the Kuwaiti market in 2012 with itcovering more than 61% of the mortadella market, with 6% increase fromlast year, and around 52% in the Kuwait market for Hamburger beef with3% increase over last year, and more than 33% of the chicken fillet with 3%increase over last year.The sector efforts during 2012 bore fruits by obtaining the “Global Standardfor Food Safety-BRC” from the “ISOQAR”. It also obtained “Superbrands”certificate in Kuwait for 2012 which is granted to outstanding trademarks thatachieve growth in the market and are widely available and well accepted bythe customers. The companies and trademarks are chosen by the committeecomprising expert businessmen and owners in the State of Kuwait.Annual Report 201237

California Garden, Gulfa Mineral Water, and Cake and Pastry factories IndustrialCluster:Gulf Food Industries Company – California Garden:Gulf Food Industries Company – California Garden is considered one of the leading companies in the field ofcanned food industries in the Arab World and the Middle East. The company offers the best and finest cannedfoods. It also produces many products for most of Arab countries which suits each country’s taste and flavor, suchas canned beans in Egyptian, Saudi, Lebanese, Palestinian and many other blends such beans with cumin ortahina, beans with olive oil or chili pepper in addition to trading canned tuna and vegetables.During 2012, the company was able to increase its market share of the canned bean products in its markets.The market share in the UAE increased from 76% last year to 80% this year, in the Kuwait market from 68% to71%, in Oman from 77% to 80%, in Qatar from 67% to 80%, in addition to the increase in tuna products share inthe UAE from 20% last year to 23% this year. The company is targeting new markets such as Iran and South Africaas well as expanding in the Iraqi market. The company is also studying launching many new products in the marketduring 2013. The company maintained the “HAACP”, “EN ISO 9001”, “EN ISO 14001”, “EN ISO 22000”,“BS OHSAS 18001” certificates as well as obtained the “HALAL Certificate” by the Halal Foods Council inEurope.The management of the Gulf Food Industries (California Garden) supervises the Trade agencies sector in Kuwaitwhich distributes the California Garden products in Kuwait as well as Americana brand products and Heinz

International products, Oriental products and Divella Pasta. The sectoroffered a group of new commercial products in 2012 such as AmericanaVine Leaves (excellent Egyptian and American quality), Americana CornBeef, California Garden Corn, and Heinz chilly ketchup.Also, the management of California Garden supervises the Gulfa MineralWater and Processing Industries Company which is considered one of theoldest companies working in the field of mineral water in the Gulf. Thecompany’s management shall study the growth performance and launch newproducts for maximizing the benefit from the trademark of Gulfa Company.Cake and Pastry Manufacturing in KSA and Kuwait:The cake sector of the National Food Industries Company in KSA is knownfor the quality and deliciousness of its cakes and pastries which are thefavorite pick of families in most Gulf countries. In fact, it was the success ofthe sector in the Gulf region which provided the motivation to achieve furthergood results by entering the Middle Eastern and Northern African markets.The sector introduced a new range of products in 2012 such as “caramelbiscuits” and “digestive biscuits”. In 2013, the company plans to introducemore new products such as biscuits with different flavors (honey, chocolateand salt), choco-chips, and black wafer. The sector was also able to open amarket for its products in Libya.In 2012, the cake sector obtained a quality certificate from the NationalCertification Council of Egypt, in accordance with the “ISO/IEC 17025”in determining the percentage of moisture and water in cake and pastryproducts and raw materials. The company also renewed the certificatesobtained by the sector such as the “ISO 9001” and the “Global Standardfor Food Safety-BRC” and the “NS-EN ISO 22000”.The Sector offers croissants of different flavors, fresh salads such as fattoush,tabouli, pasta and Greek salad, as well as various sandwiches (such as fetawith tomatoes, halloumi, hot mayo-chicken, tikka chicken, etc.,) and a largevariety of pâtée products which are in high demand in the Kuwaiti marketdue to its quality and good price.The year 2012 witnessed the launching of a new product in the sector “MuffinCake” in three different flavors (dried fruit , cranberry and chocolate). Thesector has captured 34% of the market share of the pastry products in theKuwaiti marketAnnual Report 201239

Industry, Agriculture and Poultry Activities in Egypt:The total sales of the Industries and Trade activities in Egypt reached KD 225.6 million in 2012 as compared toKD 208.1 million last year at a growth rate of 8%.Senyorita Group for Food Industries Company:Ever since Senyorita Companies Group was acquired in 2006, the sales and profits witnessed a rapid growth andas a result the goup’s sales in 2012 exceeded one billion Egyptian pounds for the first time in its history comparedto the sales of only 298 million Egyptian pounds at the time of acquisition.The Senyorita Group has various products such as potato chips with the trademark Lion in several flavors such assalt, pepper and ketchup, which is of superior quality has been widely accepted by the consumers in the Egyptianmarket as well as the “Zigo” potato chips in different flavors such as kebab, cheese and vinegar. In addition, thecompany produces other various products such as biscuits, snacks ,sweets, and chocolatesIn 2012, the company was able to provide new products that fit the taste of customers such as chips (Lion Extreme)in different flavors (hot shrimp, hot sausage, hot cheese, hot ketchup, and chili pepper). The company is planningon launch a new product, chocolate covered sandwich biscuit in 2013. It is also planning to enter new marketsin 2013 such as Lebanon and South Africa.

Greenland Group for Food Industries Company:Greenland is a big name in the field of dairy products, cheese, butter andjuices in Egypt and most Arab countries. The products range of Greenlandinclude the finest and various types of delicious cheese such as white cheesefeta, Istanbul cheese, cheddar, mozzarella, triangle cheese pieces, as wellas high quality dairy products such as long life full cream milk and skimmedmilk which tastes like fresh milk and is loved by many of its consumers inthe Egyptian household. The company Greenland is also known for its juiceproducts such as apple, orange and mango and many other flavors.The products of the company are distributed in many countries such asKuwait, KSA and the UAE as well as the Egyptian market. The companyis studying the possibility of entering the Japanese, Korean and Russianmarkets in 2013. Greenland ranked first in the Egyptian market in the fieldof producing white cheese by capturing 24% of the total market share witha 2% difference from its closest competitors despite the strong competition.This can be attributed to the trust of consumers in the high quality productsof the company and affordable prices by all sections of the society as wellas products variety in new and different flavors to satisfy the needs of itsconsumers.It is worth noting that in 2012 the company obtained the “ISO 9001”,“ISO 14001”, “OHSAS 18001” and “ISO 22000”.Share of thewhite cheesemarket inEgyptShare of thefrozen potatomarket inEgypt24%90%Food Manufacturing & Agricultural Products Group in Egypt:The International Company for Agricultural Development(Farm Frites) - Egypt:Farm Frites owns the largest half fried frozen potatoes processing unit in theArab World and the Middle East. Due to the excellent quality of its products,many restaurants in the Arab world, including Americana, approved FarmFriets to be the main supplier to procure their needs of potatoes to be servedaside from their main dishes, in addition to being the top of mind potatoAnnual Report 201241

and to many of the Arab households. During 2012, the company maintained its leading position in the Egyptianmarket by capturing a lion share of 90%. Its products enjoys 35% of the Kuwaiti and Emirati market and 14% ofthe Saudi market, 62% of the Jordanian market, 45% of the Bahraini market and 42% of the Qatari market. Thecompany was able to enter the promising Chinese market in 2012. The company is also contemplating to expandits geographic spread during 2013 by targeting new Indian and Pakistani marketsThis year, the company was able to obtain the “BS OHSAS 18001” and the “ISO 22000” and in recognitionof its social responsibility, the company obtained the “ISO 26000” certificate from the ISO in cooperation withthe Egyptian Public Authority for Standards and Quality in the field of social responsibility in the Middle East andNorthern Africa.The agricultural activity of Farm Frites is one of the distinct activities with regard to vulnerable climatic conditions.However, by the grace of God, and because of the efforts exerted by the company’s management and its workersthe potato cultivation became one of the main activities in Americana. Farm Frites Agricultural activity providesthe required quantity of raw potatoes of good quality to its production activity as an alternative to outsourcesrepresented by farmers which often led to many problems related to quality and continuous fluctuations in price.The Best From The Land

International Company for Agricultural Production and Processing:The International Company for Agricultural Production and Processingproduces frozen vegetables such as okra, peas and other vegetables. Thecompany sales was only 52 Egyptian million pounds seven years ago, yearafter year it continued achieving higher success resulting in sales exceed200 million Egyptian pounds by 2012.During 2012, the company was able to establish its presence in the localEgyptian market regardless of the strong competition in the field of frozenvegetable to capture more than 15% of the market as well as distributionin more than 10 major Arab and international markets. It enjoys 28% ofthe Jordanian market with an increase of 6% over last year and 17% of theKuwaiti market with an increase of 5% over last year and 11% in the Saudimarket. The company is planning to venture into new markets in 2013 suchas in Libya and Algeria. It is worth noting that the company maintained its“ISO 22000” certificate obtained in the previous year.Agricultural Activities and Land Reclamation:The agricultural activities and land reclamation include three companiesin Egypt, namely Americana for Land Reclamation and CultivationCompany, Karwin for Land Reclamation Company and Al Hashimiya forLand Reclamation and Cultivation Company. The various agricultural cropsproduced by the companies range from potatoes used in Farm Frites Companyas raw material, olives required for the Egyptian Canning Company as wellas agricultural crops sold in the markets.The difficulty in this type of activity lies in being affected by the externalfactors which is beyond control, as a result the productivity of the landand quality of crops affected by adverse weather conditions, spread ofagricultural pests negatively impacting the production of very sensitive cropssuch as potatoes and vegetables. Therefore, the company is seeking to usemodern agricultural methods to overcome the above challenges.It is worth noting that the three agricultural companies use advancedpesticides that are free from any chemicals that affect the public health.This is the approach followed by Americana for ensuring its responsibilitytowards the society even if this led to an increase in expenses and achievinga lower profit margin.Annual Report 201243

Egyptian Canning Company – Americana:Americana offers the finest types of canned olives through the Egyptian Canning Company in Egypt. The oliveproduction of the company is of very high quality due to the best kind of raw olives as well as the latest productiontechniques used to produce the best quality of different olive varieties. The company also produces the best kind ofcanned artichokes which has been received well by its consumers.The company products are distributed in many countries such as USA, Canada, Libya and the UAE as well as thelocal Egyptian market and other markets. The company is consideringlaunching its products in the Italian andBrazilian markets during 2013 as a major step to explore the new international markets.It is worth noting that the company has maintained in 2012 the “ISO 9001” “certificate and the professional health& safety certificate” “BS OHSAS 18001” which it had obtained previously.In 2012, the company faced many challenges such as the surge in the raw olives price and the correlation ofits sales price with the international markets as well as the circumstances of the Egyptian market. The company’smanagement endeavor is to overcome this difficult phase and looking forward to stabilized raw material price andimproved security circumstances in Egypt for achieving better results during the coming period.

Cairo Poultry Group & Egyptian Company for Starch and GlucoseThe poultry industry in Egypt faced many obstacles in 2012 due to thepolitical and economic local events such as workers’ strikes in Egypt, therise in international corn prices, Egyptian pounds devaluation against USdollar, allowing the import of frozen poultry, the overall security situation inthe Egyptian market leading to the partial halt of the tourism activity, andother challenges as well.The Poultry Group management exerted all efforts in facing theseunprecedented challenges. It also focused on maintaining its market shareand enhancing its competitiveness as compared to other local companiesand improving the sales.These efforts led to an increase in the sales during the past year despite allchallenges by reaching 2 billion Egyptian pounds. However, there was asharp decrease in the profits during the year as an exception and it is hopedthat the Poultry Group will be able to achieve excellent results in 2013 andthe coming years through the future plans, the conscious management, andresilience in facing the challenges.The activities in the Poultry Group can be divided into three main groups,which are the poultry farming activity, the slaughtering activity and theFeeds Production Activity.Poultry farming activity, includes three sub-sectors which are the Grandparents, the Parents sector and the hatchery. They are based on productionand breeding all kinds of poultry for white meat. In their production, thecompany relies on the Hubbard classic breed which has high quality andhigh productivity and Hubbard F15 was introduced as this type is smalland allows for breeding more parent hens per square meter and the lowerconsumption of feed and large production of eggs. It also introduced theArbor Acres which is well known for large production of eggs during thestages of grand-parents and parents.Annual Report 201245

Poultry Processing activity, The Cairo Poultry Processing Company (Koki) includes slaughtering activity andthe production of white meat as well as selling slaughtered chickens. It also benefits from the wastes of productionin making agricultural fertilizers by using the latest technological means in the field while obtaining the “ISO 9001”certificate. The sales of the sector reached 30 thousand tons during 2012 at a value of 822 million Egyptianpounds. It is worth noting that the sales revenues of the processed products increased by 13% which had a positiveimpact on the sector’s overall profits.Feed production activity, is considered a complementary activity for breeding and feeding chickens andprovides the required kinds & quality of feeds to the company farms. The plants in Saf and Nubariya cover almost18% of the local market in Egypt. Through its investment plan which was launched in 2011, the company aims atopening a new fodder plant in Al Nubariya region which shall start experimental operation during the year 2013and which is expected to have a production capacity of 90 tons/ hour by the end of 2013.Cairo Poultry Group also manages the activity of the Egyptian Starch and Glucose Company. By means of itsplants, the company manufactures starch and glucose, corn oil, animal feed, and by-products related to thisindustry. The company started producing dry animal feed in 2010. The exceptional changes which occurred in theEgyptian market and the export markets during 2012 had a direct impact on the company results.In 2013, the company is planning to operate the production of new environmental friendly glucose in accordancewith the latest methods which relies on adding enzymes instead of acids and with a envisaged capacity of 200tons per day.

Future Aspirations of the Company - Industrial, Trade andAgricultural activities:• The company seeks to expand in providing food materials of highnutritional value for all ages and in particular children and youth and forthose whom the company has special interest by working on increasingthe production of fresh milk through Greenland Egypt and the increaseof our pastry and fresh baked products and healthy sandwiches throughthe pastry and sandwich plant in Kuwait; which the Arab families havegrown used to and they trust it as safe food for their children and youth.• The company is strongly aiming at expansion in the European,American, and Asian markets. There are no obstacles for that ambition inaccordance with the international certificates obtained by the industrialcompanies during the past years which certifies that its products matchthe international quality specifications.• The company is aiming at using the latest techniques in the marketingactivity which are constantly evolving, using the latest marketing toolswhich have had a great impact and influence on consumers buyingbehavior. The industrial and trade sectors shall focus during upcomingperiod on the promotional marketing activities which provide a highvalue for consumers to reach a win-win situation that targeting thedifferent segments of consumers and their needs through companiesspecialized in market research.• The company shall continue its focus on human resources, which isconsidered the main element of success. The company shall continuedeveloping all categories of workers in the industrial and trade activitiesand enhance and strengthen the sales and distribution and train theteams on the modern and effective sales techniques. It shall also provideall modern tools to the sales operation in order to remain competitive.• The company shall increase the efficiency of the available productioncapacities owned by the industrial sector and shall invest for the successin the production and manufacturing operations, aiming at expanding inthis field during the upcoming period.Annual Report 201247

• The company shall expand and modernize the distribution fleet to fulfill the increasing demand from ourcustomers and for reaching new regions.• The company shall continue expanding the private lable operation while ensuring the same level of internallymanufactured quality.• The company shall continue searching for high quality and appropriate price of raw materials required forthe production process while continuing to update the production processes and taking constant care of thecontrol over sterilization processes inside each production unit which is of high priority during operationalactivities. In addition, the company shall focus on optimizing the usage of storage areas and applying moderntechnological tools and soft-wares in the field of inventory control.• The latest programming techniques and equipment shall be used for facilitating work and saving time andeffort as well as providing all the required information for decision making and working in accordancewith the continuous improvement principle by using huge databases which include all required managementinformation to aid in extracting any information quickly as required by the decision makers to enable the rightdecision at the right time.

Third:Financial Portfolio:The company has been investing in the financial portfolio since many yearsthrough the available cash surpluses to buy Blue-chip stocks regarded asgood investment opportunities. The received dividends thereof would be anadditional source of income, however, worthy to mention that this portfoliois being managed by a professional portfolio manager.The market value of the investment portfolio at the end of 2012 reachedKD 114.1 million compared to KD 113.8 million at the end of previous year.During 2012, the financial markets had not completely recovered from thefinancial crisis, thus the investment portfolio incurred losses amounting toKD 6.8 million, mainly were due to the realized and impairment lossescompared to a gain of KD 6 million in the previous year.It is worth mentioning that the fair value reserve of the financial portfoliohas reached an amount of KD (6.4) million by the end of 2012, comparedto KD (11.9) million by the end of 2011; i.e. an improvement of KD 5.5million after absorbing the realized and unrealized losses incurred duringthe year.It is expected that the return of investment portfolio will witness a tangibleimprovement in the near future, as most of the impairment in the valuewere absorbed during the past years which was resulted from the criseshit the financial markets and heavily impacted the stocks prices in the stockexchange markets.Basically, the improvement in stock prices at Kuwait stock exchange marketwill positively impact the fair value reserve and the shareholders’ equity.Annual Report 201249

Shareholders’ Equity and proposed dividendsOur company has been aiming at achieving the balance between the continuous expansions in the business andmaximizing shareholders’ equity, re-inforcing the financial position and structure as to consolidate and strengthenits future ability to grow and spread.The following table and chart show the growth in Earning per Share, Share Book Value and Retained Earningsduring the term between 2000 and 2012:2000 2003 2006 2009 2012Earnings per share* (Fils) 100 167 168 93 117Book value per share* (Fils) 419 709 1.092 664 736Retained earnings (KD million) 27.4 61.2 125.3 165.5 231.2*The share book value and the earnings per share were calculated on the basis of the number of outstanding shares at the end of the year.

• The share book value (after excluding the proposed dividends) increasedto 736 Kuwaiti fils at the end of 2012 compared to 664 Kuwaiti fils in2009. In addition, the earning per share increased to 117 Kuwaiti filsin 2012 compared to 93 Kuwaiti fils in 2009.Earningsper share2012117Fils• The retained earnings (after excluding the proposed dividends) increasedto KD 231.2 million in 2012 as compared to KD 165.5 million at theend of 2009 with an average annual growth rate over the past threeyears of 13% i.e. the retained earnings per share increased from 423fils in 2009 to 591 fils in 2012.Book valueper share2012736Fils250200Retained Earnings (KD Million)165.5231.2150125.31005027.461.202000 2003 2006 2009 2012• The return on average shareholders’ equity increased to 17% in 2012compared to 15% in 2009 despite the increase in equity (after proposeddividends) by KD 28.3 million, i.e. from KD 259.6 million in 2009 toKD 287.9 million in 2012.Honorable Shareholders:The Board of Directors proposed a cash dividend of 65% to the generalassembly (i.e. sixty five fils for each share) subject to your kind approvaland to be fully covered by the net profit of the year amounted to 117 fils pershare, to the shareholders registered in the books of the company on thedate of the company’s general assembly meeting.Annual Report 201251

Honorable Shareholders:And last but not least, the Board would like to express its gratitude and appreciation to all Arab countries where thecompany operates either through the branches, or subsidiaries or affiliates. It also expresses gratitude to the officialand state bodies, banks, and financial institutions for their continuous support and trust in the company.We also would like to express our appreciation and gratitude to all shareholders and customers for their invariabletrust and support to the company. We also would like to thank the company management including all managers,official staff employees, and workers for their great efforts to achieve these excellent results.Finally, the Board of Directors presents its deepest gratitude to His Highness, The Amir Sheikh Sabah Al-AhmedAl-Jaber Al-Sabah praying to God Almighty to bestow on him good health to continue his development plan for thecountry towards prosperity, to His Highness the Crown Prince Nawwaf Al-Ahmed Al-Jaber Al-Sabah, and to HisHighness Sheikh Jaber Al-Mubarak Al-Hamad Al-Sabah, the Prime Minister, to his honorable government and statebodies for their continuous support and care for national companies.May Allah bless all our efforts,Board of Directors

Consolidated Financial Statements andIndependent Auditors’ ReportFor The Year Ended 31 December 201253

Annual Report 2012Independent Auditors’ Report to the ShareholdersReport on the Consolidated Financial StatementsWe have audited the accompanying consolidated financial statements of Kuwait Food Company (Al Americana) S.A.K. “theCompany” and its subsidiaries (collectively “the Group”), which comprise the consolidated statement of financial position as at31 December 2012, and the consolidated statement of income, consolidated statement of comprehensive income, consolidatedstatement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significantaccounting policies and other explanatory information.Management’s Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordancewith International Financial Reporting Standards, and for such internal control as management determines is necessary toenable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud orerror.Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted ouraudit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements arefree from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, includingthe assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. Inmaking those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation ofthe consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position ofthe Group as at 31 December 2012, and its financial performance and its cash flows for the year then ended in accordancewith International Financial Reporting Standards.54

Report on Other Legal and Regulatory RequirementsFurthermore, in our opinion, proper books of accounts have been kept by the Company and the consolidated financial statements,together with the contents of the report of the Board of Directors relating to these consolidated financial statements, are in accordancetherewith. We further report that, we obtained the information that we deemed necessary for the purpose of our audit and that theconsolidated financial statements incorporate all the information that is required by the Commercial Companies Law no. 25 of 2012,and by the Company’s Articles of Association, that an inventory was duly carried out and that to the best of our knowledge and belief,no violations of the Companies Law no. 25 of 2012, or the Company’s Articles of Association have occurred during the year ended31 December 2012 that might have had a material effect on the business of the Group or on its consolidated financialposition.Bader A. Al-WazzanLicence No. 62ADeloitte & ToucheAl Fahad, Al Wazzan & Co.Abdullatif A. H. Al-Majid(Licence No. 70 A)Of Parker Randall (Allied Accountants)Kuwait, 14 February 201355

Annual Report 2012Consolidated Statement of Financial Positionas at 31 December 2012Note 2012 2011KD ‘000 KD ‘000AssetsNon-current assetsProperty, plant and equipment 5 230,569 218,297Intangible assets 6 11,735 11,986Available for sale investments 7 114,136 113,753Other assets 2,355 1,361358,795 345,397Current assetsInventories 8 99,092 96,780Trade receivables 9 53,780 51,038Other receivables 10 39,043 36,427Cash and cash equivalents 11 52,270 51,421244,185 235,666Total assets 602,980 581,063Equity and liabilitiesShare capital 12 40,200 40,200Share premium 25,687 25,687Treasury shares 13 )1,080( (1,080)Statutory reserve 14 20,100 20,100Voluntary reserve 15 3,010 3,010Foreign currency translation reserve )24,786( (20,812)Change in fair value reserve )6,383( (11,855)Retained earnings 256,607 236,129313,355 291,379Non-controlling interests 16 37,528 37,909Total equity 350,883 329,288Non-current liabilitiesBorrowings and bank facilities 17 29,164 36,226End of service indemnity 30,690 26,72559,854 62,951Current liabilitiesBorrowings and bank facilities 17 61,673 68,266Trade and other payables 18 130,570 120,558192,243 188,824Total equity and liabilities 602,980 581,06356Ahmed Mohamed HassanChief Financial OfficerAl-Moataz Adel Al-AlfiGeneral ManagerBader Mohamed Al-JouanVice ChairmanThe accompanying notes form an integral part of these consolidated financial statements.Marzouk Nasser Al-KharafiChairman and Managing Director

Consolidated Statement of Incomefor the year ended 31 December 2012Note 2012 2011KD ‘000 KD ‘000Sales 23 809,639 720,759Cost of sales 8 (666,894) (594,804)Gross profit 142,745 125,955Other income 450 328Other operating expenses (1,665) (2,464)Selling and marketing expenses )61,236( (56,120)General and administrative expenses )5,904( (5,011)Operating profit 74,390 62,688Finance costs )9,509( (8,468)(losses)/ gains from available for sale investments 19 )6,763( 5,987Foreign exchange gain 451 632Profit before income tax of subsidiaries 58,569 60,839Income tax of subsidiaries )6,528( (4,478)Profit before deductions 52,041 56,361Contribution to Kuwait Foundation for Advancement of Science (476) (454)National Labour Support Tax (1,065) (962)Zakat (464) (401)Board of Directors’ remuneration )72( (72)Net profit for the year 49,964 54,472Attributable to:Shareholders of the Company 45,903 48,022Non-controlling interests 4,061 6,45049,964 54,472Earnings per share (fils) 20 117 123The accompanying notes form an integral part of these consolidated financial statements.57

Annual Report 2012Consolidated Statement of Comprehensive Incomefor the year ended 31 December 20122012 2011KD ‘000 KD ‘000Net profit for the year 49,964 54,472Other comprehensive income itemsForeign currencies translation differences )5,073( (4,598)Change in fair value of available for sale investments )245( (62,294)Transferred to statement of income due to sale of available for sale investments 2,884 (2,600)Transferred to statement of income due to impaired of available for sale investments 3,841 -Total other comprehensive income items 1,407 (69,492)Total comprehensive income/ (loss) for the year 51,371 (15,020)Attributable to:Shareholders of the Company 47,401 (17,691)Non-controlling interest 3,970 2,67151,371 (15,020)58The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statement of Changes in Equityfor the year ended 31 December 2012Equity attributable to the shareholders of the CompanyNon-TotalSharecapitalSharepremiumTreasurysharesForeignStatutory Voluntary currencyreserve reserve translationreserveChange infair valuereserveRetainedearningsTotalcontrollinginterestsequityBalance at 31 December 2010 40,200 25,687 (1,080) 20,100 3,010 (17,833) 50,879 212,142 333,105 42,325 375,430Net profit for the year - - - - - - - 48,022 48,022 6,450 54,472Other comprehensive income itemsForeign currencies translation differences - - - - - (2,979) - - (2,979) (1,619) (4,598)Change in fair value of available for saleinvestments - - - - - - (60,134) - (60,134) (2,160) (62,294)Transferred to statement of income due to saleof available for sale investments - - - - - - (2,600) - (2,600) - (2,600)Total other comprehensive income items - - - - - (2,979) (62,734) - (65,713) (3,779) (69,492)Cash dividends from subsidiaries (note 16) - - - - - - - - - (5,697) (5,697)Change in subsidiary’s ownership - - - - - - - 1,390 1,390 (1,390) -Cash dividends (note 21) - - - - - - - (25,425) (25,425) - (25,425)Balance at 31 December 2011 40,200 25,687 (1,080) 20,100 3,010 (20,812) (11,855) 236,129 291,379 37,909 329,288Balance at 31 December 2011 40,200 25,687 (1,080) 20,100 3,010 (20,812) (11,855) 236,129 291,379 37,909 329,288Net profit for the year - - - - - - - 45,903 45,903 4,061 49,964Other comprehensive income itemsForeign currencies translation differences - - - - - (3,974) - - (3,974) (1,099) (5,073)Change in fair value of available for saleinvestments - - - - - - (1,253) - (1,253) 1,008 (245)Transferred to statement of income due to saleof available for sale investments - - - - - - 2,884 - 2,884 - 2,884Transferred to statement of income due toimpaired of available for sale investments - - - - - - 3,841 - 3,841 - 3,841Total other comprehensive income items - - - - - (3,974) 5,472 - 1,498 (91) 1,407Cash dividend from subsidiaries (note 16) - - - - - - - - - (4,619) (4,619)Share from subsidiary’s capital increase(note 16) - - - - - - - - - 268 268Cash dividends (note 21) - - - - - - - (25,425) (25,425) - (25,425)Balance at 31 December 2012 40,200 25,687 (1,080) 20,100 3,010 (24,786) (6,383) 256,607 313,355 37,528 350,883All amounts in 000’ Kuwaiti DinarsThe accompanying notes form an integral part of these consolidated financial statements.59

Annual Report 2012Consolidated Statement of Cash Flowsfor the year ended 31 December 2012Cash flows from operating activities2012 2011KD ‘000 KD ‘000Net profit for the year 49,964 54,472Adjustments for:Depreciation and amortisation 35,899 36,036End of service indemnity 6,543 6,271Impairment of tangible, intangible assets and receivables 852 1,184Net impairment/ (reverse of impairment) of inventories 304 (2,460)Reverse of impairment of other assets (540) (422)Provisions for contingent liabilities 813 1,280Loss on disposal of property, plant and equipment and intangible assets 265 4,415Finance costs 9,509 8,468Losses/ (gains) from available for sale investments 6,428 (6,346)Operating profit before changes in working capital 110,037 102,898Trade receivables and other debit balances (5,608) (7,343)Inventories (2,616) (13,049)Trade and other payables 10,627 2,097Payment of end of service indemnity (2,578) (1,763)Net cash generated from operating activities 109,862 82,84060The accompanying notes form an integral part of these consolidated financial statements.

Continued: Consolidated Statement of Cash Flowsfor the year ended 31 December 2012Cash flows from investing activitiesNote 2012 2011KD ‘000 KD ‘000Acquisition of property, plant and equipment (54,617) (43,080)Proceeds from sale of property, plant and equipment 1,381 1,129Change in other assets (454) 208Acquisition of intangible assets (1,560) (1,451)Acquisition of available for sale investments (28,238) (6,376)Proceeds from sale of available for sale investments 21,231 5,240Dividends received 6,238 12,936Net cash used in investing activities (56,019) (31,394)Cash flows from financing activitiesBorrowings and bank facilities (13,655) (3,882)Payment of finance costs (9,571) (8,577)Change in non-controlling interests (4,351) (5,697)Dividends to shareholders (25,417) (25,418)Net cash used in financing activities (52,994) (43,574)Net increase in cash and cash equivalents 849 7,872Cash and cash equivalents at the beginning of the year 51,421 43,549Cash and cash equivalents at the end of the year 11 52,270 51,421The accompanying notes form an integral part of these consolidated financial statements.61

Annual Report 2012Notes to the Consolidated Financial Statementsfor the year ended 31 December 20121. Incorporation and activitiesKuwait Food Company (Al Americana) is a Kuwaiti Shareholding Company (the Company) incorporated in theState of Kuwait on 29 December 1963.The Company’s registered office is in the State of Kuwait, P.O. Box 5087 Safat 13051 State of Kuwait.The principal activities of the Company and its subsidiaries (“the Group”) are import and manufacturing of foodand beverages; sale of such items on both a retail and wholesale basis in the State of Kuwait, and other Arabcountries; and investing the surplus funds in investment portfolios managed by specialized companies.On 26 November 2012, the Companies law No. 25 of 2012 has been issued and published in the official gazetteon 29 November 2012 to replace the Commercial Companies law No. 15 of 1960. The new Law is effectivefrom the date of its publishing in the official gazette. Companies should make necessary arrangements to be incompliance with provisions of the new law within six months from its effective date.The company is currently taking the necessary procedures in this respect.The consolidated financial statements were approved for issue by the Board of Directors on 14 February 2013.2. Basis of preparation and Significant accounting policies2.1 Basis of preparationThese consolidated financial statements have been prepared in accordance with International Financial ReportingStandards. These consolidated financial statements have been prepared on the historical cost basis except for certainfinancial instruments that are measured at fair values, as explained in the accounting policies below.2.2 New and revised standardsNew and revised IFRSs issued and effectiveIFRS 7 Financial Instruments: Disclosures - Transfers of Financial AssetsThe amendment requires additional disclosure about financial assets that have been transferred but not derecognisedto enable the user of the Group’s financial statements to understand the relationship with those assets that havenot been derecognised and their associated liabilities. In addition, the amendment requires disclosures aboutthe entity’s continuing involvement in derecognised assets to enable the users to evaluate the nature of, and risksassociated with, such involvement. The Group does not have any assets with these characteristics so there has beenno effect on the presentation of its financial statements.62

IAS 12 Deferred Taxes - Recovery of Underlying AssetsUnder the amendments, investments properties that are measured using the fair value model in accordance withIAS 40 are presumed to be recovered entirely through sale for the purpose of measuring deferred taxes unless thepresumption is rebutted. This amendment has no impact on the group’s financial statements.New and revised IFRSs in issue but not yet effective• IFRS 7 :• IFRS 9 :• IFRS 10:• IFRS 11:• IFRS 12:• IFRS 13:• IAS 1 :• IAS 19 :• IAS 27 :• IAS 28 :• IAS 32 :Financial Instruments: DisclosuresFinancial Instruments: Classification and MeasurementConsolidated Financial StatementsJoint ArrangementsDisclosures of Interests in Other EntitiesFair Value MeasurementPresentation of Financial StatementsEmployee BenefitsSeparate Financial StatementsInvestments in Associates and Joint VenturesFinancial Instruments: PresentationThe Group has not applied these new and revised IFRS. Following are the significant changes that are related tothe group activities:For annual periods beginning on or after 1 July 2012IAS 1 Presentation of Financial StatementThe amendments to IAS 1 require items of other comprehensive income to be grouped into two categories in theother comprehensive income section: (a) items that will not be reclassified subsequently to profit or loss and (b) itemsthat may be reclassified subsequently to profit or loss when specific conditions are met. The amendment affectspresentation only and has no impact on the Group’s financial position or performance.For annual periods beginning on or after 1 January 2013IFRS 10 Consolidated Financial StatementsIFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidatedfinancial statements and of SIC-12 Consolidation – Special Purpose Entities.Under IFRS 10, there is only one basis for consolidation, that is, control. In addition, IFRS 10 includes a new definitionof control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from itsinvolvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’sreturns. The Group expects the application of this standard will have no significant impact on the group financialstatements.As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries,jointly controlled entities, and associates in separate financial statements. The Group does not present separatefinancial statements.63

Annual Report 2012IFRS 11 Joint ArrangementsThe standard replaces IAS 31 “Interests in Joint Ventures”. The standard removes the option to account for jointlycontrolled entities (JCEs) using proportionate consolidation. Instead, JCEs must be accounted for using the equitymethod. The standard has no significant effect on the financial statements of the Group.IFRS 12 Disclosure of Involvement with Other EntitiesIFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements,associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are moreextensive than those in the current standards.As a consequence of the new IFRS 11 and IFRS 12; IAS 28 has been renamed IAS 28 “Investments in Associatesand Joint Ventures”, and describes the application of the equity method to investments in joint ventures in additionto associates.IFRS 13 Fair Value MeasurementIFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair valuemeasurements. The Standard defines fair value, establishes a framework for measuring fair value, and requiresdisclosures about fair value measurements.The group anticipates that the application of the new standard may affect certain amounts reported in the financialstatements and result in more extensive disclosures in the financial statements.For annual periods beginning on or after 1 January 2014IFRS 7 “Financial Instruments – Disclosures” and IAS 32 “Financial Instruments – Presentation”The amendments to IAS 32 clarify existing application issues relating to the offset of financial assets and financialliabilities requirements. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceableright of set-off’.The amendments to IFRS 7 require entities to disclose information about rights of offset and related arrangements.The amendments to IFRS 7 are effective for annual periods beginning on or after 1 January 2013 retrospectively.However, the amendments to IAS 32 are not effective until annual periods beginning on or after 1 January 2014,with retrospective application required.For annual periods beginning on or after 1 January 2015IFRS 9 Financial Instruments: Classification and MeasurementIFRS 9 introduced new requirements for the classification and measurement of financial assets and financialliabilities and for derecognition. The Group anticipates that the application of IFRS 9 in the future may have impacton amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicableto provide a reasonable estimate of the effect of IFRS 9 until a detailed review has been completed.64

2.3 Significant Accounting Policies2.3.1 Basis of ConsolidationSubsidiariesThe consolidated financial statements incorporate the financial statements of the Company and entities (includingspecial purpose entities) controlled by the Company (its subsidiaries). Control is achieved where the Company hasthe power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidatedstatement of comprehensive income from the effective date of acquisition and up to the effective date of disposal,as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to thenon-controlling interests even if this results in the non-controlling interests having a deficit balance.When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policiesinto line with those used by other members of the Group.All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over thesubsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the noncontrollinginterests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any differencebetween the amount by which the non-controlling interests are adjusted and the fair value of the consideration paidor received is recognised directly in equity and attributed to owners of the Company.When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated asthe difference between (i) the aggregate of the fair value of the consideration received and the fair value of anyretained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of thesubsidiary and any non-controlling interests.Any related accumulated items in equity will be accounted for as if the Company had directly disposed of therelevant assets (reclassified to profit or loss or transferred directly to retained earnings). The fair value of anyinvestment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initialrecognition for subsequent accounting.65

Annual Report 2012Business combinationsAcquisitions of businesses combination are accounted for using the acquisition method. The consideration transferredin a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair valuesof the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and theequity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generallyrecognised in profit or loss as incurred.At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair valueat the acquisition date, except deferred tax assets or liabilities, liabilities or equity instruments related to sharebased payment arrangements and assets that are classified as held for sale in which cases they are accounted for inaccordance with the related IFRS.Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controllinginterests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree over the netof the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment,the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sumof the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of theacquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as abargain purchase gain.Non-controlling interests may be initially measured either at fair value or at the non-controlling interests’ proportionateshare of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is madeon a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, whenapplicable, on the basis specified in another IFRS.When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree isremeasured to fair value at the acquisition date (the date when the Group obtains control) and the resulting gain orloss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition datethat have previously been recognised in other comprehensive income are reclassified to profit or loss where suchtreatment would be appropriate if that interest were disposed off.GoodwillGoodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of thebusiness less accumulated impairment losses, if any.For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groupsof cash-generating units) that is expected to benefit from the synergies of the combination.A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequentlywhen there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is lessthan its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocatedto the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Anyimpairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is notreversed in subsequent periods.On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determinationof the profit or loss on disposal.66

2.3.2 Property, plant and equipmentsProperty, plant and equipments are stated at cost less accumulated depreciation and any impairment losses.Cost includes the purchase price and directly associated costs of bringing the asset to a working condition for itsintended use. Maintenance and repairs, replacements and improvements of minor importance are expensed asincurred. In situations, where it is clearly demonstrated that the expenditure has resulted in an increase in the futureeconomic benefits expected to be obtained from the use of an item of property, plant and equipment beyond itsoriginally assessed standard of performance, the expenditure is capitalized.Depreciation is calculated based on estimated useful life of the applicable assets except for the land on a straightline basis. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carryingamount is greater than its estimated recoverable amount.The assets’ residual values, useful lives and depreciation method are reviewed at the end of each reporting period,with the effect of any changes in estimate accounted for on a prospective basis.Gains or losses on disposals are determined by the difference between the sales proceeds and the carrying amountof the asset and is recognized in the consolidated income statement.2.3.3 Intangible assetsIntangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisationand accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated usefullives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with theeffect of any changes in estimate being accounted for on a prospective basis.Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulatedimpairment losses.An intangible asset is derecognised on disposal, or when no future economic benefits are expected from useor disposal. Gains or losses arising from derecognition of measured as the difference between the net disposalproceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.2.3.4 Impairment of tangible and intangible assets other than goodwillAt the end of each reporting period, the Group reviews the carrying amount of its tangible and intangible assets todetermine whether there is any indication that those assets have suffered an impairment loss. If any such indicationexists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (ifany).The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Impairment lossesare recognised in the income statement for the period in which they arise. When an impairment loss subsequentlyreverses, the carrying amount of the asset is increased to the extent that it does not exceed the carrying amount thatwould have been determined had no impairment loss been recognised for the asset in prior years. A reversal of animpairment loss is recognised immediately in profit or loss.67

Annual Report 20122.3.5 Financial instrumentsFinancial assets and financial liabilities are recognised when a group entity becomes a party to the contractualprovisions of the instrument.Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directlyattributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets andfinancial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financialassets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to theacquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediatelyin profit or loss.Financial assetsFinancial assets are classified into the following specified categories: financial assets ‘at fair value through profit orloss’ (FVTPL), held to maturity, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classificationdepends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Allregular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. TheGroup has determined the classification of its financial assets as follows:Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quotedin an active market. Loans and receivables (including trade and other receivables and cash and cash equivalent)are measured at amortised cost using the effective interest method, less any impairment.Available for sale (AFS)AFS financial assets are non-derivatives and are not classified as (a) loans and receivables, (b) held-to-maturityinvestments or (c) financial assets at fair value through profit or loss.The financial assets available for sale is re-measured at fair value. The fair value is determined in the mannerdescribed in note 3.Changes in the fair value of available-for-sale financial assets are recognised in other comprehensive incomeand accumulated under the heading of changes in fair value reserve. Where the investment is disposed of oris determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluationreserve is reclassified to profit or loss.AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot bereliably measured are measured at cost less any identified impairment losses at the end of each reporting period.Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the dividendsis established. Foreign exchange gains and losses are recognised in other comprehensive income.68

Impairment in valueFinancial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reportingperiod. Financial assets are considered to be impaired when there is objective evidence that, as a result of one ormore events that occurred after the initial recognition of the financial asset, the estimated future cash flows of theinvestment have been affected.For AFS equity investments, a significant or prolonged decline in the fair value of the security below its cost isconsidered to be objective evidence of impairment.For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’scarrying amount and the present value of the estimated future cash flows discounted at the current market rate of returnfor a similar financial asset.The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with theexception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Whena trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveriesof amounts previously written off are credited to the income statement.When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in othercomprehensive income are reclassified to profit or loss in the period.For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment lossdecreases and the decrease can be related objectively to an event occurring after the impairment was recognised,the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount ofthe investment at the date the impairment is reversed does not exceed what the amortised cost would have been hadthe impairment not been recognised.In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed throughprofit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensiveincome.DerecognitionThe Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, orwhen it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to anotherentity.On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sumof the consideration received and receivable and the cumulative gain or loss that had been recognised in othercomprehensive income and accumulated in equity is recognised in profit or loss.Financial liabilitiesFinancial liabilities (including borrowings) are recognised initially at fair value, net of transaction costs incurred andsubsequently measured at amortised cost using the effective interest method. Any difference between the proceeds (netof transaction costs) and the redemption value is recognised in the income statement over the period of the borrowingsusing the effective interest method.DerecognitionThe Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged andexpired. The difference between the carrying amount of the financial liability derecognised and the considerationpaid and payable is recognised in profit or loss.69

Annual Report 20122.3.6 InventoriesInventories are stated at the lower of cost or net realisable value. Raw materials cost is determined on a weightedaverage cost basis. The cost of finished goods includes direct materials, direct labour and fixed and variablemanufacturing overhead, and other costs incurred in bringing inventories to their present location and condition.Net realizable value is the estimated selling prices less all the estimated costs of completion and costs necessaryto make the sale.2.3.7 End of service indemnityThe Group is liable under Kuwait Labour Law to make payments under defined benefit plans to employees attermination of employment, regarding the labour in other countries; the indemnity is calculated based on lawidentified in these countries. Such payment is made on a lump sum basis at the end of an employee service. Definedbenefit plan is un-funded and is based on the liability that would arise on involuntary termination of all employeeson the balance sheet date. This basis is considered to be a reliable approximation of the present value of theGroup’s liability.2.3.8 ProvisionsProvisions are recognized when the Group has a present legal or constructive obligation as a result of past events;it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliablyestimated. Provisions are measured at the present value of the consideration expected to be required to settle theobligation using a rate that reflects current market assessments of the time value of money and the risks specific tothe obligation.2.3.9 Treasury sharesTreasury shares represent the Parent Company’s own shares that have been issued, subsequently purchased by theGroup and not yet reissued or cancelled. Treasury shares are accounted for using the cost method. Under the costmethod, the total cost of the shares acquired is reported as a contra account within equity when the treasury sharesare disposed; gains are credited to a separate un-distributable account in equity “gain on sale of treasury shares”.Any realised losses are charged to the same account in the limit of its credit balance, any additional losses arecharged to retained earnings to reserves and then to premium. Gains realised subsequently on the sale of treasuryshares are first used to offset any previously recorded losses in reserves, retained earnings and the gain on sale oftreasury shares.70

2.3.10 DividendsThe dividends attributable to shareholders of the Parent Company are recognized as liabilities in the consolidatedfinancial statements in the period in which the dividends are approved by the Parent Company’s shareholders.2.3.11 Foreign currenciesFunctional and presentation currencyItems included in the financial statements of each of the Group’s entities are measured using the currency of theprimary economic environment in which the entity operates (‘the functional currency’). The consolidated financialstatements are presented in ‘Kuwaiti Dinars’ (KD).Transactions and balancesForeign currency transactions are translated into Kuwaiti Dinars using the exchange rates prevailing at the datesof the transactions. At the end of each reporting period, monetary items denominated in foreign currencies areretranslated at the rates prevailing at that date. Foreign exchange gains and losses are resulted from the settlementof such transactions and from the translation at year-end in the income statement.Group companiesThe results and financial position of all the Group entities that have a functional currency different from thepresentation currency are translated into the presentation currency as follows:• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balancesheet.• Income and expenses for each income statement are translated at average exchange rates.• All resulting exchange differences are recognized as a separate component of equity.2.3.12 Revenues recognitionRevenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimatedcustomer returns and other similar allowances.• Revenues from sale of goods are recognized when significant risks and rewards of ownership have been transferredto the buyer. These risks and rewards are transferred generally to the buyer on delivery and legal title is passed.• Services revenues are recognized when the services are rendered.• Dividend income is recognized when the right to receive payment has been established.• Interest income from deposits is recognized on time basis, and other revenues and expenses are recognized on anaccrual basis.71

3. Financial risk management3.1 Financial risk factorsThe Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interestrate risk, cash flow interest rate risk and price risk) in addition to credit risk and liquidity risk.The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks tominimize potential adverse effects on the Group’s financial performance. The Group has the contractual rights touse derivative financial instruments in order to hedge certain risk exposures.Risk management is carried out by a central treasury department (Group treasury) under general guidelines byexecutive management. Group treasury identifies, evaluates and hedges financial risks in close co-operation withthe Group’s operating units and its financial institutions.(A) Market riskForeign exchange riskThe Group operates in various countries and undertakes transactions denominated in various currencies, otherthan Kuwaiti Dinar. Foreign exchange risk arises from its future commercial transactions, recognized assets andliabilities and net investments in foreign operations.Foreign exchange environment is monitored on an ongoing basis to determine fluctuations of foreign currenciesagainst local currencies where each subsidiary need of foreign funds is identified and how such funds would bemade available. The Group treasury policy is to hedge its future needs of the major foreign currencies for subsequent12 months. Major Banks in each country of operation that regularly provides advices to Group companies in termsof foreign currency trends.The Group treasury also coordinates between its subsidiaries to undergo foreign exchange transactions betweenthem whenever a need arises. All Group companies borrow in their local currency. Nevertheless, as a Group’spolicy, all companies borrowing in foreign currencies must have a stream of relevant foreign income to repay itsforeign currencies exposures.The Group has certain investments in foreign countries, whose net assets are exposed to foreign currency translationrisk. Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily throughborrowings denominated in the relevant foreign currencies. During 2012, 2011 the Group did not use the hedgingactivities to hedge the foreign exchange risk.73

Annual Report 2012The Group is mainly exposed to foreign currency risk as a result of gain or losses from translated assets andliabilities denominated in foreign currencies, such as cash and cash equivalents, investments, receivables, creditors,loans and bank facilities. Following is the effect of change in main foreign currencies position by 10% as at 31December:Profit and lossEquity2012 2011 2012 2011US Dollar 522 410 2,083 1,832Price riskThe Group is exposed to equity securities price risk as a result of investments held by the Group and classified eitheras available for sale or at fair value through profit or loss. To manage this risk, the Group diversifies its portfolio inthe light of limits set out by the Group.The Group keeps its investments at specialized investments companies. A monthly report is sent to the Groupmanagement about the investments performance in order to follow up and take the necessary action whenrequired.Based on the assumption that the K.S.E. equity index had decreased by 5% with all other variables held constant,net profit of the Group will be decreased by KD 26 thousand and change in fair value reserve would be decreasedby KD 6,401 thousand as at 31 December 2012 (2011 - the profit is decreased by KD 815 thousand and changein reserve decreased by KD 5,755 thousand). Assuming that there is increase in Kuwait Stock of Exchange marketby 5%, with all variables held constant, the equity will be increased by KD 6,427 thousand (2011 – increased byKD 6,570 thousand).74Cash Flow and fair value interest rate riskFinancial assets and liabilities affected by interest rate fluctuations are cash deposits and bank loans.The Group’s treasury ensures that deposits are maintained at the best prevailing market rate at the time of maintainingeach deposit. The Group maintains banks contracts for all of its borrowings, whereby interest rates are linked tointernational and local benchmarks.The Group is not exposed to the fair value risk of its borrowings as all the borrowings bear variable interest rates.The Group main risk exposure is the cash flow interest rate risk. The Group analyses its interest rate exposure on acontinuous basis where a monthly review of all facilities takes place to ensure that the Group is being granted thepossible competitive interest rates. The Group has the rights to enter into interest rate swaps at any time to managethe effect of interest rate changes whenever it is needed.The Group study in regular basis all the income data related to the interest rate to determine the probability ofchanges in interest rates and the effect of such changes in the cash flow of the Group and the net profit in order totake the necessary actions in the timely manner.During 2012 and 2011, the Group did not get into any hedging swap interest rate contracts to hedge the cashflow interest rate risk.At 31 December 2012, if interest rate on bank facilities had increased by 0.7% with all other variables heldconstant, net profit for the year would have decreased by KD 664 thousand (2011 - KD 741 thousand).All amounts in 000’ Kuwaiti Dinars

(B) Credit riskCredit risk arises from cash and cash equivalent and trade receivable. Credit risk is the risk that the Group will incura loss because of its customer, counter party failed to discharge their contractual obligation.The Group manages credit risk exposure arising from cash at banks by dealing with well-established banks ofsound strong standing in the countries in which it operates.The operating unit’s managements assess the credit quality of the customers taking into account their financialpositions, past experience and other relevant factors. The utilization of credit limits is regularly monitored.No credit limits were exceeded at the statement of financial position date and management does not expect anylosses from non-performance by its counterparties.As the Group is working in different countries with different economic environments, the Group has set creditpolicies in each subsidiary, the following are the common features of the Group credit policies:--Sales to retail customers in restaurants business line are settled in cash or credit cards.The Group deals with well-known hyper markets which have strong credit position. The Group identifies the necessarycredit limit based on assessment of credit quality to each client separately.-When necessary, the Group obtains collaterals from clients in form of deposits, letter of guarantees to reduce thecredit risk. The fair value of collaterals is disclosed in (note 9).(C) Liquidity riskPrudent liquidity risk management implies maintaining sufficient internally generated cash, trading investments andexternal funding through an adequate amount of committed credit facilities.Subsidiaries’ annual budgets are thoroughly reviewed to ensure that proceeds and external funding are adequatelyavailable to meet each subsidiary operational needs. During the year, the Group treasury continuously monitors itssubsidiaries actual cash flows and quickly responds to any change that might impact on the ability of the subsidiaryto meet its financing needs. As a Group’s policy, borrowings are not concentrated with a single bank in eachcountry, it include a mix of reputable international, local and regional banks.The table below analyses the Group’s financial liabilities into relevant maturity Groupings based on the remainingperiod at the statement of financial position to the contractual maturity date. The amounts disclosed in the table arethe contractual undiscounted cash flows.Less than1 year2012Between 1and 2 yearsBetween 2and 5 yearsBorrowings and bank facilities 68,942 23,812 8,773Trade and other payables 130,570 - -Less than1 year2011Between 1and 2 yearsBetween 2and 5 yearsBorrowings and bank facilities 75,563 28,296 12,928Trade and other payables 120,558 - -All amounts in 000’ Kuwaiti Dinars75

Annual Report 20123.2 Capital risk managementThe Group manages its capital to ensure that` entities in the Group will be able to continue as going concern whilemaximising the return to stakeholders through the optimisation of the debt and equity balance.The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents balances)and equity (comprising issued capital, reserves, retained earnings and non-controlling interests).The gearing ratio as at 31 December is as follows:2012 2011Total borrowings 90,837 104,492Less: cash and cash equivalents (52,270) (51,421)Net debt 38,567 53,071Total equity 350,883 329,288Total capital 389,450 382,359Gearing ratio (%) 10 143.3 Fair value estimationThe fair values of financial assets and financial liabilities are determined as follows:• Level one:• Level two:Quoted prices in active markets for identical assets or liabilities.Quoted prices in an active market for similar instruments or prices quoted by managers of investmentfunds or other valuation methods where all the important inputs are based on comparative marketdata either directly or indirectly.• Level three: Inputs for the asset or liabilities that are not based on observable market data.The table below represents the financial instrument’s analysis that was recorded at fair value on the levels mentionedabove:2012Level one Level two TotalAvailable for sale investments 111,307 1,019 112,3262011Level one Level two TotalAvailable for sale investments 109,849 978 110,827Investments whose fair value cannot be reliably determined are measured at cost less any identified impairmentlosses (note7).All amounts in 000’ Kuwaiti Dinars76

4. Critical accounting estimates and assumptionsIn the application of the Group’s accounting policies, the Management is required to make judgements, estimatesand assumptions about the carrying amounts of assets and liabilities that are not readily apparent from othersources. The estimates and associated assumptions are based on historical experience and other factors that areconsidered to be relevant. Actual results may differ from these estimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimatesare recognised in the period in which the estimate is revised if the revision affects only that period, or in the periodof the revision and future periods if the revision affects both current and future periods. The following are the keyassumptions concerning the future, and other key sources concerning current period, that have a significant risk ofcausing a material adjustment to the carrying amounts of assets and liabilities within the next financial years.Valuation of financial instrumentsAs described in (note 3.3), the Group uses valuation techniques that include inputs that are not based on observablemarket data to estimate the fair value of certain types of financial instruments. The management believe that thechosen valuation techniques and assumptions used are appropriate in determining the fair value of financialinstruments.Impairment of tangible and intangible assetsThe Group reviews the tangible and intangible assets on a continuous basis to determine whether a provision forimpairment should be recorded in the statement of income. In particular, considerable judgment by managementis required in the estimation of the amount and timing of future cash flows when determining the level of provisionsrequired. Such estimates are necessarily based on assumptions about several factors involving varying degrees ofjudgment and uncertainty, and actual results may differ from what is estimated resulting in future changes to suchprovisions. The impact of such impairment on these financial statements is disclosed in notes (5 and 6).Evidence of impairment of investmentsManagement determines the impairment in equity instruments classified as available for sale when there is asignificant or prolonged decline in the fair value of these investments. Determination of what is significant orprolonged requires judgment from management. The Group evaluates, among other factors, the usual fluctuationof listed stock prices, expected cash flows and discount rates of unquoted investments, impairment is consideredappropriate when there is objective evidence on the deterioration of the financial position for the investee, includingfactors such as industry and sector performance, changes in technology and operational and financing cash flows.The impact of such impairment on these financial statements is disclosed in note (7).77

Annual Report 2012Impairment of inventoryAs each financial position date, management assesses whether there is any indication that inventory is impaired.The determination of impairment requires considerable judgment and involves evaluating factors including, industryand market conditions. The impact of such impairment on these financial statements is disclosed in note (8).Impairment of ReceivablesThe Group’s management determines impairment of receivables in the light of the Group’s previous experienceabout collectability, overdue period, change in global and local economies which led the customers to default inpayment. Impairment of receivables is recorded for receivables which are matured and not settled for more than90 days. The impact of such impairment on these financial statements is disclosed in note (9).Contingent liabilities / liabilitiesContingent liabilities are potential liabilities that arise from past events whose existence will be confirmed onlyby the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of theentity. Provisions for liabilities are recorded when a loss is considered probable and can be reasonably estimated.The determination of whether or not a provision should be recorded for any potential liabilities is based onmanagement’s judgment.TaxesThe Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining theprovision for income taxes. There are many transactions and calculations for which the ultimate tax determinationis uncertain during the ordinary course of business. The Group recognizes a liability for anticipated taxes basedon estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different fromthe amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions inthe period in which such determination is made.Any changes in the estimates and assumptions may have an impact on the carrying values of the deferred taxassets.78

5. Property, plant and equipmentsCostLandDecoration& FurnitureBuilding& coldroom2012Equipment& toolsVehiclesProjects inprogressAs at 1 January 35,966 92,484 83,583 166,022 25,687 25,516 429,258Additions 263 5,847 6,648 13,615 2,299 25,945 54,617Disposals - (7,121) (859) (4,556) (3,030) (135) (15,701)Foreign currency translation (1,309) (577) (1,959) (3,120) (552) (982) (8,499)Transfers (898) 5,899 3,455 14,904 878 (25,234) (996)As at 31 December 34,022 96,532 90,868 186,865 25,282 25,110 458,679Accumulated depreciationAs at 1 January - 61,655 32,732 97,365 19,209 - 210,961Depreciation for the year - 12,587 3,529 15,078 2,913 - 34,107Disposals - (6,683) (656) (4,092) (2,830) - (14,261)Impairment - 33 - 162 1 - 196Foreign currency translation - (360) (376) (1,450) (404) - (2,590)Transfers - (1,494) 260 964 (33) - (303)As at 31 December - 65,738 35,489 108,027 18,856 - 228,110Net Book ValueAs at 31 December 34,022 30,794 55,379 78,838 6,426 25,110 230,569Useful lives (years) - 5-7 5-25 4-7 4Total2011LandDecoration& FurnitureBuilding& coldroomEquipment& toolsVehiclesProjects inprogressTotalCostAs at 1 January 36,799 96,233 80,277 161,840 25,630 17,239 418,018Additions 578 3,373 2,983 8,755 1,851 25,540 43,080Disposals )96( (12,230) (784) (4,116) )2,259( )2,336( (21,821)Foreign currency translation )1,315( )1,185( )2,055( (3,824) )652( )628( (9,659)Transfers - 6,293 3,162 3,367 1,117 )14,299( (360)As at 31 December 35,966 92,484 83,583 166,022 25,687 25,516 429,258Accumulated depreciationAs at 1 January - 60,361 30,088 87,645 18,711 - 196,805Depreciation for the year - 12,887 3,615 14,467 3,080 - 34,049Disposals - (11,387) (479) (3,625) (2,093) - (17,584)Impairment - 809 6 240 - - 1,055Foreign currency translation - )680( )449( )1,773( )462( - )3,364(Transfers - )335( (49) 411 )27( - -As at 31 December - 61,655 32,732 97,365 19,209 - 210,961Net Book ValueAs at 31 December 35,966 30,829 50,851 68,657 6,478 25,516 218,297All amounts in 000’ Kuwaiti Dinars79

Annual Report 201280Depreciation has been charged to the statement of income as follow:2012 2011Cost of sales 30,811 31,073Selling and marketing expenses 3,278 2,959General and administrative expenses 18 1734,107 34,049During the year, the Group reviewed the recoverable amount of some restaurants and related equipment whichresulted in impairment of KD 196 thousand was recorded in the consolidated statement of income for the current year(KD 1,055 thousand – 2011). The recoverable amount of such assets has been determined on the basis of their valuein use. The discount rate used in measuring value in use was 11% per annum.The Group has capitalized borrowing costs of KD 522 thousand for projects in progress during the year ended 31December 2012 (KD 376 thousand – 2011).Property, plant and equipment include lands and buildings amounted to KD 8,723 thousand as at31 December 2012 (KD 9,216 thousand – 2011) owned based on initial contracts. The necessary legal proceduresto transfer these lands and buildings on behalf of the Group are still in progress.6. Intangible assetsGoodwillFranchises& agencies2012Key MoneyCost:As at 1 January 2,492 10,383 13,153 26,028Additions - 1,350 210 1,560Transfers - 619 377 996Disposals - (553) (78) (631)Impairment (395) - - (395)Foreign currency translation (44) (15) (57) (116)As at 31 December 2,053 11,784 13,605 27,442AmortizationAs at 1 January - 6,908 7,134 14,042Amortization - 785 1,008 1,793Transfers - 502 (199) 303Disposals - (362) (64) (426)Impairment - 9 2 11Foreign currency translation - (6) (10) (16)As at 31 December - 7,836 7,871 15,707Net Book Value as at 31 December 2,053 3,948 5,734 11,735GoodwillFranchises& agencies2011Key MoneyCost:As at 1 January 2,537 10,113 14,115 26,765Additions - 984 467 1,451Transfers - 174 186 360Disposals - )799( )1,461( )2,260(Foreign currency translation (45) )89( )154( (288)Balance as at 31 December 2,492 10,383 13,153 26,028AmortizationAs at 1 January - 6,674 6,341 13,015Amortization - 796 1,191 1,987Disposals - )548( (405) (953)Impairment - 42 35 77Foreign currency translation - )56( )28( )84(As at 31 December - 6,908 7,134 14,042Net Book Value as at 31 December 2,492 3,475 6,019 11,986TotalTotalAll amounts in 000’ Kuwaiti Dinars

7. Available for sale investments2012 2011Local shares – quoted 88,485 92,785Foreign shares – quoted 23,841 18,042Local shares – unquoted - 1,100Foreign shares – unquoted 1,810 1,826114,136 113,7537.1 Investments at unquoted shares were carried at cost as its fair value cannot reliably measured as at thefinancial statements date. The Group’s management believes that no indication of impairment in respect ofthese investments.7.2 During the year, the Group’s management determined an impairment loss for the available for sale investmentsof KD 7,622 thousand for the year ended 31 December 2012 (2011: KD 8,913 thousand) (note 19).7.3 Available for sale investments are dominated into the following currencies:2012 2011Kuwaiti Dinar 90,135 95,534US Dollar 21,262 16,008Egyptian Pound 323 369UAE Dirham 2,416 1,842114,136 113,7538. Inventories2012 2011Raw materials 52,680 50,003Finished goods 12,731 14,218Filling and packing materials 12,532 11,495Other materials 10,153 9,427Goods in transit 4,458 5,28792,554 90,430Slow-moving items provision )3,102( (2,798)Spare parts 9,640 9,14899,092 96,780The cost of inventories recognised as an expense during the year was KD 408,548 thousand (2011: KD 364,070thousand). This amount includes KD 335 thousand provided during 2012 (2011: KD 274 thousand) in respect ofwrite-downs of inventory to net realisable value, and the expense has been also reduced by KD 31 thousand during2012 (2011: KD 2,734 thousand), in respect of the reversal of such write-downs.All amounts in 000’ Kuwaiti Dinars81

Annual Report 20129. Trade receivables2012 2011Trade receivables 46,865 43,325Other receivables 12,985 13,000Due from related parties (note 25) 515 1,30760,365 57,632Allowance for doubtful debts )6,585( (6,594)53,780 51,038The average credit period granted to trade receivables on sales of goods is 90 days. No interest is charged ontrade receivables. There are no customers who represent more than 5% of the total balance of trade receivables.Trade receivables which are not matured and not impaired amounted to KD 48,076 thousand (KD 48,461 thousandas at 31 December 2011).Trade receivables which are past due and not impaired amounted to KD 5,704 thousand as at 31 December 2012(KD 2,577 thousand as at 31 December 2011) included an amount of KD 5,458 thousand represents balances duefrom 3 to 6 months, the remaining amount is due for more than six months (KD 2,075 Thousand – 2011). The fair valueof the guarantees obtained by the Group is amounted to KD 13,245 thousand (KD 12,813 thousand – 2011).Trade receivables which are impaired and fully provided amounted to KD 6,585 thousand as at31 December 2012 (KD 6,594 thousand as at 31 December 2011). Movement on the provision for doubtful debtsduring the year are as follows:2012 2011Balance at 1 January 6,594 6,626Provisions provided during the year 421 346Written off debts )259( (84)Reversal of provision no longer required )171( (294)As at 31 December 6,585 6,594The carrying amount of receivable are denominated in the following currencies:2012 2011Kuwait Dinar 8,200 7,323Saudi Riyal 9,336 9,201UAE Dirham 14,022 11,278US Dollar 7,383 5,170Egyptian Pound 14,004 17,447Other currencies 835 61953,780 51,03882All amounts in 000’ Kuwaiti Dinars

10. Other receivables2012 2011Prepaid expenses 18,557 16,579Refundable deposits 4,150 3,951Accrued income 2,995 2,755Other 13,341 13,14239,043 36,42711. Cash and cash equivalents2012 2011Cash on hand and banks’ current accounts 24,729 24,388Time deposits and banks’ call accounts 27,541 27,03352,270 51,421The average effective interest rate on the deposits and banks’ call accounts was 0.03% - 9% as at31 December 2012 (0.03% - 7.65% as at 31 December 2011).12. Share capitalThe issued and paid up capital is KD 40,200 thousands comprising of 402,002 thousand shares with nominalvalue of 100 fils each as at 31 December 2012 and 2011. All shares are in cash.13. Treasury shares2012 2011Number of shares (thousand shares) 10,848 10,848Percentage to issued share capital (%) 2.7 2.7Market value 18,876 15,83814. Statutory reserveIn accordance with the Company’s Articles of Association, 10% of the net profit before KFAS, National LabourSupport Tax, Board of Directors’ remuneration and Zakat expense for the year is required to be transferred tostatutory reserve. The General Assembly may resolve to discontinue such annual transfers when the statutoryreserve reaches 50% of the Company’s paid up capital. Distribution of the statutory reserve is limited to the amountrequired to enable the payment of a dividend of 5% of paid up capital to be made in years when accumulatedprofits are not sufficient for the payment of such dividend.All amounts in 000’ Kuwaiti Dinars83

Annual Report 201215. Voluntary reserveIn accordance with the Company’s Articles of Association, 5% of net profit for the year is to be transferred to thevoluntary reserve. This transfer may be stopped by a resolution adopted by the ordinary assembly as recommendedby the Board of Directors. There are no restrictions on distributions from the voluntary reserve. The transfer ceasedin accordance with the ordinary General Assembly decision on 12 April 1999.16. Non-Controlling interests2012 2011Balance at 1 January 37,909 42,325Share from net profit for the year 4,061 6,450Other comprehensive income itemsForeign currency translation differences )1,099( (1,619)Change in fair value of investments available for sale 1,008 (2,160)Total other comprehensive income items )91( (3,779)Changes in subsidiary’s ownership - (1,390)Share from subsidiary’s capital increase 268 -Cash dividends from subsidiaries )4,619( (5,697)Change in non-controlling interest )4,351( (7,087)Balance at 31 December 37,528 37,90917. Borrowings and bank facilities2012 2011Short termBank overdraft 44,921 38,898Loans 16,752 29,36861,673 68,266Long termLoans 29,164 36,22690,837 104,492Maturity of borrowings is as follows:2012 2011Within one year 61,673 68,266One to three years 26,860 30,741Over three years 2,304 5,48590,837 104,49284Loans are carried at variable interest rates. The effective interest rate on the loans was 8.6% as at31 December 2012 (7.8% as at 31 December 2011).Loans include an amount of KD 30,413 thousand as at 31 December 2012 (KD 40,751 thousand – 2011) securedagainst issuance of promissory notes, letters of guarantee, commercial pledge on tangible and intangible assets ofsome subsidiaries and pledge of inventory, also by a joint security issued by the Company.All amounts in 000’ Kuwaiti Dinars

The carrying amounts of the borrowings are denominated in the following currencies:2012 2011Kuwaiti Dinar 2,050 1,981US Dollar 4,611 11,654Egyptian Pound 67,378 69,049Other currencies 16,798 21,80818. Trade and other payables90,837 104,4922012 2011Trade payables 39,473 34,989Non-trade payables 22,734 21,971Accrued expenses and salaries 26,424 27,849Provisions and other liabilities 20,648 17,427Other credit balances 12,710 10,409Refundable deposits 1,469 1,334Accruals to staff 4,150 3,611Dividends 382 374Board of Directors’ remunerations 72 72Taxes and deductions 2,508 2,52219. (losses)/ gains from available for sale investments130,570 120,5582012 2011Realized (losses)/ gain )5,044( 2,323Impairment of available for sale investments )7,622( (8,913)Cash dividends 6,238 12,936Management fees )335( (359)20. Earnings per share)6,763( 5,987Earnings per share are computed by dividing the net profit attributable to the equity shareholders of the Companyby the weighted average number of the issued ordinary shares after deducting the weighted average of treasuryshares during the year as follows:2012 2011Net profit for the year attributable to the shareholders of the Company 45,903 48,022Weighted average number of issued shares (thousand share) 402,002 402,002Weighted average number of treasury shares (thousand share) )10,848( (10,848)Weighted average number of outstanding shares (thousand share) 391,154 391,154Eearnings per share (Fils) 117 12321. Cash dividendsOn 26 March 2012, the shareholders approved the Group’s financial statements for the year ended31 December 2011, and approved cash dividends of 65% from profits of 2011.On 14 February 2013, the board of Directors proposed a cash dividend of 65% for the year ended 31 December2012, this proposal is subject for the approval of the General Assembly and the regulatory authorities.All amounts in 000’ Kuwaiti Dinars85

Annual Report 201222. Investments in subsidiary companiesCompany’s Name ActivityIncorporationCountryOwnership (%)2012 2011Al Americana International Company (Safeway) Retail Kuwait 89.55 89.55Arab Gulf Company for Food and Supermarkets Food Kuwait 99.25 99.25Al Ahlia Restaurants Co. Restaurants Saudi Arabia 99.96 99.96National Food Industries Co. Industry Saudi Arabia 99.96 99.96International Fashion Co. Retail Saudi Arabia 100 100Bahrain and Kuwait Restaurants Co. Restaurants Bahrain 40 40International Cosmetics Co. Retail Saudi Arabia 100 100United Food Co. Food Saudi Arabia 98 98Kuwait Food Co. Food Egypt 100 100Kuwait Food Co. Restaurants UAE 100 100Americana International Company (Fashion way) Retail UAE 97.40 97.40Gulf Food Industries Co. - (California Garden) Industry UAE 100 100Qatar Food Co. Restaurants Qatar 100 100Touristic Projects and International Restaurants Co. Restaurants Jordan 63.60 63.60International Tourism Restaurants Co. Restaurants Oman 99 99International Touristic Projects Lebanese Co. Restaurants Lebanon 98 98Gulf and Arab World Restaurants Co. Restaurants Bahrain 94 94Al Inma’a Syrian Co. Restaurants Syria 80 80Gulfa for Mineral Water Industry UAE 92.70 92.70The Caspian International Restaurants Co. Restaurants Kazakhstan 100 100Americana Group for Food and Touristic Projectsand its subsidiaries: Holding Egypt 99.97 99.97- Egyptian Co. for International Touristic Projects Restaurants Egypt 90.32 90.32- The International Co. for Agricultural Dev. (Farm Frites) Industry Egypt 62.12 62.12- Al Mohandas National Co. (Beefy) Industry Egypt 94.06 94.06- Egyptian Canning Co. – Al Americana Industry Egypt 99.97 99.97- Americana Egypt for Cold Storage Services Egypt 50.99 50.99- Americana Marketing and Distributing Co. Distribution Egypt 98.93 98.93- Greenland Group for Food Industries Co. Industry Egypt 80.48 80.48- International Co. for Agriculture Production and processing Agriculture Egypt 99.92 87.26- Egyptian Company for Starch and Glucose Industry Egypt 73.65 73.65- Senyoreta Group for Food Industries Co. Industry Egypt 90.37 90.37- Cairo Poultry Group Poultry Egypt 51.97 51.97- Americana Development Agriculture Co. Agriculture Egypt 99.96 99.96- Al Hashimya for Land Reclamation & Cultivation Co. Agriculture Egypt 99.97 99.77- International Co. for Food Industry Industry Egypt 99.59 99.59- Americana for Land Reclamation & Cultivation Co. Agriculture Egypt 99.49 99.49• Although the Group owns 40% equity shares of Bahrain and Kuwait Restaurants Company. However, theGroup has the power to appoint and remove the majority of the board of directors. Therefore, Bahrain andKuwait Restaurants Company is controlled by the Group and is consolidated in these financial statements.86

23. Segment information23.1 Geographical and operating segments for the revenues and resultsThe Group activities are concentrated in two main sectors, restaurants & retail sector and industries & commercialsector. The results of the two sectors are reported to the high executive management in the Group, in addition, therevenue, results, assets and liabilities are being reported based on the geographic location where the group is workingon. The measurement of revenues, profits, assets and liabilities in accordance with the same bases of accounting usedin the preparation of consolidated financial statements. The following is the segment information which is consists withthe internal reporting presented to management:Restaurants &Retail sectorIndustries &Commercial sectorRevenuesIntercompanytransactions2012 2011 2012 2011 2012 2011 2012 2011Kuwait 76,698 72,083 33,891 34,480 (1,149) )814( 109,440 105,749Saudi Arabia 103,458 87,990 87,888 79,121 (22,849) )20,050( 168,497 147,061South Gulf 152,824 136,922 53,816 41,334 (3,014) )4,080( 203,626 174,176Egypt and Africa 80,737 67,587 238,698 218,670 (29,872) (25,372) 289,563 260,885Sham and others 38,513 32,888 - - - - 38,513 32,888Total 452,230 397,470 414,293 373,605 (56,884) (50,316) 809,639 720,759TotalRestaurants &Retail sectorSegments resultsIndustries &Commercial sectorTotal2012 2011 2012 2011 2012 2011Kuwait 14,193 8,338 2,888 2,274 17,081 10,612Saudi Arabia 14,205 12,539 8,769 6,680 22,974 19,219South Gulf 14,354 12,246 3,901 2,753 18,255 14,999Egypt and Africa 6,338 4,672 7,835 11,098 14,173 15,770Sham and others (1,214) )722( - - (1,214) )722(Total 47,876 37,073 23,393 22,805 71,269 59,878Add the following:(Loss)/ gains from Available for sale investments (6,763) 5,987Finance cost (934) )975(Other (5,003) (4,051)Net profit before tax of subsidiaries 58,569 60,839All amounts in 000’ Kuwaiti Dinars87

Annual Report 2012Assets23.2 Geographical concentration of assets and liabilitiesKuwaitSaudiArabiaSouthGulf2012Egypt &AfricaSham &othersProperty, plant and equipment and intangible assets 25,281 31,465 24,543 149,707 11,308 242,304Available for sale investments 99,136 - - 15,000 - 114,136Other assets - - - 2,355 - 2,355Inventories 12,695 21,504 11,965 50,249 2,679 99,092Trade receivables 8,200 10,158 13,987 21,083 352 53,780Other receivables 3,721 5,673 8,888 19,124 1,637 39,043Cash and cash equivalents 14,267 14,931 8,038 10,874 4,160 52,270Total assets 163,300 83,731 67,421 268,392 20,136 602,980LiabilitiesBorrowings and bank facilities 6,901 6,700 4,833 71,265 1,138 90,837Trade and other payables and End of serviceindemnity 37,398 33,807 30,891 53,330 5,834 161,260Total liabilities 44,299 40,507 35,724 124,595 6,972 252,097TotalAssetsKuwaitSaudiArabiaSouthGulf2011Egypt &AfricaSham &othersProperty, plant and equipment and intangible assets 19,976 26,227 25,538 147,152 11,390 230,283Available for sale investments 102,141 - - 11,612 - 113,753Other assets - - - 1,361 - 1,361Inventories 11,553 19,185 12,066 51,548 2,428 96,780Trade receivables 8,688 8,967 11,996 21,126 261 51,038Other receivables 3,429 5,049 8,668 18,030 1,251 36,427Cash and cash equivalents 7,107 18,192 7,152 14,670 4,300 51,421Total assets 152,894 77,620 65,420 265,499 19,630 581,063LiabilitiesBorrowings and bank facilities 14,265 5,725 8,527 75,290 685 104,492Trade and other payables and End of serviceindemnity 32,266 30,891 28,637 49,688 5,801 147,283Total liabilities 46,531 36,616 37,164 124,978 6,486 251,775TotalThere are some political changes and economical changes in Egypt, Bahrain and Syria which have a negativeeffect on the Group’s operations over there. The Group is preparing the plans necessary to ensure its going onconcern and monitoring control levels of performance and liquidity and the recoverability of the assets.88All amounts in 000’ Kuwaiti Dinars

24. Contingent liabilities and capital commitments2012 2011Contingent liabilitiesLetters of guarantee 4,953 3,616There is a conflict between the group and the tax department regarding the method of calculating the deductions.That conflict is still under legal dispute in the courts and its impact cannot be currently determined, full provisionsfor this purpose have been provided.Leased commitmentsLess than one year 10,482 10,151From two years to five years 23,224 18,731More than five years 8,454 6,79542,160 35,677Capital commitmentsLetters of credit 5,253 8,784Projects in progress commitments 9,157 9,28125. Related parties transactionsRelated parties represent shareholders who have representatives in the Boards of Directors, members of the Boardsof Directors, Senior Management and the companies who controlled by the major shareholders. In the ordinarycourse of business, the Group entered into transactions with related parties during the year. The following are thetransactions and balances resulted from these transactions:2012 2011TransactionsRevenue 256 862Expenses 170 183Portfolios’ management commission 335 359Key management benefits 4,687 3,983BalancesTrade receivables 515 1,307Key management – termination benefits 299 289All amounts in 000’ Kuwaiti Dinars89