BAHRAIN DUTY FREE

Bahrain Duty Freei n t e r nat i o na l awa r D w i n n i n g D u t y F r e e s h o p s

a n n u a l r e p o r t 2 0 1 0

Quality & Value

H.R.H. Prince Khalifa bin Salman al Khalifa

Prime Minister of the Kingdom of Bahrain

H.M. King Hamad bin Isa al Khalifa

King of the Kingdom of Bahrain

H.R.H. Prince Salman bin Hamad bin Isa al Khalifa

Crown Prince and Deputy Supreme Commander

of the Kingdom of Bahrain

2 www.bdutyfree.com

Quality & Value

Bahrain Duty Free ShOP

2010

3

Contents

General information ............................................................................................................... 4

Board of Directors ................................................................................................................. 5

Chairman’s report .............................................................................................................. 6 - 7

Independent auditors’ report to the shareholders .................................................................... 9

ConSolIdated fInanCIal StateMentS

for the year ended 31 December 2010

Consolidated statement of financial position ......................................................................... 10

Consolidated statement of comprehensive income ............................................................... 11

Consolidated statement of changes in equity ................................................................. 12 - 13

Consolidated statement of cash flows ................................................................................... 14

Notes to the consolidated financial statements ............................................................. 15 - 32

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General InformatIonReGIStRatIon

Bahrain Duty Free Shop Complex BSC, a joint stock company governed by the Bahrain Commercial Companies Law 2001,

was registered under commercial registration number 23509 on 15 July 1990. The company is an 80% shareholder in

Bahrain International Retail Development Centre WLL, which was established in July 2000.

SHaRe CaPItal

autHoRISed : BD 6,795,360 (2009: BD 5,227,200) divided into 67,953,600 shares

(2009: 52,272,000 shares) of 100 fils each

ISSued and fullY PaId-uP : BD 6,795,360 (2009: BD 5,227,200)

InVeStMent CoMMIttee : Farouk Yousuf Almoayyed

Abdulla Buhindi

audIt CoMMIttee : Jawad Al Hawaj

Nabil Al Zain

Mazen Abdulkarim

Ghassan Al Sabbagh

Mohammed Al Khan

ManaGInG aGent : AerRianta International (Middle East) WLL

CoMPanY SeCRetaRY : Abdul Wahid Noor

offICeS : Building 261, Al Shabab Avenue, Juffair

Telephone: 17 723100, Fax: 17 725511

Bahrain International Airport, P.O. Box 1714

Telephone 17 321330, Fax 17 321910

audItoRS : KPMG Fakhro

BanKeRS : BBK BSC

Ahli United Bank BSC

National Bank of Bahrain BSC

ReGIStRaRS : KPMG Fakhro, P.O. Box 710, Manama, Kingdom of Bahrain

2010

5

Board of dIreCtors

manaGement

farouk Yousuf almoayyedChairman

abdulla BuhindiManaging Di rector

Mazen abdulkarimDirector

dominic CarrollHead of Finance

adel RedhaHead of HR

and Marketing

Stephen o’ConnorGeneral Manager

eamonn CartyHead of Retail

abdul Wahid noor

Company Secretary

Karl SutcliffHead of

Purchasing & Logistics

Ghassan al SabbaghDirector

Mohammed al KhanDirector

Shaikh Mohamed bin ali bin Mohamed al Khalifa

Director

faieq al ZayaniDirector

Jassim Mohammed al ShaikhDirector

Jalal Mohamed JalalDirector

nabil al ZainDirector

Jawad al HawajDirector

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ChaIrman’s report

n behalf of the board of directors at Bahrain Duty Free, it gives me great pleasure to present the twentieth Annual Report, incorporating the consolidated financial

statements of the group for the year ended 31st December 2010.I am delighted to report that the Group posted another strong

financial performance during 2010. Consolidated Revenues increased by 1.5 per cent and net income finished the year with an increase of 3.4 per cent when compared to 2009. This result has been achieved in difficult economic times with passenger numbers flat as well as the continuing impact from the recession in Europe and USA.

Consolidated sales for the year 2010 amounted to BD 30,966,059 representing an increase of 1.5 per cent over last year. Gross Profits grew by 7.5 per cent year on year while our gross margin percentage increased by 2.8 per cent signalling better stock efficiencies, reduction in stock loss provisions and improved supplier agreements. Company profits of BD 6,377,387 in 2010 were up by 3.4 per cent. Included in this figure, “other income” declined by 4.8 per cent due to reduced investment and advertising income. At the end of the year, shareholders’ equity stood at BD 34.9 million compared to BD 30.9 million at the end of 2009 representing an increase of 12.9 per cent, while total assets increased by 7.8 per cent or BD 42.1 million, reflecting the ever increasing performance and strength of our financial position.

Our investment portfolio performed well in 2010 and overall growth achieved was 4.6 per cent. This equates to positive fair value adjustment of BD 366,545. The investment portfolio now stands at BD 14,130,110. Within the portfolio, some unquoted investments did not perform to our expectations in

2010 and therefore an impairment provision for BD 314,267 has been recognised.

2010 was a very challenging year with passenger volumes at Bahrain Airport reaching 8.6 million a slight decrease on 2009 actual. The F1 Grand Prix held in March was again a very successful event which continues to be one of our major highlights in terms of sales and exposure. Various other marketing campaigns were run in 2010 including the very successful summer promotion of “win a holiday every day” where all winners were flown on a chartered flight to the very popular resort of Sharm El Sheikh in Egypt.

Our retail strategy continues to concentrate on our core internal business drivers and KPI’s, improving both the number of passengers spending in the Duty Free and the average sale value to each of our customers. Management will continue to focus on sales and marketing initiatives, cost management in its procurement activities and control of overheads in the business. Shop refurbishments in 2010 continued and improved the overall ambience for the shopping experience.

Our subsidiary company, Bahrain International Retail Development Centre (BIRD) had another excellent year and the training business has grown substantially compared to 2009. Among some of their achievements are a new English training centre, launching of their first overseas projects, launching the new website (www.birdc.com), new partnership alliances and award recognition from the Ministry of Labour. The contribution of BIRD to Bahrain Duty Free continues to impact year on year. Late 2010 saw the opening of our new shop at Khalifa bin Salman Port located in Hidd. Initial sales are good and we expect this new shop to excel in 2011. In Flight sales on Bahrain Air performed exceptionally well posting a 50 per cent growth on 2009. Our

O

For the year ended 31 December 2010

2010

7

other business units at Mina Salman Port and the US Navy Base also continue to do well.

Some highlights in 2010 were the opening of the Arsenal Football shop in February, interactive floor projection system in March, receiving three awards in May for “best training programme”, “best in E commerce business award” and “best nationalisation strategy award”, launch in June of the summer promotion which ran for two months, in September the 120 winners of the summer promotion were flown to Sharm El Sheikh holiday resort, in November four shops were opened – Beijoux Tourner, Bahrain Optician, Zummorred and Mont Blanc. All of these events as well as many others have made it a memorable year for Bahrain Duty Free Shop.

My thanks goes to Aer Rianta International Middle East WLL, our management company, whose expertise and contribution at senior management level, has consolidated Bahrain Duty Free as one of the premier duty free retail operations.

We also continue to maintain our focus on developing and training our staff. The company’s level of local employees is currently at 58 per cent. Our training and development programmes ranges from MBA graduates to quality retail, marketing and operation courses delivered through our subsidiary training company “Bahrain International Retail Development Centre” (BIRD) and local institutes. My thanks are extended to the management and staff at BIRD.

The board proposes the following appropriations from the 2010 net profit:

Dividend distribution of BD 3,397,680 equivalent to 50 fils per share of which 20 fils was distributed as an interim dividend during the year.

• Charity Contribution BD 118,386• Bonus share issue of 30 per cent equivalent to

BD 2,038,608• Transfer to Retained Earnings of BD 1,704,375On behalf of my colleagues on the Board, may I extend my

sincere gratitude and appreciation to His Majesty the King, Shaikh Hamad bin Isa Al Khalifa, His Royal Highness Prime Minister Prince Khalifa bin Salman Al Khalifa, His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince and Deputy Supreme Commander, Shaikh Salman bin Hamad Al Khalifa and His Highness Shaikh Ali bin Khalifa Al Khalifa, deputy prime minister for their continuing support.

I would also like to extend my sincere thanks to the Under-Secretary for Civil Aviation Affairs and his team for their continued guidance, support and assistance helping to develop the level of regional and international traffic through Bahrain International Airport. My thanks also go to the other concerned bodies whose objective it is to promote and market Bahrain International Airport.

I would also like to thank the customers of Bahrain Duty Free for their continuing support and loyalty. Finally, I extend my gratitude to the staff and management team at Bahrain Duty Free, whose hard work and commitment are seen in these 2010 operating and financial results and wish them continued success and prosperity in 2011.

farouk Yousuf almoayyedChairman

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2010

9

Report on the consolidated financial statementsWe have audited the accompanying consolidated financial statements of Bahrain Duty Free Shop Complex BSC (“the Company”) and its subsidiary (together the “Group”), which comprise the consolidated statement of financial position as at 31 December 2010, and the consolidated statements of comprehensive income, cash flows and changes in equity for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Responsibility of the board of directors for the consolidated financial statementsThe board of directors of the Company is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as the board of directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we

consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating 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 of the Group as at 31 December 2010, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on other regulatory requirementsAs required by the Bahrain Commercial Companies Law, we report that the Company has maintained proper accounting records and the consolidated financial statements are in agreement therewith; the financial information contained in the Chairman’s report is consistent with the consolidated financial statements; we are not aware of any violations of the Bahrain Commercial Companies Law, or the terms of the Company’s memorandum and articles of association having occurred during the year that might have had a material adverse effect on the business of the Company or on its financial position; and satisfactory explanations and information have been provided to us by the management in response to all our requests.

Independent audItors’ report to the shareholders16 february 2011

Bahrain duty free Shop Complex BSC. Juffair, Kingdom of Bahrain KPMG Fakhro, Audit

5th Floor, Chamber of Commerce BuildingP.O. Box 710, Manama, Kingdom of BahrainTel: +973 17 224807 Fax: +973 17 227443

Internet: www.kpmg.com.bhC.R. No. 6220

10 www.bdutyfree.com

ConsolIdated statement of fInanCIal posItIonas at 31 december 2010Bahraini Dinars

The consolidated financial statements, which consist of pages 10 to 32 were approved by the Board of Directors on 16 February 2011 and signed on its behalf by:

farouk Yousuf almoayyed abdulla BuhindiChairman Managing Director

The accompanying notes 1 to 20 form an integral part of these consolidated financial statements.

Note 2010 2009aSSetS Current assets Cash and cash equivalents 4 20,295,722 17,317,364Trade receivables and prepayments 5 1,081,591 582,481Inventories 6 3,574,182 4,788,771total current assets 24,951,495 22,688,616non-current assets Available-for-sale investments 7 14,130,110 13,296,783Property and equipment 8 3,023,358 3,089,376total non-current assets 17,153,468 16,386,159total assets 42,104,963 39,074,775

eQuItY and lIaBIlItIeS equity Share capital 14 6,795,360 5,227,200Statutory reserve 4,572,373 4,572,373Investments fair value reserve 4,112,062 3,431,250Property revaluation reserve 396,264 466,264Retained earnings 18,915,971 17,211,596total equity attributable to equity holders of the parent company 34,792,030 30,908,683Non-controlling interest 150,081 58,461total equity (pages 12 and 13) 34,942,111 30,967,144non-current liabilities Provision for employees’ leaving indemnities 12 359,248 325,154total non-current liabilities 359,248 325,154Current liabilities Trade payable 9 3,810,690 4,551,331Royalty payable 11 2,912,314 3,038,536Management fees 80,600 192,610total current liabilities 6,803,604 7,782,477total liabilities 7,162,852 8,107,631total equity and liabilities 42,104,963 39,074,775

2010

11

Note 2010 2009ReVenue 30,966,059 30,494,641Cost of sales (17,878,352) (18,323,815)Gross profit 13,087,707 12,170,826

Other income 13 3,068,122 3,221,695Administrative expenses 10 (4,986,413) (4,486,735)Royalty 11 (3,049,638) (3,238,468)Other operating expenses (970,881) (826,974)Selling expenses (771,510) (676,617)Profit for the year 6,377,387 6,163,727

other comprehensive income Available for sale securities:

Net change in fair value 7 366,545 (747,383)Impairment loss recognised 314,267 321,979

other comprehensive income for the year 680,812 (425,404)total comprehensive income for the year 7,058,199 5,738,323

Profit attributable to: Equity holders of the company 6,285,767 6,135,609Non-controlling interest 91,620 28,118

Profit for the year 6,377,387 6,163,727

Total comprehensive income attributable to:Equity holders of the company 6,966,579 5,710,205Non-controlling interest 91,620 28,118

total comprehensive income for the year 7,058,199 5,738,323Basic earnings per share (in fils) 17 93 90

The consolidated financial statements, which consist of pages 10 to 32 were approved by the Board of Directors on 16 February 2011 and signed on its behalf by:

farouk Yousuf almoayyed abdulla BuhindiChairman Managing Director

The accompanying notes 1 to 20 form an integral part of these consolidated financial statements.

ConsolIdated statement of ComprehensIve InComefor the year ended 31 december 2010Bahraini Dinars


ConsolIdated statement of ChanGes In equItyfor the year ended 31 december 2010Bahraini Dinars

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2010

13

ConsolIdated statement of ChanGes In equItyfor the year ended 31 december 2010 Bahraini Dinars

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ConsolIdated statement of Cash flowsfor the year ended 31 december 2010Bahraini Dinars

Note 2010 2009oPeRatInG aCtIVItIeS Cash generated from sales 29,083,695 29,884,266Receipts from training services 651,098 304,688Receipts from car promotions 312,130 331,499Other receipts 1,638,733 1,680,492 31,685,656 32,200,945Payments for purchases (17,006,495) (18,315,265)Car promotion expenses (261,120) (181,888)Payments for management fees (934,000) (898,043)Payments of royalty 11 (3,175,860) (3,295,866)Payments for other operating expenses (4,887,831) (4,313,186)Directors’ remuneration paid (156,000) (130,000) (26,421,306) (27,134,248)

Cash flows from operating activities 5,264,350 5,066,697

InVeStInG aCtIVItIeS Interest income 299,372 302,495Investment income 1,096,438 1,378,666Acquisition of property and equipment (407,484) (428,898)Acquisition of available-for-sale investments (576,593) (748,497)Proceeds from sale of available-for-sale investments 7 259,100 45,001Proceeds from sale of property and equipment - 3,700Cash flows from investing activities 670,833 552,467

fInanCInG aCtIVItIeSDividend paid (2,805,825) (2,718,962)Payments to charities (151,000) (55,191)

Cash flows from financing activities (2,956,825) (2,774,153)

total cash flows for the year 2,978,358 2,845,011

Cash and cash equivalents at 1 January 17,317,364 14,472,353

Cash and cash equivalents at 31 december 4 20,295,722 17,317,364

The consolidated financial statements consist of pages 10 to 32.

2010

15

1 - BACKGROUND AND ACTIVITIESBahrain Duty Free Shop Complex BSC (the “Company”) is a Bahrain registered public company. The Company operates the Bahrain Airport duty free shops and Bahrain Sea Port duty free shops and markets its duty free goods on airlines. The Company owns 80% of the shares of Bahrain International Retail Development Centre WLL (the “Subsidiary”), which provides training services in the Kingdom of Bahrain. The consolidated financial statements for the year ended 31 December 2010 comprise the financial statements of the Company and its Subsidiary (together referred to as the “Group”).

2 - BASIS OF PREPARATIONa) Statement of complianceThe consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), the requirements of the Bahrain Commercial Companies Law, 2001 and the Central Bank of Bahrain Disclosure Standards.(i) new standards, amendments and interpretations that are

effective on or after 1 January 2010

The following standards, amendments and interpretations, which became effective in 2010, are relevant to the Group:

IAS 27 Consolidated and Separate Financial Statements The revised standard 2008 requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost, any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. The Group will apply IAS 27 (revised) prospectively from 1 January 2010 to transactions with non-controlling interests and for transactions resulting in loss of control. The change in accounting policy was applied prospectively and had no impact on the financial statements.

IFRIC 17 Distribution of non-cash assets to ownersIFRIC 17 2008 addresses how the non-cash dividends distributed to the shareholders should be measured. A dividend obligation is recognised when the dividend was authorised by the appropriate entity and is no longer at the discretion of the entity. This dividend

obligation should be recognised at the fair value of the net assets to be distributed. The difference between the dividend paid and the amount carried forward of the net assets distributed should be recognised in profit and loss. Additional disclosures are to be made if the net assets being held for distribution to owners meet the definition of a discontinued operation. The application of IFRIC 17 has no impact on the financial statements of the Group.

Improvements to IFRSs Improvements to IFRS issued in April 2009 contained numerous amendments to IFRS that the IASB considers non-urgent but necessary. ‘Improvements to IFRS’ comprise amendments that result in accounting changes to presentation, recognition or measurement purposes, as well as terminology or editorial amendments related to a variety of individual IFRS standards. The amendments are effective for annual periods beginning on or after 1 January 2010 with earlier adoption permitted. There were no material changes to the current accounting policies of the Group as a result of these amendments.

(ii) new standards, amendments and interpretations issued but not yet effective

The following standards and interpretations have been issued and are expected to be relevant to the Group but not yet effective for the year ended 31 December 2010:

IfRS 9 - financial InstrumentsStandard issued November 2009 (IFRS 9 (2009))IFRS 9 (2009) “Financial Instruments” is the first standard issued as part of a wider project to replace IAS 39 “Financial instruments: recognition and measurement”. IFRS 9 (2009) retains and simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortised cost and fair value. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on impairment and hedge accounting continues to apply. The 2009 standard did not address financial liabilities.

Standard issued October 2010 IFRS 9 (2010) adds the requirements related to the classification

notes to the ConsolIdated fInanCIal statementsfor the year ended 31 december 2010

8



and measurement of financial liabilities, and derecognition of financial assets and liabilities to the version issued in November 2009. It also includes those paragraphs of IAS 39 dealing with how to measure fair value and accounting for derivatives embedded in a contract that contains a host that is not a financial asset, as well as the requirements of IFRIC 9 “reassessment of Embedded Derivatives” The Group is yet to assess IFRS9’s full impact. Given the nature of the Group’s operations, this standard is expected to have a pervasive impact on the Group’s financial statements. While adoption of IFRS 9 is mandatory from 1 January 2013, earlier adoption is permitted. Prior periods need not be restated if an entity adopts the standard for reporting periods beginning before 1 January 2012.

IAS 24 The Revised – related party disclosuresIt was issued in November 2009 and is mandatory for periods beginning on or after 1 January 2011. The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. When the revised standard will be applied, the Group and the parent will need to disclose transactions between its subsidiaries and its associates. The Group is currently putting systems in place to capture the necessary information.

Improvements to IFRSs (2010)Improvements to IFRS issued in 2010 contained numerous amendments to IFRS that the IASB considers non-urgent but necessary. ‘Improvements to IFRS’ comprise amendments that result in accounting changes to presentation, recognition or measurement purposes, as well as terminology or editorial amendments related to a variety of individual IFRS standards. The amendments are effective for the Group’s 2011 annual financial statements with earlier adoption permitted. No material changes to accounting policies are expected as a result of these amendments.

(iii) early adoption of standards

The Group did not early-adopt new or amended standards in 2010.

b) Basis of measurementThe consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings and available-for-sale investments, which are stated at their fair values.

c) functional and presentation currencyThese consolidated financial statements are presented in Bahraini dinars, which is also the Group’s functional currency.

d) use of estimates and judgmentsThe preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Information about significant areas of estimation and critical judgements in applying accounting policies on the amounts recognised in the consolidated financial statements is summarised in note 20.

3 - SIGNIFICANT ACCOUNTING POLICIESa) Basis of consolidationSubsidiaries are entities controlled by the Company. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Subsidiary has a Board of Directors which is nominated by the Board of Directors of the parent company. The day-to-day management of the Subsidiary is with the General Manager. Intra-group balances and transactions, and any unrealised gains and losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

b) foreign currency translationItems included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic

2010

17

environment in which the entity operates (“the functional currency”). Transactions in foreign currencies are translated to Bahraini dinars, at the foreign exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into Bahraini dinars at the foreign exchange rate prevailing at that date. Foreign exchange gains and losses resulting from the settlement of such foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss.

c) Revenue recognitionRevenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an enterprise when those inflows result in increases in equity, other than increases relating to contributions from equity participants.

(i) Sales of goods – Sales of goods are recognised when the group sells a product to the customer. Sales are usually in cash or by credit card.

(ii) Training services – revenue generated from providing training services is recognised on a time apportioned basis over the period of the course.

(iii) Advertisement income is the income received from suppliers for advertising their products in the premises operated by the Group. This revenue is based on contracts and is time-apportioned over the period of the contracts.

(iv) Interest income – Interest income is recognised on a time-proportion basis.

(v) Dividend Income – Income from investments is accounted for when the right to receive is established.

d) Inventories These are stated at the lower of cost and net realisable value. Cost is determined using the weighted average basis. Incidental costs such as freight, insurance and clearing charges are directly charged to cost of sales when incurred. Net realisable value is the estimated selling price in the ordinary course of business.

e) Property and equipmentLand and building consists of office premises. Land and buildings are shown at fair value, based on valuation by external

independent valuers, less subsequent depreciation. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset. All other property and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred. Increase in the carrying amount arising on revaluation of land and building is credited to revaluation reserves in equity. Decrease that offset previous increase of the same asset is charged against revaluation reserves directly in equity; all other decreases are charged to the profit or loss. Each year the amount of depreciation based on the revalued carrying amount of the asset charged to the profit or loss is transferred from ‘revaluation reserve’ to ‘retained earnings’.

DepreciationFreehold land is not depreciated. Depreciation on other assets is calculated using the

straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year end. Depreciation is charged to the profit or loss. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit or loss. When revalued assets are sold,


Categories estimated used life in yearsFreehold buildings 7Leasehold buildings 15 - 25Premises improvement 10Furniture and fixtures 7Computer, other equipment and vehicles 5

8


the amounts included in revaluation reserves are transferred to retained earnings. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

f) financial instrumentsFinancial instruments include financial assets and financial liabilities. Financial assets of the Group include cash and cash equivalents, trade accounts receivable and available-for-sale investments. Financial liabilities of the Group include trade payables, management fees, royalty payable and certain other current liabilities. The Group initially recognises financial assets and financial liabilities on the date at which they are originated. Regular way purchases and sales of financial assets are recognised on the trade date at which the Group commits to purchase or sell the asset. All other financial assets and liabilities (including assets and liabilities designated at fair value through profit or loss) are initially recognised on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the financial asset.

g) available-for-sale investmentsAvailable-for-sale (“AFS”) investments are those non-derivative financial assets that are designated as available for sale or are not classified as (a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss. These include investments in quoted equity shares and unquoted equity shares, debt instruments, structured notes and managed funds. Purchase and sale of AFS investments are accounted for on the trade date and are initially recorded at cost, being the fair value of the consideration given including transaction charges associated with the investment. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (refer to note-3(m)) are recognized in other comprehensive income and presented within equity in the fair value reserve.

When an investment is derecognized, the cumulative gain or loss in other comprehensive income is transferred to profit or loss. Fair value for investments in quoted securities is determined using the closing bid prices as at reporting date. Fair value for investments in unquoted managed funds is estimated by reference to the latest net asset value of the fund as reported by the related fund manager.

Other unquoted investments, where reliable fair value information is not readily available, are carried at cost less impairment allowances.

h) accounts receivablesTrade receivables do not carry any interest and are stated at their fair value of goods sold as reduced by appropriate allowances for estimated irrecoverable amounts. Estimated irrecoverable amounts are based on the ageing of the receivable balances and historical experience. Individual trade receivables are written off when management deems them not to be collectible. The fair value of trade and other receivables is estimated as the present value of future cash flows at the reporting date.

i) Cash and cash equivalentsCash and cash equivalents comprise cash and bank balances and short-term bank deposits maturing within 90 days.

j) trade and other payablesTrade and other payables are stated at their amortised cost.

k) employee benefits Pension rights (and other social benefits) for Bahraini employees are covered by the Social Insurance Organisation scheme to which employees and employers contribute monthly on a fixed-percentage-of-salaries basis. The Company’s share of contributions to this funded scheme, which is a defined contribution scheme under IAS 19 – Employee Benefits, is recognised as an expense in the profit or loss. Expatriate employees are entitled to leaving indemnities payable under the Bahrain Labour Law for the private sector 1976, based on length of service and final salary and other allowances paid. A provision for this, which is unfunded, and which represents a defined benefit plan under IAS 19 – Employee Benefits, has been made by calculating the notional liability had all employees left at the financial year end.


2010

19

l) ProvisionsA provision is recognised when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.

m) Impairment(i) Financial assets A financial asset is assessed at each reporting date to

determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. A prolonged or significant decline in the fair value of quoted investments below its cost is considered in determining whether the assets are impaired.

Impairment losses on available-for-sale investment securities are recognized by transferring the cumulative loss that has been recognized in other comprehensive income, and presented in the fair value reserve in equity, to profit or loss. The cumulative loss that is removed from other comprehensive income and recognized in profit or loss is the difference between the acquisition cost, net of any principal repayment and amortization, and the current fair value, less any impairment

loss previously recognised in profit or loss. (ii) Non-financial assets The carrying amounts of the Group’s assets are reviewed

at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the profit or loss. Impairment losses are reversed when there is an indication that the impairment loss may no longer exist and there has been change in the estimates used to determine the recoverable amount.

n) Statutory reserveIn accordance with the Company’s Articles of Association and the Bahrain Commercial Companies Law 2001, 10 per cent of the net profit is appropriated to a statutory reserve, until it reaches 50 per cent of the paid-up share capital. This reserve is distributable only in accordance with the provisions of the Bahrain Commercial Companies Law 2001.

o) dividends, directors’ fees and charity contributionsDividends, directors’ fees and charity contributions are recognised as a liability in the period in which they are declared.

notes to the ConsolIdated fInanCIal statementsfor the year ended 31 december 2010Bahraini Dinars

4 - CASH AND CASH EQUIVALENTS

2010 2009Short-term bank deposits 16,681,123 13,721,928Cash at bank 3,528,073 3,518,921Cash in hand 86,526 76,515 20,295,722 17,317,364

5 - TRADE RECEIVABLES AND PREPAYMENTS

2010 2009Trade receivables 742,317 320,222Other receivables and prepayments 279,554 195,109Related parties (note 15) 81,390 104,123 1,103,261 619,454Less Impairment allowance (21,670) (36,973) 1,081,591 582,481

8



movement in impairment allowance on trade receivables:

2010 2009At 1 January 36,973 102,960Provision (reversed) during the year (15,303) (40,192)Written off during the year - (25,795)At 31 December 21,670 36,973

6 - INVENTORIES

2010 2009Inventories in hand 3,877,255 5,164,008Less Impairment allowance (303,073) (375,237) 3,574,182 4,788,771

movement in impairment allowance on inventories:

2010 2009At 1 January 375,237 407,488Provision (reversed) created during the year (14,152) 36,123Provision utilised (58,012) (68,374)At 31 December 303,073 375,237

7 - AVAILABLE-FOR-SALE INVESTMENTS

2010 2009Quoted equity shares 8,635,835 7,360,668Unquoted securities: Equity shares 3,714,605 3,724,713Structured notes 1,084,192 1,601,250Managed funds 1,601,250 942,557Debt instruments 45,000 304,100 15,080,882 13,933,288Less Impairment allowance (950,772) (636,505) 14,130,110 13,296,783

movements during the year:

2010 2009At 1 January 13,296,783 13,340,670Purchases and issuance of stock bonus 725,882 748,497Fair value gain (loss) net of impairment 366,545 (747,383)Sales and maturity of investments (259,100) (45,001)at 31 december 14,130,110 13,296,783

2010

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movement in impairment allowance on investments:

2010 2009At 1 January 636,505 314,526Provision created during the year 314,267 321,979At 31 December 950,772 636,505


8 - PROPERTY AND EQUIPMENT

freehold leasehold Premises furniture Computer, 2010 2009 land & building improvements and other total total building fixtures equipment & vehiclesCost1 January 1,137,871 1,667,443 1,520,786 1,024,623 870,890 6,221,613 5,822,028Additions 22,475 - 242,213 88,054 54,742 407,484 428,898Disposals - - - - - - (29,313)

31 December 1,160,346 1,667,443 1,762,999 1,112,677 925,632 6,629,097 6,221,613

depreciation 1 January (617,013) (554,036) (548,291) (818,822) (594,075) (3,132,237) (2,714,800)Charge for the year (71,412) (70,158) (156,254) (66,622) (109,056) (473,502) (434,988)Disposals - - - - - - 17,551

31 December (688,425) (624,194) (704,545) (885,444) (703,131) (3,605,739) (3,132,237)

net book value at 31 december

2010 471,921 1,043,249 1,058,454 227,233 222,501 3,023,358 3,089,376

2009 520,858 1,113,407 972,495 205,801 276,815 3,089,376 3,107,225

Fully depreciated assets still in use (at cost) 2,645 - - 847,147 292,604 1,142,396 965,193

8


If the land and buildings were stated at historical cost, the carrying amount would have been:

Management fee relates to amounts paid to manage the Bahrain Duty Free Shop Complex and provide experienced managerial staff and other operational support services received to AerRianta, a related party based on the management agreement. This agreement is effective 1 January 2004 for a period of seven years. On 22 July 2010, the contract was renewed and is effective for another seven years from 1 January 2011 until 31 December 2017.

2010 2009Cost 379,990 379,990Accumulated depreciation (333,636) (333,636)Net book value 46,354 46,354


properties used by the Company:

Property address description existing tenure average age Present use of the property capital value Juffair Building Building 261, Building Business Freehold 25 years 443,090 Al Shabab Avenue, measuring Juffair 1,083 m2 Shop Building Bahrain Airport Building Business 25 years 10 years 1,016,772 measuring renewable 3,300 m2 lease agreementSeaport Building Mina Salman Building Business 5 years 24 years 77,646 measuring renewable 710 m2 lease agreement

9 - TRADE PAYABLE

2010 2009Trade payable 1,784,054 1,997,953Other payables 1,093,416 1,232,838Related parties payable (note 15) 933,220 1,320,540 3,810,690 4,551,331

10 - ADMINISTRATIVE EXPENSES

2010 2009Salaries and related cost 3,673,850 3,200,451Management fee 839,062 851,296Depreciation 473,501 434,988 4,986,413 4,486,735

2010

23

A royalty of BD 200,000, or 50 per cent of the profit from duty free operations, whichever is higher to the Civil Aviation Affairs of the Government of the Kingdom of Bahrain. During the year, the Civil Aviation Affairs transferred its rights and obligations as per the royalty agreement to Bahrain Airport Company BSC (c).

11 - ROYALTY

Royalty computation 2010 2009Profit from duty free operations before royalty 6,664,404 6,647,525Less: profit from operations that are not subject to royalty (565,128) (170,589)

Profit for royalty computation 6,099,276 6,476,936

Royalty at 50 % of the above profit 3,049,638 3,238,468

Royalty payable 2010 2009At 1 January 3,038,536 3,095,934Royalty for the year 3,049,638 3,238,468

Royalty paid during the year (3,175,860) (3,295,866)

at 31 december 2,912,314 3,038,536


12 - PROVISION FOR EMPLOYEES’ LEAVING INDEMNITIES

2010 2009At 1 January 325,154 268,697Charge for the year 67,857 74,752Indemnities paid during the year (33,763) (18,295)at 31 december 359,248 325,154

13 - OTHER INCOME

2010 2009Advertising income 1,151,318 1,171,545Income on available-for-sale investments 1,096,438 1,243,309Beauty advisory income 418,367 363,330Interest on bank deposits 401,980 302,495Foreign exchange gains (net) 263,499 329,558Impairment on investments (314,267) (321,979)Rental income for Juffair building - 88,200Others 50,787 45,237 3,068,122 3,221,695

8


Additional information on shareholding pattern

(i) Names and nationalities of the major equity holders (defined as a holding in excess of 5 % of the issued and fully paid capital) and the number of equity shares held:

(ii) The Company has only one class of equity shares and the holders of these shares have equal voting rights.

Additional information on shareholding pattern

(iii) The following is a distribution schedule of equity shares setting out the number of holders:

(iv) Total number of shares owned by the directors of the Company as at 31 December 2010 was 6,707,521 (2009: 4,589,010) shares.

Notes to the coNsolidated fiNaNcial statemeNtsfor the year ended 31 december 2010 Bahraini Dinars

14 - SHARE CAPITAL

2010 2009Authorised share capital 67,953,600 (2009: 52,272,000) shares of 100 fils each 6,795,360 5,227,200

Issued and fully paid up 67,953,600 (2009: 52,272,000) shares of 100 fils each 6,795,360 5,227,200

Name Nationality Number of shares Share holding (%)Esterad Investment Co. BSC Bahraini 7,063,486 10.39 %Global Express Bahraini 5,499,670 8.09 %Rouben’s Stores Bahraini 4,425,029 6.51 %Farouq Yousuf AlMoayyed Bahraini 3,428,693 5.04 %

Categories* Number of shares Number of % of total equity holders issued sharesLess than 1% 16,670,104 550 24.531% up to less than 5% 30,904,194 27 45.485% up to less than 10% 13,353,392 3 19.6510% up to less than 20% 7,025,910 1 10.3420% up to less than 50% - - -50% and above - - -Total 67,953,600 581 100

* Expressed as a percentage of total issued and fully paid shares of the Company.

2010

25

Parties are considered to be related if one party, directly or indirectly through one or more intermediaries, has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. Related parties include entities over which the Group exercises significant influence, major shareholders, directors, the management company and key management personnel of the Group.

The Board of Directors have proposed the following appropriations and director’s remuneration for the year 2010:

d) Key management personnel

Key management personnel of the Group comprise of the Board of Directors and key members of management having authority and responsibility for planning, directing and controlling the activities of the Group. The key management personnel compensation is as follows:

15 - RELATED PARTY TRANSACTION

16 - APPROPRIATIONS AND DIRECTOR’S REMUNERATION

a) Transactions 2010 2009Purchases 7,476,617 8,300,300License fees 289,135 333,968Other operating income 59,989 84,356

2010 2009Interim dividends paid 1,359,072 1,045,440Final cash dividend proposed 2,038,608 1,568,160Bonus shares issue 30 % (2009: 30 %) 2,038,608 1,568,160Directors’ remuneration 156,000 156,000Charity 118,386 - 5,710,674 4,337,760

2010 2009Board remuneration 156,000 130,000Salaries and other short-term benefits 166,169 153,565Post employment benefits 4,298 4,784Post employment benefits payable 8,276 3,296

2010 2009b) Amounts due from related parties 81,390 104,123

c) Amounts due to related parties 932,220 1,320,540


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17 - EARNINGS PER SHAREEarnings per ordinary share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company of BD 6,285,767 (2009: BD 6,135,609) by the number of ordinary shares in issue in 2010. Diluted earnings per share have not been presented as the Company has no instruments convertible into ordinary shares that would dilute earnings per share.

18 - FINANCIAL INSTRUMENTS AND RISK MANAGEMENTThe Group has exposure to the following risks from its use of financial instruments:• Credit risk• Liquidity risk• Market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. The note also presents certain quantitative disclosures in addition to the disclosures throughout the financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established certain executive management committees, which assist the Board of Directors in effectively discharging their responsibilities for developing and monitoring the Group’s risk management policies.

The Group’s audit committee oversees how management monitors compliance with the Group’s risk management procedures and review the adequacy of the risk management practices in relation to the risks faced by the Group. The Group audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

a) Credit riskCredit risk is the risk that a customer or a counter party to a financial instrument will fail to discharge an obligation and cause the Group to incur a financial loss. The Group is exposed to credit risk primarily on its cash and cash equivalents, trade accounts receivable and investment in managed funds, debt instruments

and structured notes. The Group’s credit risk on cash and cash equivalents is limited as these are placed with banks in Bahrain having good credit ratings.

The Group manages its credit risk on accounts receivables by restricting its credit sales only through major credit cards and ensuring that the sales to related parties are as per the internal policies established for transactions with the related parties. Since the Group is involved in ‘over-the-counter’ retail sales there is no significant geographical or customer type concentration of credit risk involved in accounts receivable balances.

The Group perceives that the account receivable balances are of good credit quality as these are primarily receivable from: • vendors where the Group has net payable balances • well established credit card companies• related parties with good financial position

The Group establishes provision for impairment of accounts receivables when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the accounts receivable is impaired.

The Group manages credit risk on its investments by ensuring that investments are made only after careful credit evaluation and due diligence of the issuer of the security. The Group limits its exposure to credit risk by mainly investing in debt instruments, structured notes and managed funds managed or promoted by established bank or financial institutions. The Group has an investment committee comprising of three board members, which is responsible for all investment related decisions. Before investing in any new securities the proposal is first placed with the investment committee for its approval. Investment committee approves the proposal after considering all merits and demerits of the proposal.


2010

27

The maximum exposure to credit risk at the reporting date based on geographical concentration was:

The ageing of trade and related party receivables at the reporting date was:

Past due and impaired accounts receivables of the carrying value of BD 35,249 (2009: BD 48,773) carry an impairment provision of BD 11,612 (2009: BD 3,191), which represents incurred losses determined on a specific loss basis.

2010 2009Bahrain 31,203,703 26,939,902Middle East 2,712,611 2,593,272United States of America 226,200 301,600Others 1,166,745 1,166,745 35,309,259 31,001,519


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

2010 2009Cash and cash equivalents 20,295,722 17,317,364Available-for-sale investments 14,130,110 13,296,783Trade receivables 802,037 283,249Related party receivable 81,390 104,123 35,309,259 31,001,519

2010 2009 Gross Impairment Gross ImpairmentNot past due 788,456 10,058 375,572 26,793Past due 0-90 days 15,942 1,594 29,098 4,365Past due 91-180 days 10,634 1,063 16,484 2,624More than 180 days 8,675 8,955 3,191 3,191 823,707 21,670 424,345 36,973

b) liquidity riskLiquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the

Group’s reputation. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value. The Group ensures that a significant amount of the funds are invested in cash and cash equivalents, which are readily available to meet liquidity requirements.

The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measures:

8


There have been no transfers between Level 1 to Level 2 in 2010 (2009: Nil).

The following are the contractual maturities of financial liabilities:


2010 level 1 level 2 level 3 totalAvailable-for-sale investments 8,276,616 1,682,955 - 9,959,571

2009 Level 1 Level 2 Level 3 TotalAvailable-for-sale investments 7,062,712 1,757,268 - 8,819,980

c) Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. The Group incurs financial liabilities, in order to manage market risks. All such

transactions are carried out within the guidelines set by the Board of Directors.

(i) Interest rate riskInterest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Group’s interest rate risk is limited to its interest bearing short-term deposits and investment in debt instruments. The Group’s short-term bank

• Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

• Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using; quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable

from market data.• Level 3: Valuation techniques using significant unobservable

inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

2010 Carrying amount Contractual cash flows Within one yearTrade payable 2,717,274 2,717,274 2,717,274Royalty payable 2,912,314 2,912,314 2,912,314Management fees 80,600 80,600 80,600 5,710,188 5,710,188 5,710,188

2009 Carrying amount Contractual cash flows Within one yearTrade payable 3,318,493 3,318,493 3,318,493Royalty payable 3,038,536 3,038,536 3,038,536Management fees 192,610 192,610 192,610 6,549,639 6,549,639 6,549,639

2010

29

deposits are at fixed interest rates and mature within 90 days. The Group’s investment in debt instruments is at variable interest rates. The Group earned an effective interest rate of 2.644% for the year

ended 31 December 2010 (2009: 2.177%). At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments was:

Change in market interest rate will not have a significant impact on the carrying value of the bank deposits due to short term characteristics of these deposits. Similarly, the impact of change in market interest rates on the cash flows of variable rate investment security is not significant.

(ii) Currency riskCurrency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group has exposure to currency risk on its purchases invoiced

in foreign currency, on credit sales in foreign currency and on its certain investment in Kuwaiti dinar. Predominantly, the purchase of products is from local suppliers. The majority of the foreign currency purchases are in US dollars. The US dollar is pegged against the Bahraini dinar and therefore the Group is not exposed to any significant risk.

The Group’s exposure to significant currency risk at the reporting date was:


2010 2009fixed rate instruments Short-term bank deposits 16,681,123 13,721,928

Variable rate instruments Investment in debt instrument - 236,600 16,681,123 13,958,528

2010 uSd euRo GBP CHfAvailable-for-sale investments 2,389,545 - 321,000 -Cash and cash equivalent 259,030 232,380 163,392 -Trade receivables 149,107 108 - -Trade payables (564,670) (93,522) (26,307) - 2,233,012 138,966 458,085 -

2009 USD EURO GBP CHFAvailable-for-sale investments 2,398,709 - 319,804 -Cash and cash equivalent 149,055 9,132 76,236 -Trade receivables 135,826 162 - 3,610Trade payables (83,745) (97,562) (2,262) (17,086) 2,599,845 (88,268) 393,778 (13,476)

The Group does not perceive that fluctuations in foreign exchange rates will have any significant impact on the income or equity because the exposure to currencies other than US dollar, which is pegged to Bahraini Dinar, is not significant.

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(iii) other price riskOther price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The primary goal of the Group’s investment strategy is to ensure risk free returns and invest excess surplus fund available with the Group in risk free securities. Market price risk arises from available-for-sale investments held by the Group. The Group’s investment committee monitors its investment portfolio considering prevalent market factors. Significant investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Investment Committee.

(iv) Sensitivity analysis – equity price riskAll of the Group’s quoted equity investments are listed on either Bahrain Stock Exchange (“BSE”) or Kuwait Stock Exchange (“KSE”).

A two per cent increase in both BSE and KSE at the reporting date would have increased equity by BD 282,602 (2009: an increase of BD 141,254); an equal change in the opposite direction would have decreased equity by BD 282,602 (2009: a decrease of BD 141,254). The analysis is performed on the same basis for 2009.

d) Capital managementThe Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the Group. The Board of Directors monitors both the demographic spread of shareholders, as well as the return on capital, which the Group defines as total shareholders’ equity and the level of dividends to shareholders. The Board seeks to maintain a balance between the higher returns and growth that might be possible by a sound capital position. There were no significant changes in the Group’s approach to capital management during the year. Neither the Company nor its subsidiary is subject to externally imposed capital requirements.


average rate Bd Reporting date spot rate BdBD 2010 2009 2010 20091 USD 0.377 0.377 0.377 0.3771 CHF 0.378 0.348 0.399 0.3611 EURO 0.530 0.528 0.497 0.5411 GBP 0.642 0.594 0.581 0.611

The following significant exchange rates applied during the year:

2010

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e) fair valuesFair values of financial assets and liabilities are as follows:

2010 loans and receivables available-for- sale other amortised cost total carrying amountCash and cash equivalents 20,295,722 - - 20,295,722Trade receivables 802,037 - - 802,037Available-for-sale investments - 14,130,110 - 14,130,110

21,097,759 14,130,110 - 35,227,869

Trade payable - - 2,717,274 2,717,274Royalty payable - - 2,912,314 2,912,314Management fees - - 80,600 80,600

- - 5,710,188 5,710,188

2009 Loans and receivables Available for sale Other amortised cost Total carrying amountCash and cash equivalents 17,317,364 - - 17,317,364Trade receivables 387,372 - - 387,372Available-for-sale investments - 13,296,783 - 13,296,783

17,704,736 13,296,783 - 31,001,519

Trade payable - - 3,318,493 3,318,493Royalty payable - - 3,038,536 3,038,536Management fees - - 192,610 192,610

- - 6,549,639 6,549,639

19 - COMMITMENTS

2010 2009Capital commitments: Uncalled face value of investments in unquoted equity 395,850 299,789Property and equipment - 46,078Uncalled face value of investments in quoted equity - 118,943 395,850 464,810

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20 - CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING ESTIMATES

a) Impairment of inventoriesThe Group reviews the carrying amounts of the inventories at each reporting date to determine whether the inventories have been impaired. The Group identifies the inventories, which have been impaired based on the age of the inventory and their estimate of the future demand for various items in the inventory. If any impairment indication exists, the inventories recoverable amount is estimated based on past experience and prevalent market conditions.

b) Impairment of available-for-sale investmentsThe Group determines that available-for-sale equity securities are impaired when there has been a significant or prolonged decline in the fair value below its cost. This determination of what is significant or prolonged requires judgment. The Group considers that a 15 per cent reduction in the value of the investments as compared to its cost as a significant reduction and that a decrease over a period of six months as prolonged. Where fair values are not readily available and the investments are carried at cost,

the recoverable amount of such investment is estimated to test for impairment. In making this judgment, the Group evaluates among other factors, evidence of deterioration in the financial health of the investee, industry and sector performance, changes in technology and operational and financing cash flows.

c) Impairment of trade receivablesThe Group establishes provision for impairment of accounts receivables when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the accounts receivable is impaired.

d) Valuation of land and buildingIn 2006, the land and buildings were revalued by an independent property valuer and the resultant surplus has been taken to revaluation reserve forming a component of equity. Management considers that the carrying amount of the revalued land and building does not differ materially from its fair value at the reporting date.

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