Fan Milk Group Annual Report 2011

FAN MILK INTERNATIONAL A/SSofiendalsvej 88ADK-9200 Aalborg SV.DenmarkTel.: +45 96 33 80 00Fax: +45 98 18 93 22www.fanmilk.com

Annual Report Fan Milk Group

2011

The Fan Milk Group operates in seven West African countries. For more than 50 years, the group has produced and sold affordable frozen dairy and juice products directly to consumers through a unique street vending system. Through persistent leadership and innovation, Fan Milk has adapted to the local environment and

proven its business model is sustainable for long term growth. Over the years, the Group has created thousands of jobs and today employs 1,200 people and engages with 25,000 agents and vendors. The Fan Milk Group contributes positively to all stakeholders; shareholders, employees and the Societies in which we operate.

VisionWe will be one of the leading food companies in West Africa.

MissionWe create business for the benefit of all stakeholders. We produce and distribute high quality branded products to consumers in West Africa.

ValuesWe strive to:

ensure professional management

use world class technology

ensure high quality products

exercise sustainable business activities

be good corporate citizens

Providing fresh and frozen milk and juice products in West Africa

FAN MILK GROUP | ANNUAL REPORT 2011 1

2 Corporate structure

3 Another year of strong financial performance

4 Consolidated financial highlights and key ratios

6 Management’s review 2011

14 Our value chain

15 Our brand

16 Our products

18 Connecting with consumers

20 World class manufacturing

22 Passionate employees

24 Changing lives across West Africa

26 In focus: Ghana

32 Company information

33 Management’s statement

34 Independent auditor’s report

35 Group highlights

36 Management’s review

39 Income statement

40 Balance sheet

42 Cash flow statement

43 Accounting policies

47 Notes

49 Addresses

Contents

Financial statements 2011

Fan Milk - Our World

2 FAN MILK GROUP | ANNUAL REPORT 2011

FAN MILK GHANA

EMIDANDENMARK

100%

100% 100%

100% 100% 89%57% 62%

FAN MILK INTERNATIONALDENMARK

FAN MILK NIGERIA

FAN MILK CÔTE D’IVOIRE

FAN MILK LIBERIA

FAN MILK TOGO

FAN MILK BENIN

FAN MILK BURKINA FASO


REVENUE M.DKK

0

100

200

300

400

500

600

700

800

1990

2000

2011

Although 2011 has been a challenging year with a number of adverse factors slowing our growth, we are pleased to present yet another year of strong financial performance. Our view of the potentials of our markets remains unchanged and during the year, we have continued to make significant investments in the expansion of our production and distribution capacity, and we are ready for strong growth in 2012.

Since 1960, our high quality products, dedicated employees, superior distribution systems, and loyal consumers have all contributed to building the Fan Milk brand. We strive to conduct our business with great respect for the countries in which we operate, our history, our brand and the values we stand for. Together with our loyal employees, our brand is our most valuable asset.

The theme for this report is the Fan Milk brand, described in a broad sense through our persistent brand building activities as well as through selected stakeholders’ opinions.

On behalf of Fan Milk International, I am pleased to present our Annual Report 2011.

Preben SunkeChairman

Together with our loyal employees, our brand is our most valuable asset

Another year of strong financial performance


Consolidated financial highlights and key ratios

Figures in DKK ’000 2011 2010 2009 * 2008 * 2007

KEY FIGURES

Income statement

Revenue 750,677 772,143 633,361 634,287 569,471Index 132 136 111 111 100

Gross profit 407,253 437,935 368,664 332,157 287,222Index 142 152 128 116 100

Profit before depreciation, amortisation, etc. (EBITDA) 178,739 206,309 158,962 124,270 73,260Index 244 282 217 170 100

Operating profit (EBIT) 131,423 147,182 119,890 87,740 40,822Index 322 361 294 215 100

Net financials -10,659 -10,253 -14,799 -23,174 -12,925Index - - - - -

Net profit 91,055 97,359 76,346 48,725 10,710Index 850 909 713 455 100

Net profit, parent company’s share 61,850 61,348 48,935 32,519 2,748Index 2,251 2,232 1,781 1,183 100

Balance sheet

Total assets 646,444 539,715 418,304 372,097 388,377Index 166 139 108 96 100

Equity 375,145 326,124 227,739 170,560 140,812Index 266 232 162 121 100

Equity, parent company’s share 259,246 218,774 154,632 115,547 96,549Index 269 227 160 120 100

Dividends 4,275 2,542 3,239 2,639 39,013Index 11 7 8 7 100

Net interest-bearing debt 46,938 -12,369 21,525 65,033 56,633Index 83 - 38 115 100

RATIOS

Profitability

Gross profit ratio 54.3% 56.7% 58.2% 52.4% 50.4%

Return on equity, consolidated 26.0% 35.2% 38.3% 31.3% 6.1%

Return on equity, parent company 25.9% 32.9% 36.2% 30.7% 2.1%

Return on invested capital (ROIC) 35,7% 52.3% 49.5% 40.5% 18.9%

Profit margin 17,5% 19.1% 19.0% 13.8% 7.2%

Equity ratio 58.0% 60.4% 54.4% 45.8% 36.3%

* As 2009 is the first year in which consolidated financial statements are prepared, the comparative figures for 2008 and 2007 represent non-audited figures.

Computation of ratios The ratios have been computed in accordance with the recommendations of the Danish Society of Financial Analysts (Den Danske Finansanalytikerforening):

Gross profit ratio Gross profit x 100 Return on invested Operating profit x 100 Equity ratio Equity, end of year x 100 Revenue capital (ROIC) Average invested capital Total assets

Return on equity Profit for the year after tax x 100 Profit margin Operating profit x 100 Average equity Revenue


751

131

139

35.7

17.5

170

772

147

52.3

19.1

633

120

138

49.5

19.0

101

634

88

40.5

13.8

569

41

123

18.9

7.2

77

2011 2011

2011 2011

2010

2009

2008

2007

2010

2009

2008

2007

2010

2009

2008

2007

2010

2009

2008

2007

2011 2011

2010

2009

2010

2009

Revenue M.DKK Return in invested capital %

EBIT M.DKK EBIT margin %

Cash flow from operating activities M.DKK Capital expenditure M.DKK


Management’s Review 2011

After a record breaking year in 2010, expectations were high for 2011 and although the performance of the busi-ness was strong, we did not achieve the growth we had planned for.

Unusual rainy and cold weather conditions across our markets were among the reasons for the lack of growth, and weather statistics indicate as much as 10 per cent less sunshine hours during 2011 compared to an average year. This has, of course, had a big impact on the sales of our frozen products. Additionally, significant price increases on our key raw and packing materials put our margins under pressure. Finally, the Ghanaian Cedi and the Nigerian Naira devaluated against Danish Kroner by 13 and 10 per cent respectively.

However, positive changes towards the end of the year resulted in sales records in both November and December. Fortunately, this trend has continued into 2012.

Solid foundation for growth

In our view the potentials in our markets remain positive. In line with our strategy and expectations for strong growth, major expansion projects were carried out in 2011. The investments include significant capacity increases in our factories in Nigeria and Ghana as well as further strengthening our distribution systems and the develop-ment of new distribution centres and sales points in the two markets.

Besides increasing capacity, the factory investments in particular are concentrated around production efficiency product safety and improved working environment.

Results for 2011

Revenue and gross profitThe consolidated revenue reached DKK 751m (DKK 829m in local currencies), which represents a drop of 3 per cent in DKK against 2010, but a growth of 7 per cent measured in local currencies. Gross profit was DKK 407m (DKK 447m in local currencies) against DKK 438m in 2010. Due to increases in raw and packing materials, the gross profit margin fell from 56.7 per cent in 2010 to 54.3 per cent in 2011.

During the year, our main foreign currencies, the Ghanaian Cedi and the Nigerian Naira devaluated against DKK by 13 and 10 per cent respectively.

EBITDA and operating profit Tight cost control led to capacity cost of DKK 229m (DKK 232m in 2010). EBITDA, defined as earnings before interest, taxes and depreciation, amounted to DKK 179m (DKK 206m in 2010). With depreciations of DKK 47m, operating profit (EBIT) for the year ended at DKK 131m (DKK 147m in 2010) or margins of 17.5 per cent against 19.1 per cent in 2010.

The net effect of the exchange rate developments in 2011 was minus DKK 19m in EBITDA and minus DKK 14m in operating profit.

net financials and taxNet financial expenses in 2011 were DKK 11m against DKK 10m in 2010.

With an effective tax rate of 25 per cent, the consolidated profit was DKK 91m against DKK 97m last year. The Fan Milk Group’s share of net profits is DKK 62m against DKK 61m in 2010.


Cash flow from capital expenditure

Free cash flowCash flow from operating activities

M.DKK

2010 2011

138

37

-101

139

-170

-31

Cash FlowThe free cash flow in 2011 totalled minus DKK 31m (DKK 37m in 2010). The free cash flow is calculated as the cash flow from operating activities less cash flow from investing activities.

Cash flow from operating activities totalled DKK 139m against DKK 138m in 2010. This was achieved due to improvements of the working capital and despite a profit before tax of DKK 16m less than in 2010.

The net cash outflow used for capital expenditure amounted to DKK 170m (DKK 101m in 2010) mainly related to extension of production and distribution capacity.


nigeria M.DKK 2011 2010 2009 2008 2007

Revenue 264 262 231 281 227EBITDA 47 50 45 41 12EBIT 23 29 28 24 (3)EBIT margin 9% 11% 12% 9% -

Ghana M.DKK 2011 2010 2009 2008 2007

Revenue 347 375 285 240 219EBITDA 102 119 86 57 46EBIT 83 99 72 43 35EBIT margin 24% 27% 25% 18% 16%

1990 2000 2011

REVENUE DKK MILL.

0

300

400

200

100

1990 2000 2011

REVENUE DKK MILL.

0

300

200

100

Ghana

As a result of the development in the oil exploration in 2011, Ghana recorded a significant growth in the GDP. The political stability and the well-balanced development of the country have created a favourable investment climate and resulted in Ghana being one of the new attractive African countries for businesses and investors. Therefore, we present a separate and more detailed theme about Ghana in this report.

In 2011, Fan Milk continued the historical strong perfor-mance of the company.

In line with the positive outlook for the forthcoming years, the company continued the long term investment strategy with focus on increased production output as well as storage and distribution capacity.

Nigeria

Nigeria continues to be among the strongest growing economies in the world and recent years’ development has been astonishing. Although there are many problems in the country, it remains one of the most important African countries for businesses and investors.

In 2011, the sales volume of frozen products in Fan Milk grew by 8 per cent and measured in local currency, the revenue grew by 12 per cent.

With continuous focus on improving efficiency and keeping operational cost at a minimum, the company is ready to benefit from the growth potential in the market. Investments in increased production capacity and the expansion of sales points to the market place continued as planned throughout 2011.

Finally, our strategy of partnering more closely with franchisees in order to improve market penetration has performed beyond expectations. We are convinced that the effect of the strategy will become even more pro-nounced in 2012 and beyond.


togo Group M.DKK 2011 2010 2009 2008 2007

Revenue 111 110 97 79 89EBITDA 19 26 22 14 15EBIT 9 16 14 5 7EBIT margin 8% 15% 14% 7% 8%

1990 2000 2011

REVENUE DKK MILL.

0

120

80

40

Togo Group

At present the neighbouring countries of Ghana and Nigeria are developing at a fast pace that still has to find its way to Togo, Benin and Burkina Faso. However, the UEMOA trade agreement and the common currency, which is linked to the Euro, create more dynamic cross border markets for the benefit of businesses.

Fan Milk takes advantage of this with production facilities in Togo and sales and distribution activities throughout the three countries. The ease of export market access has been vital for the company and fortunately, the combined prospects of the three countries provide for an expansive future.

Aided by a strong development in FanDango sales, we managed to increase revenue marginally in 2011. However, the challenges from adverse weather conditions and increasing cost of raw and packing materials were difficult to mitigate. The low inflation caused by linking the local currency to the Euro also makes it difficult to adjust consumer pricing, which gives rise to fluctuating profits in these countries.

Côte d’Ivoire (Ivory Coast)

2011 marked a turning point for Côte d’Ivoire. The disagree-ments arising from the elections in late 2010 resulted in a war-like situation beginning in late February lasting until the end of April. Fortunately, the situation came to a conclusion in April where a new government was sworn in. In order to effectively return the country to a normal state, re-building of infrastructure and resumption of efficient government functions were implemented within a few months and by the end of the year, business in general had returned to previous activity levels.

The situation was critical for Fan Milk, as activities stopped for more than two months. After the situation had normalised, Fan Milk was recapitalised in order to take advantage of what we see as a new positive situation. From November onwards, sales reached an all-time high and we are optimistic that this positive development will continue.

Liberia

In comparison to 2010, we have experienced very strong growth in our business activities in Liberia. However, our volume is still too small for the company to be profitable. Furthermore, the lack of electricity causes operational costs to be extraordinarily high.

To overcome the electricity scarcity, we have developed a flexible system with small distribution vehicles, which are able to cover the capital, Monrovia. However, attracting and training agents and vendors takes more time than expected. The potential of Monrovia grows by the day and we trust that with persistence and dedication, we will also turn the business in Liberia into a success story.



Corporate Social Responsibility

Fan Milk is determined to operate in a responsible manner and firmly believes that long-term profit and existence are linked to the way in which we do business, our respect for people and the environment.

Fan Milk is committed to conducting its business in a transparent, as well as socially and environmentally responsible manner. In this regard, Fan Milk operates in accordance with international standards and relevant laws of the countries in which we operate.

UN Global CompactFan Milk wishes to continue to promote and develop its Corporate Social Responsibility with respect to human rights, social matters, environmental and climate matters and combating corruption. In 2010, Fan Milk International, therefore, joined the UN Global Compact and presented our first Communication on Progress (COP) report during 2011. In line with the requirements, Fan Milk International has published the COP report for 2011 to UN Global Compact; this can also be found on our website www.fanmilk.com.

Fan Milk International advises all subsidiaries and relevant business partners of our policy and association with the UN Global Compact. Furthermore, all Fan Milk subsidiaries are advised to adapt and implement the declaration and the policies within their local sphere of influence.

Specific policies, including The Ten Principles of The United Nations Global Compact, have been defined for human rights, labour rights, occupational health and safety, environment and climate and anti-corruption and can also be found on our website.

Our vision remains intact

On behalf of the Fan Milk Group, I would like to thank our many employees and all other stakeholders for their efforts, dedication and contributions to making 2011 yet another year of strong performance.

Our vision to become “one of the leading food companies in West Africa” remains intact and our strategic priorities guiding this vision are centred on our stakeholders, our products and innovation, quality and efficiency while stay-ing committed to conducting our business in a transparent, as well as socially and environmentally responsible manner.

The sum of this comprises the Fan Milk brand, symbolised for 50 years by the Fan Milk logo. In this year’s report, we describe how the Fan Milk brand is constantly developed through the way we work and through the collaboration of all stakeholders.

Jens Jørgen KollerupManaging Director

Our vision to become “one of the leading food companies in West Africa” remains intact and our strategic priorities guiding this vision are centred on our stakeholders, our products and innovation, quality and efficiency

Fan Milk has become a symbol of West African perseverance, staying strong through hard economic, political and social times, and emerging from these with innovative solutions to tackle such situations in the future.

1992

1990

1988

1970’s and 1980’s

1960

1997

2002

2004

2008

2010

2010

2011

2011-

A general strike in Togo results in the factory closing for 10 months.

Fan Milk Ghana is one of the first companies to be listed on the Ghana Stock Exchange.

The first pouch machine is installed, marking a turning point in efficiency, volume growth and brand awareness. From now on the majority of Fan Milk products are sold in the eye-catching pouches.

Periods of major instability in Ghana and Nigeria leads to economic downturn.

The first Fan Milk factory is incorporated in Ghana. From the beginning bicycles are used to distribute and sell products.

As one of the first operators in West Africa, Fan Milk Togo starts exporting under the newly established UMEOA agreements. The exports go to the Fan Milk companies in Benin, Burkina Faso and to an affiliate in Niger.

Fan Milk Côte d’Ivoire is established through an acquisition. Unfortunately, 2002 marks the start of a period of political instability and civil unrest, lasting on and off until 2011.

Emidan establishes sourcing activities in The Far East, creating a new competitive edge for Fan Milk.

Fan Milk products are now sold in eight West African countries, as Fan Milk Liberia is incorporated.

Fan Milk Ghana celebrates its 50th anni-versary along with Fan Milk Togo celebrating its 25th anniversary.

Fan Milk joins the UN Global Compact.

Fan Milk Nigeria celebrates its 50th anniversary.

Every second of every day Fan Milk sells 25 products through a network of 25,000 agents and vendors.

FAN MIlK – OUR wORlD


Our value chain

Global sourcing and procurement of raw materialsBased on forecasting prin-ciples, Emidan ensures the timely arrival of raw and packing materials at the factories. These materials are sourced and supplied at competitive prices through Emidan’s global network of suppliers.

logisticsEmidan follows the raw materials every step of the way by checking the quality of the goods being shipped, preparing and overseeing shipping, and assisting fast and smooth customs clearing at the destina-tion by preparing correct documentation.

High-technology productionThe modern facilities at our dairy plants allow for fast-paced and efficient production, followed by efficient freezing of our products. Laboratory test-ing throughout production and beyond, secures the quality.

DistributionThe cold chain is main-tained during distribution with our customized and branded trucks. Products arrive at the distribution centers, which have the required equipment to keep them frozen. Agents purchase the products and redistribute them from their freezers to the asso-ciated vendors.

Sales & MarketingWith product offerings and marketing efforts designed on the basis of consumer preferences in each country, we offer a wide array of products to our consumers, yet with one unified brand identity. Most consumers buy the products from ven-dors, who use our bicycles and pushcarts to keep the product frozen.

Fan Milk’s extensive value chain stretches through global sourcing, procurement, transport of raw materials and high-technology pro-duction in our factories, to distribution of our products and allows for control of every detail throughout the chain.

With a large range of competencies including effective net-working with suppliers, efficient production and laboratory testing, our expertise allows us to secure quality in each stage of the value chain. We keep our cold chain intact, seek innova-tive solutions and successfully market and sell the products to our customers and consumers.

UNIQUE COlD CHAINOur cold chain starts during production, and keeps products frozen throughout the distribution and sales phases. Maintaining this unique chain is one of our core compe-tencies which enables our consumers to buy the products that they want – refreshing, frozen Fan Milk products.


Our brand

In 1960, the first Fan Milk factory was established in West Africa. Since then, Fan Milk has changed lives, influenced economies, developed innovative systems and products, and introduced high quality dairy and juice products to West Africans. Our stakeholders, products, high quality standards and innovative solutions have successfully driven the Fan Milk brand for over 50 years and will continue to do so in the future.

Stakeholders

Fan Milk acknowledges the ever increasing importance of stakeholder relationships with the brand. We are, therefore, committed to having meaningful interactions and dialogues, to getting valuable feedback and to engaging stakeholders in the brand. We strive to include the diff erent opinions in our decision-making processes.

Products

Fan Milk’s four production facilities in the West African countries of Ghana, Nigeria, Togo and Côte d’Ivoire, pro-duce the high quality products for which we are renowned. Since the first Fan Milk factory was founded in Ghana in 1960, our strengths have included creating synergies between Danish dairy skills and expertise, and foreign market opportunities. By manufacturing high quality products at attractive prices, Fan Milk is able to offer

value for money and target consumers of different income levels in West Africa. The products are all individualised, with their own special packing, identity and advertising efforts. The product ranges are customised for the local markets, based on consumer feedback and sales.

Quality standards

As a result of the way we work, Fan Milk has become syn-onymous with excellent quality. To us, selling an affordable product does not mean compromising on quality.

The raw materials we source, machines we use, and pro-ducts we manufacture all have to be of the highest quality. We are able to do this by auditing suppliers, using modern equipment, creating and maintaining a hygienic production environment and auditing our B2B customers. In addition, three out of our four production facilities are ISO certified.

Innovative solutions

Through continuous adaptation to our local environment and the related challenges, Fan Milk has had success in West Africa. Consequently, Fan Milk has become a symbol of West African perseverance, staying strong through hard economic, political and social times, and emerging from these with innovative solutions to tackle such situations in the future.


Our products

Proudly serving dairy and juice products to all of West Africa

Fan Milk consumers are found across all age groups as well as all socioeconomic backgrounds in West Africa. This is due to our ability to supply products that offer real value for money. Given our long history, many of our consumers have a strong connection with our products, having enjoyed them as children:

“Part of the reason our consumers are loyal to our brand is the strong history of quality service that Fan Milk has given West Africans at an affordable price. Growing up with the brands, parents have passed on that tradition, that loyalty, to their children.”– Mrs Anthonia Okwo, Head of Trade and Marketing, Fan Milk Nigeria.

Creating winning recipes for winning products

Fan Milk products are created on the basis of consumer preferences in the West African markets, and on the basis of patterns in demand and consumer needs. Thereby, we ensure that consumers enjoy our products:

“We identify tastes that are popular in the region and subsequently develop and optimize the recipes to appeal to our consumers.”– Mr Brian Lilholt, M. Sc. (Dairy Technology), Fan Milk International.

Consumer reflections

Fan Milk Nigeria recently launched a telephone hotline service to facilitate feedback from consumers. Understanding our consumers’ experiences with our products is key to further improve our products and services. Surprisingly often consumers are calling in with positive feedback.

“Consumers are actually calling us to say they love the products. It happens several times a week that consumers call us unprompted to tell us how much they enjoy the Fan Milk products.” – Mr Steen Hadsbjerg, Managing Director, Fan Milk Nigeria.

At the core of the Fan Milk brand, we have our most popular products:

FanIce is a vanilla ice cream and one of the first Fan Milk products. FanIce is particularly popular in Ghana and Nigeria.

FanChoco is a frozen chocolate milk product. FanChoco’s popularity is increasing in all Fan Milk markets.

FanDango is a juice drink with added Vitamin C.

FanYogo is a frozen yoghurt, made with live yoghurt cultures. Strawberry flavoured FanYogo is particularly popular in Ghana due to its great taste and nutritious qualities.

SuperYogo is a frozen natural yoghurt, made with live yoghurt cultures. SuperYogo is popular in Nigeria due to its great taste and nutritious qualities.

Lait Vanille is a milk based product, with a sweet vanilla taste. The product was introduced just a few years ago and is the most popular Fan Milk product in Togo, Benin and Burkina Faso.

Fantastic is a drinking yoghurt available in a variety of flavours and is sold exclusively in Nigeria.

Star is a vanilla ice cream sold exclusively in Côte d’Ivoire.

Fan Milk is reliable and gives you value for money. I remember during my birthday a friend brought me a parcel. When I opened it, it was Fan Milk products. They were fantastic and I enjoyed them with my friends.– Olivia, Consumer, Ghana.

Everyone knows Fan Milk. Whenever you want to buy a product, vendors are readily available with their unmistakable horn, announcing their presence. I often buy ice cream for my friends, and we share in all the fun. My favourite flavour is vanilla.– Afia, Consumer, Ghana.

I first tasted a Fan Milk product because a persistent vendor and my hungry daughter persuaded me to buy it. It was really very delicious! I immediately went back to the vendor and bought five more products to bring home with me.– Mrs Angéle Konan, Consumer, Côte d’Ivoire.


Fan Milk’s marketing efforts include connecting with consumers directly to create positive experiences with Fan Milk, for example by using sponsored and promo-tional activities in primary and secondary schools in Togo. Another example is from Nigeria, where we visit marketplaces to offer samples and get immediate responses from consumers.

“The key success factor which I can pinpoint has been sticking with the consumer engagement activities – that has really helped us grow and gain in market share.”– Mrs Anthonia Okwo, Head of Trade and Marketing, Fan Milk Nigeria.

In Ghana, the sports-loving youth have reacted very positively to the concept of brand ambassadors:

“We make use of two remarkable and world class Ghana-ian footballers, namely, Michael Essien and André ‘Dede’ Ayew as brand ambassadors … they have been part of the foundation for our success in the past couple of years.”– Mr Jesper B. Jeppesen, Managing Director, Fan Milk Ghana.

Our brand ambassador for FanIce in Ghana, ‘Dede’ Ayew features on several billboards, vehicles, dealer signs and wall signs, as well as on national television advertise-ments. Engaging consumers with role models is part of creating a family brand and a household name. Having grown up enjoying the products himself, ‘Dede’ Ayew can relate to the popularity of the products:

“When I was young the products were something I used to enjoy with friends. I still enjoy Fan Milk products after my training sessions.”- Mr André ‘Dede’ Ayew, Professional Football Player, Olympique Marseille, France.

Connecting with consumers


The Fan Milk vendor – a West African icon

The vendors are the face of Fan Milk in the West African streets. They sell our products from their cooler boxes, to our quality conscious consumers at the local markets, schools, beaches, villages and on the urban streets. Their characteristi-cally tuned horn, and eye-catching uniform and designs on our distribution units have made the Fan Milk vendors an iconic sight across West Africa.

“We are successful because we get out there and are available to the consumer. People in West Africa spend a large amount of time outside, in the street and in the market place.Seeing a Fan Milk pushcart or bicycle triggers the need for something cool and refreshing. That is what consumers think of when they see our distribution equipment, so it is important to be everywhere with our distribution and have a unified look.”– Mr Hans J. Pedersen, Managing Director, Fan Milk Togo.


Fan Milk is a household name, with well-known products sold across West Africa. We strive to ensure that the brand is, and always will be, known for its high quality – quality in taste and quality in experience. When every little detail must be of top quality, Fan Milk has a formi-dable responsibility, and strict requirements exist with regards to maintaining the defined quality in all stages of the value chain.

When operating in a challenging and constantly changing market, it is important to always adhere to our quality standards in all aspects of what we do.

“In an ever changing world, we must continue to work hard and stay focused in order to strengthen Fan Milk’s competitiveness, build a solid foundation and have the flexibility to meet an increasingly challenging future.”- Mr Jens Jørgen Kollerup, Managing Director, Fan Milk International.

Food safety

In Fan Milk, raw and packing materials are managed in accordance with best practice as delivery of safe products is of utmost importance. The concept of quality encom-passes everything and everyone in our points of contact.

To constantly achieve high quality and in order to uphold our standards, we have systems in place throughout our procurement, production and distribution processes.The raw materials purchased from our suppliers are tested for quality and must be in compliance with international standards, as well as our own set of standards.

“We follow internationally defined standards when available and often create even more specific Fan Milk standards. We do laboratory checks of raw materials before shipment and again upon arrival to our factories … it’s better to be on top of things so that raw materials are in compliance with the standards.”– Mr Einar Mark Christensen, Deputy Director, Fan Milk International.

On site, we have Quality Assurance departments and Quality Control laboratories to monitor that the speci-fications, standards and other quality measures are enforced and maintained.

In the distribution of our frozen products, we have suc-ceeded in creating a cold chain that ensures cold products on the street in a very warm climate.

“The quality of our products and processes represents the reliability and the persistence of our activities, while guaran-teeing the feeling of security for the consumer.”– Mr Abasse Kane, Managing Director, Fan Milk Côte d’Ivoire.

“Quality is what we are selling. The quality gives value to the brand and to our products. Our most important quality initiatives are our very good practices in regards to hygiene, food security, distribution and training.”– Mr Aimé Assale, Purchasing Manager, Fan Milk Côte d’Ivoire.

Setting high quality standards

Achieving accreditations under the ISO standards in three out of four factories has greatly helped in documenting processes and activities and has brought more quality awareness to the employees, making departmental activi-ties easier and staff members more responsible.

“The most important quality measure we have is the adherence to the ISO standards, because it has made all staff quality conscious. Our staff have a slogan – they say the ISO 22000 is constant care, because we put constant care in everything we do and comply to the hygiene rules.”– Mrs Ifeoma Eribo, Quality Assurance Manager, Fan Milk Nigeria.

All employees are well-trained in quality control and hygiene. Furthermore, ensuring the minimal amount of handling of our products helps keep the hygiene levels and the cold chain intact. Employees, agents and vendors are regularly trained in hygiene and handling of products.

World class manufacturing


Quality, efficiency and productivity

Producing more than 30 products every second of every day during the high season requires highly efficient production facilities. In Fan Milk, we are proud of the sophistication and the quality of the equipment we work with in our dairy plants. The most recent addition to this is a new automated packing line in Fan Milk Nigeria, the first in Fan Milk.

However, future growth consists of more than just instal-lation of technology. Good teamwork, applying the right and most efficient machinery for the production, effective planning and professional execution are all necessary to create the right results. Little of the day-to-day operations in Fan Milk are left to chance.

“Quality, efficiency and productivity are closely connected and can be applied to everything we do and stand for. This is very important if we are to reach our long term objectives, whether it concerns the products we make or the work pro-cesses we use. We stand out because of excellence, and we are excellent because we focus on quality at all stages.”– Mr Jens Jørgen Kollerup, Managing Director, Fan Milk International.

Ensuring competitive prices

Offering high quality products at prices that are attractive for most West African consumers is a result of effective global sourcing of raw and packing materials and maintaining a broad network of suppliers. Pooling our major purchasing of high quality raw materials and other supplies through our trading company Emidan, results in cost-effective prices for all the West African companies; we enjoy discounts that are directly transferrable to the price of our products:

“If you wish to be competitive, you need also to focus on volume and logistical services. The advantages we obtain through the purchase of large quantities are directly transferred to the Fan Milk companies and that helps them gain competitive advantages and continue to be competitive in the market.”– Mr. Henrik B. Kruhöffer, Deputy Director, Emidan.

“Being able to combine purchases for Fan Milk is a huge advantage.”– Mr. Dan Lindberg Jensen, Shipping Manager, Emidan.

Our consumers are loyal because they know that they always get a high quality product.– Mr Folly Akuete, Sales Development Manager, Fan Milk Côte d’Ivoire.


The thing I like best about working for Fan Milk is the team work within a great family – the Fan Milk family.– Ms Mariam Toure, General Manager Operations, Fan Milk Côte d’Ivoire.

Without the constant care, attention and dedication of the Fan Milk employees, we would not be as successful as we are today. One of the things that characterises our employees is the passion to provide a great experience for the consumer:

“Some of us have been working at Fan Milk for over 18 years, and the passion to deliver excellent service to the consumer is virtually in our blood.”– Mr Jonathan Kwasi Attuah, Sales & Marketing Manager, Fan Milk Ghana.

Our employees are among our most important assets, along with their knowledge and dedication to producing high quality products. Fan Milk hires passionate people, and inspires them to be the frontrunners of knowledge in their field. Furthermore, Fan Milk empowers em ployees through fostering an open culture where ideas are wel-come, resulting in an environment that is respectful of all employees.

Ultimately, without our employees, there would be no organisation, no drive to excel in the market, no executors of our quality products and thus no company:

“Without motivated staff who are constantly cared for, skills improved upon and capabilities extended, we would not be where we are today. In short, our people have nurtured our brands so well to this stage.”- Mr Jesper B. Jeppesen, Managing Director, Fan Milk Ghana.

Passionate employees

Working in a dream job

“Because I knew the company as a child, as one that produced good quality products I loved to buy, I felt I wanted to be a part of that, which was why I opted for Fan Milk.”– Mrs Jane Adedayo, Procurement Manager, Fan Milk Nigeria.

“I can say that working with Fan Milk is actu-ally a dream come true, because I remember, far back when I was in school I used to dream and see myself in a white lab coat. I love doing this work, I enjoy the job and my several years of working with Fan Milk have really been fulfilling.”– Mrs Ifeoma Eribo, Quality Assurance Manager, Fan Milk Nigeria.



“Fan Milk has provided me with business acumen to move from a small shop with 2 vendors to an award winning business operating with 40 vendors. The name Fan Milk brings with it a sense of belonging. The brand has a lot of goodwill and makes selling a lot easier. They have an attractive incentive, comparable to only a few companies in the country.”– Agent, Great Samdave Enterprise, Ghana.

“My life took a complete change thanks to Fan Milk. Since I got that job, I blossomed and I am now able to take care of my children ensuring their schooling and buying their clothing; I am an independent person. The consideration given by Fan Milk towards all the B2B customers and vendors means a lot to me. We receive some material and Fan Milk ensures the good quality of the products, contributing in that way to the well-being of the vendors. Fan Milk is the only company in Côte d’Ivoire to take such good care of their partners.”– Mrs Aissata Konate, Depot Mirrador, Macaci, Williamsville and Renault, Côte d’Ivoire.

Fan Milk has given thousands of West Africans an opportunity to change their lives.

“Proving that it has been possible to impact the lives and devel–op an occupation that benefits both parties has made us proud.”– Mr Johannes Traerup Ghebrelul, General Manager, Fan Milk Liberia.

Fan Milk products continue to be a source of livelihood for many thousands across West Africa, who are able to feed their families every day with the profits they make in their vending jobs:

“I know that with Fan Milk, I will be able to plan ahead for my future.”– Mr Ojie David, Vendor, Nigeria.

Fan Milk has made it possible for numerous West Africans to save money, establish families, send their children to school and even universities, all thanks to their jobs selling Fan Milk products:

“Since I joined Fan Milk, I have used the sales that I have made to feed my family and send my children to school.”– Mrs Akintoye Adewunmi, Vendor, Nigeria.

Others have used their profits to save up for an education for themselves:

“In a year, I am hoping to start Polytechnic classes in Ibadan. Without this work, I wouldn’t be able to pay for my education.”– Mr. Sunday Ogunmorieyele, Vendor, Nigeria.

One especially inspiring life changing story comes from one of our top franchisees in Nigeria, Mr. Yinka Omogoye, Managing Director of Demillar General Services. Two years ago, he was working as a vendor. Realising the potential in becoming a Fan Milk franchisee, he sold his flat to raise funds for a franchise business:

“If you had known me some two or three years ago, I wouldn’t need to convince you that Fan Milk has contributed positively to my life. Fan Milk has made me an entrepreneur today, with a company of this size, which I am very grateful for.”

In just one year, Yinka Omogoye has created a very suc-cessful franchise business:

“We started the franchise with about 20 vendors and since then, we have been increasing at a rate of about 15 vendors per month … With the kind of resources and the assistance coming from Fan Milk, we can easily accommodate 500 vendors in the future. As the company progresses, I will also progress.”

Changing lives across West Africa


If you had known me some two or three years ago, I wouldn’t need to convince you that Fan Milk has contributed positively to my life. Fan Milk has made me an entrepreneur today, with a company of this size, which I am very grateful for.Mr. Yinka Omogoye, Managing Director of Demillar General Services, Nigeria.


Ghana is possibly one of the fastest growing economies in the world at present. Furthermore, the IMF predicts high growth figures for the coming years.


With a population of about 25 million people, consisting of more than 100 different ethnic groups and 56 local dialects, Ghana has been fortunate not to experience the kind of conflicts that have started civil unrest in many other African countries. The country shares borders with Togo in the east, Burkina Faso to the north and Côte d’Ivoire to the west. The capital, Accra, lies along the coast of the Gulf of Guinea, and has a population of 2 million people, while the second largest city, Kumasi, situated 250 km northwest of Accra, has a population of almost 2 million people.

Political History

After the Gold Coast gained independence from the United Kingdom in 1957, Ghana was created by merging the Gold Coast and the former British Togoland. As a par-liamentary democracy, Ghana enjoyed some of the most extensive infrastructure investments in post-colonial Africa, and the future of the country was supported by several industrial projects such as: The Akosombo Dam, which supplies electricity for Ghana, Togo, Benin and other neighbouring countries; Lake Volta, the world’s largest man-made lake which supports transportation of cargo; and VALCO, Africa’s largest aluminium smelter.

A high dependency on only a few commodities - gold, cocoa and timber - declining global commodity prices and depleting foreign exchange reserves made it necessary to turn to foreign donors during the 60s and 70s. However, few were willing to invest in the country and an increasing need for development assistance caused severe problems. Eventually, increasing corruption prompted several military coups, and the country alternated between military and civilian governments. Finally in 1992, a new constitution restored multi-party politics, and gave way to the Fourth Republic.

With an upcoming election in December 2012, the Presidential candidates from the two main parties, the liberal conservative NPP against the sitting social NDC will be contesting for the position. Though the NPP lost only marginally in 2008, the election ended peacefully. An orderly and peaceful election is also expected at the end of 2012.

Economic Growth

As a mid-sized middle-income country, Ghana has created the foundation for sustainable economic growth. The country has managed to build a relatively diverse economy – one that, in recent years, has outperformed many African countries, and shown a growth rate averaging three or four times that of the OECD countries. During the past decade, economic management has been solid overall. With increasing foreign direct investment, along with strong commodity revenues, implementation of debt relief programs, and the start of commercial oil production, the Ghanaian economy has reached a new level of growth.

Ghana is possibly one of the fastest growing economies in the world at present. Furthermore, the IMF predicts high growth figures for the coming years.

Whilst GDP has been growing, the rate of inflation of the Ghanaian economy has steadily declined – trends seem to be continuing, partly due to reduced government spending and increasing oil production.

Ghana IN FOCUS

GHANA AT A GlANCEPopulation 25.2 million

Urban population 51%

workforce 10.77 million

Ethnic groups over 100

GDP per capita (PPP) $3100

Source: CIA World Fact book


Trade

Currently, the economy is dependent on a number of commodities, which are still sensitive to price fluctuations, but the secondary and tertiary sectors are becoming more advanced and have contributed to growth over the past decade. The export of commodities is dominated by cocoa and gold, which represent about 24 per cent and 41 per cent of exports, respectively. Besides being the second largest producer of gold in Africa, Ghana is also rich in other mineral resources such as diamonds, manganese, iron ore, limestone, bauxite and more. The country is the second largest producer of cocoa in the world, and the third largest producer of timber in Africa. Although the discovery of oil is projected to becoming a large part of the country’s exports, Ghana will continue to be dependent on global commodity prices.

Ghana is also attempting to create a more diversified trade mix by exporting manufactured and processed products.

Oil production

The biggest economic development in the Ghanaian economy in recent years has been the discovery of two large oil fields in 2007. The Jubilee Field has been over three years in the making, and started pumping oil late 2010. The field is estimated to hold 1.5bn barrels, and will generate around USD 1bn per year, once in full operation. The second field, Owo-Tweneboa, is estimated to hold 1.4bn barrels. Other oil fields have been discovered and further searches for new oil deposits are on-going. Although estimates on the total reserves are varied, the high-end forecasts estimate more than 4.5bn barrels. The upstream oil sector has been growing rapidly, as oil is now ready to become one of Ghana’s top commodity exports, potentially making Ghana the sixth-largest crude oil exporter in Africa.

Ghana’s multiple strengths seem to ensure a continuous economic growth in the future.


Infrastructure

Ghana’s main goals with infrastructural development are to facilitate intra-regional trade; create better acces-sibility to rural areas and establish a good and attractive private sector platform which will open up for investment, enhanced productivity and job creation throughout the country.

With the expansion and rehabilitation of the two com-mercial shipping ports, i.e. the main port in the eastern city of Tema, and the other in the western city of Takoradi, the volume of cargo has increased steadily, due to trans-shipment and transit traffic to the land-locked countries of Burkina Faso, Mali and Niger. As the two oil fields lie closest to the Western Region, the area is looking forward to new and/or improved port, road and rail projects.

Ghana’s open skies policy, that frees air space regulators from limitations on capacity, frequency, route and other air operational restrictions, has made the country a hub of an extensive international airline network. In working to position itself as a gateway to West Africa, Kotoka International Airport handles a high volume of cargo and has attained Category One status by the US Federal Aviation Administration. Recent refurbishments of the airport have significantly increased traveller and cargo capacity.

Summary

Thanks to Ghana’s political stability, a comparatively diverse industrial base, the strong service sector and growing upstream sector, the country has positioned itself as a very desirable destination for foreign capital in West Africa. Ghana has performed well during the past decade, and despite the dependency on gold and cocoa, and the need for a more diversified trade mix, the trade balance is predicted to continue improving as the oil pro-duction diminishes the country’s deficit. Ghana’s multiple strengths seem to ensure a continuous economic growth in the future.

Being an important market for Fan Milk, and on the basis of the recent economic developments, Fan Milk is investing further in the Ghanaian market, increasing capacity, streamlining operations and achieving enhanced nationwide presence for the distribution of its products.

“With continuous expansion of our nationwide distribution network and optimisation of our production plant, coupled with Ghana’s strong economic performance, we can only visualise that growth will prevail and remain sustainable in many years to come.”– Mr Jesper B Jeppesen, Managing Director, Fan Milk Ltd Ghana.

32 Company information

33 Management´s statement

34 Independent auditor’s report

35 Group highlights

36 Management’s review

39 Income statement

40 Balance sheet

42 Cash flow statement

43 Accounting policies

47 Notes

FAN MIlK GROUP

Financial statements 2011


Company information

The companyFan Milk International A/SSofiendalsvej 88 ADK-9200 Aalborg SVRegistration No.: 44 32 67 28

Board of Directors Preben Sunke, Chairman

Christian EmborgPer Søndergaard PedersenMorten JensenErik Preben Holm

Board of Executives Jens Jørgen KollerupEinar Mark Christensen

AuditorsBeierholmState Authorized Public Accounting Company


Management´s statement

The Board of Directors and Board of Executives have on this day considered and adopted the consolidated financial statements for the financial year 1 January 2011 - 31 December 2011 for Fan Milk International A/S.

The consolidated financial statements are presented in accordance with the Danish Financial Statements Act (Årsregnskabsloven).

In our opinion, the consolidated financial statements give a true and fair view of the group’s and the company’s assets, liabilities and financial position as at 31 December 2011 and of the results of their activities and the consolidated cash flows for the financial year 1 January 2011 - 31 December 2011.

We believe that the management’s review gives a true and fair review of the matters dealt with in the review.

The consolidated financial statements are submitted for adoption by the general meeting.

Aalborg, 14 May 2012

Board of Executives

Jens Jørgen Kollerup Einar Mark Christensen

Board of Directors Preben Sunke Christian Emborg Per Søndergaard PedersenChairman Morten Jensen Erik Preben Holm


Independent auditor’s report

To the shareholders of Fan Milk International A/S

Report on consolidated financial statements and parent company financial statements

We have audited the consolidated financial statements and parent company financial statements of Fan Milk International A/S for the financial year 1 January to 31 December 2011, which comprise the income statement, balance sheet, cash flow statement and notes, including summary of significant accounting policies for the Group as well as for the Parent Company. The consolidated financial statements and the parent company financial statements are prepared in accordance with the Danish Financial Statements Act.

Management’s responsibility for the Consolidated Financial Statements and the Parent Company Financial Statements

The Management is responsible for the preparation of con-solidated financial statements and parent company financial statements that give a true and fair view in accordance with the Danish Financial Statements Act and for such internal control as the Management determines is necessary to enable the preparation of consolidated financial statements and parent company financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on the con-solidated financial statements and the parent company financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish Audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and the parent company financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the con-solidated financial statements and the parent company financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatements of the consoli-dated financial statements and the parent company financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers

internal control relevant to the entity’s preparation of consolidated financial statements and parent company financial statements that give a true and fair view 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 con-trol. An audit also includes evaluating the appropri-ateness of accounting policies used and the reasonable-ness of accounting estimates made by the Management, as well as the overall presentation of the consolidated financial statements and the parent company financial statements.

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

The audit has not resulted in any qualification.

Opinion

In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Group’s and the Parent Company’s financial position at 31 December 2011 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 January to 31 December 2011 in accordance with the Danish Financial Statements Act.

STATEMENT ON THE MANAGEMENT’S REVIEw

Pursuant to the Danish Financial Statements Act, we have read the Management’s review. We have not performed any further procedures in addition to the audit of the consolidated financial statements and the parent company financial statements. On this basis, it is our opinion that the information provided in the Management’s review is consistent with the consolidated financial statements and the parent company financial statements.

Aalborg, 14 May 2012

BeierholmState Authorized Public Accounting Company

Søren V. PedersenState Authorized Public Accountant


Group highlights

Figures in DKK ’000 2011 2010 2009 * 2008 * 2007

KEY FIGURES

Income statement

Revenue 750,677 772,143 633,361 634,287 569,471Index 132 136 111 111 100

Gross profit 407,253 437,935 368,664 332,157 287,222Index 142 152 128 116 100

Profit before depreciation, amortisation, etc. (EBITDA) 178,739 206,309 158,962 124,270 73,260Index 244 282 217 170 100

Operating profit (EBIT) 131,423 147,182 119,890 87,740 40,822Index 322 361 294 215 100

Net financials -10,659 -10,253 -14,799 -23,174 -12,925Index - - - - -

Net profit 91,055 97,359 76,346 48,725 10,710Index 850 909 713 455 100

Net profit, parent company’s share 61,850 61,348 48,935 32,519 2,748Index 2,251 2,232 1,781 1,183 100

Balance sheet

Total assets 646,444 539,715 418,304 372,097 388,377Index 166 139 108 96 100

Equity 375,145 326,124 227,739 170,560 140,812Index 266 232 162 121 100

Equity, parent company’s share 259,246 218,774 154,632 115,547 96,549Index 269 227 160 120 100

Dividends 4,275 2,542 3,239 2,639 39,013Index 11 7 8 7 100

Net interest-bearing debt 46,938 -12,369 21,525 65,033 56,633Index 83 - 38 115 100

RATIOS

Profitability

Gross profit ratio 54.3% 56.7% 58.2% 52.4% 50.4%

Return on equity, consolidated 26.0% 35.2% 38.3% 31.3% 6.1%

Return on equity, parent company 25.9% 32.9% 36.2% 30.7% 2.1%

Return on invested capital (ROIC) 35,7% 52.3% 49.5% 40.5% 18.9%

Profit margin 17,5% 19.1% 19.0% 13.8% 7.2%

Equity ratio 58.0% 60.4% 54.4% 45.8% 36.3%

* As 2009 is the first year in which consolidated financial statements are prepared, the comparative figures for 2008 and 2007 represent non-audited figures.

Computation of ratios The ratios have been computed in accordance with the recommendations of the Danish Society of Financial Analysts (Den Danske Finansanalytikerforening):

Gross profit ratio Gross profit x 100 Return on invested Operating profit x 100 Equity ratio Equity, end of year x 100 Revenue capital (ROIC) Average invested capital Total assets

Return on equity Profit for the year after tax x 100 Profit margin Operating profit x 100 Average equity Revenue


Management’s review

Main activities The main activities of the Fan Milk Group are production, distribution and sale of dairy products such as yoghurt, ice cream, chocolate milk etc. as well as juice and fruit drinks in West Africa. Furthermore, the Danish subsidiaries of the Group carry out a number of supporting activities, such as procurement and shipment of raw materials and packaging materials, business development assistance, consultancy services and management support.

Development in the company’s financial activities and affairs 2011 was yet another year of strong performance across the group, even though we didn’t achieve the growth we expected going into the year.

2011 was a year characterised by a number of challenges, such as significant price increases on raw and packaging materials, devaluation of our main foreign currencies and lower than normal seasonal sales.

The challenges in 2011 have not changed our view of the potential of our markets and during the year we made significant investments in the expansion of our production capacity and distribution, and the group is well prepared for a return to strong growth in 2012.

Revenue and gross profitDespite the challenges mentioned, we achieved consoli-dated revenue of DKK 751m (DKK 829m in local currencies), which represents a drop of 3 per cent in DKK against 2010, but a growth of 7 per cent in local currencies. Gross profit was DKK 407m (DKK 447m in local currencies) against DKK 438m in 2010. Due to increases in the price of raw and packaging materials, the gross profit margin fell from 56.7 per cent in 2010 to 54.3 per cent in 2011.

During the year, our main foreign currencies (the Ghanaian Cedi and the Nigerian Naira) devaluated against DKK by 13 and 10 per cent respectively.

EBITDA and operating profit Tight cost control throughout the year lead to capacity cost of DKK 229m (DKK 232m in 2010). All in all EBITDA, defined as earnings before interest, taxes and deprecia-tion, amounted to DKK 179m (DKK 206m in 2010). With depreciations of DKK 47m operating profit (EBIT) for the year ended at DKK 131m (DKK 147m in 2010) with an operating profit (EBIT) margin of 17.5 per cent against 19.1 per cent in 2010.

The net effect of the negative exchange rate developments in 2011 was minus DKK 19m in EBITDA and minus DKK 14m in operating profit.

The profit on ordinary operations for 2011 is considered satisfactory.

Special risksAs the group is primarily conducting business in countries located in West Africa, the group is constantly exposed to risks primarily relating to:

Political situation Monetary situation

The group tries to minimise the risks through increased geographical spread of its activities and by partial hedging of monetary risks.

Corporate Social ResponsibilityThe Group is conscious of its corporate social responsibility with respect to human rights, social matters, environmental and climate matters and combating of corruption. The group has joined the UN Global Compact in 2010 and is thereby, committed to actively implement the 10 principles in its activities, among others by elaborating a CSR policy that can be read in full at www.fanmilk.com.

A status on the Group progress in its CSR activities can also be found on www.fanmilk.com.


Knowledge resourcesThe group has special competencies with regard to exploiting business opportunities in Africa, including great cultural understanding and wide insight into African business conditions.

Research and development activitiesProduct development and process optimisation are carried out at a local company level. Great efforts are put into the continuous development of new flavours and packaging materials to always meet the customers’ demands.

All costs involved so far have been expensed.

The group’s expected developmentIn spite of the current global economic crisis, the Group ended 2011 on a positive note. The Group looks positively at 2012 and expects to be able to reach above 10 per cent growth in both revenue and profits in 2012 compared to 2011.

Circumstances after the end of the financial yearAfter the end of the financial year, no occurrences have had any significant influence on the annual accounts and the report.



Income statement

Amounts in DKK ’000 2011 2010

Note Revenue 750,677 772,143

Cost of sales -343,424 -334,208

Gross profit 407,253 437,935

Remuneration, salaries, etc. -104,721 -101,439 Other external costs -123,793 -130,187

Profit before depreciation, amortisation, etc. (EBITDA) 178,739 206,309

1+2 Depreciation and amortisation of intangible assets, property, plant and equipment -48,350 -59,7442 Loss/profit on disposal of property, plant and equipment 1,034 617 Operating profit (EBIT) 131,423 147,182

Financial income and similar items 6,732 5,315 Financial expenses and similar items -17,391 -15,568 Total net financials -10,659 -10,253 Profit from ordinary operating activities before tax (EBT) 120,764 136,929 3 Tax on profit from ordinary activities -29,205 -39,570 Net profit for the year 91,055 97,359 Minority shareholders’ share -29,205 -36,011 Net profit for the year, parent company’s share 61,850 61,348 Distribution of net profit Dividend for the financial year 0 0 Retained earnings 61,850 61,348 Total 61,850 61,348


Balance sheet

ASSETS

Amounts in DKK ’000 31.12.2011 31.12.2010

Note Trademark rights 371 761

1 Total intangible assets 371 761

Land and buildings 54,792 43,707 Plant and machinery 185,409 109,421 Leasehold improvements 610 850 Other plant, fixtures and fittings, tools and equipment 123,868 101,556

2 Total property, plant and equipment 364,679 255,534

Total non-current assets 365,050 256,295

Raw materials and consumables 122,138 93,900 Work in progress 147 343 Manufactured goods and goods for resale 11,200 8,121

Total inventories 133,485 102,364

Other trade receivables 9,405 11,247 Corporation tax receivable 890 1,478 Other receivables 52,228 57,023

Total receivables 62,523 69,748

Cash and bank balances 85,386 111,308

Total current assets 281,394 283,420

Total assets 646,444 539,715


EQUITY AND lIABIlITIES

Amounts in DKK ’000 31.12.2011 31.12.2010

Note Share capital 12,000 12,000 Retained earnings 247,246 206,774 Proposed dividend for the financial year 0 0

4 Equity, parent company’s share 259,246 218,774 4 Equity, minority interests 115,899 107,350 Total equity 375,145 326,124 Provisions for deferred tax 15,452 11,713 Other provisions 25,409 25,695 Total provisions 40,861 37,408 Credit institutions 16,986 25,441 Other payables 4,732 9,005 Short-term portion of long-term liabilities -12,311 -13,357 Total long-term payables 9,407 21,089 Short-term portion of long-term liabilities 12,311 13,357 Credit institutions 110,606 64,493 Trade payables 54,846 43,612 Other payables 37,709 27,438 Income tax 5,559 6,194 Total short-term payables 221,031 155,094 Total payables 230,438 176,183 Total equity and liabilities 646,444 539,715

5 Ownership and shareholders


Cash flow statement


Profit before tax 120,764 136,929 Adjustment for non-cash operating items: Depreciation of property, plant and equipment, incl. profit/loss 47,316 59,127 Other operating items incl. translation adjustments -2 -3,264

Operating profit adjusted for non-cash items 168,078 192,792 Net income taxes paid -26,017 -27,736Change in working capital: Inventories -31,121 -11,644 Receivables etc. 6,637 -24,324 Trade payables 11,234 15,150 Other payables 10,271 -6,686

Cash flow from operating activities 139,082 137,552

Net investments in property, plant and equipment: Intangible assets 221 -205 Property, plant and equipment -170,549 -101,126

Cash flow from investing activities -170,328 -101,331

Repayment of long-term debt -12,728 -12,018Dividends paid, minorities -4,275 -2,542Purchase of own shares, minorities -23,669 0Capital contribution, minorities -117 217

Cash flow from financing activities -40,789 -14,343

Total cash flow for the year -72,035 21,878

Cash and bank balances, beginning of year 46,815 24,937Cash flows for the year -72,035 21,878

Cash and bank balances, end of year -25,220 46,815 Cash and bank balances, end of year, comprises: Cash and bank balances 85,386 111,308 Credit institutions -110,606 -64,493

Total -25,220 46,815


Accounting policies

GeneralThe consolidated financial statements have been presented in accordance with the provisions of the Danish Financial Statements Act for large class C groups and enterprises. The accounting policies have been applied consistently with previous years.

Basis of recognition and measurementIncome is recognised in the income statement as earned, including value adjustments of finan-cial assets and liabilities. All expenses, including depreciation, amor-tisation, impairment losses and write-downs, are also recognised in the income statement.

Assets are recognised in the balance sheet when it is prob-able that future economic benefits will flow to the company and the value of such assets can be measured reliably. Liabilities are recognised in the balance sheet when it is probable that future economic benefits will flow from the company and the value of such liabilities can be measured reliably. On initial recognition, assets and liabilities are measured at cost. Subsequently, assets and liabilities are measured as described for each item below.

On recognition and measurement, account is taken of foreseeable losses and risks arising before the time at which the annual report is presented and proving or disproving matters arising on or before the balance sheet date.

Consolidated financial statementsThe consolidated financial statements include the parent and any subsidiaries in which the par-ent, directly or indirectly, holds more than 50 per cent of the voting rights or in which it has a controlling influence through agreements.

All financial statements used for consolidation are prepared in accordance with the accounting policies of the group.

The consolidated financial statements consolidate the audited financial statements of the parent and its subsidiaries, eliminating intercompany income and expenditure, shareholdings, balances and dividends as well as unrealised intercompany gains and losses on inventories and non-current assets.

Newly acquired or newly founded enterprises are recognised in the consolidated financial statements as from the time of acquisition. Divested or discontinued enterprises are recognised in the consolidated income statement up until the time of divestment or discon-tinuation. Comparative figures are not restated for newly acquired, divested or discontinued enterprises.

New enterprises are recognised in accordance with the purchase method, according to which the identifiable assets and liabilities of the newly acquired enterprises are recognised at fair value at the time of acquisition. A provision is made to cover expenses incidental to decided and announced restructuring in the acquired enterprise in connection with the acquisition. The tax effect of any reassessments is recognised. The cost of the investments in the acquired enterprises is set off against the proportionate share of the fair value of the subsidiaries’ net assets at the time of the establish-ment of the group relationship.

The consolidated goodwill determined at the time of acquisition (positive balance) is recognised as an asset and amortised according to the straight-line method based on an individual assess-ment of the useful life of the asset, the maximum period being, however, 20 years. Consolidated negative goodwill (negative balance), reflecting an expected adverse development in the enterprises in question, is recognised in the balance sheet under deferred income and is reduced as the conditions underlying the negative balance are realised.

Goodwill and negative goodwill from acquired enterprises can be adjusted until the end of the year after the year in which the acquisition took place.

Minority interestsThe financial items of the subsidiaries are recognised in full in the consolidated financial statements. When stating the consolidated net profit or loss and equity, the proportionate share of any such net profit or loss and equity of the subsidiaries as can be attributed to minority interests is stated separately.


Foreign currencyThe consolidated financial statements are presented in Danish kroner.

On initial recognition, transactions denominated in for-eign currencies are translated at the exchange rate applicable at the transaction date. Exchange rate differences between the exchange rate applicable at the transaction date and the exchange rate applicable at the date of payment are recognised in the income state-ment as a financial item. Receivables, payables and other monetary items denominated in foreign currencies are translated using the exchange rate applicable at the balance sheet date. The difference between the exchange rate applicable at the balance sheet date and at the date at which the receivable or payable arose or was recognised in the latest annual report is recognised in the income statement under financial income or expenses.

Foreign subsidiaries and associates are considered separate entities. Their income statements are translated using the average exchange rate for the month, and the balance sheet items are translated using the exchange rate applicable at the balance sheet date. Exchange rate adjust-ments arising from the translation of the equity of foreign subsidiaries at the beginning of the year using the exchange rates applicable at the balance sheet date and the translation of income statements from average exchange rates using the exchange rates applicable at the balance sheet date are recognised directly in equity.

Derivative financial instrumentsOn initial recognition, derivative financial instruments are measured at cost and subsequently at fair value in the balance sheet. Positive and negative fair values of derivative financial instruments are included in other receivable under assets and other payables under liabilities, respectively.

Changes in the fair value of derivative financial instruments classified as and fulfilling the crite-ria for hedging the fair value of a recognised asset or liability are recognised in the income statement together with any changes in the fair value of the hedged asset or liability.

Changes in the fair value of derivative financial instruments classified as and fulfilling the conditions for hedging future assets and liabilities are recognised in other receivables or

other payables as well as in equity. In the event that the future transaction results in the recognition of assets or liabilities, any amounts previously recognised in equity will be transferred to the cost of the asset or the liability, respectively. In the event that the future transaction results in income or expenses, any amounts recognised in equity will be transferred to the income statement in the period in which the hedged item affects the income statement.

For derivative financial instruments which do not qualify as hedging instruments, changes in the fair value are recognised in the income statement on an ongoing basis.

Changes in the fair value of derivative financial instruments which are used for hedging net investments in independent foreign subsidiaries or associates are recognised directly in equity.

Income statementRevenueIncome from the sale of goods is recognised in the income statement provided that delivery has taken place and the risk has passed to the buyer by the end of the financial year. Revenue is determined at fair value less VAT and discounts.

Income from services is recognised on a straight-line basis in step with delivery.

Depreciation and amortisationThe amortisation of intangible assets and depreciation of property, plant and equipment aim at systematic depreciation and amortisation over the expected useful lives of the assets. The fol-lowing useful lives are applied by the group:

Trademark rights 5 yearsBuildings 10 - 20 yearsPlant and machinery 5 - 10 yearsLeasehold improvements 5 yearsOther plant, fixtures and fittings, tools and equipment 2 - 10 years

Accounting policies


New acquisitions of plant and machinery as well as other plant, fixtures and fittings, tools and equipment with a cost not exceeding DKK 12,300 each are recognised in the income statement in the year of acquisition.

Net financialsInterest income and interest expenses, foreign currency translation adjustments as well as real-ised and unre-alised capital gains and losses are recognised under net financials. Amortisation of capital losses and loan costs relating to financial assets and liabilities is recognised on an ongoing basis as financial expenses and financial income, respectively.

TaxThe current and deferred taxes for the year are recognised in the income statement as taxes for the year with the portion attributable to the net profit or loss for the year, and directly in equity with the portion attributable to amounts recognised directly in equity.

Balance sheetIntangible assetsIntangible assets are measured in the balance sheet at the lower of cost less accumulated amortisation and recoverable amount.

Property, plant and equipmentProperty, plant and equipment are measured in the balance sheet at the lower of cost less accumulated depreciation and recoverable amount.

Cost comprises the purchase price and any costs directly attributable to the purchase until the date when the asset is available for use. The cost of self-constructed assets also comprises production overheads. Production over-heads include indirect material and labour costs as well as maintenance and depreciation of machinery, buildings and equipment used in the production process as well as the costs of factory administration and management. Borrowing costs are not included in the cost.

Impairment of assetsThe carrying amount of non-current assets which are not measured at fair value is assessed annually for indica-tions of impairment over and above what is reflected in depreciation/amor-tisation.

If there are indications of impairment, an impairment test is conducted of individual assets or groups of assets. The assets or groups of assets are impaired to the lower of recoverable amount and carrying amount. The higher of net selling price and value in use is used as the recoverable amount. The value in use is determined as the present value of expected net cash flows from the use of the asset or group of assets as well as expected net cash flows from the disposal of the asset or group of assets after the expiry of their useful lives.

InventoriesInventories are measured at the lower of cost according to the FIFO principle and net realisable value.

The cost of raw materials and consumables as well as goods for resale is determined as purchase prices plus expenses incurred directly in connection with the purchase.

The cost of manufactured goods and work in progress is determined as the value of direct and indirect material and labour costs. Production overheads include indirect material and labour costs as well as maintenance and depreciation of machinery, buildings and equipment used in the production process as well as the costs of factory administration and management. Borrowing costs are not included in the cost.

The net realisable value of inventories is determined as the selling price less costs of completion and costs necessary to make the sale and is determined taking into account marketability, obsolescence and development in expected selling price.

ReceivablesReceivables are measured at amortised cost, which usually corresponds to nominal value, less write-downs for bad debts.

Write-downs for bad debts are determined on the basis of an assessment of the individual receivables.

EquityThe proposed dividend for the financial year is recognised as a special item under equity.


ProvisionsOther provisions, including pension commitments etc., are recognised when the company has a legal or constructive obligation at the balance sheet date and it is probable that such obligation will draw on the financial resources of the company. The provision is measured based on an estimate of the fair value of the obligation.

Current and deferred taxCurrent tax payable and receivable is recognised in the balance sheet as tax computed on the basis of the taxable income for the year, adjusted for tax paid on account. Deferred tax liabilities and deferred tax assets are com-puted on the basis of all temporary differences between the carrying amount and tax base of assets and liabili-ties and are recognised in the balance sheet at the tax rate applicable. However, deferred tax is not recognised on temporary differences relating to goodwill which is non-amortisable for tax purposes and other items where temporary differences, except for acquisitions, have arisen at the date of acquisition without affecting either the net profit or loss for the year or the taxable income.

Deferred tax assets are recognised, following an assess-ment, at the expected realisable value through a set-off against deferred tax liabilities or against tax on future earnings.

PayablesLong-term payables are measured at cost at the time of contracting such payables (raising the loans). Payables are subsequently measured at amortised cost, where capital losses and borrowing costs are distributed over the term of the payables on the basis of the calculated, effective rate of interest at the time of contracting such payables.

Short-term payables are also measured at amortised cost, which usually corresponds to the nominal value of the debt.

Any remaining lease liability for assets held under a finance lease is measured in the balance sheet as mort-gage debt, and the interest share of the lease payment is recognised in the income statement on an ongoing basis.

Cash flow statementThe cash flow statement is prepared using the indirect method, showing cash flows from operating, investing and financing activities as well as changes in cash flows for the year and cash and cash equivalents at the beginning and end of the year.

Cash flows from operating activities comprise net profit or loss for the year, adjusted for non-cash operating items, income tax paid and changes in working capital.

Cash flows from investing activities comprise purchase and sale of non-current assets adjusted for related changes in receivables and debt.

Cash flows from financing activities comprise financing from and dividend paid to shareholders as well as the arrangement and repayment of long-term payables.

Cash and cash equivalents at the beginning and end of the year comprise cash and debt to credit institutions.

Accounting policies


1 INTANGIBlE ASSETS

Amounts in DKK ’000 Trademark rights

Cost as at 31 December 2010 1,852Exchange rate adjustment 0Additions during the year 44Disposals during the year -273

Cost as at 31 December 2011 1,623

Amortised as at 31 December 2010 -1,091Exchange rate adjustment 0Amortisation for the year -161Disposals during the year 0

Amortisation as at 31 December 2011 -1,252

Carrying amount at 31 December 2011 371

Selling price of disposed assets 265Carrying amount 273

Loss -8

2 PROPERTY, PlANT AND EQUIPMENT Other plant, fixtures and land Plant leasehold fittings, tools Amounts in DKK ’000 and buildings and machinery improvements and equipment

Cost as at 31 December 2010 75,238 243,399 2,683 201,598Exchange rate adjustment -2,594 -10,082 11 -9,231Additions during the year 17,013 105,141 55 53,620Disposals during the year -2,749 -6,751 0 -6,568

Cost as at 31 December 2011 86,908 331,707 2,749 239,419

Depreciated as at 31 December 2010 -31,531 -133,978 -1,833 -100,042Exchange rate adjustment 743 4,153 -17 2,759Depreciation for the year -1,328 -22,545 -289 -24,027Disposals during the year 0 6,072 0 5,759

Depreciation as at 31 December 2011 -32,116 -146,298 -2,139 -115,551

Carrying amount as at 31 December 2011 54,792 185,409 610 123,868 Selling price of disposed assets 3,837 659 0 784Carrying amount 2,749 680 0 809

Profit/loss 1,088 -21 0 -25

Notes


4 EQUITY

Share Retained Proposed 31.12.11 31.12.10Amounts in DKK ’000 capital earnings dividends Total Total

Equity at 31 December 2010 12,000 206,774 0 218,774 154,632Exchange rate adjustments 0 -8,198 0 -8,198 3,517Net profit for the year 0 61,850 0 61,850 61,348Net changes in equity 0 -13,180 0 -13,180 -723

Equity as at 31 December 2011 12,000 247,246 0 259,246 218,774

Amounts in DKK ’000 31.12.2011 31.12.2010

Minority interests as at 31 December 2010 107,350 73,107Dividend paid -4,275 -2,542Share of profit for the year 29,206 36,011Capital contributions -10,080 217Exchange rate adjustments -5,466 1,212Equity adjustments -836 -655

Minority interests as at 31 December 2011 115,899 107,350

5 OwNERSHIP AND SHAREHOlDERS

The following shareholders have been registered in the group’s register of shareholders as holding more than 5% of the share capital:

Skandia Kalk Holding ApS, AalborgEquity Datterholding 15 (FM) ApS, Copenhagen.

3 TAx


Current tax for the year 25,547 31,260Deferred tax for the year 4,120 8,353Adjustment of tax in respect of previous years 42 -43

Total tax for the year 29,709 39,570

Notes

FAN MIlK INTERNATIONAl A/S

Sofiendalsvej 88ADK-9200 Aalborg SV.DenmarkTel.: +45 96 33 80 00Fax: +45 98 18 93 22www.fanmilk.com

EMIDAN A/S

Sofiendalsvej 88ADK-9200 Aalborg SV.DenmarkTel.: +45 98 18 90 00Fax: +45 98 18 93 22

FAN MIlK lTD.

No. 1 Dadeban RoadRing Road North, Industrial AreaAccraGHANATel.: +233 (302) 224421Fax: +233 (302) 221951

FAN MIlK PlC.

Eleiyele Industrial LayoutIbadanNIGERIATel.: +234 (2) 2412032Fax: +234 (0) 8034040727

FAN MIlK S.A.

Zone IndustrielleB.P. Port 9130LoméTOGOTel.: +228 (223) 7160Fax: +228 (227) 0273

FAN MIlK S.A.R.l.

04 BP - 1049 RFU-ILOT4888 AKPAKPA/PLM face ISPECCotonouBENINTel.: +229 21374150Fax: +229 21374151

FAN MIlK S.A.R.l.

Secteur 9, Lot 14Zone Industrielle de GounghinOuagadougou 01BURKINA FASOTel.: +226 50340506Fax: +226 50340507

FAN MIlK CÔTE D’IVOIRE S.A.

31, Rue des Brasseurs Zone 3 C 1453 Abidjan 18CÔTE D’IVOIRETel. : +225 21248676Fax : +225 21258665

FAN MIlK lIBERIA lTD.

1000 Monrovia 10Bushrod IslandFree Port - Fishing PierMonroviaLIBERIATel.: +231 (0)6 281 256

Addresses

FAN MILK INTERNATIONAL A/SSofiendalsvej 88ADK-9200 Aalborg SV.DenmarkTel.: +45 96 33 80 00Fax: +45 98 18 93 22www.fanmilk.com

Annual Report Fan Milk Group

2011

Documents

Fan Milk Group Annual Report 2011