RAS AL KHAIMAH CERAMICS Co. (Public Shareholding Co.) Ras Al Khaimah - UAE

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1 GULF ACCOUNTANCY & AUDIT CENTRE مرآز الخليج للمحاسبة والتدقيق Ras Al Khaimah - UAE Consolidated Financial Statements And Auditors Report for the period ended on March 31,2005

2 Ras Al Khaimah - UAE INDEX Page Directors Report Auditors' Report Consolidated Balance Sheets as on March 31, 2005 Consolidated Income Statement for the period ended March 31, 2005 Statement of Sources & Application of funds (Cash Flows) for the period ended March 31, 2005 Statement of Changes in equity Notes to Consolidated financial Statements (from 1-21 )

3 To The Shareholders, RAS AL KHAIMAH - U.A.E. AUDITOR S REPORT We have reviewed the accompanying balance Sheet of RAS AL KHAIMAH CERAMICS Co. as on March 31,2005 and the Statements of operations. These financial Statements are the responsibility of the Companies management. Our responsibility is to issue a report on these financial statements based on our review. According to our audit the financial statements consist the financial statements of Kersan spol.s.r.o. Company (L.L.C) in Slovak Republic which is wholly owned by The Company and Ras Al Khaimah Ceramics (Bangladesh) Pvt. Limited Co. in Bangladesh 90% owned by the Company and RAK (GAOYAO) Ceramics Co. (L.L.C) owned by the Company. And Ras Al Khaimah Ceramics investment Sudanese Co. Ltd. In Sudan 80% owned by the Company We conducted our review in accordance with International Standards on Auditing applicable to review engagements. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personal and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Based on our review nothing has come to our attention that causes us to believe that the accompanying financial statements do not give a true and fair view in accordance with International Accounting Standards. Ahmed J. Al Abdooli Reg. No. (1) UAE FCPA England, CPA Montana, RAS AL KHAIMAH P.O.Box: 2966 R.A.K. United Arab Emirates Tel: Fax: gulfaudt@emirates.net.ae Web site:

4 Page (3) CONSOLIDATED BALANCE SHEET AS ON 31,MARCH,2005 ASSETS : 31 /3/ NON - CURRENT ASSETS : Note ( In Dirhams) (In Dirhams) Property, Plant and equipment (2 d) (3) ,821,471 Capital work in progress (4) ,870,576 Intangible assets (2 F) ,811,663 Investment in Subsidiaries (5) ,518,542 Investment in associated undertakings (6) ,822,417 Investment in Joint venture (7) ,745,100 TOTAL NON CURRENT ASSETS ,589,769 CURRENT ASSETS : Cash on hand & at Banks (8) ,787,566 Accounts Receivable (2 g) (9) ,495,265 Notes Receivable (2 H) ,881,237 Inventory (2 I) (10) ,657,396 Other Debit Balances ,317,719 TOTAL CURRENT ASSETS ,165,139,183 TOTAL ASSETS ,797,728,952 Paid up Capital (11) ,280,000 Legal Reserve (12) ,839,605 Voluntary Reserve ,805,043 General Reserve ,221,582 Net profit for the period ,435,811 TOTAL SHAREHOLDERS EQUITY ,582,041 Minority interest (2 B) (13) ,385,223 NON - CURRENT LIABILITIES: Provision for employeees End of service benefits (2 J) (14) ,247,141 Term loans (15) ,380,905 TOTAL NON CURRENT LIABILITIES ,628,046 CURRENT LIABILITIES : Short term loans & over drafts (15) ,633,692 Accounts Payable ,501,050 Other Accrued Exp. & Provisions ,998,900 TOTAL CURRENT LIABILITIES ,133,642 TOTAL EQUITY & LIABILITIES ,797,728,952 (Schedules & Notes form part of this Statement)

5 Page (4) CONSOLIDATED INCOME STATEMENT FOR THE PERIOD ENDED 31,MARCH /3/ /3/2004 Note ( In Dirhams) (In Dirhams) Sales Less : Cost of Sales (16) ( ) ( ) Gross Profit Add: Other income Less : Administrative exp. (17) ( ) ( ) Selling exp. (18) ( ) ( ) Financial charges (19) ( ) Net period Profit Less : Legal Reserve (12) ( ) ( ) Minority Interest (2B) (13) ( ) ( ) DISTRIBUTABLE NET PROFIT Basic earning per share (AED).,10.,16 * The calculation of earnings per share is based on earnings for the period attributable to ordinary shoreholders and the number of ordinary shares outstanding the period 323,136,000 ( 2003 : 224,440,000). (Schedules & Notes form part of this Statement)

6 Page (5) STATEMENT OF SOURCES & APPLICATION OF FUNDS (CASH FLOWS) FOR THE PERIOD 31,03, /3/ Note ( In Dirhams) (In Dirhams) Net Profit for current period ,033,661 Less : Minority portion of period profit ( ) (1,061,207) SOUR CES OF FUNDS (Inflows) : Net Profit for current period ,972,454 Depreciation provided for the period ,870,945 Deletions of fixed assets ,848,527 Difference of converting rate of accum. depreciation on ,074,663 Increase in provision for Indemnity ,174,269 Increase in paid up capital ,880,000 Total Sources of funds (Inflows) ,820,858 APPLICATION OF FUND (OUTFLOWS) : Difference of converting rate of fixed assets on ,951,139 Additions to fixed assets ,749,839 Increase (Decrease) in capital work in progress (2,454,310) Deletions of depreciation ,691,914 Increase in Intangible assets ,923 Decrease (Increase) in Investment in subsidiaries - (28,011,375) Increase in Investment in associates ,215 Increase in Joint venture ,226,790 Increase in non Cash Current Assets ,875,734 Decrease (Increase) in non cash Current Liabilities ,914,422 Increase in loans ( ) (79,622,543) Decrease in general reserve ,880,000 Increase in minority interest (2B) (13) ( ) (13,869,487) Dividend to Shareholders - 22,440,000 Board of Directors fees 1,600,000 1,600,000 Total Application of Fund (OUTFLOWS) ,832,262 Net Cash Applied (137,011,404) Cash Opening Balances ( ) (184,834,722) Cash Closing Balances ( ) (321,846,126)

7 - 6 - STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED At 31, DECEMBER, 2003 Dividend paid for 2003 Board of Directors fees Transfer from general reserve to capital Profit for the year 2004 Transfer to legal reserve At 31, DECEMBER, 2004 Dividend paid for 2004 Board of Directors fees Transfer from general reserve to capital Transfer from Profit to general reserve Profit for the Period Transfer to legal reserve At 31, MARCH, 2005 Capital Reserves (44,880,000) ( ) Retained Earning (22,440,000) ( ) ( ) () ( ) - ( ) ( ) Total (22,440,000) ( ) () ( )

8 Page (7) SCHEDULE & NOTES TO FINANCIAL STATEMENTS AS ON 31/03/2005 1) LEGAL STATUS AND PRINCIPAL ACTIVITY : RAS AL KHAIMAH CERAMICS CO. The (Company) was incorporated in Ras Al Khaimah by Amiri Decree No. 9/91 dated The registered address of the company is P.O.Box 4717 Al Jazera Al Hamra City of Ras Al Khaimah Emirate. United Arab Emirate.. The main activity of the company is the manufacture and sale of the variety of ceramics product, including tiles, bathroom sets and sanitary ware. 2) PRINCIPAL ACCOUNTING POLICIES : A- The Consolidated Financial Statement (Except investment in subsidiaries, associated undertaking, and joint venture referred in Note 5, 6, 7 which are Consolidated on cost basis ), have been prepared in accordance with International Accounting Standards (IAS) and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB and requirements of the UAE Federal Law No (as amended). The Consolidated Balance Sheet and Income Statement has been prepared from the individual Balance Sheet of Ras Al Khaimah ceramice Co. (Shareholding co.), and Kersan Spol.s.r.o company. (L.L.C.) in Slovak republic and RAK Ceramics (Bangladesh) And RAK GAOYAO Ceramics China Ltd. In China. And Ras Al Khaimah Ceramics Investment Sudanese Co. Ltd. In Sudan. The Consolidated Financial Statements are prepared under the historical cost convention. B- Basis of consolidation Subsidiaries : Subsidiaries : Subsidiaries are those enterprises 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 ( except the enterprises referred in Note No. 5 which are Consolidated on cost bases) from the date that control commences until the date that control ceases. Minority interests in the equity and results of entities that are controlled by the company are shown as a separate item in the consolidated financial Statements.

9 Page (8) Associates : Associates are those enterprises in which the Group has significant influence (but not control ) over the financial and operation policies, The consolidated financial Statements include the Group s proportionate share (Cost value) (Note No.6 ). Joint controlled entities : Joint controlled entities are those enterprises over whose activities the Group has joint control, established by contractual agreement. The consolidated financial Statement include the Group s proportionate share (Cost value) (Note No. 7). Transactions eliminated on consolidation : Intra group balances and transactions, and any unrealized gains arising from intra group transactions, are eliminated in preparing the consolidated financial Statement. Unrealized gains arising from transactions with associated and jointly controlled entities are eliminated to the extent of the Group s interest in the enterprise. c- Assets and liabilities in foreign currency : Assets and liabilities in foreign currency at the year are valued at the prevailing exchange rate as on Balance Sheet date, but the foreign currency transactions made during the year are valued at the rate of exchange at the date of transaction. Gains and losses are taken to income Statements.

10 Page (9) d- Property, Plant and equipment : Property, Plant and equipment are stated, in the attached Balance Sheet, at cost less accumulated depreciation. Maintenance, renewals and betterments that enhance the economic useful life of the property plant and equipment or that improve the capacity, quality or reduce substantially the operating cost or administration expenses are capitalized by adding it to the related accounts of property, plant and equipment. Upon disposal of property, plant and equipment items, the cost of these assets and its related accumulated depreciation are eliminated up to the date of disposal and any gain or loss there from are reported in the statement of income for the current year. The Group applies straight line method in accounting for the depreciation of its property, plant and equipment. Annual rates of depreciation used are as follows : % Heavy equipment & Machinery Buildings Vehicles Furniture & Fixture Computers Road Asphalting 20 Quarry & Land Development 10 Land is not depreciated, as it deemed to have an infinite life, and its donated by Ras Al Khaimah Government (Note No.3). E- Capital work in progress is recorded at cost on the basis of the percentage of work completed at the balance sheet date. The capital work in progress is transferred to appropriated asset category and depreciated in accordance of and when the asset is completed and commissioned.

11 Page (10) F- Intangible Assets : Expenditure to acquire designs for the manufacture of ceramics tile and Sanitary ware is capitalized. The amortization is provided on straight line at 50% annually. G- Accounts Receivable : Accounts receivable have been stated at the original invoice amount after deducting the provision for doubtful accounts and credit balances that have a legally enforceable right to be set off or are intended either to be settled. H- Notes receivable are Stated at the notes amount. It is recognized upon the presentation of invoices and shipping documents to banks that undertake the collection on behalf of the company and the cheques received directly from customers (PDC). I- Inventories : Inventories consists of raw materials, spares and finished goods. These inventories are stated at the lower of cost or market value, cost is being determined on weighted average rate for raw materials, direct labour and allocated of related overheads. J- Staff terminal benefits : The provision for staff terminal benefits is calculated in accordance with federal labour law and the laws applicable in the subsidiaries countries.

12 3) FIXED ASSETS : COST As on Additions Deletions As on Accumulated Depreciation As on Additions Deletions As on Net as on Net as on Heavy Equip. & Machinery ( ) ( ) ,361,690 Buildings ,212, Vehicles ( ) ( ) ,479,938 Furniture & Fixture ,625 Computers ,657,549 Road & Asphalting ,555,474 QUARRY & Land Development ,209 Land ,646,555 TOTAL ( ) ( ) ,821,471

13 Page (12) (.Public Shareholding Co) 4) CAPITAL WORK IN PROGRESS : 31/03/ (In Dirham) (In Dirham) Heavy equipment & Machinery ,099,207 Buildings ,979,395 Resin moulds ,808 Substation generator ,429,296 Crusher ( in Sudan) ,440,004 Carton factory (in Sudan) ,376,866 TOTAL ,870,576

14 NOTE : (5) INVESTMENT IN SUBSIDIARES PERIOD ENDED /03/ SA Setrim Trading in ceramic tiles France 100% 4,130,144 4,130,144 RAK France Ltd Trading in ceramic tiles and sanitary France 100% 1,238,192 1,238,192 RAK Ceramics Deutschland GME Trading in ceramic tiles and sanitary Germany 100% 246, ,176 SCI DU GOLFE Warehousing services France 100% 42,841 42,841 CSCI Gresivaudan Real estate France 100% 3,726,705 3,726,705 RAK Ceramics Iran Manufacturing of ceramic tiles Iran 80% 55,117,194 55,117,194 RAK Ceramics Italy SRL Trading in ceramic tiles and sanitary Italy 60% 1,911,316 1,911,316 RAK Ceramique S.A. Switzerland Trading in ceramic tiles and sanitary Switzerland 58% 842, ,454 Laticrete RAK Co. LLC Manufacturing of adhesives for UAE 51% 2,832,248 2,832,248 RAK Ceramics Benelux Ltd Co. RAK Belgium RAK Ceramics India RAK Global Logistic LLC RAK Ceramics Italy TOTAL Trading in ceramic tiles and sanitary Belgium Trading in ceramic tiles and sanitary Belgium Manufacturing of ceramic tiles India Logistics UAE Warehousing services Italy 51% 100% 51% 95% 125, ,064 5,411, ,000 63,983 76,518, , ,064 5,411, ,000 63,983 76,518,542

15 Public Shareholding Co.)) Ras Al Khaimah - UAE NOTE : (6) INVESTMENT IN ASSOCIATED UNDERAKINGS : 31/03/ Prestige Tiles PTY Limited RAK Ceramics UK Ltd Trading in ceramic tiles sanitary Australia Trading in ceramic tiles and sanitary UK 50% 50% 6,325, ,671 6,325, ,671 RAK Bathware PTY Ltd Trading in sanitary ware Australia 50% 993, ,215 RAK Porcelain LLC Table ware manufacturer UAE 50% TOTAL ,822,417 NOTE : (7) INVESTMENT IN JOINT VENTURE : 31/03/ RAK Ceramics (India) PVT Ltd India 60% 2,002,260 1,745,100

16 Page (15) (.Public Shareholding Co) 8) CASH ON HAND & BANKS : 31/03/ (In Dirham) (In Dirham) Cash in hand ,104 Current Accounts ,129,435 Call Accounts ,733,517 Fixed Deposits ,816,967 Margin money Deposits ,543 TOTAL ,787,566 9) ACCOUNTS RECEIVABLE : 31/03/ (In Dirham) (In Dirham) Accounts receivable ,417,241 Less : Provision for A. receivable ( ) (7,310,103) Net of Accounts receivable ,107,138 Loan to related companies (2 B) ,393,591 Curr. Acc. With related companies (2 B) ,994,536 TOTAL ,495,265 (Continued) 9) ACCOUNTS RECEIVABLE : Curr. Acct. Loan 31/12/ /12/2004 Related companies as on (In Dirham) (In Dirham) Subsidiaries Associated undertakings Joint venture TOTAL

17 Page (16).RAS AL KHAIMAH CERAMICS Co (.Public Shareholding Co) Curr. Acct. Loan Related companies as on (In Dirham) (In Dirham) Subsidiaries Associated undertakings Joint venture TOTAL ) INVENTORY : 31/03/ (In Dirham) (In Dirham) Finished Goods ,238,571 Raw Materials & Spares ,418,825 TOTAL ,657,396 11) PAID UP SHARE CAPITAL : The paid up share capital of the company was Dhs. 52,500,000 up to Aug.16,1998. on Aug.17,1998 the Extraordinary General Assembly decided to increase the paid-up capital by Dhs. 117,500,000 to be Dhs. 170,000,000 and purchased Modern Ceramic Co. (L.L.C.) Ras Al Khaimah and Kersan, spol.s.r.o. Company. (L.L.C) in Slovak Republic, totally according to Balance Sheets which had been assessed. On the extraordinary general assembly decided to increase the paid up capital by Dhs. 34,000,000 by distributing bonus shares to be 204,000,000 Dirhams. And in the extraordinary general assembly decided to increase the paid up capital by Dhs. 20,400,000 by distributing bonus shares to be 224,400,000 Dirhams. And in the extraordinary general assembly decided to increase the paid up capital by Dhs. 44,880,000 by distributing bonus shares to be 269,280,000 Dirhams. And in the extraordinary general assembly decided to increase the paid up capital by Dhs. 53,856,000 to be 323,136,000 Dirhams.

18 Page (17) 12) LEGAL RESERVE : In accordance with UAE Federal law 8/1984 article No. 192, 10% of net income of the company has been transferred to a non- distributable legal Reserve, this transfer will be continued the reserve amount to 50% of the paid up share capital. It Includes the share premium 165,000,000 Dhs were issued in the year 1998 according to article 203 UAE Companies law, as follow : 31/03/ (In Dirham) (In Dirham) Legal reserve ,839,605 Share Premium ,000,000 TOTAL ,839,605 13) MINORITY INTEREST : Minority interest represent portion to Mr. S.A.Akram Alzaman (Bangali) The partner in Ras Al Khaimah Ceramices (Bangladesh) (Private Limited Company) in Bangladesh According to contract with the company and registered in Bangladesh. And Mr. AL Hadi Hassan (Sudani ) The partner in (Ras Al Khaimah Ceramics investment Sudanese Ltd Co.) in Sudan According to Contract with the company and registered in Sudan. 31/03/ (In Dirham) (In Dirham) Of period profit ,061,207 Of Equity ,324,016 TOTAL ,385,223

19 Page (18) 14) PROVISION FOR EMPLOYEES END OF SERVICE BENEFITS : 31/03/ (In Dirham) (In Dirham) At the beginning of the year ,072,872 Charges for the year ,603,140 Payments during the year ( ) (428,871) At the end of the year ,247,141 15) BORROWINGS : 31/03/ NON CURRENT : (In Dirham) (In Dirham) Term loan ,571,108 Less : Current Portion of term loans ( ) (121,190,203) Non Current Portion of term loans ,380,905 CURRENT : Bank Overdrafts ,913,415 Short term borrowings ,530,074 Current portion of term loans (Above) ,190,203 Short term loans & overdrafts ,633,692

20 MATURITY PROFILE OF BORROWINGS AT Bank overdrafts Short term loans Term loans TOTAL Within 1 year 93,913, ,641, ,079, ,633, ,297, ,297, ,083, ,083,257 Total 93,913, ,641, ,459, ,014,597 MATURITY PROFILE OF BORROWINGS AT Bank overdrafts Short term loans Term loans TOTAL Within 1 year Total

21 Page (20) 16) COST OF SALES : 31/03/ /03/2004 (In Dirham) (In Dirham) Raw Material Direct labour Direct Expenses : L.P.G. & Natural Gas Fuel, Water & Lubricants Power Depreciation Amortization of Intangible Asset Repairs & Indirect Material Others Production Overhead TOTAL ) ADMINISTRATIVE EXPENSES : 31/03/ /03/2004 (In Dirham) (In Dirham) Staff Cost Social development Telephone, Postal & Office Supplies Depreciation Repair & Maintenance Legal & Professional Fee Others TOTAL ) SELLING EXPENSES : 31/03/ /03/2004 (In Dirham) (In Dirham) Staff Cost Advertisement & Promotion Freight & Transportation Performance Rebates Travel & Entertainment Bad Debt Written Off TOTAL

22 Page (21) 19) FINANCIAL CHARGES : 31/03/ /03/2004 (In Dirham) (In Dirham) Interest Expenses Bank Charges Exchange Rates Difference ( ) ( ) TOTAL ) PRE-OPERAITVE EXPENSES AMORTIZATION : Per- operative expenses related to RAK Ceramics Sudan amortized totally, as it started production in current year. 21) GENERAL : A. The Figures in the financial statements are rounded to the nearest Dirham. B. The Figures of comparative year re-arranged for comparing purpose. C. The Figures of statements including the data of Ras Al Khaimah Ceramics investment Sudanese in Sudan which excluding in the comparative statements.

RAK INVESTMENT AUTHORITY GOVERNMENT OF RAS AL KHAIMAH AND ITS SUBSIDIARIES

` RAK INVESTMENT AUTHORITY GOVERNMENT OF RAS AL KHAIMAH CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR S REPORT FOR THE YEAR ENDED DECEMBER 31, RAK INVESTMENT AUTHORITY GOVERNMENT OF RAS AL