United Arab Emirates Fujairah Building Industries PJSC and its ...

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Mar 12, 2017 - which would further enable us to reap the benefits of the Group as it grows by leaps and bounds in the na
Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Independent auditor's report and consolidated financial statements For the year ended December 31, 2016

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Table of contents Pages General information

1

Report of the Board of Directors

2&3

Independent auditor's report

4-7

Consolidated statement of financial position

8

Consolidated statement of profit or loss

9

Consolidated statement of other comprehensive income

10

Consolidated statement of changes in shareholders' equity

11

Consolidated statement of cash flows

12

Notes to the consolidated financial statements

13 - 40

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates General information Principal Office Address

: P. O. Box: 383 Fujairah - United Arab Emirates T: +971 9 222 2051 F: +971 9 222 7314 Email: [email protected]

Website

: www.fbifuj.ae

The Auditors

: Horwath Mak P. O. Box: 1650 Fujairah - United Arab Emirates

1

Report of the Board of Directors for the year ended December 31, 2016

Dear Shareholders, On the occasion of the end of fiscal Year 2016, on behalf of the Board of Directors, I am pleased to submit the Annual Report with the Audited Consolidated Financial Statements for the fiscal year ended December 31, 2016.

Principal activities of the Group: The principal activities of the Group comprise of the manufacture, marketing and distribution of rock wool insulation materials, concrete blocks, interlocks, kerbstones, and Terrazzo tiles, cutting, polishing, supply and installation of marble products, and extraction and processing of range of gabbro quarry materials.

Financial review: The Group has achieved revenue of AED 242.2 million for the year 2016 compared with AED 237.6 million for previous year 2015, which reflects an increase ofapprox. 2%. The Gross margin was 34.4% in 2016 compared to 34.2% in 2015. Consequently, the Group achieved a net profit of AED 15 million in 2016 compared to a net profit of AED 7.0 million in 2015 which reflects an increase of 114%. This increase in net profit is mainly attributed to the cost control and cost rationalization strategy adopted by the group during the year. The Total assets of the Group amounted to AED 409 million as of December 31, 2016 compared to AED 410 million as of December 31, 2015, while the total shareholders' equity has increased to AED 243 million as of December 31,2016 compared to AED 224 million as of December 31, 2015. The Group has managed to contribute positively to the development and prosperity of the national economy. Despite local and regional market volatility and challenges during 2016 and the tough competition in the field of building materials industry, the Group continued to strengthen its competitive position within the local and regional markets through maintaining high quality of its products and providing excellent customer service to clients, these factors have supported the company's activities providing sustainability to our operation. The group manufacturing units have also undergone significant developments through modernization, development and expansion projects to meet market requirement and UAE environmental regulations, in particular in Fujairah Rockwool Factory, the works accomplished during the year 2016 were as follows: •

Completion of project to shift, modernize the old production line from old factory site to the current location at AI Hayl Industrial area - Fujairah. This would eventually results in increase in the production capacity ofFRF.



Completion of project "Thermal Incinerator Units" for exhaust gas from cupola, which has led to substantial reduction in gases and carbon emissions meeting environmental requirements and at the same time it leads to cost reduction through recycling the wasted heat and reducing consumption of raw material.

2



Project to install a briquettes manufacturing line for industrial waste recycling is still ongoing and expected to complete during the year 2017. This plant will also contribute to the preservation of the environment and cost reduction.

On another note, Based on the Board of Directors' decision during 2015 to cease production and completely shut down the plant and machinery to curtail losses of Mis. Emirates Ceramic Factory and to designate the machinery and equipment as held for sale and to consider all the processes related to the facility as discontinued operations, most of the assets including machinery and equipment, steel sheds and others have been sold during the year 2016, knowing that most of them are fully depreciated.

Share capital: The share capital remained unchanged at AED 135,987,500 as at December 31, 2016 and December 31,2015. Independent Auditors:

Mis. Horwath Mak, Auditors, United Arab Emirates, were appointed vide Annual General Meeting held on ApriI 28, 2016 for conducting the audit for the year 2016. In the next Annual General Meeting, the shareholders will decide to appoint or re-appoint the auditors for 2017. Acknowledgements: Finally to conclude, on behalf of the members of the Board of Directors, executive management and all employees of the Group, we would like to express our sincere thanks and gratefulness to His Highness Sheikh Hamad Bin Mohammed AI-Sharqi - Member of the Supreme Council and Ruler of Fujairah and H.H. Sheikh Mohammed Bin Hamad Bin Mohammed Al-Sharqi - Crown Prince of Fujairah for their permanent support and auspices of the various sectors in the emirate. We also like to extend our heartfelt thanks to H.H. Sheikh Saleh Bin Mohammad Al-Sharqi Chairman of Department of Industry & Economy in Fujairah for his support to the company's business and growth. Our thanks are also extended to all our shareholders, various government departments, our bankers, customers, suppliers, executive managers, general managers, divisional managers and all staff & employees of the Group for their support, and assure to continue with innovative ventures which would further enable us to reap the benefits of the Group as it grows by leaps and bounds in the nation's concepts of modernity and development.

Ahmed Saeed Mohammed Alraq bani Chairman March 12,2017

3

A Crowe

Horwath Mak

Horwath

Member Crowe Horwath International

Suite 51, Fujairah Insurance Bldg. P. O. Box: 1650, Fujairah, UAE. T + 971 9 222 2005 F + 971 9222 3335 M + 971 50 657 2575

E [email protected] www.crowehorwath.ae

Ref: JMI AR/F-171009 Independent auditor's report To, The Shareholders Mis. Fujairah Building Industries P.J.S.c. Fujairah - United Arab Emirates Report on the audit of the consolidated financial statements Opinion We have audited the accompanying consolidated financial statements of Mis. Fujairah Building Industries P.J.S.c., Fujairah - United Arab Emirates (the "Entity") and its subsidiaries (collectively referred to as the "Group") which comprise the consolidated statement of financial position as at December 31, 2016, and the consolidated statement of profit or loss, consolidated statement of other comprehensive income, consolidated statement of changes in shareholders' equity, consolidated statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 3 I, 2016, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the requirements of Code of Ethics for Professional Accountants, issued by International Ethics Standards Board for Accountants (IESBA) together with ethical requirements that are relevant to our audit of the consolidated financial statements and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter Without qualifying our opinion, we draw attention to note 3.4 to the consolidated financial statements which indicates that the Board of Directors resolved to cease operations of a subsidiary entity, Mis Emirates Ceramic Factory in order to curtail losses. In view of this, the going concern assumption is no longer valid for this subsidiary entity, and accordingly its assets and liabilities are included in these consolidated financial statements on the basis of the accounting convention of realisablelsettlement values. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

4 Registered with the Fujairah Muncipality, Government of Fujairah (#27705)

~

Horwath Mak MemberCroweHorwathInternational

Crowe Horwath

Suite 51, Fujairah Insurance Bldg. P. O. Box: 1650, Fujairah, UAE. T + 971 9222 2005 F + 971 9 222 3335 M + 971 50 657 2575 E [email protected] www.crowehorwath.ae

Key audit matters (continued) a. Allowance for slow-moving inventories Inventories are valued at lower of cost or Net Realizable Value (NRV). Estimation ofNRV is based on the most reliable evidence available at the end of the reporting period, of the amount the inventories are expected to realize through sale or use considering the ageing and physical condition of the inventories. These estimates also take into consideration fluctuations of price or cost directly relating to events occurring after the end of the reporting period to the extent that such events confirm conditions existing at the end of the reporting period. Management has made an allowance for slow-moving items based on these estimates. We focused on this area because of significance of the estimates and judgements involved. Our audit procedures included: • Inquiry and discussions with the management to understand the process of identifying slow/non-moving and nonusable items and the assumptions/basis used in quantifying the allowance for slow-moving items. • Review of procedures, testing accuracy of data used by the management to estimate NRV and allowance for slowmoving items. • Review of aged inventory reports to assess the reasonableness of the allowance for slow-moving items, identify slowmoving items, and inquired/analyzed movement of these items subsequent to the year end. • Selected a sample of inventory items and compared the carrying value of those items with the subsequent selling prices and customer contracts. • Compared the gross profit margin for current year with prior year. Discussed, any significant variations in the margin with the management as this could be due to inventory valuation issues. • Verified the existence and physical condition of randomly selected items held by the Group. b. Allowance for doubtful trade receivables As at December 31, 2016, the Group's trade receivables amounted to AED 76,822,455, with an allowance for doubtfult debts of AED 14,787,066. The determination involves significant judgment, as to whether a receivable is recoverable or impairment is required. Factors considered by management include the age of overdue balances, ability to recover the amount through legally enforceable rights, existence of disputes, recent historical collection patterns and any other available information concerning the creditworthiness of the counterparty.We focused on this area because of significance of the estimates and judgements involved. Our audit procedures included: • Review and analysis of the Group's credit and collection policies and inquiry about any changes from the prior year. • Review of management's methodology used to determine the impairment of trade receivables. • Assessment of controls over approval of credit limit awarded to the customers. • Evaluation of the securities obtained from the customers for adequacy. • Analysis of aged trade receivables and inquiry over recoverability. • Analysis of historical patterns relating to collection of trade receivables. • Reviewed payments received subsequent to year end. Other information The Board of Directors and management are responsible for the other information. The other information comprises report of the Board of Directors (but does not include the consolidated financial statements and our auditor's report thereon) which we obtained prior to the date of the auditor's report and the complete annual report is expected to be made available to us after the date of this auditor's report. Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

5

Registered with the Fujairah Muncipality, Government of Fujairah (#27705)

~

Horwath Mak

Crowe Horwath

Member Crowe Horwath International

Suite 51, Fujairah Insurance Bldg. P. O. Box: 1650, Fujairah, UAE. T + 971 9 222 2005 F + 971 9222 3335 M + 971 50 657 2575 E [email protected] www.crowehorwath.ae

Other information (continued) In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read the annual report of the Group, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and in compliance with the applicable provisions of the UAE Federal Law No. (2) of 20 15 and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group's financial reporting process. Auditor's responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit 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 Group's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. Ifwe conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Registered with the Fujairah Muncipality,

Government

6

of Fujairah (#27705)

A.

Horwath Mak MemberCroweHorwathInternational

Crowe Horwath

Suite 51, Fujairah Insurance Bldg. P. O. Box: 1650, Fujairah, UAE. T + 971 9 222 2005 F + 971 9 222 3335 M + 971 50 657 2575 E [email protected] www.crowehorwath.ae

Auditor's responsibilities for the audit of the consolidated financial statements (continued) We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirements Further, as required by the UAE Federal Law No. (2) of2015, we report that, i) we have obtained all the information and explanations which we consider necessary for our audit; ii) the consolidated financial statements have been prepared and comply in all material respects with the applicable provisions of the UAE Federal Law No (2). of 2015, and Articles of Association of the Entity; iii) proper books of account have been maintained by the Group; iv) the contents of the report of the Board of Directors' which relates to the consolidated financial statements are in agreement with the Group's books of account; v) note 5 to the consolidated financial statements discloses the Group's purchases, sales and holding of investments during the year ended December 31, 2016; vi) note 27 to the consolidated financial statements discloses material related party transactions and the terms under which they were conducted; and vii) based on the information that has been made available to us nothing has come to our attention which causes us to believe that the Entity has contravened, during the financial year ended December 31, 2016, any of the applicable provisions of the UAE Federal Law No. (2) of 2015 or of its Articles of Association which would materially affect its activities or its consolidated financial position as at December 31, 20 I6.

For Horwath Mak

Senior Partner Reg. No. 548 March 12,2017

7

Registered with the Fujairah Muncipality, Government of Fujairah (#27705)

Fujairah Building Industries P.J.S.C. Fujairah - United Arab Emirates Consolidated statement of financial (In Arab Emirates Dirhams)

and its subsidiaries

position as at December

(the "Group") 31, 2016 Notes

2016

2015

Property, plant and equipment

4

199,906,022

199,047,861

Available-for-sale investments - non-current portion

5

42,894,808

38,711,157

242,800,830

237,759,018

515,972

451,811

Assets

Non-current assets

Total non-current assets Current assets Available-for-sale investments - current portion

5

Property, plant and equipment - held for sale

6

9,838

2,701,115

Inventories

7

66,821,122

86,678,711

Trade receivables

8

62,035,389

64,936,109

Advances, deposits and other receivables

9

4,098,831

6,146,323

Fixed deposits

10

15,000,000

7,000,000

Cash and bank balances

II

18,214,151

4,306,933

Total current assets

166,695,303

172,221,002

Total assets

409,496,133

409,980,020

135,987,500

135,987,500

Shareholders'

equity and liabilities

Shareholders' equity Share capital

12

Statutory reserve

14

29,849,594

28,348,713

Investments revaluation reserve

15

34,550,705

30,367,248

Retained earnings

16

Total shareholders' equity

42,709,242

29,201,318

243,097,041

223,904,779

42,993,848

48,424,126

Non-current liabilities Bank borrowings - non-current portion

17

Employees' end of service benefits - non-current portion

18

Total non-current liabilities

12,151,098

11,887,877

55,144,946

60,312,003

Current liabilities Bank borrowings - current portion

17

50,578,968

68,389,597

Employees' end of service benefits - current portion

18

426,924

737,828

Trade and other payables

19

60,248,254

56,299,119

Finance lease liability - current portion

20

336,694

Total current liabilities

111,254,146

125,763,238

Total liabilities

166,399,092

186,075,241

409,496,133

409,980,020

Total shareholders'

equity and liabilities

The accompanying notes form an integral part of these consolidated financial statements. The report of the auditors is set out on pages 4 to 7. The consolidated financial statements on pages 8 to 40 were approved by the Board of Directors on March 12, 2017 and signed on its behalf by: )

~ Chairman

8

Fujairah Building Industries P.J.S.c. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Consolidated statement of profit or loss for the year ended December 31, 2016 (In Arab Emirates Dirhamsl Notes

2016

2015

Continuing operations Revenue

21

242,177 ,259

237,617,564

Cost of sales

22

(158,828,825)

( 156,432,497)

83,348,434

Selling and distribution expenses

23

(32,524,066)

81,185,067 (35,036,161)

Administrative expenses

24

(32,271,178)

(27,251,314)

Finance costs

25

(3,808,017)

(5,068,827)

Other income

26

4,954,706

3,211,419

19,699,879

17,040,184

28

(4,691,074) 15,008,805

(10,024,908) 7,015,276

Continuing operations Basic and diluted earnings per share (U.A.E. Fils)

13

14.5

12.5

Discontinued operations Basic and diluted (loss) per share (U.A.E. Fils)

13

(3.41

(7.4)

Gross profit

Profit for the year from continuing operations Discontinued operations (Loss) for the year from discontinued operations Profit for the year

The accompanying notes form an integral part of these consolidated financial statements. The report of the auditors is set out on pages 4 to 7. The consolidated financial statements on pages 8 to 40 were approved by the Board of Directors on March 12, 2017 and signed on its behalf by:

Chairman

9

Fujairah Building Industries P.J.S.c. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Consolidated statement of other comprehensive income for the year ended December 31, 2016 (In Arab Emirates Dirhams) 2016 Profit for the year

2015

15,008,805

7,015,276

4,183,457 19,192,262

194,694 7,209,970

Other comprehensive income: items that may be reclassified subsequently to profit or loss: Change in fair value of available-for-sale investments Total comprehensive income for the year

15

The accompanying notes form an integral part of these consolidated financial statements. The report of the auditors is set out on pages 4 to 7. The consolidated financial statements on pages 8 to 40 were approved by the Board of Directors on March 12, 2017 and signed on its behalf by:

Board member

Chairman

10

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Consolidated statement of changes in shareholders' equity for the year ended December 31, 2016 (In Arab Emirates Dirhams)

Share capital Balance as at December 31, 2014 Profit for the year Change in fair value of available-for-sale investments Total comprehensive income Transferred to statutory reserve Issuance of bonus shares Balance as at December 31, 2015 Profit for the year Change in fair value of available-for-sale investments Total comprehensive income Transferred to statutory reserve Balance as at December 31, 2016

126,500,000

Statutory reserve 27,647,185

-

-

-

-

9,487,500 135,987,500

701,528 28,348,713

Investments revaluation reserve 30,172,554 194,694 194,694 30,367,248

-

-

-

-

4,183,457

-

-

4,183,457

135,987,500

The accompanying notes form an integral part of these consolidated financial statements. The report of the auditors is set out on pages 4 to 7.

11

1,500,881 29,849,594

-

34,550,705

Retained earnings

Total shareholders' equity

32,375,070

216,694,809

7,015,276

7,015,276

-

194,694

7,015,276 (701,528)

7,209,970 -

(9,487,500) 29,201,318

-223,904,779

15,008,805

15,008,805

15,008,805 (1,500,881) 42,709,242

4,183,457 19,192,262 243,097,041

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Statement of cash flows for the year ended December 31, 2016 (In Arab Emirates Dirhams) 2016 Cash flows from operating activities Profit for the year from continuing operations (Loss) for the year from discontinued operations Adjustments for: Depreciation on property, plant and equipment Impairment on property, plant and equipment Loss/(gain) on disposal of property, plant and equipment Allowance for doubtful debts Allowance for doubtful debts reversed Advances received from customers written-back Allowance for slow-moving inventories Provision for employees' end of service benefits Operating profit before changes in operating assets and liabilities (Increase)/decrease in current assets Inventories Trade receivables Advances, deposits and other receivables Increase/(decrease) in current liabilities Trade and other payables Cash generated from operations Employees' end-of-service benefits paid Net cash from operating activities Cash flows from investing activities Investment in fixed deposits Purchase of available-for-sale investments Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Net cash (used in) investing activities Cash flows from financing activities (Repayments) of term loans Proceeds from term loans (Repayments)/proceeds from other bank borrowings (Payment) of finance lease liability Net cash (used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents, beginning of the year Cash and cash equivalents, end of the year Represented by: Cash in hand Bank balances - current accounts

19,699,879 (4,691,074)

17,040,184 (10,024,908)

32,602,421 1,285,957 85,956 6,026,941 (507,594) 4,882,344 1,217,599 60,602,429

31,128,801 84,946 (91,100) 2,877,695 (33,764) (508,170) 3,256,275 1,192,488 44,922,447

14,975,245 (2,618,627) 2,047,492

762,964 (2,839,398) (373,639)

3,949,135 78,955,674

(3,481,952) 38,990,422

(1,265,282) 77,690,392

(1,386,744) 37,603,678

(8,000,000) (64,355) (34,209,594) 2,068,376 (40,205,573)

(36,658,158) 91,100 (36,567,058)

(26,610,060) 15,000,000 (11,630,847) (336,694) (23,577,601)

(25,316,718) 14,244,000 9,748,234 (2,020,910) (3,345,394)

13,907,218 4,306,933 18,214,151

(2,308,774) 6,615,707 4,306,933

138,703 18,075,448 18,214,151

46,494 4,260,439 4,306,933

The accompanying notes form an integral part of these consolidated financial statements. The report of the auditors is set out on pages 4 to 7. 12

2015

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 1

2

Legal status and business activities 1.1

M/s. Fujairah Building Industries P.J.S.C. (the “Entity”) was incorporated as a public joint stock company in the Emirate of Fujairah, United Arab Emirates, by an Emiri Decree issued by His Highness, The Ruler of Fujairah. The Entity’s ordinary shares are listed on the Abu Dhabi Securities Exchange.

1.2

The Entity and its subsidiaries (note 3.3) are collectively referred to as the “Group”.

1.3

The principal activities of the Group are unchanged since the previous year and comprise production of concrete blocks, interlocks, kerbstones, ceramic tiles, rockwool insulation materials, marble products, terrazzo tiles and quarry products.

1.4

The registered address of the Entity is P.O. Box: 383, Fujairah - United Arab Emirates.

1.5

These consolidated financial statements incorporate the operating results of the industrial licenses (note 3.3) issued by different municipalities in the Emirate of Fujairah.

New and amended standards 2.1

New and revised IFRSs applied with no material effect on the consolidated financial statements

The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2016. The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. Annual Improvements to IFRSs 2012-2014 cycles: • IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations": Adds specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-fordistribution accounting is discontinued. • IFRS 7 "Financial Instruments: Disclosures": Adds additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required. Further with consequential amendments to IFRS 1 "First-time Adoption of International Financial Reporting Standards", clarifies the applicability of the amendments to IFRS 7 on offsetting disclosures to condensed interim financial statements. • IAS 19 "Employee Benefits": Clarifies that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid (thus, the depth of the market for high quality corporate bonds should be assessed at currency level). • IAS 34 "Interim Financial Reporting": Clarifies the meaning of 'elsewhere in the interim report' and requires a crossreference. Amendments to IFRS 11 "Joint Arrangements" clarify accounting for acquisitions of interests in joint operations where the activities of the operation constitute a business. Amendments to IAS 16 "Property, Plant and Equipment" and IAS 38 "Intangible Assets" clarify that revenue-based method of depreciation or amortisation is generally not appropriate. Amendments to IAS 16 "Property, Plant and Equipment" and IAS 41 "Agriculture" require biological assets that meet the definition of a bearer plant to be accounted for as property, plant and equipment in accordance with IAS 16. Disclosure Initiative-Amendments to IAS 1 "Presentation of Financial Statements" makes the following changes: • Materiality: The amendments clarify that (1) information should not be obscured by aggregating or by providing immaterial information, (2) materiality considerations apply to the all parts of the financial statements, and (3) even when a standard requires a specific disclosure, materiality considerations do apply.

13

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 2

New and amended standards (continued) 2.1 New and revised IFRSs applied with no material effect on the consolidated financial statements (continued) Disclosure Initiative-Amendments to IAS 1 "Presentation of Financial Statements" makes the following changes: (continued) • Disaggregation and subtotals: The amendments (1) introduce a clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant and additional guidance on subtotals in these statements and (2) clarify that an entity's share of OCI of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss. • Notes: The amendments add additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered when determining the order of the notes and to demonstrate that the notes need not be presented. The IASB also removed guidance and examples with regard to the identification of significant accounting policies that were perceived as being potentially unhelpful. Amendments to IAS 27 "Separate Financial Statements" which allow an entity to account for investments in subsidiaries, joint ventures and associates either at cost or as financial asset in accordance with IAS 39/IFRS 9 or using the equity method in an entity’s separate financial statements. The amendments introduce the equity method as a third option. Amendments to IFRS 10 "Consolidated Financial Statements", IFRS 12 "Disclosure of Interests in Other Entities" and IAS 28 "Investments in Associates and Joint Ventures": Clarify the exception from preparing consolidated financial statements available to intermediate parent entities which are subsidiaries of investments entities. 2.2

New and revised standards and amendments in issue but were not mandatory for annual reporting period ending December 31, 2016 Effective for annual periods beginning on or after New and revised standards and amendments Amendments in Disclosure Initiative (Amendments to IAS 7 "Statement of Cash Flows") January 1, 2017 that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities. The liabilities arising from financing activities are disclosed (to the extent necessary): (i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes. January 1, 2018 IFRS 9 "Financial Instruments": Issued on 24 July 2014 is the IASB's replacement of IAS 39 "Financial Instruments: Recognition and Measurement". The Standard includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting. The IASB completed its project to replace IAS 39 in phases, adding to the standard as it completed each phase. The version of IFRS 9 issued in 2014 supersedes all previous versions and is mandatorily effective for periods beginning on or after 1 January 2018 with early adoption permitted (subject to local endorsement requirements). IFRS 15 "Revenue from Contracts with Customers": IFRS 15 was issued which established a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 "Revenue", IAS 11 "Construction Contracts", and the related interpretations when it becomes effective. IFRS 16 "Leases": The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17 "Leases" and related interpretations. Earlier adoption permitted if IFRS 15 "Revenue from Contracts with Customers" has also been applied. 14

January 1, 2018

January 1, 2019

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 2

New and amended standards (continued) Management anticipates that these new standards, interpretations and amendments will be adopted in the consolidated financial statements as and when they are applicable and adoption of these new standards, interpretations and amendments, may have no material impact on the consolidated financial statements in the period of initial application. There are no other standards that are not yet effective and that would be expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.

3

Significant accounting policies 3.1

Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and applicable requirements of UAE Laws. These consolidated financial statements are presented in Arab Emirates Dirhams (AED) which is the Group's functional and presentation currency. 3.2

Basis of preparation

These consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values, and assets and liabilities of a subsidiary, M/s. Emirates Ceramic Factory, that are measured at realisable/settlement values as explained in note 3.3. Historical cost is generally based on the fair value of the consideration given in exchange for assets or goods or services. The principal accounting policies applied in these consolidated financial statements are set out below. 3.3

Basis of consolidation

These consolidated financial statements comprise the financial information of the Entity and its subsidiaries (the "Group"). Details of the subsidiaries of the Entity as at the reporting date are as follows: Sl. Name of subsidiary No.

Place of incorporation

Industrial license no.

Percentage of ownership

Acquisition Principal year product 1978

Quarry products

1

Fujairah National Quarry

Fujairah - U.A.E. 80004

100%

2

Fujairah Concrete Products Fujairah - U.A.E. 80095

100%

1978

Blocks, interlocks and kerbstones

3

Emirates Ceramic Factory (discontinued operations)

Fujairah - U.A.E. 80007

100%

2006

Ceramic tiles

4

Fujairah Rockwool Factory Fujairah - U.A.E. 80008

100%

2006

Rockwool insulation materials

5

Fujairah Marble and Tiles Factory

100%

2007

Marble products and terrazzo tiles

Fujairah - U.A.E. 3923

A subsidiary is consolidated from the acquisition date, which is the date the Entity gains control over the subsidiary, and lasts till the Entity loses that control. Control usually occurs when the Entity has the power to govern the financial and operating policies of the subsidiary for the purpose of benefiting from its activities. During the current year and the prior year, there were neither acquisitions nor loss of control and the percentage of ownership in the subsidiaries remained same. All significant transactions and balances between the Entity and its subsidiaries are eliminated.

15

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 3

Significant accounting policies (continued) 3.4

Discontinued operations of a subsidiary

During May 2015, management decided to cease production and completely shutdown the plant and machinery to curtail losses of M/s. Emirates Ceramic Factory, a subsidiary. In the meeting of the Board of Directors held on November 5, 2015, it was resolved that plant and machinery be designated as held for sale. During January 2016, the sale was initiated. In view of the above, as the going concern assumption is not valid for M/s. Emirates Ceramic Factory, its assets and liabilities are included in these consolidated financial statements on the basis of the accounting convention of realisable/settlement values whereby assets are carried at amount of cash and cash equivalents that could currently be obtained by selling the assets in an orderly disposal and liabilities are carried at the undiscounted amounts of cash or cash equivalents expected to be paid to satisfy the liabilities in the normal course of business. Realisable/settlement values of assets and liabilities are based on the management's best estimate considering any impairment to the historical cost and presented as current assets and current liabilities. Property, plant and equipment of the M/s. Emirates Ceramic Factory, held for sale since November 5, 2015, are measured at lower of carrying amount and fair value less cost to sell. All operations of M/s. Emirates Ceramic Factory are treated as discontinued operations (note 28) as per International Financial Reporting Standards. 3.5

Current/non-current classification

Assets and liabilities are presented in the consolidated statement of financial position based on current/non-current classification. An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle or held primarily for the purpose of trading or expected to be realised within twelve months after the reporting period, or cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when it is expected to be settled in the normal operating cycle or it is held primarily for the purpose of trading or it is due to be settled within twelve months after the reporting period, or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. 3.6 Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 inputs are quoted price (unadjusted) in active market for identical asset or liabilities that the entity can access at the measurement date, Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly, and Level 3 inputs are unobservable inputs for the asset or liability. 16

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 3

Significant accounting policies (continued) 3.7

Foreign currency

In preparing these consolidated financial statements, transactions in currencies other than the Group's functional currency are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in profit or loss in the period in which they arise. Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as available-for-sale, are included in other comprehensive income. 3.8

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and identified impairment loss, if any. The cost comprise of purchase price, together with any incidental expense of acquisition. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance expenses are charged to profit or loss during the financial period in which they are incurred. Depreciation is charged so as to write off the cost of property, plant and equipment (other than capital work-in-progress), using the straight-line method over their useful lives as follows: Years Buildings and leasehold improvements 4 to 20 Plant and machinery 1 to 15 Heavy equipment and light vehicles 1 to 12 Furniture and fixtures 1 to 6 Buildings and leasehold improvements are being depreciated over the period from when it became available for use up to the end of the lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss. Capital work in progress Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

17

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 3

Significant accounting policies (continued) 3.9

Impairment of tangible assets

At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cashgenerating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. 3.10 Financial instruments Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. 3.11 Financial assets Financial assets are classified into the following specified categories: 'financial assets at fair value through profit or loss , 'held-to-maturity' investments', 'available-for-sale' financial assets and 'loans and receivables'. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Available-for-sale investments Available-for-sale investments are non-derivatives that are either designated in this category or not classified in any of the other categories are stated at fair value or cost at the end of each reporting period. Available-for-sale investments are initially measured at fair value plus transactions costs, if any. After initial recognition, available-for-sale investments are measured at fair value unless fair value is undeterminable. The fair value of availablefor-sale monetary financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate prevailing at the end of the reporting period. The foreign exchange gains or losses that are recognised in profit or loss are determined based on the amortised cost of the monetary asset. Other foreign exchange gains and losses are recognised in other comprehensive income. Available-for-sale investments that do not have a quoted market price in an active market and whose fair value cannot be measured reliably are measured at cost less any identified impairment losses at the end of each reporting period. Gains and losses arising from the changes in the fair value are recognised directly in equity in the investments revaluation reserve with the exception of impairment losses. Where the investment is disposed off or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in profit or loss.

18

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 3

Significant accounting policies (continued) 3.11 Financial assets (continued) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables comprise "trade receivables", "advances, deposits and other receivables" and "cash and cash equivalents" in the consolidated statement of financial position. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Trade receivables, advances, deposits and other receivables Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables, advances, deposits and other receivables are initially recognised at fair value and subsequently are measured at amortised cost reduced by appropriate allowance for estimated doubtful debts. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Impairment of financial assets The Group assesses at the end of each reporting period, whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are recognized only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. The Group may measure impairment on the basis of an instrument’s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of the previously recognised impairment loss is recognised in profit or loss.

19

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 3

Significant accounting policies (continued) 3.11 Financial assets (continued) Assets classified as available-for-sale The Group assesses at the end of each reporting period, whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss) is removed from equity and recognised in profit or loss. Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another Group. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset. 3.12 Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. All financial liabilities are recognised initially at fair value and, in the case of loans, borrowings and payables, net of directly attributable transaction costs. The Group's financial liabilities include trade and other payables, bank borrowings including bank overdraft and dividends to shareholders. Trade and other payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers and are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.Trade and other payables are recognised initially at fair value and subsequently are measured at amortised cost using effective interest method. Bank borrowings Bank borrowings are recorded at the proceeds received, net of direct issue costs, if any. Finance charges are accounted on accrual basis and are added under payables (current liabilities) to the extent that they are not settled in the period in which they arise. Dividends to shareholders Dividends to shareholders are recorded as payable in the period in which such dividends are approved by the shareholders. Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in profit or loss.

20

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 3

Significant accounting policies (continued) 3.13 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. 3.14 Inventories Inventory of raw materials, spare parts and consumables are valued at the lower of weighted average cost or net realizable value. Inventories of finished goods and work-in-progress are valued at the lower of average production cost or net realizable value. Cost of inventories comprises of costs of purchase, and where applicable cost of conversion and other costs that has been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs necessary to make the sale. 3.15 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. 3.16 Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. 3.17 Non-current assets held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less cost to sell. An impairment loss is recognised for any initial or subsequent write down of the non-current asset to fair value less cost to sell. A gain is recognised for any subsequent increases in fair value less cost to sell of an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition. Non-current assets are not depreciated or amortised while they are classified as held for sale. Non-current asset classified as held for sale are presented separately from the other assets in the consolidated statement of financial position. A discontinued operation is a component that has been disposed of or is classified as held for sale. 3.18 Defined contribution plan (for U.A.E. nationals) U.A.E. national employees of the Group are members of the Government-managed retirement pension and social security benefit scheme pursuant to U.A.E. Federal law no. 7 of 1999. The Group is required to contribute 12.5% of the "contribution calculation salary" of payroll costs to the retirement benefit scheme to fund the benefits. The employees and the Government contribute 5% and 2.5% of the "contribution calculation salary" respectively, to the scheme. The only obligation of the Group with respect to the retirement pension and social security scheme is to make the specified contributions. The contributions are charged to profit or loss. 21

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 3

Significant accounting policies (continued) 3.19 Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Revenue from the sale of goods is recognised when all the following conditions are satisfied:  the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;  the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;  the amount of revenue can be measured reliably;  it is probable that the economic benefits associated with the transaction will flow to the Group; and  the costs incurred or to be incurred in respect of the transaction can be measured reliably. Dividends from available-for-sale investments are recognised as income when the Group's right to receive the dividends is established. Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition. 3.20 Leases Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. 3.21 Critical accounting judgements and key sources of estimation uncertainty In the application of the Group's accounting policies, which are described in policy notes, the management is required to make judgements, assumptions and estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The significant judgements, assumptions and estimates made by management, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are described in the following page.

22

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 3

Significant accounting policies (continued) 3.21 Critical accounting judgements and key sources of estimation uncertainty (continued) Critical accounting judgements In the process of applying the Group’s accounting policies, which are described above, and due to the nature of operations, management makes the following judgements that have the most significant effect on the amounts recognised in the consolidated financial statements. Revenue recognition In recognising revenue, management is of the view that in line with the requirement of IAS 18 "Revenue", the risk and reward of ownership is transferred to the buyers of the goods and services and that revenue is reduced for the estimated returns, rebate and other allowances (if any). Classification of investments Management decides upon acquisition of an investment whether it should be classified as investment carried at fair value through profit or loss or held-to-maturity investments or available-for-sale. Classification of investments as fair value through profit or loss is based on how management monitors the performance of these investments. When they are not classified as held-for-trading but have readily available reliable fair values and the changes in fair values are reported as part of profit or loss in the management accounts, they are classified as fair value through profit or loss. For held-to-maturity investments, the Group classifies such investments in the light of its capital maintenance, liquidity requirements and positive intention and ability to hold those assets to maturity. All other investments are classified as available-for-sale. Impairment of financial assets The Group determines whether available-for-sale investments are impaired when there has been a significant or prolonged decline in their fair value below cost. This determination of what is significant or prolonged requires judgement. In making this judgement and to record whether impairment occurred, the Group evaluates among other factors, the normal volatility in share price, the financial health of the investee, industry and sector performance, changes in technology and operational and financial cash flows. Related parties Management has disclosed the related parties and the related due from and to related parties as per the requirements of IAS 24 "Related Party Disclosures". In view of due from and to related parties being receivable and payable on demand and management's intention to realise or pay the related parties as and when necessarily required, the disclosed balances are classified as current assets and current liabilities. Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. Allowance for doubtful debts Allowance for doubtful debts is determined using a combination of factors to ensure that trade receivables are not overstated due to uncollectibility. The allowance for doubtful debts for all customers is based on a variety of factors, including the overall quality and ageing of receivables, continuing credit evaluation of the customer's financial conditions and collateral requirements from customers in certain circumstances. In addition, specific allowances for individual accounts are recorded when the Group becomes aware of the customer's inability to meet financial obligations. 23

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 3

Significant accounting policies (continued) 3.21 Critical accounting judgements and key sources of estimation uncertainty (continued) Key sources of estimation uncertainty (continued) Inventories Inventories are stated at the lower of cost or net realizable value. Adjustments to reduce the cost of inventory to its realizable value, if required, are made for estimated obsolescence or impaired balances. Factors influencing these adjustments include changes in demand, product pricing, physical deterioration and quality issues. Based on the factors, management has identified certain inventory items to calculate the allowance for slow-moving inventories. Revisions to the allowance would be required if the outcome of these indicative factors differ from the estimates. Property, plant and equipment Property, plant and equipment are depreciated over their estimated useful lives, which are based on expected usage of the assets and expected physical wear and tear which depends on operational factors. Management has not considered any residual value as it is deemed immaterial. Leasehold improvements Management determines the estimated useful life and related depreciation charges for its leasehold improvements. This estimate is based on an assumption that the Group will renew its annual lease over the estimated useful life of the asset. It could change significantly should the annual lease not be renewed. Management will increase the depreciation charge where the useful life is less than the previously estimated useful life. Operating lease expenses Lease payments under operating lease have been recognised as an expense on a straight-line basis over the lease rental period after considering the rent escalation as per the rent agreements. The rent charge could significantly change in subsequent accounting periods should the lease contract not be renewed or there be change in lease terms of the contract. Impairment of available-for-sale investments The Group treats available-for-sale investments as impaired when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exists giving due consideration to other factors, including normal volatility in share prices for quoted equities and the future cash flows and the discount factors for unquoted equities. Valuation of unquoted equity investments Valuation of unquoted equity investments is normally based on one of the following:  



Current fair value of another instrument that is substantially the same; or The expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics; or Other valuation models.

The determination of the cash flows and discount factors for unquoted equity investments requires significant estimations. The Group calibrates the valuation techniques periodically and tests them for validity using either prices from observable current market transactions in the same instrument or from other available observable market data. Management believes that the carrying values of these unquoted equity investments are not materially different from their fair values.

24

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 3

Significant accounting policies (continued) 3.21 Critical accounting judgements and key sources of estimation uncertainty (continued) Key sources of estimation uncertainty (continued) Fair value measurement For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values and reports directly to the CEO. The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If the third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of International Financial Reporting Standards, including the level in the fair value heirarchy in which such valuations should be classified.

25

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) Property, plant and equipment 4 Buildings and Plant and leasehold machinery improvements Cost As at December 31, 2014 114,514,107 302,279,570 Addition during the year 123,490 3,127,284 Transferred from capital work-in-progress 704,967 10,314,802 Disposal during the year (4,324,312) Impairment during the year Reclassification to property, plant and equipment held for sale (note 6) (15,913,535) (39,626,467) As at December 31, 2015 99,429,029 271,770,877 Addition during the year 81,250 648,218 Transferred from capital work-in-progress 2,638,877 37,884,674 Disposal during the year (4,065,824) Impairment during the year (note 24) Reclassification from property, plant and equipment held for sale (note 6) 3,030,125 As at December 31, 2016 102,149,156 309,268,070 Accumulated depreciation As at December 31, 2014 Charge for the year Eliminated on disposal during the year Reclassification to property, plant and equipment held for sale (note 6) As at December 31, 2015 Charge for the year Eliminated on disposal during the year Eliminated on impairment during the year (note 24) Reclassification from property, plant and equipment held for sale (note 6) As at December 31, 2016 Carrying value As at December 31, 2016

Heavy equipment and light vehicles

Furniture and fixtures

Capital work-inprogress

Total

59,930,127 1,899,645 (172,286) -

17,093,243 889,826 284,932 -

6,296,935 30,617,913 (11,304,701) (84,946)

500,113,982 36,658,158 (4,496,598) (84,946)

(791,000) 60,866,486 5,864,055 418,710 (3,058,300) -

(2,673,065) 15,594,936 391,172 (7,154) (2,264,917)

25,525,201 27,224,899 (40,942,261) -

(59,004,067) 473,186,529 34,209,594 (7,131,278) (2,264,917)

64,090,951

16,525 13,730,562

11,807,839

3,046,650 501,046,578

58,785,526 6,648,117 -

188,441,345 18,513,569 (4,324,312)

43,815,757 3,962,222 (172,286)

12,766,789 2,004,893 -

-

303,809,417 31,128,801 (4,496,598)

(15,085,990) 50,347,653 6,208,991 -

(37,783,722) 164,846,880 20,454,634 (4,065,824) -

(791,000) 46,814,693 4,170,124 (2,945,132) -

(2,642,240) 12,129,442 1,768,672 (2,856) (1,624,215)

-

(56,302,952) 274,138,668 32,602,421 (7,013,812) (1,624,215)

56,556,644

3,030,125 184,265,815

48,039,685

7,369 12,278,412

-

3,037,494 301,140,556

45,592,512

125,002,255

16,051,266

1,452,150

11,807,839

199,906,022

As at December 31, 2015 49,081,376 106,923,997 14,051,793 3,465,494 25,525,201 Notes: - Buildings are constructed on plots of land obtained on lease from the Government of Fujairah and renewed on an annual basis. - Certain vehicles having carrying value of AED 2,148,164 (2015: 2,368,164) are hypothecated against a bank loan (note 17). - Capital work-in-progress at the end of the reporting period represents plant and machinery being installed/modified at various subsidiaries. - Depreciation for the year includes AED 27,335,273 (2015: AED 24,402,045) charged to cost of sales (note 22). - Finance cost capitalised during the year amounted AED 845,761 (2015: 96,506). 26

199,047,861

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 4

5

Property, plant and equipment (continued) Depreciation charge for the year: - Continuing operations - Discontinued operations Available-for-sale investments Equity securities : Quoted : Unquoted Movement in available-for-sale investments is as follows: Balance at the beginning of the year Acquired during the year Change in fair value (note 15) Balance at the end of the year Comprising: Non-current portion Current portion (note 3.4)

6

7

2016

2015

32,602,421 32,602,421

29,967,190 1,161,611 31,128,801

41,690,780 1,720,000 43,410,780

37,442,968 1,720,000 39,162,968

39,162,968 64,355 4,183,457 43,410,780

38,968,274 194,694 39,162,968

42,894,808 515,972 43,410,780

38,711,157 451,811 39,162,968

During the current and previous year, there were no sales of equity securities. All equity securities represent investments in local companies in the United Arab Emirates. Property, plant and equipment - held for sale Cost Balance at the beginning of the year 59,004,067 Transferred (to)/from property, plant and equipment of continuing operations (3,046,650) (note 4) (235,784) Transferred to inventory of continuing operations Disposal during the year (53,727,958) Impairment during the year (1,253,174) Balance at the end of the year 740,501 Accumulated depreciation Balance at the beginning of the year 56,302,952 Transferred (to)/from property, plant and equipment of continuing operations (3,037,494) (note 4) (235,784) Transferred to inventory of continuing operations Eliminated on disposal during the year (51,691,092) Eliminated on impairment during the year (607,919) Balance at the end of the year 730,663 Carrying value 9,838 Inventories Continuing operations Raw materials Finished goods Spare parts Consumables Inventories in transit Less: Allowance for slow-moving items (a)

27

6,078,084 38,689,594 25,173,265 4,488,658 32,820 (16,452,895) 58,009,526

59,004,067 59,004,067 56,302,952 56,302,952 2,701,115

7,401,417 40,370,594 26,179,052 8,545,822 3,305,886 (12,829,832) 72,972,939

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 2016 7

Inventories (continued) Discontinued operations Raw materials Work-in-progress Finished goods Spare parts Consumables Less: Allowance for slow-moving items (b) (a)+(b) Allowance for slow-moving inventories Movement in allowance for slow-moving inventories is as follows: Balance at the beginning of the year Charge during the year - continuing operations (note 24) Charge during the year - discontinued operations (note 28) Written-off during the year - discontinued operations Balance at the end of the year

2015

12,414,310 2,434,117 52,937 (6,089,768) 8,811,596 66,821,122

692,427 62,387 15,363,276 4,139,993 210,061 (6,762,372) 13,705,772 86,678,711

19,592,204 3,623,063 1,259,281 (1,931,885) 22,542,663

14,259,574 1,996,994 3,565,860 (230,224) 19,592,204

The above inventories, except inventories in transit, are lying in factory premises and yards located at Dibba and Fujairah, United Arab Emirates. 8

Trade receivables Trade receivables Less: Allowance for doubtful debts

76,822,455 (14,787,066) 62,035,389

76,037,411 (11,101,302) 64,936,109

At December 31, 2016, there are 5 customers (2015: 5 customers) representing 35% (2015: 33%) of the trade receivables. Credit period normally agreed with the customers is 60 to 120 days (2015: 60 to 120 days). No interest is charged on trade receivables balances in the normal course of business. Trade receivables outstanding for more than 180 days are reviewed and allowance for doubtful debts is recorded based on estimated irrecoverable amounts from the sale of goods, determined by reference to past default, management experience and prevailing economic conditions. Ageing of trade receivables:0 - 180 days 181 - 365 days 366 days and above Allowance for doubtful debts Movement in allowance for doubtful debts is as follows: Balance at the beginning of the year Charge during the year - continuing operations (note 24) Charge during the year - discontinued operations (note 28) Written-off during the year Reversal during the year (note 26) Balance at the end of the year

2016

2015

52,865,481 8,496,416 673,492 62,035,389

57,585,510 3,884,090 3,466,509 64,936,109

11,101,302 5,669,088 357,853 (1,833,583) (507,594) 14,787,066

8,607,371 2,835,439 42,256 (350,000) (33,764) 11,101,302

In determining the recoverability of trade receivables, the Group considers any change in the credit quality of the trade receivables from the date credit was initially granted up to the reporting date. Accordingly, the management believes that no further allowance is required for doubtful debts.

28

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 8

9

10

Trade receivables (continued) Geographical analysis The geographical analysis of trade receivables is as follows: Within U.A.E. Outside U.A.E. : G.C.C. Outside U.A.E. : Others Advances, deposits and other receivables Prepayments Advances to suppliers Other receivables Fixed deposits Fixed deposits with bank

2016

2015

57,914,314 4,121,075 62,035,389

58,868,115 4,808,558 1,259,436 64,936,109

2,447,602 1,369,152 282,077 4,098,831

2,727,778 3,194,570 223,975 6,146,323

15,000,000

7,000,000

Fixed deposit amounting AED 7,000,000 is under lien against credit facilities (note 17). 11

Cash and bank balances Cash in hand Bank balances - current accounts

138,703 18,075,448 18,214,151

46,494 4,260,439 4,306,933

135,987,500 1 135,987,500

135,987,500 1 135,987,500

Bank balances are maintained with banks registered in the United Arab Emirates. 12

Share capital Number of shares Nominal value per share Issued and fully paid-up share capital

13

(Nos.) (AED) (AED)

During 2015, the share capital was increased by AED 9,487,500 (7.5%) through issuance of 9,487,500 bonus shares of AED 1 each as approved by the shareholders in the Annual General Meeting held on April 9, 2015 (note 16). For the year ended December 31, 2016 2015 Basic and diluted earnings per share Continuing operations Profit for the year from continuing operations (AED) 19,699,879 17,040,184 Weighted average number of shares Earnings per share

(Nos.) (U.A.E. Fils)

135,987,500 14.5

135,987,500 12.5

(AED) (Nos.) (U.A.E. Fils)

(4,691,074) 135,987,500 (3.4)

(10,024,908) 135,987,500 (7.4)

Discontinued operations (Loss) for the year from discontinued operations Weighted average number of shares (Loss) per share 14

Statutory reserve Balance at the beginning of the year Transferred from profit for the year (note 16) Balance at the end of the year

29

2016

2015

28,348,713 1,500,881 29,849,594

27,647,185 701,528 28,348,713

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 14 Statutory reserve (continued) According to the Articles of Association of the Entity and Article 239 of the UAE Federal Law No. (2) of 2015, the Entity has established a statutory reserve by appropriation of 10% of the profit for each year. The shareholders' general assembly may stop appropriations to the statutory reserve once its balance reaches 50% of the paid-up share capital. This reserve is not available for distribution except in the circumstances stipulated by law. 15

Balance at the beginning of the year Change in fair value of available-for-sale investments (note 5) Balance at the end of the year 16

2015

30,367,248 4,183,457 34,550,705

30,172,554 194,694 30,367,248

29,201,318 15,008,805 (1,500,881) 42,709,242

32,375,070 7,015,276 (701,528) (9,487,500) 29,201,318

81,446,810 15,000,000 (26,610,060) 69,836,750

92,519,528 14,244,000 (25,316,718) 81,446,810

42,993,848 26,842,902 69,836,750

48,424,126 33,022,684 81,446,810

2,818,843 39,112,042 905,865 27,000,000 69,836,750

9,487,327 58,312,042 1,647,441 12,000,000 81,446,810

Retained earnings Balance at the beginning of the year Profit for the year Transferred to statutory reserve (note 14) Issuance of bonus shares (note 12) Balance at the end of the year

17

2016 Investments revaluation reserve

Bank borrowings

(a) Term loans Balance at the beginning of the year Received during the year Repaid during the year Balance at the end of the year Comprising: Non-current portion Current portion Break-up of term loans Term loan 1 Term loan 2 Term loan 3 Term loan 4 Term loan 1 During 2008, the Group was sanctioned a long term loan by a local bank for AED 50 million to finance the setting up of the marble and tiles factory. This loan is scheduled to be repaid in monthly installments ranging from AED 400,000 to AED 600,000, inclusive of interest, commenced from May 2011 and ending in May 2017. Term loan 2 During 2008, the Group was sanctioned a medium term loan by a local bank for AED 120 million to finance the construction of a rockwool factory and installation of new plant and machinery therein. This loan was rescheduled in July 2014 to be repaid in 54 equal monthly installments of AED 1.6 million, exclusive of interest, commenced from August 2014 and ending in January 2019.

30

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 17 Bank borrowings (continued) (a) Term loans (continued) Term loan 3 During 2015, the Group was sanctioned a revolving vehicle loan facility by a local bank for AED 3 million to part finance the purchase of motor vehicles, of which AED 2,244,000 was drawn. This loan is scheduled to be repaid in 36 equal monthly installments of AED 66,213, inclusive of interest, commenced from March 2015 and ending in February 2018. Term loan 4 During 2015, the Group was sanctioned a medium term loan by a local bank for AED 89 million to finance the installation of plant and machinery and construction of labour camp. Up to December 31, 2016, AED 27 million was drawn down. This drawn down amount is scheduled to be repaid in 20 equal quarterly installments of AED 1,350,000 commencing in April 2017 and ending in January 2022. Interest calculated on monthly basis, at commercial rate, is charged to the above loan accounts. 2016

2015

21,454,502 2,281,564 23,736,066

27,122,621 8,244,292 35,366,913

(b) Due to banks Bank overdrafts Trust receipts Bank overdrafts Bank overdrafts are repayable on demand. Interest calculated on monthly basis, at commercial rate, is charged to the accounts. Trust receipts Trust receipts are a form of bank credit facility granted against the purchase of raw materials. Interest is calculated for the tenure and paid at earlier of month-end or maturity. Bank borrowings - non-current portion Term loans (refer a)

42,993,848

48,424,126

26,842,902 23,736,066 50,578,968

33,022,684 35,366,913 68,389,597

93,572,816

116,813,723

Bank borrowings - current portion Term loans Due to banks

(refer a) (refer b)

Total bank borrowings Bank borrowings are secured by:i) ii) iii) iv) 18

Corporate guarantee of the Entity. Assignment of certain insurance policies, covering buildings, plant and machinery, in favour of the bank. Lien over fixed deposit of AED 7,000,000 (note 10). Hypothecation of certain vehicles (note 4).

Employees' end of service benefits Balance at the beginning of the year Add: Charge for the year Less: Paid during the year Balance at the end of the year Comprising: Non-current portion Current portion (note 3.4)

31

12,625,705 1,217,599 (1,265,282) 12,578,022

12,819,961 1,192,488 (1,386,744) 12,625,705

12,151,098 426,924 12,578,022

11,887,877 737,828 12,625,705

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 18 Employees' end of service benefits (continued)

19

Amounts required to cover end of service benefits at the consolidated statement of financial position date are computed pursuant to the United Arab Emirates Federal Labour Law based on the employees’ accumulated period of service and current basic remuneration at that date. 2016 2015 Trade and other payables Trade payable

45,256,494

45,902,735

Advances received from customers

3,960,369

2,213,449

Accruals

5,331,527

3,114,827

Staff provisions

5,254,878

4,565,568

Unclaimed dividends Interest payable

20

29,963

29,963

415,023

472,577

60,248,254

56,299,119

336,694

2,357,604

(336,694)

(2,020,910)

Finance lease liability Balance at the beginning of the year Paid during the year Balance at the end of the year

-

336,694

-

336,694

Comprising: Current portion

For the year ended December 31, 21

Sales: Within U.A.E. : Outside U.A.E. - G.C.C.

22

2016

2015

223,987,656

224,954,542

18,189,603

12,663,022

242,177,259

237,617,564

7,401,417 48,238,742 (6,078,084) 49,562,075 21,980,161 27,335,273 58,270,316 157,147,825 40,370,594 (38,689,594) 158,828,825

6,038,142 49,905,336 (7,401,417) 48,542,061 21,741,462 24,402,045 60,246,736 1,344,030 156,276,334 40,526,757 (40,370,594) 156,432,497

Revenue

Cost of sales Raw materials at the beginning of the year Purchases during the year Raw materials at the end of the year (note 7) Raw materials consumed Direct labour Depreciation on property, plant and equipment (note 4) Manufacturing overhead Work in progress at the beginning of the year Cost of goods manufactured Finished goods at the beginning of the year Finished goods at the end of the year (note 7)

32

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) For the year ended December 31, 23

Salaries and other related benefits Vehicle expenses Rent Insurance Telephone and communication Advertisement and business promotion Government fees on crusher sales Hired transportation Depreciation on property plant and equipment Legal, visa, professional and related expenses Others 24

10,125,334 6,866,475 3,346,561 364,417 200,179 1,390,562 2,840,092 3,238,955 2,560,947 597,424 993,120 32,524,066

10,494,891 9,861,857 4,235,175 390,322 288,951 970,734 2,177,473 2,637,044 2,751,320 433,070 795,324 35,036,161

14,208,776 465,649 675,948 150,802 1,559,096 487,788 268,526 2,706,201 3,623,063 5,669,088 640,702 1,815,539 32,271,178

14,040,894 602,447 658,290 141,544 1,710,390 522,804 290,405 2,813,825 1,996,994 2,835,439 84,946 1,553,336 27,251,314

3,808,017

5,068,827

113,689 1,000,146 1,209,660 86,000 488,635 881,127 507,594 667,855 4,954,706

48,606 512,427 86,000 91,100 760,529 33,764 508,170 1,170,823 3,211,419

Finance costs Interest on bank borrowings

26

2015

Administrative expenses Salaries and related benefits Vehicle expenses Rent Insurance Legal, visa, professional and related expenses Telephone and communication Utilities Depreciation on property plant and equipment Allowance for slow-moving inventories (note 7) Allowance for doubtful debts (note 8) Impairment of property, plant and equipment (note 4) Others

25

2016 Selling and distribution expenses

Other income Interest on fixed deposits Sale of scrap Compensation received Rental income Gain on disposal of property, plant and equipment Dividends on available-for-sale investments Allowance for doubtful debts reversed (note 8) Advances received from customers written-back Others

33

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 27 Related party transactions The Group enters into transactions with other entities that fall within the definition of a related party as contained in IAS 24 "Related Party Disclosures". Such transactions are in the normal course of business and at terms that correspond to those on normal arms-length transactions with third parties. Related parties comprise entities under common ownership and/or common management and control; their partners and key management personnel. Management decides on the terms and conditions of the transactions and services received/rendered from/to related parties as well as other charges, if applicable. 2016 2015 a) Balances due from related parties (included in trade receivables) 2,682,388 4,542,762 b) Balances due to related parties (included in trade and other payables) c) Balance due from a related party (included in advances to suppliers)

3,023,775 -

82,643 248,946

No bank guarantees are received from or provided to related parties against balances due from/to them. d) Transactions with related parties The nature of significant related party transactions and the amounts involved were as follows: For the year ended December 31, 2016 2015 10,477,851 12,928,251 Sales Purchases e) Key management personnel compensation The compensation of key management personnel is as follows: Key management remuneration 28

9,398,842

3,650,068

4,093,419

3,755,651

Discontinued operations During May 2015, management decided to cease production and completely shutdown the plant and machinery to curtail losses of M/s. Emirates Ceramic Factory, a subsidiary. In the meeting of the Board of Directors held on November 5, 2015, it was resolved that plant and machinery be designated as held for sale and to consider operations of the subsidiary as discontinued operations. For the year ended December 31, 2016 2015 Revenue Manufacturing costs Finished goods at the beginning of the year Finished goods at the end of the year (note 7) Cost of sales Gross (loss)/profit Selling and distribution expenses Administrative expenses Allowance for slow-moving inventories (note 7) Allowance for doubtful debts (note 8) Corporate office expenses Finance costs Other income (Loss) for the year from discontinued operations Cashflows of discontinued operations Operating activities Investing activities Financing activities Net (decrease) in cash and cash equivalents

34

2,762,298 (15,363,276) 12,414,310 (2,948,966) (186,668) (1,188,134) (2,086,757) (1,259,281) (357,853) (111,258) 498,877 (4,691,074)

8,701,293 (6,770,409) (16,978,881) 15,363,276 (8,386,014) 315,279 (2,599,592) (3,456,896) (3,565,860) (42,256) (480,000) (284,342) 88,759 (10,024,908)

(283,617) 1,936,039 (1,776,704) (124,282)

(3,513,010) (59,035) 3,387,929 (184,116)

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 29

Business segments The Group has broadly four reportable segments, including discontinued operations, as discussed below which are the Group's strategic business units which operate in different sectors and are managed separately because of different strategies and are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. All operating segments' operating results are reviewed regularly by the Group's executive managment to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Ceramic Total products Continuing Discontinued Quarrying Manufacturing Other Eliminations operations operations Eliminations Total For the year ended December 31, 2016 Revenue

32,733,964

221,155,123

378,838

18,156,101

1,071,222

4,936,998

26,274,193

Total assets

43,766,316

Total liabilities

Profit/(loss) Depreciation

-

(11,711,828)

242,177,259

2,762,298

93,718

19,699,879

(4,206,211)

1,442,813

(51,583)

32,602,421

338,415,714

266,256,356

(248,360,368)

400,078,018

22,317,661

163,114,445

37,022,138

(57,644,984)

31,843,126

217,273,249

-

(484,863)

244,939,557 15,008,805

-

32,602,421

9,418,115

-

409,496,133

164,809,260

1,589,833

-

166,399,093

(11,498,811)

237,617,564

8,701,293

-

246,318,857

(176,577)

17,040,184

(10,024,908)

-

7,015,276

29,967,190

1,161,611

-

31,128,801

As at December 31, 2016

For the year ended December 31, 2015 Revenue (Loss)/profit

17,229,122

782,533

4,108,475

24,211,018

1,647,697

Total assets

46,014,130

333,703,202

245,972,885

(236,447,922)

389,242,295

20,737,725

-

409,980,020

Total liabilities

25,943,422

176,882,128

28,359,085

(55,907,527)

175,277,108

10,798,133

-

186,075,241

Depreciation

(794,894)

-

-

As at December 31, 2015

35

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 30

Financial instruments

a) Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability are disclosed in note 3 to the consolidated financial statements. b) Fair value of financial instruments that are not measured at fair value on recurring basis As at December 31, 2016 2015 Carrying amount

Financial assets Trade receivables Advances, deposits and other receivables Fixed deposits Cash and bank balances

As at December 31, 2016 2015 Fair value

62,035,389 282,077 15,000,000 18,214,151 95,531,617

64,936,109 223,975 7,000,000 4,306,933 76,467,017

62,035,389 282,077 15,000,000 18,214,151 95,531,617

64,936,109 223,975 7,000,000 4,306,933 76,467,017

93,572,816 56,287,885 149,860,701

116,813,723 336,694 54,085,670 171,236,087

93,572,816 56,287,885 149,860,701

116,813,723 336,694 54,085,670 171,236,087

Financial liabilities Bank borrowings Finance lease liability Trade and other payables

Financial instruments comprise of financial assets and financial liabilities as stated above. As at the end of the reporting period, the fair values of financial instruments approximate their carrying amounts. The fair value of the financial instruments is included at the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties. c) Valuation premise for fair value of financial instruments that are not measured at fair value on recurring basis The following methods and assumptions were used to estimate the fair values: Receivables are evaluated based on parameters such as interest rates and individual creditworthiness of the customer. Based on this evaluation, allowances are taken into account for the expected losses of these receivables. As at the end of the reporting period, the carrying amounts of such receivables, net of allowances, were not materially different from their calculated fair values. The fair values of financial liabilities are estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. As at the end of the reporting period, the carrying amounts of such financial liabilities were not materially different from their calculated fair values. d) Fair value of financial instruments that are measured at fair value on recurring basis Information about how the fair value is determined, valuation technique and input used is as follows:-

Available-for-sale investments - Quoted

Valuation technique Quoted Price

Fair value hierarchy Level 1

Fair value as at December 31, 2016 2015 41,690,780 37,442,968

Fair values of the quoted instruments are based on quoted market prices in active markets at the end of the reporting period.

36

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 30

Financial instruments (continued)

d) Fair value of financial instruments that are measured at fair value on recurring basis (continued): Reconciliation of fair value measurement: Fair value at the beginning of the year Change in fair value during the year Fair value at the end of the year 31

2016

2015

30,367,248 4,183,457 34,550,705

30,172,554 194,694 30,367,248

Financial risk management objectives Management has set out the Group’s overall business strategies and its risk management philosophy. The Group’s overall financial risk management program seeks to minimize potential adverse effects on the financial performance of the Group. The Group's policies include financial risk management policies covering specific areas, such as market risk (including foreign exchange risk and interest rate risk), liquidity risk and credit risk. Periodic reviews are undertaken to ensure that the Group’s policy guidelines are complied with. There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures the risk. The Group manages its financial risk by closely monitoring, on a regular basis, the investments in different sectors. The Group does not enter into or trade for speculative or risk management purposes.

a) Foreign currency risk management Exposures to exchange rate fluctuations arise as the Group undertakes certain transactions denominated in foreign currencies. There are no significant exchange rate risks, as substantially all financial assets and financial liabilities are denominated in Arab Emirates Dirhams, other G.C.C. currencies or United States Dollars to which the Arab Emirates Dirhams is fixed. Management undertakes suitable procedures to minimize risks associated with transactions denominated in currencies other than Arab Emirates Dirhams and United States Dollars. b) Interest rate risk management The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s borrowings with floating interest rates. The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debts. Interest on financial instruments having floating rates is re-priced at intervals of less than one year and interest on financial instruments having fixed rate is fixed until the maturity of the instrument. The Group is also exposed to interest rate price risk with reference to its fixed rate time deposits with banks. Interest rate sensitivity analysis The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative instruments at the reporting date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the reporting date was outstanding for the whole year. A 50 basis point increase or decrease is used for reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonable possible change in interest rates. If interest rates had been 50 basis points higher/(lower) and all other variables were held constant, the consolidated financial result for the current year would (decrease)/increase by AED 467,864 (2015: AED 584,069).

37

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 31

Financial risk management objectives (continued)

c) Liquidity risk management Ultimate responsibility for liquidity risk management rests with the management which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial instruments. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank borrowings and equity from the Shareholders. Liquidity and interest risk tables The table below summarises the maturity profile of the Group’s financial instruments. The contractual maturities of the financial instruments have been determined on the basis of the remaining period at the end of the reporting period to the contractual maturity date. The maturity profile is monitored by the management to ensure adequate liquidity is maintained. The maturity profile of the financial instruments at the end of the reporting period, based on contractual repayment arrangements, is also shown below: Interest bearing Particulars

On demand or less than 3 months

Non-Interest bearing

On Within 1 More than 1 demand or year year less than 3 months

Within 1 year

More than 1 year

Total

As at December 31, 2016 Financial assets Available-for-sale investments Trade receivables Advances, deposits and other receivables Fixed deposits Cash and bank balances

-

-

-

-

515,972

-

-

-

-

62,035,389

-

62,035,389

-

-

-

-

282,077

-

282,077

-

-

15,000,000

8,000,000

7,000,000

-

8,000,000

7,000,000

-

21,454,502

29,124,466

42,993,848

-

21,454,502

29,124,466

42,993,848

-

18,214,151 18,214,151

62,833,438

42,894,808

42,894,808

43,410,780

18,214,151 138,942,397

Financial liabilities Bank borrowings Trade and other payables

38

56,287,885 56,287,885

-

93,572,816

-

56,287,885 149,860,701

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 31

Financial risk management objectives (continued)

c) Liquidity risk management (continued) Liquidity and interest risk tables (continued) Interest bearing Particulars

On demand or less than 3 months

Non-Interest bearing

On Within 1 More than 1 demand or year year less than 3 months

Within 1 year

More than 1 year

Total

As at December 31, 2015 Financial assets Available-for-sale investments

-

-

-

-

451,811

Trade receivables Advances, deposits and other receivables

-

-

-

-

64,936,109

-

64,936,109

-

-

-

-

223,975

-

223,975

Fixed deposits Cash and bank balances

-

7,000,000

-

-

-

7,000,000

-

7,000,000

-

4,306,933 4,306,933

65,611,895

38,711,157

38,711,157

39,162,968

4,306,933 115,629,985

Financial liabilities Bank borrowings Finance lease liability Trade and other payables

27,122,621 27,122,621

41,266,976 336,694 41,603,670

48,424,126 48,424,126

-

-

-

116,813,723

-

-

-

336,694

-

54,085,670 171,236,087

-

54,085,670 54,085,670

d) Credit risk management Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties. The Group’s exposure is continuously monitored and regularly reviewed by management and the Group maintains an allowance for doubtful debts based on expected collectability of trade receivables, where appropriate. Trade receivables consist of large number of customers. Ongoing credit evaluation is performed on the financial condition of trade receivables. Further details of credit risks on trade and other receivables are discussed in notes 8 and 9 to the consolidated financial statements. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The carrying amounts of the financial assets recorded in the consolidated financial statements, which are net of impairment losses, represents the Group’s maximum exposure to credit risks.

39

Fujairah Building Industries P.J.S.C. and its subsidiaries (the "Group") Fujairah - United Arab Emirates Notes to the consolidated financial statements for the year ended December 31, 2016 (In Arab Emirates Dirhams) 31

Financial risk management objectives (continued)

e) Equity price risks management The Group’s quoted and unquoted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group manages the equity price risk through diversification and by placing limits on individual and total equity instruments. At the reporting date, the exposure to unquoted equity securities at cost was AED 1,720,000 (2015: AED 1,720,000). 32

Capital risk management The Group manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the equity balance. The overall strategy remains unchanged from prior year.

33

Proposed distribution of profits For the year 2016, the Board of Directors have proposed a cash dividend of 5% of the paid-up share capital, amounting to AED 6,799,375 (2015: Nil), subject to approval by the Shareholders’ General Assembly.

34

Contingent liabilities As at December 31, 2016 2015 1,692,287 1,700,000 3,080,732

Letters of credit Letter of guarantee

Except for the above and ongoing business obligations which are under normal course of business against which no loss is expected, there has been no other known contingent liability on these consolidated financial statements as of the reporting date. 35

Commitments As at December 31, 2016 2015 12,117,870 11,345,642

Capital commitments

Except for the above and ongoing business obligations which are under normal course of business against which no loss is expected, there has been no other known commitment on these consolidated financial statements as of the reporting date. 36

Comparatives Certain amounts of the prior year were reclassified to conform to the current year's presentation. However, such reclassification has no impact on the previously reported consolidated financial result or equity.

40