Valued Shareholders
On behalf of the Board of Directors, it gives me pleasure to welcome the Shareholders of Baniyas Co-operative Society and the representative of the Ministry of Social Affairs and the representative of the auditors M/s Ernst & Young, chartered accountants.

Valued Shareholders
This year’s general assembly meeting coincides with the end of term of the Board of Directors and calls for the election of new Board of Directors or the renewal of the trust of the existing Board Members and we are honored to express our pride in the trust that you have given us during the tenure of our board membership.

Valued Shareholders
As you are aware, the previous year has gone through an economic recession that impacted on all aspects of life influencing the consumer leading to new consumer habits in the form of caution and fear from an unknown future. In addition, fierce and unfair competition is beginning to take place in Baniyas area. However, despite these challenges, the Baniyas Co-operative Society set out plans to manage this crisis phase and achieved commendable results as follows:

• Total sales achieved a record high of AED 99.6 million in the year 2010 compared to AED 97.9 million in the year 2009 representing an annual increase of 2%.
• Total sales of Baniyas branch for 2010 were AED 48.8 million compared to AED 49.3 million in 2009 representing a decline of 1%.
• Total sales of Shahama branch for 2010 reached AED 50.8 million compared to AED 48.3 million in 2009 representing an increase of 6%.
• The revenues of supermarkets represented by shelf rentals and special promotion income increased by 16% from AED3.9 million in 2009 to AED 4.5 million in 2010.
• The lease income for the year 2010 reached AED 9.4 million compared to AED 8.9 million during the year 2009.

Valued Shareholders
Total profit increased by 11 per cent from AED 14.8 million in 2009 to AED 16.5 million in 2010.

"This commendable performance is the result of sustained mplementation by the management of operational and financial processes to ensure a healthy gross margin, control of the general and administration expenses and the aintenance of sustainable lease income."

Based on these results, the Board of Directors is pleased to recommend to the general assembly the distribution of 25% overall dividend from a capital base of AED 33.3 million (10% return on shares and 15% return on sales). Therefore, the total distributed dividend is AED 8,325,000.

Valued Shareholders
In line with its policies to be socially responsible, the Society contributed to a number of welfare organizations and institutions in the area. The total contribution in kind and in money has reached AED 220,000 during 2010.

The society is currently coordinating with the municipality of Al Wathba to honor the high-achieving secondary students during the academic year 2010-2011 by granting 40 laptop computers for this purpose.

Future Plans
It is the responsibility of this Board to bring to the attention of the esteemed shareholders that the areas of Baniyas and Shahama are undergoing a severe competition from major retailers such as:

• Carrefour in Bawabat Al Sharq Shopping Mall
• Carrefour in Al Bahya
• Lulu Supermarket in Baniyas
• Abu Dhabi Co-operative Society in Al Shamkha
• In addition to the announcement of other Co-operative societies such as Al Reef Co-operative Society, The Armed Forces Co-operative in Shahama, in addition to the expansion of the Yas Mart

We also predict that this competition will lead to a decline in the market share of Baniyas Co-operative Society in its area which will impact negatively on the level of turnover and the income from these properties. Furthermore, the Co-operative Society return tenants are beginning to address the management requesting a decrease in the level of rents as well as a request not to apply the 5% yearly increase.

Therefore, the management has begun to plan for a new strategy to diversify the sources of income in order not to rely solely on the income from the branches and this strategy can be summarized as follows:

First, the investment in commercial properties that generate acceptable returns to shareholders and in this respect, the Society began to implement this new strategy. For instance, it participated in an auction organized by the Department of Justice in the Emirate of Abu Dhabi to acquire a commercial building in Al Samha for an amount of AED 5.5 million.

The Society has used the services of a valuation company to ensure of the appropriateness of the bid price, as well as to seek advice on the potential in renovation and enhancement of the income of this new acquisition.

Secondly, opening of new branches in any available area. The Society has attempted to seek leasing opportunities in all area such as Baniyas, Al Shamkha, Al Shawamikh, Al Ghabat, Al Reef Project, serviced apartment in Bawabat Sharq, etc. However, it had encountered many challenges, in particular, the high level of rent makes all these opportunities unviable.

Furthermore, Baniyas Co-operative Society has addressed the Urban Planning Council to award it a piece of land in Al Shamkha to provide services to residents in that area. However, we were surprised to receive a negative answer from the Urban Planning Council as they clarified that the piece of land was already awarded to the Abu Dhabi Co-operative Society and there were no lands destined to accommodate other Co-operative societies.

Furthermore, Baniyas Co-operative Society submitted a bid to lease a new property in Al Ghabat area in Baniyas with an area of 2,000 sqm and the Society is still awaiting a formal reply from the land lord.

Thirdly, the Society is currently studying the possibility of entering a new activity that consists of the acquiring the right to certain agencies or brands with the view of distributing their products in the area. We expect to start a new department to cater to this activity in the near future.

Fourth, the Society has begun the preparation with the view of implementing a new Loyalty Program to its members and customers to improve the relationship and loyalty between the Society and the customers by organizing attractive promotion activities.

The Board of Directors
Bani Yas Cooperative Society