Distinguished Shareholders,

It is with great pleasure that I welcome you to the historic city of Calabar for this year's Annual General Meeting of our Company, UAC OF NIGERIA PLC (UACN), and to present to you the Annual Report and Accounts for the financial year ended 31st December, 2006. As it is customary, I will like to briefly review the developments in the business environment during the year, which impacted on the business performance of the Company.

BUSINESS ENVIRONMENT
The business environment in 2006 was characterized by a mix of positive and negative factors. The positives included the continuation of a stable exchange rate regime and moderate inflationary environment, moderate domestic interest rates for the corporate sector and slight improvement in consumer purchasing power; albeit most went into consumption of telecom services. The decision of the government to hold constant the price of fuel helped to ensure the stability of its cost, but, on the other hand, the lack of improvement in the electricity supply situation continued unabated. This worsened towards the end of the year with acute scarcity of refined petroleum products resulting in higher production costs and lower consumer purchasing power.

The continued high prices in the international oil markets meant that Nigeria and other oil exporting nations continued to reap windfall incomes. Unfortunately, due to the upsurge in militancy in the Niger-Delta, which reduced production reportedly by as much as 25%, Nigeria was unable to take full advantage of the windfall. The open discord between the President and Vice-President raised the perceived risk attached to the 2007 political transition programme and became a cause for concern both domestically and internationally. The other significant concern apart from the political environment is the risk of policy reversal and, therefore, the need for sustainability and institutionalization of the economic reforms recorded since the return to civil rule in 1999 and, particularly, from 2003. Institutionalizing these reforms, in our view, through appropriate legislation and regulatory systems, would guarantee the continuation of the improving business and economic environment beyond the 2007 transition.

In general terms, while consumer spending rose, the increased spending was insufficient to allow significant volume growth in the manufacturing sector, especially as energy and infrastructural costs remained high. The avian influenza (“bird flu”) outbreak in the world and in many parts of Nigeria in 2006 affected the performance of the agroallied and foods sector as the demand for poultry feeds declined drastically. Consumer concerns about the safety of chicken-based products also affected the performance of the quick-service restaurant business. This, of course, reflected in the performance of some of our businesses. Though “bird flu” concerns have not been completely extinguished, its effects have, however been ameliorated by the continuous enlightenment programmes embarked upon by operators of fast food restaurants with UAC of Nigeria Plc taking a visible lead, and the activities of the government to allay the fears of the citizenry on the consumption of chicken.

PERFORMANCE OF THE GROUP
Overall, the UACN Group achieved a turnover of N28.4 billion and profit before tax of N3.893 billion. The 43% growth in profit before tax was accentuated by profit from disposal of fixed assets of N1.17 billion. Profit after taxation, minority interest and extraordinary items stood at N3.2 billion, an increase of 97% or N1.6billion over 2005 performance. As you will notice in the report, we have taken steps to reflect on the Balance Sheet the dimunition/impairment in the values of certain assets in consideration of their nature, intended use, technology and business discontinuity. It is instructive to add that as part of our corporate strategy, our portfolio is being reviewed to align our investments with future favourable trend. Thus, we liquidated our holding in Tractor & Equipment Nigeria Limited as a step aimed at redirecting our resources and strengthening our business for the long haul.

FOODS BUSINESS RESTRUCTURING
In the course of the year, the Foods businesses of the Company were restructured to position them for the challenges in the market place. The business structure prior to the exercise accommodated rather unrelated business units, thereby affecting their operational and strategic coherence and sub-optimizing efficiency. To this end, the ice cream section of the uac Foods evolved into a new stand alone business unit named uac dairies. uac dairies, apart from continuing with the production and marketing of ice cream, will also venture into other aspects of the dairy market for growth. The former MR BIGG'S Division evolved into uac restaurants, which now runs the food courts in addition to MR BIGG'S restaurants. The Central Kitchen Units of the former MR BIGG'S Division was, however, excised and merged with the rump of uac Foods for synergy and to capture new opportunities. Another Division named uac franchising has also been established. This Division manages franchise relationship of licensed international brands of Innscor Foods, Zimbabwe and Nandos , South Africa alongside the franchise operations of Mr Bigg's. The uac Group seeks to increase and leverage the corporate brand across all businesses as this new strategic thrust evolves.

FUTURE OUTLOOK
We are confident that we are on the right path in terms of our new strategic posture and business focus of the Group. As things now stand, UAC is well-positioned to enhance sustainable growth and improve shareholder return. The company will place strong emphasis on strategy execution in order to efficiently and effectively realize the expected gains. Our projections indicate positive growth in all areas and we are committed to achieving them. Looking ahead, we see good opportunity for continued strong profitable growth.

CLOSING
In closing, I would like to express my gratitude to all our esteemed shareholders for your support and to my colleagues on the Board for their co-operation. I also thank all members of the Management and Staff of the Company for their diligence and resourcefulness. Thank you all.

Lt. Gen. M.I. Wushishi (rtd), GCON, CFR, FSS, PSC
Chairman