edrington celebrating 150 years annual report...edrington celebrating 150 years the edrington group...

EDRINGTONCELEBRATING150 YEARS

The Edrington GroupAnnual Report & Financial StatementsFor the year ended 31st March 2011

Company Registration No: SC36374

1Celebrating 150 Years

This annual report departs from the usual format to celebrate one hundred and fifty years of theorganisation known today as The Edrington Group.

William A. Robertson embarked on a number ofbusiness ventures in Glasgow in the mid-nineteenthcentury but it was his partnership with John W. Baxterin 1861 that created Robertson & Baxter Limited.

One hundred and fifty years later we trace the brandsand partnerships that followed as a consequence ofWilliam Robertson’s enterprise, navigating through the important milestones of the foundation of The Robertson Trust, which celebrates its half centenarythis year, the formalisation of the Edrington group of companies in 1961, through to the five key brandsthat characterise the present day Edrington.

Contents

Introduction 01150 Years of History 02Values Secured Since 1961 14Innovation for Future Growth 20Edrington Today: Locations 24Edrington Today: Brands in Action 26Financial Highlights 32Chairman’s Statement 33

Chief Executive’s Review 34Financial Review 36Directors’ Report 39Corporate Social Responsibilitiy 44The Robertson Trust 46The Brugal Foundation 49Directors & Advisers 50Independent Auditors’ Report 52

Group Profit & Loss Account 53Balance Sheets 54Group Cash Flow Statement 55Other Statements 56Accounting Policies 57Notes on Financial Statements 61

2 Celebrating 150 Years

150 YEARS OF HISTORY

1861William A. Robertson founded Robertson &Baxter Limited, securing the agencies for severalwines and liquors. A prodigiously shrewd andambitious Fifer, he was noted as a philanthropiccharacter, giving away considerable money tocharities – a philosophy that remains a strongfeature of the current Edrington Group.

1879Clyde Bonding Company Limited, founded in 1879, is among Scotland’s largest specialistbottling and maturation companies. Thecompany received its warehousing certificate in July 1897.

1887William A. Robertson is the firstchairman of the newly formedHighland Distilleries Company Ltd.

Highland Distilleries


1888Don Andres Brugal Montaner - the founder of Brugal & Co., S.A.

1890-2001106 West Nile Street, Glasgow, the headquartersof Robertson & Baxter and Highland Distillersfor over 110 years. The Group moved to newheadquarters in Great Western Road where theyremain today.



1890’s-1970’sThe Famous Grouse advertising

through the decades.

c. 1900Macallan workers on the Easter Elchies estate.


1923Francis Berry and Hugh Rudd, the partners ofthe prestigious wine and spirit merchants BerryBros & Rudd create Cutty Sark Scots Whisky. The long association with the Group began in1936 and culminated in the Group purchase of Cutty Sark in 2010.

1937Highland Park distillery becomes part of theHighland Distilleries’ portfolio.



1961The Robertson sisters, (Miss Agnes, Miss Ethel -known by her childhood nickname “Babs” - andMiss Elspeth) secured the ongoing independenceof the Group in 1961. Their various businessinterests, inherited from their grandfatherWilliam A. Robertson, were to be brought underone holding company, known as Edrington. They stipulated that the dividends fromEdrington should pass to a new charitable trust to be known as The Robertson Trust.

1970Bordeaux House in Perth, the original home of Matthew Gloag & Son. In 1970 HighlandDistilleries acquires the business and with it The Famous Grouse.


1979At the time of its acquisition by HighlandDistilleries, Highland Park was used mainly forblending. The increasing interest in single maltsprompted the proprietary bottling of a 12 year oldsingle malt widely acknowledged as “the best all-rounder” in the world of malt whisky.

1985A newly refurbished Easter Elchies House is opened at The Macallan.


1999Highland Distillers enters a sales distributionjoint venture with Remy Cointreau and JimBeam, becoming a four-way entity when Vin & Sprit (Absolut vodka) joins in 2001.William Grant & Sons takes a minority stake inThe 1887 Company, set up by Edrington topurchase Highland Distillers.


1996Highland Distilleries and Suntory form ashareholders’ agreement to acquire TheMacallan. Suntory had already established a strong relationship with the brand as thebrand’s distributor in Japan since 1991.

1990A joint venture between Intermarchéand Edrington, Row & Co. Ltd, isestablished to exploit the opportunityfor own name brands in France.


2005Highland Park 18 year old single malt named “best spirit in the world”.

2003Edrington opens offices in Shanghai and launchesThe Macallan in Asia.



2008The addition of Brugal, a fast-growing premiumgolden rum, allows the Group to diversify into anew and exciting category. The culture and valuesof the Brugal family make them an ideal partner.


2009The Edrington Group and Beam GlobalWines & Spirits set up a new sales anddistribution alliance in 24 keyinternational markets.

2009The Group takes direct control of six internationaldistribution companies in Norway, Sweden,Denmark, Finland, Taiwan and South Korea. Thesix are joined by China and Hong Kong in 2011.



2010Cutty Sark becomes a wholly-owned keybrand in The Edrington Group, completing a partnership that dates back to 1936.

2010The Famous Grouse celebrates 30 years as Scotland’s favourite whisky.


2011The Edrington Group celebrates 150 years ofhistory with a record breaking set of results.

VALUES

“I feel immensely proud to be part of Edrington’scontinuing legacy. Today the business is both dynamicand international and yet the values secured in 1961remain alive and well.”

Ian Curle, Chief ExecutiveThe Edrington Group


VALUES

The guiding principles of The EdringtonGroup can be summed up asIndependence, Integrity, Innovation andInvolvement. It will be clear from a glanceat the history of the company that thesevalues have deep roots, and are asrelevant today as they ever were.

Edrington Holdings Ltd. was established in May 1961, at the same time as TheRobertson Trust. The reason? To securethe independence and continuity of thecompanies in which the three Robertsonsisters, Agnes, Ethel and Elspeth, had aninterest (i.e. Robertson & Baxter, Highland

Distilleries and Clyde Bonding Company)and to protect their employees againsthostile takeover.

In 1947 and again in 1955 The SeagramCompany of Canada had made predatoryovertures – the latter only being fought offwhen the mighty Distillers CompanyLimited, a key customer of Highland,announced that they would contest the bid.

Measures were immediately put in place tomake it more difficult for a hostile bidder toacquire the companies, but the sisters, whoowned the majority of the shares, remainednervous, and their concern was

compounded by the fact that they were nolonger young: in 1960 they were aged 64, 63and 57, and at that time death duties werecharged at 80% of the estate. When theydied, the companies would have to be sold.

They sought the advice of the leading taxbarrister of the day, and he recommendedthe dual vehicles of a holding companyand a charitable trust. The sisters’ capital inthe family companies would be transferredto the holding company, named Edringtonafter one of their farms in Berwickshire, andthe shares received in exchange would begifted to the charitable trust.


That decision set in train a half-century of independent thinking. Galvanised byfending off a major predator, Edrington seta future course for growth. It did so in theunderstanding that it would need to adaptfrequently in a rapidly changing industry.

In the new millennium that philosophy hasturned into action with successfulpartnerships in international distribution,the establishment of eight directlycontrolled sales companies, and the firstexpansion of the company outside Scotch

whisky through the incorporation ofBrugal, the number one rum in theCaribbean.

Independent thinking has become not just a cornerstone of the Edrington valuesbut an active mantra for today’s teamswho are encouraged to embrace theunconventional.

Independence


VALUES

The Robertson sisters’ integrity wasunimpeachable, and they learned it fromtheir father and grandfather, whose centralroles within the Scotch whisky industry as a whole demanded that they take a broader and longer view than mere self-interest.

‘The Long View’ became the companies’watch-word, and remains so to this day.Decisions on brand investment continue to be taken from that perspective. Thebrand teams are staffed with individualswho understand this and who realise that they are curators of the Group’s long term assets.

Later this year the Group will introduce a Code of Conduct which will define andenshrine the Group’s integrity. While thiswill be founded on the Robertson sisters’vision, it will go further than they couldhave imagined and will embrace frontiersof the business that are more distant thanin their time.

Integrity

Innovation

The 1961 construct of The Robertson Trustowning Edrington was a business model of great ingenuity, and the Group hassubsequently responded pro-actively to develop it.

Realising that future development wouldrequire a strong route to market in moreinternational territories, the Group embracedthe unique Maxxium distribution model, a collaboration with two (and subsequently a third) independent spirits companies.

And this more powerful distributionnetwork has been serviced by manyimaginative consumer activities:-

The visitor centre at Highland Park(installed in 1986, and awarded 5 Stars byVisitScotland in 2000) was expanded andre-designed in 2008; that at The Macallan(which opened in 2001) now includes theremarkable ‘Masters of Wood’ experience,a unique and superbly designedintroduction to the importance of wood inthe make-up of the whisky. Most recently,a new ‘Taste Experience’ was added to thePavilion in The Famous GrouseExperience within Glenturret Distillery –itself a leading Scottish visitor attraction‘for all the family’.

In relation to brand development, The Snow

Grouse was the first whisky designed to beserved direct from the freezer, while TheMacallan ‘Fine & Rare’ range was the first to offer connoisseurs and collectors arange of 37 malts, dating from 1926. TheMacallan’s limited edition, extra agedwhiskies, presented in custom madedecanters by Lalique are highly soughtafter, while the brand’s ‘Masters ofPhotography’ promotion, featuringlegendary contemporary photographers –so far, Rankin and Albert Watson – speciallycommissioned with an entirely open brief isunprecedented and has generated hugeinterest in stylish, non-drinks publications.


The Robertson sisters treated theiremployees as members of the family.There are numerous stories about theirconcern and consideration: Miss Babsonce said to Sir Ian Good: “People spendmore of their lives here in the office thananywhere else, so if they are unhappy here,their lives become miserable”. Not only did she know everyone by name, sheencouraged any member of staff to bringtheir problems directly to her: “whensomeone in the family is in trouble, thefamily rallies round”.

Today, this attitude is manifested in a widevariety of ways. Here are some examples:

> The Group is about to introduce aninternational version of its Giving isRewarding scheme, allowing company

employees overseas the opportunity to have local charitable donationsfunded by the Group

> The Edrington Achievement Award –an international programme designedto recognise individuals or teams who have contributed significantly to the business

> The Sharesave Scheme to helpemployees purchase shares atfavourable rates and take a personalstake in the organisation

> The TEG Times – A quarterly magazine that keeps staff up to datewith all the people news in this 2,300strong organisation

> Social committees on every site.

Beyond looking after the employees ofEdrington, the Robertson sisters sought,through their Trust, to ‘continue andextend’ their involvement in the communityat large. To this end the trustees weregranted very broad powers to support any‘charitable purposes as they mightdetermine, in their sole discretion’.

Over the five decades of the Trust’sexistence, its priorities have remained faithfulto the sisters’ remit – in the decade to 2010,the key areas of involvement might besummarised as: care for the elderly, youngpeople and families, healthcare, educationand training, community arts and sports.

During the 1960s, the Trust dispersed alittle over £100,000: in the past year alonecharitable giving reached £11.4m.

Involvement


INNOVATION


Chris Armstrong, Brand Heritage Assistant in theaward winning Famous Grouse Experience VisitorCentre in Crieff, Perthshire.


INNOVATION

Highland Park’s continued premiumquality is further enhanced with theoutstanding 50 year old and limitededition expressions like the Saint Magnus,released in 2010.

Drinks Innovation: Andy Gemmell,Maxxium’s Mixologist creates a number of new drinks with our key brands.


Overton warehouses at The Macallan.

The Edrington Group are becoming renownedfor their informative visitor centres includingthe award winning Famous Grouse Experienceand the recently opened Macallan VisitorCentre above.

EDRINGTON TODAY

The Dominican Republic

Home of Brugal with annualcase sales of over threemillion; over 80% marketshare.

Scotland

The Dominican Republic

Glasgow

North BritishDistillery

San Pedro de Macoris

Clyde Cooperage

Maxxium UK (JV)

PerthThe Famous Grouse Experience

The Glenrothes DistilleryTamdhu Distillery The Macallan

Distillery

Highland Park Distillery

Edrington USA

Puerto Plata

Santo Domingo


2,300 EMPLOYEES WORLDWIDE, 60% OF THEM BASEDINTERNATIONALLY.

Scotland

The home of Scotch whisky and in particular, The Famous Grouse, The Macallan, Highland Park and Cutty Sark.

Maxxium Korea

Edrington ShanghaiMaxxium China

Maxxium TaiwanMaxxium Hong Kong

Maxxium Espana (JV)

Maxxium Netherlands (JV)Maxxium Russia (JV)Maxxium Denmark

Maxxium Sweden

Maxxium Norway Maxxium Finland



EDRINGTON TODAYBRANDS IN ACTION

Clockwise from top left:

Gordon Motion, Master Distiller, at the launch ofThe Snow Grouse in The Netherlands.

Gordon Banks MP (2nd from right) opens the newFamous Grouse Tasting Experience.

The reveal of one of six hand decorated grouse inAthens to celebrate the 30th anniversary of brandleadership in Scotland.


Clockwise from top:

Preparing Macallan cocktails in the fast-growing Taiwanese market.

The launch of Cire Perdue in association with Lalique in Taipei.

The new stillhouse in Speyside.



Above:Promoting classic cocktails in London.

Right:Gerry Tosh (Head of Brand Education) and jewellery designer, Maeve Gillies, at the launch of Highland Park 50 Years old.


Top & left: The Cutty Sark “city raid” in Lisbon.

Above:Sampling in New York.



Left & below:Creating a fun atmosphere at the Festival deMerengue at Santo Domingo.

Right: Ensuring the brand soars in the populartourism area of Punta Cana.


FINANCIAL HIGHLIGHTS*

08

DIVIDEND PER SHARE

+16.1% 09 10 11

27.0p

18.6p

23.25p

17.5p

08

PROFIT BEFORE TAX

+19.3% 09 10 11

£141.5m

£94.8m

£118.6m

£72.6m

08

SHAREHOLDERS’ EARNINGS

+20.1% 09 10 11

£65.0m

£41.4m

£54.1m

£36.8m

08

GROUP TURNOVER

+18.2% 09 10 11

£553.4m

£419.9m

£468.3m

£291.5m

*Year ending 31st March


The forecasters predicted a challengingeconomic climate in 2010-11 and theirassumptions proved correct. Manyeconomies found themselves underpressure and Southern Europe in particularexperienced especially difficult conditions.In spite of these challenges both Scotchwhisky and golden rum deliveredencouraging performances.

Scotch whisky in particular continued its impressive global performance byincreasing the value of its exports by 10%in 2010. Exports are now at a record highand have grown by 60% since the newmillennium. This is in part due to the widegeographical spread of the business – over200 countries now import Scotch – andalso the aspirational qualities of Scotchwhisky in developing markets such as Asia.

In the UK the market for Scotch continuesto be extremely competitive. The mostimportant constituent in the price paid bythe consumer is duty and VAT which nowaccount for 54% of the average price of a bottle of The Famous Grouse. For manyyears the industry has petitioned that theduty taxation burden in the UK is unfairand discriminates in favour of importedcategories of alcoholic drink. Optimismlevels rose when a new coalitiongovernment was elected in May 2010 with a mandate for change. However it is disappointing to record that despiteScotch whisky’s £3.45 billion contributionto the UK economy in 2010, the coalitiongovernment has so far chosen not toimplement a fair tax system. It is difficult to understand in these difficult economictimes why the UK government fails tograsp the estimated increase in revenue of £1.1 billion which would flow to theTreasury from a fair alcohol duty regime.

CHAIRMAN’S STATEMENT

Quite correctly there continues to be muchdebate on alcohol’s role in society. Despitea reduction in consumption in the UK every year since 2004, irresponsibleconsumption remains at unacceptablelevels. There are many views on how totackle this issue but the ‘easy fix’ promotedby advocates of minimum pricing ignoresthe many issues which cause irresponsibleconsumption.

Improving this situation is most likely to be achieved through a wide range of measures. One such initiative that the Group was pleased to support is the Public Health Responsibility Deal. The Deal announced by the Secretary of State for Health comprises a widerange of initiatives to help people achieve a healthier diet, increase their levels of physical activity, drink sensibly andunderstand the health risks of theirlifestyle choices. For the first time thesekey strands of public health have beenpulled together with the aim of makingfaster improvements to the nation’shealth. Edrington signed up as a fullpartner to the deal and made a series of detailed pledges that will build on its existing contributions to education and alcohol.

This year the Group celebrates both astrong set of results and two importantanniversaries. One hundred and fifty years ago William A. Robertson formed a partnership with John Baxter that set intrain the company we know today as TheEdrington Group. A century later, his directdescendants, Ethel, Agnes and ElspethRobertson, made a landmark decision tosecure the independence of the Group by placing the business in the hands of a charitable trust.

Since 1961 The Robertson Trust hassupported good causes in Scotland withdirect contributions rising in the last year to over £11 million. I knew the Robertsonsisters and I am certain they would bethrilled at the health of the Trust and theinternational dynamism of The EdringtonGroup. In April 2011 the distributioncompanies in China and Hong Kong wereincorporated into the Group bringing thenumber of employees to over 2,300 with60% of those based internationally. I wouldlike to take this opportunity to thank allemployees for their continued support and their significant contribution to thisyear’s results.

With the continued investments in ourbrands and the broad geographic andcategory spread of our business, weremain confident about the long termprospects for the Group.

Sir Ian GoodChairman

8th June, 2011


The Group continues to makegood progress and we have further improved Edrington’sstrategic position and businessperformance during 2010/11.

The strategic position of the Group was enhanced with the acquisition of the Cutty Sark brand and by taking ownershipof the Maxxium distribution companies in China and Hong Kong.

Our strong financial performance wassupported by brand growth, increasedearnings and improved cash flow.

Shareholders’ earnings (pre-exceptionals) have grown by 20% in thecurrent year. Over the last three years thetotal growth in shareholders’ earnings amounts to 76%. This is prior toexceptional earnings, which furtherenhance this figure.

Brand growth has been driven byincreased investment and improvedeconomic conditions in many of ourmarkets. We have continued to investbehind our premium brands despite the difficult trading conditions in maturemarkets in recent years. This investmentis now paying off as we see stabilityreturning to many western markets. In the current year we have experiencedgrowth in the USA and UK, however, this has been offset by declines in Greece and Spain.

In Asia our business has continued togrow steadily and we are experiencingpositive developments in Russia and a number of emerging territories.

During the year we made significantinvestments in our operational assets in both Scotland and the DominicanRepublic. We also continued to lay down substantial whisky and rum stocks to enable the long term growth of our brands.

Strategy

Our strategy is focused on the long termdevelopment of Edrington and it can besummarised as follows:

> Invest in our premium spirits portfolio:

Our premium spirits portfolio comprisesThe Macallan, The Famous Grouse,Brugal, Cutty Sark and Highland Park.Investment is targeted on brand equitygrowth and is focused in the marketswhere we anticipate the greatestopportunity for long term growth. Brand initiatives are focused strongly on the consumer and sustained with programmes that innovate within our categories.

> Invest and develop our Route to Market:

We operate a number of Route to Marketmodels, depending on the best fit for our brands in each marketplace. Inrecent years, we have increased thenumber of markets where we have full ownership, however, joint venturesand third party arrangements still play an important part of our Route to Market model.

> Invest in our people and align ourresources to support our brand growth:

With the addition of Hong Kong andChina we now employ over 2,300 peopleworldwide. This has increased the talentavailable to Edrington and provides us with an opportunity for future growth.A consequence of the internationaldevelopment of the Group is that our operating model has become more decentralised leading to more of our key decision makers beinglocated in our key markets.

CHIEF EXECUTIVE’S REVIEW


Brands

The Famous Grouse brand grew by 4% during the year with the premiumexpressions contributing 8% growth. The Black Grouse continued to spearheadthe brand’s premium development withsales growth of 21%.

The overall strong performance was drivenby brand share growth in the UK andresilient performances in the USA andmajor European markets. Although at an early stage of development, the brandcontinues to make progress in emergingmarkets, with Russia a notable highlight.

The Macallan continues its impressiveperformance on all fronts. Our leadingluxury malt whisky brand grew by 14%,selling over 700,000 cases. This growthhas been achieved at premium prices aswe continue to invest behind the brand.Asian markets represent over 50% ofbrand sales and our rate of growth in the USA market has increased as theeconomy improves. The brand has beensupported with the launch of premiumexpressions, including the third Laliquecrystal decanter and the Masters ofPhotography Edition featuring the worldrenowned photographer Albert Watson.

The Brugal brand consolidated its positionas the number one rum in Spain during theyear and increased its availability in otherinternational markets. Sales also grew inthe Dominican Republic with an increase inpopularity of the Brugal Blanco expression.

The premium position of the brand wasenhanced by the repackaging of the entire range for domestic and internationalmarkets. A new communication platform is being launched as we increase theinvestment behind the brand and drive

for growth in the USA and otherinternational markets.

The acquisition of Cutty Sark added a further one million case brand to ourpremium spirits portfolio and strengthenedour distribution presence in southernEurope and the USA.

The acquisition was earnings positive inthe first year allowing further investmentbehind the brand this year as we revealnew packaging and introduce the brand to new markets.

The Highland Park brand grew itscontribution by 9% as we continue toinvest behind the brand. The renownedquality of this whisky is matched by therange of awards it receives. We remaincommitted to growing the premium rangeof the brand which was enhanced by thelaunch of the 50 year old this year.

Route to Market

The strategic position of the Group hasimproved with further investment in Routeto Market. On 1st April, 2011 we tookownership of the Maxxium distributioncompanies in China and Hong Kong. Asia has been an area of significant growth for Edrington over the last numberof years and we now own distributioncompanies in Taiwan, China, Hong Kongand South Korea. The business operatesfrom a regional office in Shanghai and we now employ over 280 people in Asia.

This decentralised approach has beenextended to the Nordics where we nowmanage Sweden, Norway, Finland,Denmark, Germany, Switzerland andAustria from our Stockholm office. The

Nordic markets are of particular importanceto The Famous Grouse and Highland Parkand they represent 14% and 13% of brandcontribution respectively.

The Group is currently in the process ofopening a regional office in New York tosupport brand growth in America. Theprimary focus is the North Americanpremium spirits market where our brandshave significant potential and the marketcontinues to grow. The team will alsooversee South America and identifyopportunities for the development of our brands as this region continues to enjoy economic growth.

Edrington’s regional offices now includeShanghai, New York, Madrid, Stockholmand Santo Domingo.

People

The ongoing success and growth of theGroup is due to the talent and endeavourof our employees. As Edrington has grownin recent years we have benefited from theskills and cultural diversity of our neweremployees. We will seek to develop theseskills and harness the potential of allemployees as we continue to grow the business. I would like to take thisopportunity to thank all our employees fortheir ongoing commitment and dedication.

Ian CurleChief Executive

8th June, 2011


Results for the Year

The Group reported shareholders’ earnings,before exceptionals of £65.0m compared to£54.1m in 2010, an increase of 20.1%. Theresults were driven by strong brandperformance, overhead savings within the Group, and a prevailing beneficialcurrency rate.

The effective tax rate, before exceptionals,for the Group rose to 27.1% from 25.2% as certain tax benefits realised in 2010 did not recur.

Shareholders’ earnings reflected netexceptional income, before taxes anddeduction of minority interests, of £13.2m(2010: £6.4m) primarily driven by the£14.6m gain on the disposal of TheGlenrothes Single Malt brand and otherassets related to the acquisition of theCutty Sark brand.

A final dividend for the year of 20.0p (2010:Nil) has been proposed which makes atotal for the year of 27.0p (2010: 23.25p),an increase of 16.1%.

Financial Performance

The Group’s portfolio of premium spiritsbrands performed well despite challengingeconomic conditions, particularly inEurope and the Group continues to benefit from lower sterling exchange ratesas an exporter, resulting in higher profits.

The improvement in profit on the prior year was led by the continued growth of The Macallan as a result of commercialsuccess in Asia, USA and Europe. TheGroup also realised the incrementalcontribution generated by Cutty Sarkfollowing its acquisition in April 2010. The

Famous Grouse and Highland Park brandsdelivered satisfactory increases on prioryear profitability given the difficult tradingconditions in established markets. Brugalhad a strong year in its domestic market,the Dominican Republic, but foundearnings growth harder to achieve in theSpanish market where the economicclimate remains challenging.

The Group has continued to invest in brandinnovation and operational improvement inthe year to maintain growth and driveimprovements in profitability.

The overall performance of the wholly-owned and joint venture distributionbusinesses has improved, contributingearnings over £1.9m up on last year. The Group continues to increase itsinterest in the Maxxium distribution entities,acquiring 100% ownership of MaxxiumShanghai Limited and Maxxium HongKong Limited from Beam Global on 1st April, 2011. The effects of this latesttransaction will be reflected in next year’s financial statements.

Overhead savings of more than £2.7mwere realised primarily reflectingimprovements in pension fundperformance in the year and the fact that personnel costs associated with the restructuring of Tamdhu in 2010 did not recur.

Financing

Last year, the Group results reflected thecombination of low interest rates prevailingin the market at that time, and the moremodest bank margins which had been inexistence at the previous renewal of itsborrowing facilities. In June 2010, The

1887 Company successfully refinanced its debt facilities, expanding its bankinggroup, but at significantly increased bankmargins. Total interest expense in the yearwas £33.2m, £7.8m up on the previousyear. Subsequently, the Group hassucceeded in refinancing part of this 1887 debt via a longer term US privateplacement, which was completed in April2011. This new arrangement reducesinterest costs, and ensures the availabilityof a significant tranche of finance for themedium term, in keeping with the Group’smaturing stocks profile.

Brand Values

In April 2010, the Group completed itsacquisition of the Cutty Sark brand whichhas resulted in an addition to intangibleassets in the balance sheet of £32.7m.This new brand asset is being amortisedover 10 years in line with the directors’expectation of its useful economic life. The Group regularly reviews the value of its brands and continues to be satisfiedthat brand value is substantially in excessof the book value recorded in the balancesheet. Details of the assumptions used in assessing brand value are disclosed in Note 10 to the financial statements.

Tangible Fixed Assets

The Group invested a further £14.8m in its production facilities around the world to enhance quality, improve operationalefficiency and increase mature stockwarehousing capacity.

The installation of a new bulk whiskyhandling facility for whisky blending

FINANCIAL REVIEW


and marrying at its Glasgow site (a totalinvestment of some £8m) is well under wayand expected to be completed later thisyear. The investment will also provide theGroup with more warehousing space formaturing whisky as it seeks to increaseproduction to meet forecast demand.

At the Group’s distilleries, higherproduction levels are driving increasedinvestment in casks, a key factor in thequality of our premium whiskies and rum.

In the Dominican Republic, work is nowalmost complete on the modernisation ofbottling facilities at Puerto Plata, resultingin an improved working environment forour employees.

Investments

The Group’s investment profile wasbroadly unchanged as it looked tointegrate recent acquisitions into the business.

Stocks

Investment in whisky and rum stocks,together with the related carrying costs,continues to grow as we produce forexpected growth in long term demand. The Group has to ensure that investment in future growth is balanced withappropriate financing facilities due to the long maturity cycle of its products.

Cash Flow and Borrowings

The Group generated a net cash inflow of£53.4m (2010: £19.6m) as a result ofimproved trading performance in the year,

and reduced net debt to £516.0m from£570.1m in 2010. The cash performance of the Group is encouraging given abackground of continued investment inwhisky stocks, capital expenditure and the servicing of debt.

Hedging and Risk Management

The Group undertakes hedging oncurrency and interest rates with the aim of reducing volatility in future cash flowsand enabling more accurate businessplanning.

Because the Group earns income in avariety of foreign currencies, it undertakesspot and forward currency transactions to fix the rates at which these foreigncurrencies are converted into sterling from

time to time. Hedging is undertaken undera policy agreed by the board over a two year rolling forward period. The Group also uses hedging instruments to reducevolatility in the accounting translation ofearnings from subsidiaries reporting under foreign functional currencies, such as Brugal.

The hedging policy on interest ratesextends over a five year period andinvolves swapping variable interest ratesfor fixed rate commitments under a policyalso agreed by the board.

The Group continues to monitor itsexposure to financing risk on an ongoingbasis and has developed a robust riskmanagement framework in conjunctionwith the Risk Management Committee. A summary of key risks and our processes


to manage them is included in theDirectors’ Report.

Group Pension Schemes

The Group’s reported defined benefitpension liability, net of deferred tax, hasfallen to £33.5m (2010: £39.6m) reflectingthe impact of increased lump sumcontributions in 2011, and stronginvestment performance. The Group iscommitted to the long term reduction of the pension deficit and has recentlyagreed a funding plan with the schemes’Trustees to ensure sufficient funding ismade available on a long term basis tomeet our pension liabilities as they arise.

Capital Management

The Group has 66 million called-up,allotted and fully paid shares with anominal value of £6.6m split between two classes of equity share, and iscontrolled by The Robertson Trust, a charitable organisation.

The capital structure of the Group is stableand has remained constant for a numberof years. When the Group needs to raisefunds, for example to make an acquisitionor refinance existing debt, it generally does this through borrowings which it thenrepays with cash from trading. Furtherdetails of the Group’s debt structure areexplained in Note 17.

Approximately three million shares are held by the Employee Benefit Trust, a consolidated entity which acts as amarket for shares in The Edrington Group. The Group operates the ShareSave andShareReward Schemes for the benefit of

employees and uses the Employee BenefitTrust to administer these arrangements.

The Group makes regular dividendpayments on equity shares based on its view of the current and future cashrequirements of the Group, and of itsprofits for the year. Dividend policy and any changes to the structure of equityshare capital are approved by the board of directors.

Richard HunterGroup Finance Director

8th June, 2011

FINANCIAL REVIEW(CONTINUED)


The directors present the auditedfinancial statements for the yearended 31st March, 2011.

Results for the year

The Group’s financial results, which aredetailed in the profit and loss account onpage 53, cover the year to 31st March, 2011.

An interim dividend of 7.0p (2010: 6.0p)per share was paid on 10th November,2010. The directors agreed a final dividendof 20.0p per share which will be paid on8th July, 2011, making a total of 27.0p pershare (2010: 23.25p per share).

The aggregate dividends recognised in theyear amounted to £4.4m (2010: £23.3m)excluding proposed dividends that were not approved by the balance sheet date.

The profit after taxation for the yearattributable to Edrington shareholders was £72.7m (2010: £58.1m).

Principal Activities

The Group owns some of the leadingpremium Scotch whisky and golden rumbrands in the world, including The FamousGrouse, The Macallan, Highland Park,Brugal and Cutty Sark.

It directly controls its route to market in eightcountries, and operates the remainderthrough joint venture and third partyagreements.

The Group produces its brands at a numberof specialist operations covering every facetof distilling, blending and bottling.

The company’s principal subsidiaries at31st March, 2011 are listed in Note 12.

Review of the Business

A review of the year’s trading, together withthe directors’ view of future prospects, is

included in the Chairman’s Statement, theChief Executive’s Review and the FinancialReview on pages 33 to 38.

The key performance indicators of theGroup against which its success ismeasured are growth in shareholders’earnings, brand performance and netdebt, which are further detailed in theFinancial Review.

Charitable and Political Contributions

The Group does not in general makecharitable donations as its principalshareholder is itself a charitableorganisation. No political contributionswere made during the year.

Corporate Governance

As a private business, the Group is not obliged to follow the UK CorporateGovernance Code. It is however committedto high standards of both governance andcorporate citizenship, and recognises thesignificant benefits that can accrue from sodoing. The Group therefore aims to adoptthose elements of governance that areappropriate and add value to theorganisation and for its stakeholders.Having reviewed the code in detail,together with the associated guidance, the directors consider that the Group hastaken the steps appropriate to its particularcircumstances as outlined below.

The Edrington Group’s core values (the 4 “I”s) are Integrity, Independence,Innovation and Involvement, and the Group is committed to demonstratingthese values in all of its operations and interactions.

DIRECTORS’ REPORT


The board, which has a schedule ofmatters specifically reserved to it, meets at least five times a year to ensure that itmaintains full and effective control overfinancial, operational and complianceissues. The board sets and reviews thestrategic aims of the Group and ensuresthat resources are in place to meet thoseobjectives. The composition of the board –size, mix of skills and experience andbalance of executive and non-executivedirectors – is considered to beappropriate. All non-executive directors are considered to be independent.

The Remuneration & Nominationscommittee is chaired by Ronnie Bell.Together with the chairman, chief executiveand Group HR director, the committeedetermines directors’ remuneration withreference to an external triennialbenchmarking review prepared with theassistance of independent specialistconsultants. In addition, the committeereviews a number of reward initiatives forall Edrington wholly-owned businesses.Senior executive succession anddevelopment programmes also feature

on an annual basis. The most recentreview was carried out by Hewitt NewBridge Street in March 2011.

The Audit Committee is chaired by Callum Barton and together with the Group finance director meets periodicallywith the auditors to plan the audit, reviewthe statutory accounts and discuss issuesarising from the audit. It also considers the ongoing independence of the externalauditors and the effectiveness of the auditprocess. The conclusions of the committeeare reported to the board before the board approves the annual results. Thecommittee approves risk managementplans, thereafter receiving reports onmaterial matters arising and actions taken.

Risk Management

In common with most businesses, theGroup goes to considerable lengths toensure that the principal risks faced by the Group are identified, evaluated,managed and monitored appropriately.

At least once a year the board undertakesa formal review of the Group’s risk profile,assesses the application of the principalcontrols operated throughout the Group,and ensures that appropriate action istaken on risks so identified.

A Group Risk Management Committeemeets at least twice a year, under thechairmanship of the Group companysecretary with senior representatives from every discipline across the Group, to complete a process of evaluating andassessing risks and reviewing theadequacy of existing procedures tomanage and/or reduce risk.

The work of the Group Risk ManagementCommittee is very wide ranging, fromestablishing and testing policies to ensurethat the potential impact of major incidentsis minimised and can be quickly andefficiently recovered from, through tocompliance with the Group’s variouslegislative and regulatory obligations. The committee also conducts simulationsof incidents which could befall thebusiness, and then proactively applies the lessons learned from dealing withthose simulations. Steps were taken during the year to integrate the Group’snew international locations into thecommittee’s management process.

Corporate Social Responsibility continuesto be a major focus of attention with adedicated team monitoring developmentsand ensuring that the Group is taking all appropriate action. More details on the Group’s approach in this area are set out on pages 44 and 45.

The board retains overall responsibility for the Group’s system of internal control,including the financial controls designed to give reasonable assurance againstmaterial financial misstatement or loss. The board believes the financial controls inplace allow it to meet its responsibility forthe integrity and accuracy of the Group’saccounting records, and also to providetimely, accurate financial information of aquality appropriate to enable it todischarge its duties.

The principal operational risks areassociated with the performance of theGroup’s key brands in markets around theworld. Customer demand, particularly forluxury or premium products, is uncertain in the current economic climate and has significant impact on the Group’s

DIRECTORS’ REPORT(CONTINUED)


results. In particular, the Group has asignificant proportion of trade in certainMediterranean markets which have beenheavily impacted by the global credit crisis.

Reduced levels of customer demand may potentially lead to price discounting in the markets and intensify competition for market share, impacting volumes and the profitability of the Group.

Trading in overseas markets is impactedby prevailing currency rates and theGroup’s results, when restranslated intosterling, can be significantly affected byvariances in exchange rates. The Group is also subject to extensive regulatoryrequirements in certain markets which can significantly impact the cost of doing

business as well as the reputation of the Group and its brands.

The Group addresses its principaloperational risks by investing inexperienced, professional teams in each key market, who operate within an established internal control framework and who are supported by senioroperational and commercial managementat the Group level. Where necessary, the Group may use the services of local professional advisers to drive effective business performance and limit exposure to risk.

The Group’s undertakings expose it to a variety of financial risks includingchanges in interest rates, credit and

liquidity risks. Procedures are in placeaimed at limiting the adverse, andmaximising the positive, effects on theGroup’s financial performance throughmonitoring levels of debt finance and therelated finance costs. Policies are also in place that require appropriate creditchecks on potential customers and theestablishment and periodic review of credit limits, together with the insurance of selected credit balances.

As the Group makes sales, purchases and investments in a variety of foreigncurrencies, it is similarly exposed toexchange rate movements, and thereforehas a policy which specifies the profile oftrading exposures to be hedged, and thehedging instruments the Group may use.

The Group actively maintains a mixture oflong and short term debt finance designedto ensure it has sufficient funds availablefor the Group’s activities, and has a policyof stabilising interest costs at acceptablelevels through a mixture of borrowing overthose different time periods and fixinginterest rates on other portions of debtusing approved financial instruments.

A Group risk finance manager hasresponsibility for ensuring that the financialrisk profile across the Group is understoodand is well managed with appropriatecontrols in place. A Financial RiskManagement Framework operates intandem with the Group Risk ManagementCommittee and external auditors. Newcontrols over (i) tax accounting, (ii)recording, approval and processing ofemployee expenses and (iii) activities inwholly-owned and joint venture distributioncompanies have been tested and refined,and processes applied as an outcome ofthese reviews are now in place. During the


last year the implications of the UK BriberyAct have been addressed and an Anti-Corruption Policy has been approved andwill be introduced before 1st July, 2011with associated training, processes andmonitoring. The Group finance directorcontinues to act as the Group’s SeniorAccounting Officer.

The external auditors are engaged toexpress an opinion on the financialstatements. They independently reviewand assess the system of internal financialcontrol, referencing the work of the Grouprisk finance manager as appropriate, andreview and test the information containedin the financial statements to the extentnecessary for expressing that opinion.

Directors’ Responsibilities for theFinancial Statements

The directors are responsible for preparingthe Annual Report and the financialstatements in accordance with applicablelaw and regulations. Company law requires the directors to prepare financialstatements for each financial year. Underthat law the directors have elected toprepare the financial statements inaccordance with United KingdomGenerally Accepted Accounting Practice(United Kingdom Accounting standardsand applicable law). Under company law the directors must not approve thefinancial statements unless they aresatisfied that they give a true and fair viewof the state of affairs and profit or loss ofthe company and Group for that period. In preparing these financial statements, the directors are required to:

> select suitable accounting policies and then apply them consistently;

> make judgements and estimates that are reasonable and prudent;

> state whether UK accountingstandards have been followed, subject to any material departuresdisclosed and explained in thefinancial statements; and

> prepare the financial statements on a going concern basis unless it is inappropriate to presume that both the company and the Group will continue in business.

The directors are responsible for keepingadequate accounting records which aresufficient to show and explain the Group’stransactions and disclose with reasonableaccuracy at any time the financial position

of the company and the Group to enable them to ensure that the financialstatements comply with the CompaniesAct 2006. They are also responsible forsafeguarding the assets of the companyand the Group and hence for takingreasonable steps for the prevention anddetection of fraud and other irregularities.

Each of the persons who is a director at the date of approval of this reportconfirms that:

> so far as they are aware, there is norelevant audit information of which theGroup’s auditors are unaware; and

> the director has taken all the steps thatthey ought to have taken as director in order to make themselves aware of any relevant audit information and to establish that the Group’s auditorsare aware of that information.

This confirmation is given and should be interpreted in accordance with theprovisions of the Companies Act 2006.

The directors are responsible for themaintenance and integrity of the corporateand financial information included on thecompany’s website. Legislation in the UnitedKingdom governing the preparation anddissemination of financial statements maydiffer from legislation in other jurisdictions.

Going Concern

The current economic conditions cancreate uncertainty over the level of demandfor consumer products, exchange andinterest rate fluctuations, and the availabilityof bank finance in the foreseeable future.The directors believe however, that theGroup has a strong customer base and

DIRECTORS’ REPORT(CONTINUED)


holds enough stock (or has plans in placeto produce adequate stock) to ensurecontinued supply to these customers forthe foreseeable future. The Group, led bythe Treasury Committee, also has in placea financial risk management programmewhich minimises the adverse impact ofcurrency and interest rate exposure to theGroup. The Group’s forecast has beenreviewed, taking account of possibleadverse changes in trading performance,and it is anticipated that all necessarybanking covenants would still be met.

In June 2010, The 1887 Group secured its new banking facilities and in April 2011 completed a successful US privateplacement, all as detailed in Note 17 and in the Financial Review.

Based on these facts, the directorsconsider that the company and the Grouphave adequate resources to continue inoperational existence for the foreseeablefuture and that it is therefore appropriate to prepare the financial statements on agoing concern basis.

Employees

Our success, both as a Group and asindividuals, depends on the contributionsof all the people we work with. The Group’s selection, training, developmentand promotion policies ensure equalopportunities for all employees regardlessof factors such as gender, race, age,religion or belief, or disability. All decisions are based on merit.

Employee training and development isimportant to the Group and as such, theGroup will continue to give full support in this key area.

The Group has maintained its policy ofconsulting with or informing employees or their representatives from time to timeon matters of concern to them.

Employee Share Schemes

The Group operates two share schemesfor employees.

The ShareSave Scheme is an annualscheme enabling Group employees tosave for a three year period to buyEdrington ‘B’ Ordinary Shares at 80% ofthe market price. The scheme has beenapproved by HM Revenue and Customs.The Group charges the fair value of theoption at the date of grant to the profit and loss account over the vesting periodof the scheme.

The ShareReward Scheme allowsEdrington ‘B’ Ordinary Shares to beawarded annually to eligible employees of the Group. The employee’s entitlementto receive shares is dependent on thegrowth in the Group’s profit attributable toshareholders exceeding inflation by a pre-determined amount. The scheme has beenapproved by HM Revenue and Customs.The Group charges the annual fair value ofthis scheme to the profit and loss account,if the performance criteria have been met.

The ShareReward Scheme was triggeredin respect of the year to 31st March, 2011.

Executive Incentive Plans

The Group operates two incentive plans for senior executives.

An Annual Incentive Plan rewards (a)executive directors based on the Group’s

financial results and the executives’individual performance against strategicobjectives and (b) senior executives based on the Group’s performance andthe executives’ individual performanceagainst objectives.

The Annual Incentive Plan was triggered inrespect of the year to 31st March, 2011 andthe associated costs of this plan have beencharged to the profit and loss account.

The Long Term Incentive Plan rewardssenior executives based on the Group’sperformance over a three year period, byawarding Edrington ‘B’ Ordinary Shares.The Group charges any associated coststo the profit and loss account over theperiod of the plan. The performanceconditions, which are more demandingthan that for the Annual Incentive Plan,were met in respect of the three yearperiod to 31st March, 2011.

Auditors

As auditors are now deemed, undersection 487(2) of the Companies Act 2006,to be reappointed automatically, GrantThornton UK LLP, having expressed theirwillingness, will continue as our auditors.

by order of the board

Martin CookeGroup Company Secretary

8th June, 2011


The Group strengthened its commitment to socialresponsibility in several significant ways during the year.

Alcohol in Society

Edrington became a partner to the UKPublic Health Responsibility Deal in spring 2011.

The Deal announced by the Secretary ofState for Health, Andrew Lansley,comprises a wide range of initiatives tohelp people achieve a healthier diet,increase their levels of physical activity,drink sensibly and understand the healthrisks of their lifestyle choices. For the firsttime these key strands of public healthhave been pulled together with the aim ofmaking faster improvements to thenation’s health.

Edrington supports the intent of the Dealand signed up to all the core commitmentsand supporting pledges within it, and hasconfirmed three specific pledges in thealcohol sector:-

1. We will ensure that over 80% ofproducts on shelf (by December 2013)will have labels with clear unit content,NHS guidelines and a warning aboutdrinking when pregnant.

2. We commit to maintaining the levels of financial support and in-kind fundingfor Drinkaware and the “Why let thegood times go bad?” campaign as set out in the Memoranda ofUnderstanding between Industry,Government and Drinkaware.

3. We commit to further action onadvertising and marketing, namely thedevelopment of a new sponsorshipcode requiring the promotion ofresponsible drinking, not puttingalcohol adverts on outdoor poster siteswithin 100m of schools and adheringto the Drinkaware brand guidelines toensure clear and consistent usage.

One of the four core components of theDeal is Health in the Workplace, whereEdrington has already taken many positivesteps. A great example has been thecollaboration with Sodexo to provide ahealthier diet in staff restaurants,culminating in the achievement of theScottish Government’s “Healthy Living”accreditation. So it was with confidencethat Edrington was pleased to sign up to allthe pledges in the Health at Work section.

Edrington provided a third year of directfunding of Drinkaware, the UK charitywhich provides education on alcohol and promotes responsible consumption.During 2010 Drinkaware became theleading website for information on alcoholand ran a second, successful year of the“Why let the good times go bad?”campaign. Producers were asked tocontribute both funding and materials in kind to support this responsibleconsumption campaign.

In collaboration with Maxxium UK allmaterials for the acclaimed “Famous Bars”promotional activity carried the messagesand logo of the “Why let the good times go bad?” programme, reaching 43,000consumers.

The Edrington Code for responsibleMarketing and Promotion was updatedduring the year to include a new section ondigital marketing. Training programmeswere significantly enhanced withpresentations made to marketing, salesand packaging teams in Scotland, Swedenand Spain. An online training course hasbeen developed and will run during 2011to ensure widespread understanding of the strengthened code.

In Spain, Maxxium continued to providesupport for FEBE’s (Federacion Española

CORPORATE SOCIAL RESPONSIBILITY

The Macallan Cire Perdue Charity : Water activity


de Bebides Espirituosas) responsibleconsumption activity. FEBE funds theFundación Alcohol y Sociedad (Alcohol &Society Foundation) charity that hasinvested over 20m euros in responsibleconsumption publicity since 2000.

Environment

Edrington has committed to fully participateand contribute towards the Scotch WhiskyAssociation (SWA) Environmental Strategy.An Environmental Strategy Group wasestablished to co-ordinate environmentalimprovement activity. Three separateworking groups are now underway withplans to meet the ambitious targets set out in the SWA strategy.

Planning for the implementation of a newfacility to convert distillery by-products to

energy moved a step closer. CoRDe is apartnership between Helius Energy plc and The Combination of Rothes DistillersLimited, a group of eight Scotch whiskyproducers. Edrington is the majorityshareholder in the £35 million investment in a biomass heat and power plant atCORD’s existing site in Rothes.

The plant will use a combination ofdistillery by-products and wood chip from sustainable resources to generate 7.2 megawatts of electricity per annum,enough for 9,000 homes, with the potential to export to the National Grid.

The new plant is expected to go live in thefirst half of 2013 and make a significantcontribution to the achievement of the SWA Environmental Strategy target of 20% of primary energy to be derived from non-fossil fuels by 2020.

Brand Initiatives

The Macallan and Lalique set a record for a bottle of whisky sold at auction with100 percent of the proceeds benefitingcharity: water, an organization thatprovides access to clean, safe drinkingwater to people in developing nations.Coveted by bidders around the world, The Macallan 64 Year Old in Lalique: CirePerdue sold for $460,000 in a lively auctionat Sotheby’s in New York City.

The Famous Grouse completed its thirdyear of providing funds to the RSPB for the protection of the black grouse. Sinceits launch in the UK in 2008 everypurchase of The Black Grouse Scotchwhisky has made a direct contribution tothe preservation of the one of the country’smost endangered species. Funding isexpected to exceed £300,000 since thesponsorship began allowing a wide rangeof projects to fund the restoration of thebird’s native habitat.

International donations

The Group has agreed to extend theprinciple of the Giving is Rewardingscheme to its international markets givingoverseas employees a chance to supportgood causes in their markets. In its eightdirect control markets (Norway, Sweden,Denmark, Finland, China, Hong Kong,Taiwan, Korea) employees’ charitabledonations will be funded by Edrington up to a limit of £1m.

Finally, the Group announced theappointment of Gerry O’Donnell to the newpost of Public Affairs Director. This new rolewill have a special focus on corporate socialresponsibility, and involve working closelywith industry groups and government.

Black Grouse ‘lekking’ in their natural habitat.


History

The Robertson Trust wasestablished in 1961 by theRobertson sisters, Agnes, Ethel and Elspeth, who donated theshares in the Group founded bytheir grandfather, WilliamRobertson, to the Trust forcharitable purposes. Today the Group is still controlled by the Trust.

The Trust supports Scottishcharities which benefitindividuals, groups andcommunities across the lengthand breadth of Scotland. In thisway it seeks to continue thetraditions of the Robertson sistersby funding organisations that canmake a real difference to localcommunities, as well as have a wider impact on Scottish life.

50th Anniversary

2011 is a milestone for the Trust as itcelebrates its 50th anniversary. To markthis important event in the Trust’s history,the Trust has set aside £2.5m for a special50th Anniversary Award Programme.

Achievements and Performance 2011

The Trust’s giving is funded by Edringtondividend income. As Edrington’sperformance has grown so too has theTrust’ income and this is reflected in theincreased level of giving the Trust commitsto on an annual basis. Looking forward

into 2012, the Trustees are committed tomaintain the current levels of giving. It isexpected that the total giving in 2012 willbe in excess of £14m including theexceptional anniversary fund.

£11.4m was committed to 559 differentcharities (£9.7m, 518: 2010).

The split of donations awarded in 2011 is shown in the table below.

The regions with Edrington sites (Glasgowcity, Perth & Kinross, Moray and Orkney)make up 25% of the total donations madeby the Trust totalling £2.6m.

Major Awards

£1.6m was awarded to major capitalawards in 2011.

Camphill Blair Drummond just outsideStirling was founded over 30 years ago to offer specialist residential provision foradults with complex learning difficultieswithin a vibrant community setting. They received £180k towards the building of 2 new adjoining houses called “Parkland House” within thegrounds of the original site.

£250k was awarded to the RiversideMuseum Appeal Trust towards the cost of the Education Suite within the new

THE ROBERTSON TRUST50TH ANNIVERSARY YEAR1961-2011

Total Average Number of Committed Donation

Type Donations £k £k % of Total

Major Capital 10 1,644 164 15

Main 293 8,015 27 69

Small 248 850 3 8

Development 8 927 116 8

Total 559 11,436 20 100

£250,000 was given to the National Trust for Scotland towards the cost of creating the Education Suite in the new Robert Burns Museum in Alloway.


Glasgow museum which is due to open insummer 2011.

Teenage Cancer Trust, a UK wide charity,was founded on the principle that youngpeople have a significantly greater chancein their fight against cancer if they aretreated by experts in teenage cancer, in an environment tailored to their needs.£100k was awarded to help fund a newTeenage Cancer Trust Unit at the WesternGeneral Hospital in Edinburgh.

Main Awards

The Trust has four priority areas offunding:- Care, Education & Training,Health, and Community Arts & Sports.

Supporting young people is an importantfeature of The Trust’s work across all four categories.

Prince’s Scottish Youth Business Trust isan excellent example of support for youngpeople starting up a business for the firsttime. £125k was awarded to PSYBT tosupport their network of volunteers inSpeyside, Glasgow and Orkney.

Elgin Youth Development Group, basedin Morayshire have developed a range ofexciting educational and leisure projectsfor young people aged 11-18 in an areawhere nothing else exists. They havestarted to help other youth projectsacross the country based on theirlearning and success in Elgin. Due to

their successful track record the Trustmade an award of £45k towards thegroups core running costs.

Development

£1m was committed to developmentprojects in 2011. The Trust’s support inthis area is currently focussed on supportfor offenders and their families; alcoholmisuse, and community sport.

Donations made during the year include a £155k award to Scottish Sports Futureswho will lead a programme which aims toleave a lasting legacy for young people inthe East End of Glasgow following the2014 Commonwealth Games.

Alcohol Focus Scotland received an award (£130K) to develop a successfullocal Blackburn initiative (previouslysupported by the Trust) and roll it out on a national level. The shared learnings and successes approach is a key part of the development work for the Trust. The aim of the Blackburn project was to engage all sections of the localcommunity in creating solutions forproblems caused by alcohol misuse. A range of interventions were introducedincluding improved educationprogrammes in local schools.

Small Awards

These remain an important part of TheRobertson Trust’s funding programme. Atotal of 248 awards were made during theyear many of which were centred aroundThe Edrington Group’s sites in Scotland.

2010 Graduates with Sir Ian Good.


The Scholarship Trust

The Robertson Scholarship Trust wasformed in 1992 to provide scholarships tohelp young Scots advance their education.It accepts approximately 50 students fromGlasgow secondary schools per year andhas over 200 students currently under theBursary Award Scheme.

The Trust also makes awards to studentswho show exceptional promise in theperforming arts. Through its support ofScottish Sports Aid, the Trust gives supportto young Scots who demonstrate thepotential to represent their country at thehighest level of their sport. Early recipientsinclude Sir Chris Hoy who is the first BritishOlympian in 100 years to win three goldmedals at one Olympic games.

A new partnership with the BrugalFounation

A partnership initiative with the BrugalFoundation is in the early stages ofdevelopment. The broad aim is to build anexchange programme to allow students fromthe Brugal Foundation to come and study in Glasgow. In return, one of the RobertsonTrust Scholars will be supported to study ordo volunteer work in the Dominican Republic.

The John Macphail Scholarship

In 2005, the Trustees established a rugbyscholarship in memory of John Macphail, a former chairman and chief executive ofThe Edrington Group and chairman of TheRobertson Trust, who won two caps for

Scotland in 1949 and 1951. Thescholarship enables a young rugby player,who demonstrates the potential to win afuture Scottish cap, to spend 12 weekstraining and playing club rugby in NewZealand. Due to success of the scheme ithas been expanded and adopted as partof SRU’s programme to develop its mosttalented players. In partnership with SRU,the Trust has made four John MacphailScholarship awards this year to support three players and one coach.

Giving is Rewarding

Edrington employees are able toparticipate in a ‘Giving is Rewarding’scheme, through which the Trust matchescharitable donations raised by anyemployee up to a limit of £1,500 perindividual. Employees are also able tomatch time given volunteering in supportof a charity. The total Giving is Rewardingfor 2011 was £43k (2010: £55k). Althoughthe total given was down, the number ofparticipants rose in the year from 68 to 74.The donations ranged from £10 to £2,000per application.

To mark the 50th anniversary of the Trust, the amount raised by any employee will bedoubled up to a limit of £5,000 per employee.

Trust Appointments

The Trust’s director, Duncan Munro, willretire in July 2011. Kenneth Fergusson has been appointed as Trust director and takes up his post in June 2011. He joins the Trust from the Scottishchildren’s charity Aberlour where he was finance director.

THE ROBERTSON TRUST (CONTINUED)

Further information about the activities andachievements of the Trust can be found in theTrust’s Annual Review, which is obtainablefrom the Trust’s offices or on the website at

www.therobertsontrust.org.uk.

Stephen Gemmell Head ofPlayer Development for ScottishRugby, with Duncan Munro,Director of the Robertson Trustand this year’s John Macphailscholarship winners: GeorgeTurner, Grant Gilchrist and Harry Leonard.


The Brugal Foundation continues tosupport the economic development offuture generations of Dominicans. Since its foundation the non-profit organisation,funded by annual contributions from theprofits made by Brugal and members of the Brugal family, has invested in the provision of education throughscholarship programmes, training courses, and local enterprises.

This past year the Foundation has workedin partnership with the Santo DomingoTechnological Institute (INTEC), investingalmost one and a half million pesos(£24,000) developing a programme toimprove the teaching of Spanish andmathematics to children.

Professors from the George Arzeno Brugal educational centre, opened in 2009 in honour of Brugal’s late president,designed the course for teachers in PuertoPlata and the northern area of the country.A first step was to examine and evaluatethe numerous available teaching methodsin order to find best practice approaches.Their goal was simple: to improve thequality of a child’s learning experience.

The course consisted of 80 hours oflectures and 74 hours in workshops.Qualified trainers from the educationalcentre were enlisted to run the programmealongside the INTEC staff, who providedtechnical support.

The agreement between The BrugalFoundation and INTEC is part of a broadercommitment to the education of theDominican people. It includes supportingfamilies of Brugal through the furthereducation of their children, for examplewith Brugal Foundation scholarshipsoffering grants to university students who

study subjects that contribute to theongoing development of the country.

The George Arzeno Brugal educationalcentre has continued to thrive over the last 12 months as a result of sustainedinvestment. The Foundation recently built alibrary, IT room and four more classrooms.These new classrooms make room foranother 70 students at the centre.

Continued investment has also promptednew volunteers to give some of their timeto other Foundation projects. One suchgroup from Brugal’s San Pedro de Macoris distillery has tackled some of theFoundation’s more challenging projects.One of their first initiatives was helping with the reforestation of the basin of the Higuamo River.

After many years of hard work The BrugalFoundation has firmly established itself as

a significant force for good within theDominican Republic. Lizzie Sánchez, the Foundation’s director, who is already a member of the directors’ board of the Fe y Algeria Association, was recentlyinvited to become a member of theexecutive board of the EnvironmentalTechnical Institute of Jarabacoa, anacknowledgement of the Foundation’songoing commitment to improve thequality of life in the Dominican Republic.

THE BRUGAL FOUNDATION


DIRECTORS & ADVISERS

1 2 3

4 5 6

7 8


1 Sir Ian Good (67)Chairman

Ian Good joined Edrington in 1969, hasbeen a member of the Group board since1979 and chairman since 1994. He is alsochairman of The Robertson Trust.

2 Ian Curle (49)Chief Executive

Ian Curle was appointed as chief executiveof the Group in 2004, having joined in1986. He is a trustee of The RobertsonTrust, chairman of The North BritishDistillery, and vice-chairman of The Scotch Whisky Association Council.

3 Richard Hunter (56)Group Finance Director

Richard Hunter has been Group financedirector since 1994, having joined theGroup in 1981. He is currently president of Brugal and a trustee of The RobertsonTrust. He is also responsible forinformation technology in the Group.Elsewhere, Richard is chairman of themanagement committee of The Keepers of the Quaich. Richard is a member of theCourt of The University of Strathclyde anda governor of The High School of Glasgow.

4 Bill Farrar (53)Group Sales and Marketing Director

Bill Farrar joined the Group in 1989 andwas appointed to the Edrington board in 2003. He is chairman of HighlandDistillers and a member of the board of the Edrington/Beam Global alliance. He is a Fellow of the Marketing Society of Scotland and school governor ofCraigclowan School, Perth.

5 Graham Hutcheon (47)Group Operations Director

Graham Hutcheon joined the Group in2000 as director of distillation. He wasappointed Group operations director in2003. He is a member of the operationscommittee of The Scotch WhiskyAssociation, chairing the environmentcommittee, and is director of both TheScotch Whisky Research Institute and The North British Distillery. Graham alsoserves on the Council of CBI Scotland.

6 Martin Cooke (49)Group Company Secretary

Martin Cooke joined the Group in 1988and was appointed company secretary in 1997. He is a trustee of the Group’spension schemes and a director of DunardInsurance (Isle of Man), the Group’s own insurance company. He also chairsthe Group’s risk management committeeand is a member of the corporate socialresponsibility team.

7 Ronnie Bell (61)Non-Executive Director

Ronnie Bell was appointed a non-executivedirector of the Group in 2005.

He is a former group vice president withKraft Foods Inc. and spent his 30-yearexecutive career at Kraft, retiring in 2004after five years as president of Kraft FoodsEurope. He is also a former director ofGallaher Group Plc.

Ronnie was appointed chairman ofPremier Foods in 2010. He is alsochairman of Milk Link, a large farmer-owned dairy business, and a director ofAnsell, an international healthcare group.

8 Callum Barton (61)Non-Executive Director

Callum Barton, former president and CEO of Richemont North America, wasappointed a non-executive director of theGroup in 2007. Callum has over 30 years’experience of the luxury goods businesswith the Richemont Group and during his career he was chief executive of Alfred Dunhill in London. Prior to that he held a number of senior managementpositions with Cartier in Paris and Piaget,Baume & Mercier in Geneva.

DirectorsSir J.J.G. Good, C.B.E., ChairmanI.B. Curle, Chief ExecutiveR.J.A. HunterR.W. Farrar G.R. Hutcheon R.J.S. BellK.C.O. Barton

Secretary M.A. Cooke

Registered Office2500 Great Western RoadGlasgow G15 6RW

Independent AuditorGrant Thornton UK LLPChartered Accountants

Solicitors Maclay Murray & Spens LLP


We have audited the financial statementsof The Edrington Group Limited for theyear ended 31st March, 2011 whichcomprise the group profit and lossaccount, the group and company balancesheets, the group cash flow statement, the group statement of total recognisedgains and losses, the reconciliation ofmovement in shareholders’ funds, theaccounting policies and related notes. The financial reporting framework that has been applied in their preparation is applicable law and United KingdomAccounting Standards (United KingdomGenerally Accepted Accounting Practice).

This report is made solely to thecompany’s members, as a body, inaccordance with Chapter 3 of Part 16 of the Companies Act 2006. Our auditwork has been undertaken so that wemight state to the company’s membersthose matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extentpermitted by law, we do not accept orassume responsibility to anyone otherthan the company and the company’smembers as a body, for our audit work,for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors’Responsibilities Statement set out on page42, the directors are responsible for thepreparation of the financial statements and for being satisfied that they give a trueand fair view. Our responsibility is to auditand express an opinion on the financialstatements in accordance with applicable

law and International Standards onAuditing (UK and Ireland). Thosestandards require us to comply with the Auditing Practices Board’s (APB’s)Ethical Standards for Auditors.

Scope of the audit of the financialstatements

A description of the scope of an audit of financial statements is provided on the APB’s website atwww.frc.org.uk/apb/scope/private.cfm

Opinion on financial statements

In our opinion the financial statements:

> give a true and fair view of the state of the group’s and the parentcompany’s affairs as at 31st March,2011 and of the group’s profit for the year then ended;

> have been properly prepared inaccordance with United KingdomGenerally Accepted AccountingPractice; and

> have been prepared in accordancewith the requirements of theCompanies Act 2006.

Opinion on other matters prescribed bythe Companies Act 2006

In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with thefinancial statements.

Matters on which we are required toreport by exception

We have nothing to report in respect of thefollowing matters where the CompaniesAct 2006 requires us to report to you if, inour opinion:

> adequate accounting records have not been kept by the parent company,or returns adequate for our audit havenot been received from branches notvisited by us; or

> the parent company financialstatements are not in agreement withthe accounting records and returns; or

> certain disclosures of directors’remuneration specified by law are not made; or

> we have not received all theinformation and explanations we require for our audit.

Robert HannahSenior Statutory Auditorfor and on behalf of Grant Thornton UK LLP, Statutory Auditor, Chartered AccountantsGlasgow

9th June, 2011

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE EDRINGTON GROUP LIMITED


Continuing Acquisitions Operations Total 2011 2011 2011 2010 Note £m £m £m £m

Group Turnover and Share of Joint Venture Turnover 1 668.3 647.4

Share of joint venture turnover (114.9) (179.1)

Group Turnover 42.4 511.0 553.4 468.3

Cost of sales (381.5) (324.0)

Gross Profit 171.9 144.3

Administrative expenses (9.3) (9.2)

Operational restructuring costs 2 (1.4) -

Exceptional gain on the curtailment of post retirement medical benefits 2 - 5.9

Group Operating Profit 12.9 148.3 161.2 141.0

Share of operating profit in joint ventures 13.2 12.2

Exceptional gain on disposal 2 14.6 -

Share of net exceptional income from joint ventures 2 - 0.5

Profit on Ordinary Activities before Interest 189.0 153.7

Income from investments 3 0.2 1.2

Net interest payable 4 (33.2) (25.4)

Other finance costs 5 (1.3) (4.5)

Profit on Ordinary Activities before Taxation 6 154.7 125.0

Taxation 8 (41.7) (31.6)

Profit on Ordinary Activities after Taxation 113.0 93.4

Attributable to equity minority interests (40.3) (35.3)

Retained Profit Attributable to The Edrington Group Limited 21 72.7 58.1

All the activities of the Group are classed as continuing.

There is no material difference between the profit on ordinary activities before taxation and the retained profit attributable to the Groupstated above and their historical cost equivalents.

GROUP PROFIT AND LOSS ACCOUNTYEAR TO 31ST MARCH, 2011


Company Group 2011 2010 2011 2010 Note £m £m £m £m

Fixed Assets Intangible assets 10 - - 976.7 949.5Tangible assets 11 - - 195.6 188.4Investments in subsidiaries 12 258.1 257.8 - -Investments in joint ventures 12 - - 57.0 56.9

- Gross assets - - 205.8 196.8- Gross liabilities - - (148.8) (139.9)

Associates and other investments 12 - - 9.9 11.6

258.1 257.8 1,239.2 1,206.4Current Assets Stocks 13 - - 373.8 378.5Investments 14 - - 10.4 12.5Debtors – due within one year 15 26.0 388.0 109.6 105.5Group Debtors – due after one year 15 350.9 - - -Cash at bank and in hand 51.6 7.3 125.7 70.2

428.5 395.3 619.5 566.7Creditors Amounts falling due within one year 16 (21.4) (18.9) (274.1) (493.4)

Net Current Assets 407.1 376.4 345.4 73.3

Total Assets less Current Liabilities 665.2 634.2 1,584.6 1,279.7

Creditors Amounts falling due after more than one year 17 (282.8) (282.7) (515.7) (282.8)Provision for liabilities 19 - - (46.0) (45.2)

Net Assets (excluding retirement benefit liabilities) 382.4 351.5 1,022.9 951.7

Retirement benefit liabilities 27 - - (36.2) (41.8)

Net Assets 382.4 351.5 986.7 909.9

Capital and ReservesShare capital 20 6.6 6.6 6.6 6.6Share premium 21 0.5 0.5 0.5 0.5Merger reserve 21 - - 29.5 29.5Capital reserve 21 - - 35.8 35.8Capital redemption reserve 21 1.0 1.0 1.0 1.0Revaluation reserve 21 - - 8.3 8.5Share based payments reserve 21 - - 2.8 3.1Profit and loss account 21 374.3 343.4 433.8 370.2

Shareholders’ Funds 382.4 351.5 518.3 455.2Equity minority interests - - 468.4 454.7

382.4 351.5 986.7 909.9

The consolidated financial statements of The Edrington Group Limited (registered number SC36374) were approved by the board ofdirectors and authorised for issue on 8th June, 2011. They were signed on behalf of the board by:

I.B. Curle R.J.A. HunterDirector Director

BALANCE SHEETSAS AT 31ST MARCH, 2011


2011 2010 Note £m £m £m £m

Net Cash Inflow from Operating Activities 22 187.7 125.6

Dividends Received from Joint Ventures 4.9 4.3

Returns on Investments and Servicing of Finance

Interest paid (38.4) (25.2)

Interest received 2.6 0.7

Dividends received 0.2 1.2

Dividends paid to minority interests in subsidiaries (22.4) (15.9)

Net Cash Outflow from Returns on Investments and Servicing of Finance (58.0) (39.2)

Taxation

Corporation tax (27.4) (23.8)

Capital Expenditure and Financial Investment

Purchase of tangible fixed assets (30.5) (22.2)

Purchase of own shares (6.5) (2.4)

Sale of own shares 3.6 2.2

Sale of tangible fixed assets 4.1 2.9

Loans to joint ventures (0.1) (0.2)

Net Cash Outflow from Capital Expenditure and Financial Investment (29.4) (19.7)

Acquisitions and Disposals

Acquisition of Cutty Sark 10 (18.0) -

Proceeds from disposal of Glenrothes brand 10 9.0 -

Proceeds from disposal of assets related to the Cutty Sark acquisition 10 5.3 -

Purchase of Maxxium subsidiaries - (6.1)

Purchase of Maxxium joint ventures - (28.8)

Repayment of share premium from Maxxium Worldwide BV - 38.2

Net Cash (Outflow)/Inflow from Acquisitions and Disposals (3.7) 3.3

Equity Dividends Paid (15.7) (12.0)

Net Cash Flow before use of Liquid Resources and Financing 58.4 38.5

Financing 23

Bank loan (4.0) (12.4)

Loan notes (0.1) (4.1)

Other loans (0.9) (2.4)

(5.0) (18.9)

Increase in Cash in the Year 23 53.4 19.6

GROUP CASH FLOW STATEMENTYEAR TO 31ST MARCH, 2011


OTHER STATEMENTSYEAR TO 31ST MARCH, 2011

Statement of Total Recognised Gains and Losses

2011 2010 £m £m

Profit for the year 72.7 58.1

Actuarial gain/(loss) recognised in the pension schemes (net of minority interests) 1.2 (17.3)

Movement on deferred taxation relating to pension liability (net of minority interests) (1.3) 4.8

Actuarial gain/(loss) recognised in the pension schemes of joint ventures 5.5 (7.4)

Movement on deferred taxation relating to pension liability of joint ventures (1.7) 2.1

Exchange adjustments on the net assets of joint ventures (net of minority interests) (0.5) (1.9)

Currency translation difference on foreign investments (6.3) (8.8)

Currency translation difference on related borrowings 1.1 6.9

Total recognised gains and losses relating to the year 70.7 36.5

Reconciliation of Movement in Shareholders’ Funds

2011 2010 £m £m

Profit for the year 72.7 58.1

Equity dividends payable in the year (4.4) (23.3)

Actuarial gain/(loss) recognised in the pension schemes (net of minority interests) 1.2 (17.3)

Movement on deferred taxation relating to pension liability (net of minority interests) (1.3) 4.8

Actuarial gain/(loss) recognised in the pension schemes of joint ventures 5.5 (7.4)

Movement on deferred taxation relating to pension liability of joint ventures (1.7) 2.1

Movement in own shares (2.9) (0.2)

Share based payment (credit)/expense (0.3) 2.5

Exchange adjustments on the net assets of joint ventures (net of minority interests) (0.5) (1.9)

Currency translation difference on foreign investments (6.3) (8.8)

Currency translation difference on related borrowings 1.1 6.9

Net addition to shareholders’ funds 63.1 15.5

Opening shareholders’ funds 455.2 439.7

Closing shareholders’ funds 518.3 455.2


ACCOUNTING POLICIES

The accounting policies set out below havebeen applied consistently to all periodspresented in these consolidated financialstatements, unless otherwise stated.

Basis of Preparation

These financial statements have beenprepared on the going concern basis and under the historical cost convention(with the exception of certain investmentsin the company’s balance sheet which are recorded at valuation in 1974 andcertain land and buildings in the Groupbalance sheet which are recorded atvaluation in 1990) and in accordance with the Companies Act 2006 andapplicable accounting standards with the exception of a true and fair override as detailed below.

The Group financial statementsconsolidate the financial statements of the ultimate parent company (TheEdrington Group Limited), all entitiescontrolled by the company (itssubsidiaries) and the Group’s share of itsinterests in joint ventures and associates.The financial year of all subsidiaries endson 31st March, with the exception ofBrugal & Co., S.A. which has a financialyear end of 31st December. Financialstatements for Brugal & Co., S.A. wereprepared for the year ended 31st March,2011 for consolidation purposes.

Subsidiaries are entities in which theGroup has an interest in the voting sharecapital of greater than 50%.

Joint ventures are entities in which theGroup holds an interest on a long termbasis and which are jointly controlled bythe Group, with one or more venturers

under a contractual arrangement.Associates are entities in which the Grouphas an investment of at least 20% of theshares and over which it exerts significantinfluence. To the extent that joint venturesand associates are material, the Group financial statements include theappropriate share of their post-acquisitionresults and reserves. Investments in jointventures and associates are carried in theconsolidated balance sheet at the Group’sshare of their net assets at the date ofacquisition and of their post-acquisitionretained profit or losses together with anygoodwill arising on the acquisition, net ofamortisation. The investor’s share of theresults is included within the consolidatedprofit and loss. The profit and lossaccount also shows the Group’s share of the joint ventures’ turnover and thebalance sheet shows the gross assetsand liabilities of the net investment in joint ventures.

On 1st April, 2010 the Group acquired the Cutty Sark brand giving it full rights to profits from the production and sale of the blended Scotch whisky. The brandhas been included in the accounts usingthe acquisition method of accounting and profits and losses relating to thebrand have been consolidated from the date of acquisition.

Foreign Currencies

Transactions in foreign currencies arerecorded at the rate of exchange at thedate of the transaction or, if hedged, at the forward contract rate. Monetary assetsand liabilities denominated in foreigncurrencies at the balance sheet date are reported at the rates of exchange

prevailing at that date or, if appropriate, atthe forward contract rate. Other exchangedifferences are taken to the profit and lossaccount when they arise.

Foreign Operations

Trading results denominated in foreigncurrency are translated into sterling ataverage rates of exchange during the year.Assets and liabilities are translated at therates of exchange ruling at the year endexcept where rates of exchange are fixed under contractual arrangements.Differences on exchange arising from the retranslation of the opening net assetsof foreign subsidiaries denominated inforeign currency and of any related loansare taken to reserves together with thedifferences between the profit and lossaccounts translated at average rates and rates ruling at the year end.

Turnover

Turnover is defined as the invoiced value ofsales, excluding Value Added Tax and duty.Revenue from the sale of cased goods isrecognised when the goods are shipped.Bulk whisky revenue is recognised whenthe stock is dispatched or when ownershipof the stock is transferred to the purchaser.

Exceptional Items

Exceptional items are those that, inmanagements’ judgement, need to be disclosed by virtue of their size orincidence. These items are included withinthe profit and loss caption to which theyrelate, and are separately disclosed either


in the notes to the accounts, or the face ofthe consolidated profit and loss account.

Taxation

Current taxation, including UK corporationtax and foreign tax, is provided at amountsexpected to be paid (or recovered) usingthe tax rates and laws that have beenenacted or substantively enacted by thebalance sheet date.

Deferred tax is provided in full on timingdifferences which result in an obligation at the balance sheet date to pay more tax,or a right to pay less tax, at a future date,at rates expected to apply when theycrystallise based on tax rates and lawenacted or substantively enacted at thebalance sheet date. Timing differencesarise from the inclusion of items in incomeand expenditure in taxation computations,in periods different from those in whichthey are included in financial statements.Deferred tax is not provided on timingdifferences arising from the revaluation offixed assets where there is no commitmentto sell the asset, or un-remitted earnings of subsidiaries and associates where thereis no commitment to remit these earnings.Deferred tax assets are recognised to theextent that it is regarded as more likelythan not that they will be recovered.Deferred tax assets and liabilities are not discounted.

Brands

Acquired brands with a material value,which are long term in nature, are recordedat cost less appropriate provision forimpairment. Such brands are only

recognised where title is clear, brandearnings are separately identifiable and the brand could be sold separately fromthe rest of the business.

Brands that are regarded as having alimited useful life are amortised on astraight-line basis over those lives and are reviewed for impairment wheneverevents or circumstances indicate that thecarrying value may not be recoverable.Brands that in the opinion of the directors,on the basis of their assessment on thestrength of the brands and industry, areregarded as having an indefiniteeconomic life are not amortised. This is adeparture from the requirements of theCompanies Act 2006 which requires allfixed assets to be amortised, however, ispermitted by FRS 10 Goodwill andIntangible Assets. These assets arereviewed for impairment at least annuallyor when there is an indication that theasset may be impaired. The impairmentreviews compare the carrying value of thebrand with its net present value based ondiscounted future cashflow.

The assumptions used in the annualimpairment reviews and details of theCutty Sark acquisition are included in Note 10.

Fixed Assets and Depreciation

Fixed assets are stated at cost net ofdepreciation and any provision forimpairment.

No depreciation has been provided onland. Depreciation of other fixed assetshas been calculated on a straight-linebasis by reference to the useful life of theassets. The principal annual rates used for

this purpose are:

Property 2% to 5%Plant, vehicles, etc. 5% to 33%Casks 5% to 15%

Stocks

Stocks are valued at the lower of cost and net realisable value. Cost is defined as the production cost (including distillery overheads) or purchase price, as appropriate, plus carrying costs(excluding interest). Net realisable value is based on estimated selling price, less the estimated costs ofcompletion and selling. Provision is made for obsolete and slow-moving items where appropriate.

Cash and Liquid Resources

Cash comprises cash in hand anddeposits repayable on demand, lessoverdrafts payable on demand. Liquidresources are current asset investmentswhich are disposable without curtailing or disrupting the business and are eitherreadily convertible into known amounts of cash at or close to their carrying values or traded in an active market. Liquid resources comprise term depositsof less than one year (other than cash).

Provisions

Provisions are liabilities of uncertain timing or amounts. A provision isrecognised if, as a result of a past event, the Group has a present legal or constructive obligation that can beestimated reliably and which will result in an outflow of economic benefit.

ACCOUNTING POLICIES(CONTINUED)


Provisions are discounted where the effect is materially different to the original undiscounted amount, andrepresent the directors’ best estimate of likely settlement.

Pensions and Other Post Retirement Benefits

The Group operates two principal pensionschemes based on final pensionablesalary in addition to a number of schemesbased on defined contributions. Theassets of the schemes are held separatelyfrom those of the Group.

Defined benefit scheme assets aremeasured at fair values. Scheme liabilitiesare measured on an actuarial basis using the projected unit method and arediscounted at appropriate high qualitycorporate bond rates. The net surplus or deficit, adjusted for deferred tax, ispresented separately from other netassets on the balance sheet. A net surplusis recognised only to the extent that it isrecoverable by the Group.

For defined benefit schemes the amountscharged to operating profit are the currentservice cost and gains/losses fromsettlements and curtailments. These are included as part of staff costs. Pastservice costs are spread over the perioduntil the benefits vest. Interest on thescheme liabilities and the expected returnon the scheme assets are included inother finance costs. Actuarial gains andlosses are reported in the statement of total recognised gains and losses.

For defined contribution schemes theamount charged to profit and loss accountin respect of pension costs is the

contributions payable in the year. Anydifferences between contributions payablein the year and the contributions actuallypaid are shown as either accruals orprepayments in the balance sheet.

In addition, the Group pays other postretirement discretionary benefits. In theview of the directors, there is no futurecommitment to pay these benefits,however, as it has been custom andpractice to pay them in the past, theybelieve that the most appropriatetreatment is to provide for the full potential liability in the accounts.

Financial Instruments

Financial liabilities and equity instrumentsare classified according to the substanceof the contractual arrangements enteredinto. An equity instrument is any contractthat evidences a residual interest in theassets of the entity after deducting all of its financial liabilities.

Where the contractual obligations offinancial instruments (including sharecapital) are equivalent to a similar debtinstrument, those financial instruments areclassed as financial liabilities. Financialliabilities are presented as such in thebalance sheet. Finance costs and gains or losses relating to financial liabilities areincluded in the profit and loss account.Finance costs are calculated so as toproduce a constant rate of return on the outstanding liability.

When the contractual terms of sharecapital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument.Dividends and contributions relating

to equity instruments are debited directlyto equity.

Derivatives

The Group uses derivative financialinstruments to reduce its exposure tointerest rate and exchange ratemovements. The Group does not hold oruse derivative instruments for speculativepurposes and does not recognise them atfair value within the financial statements.

For an interest rate swap to be treated asa hedge the instrument must be related to actual assets or liabilities or a probablecommitment and must change the nature of the interest rate by converting a fixed rate to a variable rate or viceversa. Interest differentials under theseswaps are recognised by adjusting net interest payable over the period of the contracts.

For foreign exchange contracts thetransactions to which they relate aretranslated at the contracted rate ofagreement.

Share Based Payments

The Group issues equity-settled sharebased payments to certain employees(ShareReward Scheme). The fair value of the shares granted is charged to theGroup’s profit and loss account over thevesting period with a corresponding creditto ‘Share based payments reserve’ in thebalance sheet.

In addition, the Group also providesemployees with the ability to save for athree year period to buy Edrington ‘B’Ordinary Shares at 80% of the marketprice (ShareSave Scheme). The fair


value of the share options awarded isdetermined at the grant date and isexpensed on a straight line basis over the three year vesting period, based on an estimate of the shares that willultimately vest.

The fair value of shares/options granted iscalculated at grant date using the Black-Scholes model and in accordance withFRS 20 Share Based Payments.

Accounting for The Edrington GroupLimited Employee Benefit Trust

The Edrington Group Limited as thesponsoring company of The EdringtonGroup Limited Employee Benefit Trustrecognises the assets and liabilities of theEmployee Benefit Trust in the company’saccounts as it has ‘de facto’ control ofthose assets and liabilities. The companyaccounts for the Employee Benefit Trust as follows:

> Until such time as the company’s ownshares held by the Employee BenefitTrust vest unconditionally inemployees, the consideration paid forthe shares is deducted in arriving atshareholders’ funds.

> Other assets and liabilities (includingborrowings) of the Employee BenefitTrust are recognised as assets andliabilities of the company.

> Consideration paid or received for thepurchase or sale of the company’sown shares in the Employee BenefitTrust is shown as a separate amount inthe reconciliation of movements inshareholders’ funds.

> No gain or loss is recognised in theprofit and loss account or statement of total recognised gains and losseson the purchase, sale, issue orcancellation of the company’s own shares.

> Finance costs and any administrationexpenses are charged as they accrue.

> Any dividend income arising on ownshares is deducted from the aggregateof dividends paid.

ACCOUNTING POLICIES(CONTINUED)


NOTES ON FINANCIAL STATEMENTS

1 Turnover

The analysis of turnover by class of business or geographical market has not been disclosed as the directors consider that thiscould be seriously prejudicial to the Group’s interests.

2 Exceptional Items 2011 2010 £m £m

Reported before Group Operating Profit:

Operational restructuring costs (1.4) -

Curtailment of post retirement benefits liability - 5.9

Reported after Group Operating Profit:

Gain on disposal of The Glenrothes brand and related assets 14.6 -

Share of exceptional income from joint ventures - 0.5

13.2 6.4

Share of joint venture exceptional tax liability (2.2) -

Taxation (1.1) (1.7)

Minority Interest (2.2) (0.7)

Net impact on Retained Earnings 7.7 4.0

Operational restructuring costs have been recorded in the year primarily relating to the implementation of changes in blending processes.

On 1st April, 2010 the Group disposed of The Glenrothes Single Malt whisky brand and certain related investments to Berry Bros& Rudd resulting in a net gain of £14.6m.

The Group recorded an exceptional cost in relation to the expected settlement of a tax matter in an overseas joint venture. Its share of this cost was £2.2m (€2.5m).

In 2010 an exceptional gain was recorded following the curtailment of the Group’s post retirement benefits scheme liabilities. In addition an exceptional credit was recorded for the revaluation of investments in certain Maxxium joint ventures.

3 Income from Investments 2011 2010 £m £m

Income from other fixed asset investments 0.2 1.2

4 Net Interest Payable 2011 2010 £m £m

Interest payable and similar charges (34.7) (25.1)

Interest payable on other loans - (0.1)

Interest payable by joint ventures (1.1) (0.9)

Interest received 2.6 0.7

(33.2) (25.4)


5 Other Finance Costs 2011 2010 £m £m

Interest on defined benefit pension schemes (0.8) (3.8)

Interest on discretionary post retirement benefits (0.2) (0.4)

Share of other finance costs in joint ventures (0.3) (0.3)

(1.3) (4.5)

6 Profit on Ordinary Activities before Taxation 2011 2010 £m £m

Profit on ordinary activities before taxation is stated after charging/(crediting):

Auditor’s remuneration – audit services 0.2 0.2

Depreciation of tangible fixed assets 13.9 11.6

Gain on sale of tangible fixed assets (0.3) (0.8)

Amortisation of brands 3.3 -

Included within the audit services noted above is an amount of £54,200 (2010: £50,500) in respect of the audit of subsidiarycompanies. In addition to the audit services, our auditors also received £91,000 (2010: £21,000) for share valuation services and£12,000 (2010: £15,000) for the audit of the pension schemes.

The depreciation charge noted above is different from that shown in Note 11 to these financial statements, as cask depreciationis added to the cost of stocks of Scotch whisky and is not released to the profit and loss account until the relevant stock is sold.The figure shown above represents the annual depreciation charge on other fixed assets together with cask depreciation releasedthrough cost of sales.

7 Employees

The average number of employees during the year was as follows: 2011 2010 Number Number

Engaged in distilling, coopering, blending, bottling and marketing of Scotch whisky & rum 2,178 2,169

Employment costs during the year amounted to: 2011 2010 £m £m

Wages and salaries 53.9 55.6

Social security costs 4.5 3.8

Other pension costs (Note 27) 5.3 3.8

63.7 63.2

Remuneration in respect of the board of directors was as follows: 2011 2010 £m £m

Emoluments (excluding pension contributions) 1.3 1.3

Benefits 0.4 0.4

Employee share schemes 0.1 0.1

Performance related Annual Incentive Plan 1.0 1.2

Performance related Long Term Incentive Plan 0.7 0.5

3.5 3.5

NOTES ON FINANCIAL STATEMENTS (CONTINUED)


The amounts set out above include remuneration in respect of the highest paid director each year as follows: 2011 2010 £000 £000

Emoluments (excluding pension contributions) 373 365

Benefits 153 150

Employee share schemes 26 18

Performance related Annual Incentive Plan 416 442

Performance related Long Term Incentive Plan 259 158

1,227 1,133

Employee share schemes reflects the costs for both the annual ShareSave scheme and the ShareReward scheme (when it isawarded), which rewards employees including directors for achievement of performance targets.

Performance related payments include Annual Incentive Plan and Long Term Incentive Plan costs for Edrington and itssubsidiaries’ employees.

Amounts disclosed under other benefits for both the directors and the highest paid director, includes a non-pensionable salarysupplement made to certain directors in lieu of the company’s contribution to the pension scheme, following their withdrawal fromthe Group pension scheme.

The Annual Incentive Plan rewards directors and senior executives on both personal targets and on annual performance results.The annual performance results target was met partly this year and fully last year.

The Long Term Incentive Plan is based on a rolling three year performance target. This was fully achieved this year and partlyachieved last year.

For further details on these incentive schemes and share schemes please refer to the Directors’ Report on page 43.

During the year, 4 directors (2010: 4 directors) exercised share rights under the ShareSave Scheme. The aggregate of gains bydirectors exercising share rights during the year was £10,800 (2010: £1,700). During the year, 2 directors (2010: 3 directors)participated in defined benefit pension schemes. No other directors participated in any other Group pension schemes during the year.

The highest paid director exercised share rights under the ShareSave Scheme this year and last year. The highest paid director’saccrued pension at the year end was £131,000 (2010: £128,000).

8 Taxation 2011 2010 £m £m

The tax charge represents:

Current tax:

UK Corporation tax at 28% (2010: 28%) 23.6 16.4

Adjustment in respect of prior periods (2.0) (5.0)

21.6 11.4

Foreign Tax 9.8 11.5

Tax on share of profits of joint ventures 6.4 2.8

Total current tax 37.8 25.7

Deferred tax:

Deferred tax charge for the year 0.8 2.4

Adjustment in respect of prior periods 0.6 0.7

Deferred tax charge for joint ventures 0.4 -

Pension contribution relief in excess of net pension cost charge 2.1 1.1

Release of deferred tax asset on curtailment of post retirement medical benefits (see Note 2) - 1.7

Tax on profit on ordinary activities 41.7 31.6


8 Taxation (continued)

Factors affecting the current tax charge for the year 2011 2010 £m £m

The current tax charge for the year is different than the standard rate of corporation tax in the UK:

Profit on ordinary activities before tax at 28% (2010: 28%) 43.3 35.0

Expenses not deductible for tax purposes 3.1 1.1

(Lower)/higher tax charge in overseas earnings (1.6) 0.1

Non-taxable income (3.3) (1.2)

Difference between tax depreciation and accounting depreciation 0.8 (3.9)

Other timing differences 0.9 1.2

Adjustment relating to prior period corporation tax (2.0) (5.0)

Pension contribution relief in excess of net pension cost charge (2.1) (1.1)

Deferred tax not recognised 1.2 (0.5)

Effect of change in deferred tax rate (2.5) -

37.8 25.7

9 Dividends 2011 2010 £m £m

Dividends payable from profit and loss reserves:

- Final of Nil (2010: 13.0p) - 8.6

- Interim of 7.0p (2010: 6.0p) 4.6 3.9

Less: dividends paid to the Edrington Benefit Trust (0.2) (0.5)

4.4 12.0

Proposed and approved before the year end (recognised as a liability):

Second interim of Nil (2010: 17.25p) - 11.3

4.4 23.3

Proposed after the year end (not recognised as a liability):

Final of 20.0p (2010: Nil) 13.2 -

10 Intangible Fixed Assets Brands £m

Group

Cost at 1st April, 2010 949.5

Acquisitions 32.7

Exchange adjustment (2.2)

Cost at 31st March, 2011 980.0

Amortisation at 1st April, 2010 -

Charge for the year (3.3)

Amortisation at 31st March, 2011 (3.3)

Net book value at 31st March, 2011 976.7




In the opinion of the directors, the fair value of the brands is substantially higher than their historic net book value as reported. In considering whether the book values of brands are impaired, the Group undertakes valuations based on the net present value of discounted future cashflows attributable to the brands themselves. The cashflows are generally considered over a 10 yearperiod reflecting various long term growth rates of up to 2% for those brands with indefinite economic lives.

Acquisition of Cutty Sark Brand

On 1st April, 2010 the Group acquired the Cutty Sark brand and certain related assets from Berry Bros & Rudd for a considerationof £37.7m. The purchase of the Cutty Sark brand has been accounted for using the acquisition method of accounting and hasbeen included in the Group’s balance sheet at its fair value at the date of acquisition.

The following table sets out the book value and provisional fair value of the assets and liabilities acquired by the Group: Book Revaluation Fair Value Adjustment Value £m £m £m

Brand - 32.7 32.7

Debtors 5.0 - 5.0

Net Assets 5.0 32.7 37.7

Consideration (37.7)

Goodwill -

The acquisition price was paid as follows: £m

Cash consideration 18.0

Whisky stocks 18.0

Other assets 1.7

Total cost of acquisition 37.7

The fair value of the Cutty Sark brand has been calculated using discounted future cashflows over a 10 year period and is inexcess of the book value capitalised above. The directors have chosen to amortise the brand over 10 years in line with theirassessment of its useful economic life.

Prior to acquisition, the Group had a trading arrangement with Berry Bros & Rudd to supply and bottle Cutty Sark blended Scotchwhisky and participated in 50% of the profits from those brand sales. In the year ended 31st March, 2010 the Group resultsincluded turnover of approximately £25.7m and operating profit of approximately £6.1m related to the Cutty Sark brand.

From 1st April, 2010 the Group consolidated 100% of the profits generated from Cutty Sark. Trading activities were merged withother operating activities following acquisition and are not accounted for within a separate reporting unit. Consolidated resultsattributable to the Cutty Sark brand are therefore based on estimated allocations of income and expense within the wider group.For the year ended 31st March, 2011 the brand generated turnover of £42.4m and operating profit of approximately £12.9m.


11 Tangible Fixed Assets Freehold Plant,

Land & Vehicles Buildings etc. Casks Total

£m £m £m £m

Group

Cost or valuation at 1st April, 2010 88.9 122.4 139.7 351.0

Additions 0.6 15.4 14.5 30.5

Disposals (0.1) (2.0) (8.3) (10.4)

Exchange adjustment (1.2) (2.2) (0.4) (3.8)

Reallocations 1.0 (1.0) - -

Cost or valuation at 31st March, 2011 89.2 132.6 145.5 367.3

Depreciation at 1st April, 2010 28.0 83.6 51.0 162.6

Charge for year 2.5 7.5 6.1 16.1

Disposals - (1.8) (3.1) (4.9)

Exchange adjustment (0.3) (1.5) (0.3) (2.1)

Depreciation at 31st March, 2011 30.2 87.8 53.7 171.7

Net book value at 31st March, 2011 59.0 44.8 91.8 195.6

Net book value at 31st March, 2010 60.9 38.8 88.7 188.4

Included in freehold land and buildings is £1.8m (2010: £1.8m) in respect of freehold land which is not depreciated.

Certain of the Group’s land and buildings were revalued on 30th November, 1990 on a depreciated replacement cost basis. No provision has been made for the estimated deferred tax that would arise as a result of this valuation, because in the opinion of the directors, those land and buildings which were revalued are unlikely to be disposed of in the foreseeable future. Thetransitional arrangements set out in FRS 15 Tangible Fixed Assets have been applied on the implementation of this standard.Accordingly, the 1990 valuation is being retained and will not be updated.

The figures stated above for cost or valuation at 31st March, 2011 may be analysed as follows: Freehold Plant,

Land & Vehicles Buildings etc. Casks Total

£m £m £m £m

Group

Cost 70.6 132.6 145.5 348.7

Valuation 1990 18.6 - - 18.6

89.2 132.6 145.5 367.3

If the previously noted land and buildings had not been revalued, the land and buildings category would have been stated underthe historical cost basis at the following amounts: Freehold

Land & Buildings

£m

Cost 75.5

Accumulated depreciation (27.1)



The Group’s capital commitments at 31st March, 2011 were £0.2m (2010: Nil).



12 Fixed Asset Investments Associates

Joint and Other Total Ventures Investments Investments

£m £m £m

Group

At 1st April, 2010 56.9 11.6 68.5

Share of profits of joint ventures less dividends received 1.1 - 1.1

Exchange adjustment on the net assets of joint ventures (0.4) (1.3) (1.7)

Actuarial gain on pension scheme 5.8 - 5.8

Movement on deferred tax relating to pension scheme (1.7) - (1.7)

Disposals (4.4) - (4.4)

Exchange adjustments (0.3) (0.4) (0.7)

At 31st March, 2011 57.0 9.9 66.9

Investments in Subsidiaries

£m

Company

Cost or valuation at 1st April, 2010 257.8

Additions 0.3

Cost or valuation at 31st March, 2011 258.1

Shares in subsidiaries include valuations of £2.2m (cost: £0.4m) being the directors estimate in 1974 of the value of the holdingsat that time in subsidiaries.

Principal Subsidiaries

At 31st March, 2011 the Group held more than 20% of the equity, and no other share or loan capital, of the following companies(all companies are registered in the UK unless stated otherwise):

Proportion held at

Name of Company Holding 31st March, 2011 Nature of Business

Edrington Distillers Limited Ordinary Shares 100%* Blending, bottling, sales and marketing of Scotch whisky

The 1887 Company Limited Ordinary Shares 75%* Management of Scotch whisky companies

Highland Distillers Group Limited Ordinary Shares 100% Management of Scotch whisky companies

Highland Distillers Limited Ordinary Shares 100% Distilling, sales and marketing of Scotch whisky

The Macallan Distillers Limited Ordinary Shares 100% Distilling, sales and marketing Preference shares 100% of Scotch whisky

Edrington International Brands Limited Ordinary Shares 100%* Holding company

Brugal & Co., S.A. Ordinary Shares 61% Distilling, sales and marketing of (Country of registration – Dominican Republic) Dominican rum

Maxxium Korea Limited(Country of registration – Korea) Ordinary shares 100% Sales and distribution of alcoholic beverages

Maxxium Sweden AB(Country of registration – Sweden) Ordinary shares 100% Sales and distribution of alcoholic beverages


12 Fixed Asset Investments (continued)

Principal Subsidiaries (continued)Proportion

held at Name of Company Holding 31st March, 2011 Nature of Business

Maxxium Danmark A/S(Country of registration – Denmark) Ordinary shares 100% Sales and distribution of alcoholic beverages

Maxxium Norge AS(Country of registration – Norway) Ordinary shares 100% Sales and distribution of alcoholic beverages

Maxxium Finland OY(Country of registration – Finland) Ordinary shares 100% Sales and distribution of alcoholic beverages

Maxxium Taiwan Limited(Country of registration – Taiwan) Ordinary shares 87.5% Sales and distribution of alcoholic beverages

The company has 70% of the voting rights in respect of The 1887 Company Limited.

Principal Joint VenturesProportion

held at Name of Company Holding 31st March, 2011 Nature of Business

Lothian Distillers Limited Ordinary Shares 50% Distillation and maturing of Scotch grain whisky

Row & Company Limited Ordinary Shares 50% Sales and marketing of Scotch whisky

Maxxium UK Limited Ordinary Shares 50% Sales and distribution of alcoholic beverages

Maxxium España SL(Country of registration – Spain) Ordinary Shares 50% Sales and distribution of alcoholic beverages

Maxxium Shanghai Limited(Country of registration – China) Ordinary Shares 50% Sales and distribution of alcoholic beverages

Maxxium Hong Kong Limited(Country of registration – Hong Kong) Ordinary Shares 50% Sales and distribution of alcoholic beverages

Maxxium Cyprus Limited Holding company of Denview(Country of registration – Cyprus) Ordinary Shares 50% Ltd (Maxxium Russia)

Denview Limited(Country of registration – Russia) Ordinary Shares 50% Sales and distribution of alcoholic beverages

Maxxium Nederland BV(Country of registration – The Netherlands) Ordinary shares 50% Sales and distribution of alcoholic beverages

Vinicola del Norte S.A.(Country of registration – Dominican Republic) Ordinary Shares 33% Manufacture of wines and spirits

* Indicates that the investment is held directly by the company.



The following information is given in respect of the Group’s share of its joint ventures on an aggregate basis: 2011 2010 £m £m

Profit and Loss Account

Gross Turnover 305.8 331.4

Profit on ordinary activities before interest and taxation 13.2 12.2

Interest (1.4) (1.2)

Taxation (6.8) (2.8)

5.0 8.2

Balance Sheet

Fixed assets 17.1 21.4

Current assets 188.7 175.4

205.8 196.8

Liabilities due within one year (141.6) (125.7)

Liabilities due after one year (7.2) (14.2)

(148.8) (139.9)

Net assets 57.0 56.9

13 Stocks 2011 2010 £m £m

Group

Raw materials 6.4 7.5

Scotch whisky 337.2 341.7

Rum 13.0 13.9

Packaging materials 10.5 11.9

Other stocks 6.7 3.5

373.8 378.5

14 Current Asset Investments 2011 2010 £m £m

Group

Maxxium Worldwide BV 10.4 12.5

10.4 12.5

Following the restructuring of Maxxium Worldwide BV the company ceased trading and it is expected that the value of theinvestment will be realised in the next 12 months.


15 DebtorsCompany Group

2011 2010 2011 2010 £m £m £m £m

Amounts falling due within one year:

Trade debtors - - 52.4 49.9

Loan to Group undertakings 21.1 382.7 - -

Amounts owed by Group undertakings 0.4 - - -

Amounts owed by joint ventures - - 31.7 34.3

Other debtors & prepayments 3.1 2.4 25.5 21.3

UK corporation tax group relief receivable 1.4 2.9 - -

26.0 388.0 109.6 105.5

Amounts falling due after one year:

Loan to Group undertakings 350.9 - - -

350.9 - - -

Following a restructuring of loans within the Group, certain loans to subsidiaries have been reclassified as being due after morethan one year.

16 Creditors: amounts falling due within one yearCompany Group

2011 2010 2011 2010 £m £m £m £m

Amounts falling due within one year:

Bank loans (Note 17) - - 125.0 360.0

Bank overdraft - - 13.0 7.6

Other loans - - 0.4 1.7

Trade creditors - - 24.7 17.9

Loans from Group undertakings 21.2 6.9 - -

Loans from joint ventures - 0.2 6.2 6.3

Amounts owed to joint ventures - - 13.7 8.7

Accruals and other creditors 0.2 11.8 61.5 65.4

Other taxes and social security costs - - 13.6 14.6

Corporation tax - - 16.0 11.2

21.4 18.9 274.1 493.4



17 Creditors: amounts falling due after more than one yearCompany Group

2011 2010 2011 2010 £m £m £m £m

Bank loans 283.3 283.5 513.4 283.5

Less: deferred arrangement fees (0.5) (0.8) (3.0) (0.8)

282.8 282.7 510.4 282.7

Other loans - - 0.3 -

Other creditors - - 5.0 0.1

282.8 282.7 515.7 282.8

Company Group 2011 2010 2011 2010

£m £m £m £m

Bank borrowings and other loans are repayable as follows:

Amounts falling due:

Within one year - - 138.0 368.8

Between one and two years 283.3 - 283.4 -

Between two and five years - 283.5 230.3 283.5

283.3 283.5 651.7 652.3

The Group has access to banking facilities under two separate arrangements:

The Edrington Group Limited has a five year, multicurrency, revolving credit facility of €420m which is renewable in November2012. At 31st March, 2011 £282.4m (€320m) (2010: £283.5m (€320m)) had been drawn down under the facility.

At 31st March, 2011 the subsidiary 1887 Group had two revolving credit facilities of £125m, repayable in July 2011 and £300m,repayable in July 2013. At the balance sheet date The 1887 Group had drawn down £355.0m (2010: £360.0m) under its banking facilities.

Interest payable on the loans is linked to EURIBOR and LIBOR.

The borrowings of the Group and of the subsidiary 1887 Group are secured by guarantees from, and floating charges over, the assets of those respective groups.

The 1887 Group has guaranteed bank borrowings for certain distribution companies totalling £18.4m (2010: £21.3m).

On 4th April, 2011 The 1887 Group entered into new financing facilities in the form of a US private placement. The 1887 Group’sfinancial facilities now consist of (i) a bank revolving credit facility of £240m repayable in July, 2013; (ii) a US private placement for $75m repayable in April, 2018; (iii) a US private placement for $225m repayable in April, 2021. As with the previous bankfacility, these facilities are all secured by guarantees from and floating charges over the assets of The 1887 Group and some of its operating subsidiaries. The 1887 Group entered into cross currency interest rate swaps and a series of forward exchangecurrency contracts to hedge the US dollar principal amounts and interest payments.


18 Fair Value of Hedging Instruments

The Group operates a prudent hedging policy of fixing forward the rates for both currency and interest via forward exchangecontracts and swaps. The Group does not enter into currency or interest hedges for speculative purposes.

As required by Statutory Instrument 2008/410, the following table sets out the fair value for those hedges outstanding at the year end.

Fair value of financial instruments held to manage interest rates: Fair Value Fair Value 2011 2010 £m £m

Interest rate swaps (14.9) (23.0)

Fair value of financial instruments held to hedge the currency exposure on sales:

Forward exchange currency contracts (0.2) (7.8)

The Group’s interest rate swaps were taken out to hedge interest rate risk on bank borrowings and the US private placement. The Group’s forward exchange currency contracts were taken out to hedge the Group’s risk across its overseas markets.

19 Provisions for Liabilities Deferred Other

taxation provisions Total £m £m £m

At 1st April, 2010 15.7 29.5 45.2

Provided in the year (Note 8) 0.8 - 0.8

At 31st March, 2011 16.5 29.5 46.0

Other provisions include a provision made by Brugal & Co., S.A. for the termination of a distribution agreement.

Deferred tax is provided as follows: 2011 2010

Provided Provided £m £m

Group

Deferred taxation:

Capital allowances in excess of depreciation 27.2 23.8

Other timing differences (10.7) (8.1)

16.5 15.7

Certain investments held by the Group have previously been revalued. No deferred tax has been provided on the uplift arisingfrom the revaluations as the Group has no intention to dispose of these investments in the foreseeable future. If such a disposaldid occur, the tax which would be payable is estimated to be £0.7m (2010: £1.1m).



20 Share Capital Called up,

allotted and fully paid

£m

Group and company

At 1st April, 2010 and 31st March, 2011:

550,000 ‘A’ Ordinary Equity Shares of 10p each 0.1

65,318,400 ‘B’ Ordinary Equity Shares of 10p each 6.5

6.6

The ‘A’ Ordinary Shares carry 500 votes per share on a poll. The ‘B’ Ordinary Shares carry 1 vote per share on a poll on aresolution affecting their rights, or to sanction a reduction of capital, or winding up of the company or a sale of part of itsundertaking, but no vote otherwise. Foreign controlled shares carry no voting rights. Dividends are paid according to the amount paid up per share. On a winding up, subject to the Articles, a liquidator may value any assets and determine how such assets shall be divided between the members or different classes of members.

21 Reserves

Group

(i) Profit and Loss Account £m

Balance at 1st April, 2010 370.2

Retained profit for year 72.7

Equity dividends payable in the year (4.4)

Exchange adjustments on the net assets of joint ventures (0.5)

Currency translation difference on foreign investments (6.3)

Currency translation difference on related borrowings 1.1

Transfer from revaluation reserve 0.2

Purchase of own shares (6.5)

Receipts from sale of own shares 3.6

Actuarial gain on pension scheme 6.7

Movement on deferred tax relating to pension liability (3.0)

Balance at 31st March, 2011 433.8

(ii) Other Reserves Capital Share based

Share Merger Capital redemption Revaluation payments premium reserve reserve reserve reserve reserve

£m £m £m £m £m £m

Balance at 1st April, 2010 0.5 29.5 35.8 1.0 8.5 3.1

Transfer to retained profit - - - - (0.2) -

Share based payment credit - - - - - (0.3)

Balance at 31st March, 2011 0.5 29.5 35.8 1.0 8.3 2.8

The cumulative amount of negative goodwill arising from acquisitions credited to reserves prior to 31st December, 1998 was£3.8m. This negative goodwill would only be credited to the profit and loss account on any subsequent disposal of the businessto which it related. Negative goodwill arising after that date will be carried forward under intangible assets in the balance sheetand amortised over its useful life.


21 Reserves (continued)

Company

Capital Share redemption Retained premium reserve profit

£m £m £m

Balance at 1st April, 2010 0.5 1.0 343.4

Retained profit for the year - - 38.2

Equity dividends payable in the year - - (4.4)

Purchase of own shares - - (6.5)

Receipts from sale of own shares - - 3.6

Balance at 31st March, 2011 0.5 1.0 374.3

The profit and loss account reserve includes the reserves of The Edrington Group Limited Employee Benefit Trust amounting to £11.8m (2010: £8.8m) and a deduction from the company’s reserves for their own shares held by the Employee Benefit Trustamounting to £20.2m (2010: £14.3m). There are restrictions on the parent company’s ability to distribute the reserves of theEmployee Benefit Trust, while the realised profit of the company is unaffected by the deduction from reserves for the own sharesheld by the Employee Benefit Trust.

A profit and loss account is not presented in respect of the company, as allowed by section 408 of the Companies Act 2006. Theprofit attributable to the shareholders dealt with in the financial statements of the company amounts to £38.2m (2010: £31.6m).

Own Shares

The Edrington Employee Benefit Trust was established by Trust Deed in June, 1992 to act as a market for shares in The EdringtonGroup Limited, and it will, so far as possible, look to satisfy the demand for Edrington shares on maturity of the Group’s approvedShareSave Schemes.

The Employee Benefit Trust will also sell shares to the trustees of The Edrington Group ShareReward Scheme for those trusteesto allocate in accordance with the rules of that Scheme. The Employee Benefit Trust also distributes shares under a shadowShareReward Scheme for those directors not entitled to participate in the approved Edrington Group ShareReward Scheme.

The Employee Benefit Trust holds 3,355,002 ‘B’ Ordinary shares (2010: 2,983,520 shares) with a cost of £20.2m (2010: £14.3m).

The charge to the Group profit and loss account this year in respect of share awards by the ShareReward Scheme was £2.2m(2010: £2.4m).

Previously the Employee Benefit Trust offered certain individuals in the employment of The Edrington Group, the facility of a loanto assist in the purchase of shares in The Edrington Group Limited. The Employee Benefit Trust holds the shares in its own nameon behalf of the employees, as security for the loans. At 31st March, 2011 the Employee Benefit Trust held a further 378,851(2010: 773,674) ‘B’ Ordinary shares in its own name as security against employee loans of £0.4m (2010: £0.9m).



22 Net Cash Inflow from Operating Activities 2011 2010 £m £m

Group operating profit 161.2 141.0

Depreciation and amortisation 17.2 11.6

Gain on sale of fixed assets (0.3) (0.8)

Disposal of investments 0.2 0.1

Difference between pension charge and cash contributions (9.1) (8.3)

Increase in stocks (0.4) (7.9)

Decrease in debtors 2.0 11.3

Increase/(Decrease) in creditors 17.3 (17.3)

Share based payments (credit)/expense (0.4) 1.8

Exceptional gain on curtailment of post retirement medical benefits - (5.9)

Net cash inflow from operating activities 187.7 125.6

23 Analysis of Net Debt At 1st April Exchange Cash Non Cash At 31st March

2010 Adjustment flow Movement 2011 Note £m £m £m £m £m

Cash in hand 70.2 (3.3) 58.8 - 125.7

Bank overdrafts (7.6) - (5.4) - (13.0)

62.6 (3.3) 53.4 - 112.7

Bank loan (643.5) 1.1 4.0 - (638.4)

Loan notes (0.5) - 0.1 - (0.4)

Other loans (1.2) - 0.9 - (0.3)

Total loans (645.2) 1.1 5.0 - (639.1)

Current asset investments 12.5 (0.1) - (2.0) 10.4

Total net debt 24 (570.1) (2.3) 58.4 (2.0) (516.0)

24 Reconciliation of Net Cash Flow to Movement in Net Debt 2011 2010 £m £m

Increase in cash in hand in the year 53.4 19.6

Net cash outflow from loans 5.0 19.0

Movement in net debt in the year 58.4 38.6

Movement in current asset investments (2.0) 12.5

Exchange adjustment (2.3) 7.0

Movement in net debt in year 54.1 58.1

Net debt at 1st April (570.1) (628.2)

Net debt at 31st March (516.0) (570.1)


25 Transactions with Related Parties

During the year, in the normal course of business, The Edrington Group Limited and its subsidiaries entered into the followingtransactions with related parties as defined in FRS 8 Related Party Transactions.

The Group made purchases of £10.3m (2010: £12.5m) and received services to the value of £5.3m (2010: £5.7m) from LothianDistillers Limited. The Group also made purchases of £5.5m (2010: £7.2m) from Row & Company Limited and made sales to thatcompany of £9.8m (2010: £10.7m). The Group made sales to other joint ventures amounting to £181.0m (2010: £155.1m) andreceived services to the value of £45.4m (£48.4m). The balances due to/from joint ventures in respect of these transactions are asdisclosed in Notes 15 and 16.

The Group has an interest-free loan from Lothian Distillers Limited included in Note 16.

The Edrington Group Limited received dividends of £42.9m (2010: £25.9m) from its subsidiary, The 1887 Company Limited. The directors of The Edrington Group Limited received dividends from the Group totalling £0.3m in the year (2010: £0.2m).

The directors have taken advantage of the exemption offered by FRS 8 not to disclose transactions with wholly-ownedsubsidiaries.

26 Share Based Payments

Equity-settled share option scheme

The company has a share option scheme for all employees of the Group. Options are exercisable at the market price of thecompany’s shares on the date of grant. The vesting period is 3 years. If the options remain unexercised after a period of 3½ years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest.

Details of the share options outstanding during the year are as follows:2011 2010

Weighted Weighted Average Average Number of Exercise Number of Exercise Share Price Share Price

Options (in £) Options (in £)

Outstanding at beginning of year 843,181 £4.92 833,658 £4.95

Granted during the year 245,442 £5.52 361,740 £4.42

Forfeited during the year (53,351) £4.79 (79,602) £4.95

Exercised during the year (256,865) £5.18 (272,615) £4.34

Outstanding at the end of the year 778,407 £5.03 843,181 £4.92

Exercisable at the end of the year - N/A - N/A

The weighted average share price at the date of exercise for share options exercised during the period was £7.55 (2010: £4.82).The options outstanding at 31st March, 2011 had a weighted average exercise price of £5.03 (2010: £4.92), and a weightedaverage remaining contractual life of 2 years (2010: 2 years). The fair value of the options granted on 1st April, 2010 is £0.3m(2010: £0.2m).



The fair value of shares and options granted is calculated at grant date using the Black-Scholes model and in accordance withFRS 20 Share Based Payments. The inputs into the Black-Scholes model are as follows: 1st April 1st April 1st April Grant date 2010 2009 2008

Share price at grant date £6.36 £6.14 £6.18

Exercise price at grant date £5.03 £4.92 £4.95

Expected volatility 12% 10% 12%

Expected life 3 years 3 years 3 years

Risk free rate 2.4% 3.5% 4.6%

Expected dividend yield 6.3% 3.0% 2.6%

Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years.

The Group recognised total expenses of £2.4m relating to equity-settled share based payment transactions in the year to 31stMarch, 2011 (2010: £2.6m).

27 Retirement Benefit Liabilities

Retirement benefit liabilities after deferred tax comprise: 2011 2010 £m £m

Defined benefit liabilities in principal subsidiaries (32.8) (39.1)

Defined benefit liabilities in Maxxium Taiwan Limited (0.7) (0.5)

Other post retirement benefits (2.7) (2.2)

(36.2) (41.8)

Defined Benefit Schemes

The Group operates two defined benefit pension schemes in the UK providing benefits based on final salary, which have beenclosed to new employees since February 2008. The benefit commitments are funded in advance and the assets of the schemesare held in separate trustee administered funds. The contributions are determined by a qualified actuary on the basis of regularvaluations using the projected unit method.

The most recent actuarial valuations of the defined benefit pension schemes and other post retirement benefits were undertakenin March 2010. Both valuations, which were updated to 31st March, 2011 were performed by independent, professionallyqualified actuaries.

Maxxium Taiwan Ltd, in which the Group has a 87.5% holding, also has a defined benefit pension scheme.

The notes below do not include amounts relating to Maxxium Taiwan’s scheme on the grounds of materiality to the Group.

The major assumptions used by the actuary were as follows: 2011 2010

Rate of increase in salaries 4.4% 4.5%

Rate of increase of pensions in payment 3.3%-5.0% 3.4%-5.0%

Discount rate 5.5% 5.5%

Inflation assumption 3.4% 3.5%

Medical benefits inflation assumption 5.7% 5.8%

The post retirement mortality assumptions used to value the benefit obligation at 31st March, 2011 is SIPXA adjusted by 115% for both males and females and at 31st March, 2010 was PXA00 adjusted by 120% for males and 110% for females, plus anallowance for long cohort projections.


27 Retirement Benefit Liabilities (continued)

The assets in the schemes and the expected rates of return were: 2011 2010

Rate of 2011 Rate of 2010 Return Value Return Value

% £m % £m

Equities and property 7.5% 107.5 7.6% 99.9

Corporate Bonds 5.5% 37.7 5.5% 28.4

Bonds 4.4% 29.4 4.5% 26.0

Cash 0.5% 0.4 0.5% 2.9

Property 6.9% 14.5 7.0% 11.4

Insured pensions 5.5% 5.7 5.5% 7.0

Total fair value of assets 195.2 175.6

Present value of scheme liabilities (239.5) (229.9)

Deficit in pension schemes (44.3) (54.3)

Related deferred tax asset 11.5 15.2

Net deficit in pension schemes (32.8) (39.1)

Analysis of amount charged to operating profit in respect of defined benefit schemes 2011 2010 £m £m

Current service cost (4.8) (3.4)

Analysis of net charge to finance costs 2011 2010 £m £m

Expected return on pension schemes assets 11.8 7.8

Interest on pension liabilities (12.6) (11.6)

Net charge to finance costs (0.8) (3.8)

Analysis of amount recognised in statement of total recognised gains and losses (STRGL) 2011 2010 £m £m

Actual return less expected return on assets 0.3 36.2

Experience gains and losses on liabilities (1.0) 0.2

Changes in assumptions 2.7 (54.1)

Actuarial gain/(loss) recognised in the STRGL 2.0 (17.7)

The cumulative actuarial gains and losses recognised in the STRGL at 31st March, 2011 were £(48.6m) (2010: £(50.6m)).



2011 2010 £m £m

Reconciliation of fair value of scheme assets

Opening fair value of scheme assets 175.6 126.3

Expected return on assets 11.8 7.8

Employers’ contributions 13.6 11.4

Members’ contributions 1.1 1.2

Actuarial gains 0.3 36.2

Benefits paid (7.2) (7.3)

Closing fair value of scheme assets 195.2 175.6

The actual return on plan assets was £12.0m (2010: £19.2m).

2011 2010 £m £m

Reconciliation of defined benefit obligation

Opening defined benefit obligation (229.9) (167.1)


Interest cost (12.6) (11.6)

Members’ contributions (1.1) (1.2)

Actuarial gains/(losses) 1.7 (53.9)

Benefits paid 7.2 7.3

Closing defined benefit obligation (239.5) (229.9)

2011 2010 £m £m

Movement in deficit during the year

Deficit in schemes at beginning of year (54.3) (40.8)


Contributions 13.6 11.4

Net interest cost (0.8) (3.8)

Actuarial gains/(losses) 2.0 (17.7)

Deficit in schemes at end of year (44.3) (54.3)


27 Retirement Benefit Liabilities (continued) 2011 2010 2009 2008 2007 £m £m £m £m £m

Five year history:

Total market value of assets 195.2 175.6 126.3 139.9 134.1

Present value of scheme liabilities (239.5) (229.9) (167.1) (162.5) (183.9)

Deficit in pension scheme (44.3) (54.3) (40.8) (22.6) (49.8)

History of experience gains and losses

Experience adjustments on schemes’ assets 0.3 36.2 (31.8) (10.1) (0.6)

Percentage of schemes’ assets 0.2% 20.6% 25% 7.2% 0%

Experience adjustments on schemes’ liabilities (1.0) 0.2 (1.1) 5.2 (0.3)

Percentage of schemes’ liabilities 0.4% 0.1% 0.7% 3.2% 0%

Total amount recognised in statement of total recognised gains and losses 2.0 (17.7) (25.7) 22.2 0.6

Percentage of schemes’ liabilities 0.8% 7.7% 15.4% 13.7% 0%

Defined Benefit Schemes

The Group paid contributions of 35% of pensionable salary and an additional lump sum payment of £7.1m to the pensionschemes during 2011. It is anticipated that the Group will pay 28% of pensionable salary and will make additional lump sumpayments of £10.0m in the year to March 2012.

In addition to the Group defined benefit schemes, Maxxium UK Limited and Lothian Distillers Limited operate defined benefitschemes. The Group’s aggregate share of the net pension deficit of these joint ventures is £5.5m (2010: £9.9m).

Defined Contribution Schemes

The Group operates a number of defined contribution schemes for employees in the UK and overseas.

The pension charge for the year in respect of the Group’s defined contribution schemes amounted to £0.5m (2010: £0.4m).

Other Post Retirement Benefits 2011 2010 £m £m

Other post retirement benefits reflected in the accounts

Potential liability for discretionary post retirement benefits (3.5) (3.1)

Related deferred tax asset 0.7 0.9

Net potential liability for discretionary post retirement benefits deficit (2.8) (2.2)

28 Control

The company is controlled by The Robertson Trust, a charitable organisation.

29 Post Balance Sheet Event

On 1st April 2011, the Group completed the acquisition of Maxxium Shanghai Limited and Maxxium Hong Kong Limited fromBeam Global Netherlands BV by increasing its stakeholding in those entities to 100% of issued share capital. The provisionalconsideration for the acquisition is approximately £5.5m, subject to finalisation of ongoing negotiations around working capital.


Brugal & Co., S.A.Av. J. F. Kennedy No. 57Edificio BrugalSanto DomingoDominican Republic 1183T +809 566 5651F +809 732 7777www.brugal.com.dowww.brugal-ron.com

The Macallan DistilleryEaster Elchies Craigellachie, BanffshireAB38 9RXT +44 (0)1340 871471 F +44 (0)1340 871212www.themacallan.com

Highland Park DistilleryHolm RoadKirkwall, OrkneyKW15 1SUT +44 (0)1856 873107 F +44 (0)1856 876091www.highlandpark.co.uk

The Glenrothes DistilleryRothesAberlour, MorayAB38 7AAT +44 (0)1340 872300 F +44 (0)1340 872172

The Famous Grouse ExperienceGlenturret DistilleryThe Hosh, CrieffPerthshirePH7 4HAT +44 (0)1764 656565 F +44 (0)1764 654366www.thefamousgrouse.com

The Clyde CooperageNorth British WarehousesAddiewell, West LothianEH55 8NTT +44 (0)1506 873433 F +44 (0)1506 873438

Maxxium Taiwan 5F, No. 310 Chung Hsiao East RoadSection 4TaipeiTaiwan 106T +886 2 8773 9099F +886 2 8773 9380

Maxxium Korea Keumkang Tower, 11th Floor889-13 Daechi-DongKangnam-Ku135-570 SeoulSouth KoreaT +82 2 3468 4600F +82 2 3468 4601

Maxxium SwedenLuntmakargatan 46Box 5314102 47 StockholmSwedenT +46 8440 8300F +46 8 20 87 80

Maxxium DenmarkDronningens Tvaergade 91302 CopenhagenDenmarkT +45 43 225 500F +45 43 46 19 28

Maxxium NorwayP.O.Box 4531Nydalen 0404OsloNorwayT +47 91 152 020F +47 22 95 29 59

Maxxium FinlandItälahdenkatu 15-1700210 HelsinkiFinlandT +358 (0)20 7981 520F +358 (0)20 7981 522www.liquidinspiration.fi

Maxxium Shanghai Unit 1, 19/F, Tower 1 Grand Gateway No.1 Hong Qiao RoadShanghai 200030China T + 86 21 64483388 F + 86 21 64483369

Maxxium Hong KongSuite 1207-09A,Exchange Tower 33 Wang Chiu Road Kowloon Bay Hong Kong T: +852 2891 8086 F: +852 2838 4664

Maxxium España C/ Arturo Soria 107 28043 Madrid Spain T +34 91 353 4600 F +34 91 353 4610

Maxxium UKMaxxium House Castle Business Park Stirling FK9 4RT T +44 (0)1786 430 500 F +44 (0)1786 430 600

Maxxium Nederland De Cuserstraat 89 1081 CN Amsterdam The Netherlands T +31 20 5806 806 F +31 20 6811 051

Maxxium Russia 30/1, Obrucheva Street Building 2, 4th Floor 117861 Moscow Russia T +7 495 980 97 37 F +7 495 980 97 30

North British Distillery9 Wheatfield RoadEdinburghEH11 2PXT +44 (0)131 337 3363 F +44 (0)131 346 7488www.northbritish.co.uk

Principal joint venture companies:

Principal subsidiaries:

The Edrington Group2500 Great Western RoadGlasgowG15 6RWT +44 (0)141 940 4000 F +44 (0)141 940 4040

West KinfaunsPerthPH2 7XZT +44 (0)1738 440000 F +44 (0)1738 493838

www.edringtongroup.com

GROUP LOCATIONS

This annual report is printed on paper from well-managedforests, controlled sources and recycled wood or fibre.

The Edrington Group2500 Great Western RoadGlasgow G15 6RWTel: +44 (0)141 940 4000Fax: +44(0)141 940 4040

www.edringtongroup.com please enjoy our brands responsibly

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