listed companypetrafoods.listedcompany.com/misc/ar2010.pdf · OUR GROWTH Revenue has increased three-fold as our businesses have deepened and broadened their global and regional footprints

Annual Report 2010

BUILDINGSUCCESS UPON SUCCESS

OUR GROWTH

Revenue has increased three-fold as our businesses have deepened and broadened their global and regional footprints.

Net Profi t in 2010 – the highest ever in the history of Petra Foods – results from the successful implementation of our strategies.

Global Presence of our business in 11 countries, on four continents.

3Total Assets increase refl ects Petra Foods’ relentless growth as we continuously strive to deliver satisfaction to all of our customers.

US$44.5m

X186%

11countries

2006-2010

Our Brands’ market share in key Indonesian market.

Master Brands and Key Sub-Brands give us a portfolio to reach out to consumers at all levels in the marketplace.

Largest Supplier of cocoa ingredients in the world.

Production Facilities, Offi ces and Businesses spread across Asia, Latin America, the USA and Europe.

>50%

16

3rd

>20

Financial Highlights for FY2010

+26%Revenue to US$1,566 million

+61%EBITDA to US$108.4 million

+81%Net Profit to US$44.5 million

+42%DPS to 2.89 US cents(2)

+67% EPS to 7.73 US cents(1)

+5.1%ptROE to 17.7%

+63%Share Price Performance

Petra Foods STI180

160

140

120

100

80

60

+63%

+10%

%

Jan 2010 Feb 2010 Mar 2010 Apr 2010 May 2010 Jun 2010 Jul 2010 Aug 2010 Sep 2010 Oct 2010 Nov 2010 Dec 2010

Closing Price: S$1.68(At 31st December 2010)

(1) Earning Per Share (EPS) for 2010 is calculated based on weighted average number of shares of 575,282,808 shares after the Share Placement (532,277,000 – 2009).(2) Dividend Per Share (DPS) is calculated based on the enlarged Share Capital (after the Share Placement) of 611,157,000 shares (532,277,000 – 2009).

Petra Foods is a Singapore-based company with global operations. Each of its two Divisions is a leader in its chosen market.

• Fourth largest cocoa bean grinder.

• Third largest independent cocoa ingredients supplier.

• Market leader in South East Asia’s largest chocolate confectionery market.

• Signifi cant size; Revenue of US$1.6 billion, Net Profi t of US$44.5 million, Total Assets of US$1.1 billion.

• Global presence, with operations in 11 countries.

Signifi cant Achievements of the Year

• Record year for profi tability, with net profi t of US$44.5 million, the highest in the history of the Company.

• Turning around European operations within the year of investment completion.

• Strengthened the supply chain through the establishment of the Processors Alliance for Cocoa Traceability and Sustainability (PACTS) joint venture.

• Successfully executed share placement of US$60 million, further strenghtening our fi nancial position and preparing us to take advantage of future growth opportunities.

1 Financial Highlights for FY20102 Petra Foods at a Glance4 Proven Track Record 6 Momentum for Growth8 Our Group’s Five-Year

Financial Highlights 10 Chairman’s Letter12 CEO’s Letter14 Board of Directors

18 Senior Management Business Review20 – Cocoa Ingredients Division 24 – Branded Consumer Division Financial Strategy30 – In Conversation with the CFO32 Operating and Financial Review36 Financial Statements

Contents

Petra Foods Limited Annual Report 2010 Financial Highlights for FY2010 1

Petra Foods at a Glance

From our origins in South East Asia in 1984, our Group now stretches across four continents with operations in 16 locations to better serve our many international Cocoa Ingredients customers and to satisfy our growing consumer base in South East Asia.

Our presence

Headquarters Cocoa Ingredients Division Branded Consumer Division


North America

United States of America

Latin America

Mexico

Brazil

Europe

FranceThe Netherlands

Germany

Asia

Thailand

Malaysia

Indonesia

Singapore

The Philippines

Revenue Breakdown by Business Cocoa Ingredients Division Branded Consumer Division

77%

23%

Group Revenue up to US$1,566 million

+26%

2 Petra Foods Limited Annual Report 2010

COCOA INGREDIENTS DivisionRevenue Growth from 2006 to 2010 (US$ million)

BRANDED CONSUMER Division

+88%

Revenue up to US$367 million

From a single marketplace business, we have grown the scale of our Branded Consumer business throughout the region with operations in Indonesia, Philippines, Singapore and Malaysia.

Over this period, we further strengthened our presence in all our markets and increased the market penetration of our Own Brands by enhancing our brand offerings through new product innovations, extending into new categories, and extending our distribution reach.

+266%

Revenue up to US$1,199 million

With our world class processing facilities strategically located in Asia, the Americas and Europe, we now have a truly global footprint that allows us to serve all our key customers, fulfi lling their requirements for cocoa ingredients that meet exacting standards of quality, safety, reliability and consistency.

Over the last fi ve years, we have grown the revenues of the Cocoa Ingredients Division by more than 3 times and expanded our global grinding capacity to 370,000 metric tons (mt) per annum.

Revenue Growth from 2006 to 2010 (US$ million)


1,1992010

9452009

8742008

5972007

3282006

+27%

+82%

+47%+8%

3672010

3002009

2532008

2402007

1952006

+22%

+23% +5%

+19%

Petra Foods Limited Annual Report 2010 3

PROVEN TRACK RECORDSuccessful value creation through business excellence and global presence, to deliver sustainable growth.

RECORD NET PROFIT Petra Foods’ EBITDA of US$108.4 million and net profi t of US$44.5 million represent the highest earnings achieved in the company’s history. Compared to 2009, these represent increases of 61.3% in EBITDA and 80.6% in net profi t driven by the strong growth in both Divisions.

DOUBLE DIGIT GROWTH AT GROUP & BUSINESS UNIT LEVELSEach of our Divisions has contributed to the record numbers achieved during 2010. Our Branded Consumer Division increased sales by US$67.0 million (22.4%) and EBITDA by US$15.1 million (38.5%) and our Cocoa Ingredients Division increased sales by US$254.5 million or 26.9% and EBITDA by US$26.1 million or 93.5%.

Increases in EBITDA during 2010, refl ect the focus within each Division on profi tability.

CONTINUING IMPROVEMENTS IN PROFITABILITYBranded Consumer focuses on growing our Brands in their marketplaces while balancing raw material cost management with carefully timed price adjustments when necessary, and Cocoa Ingredients manages its EBITDA/mt yield by increasing the proportion of customized products within its sales mix.

MORE BALANCED CONTRIBUTION FROM BUSINESS DIVISIONSIn 2010, each Division contributed 50% of EBITDA, with the substantial increase in EBITDA in Cocoa Ingredients refl ecting improvements in the operations in Europe.

MORE DIVERSIFIED GEOGRAPHICALLYThe core market for our Branded Consumer Division is the Indonesian market but the Division also concentrates on the ASEAN region. Within this region we have achieved signifi cant growth momentum and our sales outside Indonesia have risen to 31.2% of total Branded Consumer sales. We expect this momentum to be sustained in the year to come. And our Cocoa Ingredients Division serves the global market for cocoa ingredient products.

KEY PLAYER FOR COCOA INGREDIENTSOur Cocoa Ingredients Division has now grown to be a global organization. We are the world’s fourth largest grinder of cocoa beans, and we are the third largest supplier of cocoa ingredients in the world.

DELIVERING

MOMENTUM FOR GROWTHOur solid foundations have led to continued growth in profitability.

GLOBAL REACH WITH SCALABLE SYNERGYOur Cocoa Ingredients business has grown in size and we now have eight factories and three other operations in 11 countries, on four continents. And our Branded Consumer Division has expanded both its manufacturing and its distribution beyond the core market of Indonesia. Each Division leverages on its core competencies to fuel this pattern of growth.

RIDING ON OUTSOURCING AND CONSOLIDATION TREND IN THE COCOA INGREDIENTS INDUSTRYThe current trend for global food companies to outsource the production of ingredients has helped us to grow our Ingredients business – partly through acquisitions and partly because international food companies will only purchase from trusted partners who have proven technologies and capabilities. And the process of consolidation within the global food industry has also helped us to leverage our reputation, our skills and our technology to further grow our business.

STRENGTHENED PRESENCE IN EUROPE, THE WORLD’S LARGEST COCOA MARKET2010 was the fi rst full year of operation of our new factory in Hamburg. During 2010 all of our operations in Europe were able to expand their scale, and the Hamburg factory introduced new customized products. As a result – and with the support of our committed team of employees in Europe – the European operations turned EBITDA positive during 2010, thereby contributing signifi cantly to the improved results for Delfi Cocoa.

GROWING IN A FAST-GROWING CONSUMER MARKETPLACEOur Branded Consumer Division will continue to focus on the growth region of South East Asia – a region where historical growth rate for chocolate confectionery sales has outpaced that of global growth. We will further grow our Brands in our key markets of Indonesia and Philippines by continuously refreshing our product portfolio and expanding into new product categories, responding to changes in market demographics and tastes, purchasing power and preferences.

STRONG PORTFOLIO OF WELL-ESTABLISHED GLOBAL CUSTOMERSDelfi Cocoa’s reputation as a solid, reliable partner has led us to be sought-out by many of the leading food companies in the world – companies that insist on partnering only with suppliers who can guarantee quality, consistency and food safety in the ingredients which they require. These customers form the bedrock on which we have built our business. And our Branded Consumer Division has been selected as a distribution partner within the ASEAN countries by many of the world’s leading food companies.

BUILDING

1,1992010

9452009

8742008

5972007

3282006

367

300253

240

195

1,245

1,566

1,127

837

523

Our Group’s Five-Year Financial Highlights

Our Group’s Five-Year Financial Highlights

Revenue by Division US$ million Cocoa Ingredients Division Branded Consumer Division

EBITDA by Division* US$ million Cocoa Ingredients Division Branded Consumer Division

* Before adjustment

35%

4%

34%

3%

15%

9%

28.9%5-year CAGR

542010

282009

222008

272007

282006

54

3937

3226

67

108

595954

442010

252009

232008

262007

292006

Revenue Breakdown by Geography % ASEAN Europe North America Australia South America Other Asian Countries

* Before adjustment

Net Profi t after Tax* US$ million

13.4%5-year CAGR

20.0%5-year CAGR


Five-Year Financial Highlights

2010 2009 2008 2007 2006

For The Year (US$ million)RevenueBranded Consumer 366.9 299.9 252.8 239.8 195.4Cocoa Ingredients 1,199.1 944.6 874.5 596.8 327.5Group Revenue 1,566.0 1,244.5 1,127.3 836.6 522.9

EBITDA Before Adjustments*Branded Consumer 54.4 39.3 36.6 31.7 26.6 Cocoa Ingredients 54.0 27.9 22.4 27.6 27.8 Group EBITDA 108.4 67.2 59.0 59.3 54.4

Profi t before Tax 58.5 27.3 21.5 31.7 37.3 Net Profi t before Exceptional Items 44.5 24.6 22.9 25.6 27.3 Exceptional Items – – – 0.7 1.8 Net Profi t after Exceptional Items 44.5 24.6 22.9 26.3 29.1

EBITDA After Adjustments*Branded Consumer 54.4 39.3 35.3 31.7 26.6 Cocoa Ingredients 54.0 27.9 13.1 27.6 27.8 Group EBITDA 108.4 67.2 48.4 59.3 54.4

Profi t before Tax 58.5 27.3 10.9 31.7 37.3 Net Profi t before Exceptional Items 44.5 24.6 14.1 25.6 27.3 Exceptional Items – – – 0.7 1.8 Net Profi t after Exceptional Items 44.5 24.6 14.1 26.3 29.1

At Year End (US$ million)Total Assets 1,053.8 862.1 631.1 536.3 368.7 Total Liabilities 759.7 642.0 427.9 329.8 196.7 Shareholders’ Funds 294.1 207.7 183.6 188.8 172.0 Total Debt 549.1 462.3 320.4 225.3 124.9 Net Debt 506.3 444.0 304.0 219.0 114.9

Return on Equity (%) Before Adjustments 17.7 12.6 12.1 14.6 18.0 After Adjustments 17.7 12.6 7.6 14.6 18.0 Net Debt to Equity (%) 172.0 202.0 150.0 106.0 66.8 Adjusted Net Debt to Equity (%) – excluding Trade Finance and MTN 34.0 70.0 66.0 50.0 50.0

Per Share DataDividend (US cents) 2.89 2.04 2.04 2.04 1.97Earnings (US cents) Before Adjustments Basic & Fully Diluted 7.7 4.6 4.3 4.9 5.5 After Adjustments Basic & Fully Diluted 7.7 4.6 2.6 4.9 5.5

Net Tangible Assets (US cents) 0.45 0.35 0.30 0.31 0.30

Operating StatisticsEBITDA/mt of Sales Volume – Cocoa Ingredients (excluding Adjustments) (US$) 215 119 98 136 204

Gross Profi t Margin – Branded Consumer 31.1% 29.1% 30.8% 31.3% 31.9%

* The Adjustments in 2008 pertain to the Hedge Re-designation Charge; the forex losses; and the Fair Value Accounting Charge.

Our Group’s Five-Year Financial HighlightsPetra Foods Limited Annual Report 2010 9

New capital raised in 2010

Sales CAGR since listing

+26.4%

US$60m

Chairman’s Letter

Chairman’s Letter

“ Because of our strategic positioning we are optimistic that the growth momentum we have built will allow us to continue to achieve satisfactory growth in the years to come.”

Pedro MataChairman


Chairman’s Letter

Dear fellow shareholders,When I wrote to you last year I explained that we at Petra Foods were optimistic about the year to come and that we felt that we would be able to maintain the growth momentum which we had built up.

I am very pleased to report to you that in 2010 Petra Foods achieved record revenues of US$1.6 billion and record earnings of US$44.5 million representing increases of 25.8% and 80.6% from 2009. Our business model is to nurture the two Divisions which make up Petra Foods – our Branded Consumer business and our Cocoa Ingredients business. Together these Divisions constitute our “twin-engines of growth”, and I am pleased to report that in 2010 both Divisions achieved solid growth and excellent results.

Delivering growthSince our listing as a public company in 2004 we have been committed to follow a strategy of growth, and we are gratified that our twin-engines of growth have given us a sturdy platform for long term growth. These twin businesses are complementary and each in its own way contributes to the strength and success of Petra Foods. Both businesses play a role in the Cocoa Value Chain. Each Division is a leader in its chosen market: the Branded Consumer Division dominates the Indonesian chocolate confectionery market and now is a significant player in the ASEAN regional market; and the Cocoa Ingredients Division has now grown to be a global organization. We are the world’s fourth largest grinder of cocoa beans. And we are the third largest supplier of cocoa ingredients in the world.

Growth momentumWe are optimistic that the growth momentum which we have built up will allow us to continue to achieve satisfactory growth in the year to come. Since our listing as a public company in 2004 we have achieved CAGR growth rates of 26.4% in Sales, 18.1% in EBITDA, and 15.9% in Net Profit. All aspects of our business have grown significantly during this time. In both of our Divisions we have acquired factories, added to our product ranges, increased production capacity, and entered new markets. And we have expanded our ingredients business into Latin America and into Europe. This expansion in our business has been driven by our management team and we have every expectation that they will be able to bring our business to the next level of performance.

Part of this confidence is because of the growth momentum we have built up. The Cocoa Ingredients Division now has operations in 11 countries on four continents. The installed capacity to grind cocoa beans has expanded to 370,000 mt/year, and the completion of the investment programme in Europe allows us to serve customers in the European market – the largest market for cocoa ingredients in the world. In 2010 the Division increased its sales volumes by 7.3% and we plan to further increase our bean grinding capacity during 2011.

The Branded Consumer Division is firmly rooted in the Indonesian chocolate confectionery market – the largest market for chocolate confectionery in the ASEAN region – as well as being an important supplier in the ASEAN region. We have a firm position founded on a strong portfolio of consumer products and world-class manufacturing facilities. Overall, the revenues of the Branded Consumer Division expanded by 22.4% in 2010 compared to 2009.

Sustaining fundamentalsAs we look to the future we continue to be optimistic because of where Petra Foods has positioned our two Divisions. The Cocoa Ingredients Division is now a major player in the global food

industry where consolidation and outsourcing are significant realities. Because the major customers are world-class food companies with high standards and exacting requirements, these trends favour suppliers like ourselves who have powerful technical capabilities and who have strong manufacturing systems and discipline. And the Branded Consumer Division has focused its business on the ASEAN region where demand for chocolate confectionery has grown steadily in recent years.

Cocoa Value ChainWithin their chosen markets, each of our Divisions has considerable depth and reach because of the range of products and services they can offer and because of the geographic coverage they enjoy. Together they cover much of the Cocoa Value Chain which stretches from the farm gate to the final consumer. While we have been active for some time now in the procurement of cocoa beans in origin countries, this year we have extended our activities by helping to set up the PACTS organization (Processors Alliance for Cocoa Traceability and Sustainability). This organization is creating a win-win situation by improving the livelihood of cocoa farmers in origin countries while assuring a flow of high quality, traceable and sustainable cocoa to processors such as our Cocoa Ingredients Division. This is one of the ways we can act to safeguard the interests of our customers and consumers while also helping to safeguard the resources of the Earth.

Concern for the futureAs I write this letter the outcome of the tragic situation in the Ivory Coast is far from clear but we are hopeful that a peaceful resolution of the problems will become evident. We will continue to do all that we can to make cocoa an important source of income for all cocoa farmers and their communities and we hope that increasing incomes and prosperity will help to stabilize the countries where cocoa is grown.

We are watching developments with interest but we continue to source cocoa beans from many countries and through the international trade as part of our policy to mitigate risk in our business.

Strengthening our companyDuring 2010 we increased the share capital of the company by 14.8% when we issued 78.9 million new shares. We were very pleased that all of the new shares were immediately taken up as this represents a strong testimony of the investors confidence in the future of the Company. The new capital raised (about US$60 million) will be used to fund strategic growth opportunities and to increase our financial resources for Petra Foods’ current operations.

AppreciationIn closing I would like to record my sincere appreciation of the efforts and the support of all of the stakeholders in our business. Our team of dedicated employees and managers are tireless in their efforts to allow us to grow our businesses; our suppliers who support our efforts to constantly improve on quality, reliability and food safety issues; our customers and partners who share our vision for quality and consistency in all of our products and services; and you our shareholders who support us with your confidence in our chosen strategies.

Pedro MataChairman24th March 2011


EBITDA growth in 2010

Record Net Profi t in 2010

CEO’s Letter

“ By continually creating reach and scale for each of our businesses our twin engines of growth have allowed us to build success upon success.”

US$44.5m

+61%

CEO’s Letter

John T.C. ChuangCEO


Dear fellow shareholders,During 2010 Petra Foods recorded the highest revenues and the highest earnings in the history of the company. Compared to 2009, revenues grew by 25.8% to US$1.6 billion, earnings grew by 80.6% to US$44.5 million, and at the same time EBITDA grew by 61.3% to US$108.4 million. These successful results have been made possible by the record earnings and strong growth in both Divisions.

Record earnings; strong growthBoth Divisions achieved record earnings and growth during 2010. Compared to 2009 our Branded Consumer Division increased sales revenues by US$67.1 million or 22.4% and Cocoa Ingredients Division by US$254.5 million or 26.9%. EBITDA increased by US$15.1 million (38.5%) in Branded Consumer and by US$26.1 million (93.5%) in Cocoa Ingredients. A significant factor in the EBITDA improvement in Cocoa Ingredients is the substantial improvements in the operations in Europe which turned EBITDA positive during 2010.

Success in 2010The successes of 2010 reflect the positioning of each of our Divisions during the recent years of growth. The scale and size of the Branded Consumer Division offers opportunities to improve profitability, and our distribution networks and expertise can be leveraged to the advantage of our Own Brands and of the Agency brands which we increasingly include in our distribution mix.

The Branded Consumer business is focused on the ASEAN region and here we have achieved significant growth momentum. The Indonesian market is the largest market within the ASEAN region, and in Indonesia our Own Brands have developed scale and a commanding position in the chocolate confectionery market, while our distribution of Agency brands further strengthens our already strong position.

Outside Indonesia our business continues to grow significantly, and throughout the ASEAN region we see tremendous growth opportunities. We expect the momentum we have built up will be sustained in the year to come because the appetite for chocolate confectionery continues to increase within the region, while the opportunities for consumption (rising disposable incomes, our powerful and attractive brands, and our carefully priced products that appeal to the mass market) have grown over recent years.

Cocoa Ingredients success during 2010 reflects a number of factors. During the year overall sales volumes increased by over 17,000 mt (7.3%) as we continue to take every opportunity to maximize the use of the capacity we have installed. The completion of the investment programme in Europe has given the Division a truly Global reach and scale, allowing us to better serve our customers everywhere that we find them and to continue to grow our presence in all of our markets. And we take every opportunity to raise our EBITDA yield through a higher customized content in our product mix. Additionally, our Global reach enables us to concentrate on improving the service we give our customers through improvements and innovations in the Cocoa Value Chain.

Sustaining the Cocoa Value ChainManaging the Cocoa Value Chain has always been key to our success as we concentrate on providing the best service and the best products to our customers. At the beginning of the chain lie the cocoa farmers in the countries of origin. We focus our procurement efforts in various origin countries as a way to improve quality, and an example of these efforts is the PACTS Joint Venture that we formed during 2010.

PACTS is a joint venture in the Ivory Coast, and it operates at the very first link in the Cocoa Value Chain. Sustainability of the supply of cocoa is a critical link in the Cocoa Value Chain and PACTS is intended to ensure this by creating a win-win situation for the cocoa farmers and for our customers. PACTS helps cocoa farmers to improve the quality of the cocoa that they produce through the use of scientific and controlled methods of production and fermentation of cocoa beans. Raising the quality of their harvest allows the farmers to gain more income for themselves, their families and their community. And improvements in the quality of the cocoa help processors such as Petra Foods to provide better products to our customers.

Finally, because PACTS serves various local communities in the Ivory Coast it helps us to manage the traceability of the cocoa we process. Traceability is increasingly important to our industrial customers as they in turn respond to the desires of consumers to be assured that the products they consume have been produced in a fair, sustainable and environmentally sensitive way.

Expanding and strengthening Petra FoodsDuring 2010 we took an important step to strengthen Petra Foods and another to strengthen our operations.

During the month of June 2010 Petra Foods issued 78.9 million new shares and raised approximately US$60 million in new capital. This increase in the capital of the Company (about 15%) was carried out so as to have adequate funds available for strategic growth opportunities, and to increase the financial resources available to fund Petra Foods’ current operations.

In January 2010, for US$13.2 million we acquired the remaining 32% of the shares of our European operations from our Joint Venture partner Armajaro Trading Limited. This change allows us to completely integrate our European operations into our global Cocoa Ingredients business.

Looking to the futureBecause of our strategic positioning we are optimistic that the growth momentum we have already built up will be sustained. Despite the continued economic uncertainties in the world economy, and in particular the tragic unrest that persists today in the Ivory Coast, we find that demand for cocoa ingredients remains very strong and we are convinced that the global network we have been able to put in place will allow us to continue to serve this growing demand efficiently, effectively and competitively. At the same time our technical capabilities and standards allow us to continue to create new products and services tailored to the specific needs of our customers.

And the outlook for the Branded Consumer Division remains exciting. Consumer appetite for chocolate confectionery remains strong in the ASEAN region where we have already built a strong brand equity position, and our distribution expertise and reach continually expands.

For these reasons we look forward to 2011 with excitement and enthusiasm and we hope to continue to deliver service and satisfaction to our customers and success to you, our fellow shareholders.

John T.C. ChuangChief Executive Officer24th March 2011

CEO’s LetterPetra Foods Limited Annual Report 2010 13

Board of Directors

Board of Directors

Pedro has served as Chairman and Independent Director of our company since 6th July 2001 and 12th June 2001 respectively.

Pedro is President of MGS Mata Global Solutions; a senior advisor to Quad-C (a USA based private equity fund); and the CEO of Classic Party Rentals. With its Headquarters in Los Angeles, Classic Party Rentals is the leading US party and event rental company.

For 29 years, Pedro served W.R.Grace & Co. as President and CEO of several Divisions, including serving for 6 years as Chief Executive Officer of Grace Cocoa which under his leadership was the world’s largest and premier supplier of cocoa ingredients to the confectionery, dairy, baking and beverage industries.

Pedro is the Chairman of our Risk Committee as well as a member of the Audit, Remuneration and Nominating Committees.

Davinder has served as a Non-Executive Director of our company since 12th June 2001.

Recognized as one of Singapore’s foremost trial and appellate lawyers, Davinder was one of the first Senior Counsel ever to be appointed in Singapore when that position was created in 1997. Davinder serves as the Chief Executive Officer of Drew & Napier LLC, and in December 2008 he was appointed by the Monetary Authority of Singapore to advise on legal issues arising from the Lehman Brothers collapse.

A practicing lawyer for over 25 years, Davinder has also been appointed as an arbitrator and mediator. Between 1988 and 2006 Davinder was a Member of Parliament of Singapore.

Davinder is the Chairman of our Remuneration Committee as well as a member of the Audit and Nominating Committees.

“ The management continues to perform superbly, always looking ahead to anticipate and plan for challenges.”

“ At Petra Foods we seek to balance short-term and long-term objectives, allowing us to deliver record results and achieve a position of leadership in our chosen markets.”

Mr Pedro Mata-BruckmannIndependent DirectorAmerican

Mr Davinder Singh, s/o Amar SinghIndependent Director Singaporean


Board of Directors

Mike was appointed as an Independent Director of our company on 6th May 2005.

Mike has over 25 years of business experience in the investment and finance industries with over 20 of those years being spent in Asia. Between 1997 and 2000 he served as Managing Director of Credit Lyonnais (Singapore) Merchant Bankers Pte Ltd, as well as Director of PPM Ventures (Singapore) Pte Ltd, a private equity investment arm of Prudential Plc, between 2001 and 2004. He is now Group Finance Director of Isis Shipping Limited.

Mike is a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Singapore Institute of Directors.

Mike is the Chairman of our Audit Committee as well as a member of the Remuneration, Nominating and Cocoa Risk Committees.

On 12th June 2001, Josephine was appointed as Non-Executive Director of our company.

Josephine has been based in Hong Kong for over 25 years and is Chief Investment Advisor of Chepstow Capital Advisors Limited, a Hong Kong based Asian private equity firm. Formerly, she served as the Deputy Chief Executive Officer of CLSA Capital Partners which she joined in 1995 to set up its private equity activities. Josephine is a Fellow of the Hong Kong Institute of Directors and a member of the Law Society of England and Wales, and of the Law Society of Hong Kong.

Josephine is a member of our Audit and Remuneration Committees and Chair of the Nominating Committee.

“ Petra Foods provides a double dose of satisfaction: the satisfaction of a well-run business and the satisfaction of enjoying one of Nature’s great pleasures, the smell and taste of chocolate.”

“ Like the Delfi skier’s two skis, Petra Foods’ two businesses complement each other providing support, fl exibility and the ability to travel at speed.”

This picture is for positioning only.

Mr Michael DeanIndependent DirectorBritish

Ms Josephine PriceIndependent DirectorBritish


Board of Directors

Board of Directors

John founded the company in 1984 and has built Petra Foods from a regional player to be a global company – one of the largest cocoa ingredients providers in the world, and a leading chocolate and confectionery company in ASEAN region. He has been CEO of the company since November 2004. John has over 30 years of experience in the chocolate, cocoa and confectionery business.

John is a member of our Nominating and Cocoa Risk Committees.

Joseph was appointed to our Board on 2nd March 1999 as an Executive Director.

Joseph has over 30 years of experience in senior management positions within the chocolate, confectionery and cocoa industries. Joseph is responsible for the overall management and business development of the Branded Consumer Division in our core market of Indonesia. The business of the Branded Consumer Division includes the manufacture and distribution of our own branded consumer products, and the distribution of third-party products through our own extensive distribution network.

“ Our business environment is constantly changing and our reactions must be dynamic and focused. This is what we do all the time.”

“ Customer focus and our passion for chocolate and cocoa are the foundations on which we build growth and success.”

This picture is for positioning only.

Mr John Chuang Tiong ChoonGroup Chief Executive OfficerSingaporean

Mr Joseph Chuang Tiong LiepPresident DirectorBranded Consumer Division (Indonesia) Singaporean


Board of Directors

William was appointed to our Board on 31st May 2001 as an Executive Director, and as President of Joint Ventures and Chief Operating Officer of our Branded Consumer Division in Indonesia.

A graduate of the California State University Long Beach (Business Administration with Finance), William has over 25 years of experience in senior management positions within the chocolate, confectionery and cocoa industries. William is responsible for the overall operations and the management of the Branded Consumer Division in our core market of Indonesia, and he is also responsible for all of the joint ventures of the Branded Consumer Division.

KC was appointed to our Board on 1st August 2005 as an Executive Director.

KC’s special focus is the Branded Consumer Division where he is responsible for overseeing the international operations and business development of the Division. KC has over 30 years of experience in the branded chocolate and confectionery and fast moving consumer goods industries. He uses this experience to expand the presence of Petra Foods’ products and brands in our chosen consumer markets.

“ Customer satisfaction is the key to our growth, the key to our success, and the source of our inspiration.”

“ Our journey is never ending, but every year we reach new destinations!”

Mr William Chuang Tiong KieChief Operating OfficerBranded Consumer Division (Indonesia)Singaporean

Mr Chua Koon Chek (“KC”)Executive DirectorSingaporean


Senior Management

Senior Management

Edmund Ee Kim SengPresident, Cocoa Ingredients DivisionEdmund has nearly 30 years of cocoa industry experience under his belt, and as President of the Cocoa Ingredients Division, he plays a key leadership role as well as being in charge of the sales and marketing activities of the Division.

Edmund first entered into the cocoa industry in 1979 when he joined Allied Chocolate Industries Ltd, subsequently moving to Allied Cocoa Industries Pte Ltd as Sales Manager from 1982 to 1984. Between 1984 and 1989 he was Commercial Manager of De Zaan Far East (S) Pte Ltd, and in 1989 he joined Petra Foods.

Chin Koon YewChief Financial OfficerChin joined Petra Foods in 2001 as the CFO of Petra Foods, the position he undertakes today.

Before he joined Petra Foods, Chin worked for W.R.Grace for 17 years, progressively undertaking more responsibility in various financial and managerial positions and culminating in the role of Chief Financial Officer Asia Pacific in 1998. In 2001 he joined Petra Foods in his current position, and as Chief Financial Officer, Chin is in charge of all of the Petra Foods Group’s financial operations.

Ben RyanDirector, Business Development and Special ProjectsBen joined our Group in 2003, and is responsible for the Group’s business development and special projects.

Ben worked for W.R. Grace & Co and ADM International for 23 years between 1976 and 2000 in New York, Paris, Berlin, the Netherlands, and the United Kingdom in various executive positions in financial and information technology roles. Of those years, 15 were associated with the cocoa business.

Pontjo Susanto WidjajaDirector, Distribution for Nirwana LestariSusanto has achieved 30 years of operational experience in the cocoa and chocolate industry – and 30 years of service within our Group. Susanto joined PT General Food Industry in 1978, bringing with him experience in audit, accounting and administration positions in Drs H. Sudarmin AK and PT Naintex.

Susanto has served in various capacities within our Group, and he is currently the Director, Distribution for PT Nirwana Lestari.

Ferry HaryantoDirector, Commercial for PT Nirwana LestariFerry is the Director, Commercial for PT Nirwana Lestari, a position he has undertaken since 1995.

Before joining our group, Ferry gained 10 years of experience in sales and marketing roles with PT Gitaswara Indonesia and San Miguel Breweries, and from 1990 until he joined us in 1995 he undertook the position of General Manager (Commercial Division) for PT Gunung Agung Trading.

In his current position, Ferry is responsible for the Group’s sales and marketing operations for modern trades in Jakarta and Bali.


Senior Management

Ridwan C. KidjoDirector, Commercial for PT Perusahaan Industri CeresRidwan C. Kidjo is the Director, Commercial for PT Perusahaan Industri Ceres. Ridwan has up to 18 years of experience in diverse operational, managerial, sales and marketing roles within PT Nirwana Lestari and PT Perusahaan Industri Ceres, where Ridwan honed his skills in business development, marketing and brand development. In his current role as Director, Commercial, Ridwan oversees and drives the Group’s sales and marketing operations for the Group’s proprietary brands, in Indonesia.

Nancy FlorensiaDirector, Finance for PT Perusahaan Industri CeresNancy joined PT Ceres in 1991 and she is responsible for all of the financial operations in PT Ceres. Prior to joining our Group, Nancy had 10 years of experience in accounting and financial positions in PT Indocement, PT Henoch Jaya and the PT Kedaung Group.

Ng Sin HengDirector, Commercial Cocoa Ingredients DivisionIn 1988 Sin Heng joined Petra Foods as the Commodities Manager and in 1996 he became the Director, Commercial of the Cocoa Ingredients Division, the position which he undertakes today.

Sin Heng has over 20 years of experience in the commercial aspects of the chocolate, confectionery and cocoa industry, gained from his time with Allied Management and Consultants Pte Ltd, Cocoa Merchants, London, Allied Cocoa Industries Pte Ltd, and De Zaan Far East Pte Ltd.

Lim Seok Bee (“SB”)Director of Quality Assurance, Technology & OperationsSB joined the Group as the Director of Quality Assurance, Technology and Operations in 1991, and has over 30 years of experience in the quality assurance and quality development aspects of the cocoa and chocolate industry.

Before joining Petra Foods, SB worked for Chocolate Products (M) Sdn Bhd, in roles encompassing quality control and production, and in De Zaan Far East (S) Pte Ltd as a Quality Assurance and Development Manager, and Vice President (Quality Assurance and External Project Development) in 1989.

SB is in charge of the Group’s quality assurance management and technological aspects and operations of our Cocoa Ingredients Division.

Chris Oo Hoe HeeRegional General Manager, Branded Consumer DivisionChris has over 20 years of broad experience in the consumer business in Singapore and the ASEAN region having worked in food manufacturing, distribution, retailing and franchising with both multinational companies and small and medium-sized enterprises.

Chris joined Petra Foods on 1st January, 2006 as Regional General Manager for the Branded Consumer Division, with particular focus on our consumer business in the ASEAN markets. Prior to joining Petra Foods, Chris was the Executive Vice President of the consumer business of a public listed company.


Business Review Cocoa Ingredients Division

Business Review

Sales Revenue increased 26.9% to US$1.2 billion.

EBITDA increased 93.5% to US$54.0 million.

US$54.0mUS$1.2b



For our Cocoa Ingredients Division – known to our customers as Delfi Cocoa – 2010 was a year of growth and a year of success. During the year we increased our sales revenues by US$254.5 million or 26.9% to reach a record annual sales total of US$1.2 billion. And during 2010 we increased our EBITDA by US$26.1 million or by 93.5% to reach a total of US$54.0 million. At the same time, the volume of products shipped during the year from our factories grew by a solid 7.3% as our Division stretched to keep up with the demands of our customers for Delfi Cocoa’s special products.

Building our businessEver since we entered the Cocoa Ingredients business way back in 1988, the foundation of our business has rested firstly on our technical capabilities, secondly on the reputation of Delfi Cocoa, and thirdly on the portfolio of customers which we have built. These three factors are completely intertwined. Our technical capabilities enable us to produce customized cocoa ingredient products tailored to the needs and the applications of our customers. Coupled with our strong manufacturing and quality disciplines, this gives us the ability to meet – and often to exceed – the needs and requirements of our customers, leading to Delfi Cocoa’s reputation as a solid, reliable partner who is capable of innovation in products and services. As a result, over the years we have been sought-out by many of the leading food companies in the world. These leading companies insist on partnering only with suppliers who can guarantee quality, consistency and food safety in the ingredients which they require, and the support of these premier customers has enabled us to build our business on most solid foundations.

Growing our businessFrom our start in 1988, we have continually grown our business both in terms of installed capacity and our geographical coverage. Over the years, the growth in our capacity has been impressive and relentless (since 2002 we have grown our capacity by a CAGR of 17.8%), but this growth has always been demand-led growth. We do not speculatively add extra processing capacity in our factories, hoping to develop new markets to absorb the new capacity. Instead, we continuously respond to the demands of our customers for our top-quality cocoa ingredient products and the increase in our capacity is driven by these customer demands. For this reason our factories are always busy places.

Cocoa Ingredients DivisionBuilding and succeeding


Business ReviewCocoa Ingredients Division


Regional presence – global networkWe have also grown the size and shape of our geographic footprint. At first we were happy to be an Asian-focused company, serving the needs of our customers across Asia. But when we had developed our size, scale, and reputation in Asia, we took advantage of opportunities to follow our international customers into their regional markets and to invest in Latin America and Europe. Partly these opportunities arose from the growing trend for major food companies to outsource the production of their key ingredients to trusted partners who have proven technologies and capabilities. And partly these opportunities were sought by us so as to better serve our customers. As a result of this expansion, we have now reached the point where we have eight factories and three other operations in 11 countries, on four continents.

Service and opportunitiesThe fruits of our expansion are that we now have the ability to serve our international customers in their important regional markets directly from our factories located in those regions. This is a most necessary ability for a supplier to many of the world’s leading food companies. An added advantage for Delfi Cocoa is the fact that we now have successfully created a global network. This brings us opportunities that up to now were not available to us. It allows us to take advantage of economies of scale when sourcing and transporting our raw materials; it allows us the luxury of specialization in our various factories; it increases the opportunities to better serve our international customers; and it brings opportunities to focus directly on the sourcing processes of our cocoa beans, with a view to ensuring that they are produced in a sustainable and ethical manner.

Petra Foods Grinding Capacity 2002-2010Metric Tons (’000)

Cocoa Value ChainFor all of the years of our existence, we have been involved in the Cocoa Value Chain. We consider the Cocoa Value Chain to be the process by which cocoa beans are harvested, transported, processed into cocoa ingredients, and converted into consumer products. We visualize this process as a series of links in a chain which stretches from the gate of the farm on which our cocoa is produced right down to the individual consumer of a cocoa or chocolate product.

Our experience has been that the better we are able to control and add-value to each link in the Cocoa Value Chain, the better we are able to deliver quality and value to our customers. And maximizing the benefits to our customers is one of our constant objectives. During 2010, we took an important step to strengthen our position in the earliest part of the Cocoa Value Chain by entering into a joint venture which we named PACTS – Processors Alliance for Cocoa Traceability and Sustainability. Our partners in this joint venture are the French group CEMOI and the US company Blommer Chocolate. Together we are developing a chain of stations in the Ivory Coast where cocoa can be gathered, fermented, bagged and shipped to processing companies such as Delfi Cocoa.

Progress in sustainabilityThe PACTS joint venture is intended to achieve a number of objectives. First and foremost, is the issue of sustainability. Clearly, without an adequate reward to the farmers, the production of cocoa will decline. PACTS looks to create a win-win situation by helping the farmers to improve the quality of their cocoa through the use of scientific and controlled methods of production and fermentation of cocoa beans.

20092008200720062005200420032002 2010

* Starting from our roots in Asia we have expanded into Latin America (in 2003) and Europe (in 2007).

17.8%CAGR

370370

320310

240220

200200

100



And raising the quality of the cocoa will directly raise the income of the farmers and their communities because processors such as Delfi Cocoa will pay a premium for good quality raw materials.

Secondly, the methods to be promoted for raising quality can also be oriented in such a way that they protect the environment – the earth on which we all depend, and the social environment in which the community of cocoa farmers exists.

Thirdly, the cocoa processed in the PACTS stations is all grown locally. Each processing station is rooted in a village or commune and is intended to be operated for the benefit of the local people. This means that the provenance of the cocoa shipped to the processors can be established and traceability assured – an increasingly important factor in today’s marketplace.

Finally, we are optimistic that the success of the PACTS experience will lead to many further processing stations being established in the Ivory Coast and that the benefits for the cocoa community will become widespread and general.

PACTS is one of a series of initiatives in which Delfi Cocoa joins. These include our membership of the World Cocoa Foundation (WCF) which encourages responsible, sustainable cocoa farming and aims to raise the income of cocoa farmers; our sponsorship of the Cocoa Livelihoods Program in West and Central Africa, jointly funded by the WCF and the Bill and Melinda Gates Foundation; and our partnership with the World Bank’s International Finance Corporation in a program designed to improve returns to cocoa farmers in Indonesia.

Progress in EuropeIn October 2009 our European flagship factory was officially opened in Hamburg and so 2010 was its first full year of operation. During 2010, all of our operations in Europe were able to expand their scale and the Hamburg factory was able to capitalize on the Delfi technology and disciplines introduced during the construction phase. Particular attention was paid to maximizing the throughput of both of our factories and Hamburg worked hard to introduce new customized products. As a result of these achievements and with the support of our committed team of employees in Europe, the European operations turned EBITDA positive during 2010, thereby contributing significantly to the improved results for Delfi Cocoa.

Looking to the futureDuring 2011, we intend to build on the momentum which we have already established and to continue to grow our business. To do this we are not planning any innovations in our strategy or our operations – instead we will continue to follow the path which has brought us much success so far.

We are planning to expand the installed processing capacity in some of our factories, mainly in Asia, and we will continue to develop new products and new abilities that will meet the special needs of our customers.

We will also continue to respect our core values by maintaining our focus on our customers; by continuing to achieve the quality standards which underpin our relationships with our customers; and by continuing to respect and motivate our dedicated team of employees who make all of our dreams and achievements possible.

Production Flow-Chart

Cocoa Beans

Cleaning Drying Breaking Winnowing

CocoaLiquor

Products:Chocolate DrinksChocolate MilkBiscuits and Others

Chocolate

Sugar & Other Ingredients

CocoaPowder

CocoaButter

‹ ‹ ‹‹

‹AlkalizingRoastingGrindingRefining

‹

Pressing

‹


Business Review

Business Review Branded Consumer Division

Sales Revenue increased 22.4% to US$366.9 million.

EBITDA increased 38.5% to US$54.4 million.

US$54.4mUS$366.9m


From Strength to StrengthIn 2010, the growth momentum for our Branded Consumer Division was strong despite the global uncertainties and volatile commodity prices. It was a year where our management team successfully guided our “House of Brands” to another year of record performance. The strong performance was achieved on the back of continued strong market positions achieved by our Core Brands garnered by innovative marketing programmes, product innovation, strong sales and distribution network, and increased operational efficiencies.

We achieved revenue growth of 22.4% Year-on-Year (Y-o-Y) to US$366.9 million with an even more impressive EBITDA growth of 38.5% Y-o-Y to US$54.4 million. The strong EBITDA growth of our Branded Consumer Division was driven by the revenue growth of our Own Brands and the Agency Brands we distribute, and the higher margins achieved for our Own Brands.

To put this growth into perspective, it has not only been a growth achieved Y-o-Y but multi-year as well. The strong results achieved can be attributed to the solid “House of Brands” and “Distribution Power House” we have built and reaffirms our strategies of focusing on our core markets in South East Asia, investing in our Brands constantly, driving innovation, and growing our distribution capabilities and reach.

With our rich heritage, our extensive knowledge of the chocolate business coupled with our constantly evolving expertise and our expanding regional footprint, we believe that these are the solid foundations we have built for our Branded Consumer Division that allowed us to grow at such a rapid pace and which will enable the growth to continue.

Building growth through our BrandsThe love for our Brands in our Core Markets of Indonesia and the Philippines have been shared from one generation to the next, leaving our consumers with lasting fond memories. In our core market of Indonesia for example, this translates to a market share of such extraordinary level that it is more than three times that of our nearest competitor.

As a successful brand owner, we work to continually satisfy our consumers’ tastes by harnessing our constantly evolving expertise as brand builders to create and deliver to the market new products that are of the highest quality, a delight to all the senses and which are fun for our consumers to enjoy. Furthermore we understand that while product superiority is essential, we also need to offer a broad range of choices which meets different consumer desires and price points wherever we operate.

Branded Consumer DivisionBy continuously investing in our Brands, driving innovation, and growing our distribution capabilities and reach, we have built a robust House of Brands and a Distribution Power House in the region.

Business Review Branded Consumer DivisionPetra Foods Limited Annual Report 2010 25

3-in-1 coffeemix products and other convenience beverages in Indonesia. Our JV partner is the leading brand owner and manufacturer of 3-in-1 instant coffees, beverages and convenience foods in South East Asia.

Through this Joint Venture, we are targeting to further broaden our product portfolio and diversify our revenue stream into the vast and fast growing instant 3-in-1 coffeemix segment in Indonesia. Our extensive knowledge of the Indonesian consumer market, our experience and expertise in building a successful portfolio of brands, as well as our extensive distribution network in Indonesia, together with Super’s strong capabilities in developing market-leading instant beverages, we believe is the winning combination for the JV’s success.

With a population of more than 200 million people and a strong coffee drinking culture, Indonesia is now the largest coffee consuming country in South East Asia with overall retail sales value of the coffee market valued at over US$600 million per annum of which the instant coffeemix segment accounts for approximately 30%.

More significantly, the growth potential of the instant coffeemix market remains robust given Indonesia’s relatively young and growing population, coupled with increased urbanization and the growing demand for convenience products.

Building growth through distribution strengthJust as our Brands extend across multiple product categories and multiple price points, our distribution business model is a multi-dimensional one. We have the distribution expertise to carry our Brands through many different outlets, ranging


Business ReviewBranded Consumer Division

Branded Consumer Revenue US$ million

To achieve this, our team will continue to: 1. Extend and continually energize the brand image of our

major brands by delivering to our consumers relevant products and new innovations of unsurpassed quality;

2. Extend and expand our portfolio into new categories of

the confectionery chain by utilizing our Brands’ popularity. Over the last few years, we have expanded our presence from chocolate confectionery into the sugar confectionery category and, more recently, into the beverage segment through our “Delfi Hot Cocoa Indulgence”; and

3. Focus on design, packaging, marketing and advertising in order to get our products across more persuasively. The way we package our products plays just as important a role in our efforts to build the value of our Brands and to keep our Brands fresh in the minds of our consumers.

The objective of our product innovation strategy is to further enchant our consumers to drive continued consumption growth and to continually broaden our marketplace through innovative new products, especially in our core markets of Indonesia and the Philippines. This program remains a key factor in driving our Division’s growth with new products launched over the last 3 years contributing 12.5% of Own Brands sales in 2010. Even going forward, our product pipeline is still overflowing with winning ideas.

To further broaden our product portfolio, in March of 2011, we formed a S$1.5 million Joint Venture (“JV”) with SGX-listed Super Group Limited (“Super”). We have a 60% share in the JV called “Ceres-Super” which will market and distribute instant

Branded Consumer EBITDA US$ million

1952006

3672010

2402007

2532008

3002009

262006

542010

322007

372008

392009

21.7%CAGR

24.5%CAGR


from supermarkets, hypermarkets, convenience stores and pharmacies, all the way to owner operated mini markets, the corner “mom and pop” stores, petrol station kiosks, medical halls and “sari sari” stores. In our market of Indonesia, the number of retail outlets that our Brands can be found in has more than doubled since 2004, now numbering more than 400,000 outlets.

This strength provides us with a significant competitive edge in distributing our Own Brands and when introducing new products into the marketplace. Our distribution expertise and the extensive reach of our network continues to be recognised by many food and beverage companies, ranging from major international food and beverage names to local companies.

We now distribute Agency products in Indonesia, the Philippines, Malaysia and Singapore, and, in all, our distribution expertise extends to nine broad categories, extending beyond even the food and beverage category. As sales of our Own Brands have grown over the years, so too has the revenue contribution from the distribution of Agency products. The number of principals we represented has seen a marked increase in the last few years with several big international names signing with us. Their contribution was immediately felt with revenue from 3rd Party products forming 48% of 2010’s Branded Consumer revenue.

More significantly, as our portfolio of Brands is constantly evolving to generate the long term growth, similarly our distribution expertise is constantly being strengthened to drive our products into the marketplace. With our footprint now firmly entrenched in our four key markets, we have also made significant changes to our distribution infrastructure to keep it relevant in a constantly changing environment.

2011 outlookThe Management Team has been able to grow our Branded Consumer Division by successfully building a solid foundation for our business, and looking forward, we will remain focused on our core markets and will continue to strengthen our portfolio of brands within these by using business innovations across all platforms to continuously deliver value to all our consumers/customers and the Group.

As South East Asia continues to offer healthy economic and consumer growth potential, we are optimistic that our strong financial position, strategies of striving for operational excellence and bolstering market leadership through consistent branding efforts should put us in good stead.

A major challenge that our Branded Consumer business, and many of its peers, will face in 2011 is the current cost inflationary pressures for its raw materials. Our strategy, which has served us well in the past, to minimize the impact of price fluctuations is to utilize a strategy of establishing a forward cover for our major raw material requirements to lock-in costs and ensure cost visibility, and through selective pricing adjustments if necessary. Therefore, despite the continued global uncertainties, we are confident of delivering further growth in 2011.



Business ReviewBranded Consumer Division

Extending across a broad spectrum of categories and price points, our portfolio of brands appeals to the different consumer groups in our key markets. Our strong innovative culture allows us to continually create powerful winning ideas that captivate and delight our consumers.



Breakdown of Loans in Respective Currencies

USD Euro Others IDR

Repayment Schedule of Term Loan & MTN

Repayment in 2013 Repayment in 2012 Repayment in 2011

Breakdown of Debt Facilities Working Capital Term Loans & MTN

Floating & Fixed Rate Components of Loan

Floating Rate Fixed Rate

Financial Strategy In Conversation with the CFO


21%

38%

41%

49%

51%

8%

5%

27%

60%

67%

33%

Chin Koon YewCFO



Maybe you can start with sharing what were the Group’s achievements in 2010?From the lows in 2009, the global economies have somewhat recovered although there are still significant uncertainties prevailing. However from the Group’s perspective, it was a fantastic year for us in 2010. In addition to the record profit achieved by the Group which resulted in a 5.1 percentage point improvement in our Return on Equity to 17.7%, it was also a year where our financial position was significantly strengthened.

Some of our key achievements in 2010 included the successful and well-received Equity Placement of US$60.2 million. The proceeds raised have benefited us on two fronts – one is to further strengthen our Balance Sheet while the other allows us to take advantage of future growth opportunities. It is also noteworthy that as a result of the strong earnings coupled with proceeds from the Placement, the Group’s gearing ratio improved to 1.72 times at end 2010 from 2.02 times previously. More significantly, our adjusted Net Debt/Equity ratio is reduced to 0.34 times from 0.70 times previously.

Over the course of 2010, we also raised our financial headroom (i.e. the unutilized portion of our credit facilities) to US$302 million which we believe puts us in a strong position to deal with any contingencies that may arise.

What is your view on the current interest rate environment?There are different schools of thought on how long this low interest rate environment will last. We have adopted initiatives to buffer the Group from a reversal of the current low interest rate environment.

On this front, close to 50% of our debt portfolio has already been converted into long term fixed interest rate structures and going into 2011, we will continue to identify windows of opportunities to further increase this percentage.

How will the Group deal with the volatility in cocoa bean prices? Will there be any adverse impact on profitability?The volatility and uptrend in prices are not limited to only cocoa beans but to other agricultural commodities as well. Going into 2011, this volatility in raw material prices will persist.

For the Group as a whole, it is useful to emphasize to Shareholders that the individual management team for our two Divisions have a strong track record of growing the business in different geographic locations even through periods of political, financial and economic crises as well as volatility in raw material prices and the currency markets.

Furthermore for our Cocoa Ingredients Division, given our robust Cost Pass Through model coupled with strict hedging policy, we have been successful in mitigating the effect of cocoa bean price fluctuations.

For Branded Consumer business, our strategy to deal with them includes pricing adjustments, establishing forward cover which provides us with cost visibility, and new product launches, especially in the premium segment. This strategy has been effective in continually mitigating higher raw material costs and protecting our Gross Profit Margin.

In terms of how we handle our raw material requirements and supply risks, the sourcing strategy of our Cocoa Ingredients business is to source from multiple origin countries through a number of reputable suppliers. Essentially the objective and strategy is to mitigate any supply risk, especially with cocoa beans being grown in regions which are less stable politically.

For example, at time of writing the political upheaval in the Ivory Coast is currently underway. We have put in place contingent sourcing plans should it turn out to be an extended affair.

Going forward, we need to look beyond our current structure on how we can continue to fulfill our growing requirements. On this front, our participation in the PACTS Joint Venture is just one of the many initiatives to further reduce our supply risk in a sustainable manner.

Our direct sourcing initiative in key origin locations not only strengthens our control over the supply chain but also enables the Group to derive lower cost benefits and assure ourselves of improved quality of beans.

Likewise, how does the Group handle the volatility in the currency markets?Although the Group’s operations currently span different geographic zones, we simplify our business models such that the impact of volatility in the currency markets is minimized. We do this by matching the borrowings of the units with the functional currency revenue.

For example, the borrowings of our Cocoa Ingredients in Asia are in USD to match its functional currency, while our European Cocoa Ingredients operations have Euro revenue and Euro borrowings.

Likewise, for our Branded Consumer business, borrowings are in local currency to match its revenue.

What is your focus in the current financial year? One of our key areas of focus is to continue to maintain strong positive Free Cash Flow by tight working capital management and rigorous assessment of capital expenditure. In 2011, the Group will be looking to add additional capacity in some of our key strategic locations which will be funded through our strong Cash Flow generation.

To further support our long term growth, one of the Group’s financial strategies is to further increase our Financial Headroom which will provide us with the financial resources to pursue growth opportunities and a cushion to weather any contingencies, including further spikes in bean prices.


Operating and Financial Review


Financial Highlights of Petra Foods

FY 31 December (US$ million) 2010 2009 % chg

Cocoa Ingredients 1,199.1 944.7 26.9Branded Consumer 366.9 299.8 22.4Total Revenue 1,566.0 1,244.5 25.8

Cocoa Ingredients 54.0 27.9 93.5Branded Consumer 54.4 39.3 38.5EBITDA 108.4 67.2 61.3

Profi t before Tax 58.5 27.3 114.0

Net Profi t attributable to Shareholders 44.5 24.6 80.6

Earnings per share 7.73 4.63 67.1

At Year End (US$ million) 2010 2009 % chg

Total Assets 1,053.8 862.1 22.3Total Liabilities 759.7 642.0 18.4Total Shareholders’ Equity 294.1 207.7 41.6Total Debt 549.1 462.3 18.8Net Debt 506.3 444.0 14.0

Return on Equity 17.7 12.6 5.1% ptNet Debt to Equity 172.0 202.0Adjusted Net Debt to Equity (%) – excluding Trade Finance and MTN 34.0 70.0



The year 2010 will be remembered as a year in which the global economy rebounded amidst uneven growth throughout the emerging and developing economies. Despite this, the Group achieved record net profit attributable to equity holders of US$44.5 million in 2010, representing Year-on-Year (Y-o-Y) growth of 80.6%.

The Group’s strong 2010 performance can be attributed to: 1. The positive business environment for our two Core

Businesses with strong demand globally for customized cocoa ingredients and strong regional consumption; and

2. The successful execution of the Group’s growth strategy with higher sales, higher unit pricing and higher margins achieved by the Cocoa Ingredients and Branded Consumer Divisions.

Another contributor to the Group’s strong financial performance was the significant improvement in the performance of our European Cocoa Ingredients operations. A key point to highlight is that the European operations turned profitable in 4Q 2010 at the net level.

The higher sales volumes and higher unit pricing achieved generated revenues of US$1.6 billion for 2010, representing Y-o-Y growth of 25.8%. In addition to the higher revenue, the higher margins/yields achieved by our two business units, despite the volatile commodity prices, drove the Group’s EBITDA higher Y-o-Y by 61.3% for 2010.

Branded Consumer DivisionA very strong performance was achieved in 2010 for Own Brands and Agency (or 3rd Party) Brands sales with Revenue and EBITDA growing by 22.4% and 38.5% respectively. Note that adjusted for the stronger regional currencies in 2010, the Branded Consumer Division’s revenue growth was 8.7% Y-o-Y.

Revenue Performance by MarketsIndonesiaOur key brands (eg. SilverQueen, Cha Cha and Ceres Meises) in 2010 continued to generate double digit revenue growth as a result of the stronger domestic economy, our robust marketing support behind priority brands as well as strong gains from new products launched over the last 18 months. For Agency Brands, the strong double digit revenue growth was driven mainly by organic sales growth achieved by existing agencies.

Branded Consumer DivisionKey Financial Highlights


Year-on-Year

Indonesia 252.4 198.2 27.3The Regional Markets 114.5 101.6 12.6Branded Consumer Revenue 366.9 299.8 22.4Gross Profi t Margin (%) 31.1% 29.1% 2.0% ptTotal EBITDA 54.4 39.3 38.5

Cocoa Ingredients DivisionKey Financial Highlights


Revenue 1,199.1 944.6 26.9EBITDA 54.0 27.9 93.5EBITDA/mt (6 months moving average) in US$ 215 119 80.7Sales Volume (mt) 250,949 233,860 7.3




The Regional Markets of the Philippines, Malaysia and SingaporeFor 2010, regional markets formed 31.2% of the Division’s revenue with Own Brands achieving revenue growth of 23.0% Y-o-Y, reflecting the stronger domestic economies and the success of the Division’s strategy of growing Own Brands, especially in the Philippines. For Agency Brands distribution in our regional markets, the strong revenue growth was on the back of not only new agencies secured but also from growth in existing agencies and our success in gaining greater penetration into the different channels and regions.

Profit PerformanceThe EBITDA growth of 38.5% was driven primarily by the revenue growth of Own Brands and Agency Brands, the higher margin achieved and the stronger regional currencies.

The Branded Consumer Division’s 2010 gross profit margin was higher by 2.0 percentage points over 2009 driven mainly by higher Own Brands margin as a result of the price increase implemented in January 2010 and cost containment initiatives. Furthermore, the strong local currency appreciation, especially for the Indonesian Rupiah, in 2010 translated to lower input costs.

Cocoa Ingredients DivisionFor the Cocoa Ingredients Division, the strong 2010 EBITDA growth of 93.5% Y-o-Y was due to the higher sales volume and the higher EBITDA yield achieved. All regions contributed to the significantly higher EBITDA yield of US$215/mt, up 80.7%

Y-o-Y which reflected the Division’s focus on premium products and Europe’s turnaround. The key drivers of volume growth are continued strong demand from global customers and new customers secured. It should be pointed out that our Cocoa Ingredients business model is essentially a cost pass-through model, allowing us to mitigate the impact of periods of bean price volatility.

With our European operations now in full commercial operations, continued improvement in EBITDA yield was achieved with a positive EBITDA yield generated in 2010. To recap, our state-of-the-art cocoa ingredients processing facility in Hamburg commenced commercial production in May 2009 and we began ramping up production. During this period, we have already received quality accreditations (which are a necessary precursor to selling meaningful quantities of customized higher margin products) from some of our major customers and we are working to secure more customer approvals.

More importantly, with Europe now fully integrated into the Division’s global platform, our competitive position to supply our global customers has been significantly strengthened.

Cash Flow Generation and Capital ExpenditureDuring the course of 2010, the Group generated Free Cash Flow of US$7.4 million on the back of the strong operating Cash Flow of US$33.7 million. The positive Free Cash Flow was generated notwithstanding higher working capital requirements due to higher cocoa inventory values and the acquisition of the remaining minority interest in Delfi Cocoa Europe.

Branded Consumer Division’s Gross Profi t Margin Trend

32.44Q10

31.43Q10

30.32Q10

30.21Q10

29.1FY 2009

29.84Q09

29.83Q09

28.22Q09

28.51Q09

31.1FY2010



Cocoa Ingredients Division’s EBITDA/mt of Sales Volume(6-month moving average)

2314Q10

2233Q10

1982Q10

1561Q10

119FY 2009

1284Q09

1213Q09

1132Q09

1071Q09

215FY2010

Capital expenditure in 2010 totalled US$14.5 million, which is significantly lower compared to the US$41.3 million utilized in the previous year. This apparent lower capital expenditure in 2010 compared to 2009 is due to the completion of the investment programme for the Hamburg Cocoa Ingredients operations, which accounted for a large portion of the 2009 capital expenditure.

Balance SheetAs at 31 December 2010, total shareholder’s equity increased to US$294.1 million, an increase of US$86.4 million. This has also resulted in an improved gearing ratio (Net Debt to Equity) at end 2010 of 1.72x from 2.02x. The reduction in the gearing ratio was due to:1. The higher net profit of US$44.5 million generated; and

2. The Equity Placement of US$60.2 million.

Total assets also grew by US$192.3 million with the increase mainly attributable to:1. Additional receivables of US$30.9 million in line with higher

revenue growth; and

2. Increased inventories of US$136.6 million arising from higher beans inventory carried for the Group’s enlarged capacity and cocoa inventories, compounded by the surge in bean prices.

The higher working capital was funded through a combination of operating Cash Flow, MTN, trade finance and short term advances. More significantly, if the financing of cocoa inventories is excluded, the adjusted Net Debt to Equity ratio decreases considerably to 0.34x (end-2009: 0.70x).

OutlookDespite the continuing uncertain global environment, we expect the operating environment for our Core Businesses to remain strong. To further capitalize on the growth opportunities, our strategy is to: 1. Further grow our key markets to capitalize on the strong

demand for high-end customized products and the strong regional consumption growth;

2. Further stimulate consumer demand by driving growth of our current portfolio of products (especially in the higher margined segment); launching of new products and expanding into new product categories;

3. Invest in additional production and distribution capacity to capture this growth opportunity;

4. Strengthen our global supply chain for Cocoa Ingredients through increased sourcing initiatives in key origin locations to mitigate supply risk, drive cost benefits, and improve the quality of beans; and

5. Form strategic sourcing alliances with partners in origin countries.

With the continued momentum of our Core Businesses, the Group is going into 2011 well-positioned to tackle the continuing global uncertainties, including volatile raw material prices, and therefore, barring unforeseen circumstances, we are looking forward to another year of growth.


Financial Statements

37 Corporate Governance Report46 Directors’ Report50 Statement by Directors51 Independent Auditor’s Report52 Consolidated Income Statement53 Consolidated Statement of

Comprehensive Income54 Balance Sheets55 Consolidated Statement of

Changes in Equity

56 Consolidated Cash Flow Statement57 Notes to the Financial Statements118 Appendix (Shareholders’ Mandate)129 Annexure130 Disclosure Under SGX-ST Listing

Manual Requirements137 Shareholding Statistics138 Substantial Shareholders’ Interests 139 Notice of Annual General Meeting Proxy Form

Contents

Corporate Governance Report

We strongly believe in corporate governance being fi rmly embedded and integrated within Petra Foods’ (“Petra Foods” or “Company” ¹) businesses, systems, processes and operations. Our belief is that good and strong corporate governance is effective only with integrity, excellence and commitment from our people. These key values have helped us formulate and uphold our internal controls and governance practices which we feel have helped enhance the Group’s development, performance and growth.

¹ All references to Petra Foods or Company refers to the “Petra Foods Group” or the “Group” which is inclusive of all its subsidiary companies.

Our annual corporate governance practices review is conducted bearing in mind that our corporate governance standards are grounded in our values, policies, best practices and internal controls, which we acknowledge are elements that will help us create long term value for our shareholders. We welcome the high standards in corporate governance and we are committed to upholding the Code of Corporate Governance 2005 (the “Code”).

The Board meets regularly and are provided with relevant updates and information. The Board comprises a healthy and well balanced mix of entrepreneurs, professionals and commercial expertise. Half of the Board comprises non-executive directors; and three non-executive directors are independent directors, with one non-independent director. There is a clear separation of the role of the Chief Executive Offi cer (“CEO”) and the Chairman; and one of our four executive directors serves as the fi rst among equals, in his capacity as CEO and Managing Director (“MD”). In addition, Board meetings are convened when there are urgent commercial matters to be discussed or decided upon. All directors are expected to act in good faith, provide advice and insights and have in mind at all times the interests of Petra Foods and its shareholders.

The Board is supported by the Audit Committee, Remuneration Committee, Nominating Committee and the Cocoa Risk Committee. The committees provide independent supervision of Management. Additional committees may be formed as and when business exigencies require.

Our corporate governance practices are given below with specifi c references to the Code.

(I) BOARD MATTERS AND CONDUCT OF ITS AFFAIRS

Principle 1: Every company should be headed by an effective Board to lead and control the Company. The Board is collectively responsible for the success of the Company. The Board works with Management to achieve this and Management remains accountable to the Board.

Policy and Practice

Each director contributes his or her own brand of expertise, competencies, leadership, skills and a diversity of knowledge and experience to the Board. The Board provides executive leadership in Petra Foods. The Board together with each director are obliged to act in good faith and in the best interests of the Company.

The key functions of our Board are to focus on three key areas namely:

(a) setting the corporate strategy and direction; (b) ensuring effective leadership and management; and(c) supervising the proper conduct of the Group’s businesses.

The Board comprises eight directors of whom three are non-executive independent directors, one non-executive non-independent director and four are executive directors. The independent directors are Ms Josephine Price, Mr Michael Dean, and Mr Pedro Mata-Bruckmann, who is also the Chairman of the Company. Mr Davinder Singh is a non-executive non-independent director. Mr Chuang Tiong Choon (“John Chuang”) is the CEO and MD. Profi les of the directors are found on page 14.

Notwithstanding that Mr Davinder Singh is deemed a non-executive non-independent director for the fi nancial year ended 31 December 2010 and fi nancial year ending 31 December 2011, by virtue of his relationship with the Company in respect of Guideline 2.1 (d) and his position as Managing Director of Drew and Napier LLC and director of DrewCorp Services Pte Ltd, which have collectively rendered professional services to the Company in fees aggregating more than S$200,000 (in 2010), the Board is confi dent that Mr Davinder Singh is able to exercise strong independent judgment in the best interests of the Company. It follows that the Board is unanimous in its view that he has maintained a high standard of conduct, care and duty and has observed the ethical standards of his profession and is conscious of the need to disclose any confl ict of interests arising from any other engagements.

The strategic policies of the Group and signifi cant business transactions are reviewed and deliberated by the Board; and the Board also approves the annual budget, reviews the performance of the business and approves the release of the quarterly and full year fi nancial results at its regular Board meetings. The Board has delegated its authority to the Audit Committee to review and recommend to the Board the release of the quarterly and full year fi nancial results.

Corporate Governance ReportPetra Foods Limited Annual Report 2010 37

(I) BOARD MATTERS AND CONDUCT OF ITS AFFAIRS (CONTINUED)

The Board delegates specifi c responsibilities to committees namely:

(a) the Audit Committee, (b) the Nominating Committee;(c) the Remuneration Committee; (d) the Executive Committee; and(e) the Cocoa Risk Committee.

The attendance of the Board and committee members at meetings to discharge their duties during the fi nancial year is given in the matrix below:-

BoardCommittees

Audit Nominating Remuneration Cocoa Risk

A B A B A B A B A B

Pedro Mata-Bruckmann 6 6 4 4 1 1 2 2 3 3Chuang Tiong Choon 6 6 4 3 * 1 1 2 2 * 3 3Chuang Tiong Liep 6 6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.Chuang Tiong Kie 6 6 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.Michael Dean 6 6 4 4 1 1 2 2 3 3Davinder Singh 6 5 4 3 1 1 2 2 n.a. n.a.Josephine Price 6 6 4 4 1 1 2 2 n.a. n.a.Chua Koon Chek 6 6 n.a. n.a. n.a. n.a. n.a n.a. n.a. n.a.

Note:A – represents number of meetings held; andB – represents number of attendance.* – by invitation

In the best interests of the Company and our businesses, we regularly supplement our Board meetings by providing for the attendance of directors at meetings through videoconferencing or teleconferencing, enabling the Board to provide direction, guidance and advice to Management quickly and sometimes at short notice (as and when the need arises). Attendance at meetings via audio visual means is provided for in our Articles of Association. The Board’s adaptability and response has often allowed Petra Foods to grapple with business and corporate matters adequately and effectively in an increasingly competitive business environment. All our directors often make themselves available and accessible to Management for discussion and consultation outside the framework of formal Board, committees and Management meetings.

The Cocoa Risk Committee which, works closely with Management in effectively managing and grappling with the risks, exposure and dynamics of a highly competitive cocoa ingredients industry; oversees the Group’s framework and guidelines to ensure adequacy, care and diligence in complying with the guidelines; and generally advising the Board on cocoa related issues and risks.

The attendance matrix illustrates the attendance of our directors in Board meetings and committee work, the contribution of our directors goes beyond attendance at formal Board and committee meetings. The matrix alone is not altogether a fair refl ection of the true value and substance of their contributions. Directors contribute by providing the Company with guidance, advice and counsel on the strategic direction of the Company’s businesses and operations.

The Board enjoys relevant information and updates on the Company’s policies and procedures relating to governance, disclosure of interests in securities and restrictions on disclosure of price sensitive information.


Corporate Governance Report38 Petra Foods Limited Annual Report 2010


Board Composition and Balance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgment on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

Policy and Practice

The Board comprises eight directors, three of whom are non-executive independent directors, one non-executive non-independent director and four executive directors. The combined expertise in business, commerce, fi nance and law, as well as the diverse experience of the directors, provides for intelligent discussions and lively exchanges of ideas that no doubt have a profound impact on the quality and fabric of the Group’s business, corporate strategy and the systems and processes. Over the years, we have forged and reinforced a strong professional relationship between the Board and Management. All these elements add to the richness of the Company’s effi ciency, commercial prowess and effectiveness.

The Board is supported by key committees to provide proper oversight of the Board itself and Management. The Audit Committee, the Nominating Committee and Cocoa Risk Committee, are each chaired by independent directors and the Remuneration Committee is chaired by a non-executive non-independent director. Committees or sub-committees may be formed from time to time to address specifi c areas as and when the need arises. Membership of the committees is thought through, considered carefully and managed to ensure that responsibility amongst the directors is equitably distributed, to elicit the best possible involvement, participation and contributions from the directors to enhance the Board’s effectiveness.

Chairman and Chief Executive Offi cer

Principle 3: There should be a clear division of responsibilities at the top of the Company; the working of the Board and the executive responsibility of the Company’s business; which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.

Policy and Practice

The Chairman acts independently in the best interests of the Company and its shareholders. The Chairman helps ensure that there is harmony within the Board, and he also ensures that the Board gels with Management to engage in fruitful discussions on strategic, business and planning issues key to the Group’s success. There is a clear separation of power between the Chairman and the CEO. Mr Pedro Mata-Bruckmann, an independent director, has been our Chairman since 6 July 2001, and he is responsible for the Board.

Mr John Chuang is our CEO and MD. The CEO together with the Chairman schedules regular Board and committees meetings as and when required and he formulates the agenda. He is responsible for the Group’s businesses with full executive responsibilities over the business and operational decisions in the Company. The CEO oversees the compliance with the corporate governance guidelines. He makes sure that the information shared is adequate and is of the requisite quality and standing for the Board to discharge its duties and responsibilities effectively. He also oversees the timely fl ow of information to the Board, and ensures that the information is adequate and is of the requisite quality and standard for the Board to discharge its duties and responsibilities effectively.





Board Membership

Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board.

Policy and Practice

Nominations and appointments of directors are within the rights of the shareholders. Every director in the Company will be due for re-election at least once every three years. The Company’s Articles of Association requires one-third of the directors to retire and submit themselves for re-election by the shareholders at every annual general meeting (“AGM”). Board renewal ensures the benefi t of good corporate governance and the relevance, adaptability and effectiveness of the Board amidst a challenging business environment and changing business needs.

The Nominating Committee (“NC”) oversees the nomination of our directors for election or re-election. The NC ensures that the Board and its committees comprise individuals who are best able to discharge their duties and responsibilities as directors with regard to the highest standards of corporate governance. As and when necessary, the NC extends this role to include reviewing candidates for key appointment within the Company.

Board Performance

Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.

Policy and Practice

The Chairperson of the NC is Ms Josephine Price. The NC comprising Mr John Chuang, Mr Pedro Mata-Bruckmann, Mr Davinder Singh, Ms Josephine Price and Mr Michael Dean, was established on 13 July 2004. The NC applies objective performance criteria, for the purpose of assessing the performance and contributions of individual directors and the Board, which was accepted and endorsed by the Board as a means of self assessment and evaluation.

The directors were aware that they are duty bound to act in good faith, with care and due diligence in the best interests of the Company and its shareholders.

The fi nancial indicators set out in the Code to serve as a guide for the evaluation of the Board appears to be fashioned for assessing the contributions of Management, and may be less suitable for assessing directors and the Board. We feel that fi nancial indicators are a snapshot only of the Company’s past performance and are not indicative of the long term growth or value creation of the Company.

Having said that, the performance of our executive directors are benchmarked against profi tability, income of the Group as well as other factors such as strategy development and succession. Under the mentorship of our Chairman and the guidance of the NC, the Board conducted a self assessment both individually as well as collectively at the beginning of and the end of fi nancial year 2010, applying the following criteria:-

1. Contribution towards development of company strategy 2. Constructive discussion/interaction amongst directors 3. Board’s response to urgent matters/issues4. Profi tability 5. Return on Investments/Sales 6. Attendance at Board meetings7. No. of meetings held in a year8. Understanding the macro-environment (countries & sector)9. Understanding & monitoring risks 10. Compliance & governance 11. Board/Management succession planning12. Communication between Directors and Management




The NC has ensured that each director brings unique contributions to the Board by way of a fresh or independent perspective to facilitate well thought through and balanced decisions in the best interests of the Company. The NC reviewed the Board’s composition as a whole with a view to ensuring that there is a blend of talent, expertise, knowledge and experience in commercial, fi nancial and management skills much needed for the successful running of the Company’s businesses.

Each member of the NC shall abstain from voting on any resolutions in respect of the assessment of his/her performance or re-nomination as a director.

Access to Information

Principle 6: In order to fulfi l their responsibilities, Board members should be provided with complete, adequate and timely information prior to Board meetings and on an on-going basis.

Policy and Practice

The Board is consistently made aware that they have full and free access to Management, the Company Secretaries and any information the Board requires. If required, the Board has access to independent advice to help them fulfi l their responsibilities and duties. Management attends to directors individually and accord them individual attention upon their request, to make sure that all their questions are answered and that pertinent issues are grappled with suffi ciently.

Management constantly keeps in touch with the Board of directors to ensure that they are provided with timely, accurate and comprehensive data and information on matters which requires the Board’s decision, on matters of importance which the Board should have knowledge of and reports that relate to the fi nancial and operational performance of the Company. We do this as and when necessary or upon the request of our directors. If a Board meeting is not possible, the Company communicates with the Board through electronic means, which includes electronic mail, teleconferencing and video conferencing.

The Chairman and directors of the Audit Committee make it a point to meet the external auditors at least once a year without the presence of the CEO and other members of the Management team, with the intent of upholding our policy of a free and unfettered fl ow of information within the Group, for the benefi t of our directors.



(II) REMUNERATION MATTERS

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fi xing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A signifi cant proportion of the executive directors’ remuneration should be structured so as to link rewards to corporate and individual performance.

Policy and Practice

The Remuneration Committee (“RC”) comprises three independent non-executive directors and one non-executive non-independent director. The RC is chaired by Mr Davinder Singh, and comprises Mr Pedro Mata-Bruckmann, Ms Josephine Price and Mr Michael Dean. The RC has access to expert professional advice on human resource matters and it takes into consideration industry practices and norms in determining compensation.

The RC is keen to see that talent should be nurtured and groomed, and it takes the lead in upholding the remuneration policies of the Company which seeks to ensure that the Board and Management tap the leadership, drive and expertise needed to sustain the Company’s success and global businesses.

The CEO, Mr John Chuang works closely with the RC and attends the RC meetings as an advisor as this enables Mr Chuang to contribute to the RC in respect of human resource policies, compensation and staff issues for members of the senior management team and key staff, and major compensation or incentive policies such as staff salaries framework, share option schemes, framework for bonus and other incentive schemes. The RC also reviews the remuneration of each of the directors, executive offi cers and other employees and makes recommendations to the Board for approval.

Each member of the RC abstains from voting on any resolutions in respect of his/her remuneration package or fees. The RC sets short and long-term incentive compensation for our executive offi cers and key employees.

Disclosure on Remuneration

Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration in the Company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance.

Policy and Practice

The executive directors do not receive any directors’ fees, and the directors’ fees are set in accordance with a framework of basic fees. A breakdown (in percentage terms) showing the level and mix of each key executive and director’s remuneration paid and payable for this fi nancial year as recommended in the Code is set out in the director’s report and audited Financial Statements at page 131 to 132.



(III) ACCOUNTABILITY AND AUDIT

Principle 10: The Board should present a balanced and understandable assessment of the Company’s performance, position and prospects.

Policy and Practice

We intend to build on the good relationship we have nurtured over the years with our shareholders, and we will keep them informed updated with balanced, informative and understandable assessments of the Company’s results. This is overseen by the Investor Relations and Corporate Communications, headed by the Group Chief Financial Offi cer. Investor Relations communicates with investors on a regular basis and attend to their queries.

All shareholders of the Company receive the annual report and a notice of AGM; and the notice is advertised in the newspapers. Briefi ng sessions and meetings with the investment community are held quarterly either at the same time when the Company’s fi nancial results are announced to the Singapore Exchange Securities Trading Limited (“SGX-ST”) or just after such announcements. These meetings and briefi ng sessions allow us to shed light on how the Company’s business initiatives are translated, implemented and turned into results.

Audit Committee

Principle 11: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties.

Policy and Practice

The members of the Audit Committee (“AC”) are Mr Michael Dean (Chairman), Mr Pedro Mata-Bruckmann, Mr Davinder Singh and Ms Josephine Price. The AC was formed on 6 July 2001 under a written charter, and it comprises three independent directors and one non-executive non-independent director who possess a wealth of corporate, fi nancial, investment, legal and commercial expertise to discharge their duties and responsibilities effectively. The AC’s functions are as follows:

(a) review and evaluate fi nancial and operating results and accounting policies; (b) review the audit plan of external auditors, their evaluation of the system of internal accounting controls and their audit report; (c) review the Group’s fi nancial results and the announcements before submission to the Board for approval; (d) review the assistance given by the Management to external auditors;(e) consider the appointment/re-appointment of external auditors; (f) review interested person transactions; (g) review and direct the audit plan of the internal auditors;(h) recommend the appointment of an independent fi nancial advisor where necessary, in respect of any transaction, matter or

other corporate action taken by the Group; (i) meet annually with the external and internal auditors without the presence of Management; and(j) review matters raised by staff about possible concerns of improprieties in matters of fi nancial reporting or other matters.

The AC Charter sets out its functions and responsibilities in greater detail.



(III) ACCOUNTABILITY AND AUDIT (CONTINUED)

The AC meets regularly and holds informal discussions and meetings with Management from time to time or when the need arises, in order to discharge its responsibilities. The AC has full discretion to invite any director or executive offi cer to attend its meetings. Access to and co-operation of the Company’s Management has been accorded to the AC who have been given the resources required to discharge its functions properly. In addition, the external auditors have unrestricted access to the AC; and the AC members meet at least once each year on their own to discuss matters concerning the Company without Management being present.

The Company observes vigilance, transparency and checks & balances in upholding corporate governance principles. KPMG LLP (“KPMG”) helps us drive these principles by fulfi lling the Internal Audit role and function. (Please also see Principle 13 below). In keeping with this mindset and approach, the AC meets and interfaces with both the internal and external auditors without the presence of Management to discuss the results of their audit and fi ndings.

The AC is pleased to recommend the re-appointment of the external auditors PricewaterhouseCoopers LLP, after having reviewed the volume of non-audit services to the Group by the external auditors, and being satisfi ed that the nature and extent of such services will not prejudice the professionalism, independence and objectivity of the external auditors.

Internal Controls and Internal Audit

Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.

Principle 13: The Company should establish an internal audit function that is independent of the activities it audits.

Policy and Practice

KPMG works closely with the Company in managing the internal audit framework which safeguards the Company’s rights and interests in the internal audit function. The framework is closely monitored by our Internal Auditors who report directly to the Chairman of the AC on audit matters, and to the Group Chief Financial Offi cer on administrative matters.

The AC also reviews the internal audit programme, the scope and fi ndings of internal audit procedures, and ensures that internal audits are adequately resourced and has appropriate standing within the Group. Ultimate responsibility for overseeing the overall internal control framework needed to safeguard the shareholders investments and the assets of the Company rests on the shoulders of the Board.

The Board reviews the effectiveness of all internal controls, including operational controls regularly. It is noted however that no cost effective internal control system will preclude all errors and irregularities because the system is designed to manage rather than to totally eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute safeguards against material damage, loss or misstatement.



(IV) COMMUNICATION WITH SHAREHOLDERS

Principle 14: The Company should engage in regular, effective and fair communication with shareholders.

Policy and Practice

The Company conveys our fi nancial performance, position and prospects on a quarterly basis via announcements to the SGX-ST and the Company’s website. We hold briefi ng sessions with the investment community when fi nancial results are announced. Our view is that we prefer regular communication with our shareholders as this enhances transparency and openness. This practice is in tandem with our long term strategy of growing and consolidating our businesses globally.

In accordance with applicable regulations, all fi nancial results comprising fi nancial performance, position and prospects as well as price sensitive information are released through various media including press releases, SGXNET and/or the Company’s website at http://www.petrafoods.com. The Company’s Investor Relations Team meets with key investors regularly and answers queries from shareholders; and the Team also holds briefi ng sessions with the investment community when fi nancial results are announced.

The Company prohibits selected employees from trading in its securities for a period commencing 1 month before the announcement of full year fi nancial results and two weeks from the release of quarterly fi nancial results. The Company has clear policies and guidelines for dealings in securities of the Company by directors and offi cers, which are in conformity with the rules relating to dealings in securities in Rule 1207(18) of the Listing Manual.

Greater Shareholder Participation

Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the Company.

Policy and Practice

Our directors attended our annual general meeting held last year on the 28 April 2010. All of our directors will endeavour to attend the annual general meeting, and shareholders will be given the chance to share their thoughts and ideas or ask questions relating to the resolutions to be passed or on other corporate and business issues. The Chairman of the AC, the RC and the Chairperson of the NC, as well as the external auditors will be present and on hand to address all issues raised and questions at these meetings. We are in favour of encouraging greater shareholder participation.


Directors’ Report

Directors’ Reportfor the fi nancial year ended 31 December 2010

The directors present their report to the members together with the audited fi nancial statements of the Group for the fi nancial year ended 31 December 2010 and the balance sheet of the Company as at 31 December 2010.

DIRECTORS

The directors of the Company in offi ce at the date of this report are as follows:

Pedro Mata-Bruckmann (Chairman)Chuang Tiong ChoonChuang Tiong LiepChuang Tiong Kie Chua Koon Chek Anthony Michael Dean Davinder SinghJosephine Price

ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES AND DEBENTURES

Neither at the end of nor at any time during the fi nancial year was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefi ts by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, other than as disclosed in this report.

DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES

(a) According to the register of directors’ shareholdings, none of the directors holding offi ce at the end of the fi nancial year had any interest in the shares or debentures of the Company or related corporations, except as follows:

Holdings registered in thename of a director or nominee

Holdings in which a director is deemed to have an interest

At 31.12.2010 At 1.1.2010 At 31.12.2010 At 1.1.2010

The Company(Ordinary shares)Pedro Mata-Bruckmann 277,000 277,000 – –Chuang Tiong Choon – – 311,799,000 311,799,000Chuang Tiong Liep 50,000 50,000 308,741,000 308,741,000Chuang Tiong Kie 110,000 110,000 – –Chua Koon Chek 700,000 700,000 – –Anthony Michael Dean 50,000 50,000 – –Davinder Singh 100,000 100,000 – –Josephine Price 319,000 319,000 – –


DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (CONTINUED)

Holdings registered in thename of a director or nominee

Holdings in which a director is deemed to have an interest

At 31.12.2010 At 1.1.2010 At 31.12.2010 At 1.1.2010

Siam Cocoa Products Co. Ltd(Ordinary shares of Baht 100 each)Chuang Tiong Choon 1 1 – –

Cocoa Specialities, Inc.(Ordinary shares of Pesos 100 each)Chuang Tiong Choon 1 1 – –

DCMX Cocoa, S.A. de C.V.(Ordinary shares of Peso 1 each) Chuang Tiong Choon 1 1 – –

Delfi Foods, Inc.(Ordinary shares of Peso 1 each)Chuang Tiong Choon 1 1 – –

Delfi Marketing, Inc.(Ordinary shares of Pesos 100 each)Chuang Tiong Choon 1 1 – –Chuang Tiong Liep 1 1 – –

Fremont Investment Limited^(Ordinary shares of US$1 each)Chuang Tiong Choon NA – NA 51Chuang Tiong Liep NA – NA 30Chuang Tiong Kie NA 19 NA –

Springbright Investments Limited^(Ordinary shares of US$1 each)Chuang Tiong Choon – – 51 NAChuang Tiong Liep – – 30 NAChuang Tiong Kie – – 19 NA

Berlian Enterprises Limited(Ordinary shares of US$1 each)Chuang Tiong Choon – – 51 51Chuang Tiong Liep – – 30 30Chuang Tiong Kie 19 19 – –

Aerodrome International Limited*(Ordinary shares of US$1 each)Chuang Tiong Choon – – 100 2

^ On 19 March 2010, Fremont Investment Limited (“Fremont”) transferred all its shares in the Company to Springbright Investments Limited and Fremont ceased to be a related corporation of the Company.

* Aerodrome International Limited (“AIL”) is currently held by Johnsonville Assets Limited (“JAL”) (70%) and Johnsonville Holdings Limited (“JHL”) (30%). Credit Suisse Trust Limited (“CST”) is a Singapore registered public trust company. CST’s deemed interest arises from its 100% shareholding in AIL as the trustee of JAL and JHL. Mdm Lim Mee Len (wife of Mr Chuang Tiong Choon) is the benefi ciary of JAL. Mdm Lim Mee Len and Mr Chuang Tiong Choon are benefi ciaries of JHL.


Directors’ ReportPetra Foods Limited Annual Report 2010 47


DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (CONTINUED)

(b) Chuang Tiong Choon and Chuang Tiong Liep who by virtue of their interest of not less than 20% of the issued capital of the Company, are deemed to have interests in the whole of the share capital of the Company’s wholly-owned subsidiaries.

(c) The directors’ interests in the shares of the Company as at 21 January 2011 were the same as those as at 31 December 2010 for all the directors.

DIRECTORS’ CONTRACTUAL BENEFITS

Since the end of the previous fi nancial year, no director has received or become entitled to receive a benefi t by reason of a contract made by the Company or a related corporation with the director or with a fi rm of which he is a member or with a company in which he has a substantial fi nancial interest, except as disclosed in the accompanying fi nancial statements and in this report.

SHARE OPTIONS

Share-based incentive schemes

The Petra Foods Employees Share Option Scheme and the Petra Foods Share Incentive Plan (collectively, the “Schemes”) were approved by the shareholders at an Extraordinary General Meeting of the Company held on 22 September 2005. The Schemes are administered by the Remuneration Committee of the Board comprising the following directors:

Davinder Singh (Chairman)Pedro Mata-BruckmannJosephine PriceAnthony Michael Dean

The Schemes will provide an opportunity for executive directors, non-executive directors, and employees of the Company, its subsidiaries and associated companies (the “Group Employees”) who have contributed signifi cantly to the growth and performance of the Group to participate in the equity of the Company.

The Schemes, which form an integral and important component of a compensation plan, are designed to reward and retain Group employees whose services are vital to the Group’s well-being and success.

• Participants

To participate in the Schemes, Group employees must attain the age of 21 years on or prior to the relevant offer date and, must have been in the employment of the Group for a period of at least twelve months, or such shorter period as the Remuneration Committee may determine.

• Exercise price

The options that are granted under the Share Option Scheme, have an exercise price, which at the Remuneration Committee’s discretion, is either set at a price (the “Market Price”) equal to the average of the last dealt prices for the Company’s shares published on the SGX-ST daily offi cial list for the fi ve consecutive market days immediately preceding the date of grant of the relevant option or at a discount to the Market Price (subject to a maximum discount of 20%).

• Exercise period

Options granted under the Share Option Scheme which are fi xed at the Market Price may be exercisable after the fi rst anniversary of the date of grant of such options while options exercisable at a discount to the Market Price may be exercised after the second anniversary from the date of grant of the options.

Options granted under the Share Option Scheme to Group Employees (other than non-executive directors and/or employees of associated companies) will have a life span of ten years from the date of grant and options granted to non-executive directors and/or employees of associated companies will have a life span of fi ve years from the date of grant.

• Grant of options

Options may be granted at any time during the period when the Share Option Scheme is in force, except that no options shall be granted during the period of 30 days immediately preceding the date of announcement of the Company's interim or fi nal results. In the event that an announcement on any matter of an exceptional nature involving unpublished price sensitive information is imminent, offers may only be made after the second market day from the date on which the aforesaid announcement is made.

Directors’ Report48 Petra Foods Limited Annual Report 2010

SHARE OPTIONS (CONTINUED)

• Awards under the Share Incentive Plan

The Remuneration Committee shall at its discretion at any time during the period when the plan is in force grant an Award to any participant. An Award represents the right of a participant to receive fully paid ordinary shares of the Company, their equivalent cash value or combinations thereof, free-of-charge.

The Remuneration Committee shall at its discretion decide at the point of an Award of shares, the grant date, the vesting period,

the number of ordinary shares to be awarded and the retention period. New ordinary shares allotted and issued on the release of an Award shall rank pari passu in all respects with the previously issued shares.

There were no options granted during the fi nancial year to subscribe for unissued shares of the Company or any subsidiary.

There was no Award under the Share Incentive Plan granted during the fi nancial year.

AUDIT COMMITTEE

All members of the Audit Committee were non-executive directors. The members of the Audit Committee at the end of the fi nancial year were:

Anthony Michael Dean (Chairman)Josephine Price Pedro Mata-BruckmannDavinder Singh

The Audit Committee performs its functions in accordance with section 201B of the Singapore Companies Act, Cap 50, the SGX-ST Listing Manual, and the Code of Corporate Governance 2005.

The Audit Committee has reviewed the overall scope of both internal and external audits and the assistance given by the Company’s offi cers to the auditors. It has met the Company’s internal and independent auditors to discuss the results of their respective examinations and their evaluation of the Company’s system of internal accounting controls.

The Audit Committee has also reviewed the balance sheet of the Company and the consolidated fi nancial statements of the Group for the fi nancial year ended 31 December 2010 as well as the independent auditor’s report thereon prior to their submission to the Board of Directors for approval.

The Company renewed its Shareholders’ Mandate for it to enter into certain categories of transactions with specifi ed classes of the Company’s Interested Persons. The Audit Committee has also reviewed the interested person transactions of the Group during the fi nancial year in accordance with established procedures.

The Audit Committee has nominated PricewaterhouseCoopers LLP for re-appointment as independent auditor of the Company at the forthcoming Annual General Meeting. The Audit Committee has conducted an annual review of non-audit services to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the independent auditor.

INDEPENDENT AUDITOR

The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment.

On behalf of the directors

Chuang Tiong Choon Chuang Tiong KieDirector Director

24 March 2011


Directors’ ReportPetra Foods Limited Annual Report 2010 49

In the opinion of the directors,

(a) the balance sheet of the Company and the consolidated fi nancial statements of the Group as set out on pages 52 to 117 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2010 and of the results of the business, changes in equity and cash fl ows of the Group for the fi nancial year then ended; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the directors

Chuang Tiong Choon Chuang Tiong KieDirector Director

24 March 2011

Statement by Directors

Statement by Directors50 Petra Foods Limited Annual Report 2010

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying fi nancial statements of Petra Foods Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 52 to 117, which comprise the consolidated balance sheet of the Group and the balance sheet of the Company as at 31 December 2010, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash fl ows of the Group for the fi nancial year then ended, and a summary of signifi cant accounting policies and other explanatory information.

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation of fi nancial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls suffi cient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition that transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profi t and loss accounts and balance sheets and to maintain accountability of assets.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation of fi nancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the consolidated fi nancial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010, and the results, changes in equity and cash fl ows of the Group for the fi nancial year ended on that date; and

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors, have been properly kept in accordance with the provisions of the Act.

PricewaterhouseCoopers LLPPublic Accountants and Certifi ed Public Accountants

Singapore, 24 March 2011

Independent Auditor’s Reportto the members of Petra Foods Limited

Independent Auditor’s ReportPetra Foods Limited Annual Report 2010 51

Consolidated Income Statementfor the fi nancial year ended 31 December 2010

The Group

Notes2010

US$’0002009

US$’000

Revenue 4 1,566,020 1,244,469Cost of sales 5 (1,366,417) (1,102,284)Gross profi t 199,603 142,185

Other operating income 4 5,670 4,690Selling and distribution costs (84,516) (67,448)Administrative expenses (35,288) (32,996)Finance costs 7 (25,891) (18,171)Other operating expenses (1,415) (1,263)

58,163 26,997Share of results of associated companies 19 298 322Profi t before income tax 58,461 27,319Income tax expense 9 (13,988) (7,582)Total profi t 44,473 19,737

Profi t attributable to:Equity holders of the Company 44,473 24,625Non-controlling interest – (4,888)

44,473 19,737

Earnings per ordinary share 1 (expressed in US cents per share)Basic and Diluted 11 7.73 4.63

1 Diluted earnings per share for fi nancial years 2010 and 2009 are the same as basic earnings per share as there were no potentially dilutive ordinary shares.

The accompanying notes form an integral part of these fi nancial statements.

Consolidated Income Statement52 Petra Foods Limited Annual Report 2010

Consolidated Statement of Comprehensive Income

Consolidated Statement of Comprehensive Incomefor the fi nancial year ended 31 December 2010

The Group

2010US$’000

2009US$’000

Profi t for the year 44,473 19,737

Other comprehensive income:Cash fl ow hedges:– Fair value gains 15,412 10,981– Transfer to income statement (21,776) (15,757)– Tax on fair value adjustments 553 2,430

(5,811) (2,346)

Currency translation differences 1,117 10,369Other comprehensive (expense)/income, net of tax (4,694) 8,023

Total comprehensive income for the year 39,779 27,760

Total comprehensive income attributable to:Equity holders of the Company 39,779 35,069Non-controlling interest – (7,309)

39,779 27,760



Balance Sheetsas at 31 December 2010


The Group The Company

Notes2010

US$’0002009

US$’0002010

US$’0002009

US$’000

ASSETSCurrent assetsCash and cash equivalents 12 42,782 18,338 27,375 6,759Derivative assets 15 11,451 4,509 11,451 4,087Trade receivables 13 164,964 134,022 251,304 183,034Inventories 14 491,362 354,796 9,397 7,066Tax recoverable 9 9,205 5,323 – –Other current assets 17 33,518 32,009 12,968 17,806Receivables from subsidiaries 20 – – – 10,000

753,282 548,997 312,495 228,752

Non-current assetsInvestments in subsidiaries 18 – – 124,092 103,114Investments in associated companies and joint venture 19 3,065 2,363 3,265 3,000Receivables from subsidiaries 20 – – 74,956 54,519Loan to associated company 21 2,531 2,411 – –Property, plant and equipment 22 255,604 270,049 1,175 1,134Intangible assets 23 21,105 22,032 1,784 1,784Deferred income tax assets 9 17,464 14,805 – –Other non-current assets 25 798 888 21 –

300,567 312,548 205,293 163,551Total assets 1,053,849 861,545 517,788 392,303

LIABILITIESCurrent liabilitiesTrade payables 26 122,317 115,028 51,713 34,246Other payables 27 55,960 38,326 11,920 10,545Current income tax liabilities 9 5,149 4,815 – 2,116Derivative liabilities 15 10,975 5,607 7,000 5,257Borrowings 28 441,524 295,931 161,585 85,430

635,925 459,707 232,218 137,594

Non-current liabilitiesBorrowings 28 107,591 166,376 70,073 101,102Deferred income tax liabilities 9 5,917 7,046 330 1,051Provisions for other liabilities and charges 30 10,314 8,347 – –

123,822 181,769 70,403 102,153Total liabilities 759,747 641,476 302,621 239,747NET ASSETS 294,102 220,069 215,167 152,556

EQUITYCapital and reserves attributable to the equity holders of the CompanyShare capital 31 155,951 95,767 155,951 95,767Foreign currency translation reserve 32 (1,962) (3,079) – –Other reserves (1,115) 5,270 (227) 4,903Retained earnings 33 141,228 109,735 59,443 51,886

294,102 207,693 215,167 152,556Non-controlling interest – 12,376 – –TOTAL EQUITY 294,102 220,069 215,167 152,556

Balance Sheets54 Petra Foods Limited Annual Report 2010

Attributable to equity holders of the Company

Share capital

US$’000

Foreign currency

translation reserve

US$’000

Cash fl ow hedge

reserveUS$’000

General reserve

US$’000

Retained earningsUS$’000

TotalUS$’000

Non-controlling

interestUS$’000

Total equity

US$’000

The GroupBalance at

1 January 2010 95,767 (3,079) 3,651 1,619 109,735 207,693 12,376 220,069Total comprehensive

income for the year – 1,117 (5,811) – 44,473 39,779 – 39,779Issue of shares 61,143 – – – – 61,143 – 61,143Share issue expenses (959) – – – – (959) – (959)Acquisition of additional

interest in a subsidiary – – (378) (433) – (811) (12,376) (13,187)Transfer to general

reserve – – – 237 (237) – – –Final dividend relating to

2009 paid – – – – (5,429) (5,429) – (5,429)Interim dividend relating

to 2010 paid – – – – (7,314) (7,314) – (7,314)Balance at

31 December 2010 155,951 (1,962) (2,538) 1,423 141,228 294,102 – 294,102

Balance at 1 January 2009 95,767 (13,089) 3,217 1,538 96,129 183,562 19,685 203,247

Total comprehensive income for the year – 10,010 434 – 24,625 35,069 (7,309) 27,760

Transfer to general reserve – – – 81 (81) – – –

Final dividend relating to 2008 paid – – – – (5,429) (5,429) – (5,429)

Interim dividend relating to 2009 paid – – – – (5,509) (5,509) – (5,509)

Balance at 31 December 2009 95,767 (3,079) 3,651 1,619 109,735 207,693 12,376 220,069

Consolidated Statement of Changes in Equityfor the fi nancial year ended 31 December 2010

Consolidated Statement of Changes in Equity



Consolidated Cash Flow Statementfor the fi nancial year ended 31 December 2010

Notes2010

US$’0002009

US$’000

Cash fl ows from operating activitiesProfi t before tax 58,461 27,319Adjustments: Depreciation and amortisation 22, 23(b) & 23(c) 23,668 21,545 Property, plant and equipment written off 565 15 (Gain)/loss on disposal of property, plant and equipment (622) 135 Interest income 4 (249) (182) Interest expense 7 26,197 18,112 Fair value of derivatives 4,701 (3,834) Net foreign exchange (gain)/loss 7 (306) 59 Share of profi ts from associated companies 19 (298) (322)Operating cash fl ow before working capital changes 112,117 62,847

Change in working capital: Inventories (136,566) (134,409) Trade and other receivables (40,268) (48,676) Trade and other payables 28,914 72,118Cash used in operations (35,803) (48,120)

Interest received 249 182Income tax paid 9(b) (21,615) (16,908)Net cash used in operating activities (57,169) (64,846)

Cash fl ows from investing activitiesPurchases of property, plant and equipment (13,499) (39,574)Acquisition of remaining interest in a subsidiary 18 (13,187) –Investment in joint venture 19 (265) –Payments for patents and trademarks (53) (74)Proceeds from disposal of property, plant and equipment 748 319Net cash used in investing activities (26,256) (39,329)

Cash fl ows from fi nancing activitiesProceeds from issuance of shares - net 60,184 –Proceeds from term loans 938 29,264Proceeds from trade fi nance and short term advances 104,410 101,109Proceeds from issuance of Medium Term Notes 7,179 15,972Repayment of term loans (31,261) (25,904)Repayment of lease liabilities (1,102) (1,335)Interest paid (26,197) (18,955)Dividends paid to equity holders of the Company 34 (12,743) (10,938)Net cash provided by fi nancing activities 101,408 89,213

Net increase/(decrease) in cash and cash equivalents 17,983 (14,962)

Cash and cash equivalentsBeginning of fi nancial year 12 (28,046) (14,301)Effects of currency translation on cash and cash equivalents 5,430 1,217End of fi nancial year 12 (4,633) (28,046)

Consolidated Cash Flow Statement



Notes to the Financial Statements for the fi nancial year ended 31 December 2010

Notes to the Financial Statements

These notes form an integral part of and should be read in conjunction with the accompanying fi nancial statements.

1. GENERAL

Petra Foods Limited (the “Company”) is incorporated and domiciled in Singapore and is publicly traded on the Singapore Exchange Securities Trading Limited. The address of its registered offi ce is 111 Somerset Road, #16-01 TripleOne Somerset, Singapore 238164.

The principal activities of the Company consist of manufacturing and marketing of cocoa ingredients and consumer chocolate confectionery products and investment holding. The principal activities of each of the subsidiaries are set out in Note 18.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation

These fi nancial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”). The fi nancial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below.

The preparation of fi nancial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group’s accounting policies. It also requires the use of critical accounting estimates and assumptions. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are signifi cant to the fi nancial statements, are disclosed in Note 3.

Interpretations and amendments to published standards effective in 2010

On 1 January 2010, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that are mandatory for application from that date. Changes to the Group’s accounting policies have been made, as required, in accordance with the transitional provisions in the respective FRS and INT FRS.

The adoption of these new or amended FRS and INT FRS did not result in substantial changes to the Group’s and Company’s accounting policies and had no material effect on the amounts reported for the current or prior fi nancial years except as disclosed below:

• FRS 103 (revised) Business Combinations

(Effective for annual periods beginning on or after 1 July 2009)

Please refer to Note 2.2(a)(ii) for the revised accounting policy on business combinations.

As the changes have been implemented prospectively, no adjustments were necessary to any of the amounts previously recognised in the fi nancial statements.

• FRS 27 (revised) Consolidated and Separate Financial Statements

(Effective for annual periods beginning on or after 1 July 2009)

The revisions to FRS 27 principally change the accounting for transactions with non-controlling interests. Please refer to Note 2.2(a)(iii) for the revised accounting policy on changes in ownership interest that results in a lost of control and Note 2.2(b) for that on changes in ownership interests that do not result in lost of control, which the Group has applied for the acquisition of the remaining 32% of the issued share capital of Petra Europe Holdings Pte Ltd on 29 January 2010 (Note 18).

As the changes have been implemented prospectively, no adjustments were necessary to any of the amounts previously recognised in the fi nancial statements.




2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.2 Group accounting

(a) Subsidiaries

(i) Consolidation

Subsidiaries are entities over which the Group has power to govern the fi nancial and operating policies so as to obtain benefi ts from its activities, generally accompanied by a shareholding giving rise to a majority of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases.

In preparing the consolidated fi nancial statements, transactions, balances and unrealised gains on transactions between group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary attributable to the interests which are not owned directly or indirectly by the equity holders of the Company. They are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and balance sheet. Total comprehensive income is attributed to the non-controlling interests based on their respective interests in a subsidiary, even if this results in the non-controlling interests having a defi cit balance.

(ii) Acquisition of businesses

The acquisition method of accounting is used to account for business combinations by the Group.

The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary.

Acquisition-related costs are expensed as incurred.

Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.

On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree at the date of acquisition either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifi able assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identifi able assets acquired is recorded as goodwill. Please refer to the paragraph “Intangible assets - Goodwill” for the subsequent accounting policy on goodwill.

(iii) Disposals of subsidiaries or businesses

When a change in the Company’s ownership interest in a subsidiary results in a loss of control over the subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts recognised in other comprehensive income in respect of that entity are also reclassifi ed to profi t or loss or transferred directly to retained earnings if required by a specifi c Standard.

Any retained interest in the entity is remeasured at fair value. The difference between the carrying amount of the retained investment at the date when control is lost and its fair value is recognised in profi t or loss.

Please refer to Note 2.10 for the Company’s accounting policy on investments in subsidiaries.





2.2 Group accounting (continued)

(b) Transactions with non-controlling interests

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control over the subsidiary are accounted for as transactions with equity owners of the Group. Any difference between the change in the carrying amounts of the non-controlling interests and the fair value of the consideration paid or received is recognised in a separate reserve within equity attributable to the equity holders of the Company.

(c) Associated companies

Associated companies are entities over which the Group has signifi cant infl uence, but not control, generally accompanying a shareholding giving rise to between and including 20% and 50% of the voting rights. Investments in associated companies are accounted for in the consolidated fi nancial statements using the equity method of accounting less impairment losses, if any.

Investments in associated companies are initially recognised at cost. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Goodwill on associated companies represents the excess of the cost of acquisition of the associate over the Group’s share of the fair value of the identifi able net assets of the associate and is included in the carrying amount of the investments.

In applying the equity method of accounting, the Group’s share of its associated companies’ post-acquisition profi ts or losses are recognised in profi t or loss and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. These post-acquisition movements and distributions received from associated companies are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associated company equals or exceeds its interest in the associated company, including any other unsecured non-current receivables, the Group does not recognise further losses, unless it has obligations or has made payments on behalf of the associated company.

Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associated companies have been changed where necessary to ensure consistency with the accounting policies adopted by the Group.

Gains and losses arising from partial disposals or dilutions in investments in associated companies are recognised in profi t or loss.

Investments in associated companies are derecognised when the Group loses signifi cant infl uence. Any retained interest in the entity is remeasured at its fair value. The difference between the carrying amount of the retained investment at the date when signifi cant infl uence is lost and its fair value is recognised in profi t or loss.

Please refer to Note 2.10 for the Company’s accounting policy on investments in associated companies.





2.2 Group accounting (continued)

(d) Joint ventures

The Group’s joint ventures are entities over which the Group has contractual arrangements to jointly share the control over the economic activities of the entities with one or more parties. The Group’s interest in joint ventures are accounted for in the consolidated fi nancial statements using the equity method of accounting less impairment losses, if any.

Investments in joint ventures are initially recognised at cost. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

In applying the equity method of accounting, the Group’s share of its joint venture’s post-acquisition profi ts or losses are recognised in profi t or loss and its share of post-acquisition movements in reserves are recognised in equity directly. These post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, including any other unsecured non-current receivables, the Group does not recognise further losses, unless it has obligations or has made payments on behalf of the joint venture.

Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of joint ventures have been changed where necessary to ensure consistency with the accounting policies adopted by the Group.

Dilution gains and losses arising from investments in joint ventures are recognised in profi t or loss.

Please refer to Note 2.10 for the Company’s accounting policy on investments in joint ventures.

2.3 Foreign currency translation

(a) Functional and presentation currency

Items included in the fi nancial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The consolidated fi nancial statements are presented in United States Dollars, which is the Company’s functional and presentation currency.

(b) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognised in profi t or loss, unless they arise from borrowings in foreign currencies and other currency instruments designated and qualifying as net investment hedges and net investment in foreign operations.

Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair value measurements are determined.

(c) Translation of Group entities’ fi nancial statements

The results and fi nancial position of all the Group entities (none of which has the currency of a hyperinfl ationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) Assets and liabilities are translated at the closing exchange rates at the reporting date.

(ii) Income and expenses are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and

(iii) All resulting currency translation differences are recognised in the foreign currency translation reserve.





2.4 Revenue and other operating income recognition

Revenue for the Group comprises the invoiced amount, at fair value, for the sale of goods and rendering of services, net of value added tax, rebates and discounts, and after eliminating sales within the Group. Revenue is recognised as follows:

(a) Sale of goods

Revenue from sales of goods is recognised when signifi cant risks and rewards of ownership of the goods are transferred to the buyer and collectibility of the related receivables is reasonably assured.

(b) Rendering of services – processing fees

Revenue from the processing arrangements is recognised at the time when the services are rendered.

Interest income

Interest income is recognised on a time-proportion basis, using the effective interest method.

2.5 Borrowing costs

Borrowing costs incurred to fi nance the development of property, plant and equipment are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are recognised in the profi t or loss using the effective interest method.

2.6 Income taxes

Current income tax for current and prior periods is recognised at the amount expected to be paid or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.

Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profi t or loss at the time of the transaction.

A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries and associated companies and joint venture, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

A deferred income tax asset is recognised to the extent that it is probable that future taxable profi t will be available against which the deductible temporary differences and tax losses can be utilised.

Deferred income tax is measured:

(i) at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date; and

(ii) based on the tax consequence that will follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities.

Current and deferred income taxes are recognised as income or expenses in profi t or loss, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred income tax on temporary differences arising from the fair value gains and losses on cash fl ow hedges are charged or credited directly to equity in the same period the temporary differences arise. Deferred income tax arising from a business combination is adjusted against goodwill on acquisition.





2.7 Cash and cash equivalents

For the purpose of presentation in the consolidated cash fl ow statement, cash and cash equivalents include cash on hand, deposits with fi nancial institutions which are subject to an insignifi cant risk of change in value and bank overdrafts but exclude bank balances that are pledged as security for fi nancing facilities. Bank overdrafts are presented as current borrowings on the balance sheet.

2.8 Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. An allowance for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the allowance is the difference between the asset’s carrying amount and the present value of estimated future cash fl ows, discounted at the original effective interest rate. The amount of the allowance is recognised in profi t or loss.

2.9 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis and includes all costs in bringing each product to its present location and condition. Inventories comprise manufactured and purchased inventories.

The cost of manufactured inventories includes raw material cost, direct labour cost and production overheads based on the normal level of activity but excludes borrowing costs. The raw material cost, which comprises primarily cocoa beans and cocoa butter, includes their purchase price, inward shipping costs and import duties and charges. Direct labour cost comprises primarily manufacturing staff cost. Production overheads comprise primarily utilities charges, rental costs, depreciation of plant and machinery and indirect costs relating to the manufacturing of the inventories.

Work-in-progress inventories include direct material cost and direct labour cost incurred to the date of the fi nancial statements. The amount also includes an allocated amount of production overheads by applying an overhead rate to the estimated stage of completion.

The cost of goods purchased includes their purchase price, inward shipping costs and import duties and charges.

Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

2.10 Investments in subsidiaries, associated companies and joint ventures

Investments in subsidiaries, associated companies and joint ventures are stated at cost less accumulated impairment losses (Note 2.13(c)) in the Company’s balance sheet. On disposal of investments in subsidiaries, associated companies and joint ventures, the difference between disposal proceeds and the carrying amount of the investments are recognised in profi t or loss.

2.11 Property, plant and equipment

(a) Measurement

(i) Property, plant and equipment

All items of property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses (Note 2.13(c)).

(ii) Components of costs

The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Cost also includes borrowing costs that are directly attributable to the construction of qualifying assets, and any fair value gains or losses on qualifying cash fl ow hedges of property, plant and equipment that are transferred from the hedging reserve. The projected cost of dismantlement, removal or restoration is also included as part of the cost of property, plant and equipment if the obligation for the dismantlement, removal or restoration is incurred as a consequence of acquiring or using the assets.





2.11 Property, plant and equipment (continued)

(b) Depreciation

Freehold land and construction work-in-progress are not depreciated.

Depreciation on other items of property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives. The estimated useful lives are as follows:

Useful lives

Leasehold land, buildings and improvements 10 – 50 yearsMachinery and equipment 10 – 15 yearsMotor vehicles 5 yearsOffi ce equipment 5 – 10 years

The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in profi t or loss when the changes arise.

(c) Subsequent expenditure

Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefi ts associated with the item will fl ow to the Group and the cost can be reliably measured. All other repair and maintenance expenses are recognised in profi t or loss when incurred.

(d) Disposal

On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in profi t or loss within ‘Other (loss)/gain - net’.

2.12 Intangible assets

(a) Goodwill on acquisitions

Goodwill represents the excess of the cost of acquisition of subsidiaries or associated companies or joint ventures over the fair value of the Group’s share of the identifi able net assets and contingent liabilities of the acquired subsidiaries or associated companies or joint ventures at the date of acquisition.

Goodwill is recognised separately as an intangible asset and is tested at least annually for impairment and carried at cost less accumulated impairment losses (Note 2.13(a)). Prior to 1 January 2001, goodwill on acquisitions was adjusted against retained earnings in the year of acquisition.

Negative goodwill represents the excess of the fair value of the identifi able net assets of subsidiaries or associated companies or joint ventures when acquired over the cost of acquisition. Negative goodwill is recognised immediately in profi t or loss.

Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity sold.

(b) Brands, patents and trademarks

Brands acquired as part of business combinations are recognised when they arise from contractual or other legal rights, or are separable.

Such brands are recognised at their fair values at the acquisition date and subsequently carried at cost (i.e. the fair values at initial recognition) less accumulated amortisation and accumulated impairment losses.

Brands that are regarded as having indefi nite useful lives are not amortised and are subsequently tested for impairment annually (Note 2.13(b)).

Brands that are regarded as having limited useful lives are stated at cost less accumulated amortisation and accumulated impairment losses (Note 2.13(c)). Amortisation is calculated using the straight-line method to allocate the cost of brands over their estimated useful lives.





2.12 Intangible assets (continued)

(b) Brands, patents and trademarks (continued)

Patents and trademarks are stated at cost less accumulated amortisation and accumulated impairment losses (Note 2.13(c)). Amortisation is calculated using the straight-line method to allocate the cost of patents and trademarks over their estimated useful lives of up to 5 years.

The useful lives of brands, patents and trademarks are assessed at each balance sheet date and adjustments are included in the profi t or loss for the fi nancial year in which the changes arise.

(c) Customer lists

Customer lists are acquired as part of business combinations and are recognised at their fair values at the acquisition date and subsequently carried at cost (i.e. the fair values at initial recognition) less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of customer lists over their estimated useful lives.

2.13 Impairment of non-fi nancial assets

(a) Goodwill

Goodwill is tested for impairment annually, and whenever there is indication that the goodwill may be impaired.

For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-generating-units (“CGU”) expected to benefi t from synergies of the business combination.

An impairment loss is recognised in profi t or loss when the carrying amount of the CGU, including the goodwill, exceeds the recoverable amount of the CGU. Recoverable amount of the CGU is the higher of the CGU’s fair value less cost to sell and value-in-use.

The total impairment loss of a CGU is allocated fi rst to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU.

An impairment loss on goodwill is recognised as an expense and is not reversed in a subsequent period.

(b) Brands

Brands that are regarded as having indefi nite useful lives are tested annually for impairment, as well as when there is any indication that the carrying amounts may not be recoverable.

An impairment loss is recognised in profi t or loss when the carrying amount of the acquired brand exceeds the recoverable amount of the acquired brand. Recoverable amount of the brand is the higher of a brand’s fair value less cost to sell and value-in-use.

An impairment loss on brand is recognised as an expense and is reversed if, and only if, there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the brand’s carrying amount does not exceed the carrying amount that would have been determined, if no impairment loss had been recognised.





2.13 Impairment of non-fi nancial assets (continued)

(c) Other intangible assets Property, plant and equipment Investments in subsidiaries, associated companies and joint ventures

Other intangible assets, property, plant and equipment and investments in subsidiaries, associated companies and joint ventures are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired. If any such indication exists, the recoverable amount (i.e. the higher of the fair value less cost to sell and value-in-use) of the asset is estimated to determine the amount of impairment loss.

For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash fl ows that are largely independent of those from the other assets. If this is the case, recoverable amount is determined for the CGU to which the asset belongs.

If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount.

The difference between the carrying amount and recoverable amount is recognised as an impairment loss in profi t or loss.

An impairment loss for these assets is reversed if, and only if, there has been a change in the estimates used to determine the assets’ recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for these assets other than goodwill is recognised in profi t or loss.

2.14 Derivative fi nancial instruments and hedging activities

Derivatives are used by the Group to manage exposure to foreign exchange, interest rate and cocoa bean price risks arising from operational and fi nancing activities.

Derivatives are initially recognised at fair value on the dates the contracts are entered into and are subsequently carried at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

At the inception of a hedge relationship, the Group formally designates and documents the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash fl ows of hedged items.

Where the derivative qualifi es for hedge accounting, recognition of any resultant gain or loss is based on the nature of the item being hedged. The Group designates certain derivatives as either (1) hedges of the fair value of recognised assets or liabilities or a fi rm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash fl ow hedge).

Cash fl ow hedges refer to hedges against exposure to variability in cash fl ows that is either attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecast transaction. Fair value hedges are intended to hedge changes in fair value attributable to a particular risk inherent in the qualifi ed hedged item.

Hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifi es for hedge accounting. Upon discontinuation of hedge accounting, any cumulative gains or losses on the hedging instrument that remain recognised in the cash fl ow hedge reserve from the period when the hedge was effective should remain in equity until the forecast transactions occurs. If the forecast transaction is no longer expected to occur, the net cumulative gain or loss is immediately recognised in profi t or loss.





2.14 Derivative fi nancial instruments and hedging activities (continued)

(a) Cocoa Bean Futures

The Group enters into exchange traded cocoa bean futures to hedge the cocoa bean price risk arising from its forcasted purchases of cocoa beans and forecasted sales of cocoa ingredients.

The Group applies cash fl ow hedge (“CFH”) accounting whereby the cocoa bean futures are designated as the hedging instruments to the underlying forecasted sale or purchase contracts to hedge the variability in cash fl ow that is attributable to the risk of cocoa bean price movement.

The fair values of the effective portion of the cocoa bean futures designated as cash fl ow hedges are recognised in the cash fl ow hedge reserve and transferred to profi t or loss in the periods when the forecast transactions are recognised in profi t or loss. The fair values of the ineffective portion of the cocoa bean futures are recognised immediately in profi t or loss.

The fair values of the cocoa bean futures are determined based on the quoted closing prices on the relevant Exchange as at balance sheet date.

(b) Foreign Exchange Forward and Futures Contracts

The Group enters into foreign exchange forward and futures contracts to hedge the currency risk arising from its forecasted purchase of cocoa beans and forecasted sales transactions as well as fi rm commitments for purchases and sales denominated in foreign currencies.

The Group designates its foreign exchange forwards and futures as cash fl ow hedges. Under the CFH accounting, the foreign exchange forwards and futures are designated as hedging instruments to the underlying forecasted sales or purchase contracts to hedge the variability in cash fl ow that is attributable to the foreign exchange risk. The fair value changes on the effective portion of the foreign exchange forwards or futures designated as cash fl ow hedge are recognised in the cash fl ow hedge reserve and transferred to profi t or loss in the periods when the forecast transactions are recognised in profi t or loss. The fair value of the ineffective portion of the foreign exchange forwards or futures are recognised immediately in profi t or loss.

The fair value of foreign exchange forward and future contracts are determined using forward exchange market rates at the balance sheet date.

(c) Interest Rate Swaps

The Group has entered into interest rate swaps (“IRSs”) to hedge the Group’s exposure to interest rate risk on its fl oating rate borrowings. These IRSs entitle the Group to receive interest at fl oating rates on the notional principal amounts and oblige the Group to pay fi xed rate interest on the same notional principal amounts, thus allowing the Group to raise borrowings at fl oating rates and swap them into fi xed rates.

For interest rate swaps which qualify as cash fl ow hedges, the fair value changes on the effective portion of interest rate swaps are recognised in the cash fl ow hedge reserve and reclassifi ed to profi t or loss (as part of fi nance costs) when the interest expense on the borrowings are recognised in profi t or loss. The fair value changes on the ineffective portion of interest rate swaps are recognised immediately in profi t or loss.

The fair value of the interest rate derivatives is calculated at the present value of the estimated future cash fl ows discounted at actively quoted interest rates.





2.14 Derivative fi nancial instruments and hedging activities (continued)

(d) Cross Currency Interest Rate Swaps

The Group issued medium term notes (“MTNs”) which are denominated in Singapore Dollars (“SGD”). To hedge against the currency risk and interest rate risk arising from these MTNs, the Group entered into cross currency interest rate swaps which enable the Group to receive principal and interest payments in SGD and pay its fi xed rate principal and interest in United States Dollars.

These cross currency interest rate swaps have been designated as hedging instruments under cash fl ow hedge accounting whilst the SGD principal and interest cash fl ow payments are designated as the hedged items.

The fair value change on the effective portion of the cross currency interest rate swaps designated as cash fl ow hedge is recognised in the cash fl ow hedge reserve and reclassifi ed to profi t or loss when currency translation gains/losses and interest expense on the borrowing is recognised in profi t or loss.

The fair value of the cross currency interest rate swaps is determined using discounted cash fl ow analysis based on the appropriate interest rates and forward exchange rates.

(e) Derivatives that are not designated or do not qualify for hedge accounting

Fair value changes on those derivatives are recognised in profi t or loss when the changes arise.

2.15 Trade and other payables

Trade and other payables are initially recognised at fair value, and subsequently measured at amortised cost using the effective interest method.

2.16 Provisions for other liabilities and charges

Provisions for other liabilities and charges are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outfl ow of resources will be required to settle the obligation; and the amount can be reliably estimated.

2.17 Financial guarantees

The Company has issued corporate guarantees to banks for bank borrowings of its subsidiaries. These guarantees are fi nancial guarantees as they require the Company to reimburse the banks if the subsidiaries fail to make principal or interest payments when due in accordance with the terms of their borrowings.

Financial guarantees are initially recognised at their fair value plus transaction costs in the Company’s balance sheet.

Financial guarantees are subsequently amortised to profi t or loss over the period of the subsidiaries’ borrowings, unless it is probable that the Company will reimburse the bank for an amount higher than the unamortised amount. In this case, the fi nancial guarantee shall be carried at the expected amount payable to the bank in the Company’s balance sheet.

Intragroup transactions are eliminated on consolidation.

2.18 Borrowings

Borrowings are recognised initially at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profi t or loss over the period of the borrowings using the effective interest method.

Borrowings which are due to be settled within 12 months after the balance sheet date are presented as current borrowings.





2.19 Leases

Finance leases

Leases where the Group assumes substantially all risks and rewards incidental to ownership of the leased assets are classifi ed as fi nance leases.

The leased assets and the corresponding lease liabilities (net of fi nance charges) under fi nance leases are recognised on the balance sheet as plant and equipment and borrowings respectively, at the inception of the leases based on the lower of the fair value of the leased assets and the present value of the minimum lease payments.

Each lease payment is apportioned between the fi nance expense and the reduction of the outstanding lease liability. The fi nance expense is recognised in profi t or loss on a basis that refl ects a constant periodic rate of interest on the fi nance lease liability.

Operating leases

Leases where substantially all risks and rewards incidental to ownership are retained by the lessor are classifi ed as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are taken to profi t or loss on a straight-line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

2.20 Employee benefi ts

(a) Defi ned benefi t plans

Defi ned benefi t plans are post-employment benefi t plans under which the Group pays fi xed contributions into separate entities such as the Central Provident Fund on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid.

The liability recognised in the balance sheet in respect of defi ned benefi t pension plans is the present value of the defi ned benefi t obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognised actuarial gains or losses and unrecognised past service costs. The defi ned benefi t obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defi ned benefi t obligation is determined by discounting the estimated future cash outfl ows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefi ts will be paid, and that have terms to maturity approximating to the terms of the related pension liability.

Actuarial gains and losses are recognised as income or expense when the net cumulative unrecognised actuarial gains and losses for each individual plan at the end of the previous reporting year exceeded 10% of the higher of the defi ned benefi t obligation and the fair value of plan assets at that date. These gains or losses are recognised over the expected average remaining working lives of the employees participating in the plans.

Past-service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the employees remaining in service for a specifi ed period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period.

(b) Defi ned contribution plans

Defi ned contribution plans are post-employment benefi t plans under which the Group pays fi xed contributions into separate entities such as the Central Provident Fund.

The Group’s obligation, in regard to the defi ned contribution plans, is limited to the amount it contributes to the fund. The Group’s contributions to defi ned contribution plans are recognised in the fi nancial year to which they relate.

(c) Employee leave entitlement

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.





2.20 Employee benefi ts (continued)

(d) Termination benefi ts

Termination benefi ts are those benefi ts which are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefi ts. The Group recognises termination benefi ts when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefi ts as a result of an offer made to encourage voluntary redundancy. Benefi ts falling due more than 12 months after balance sheet date are discounted to present value.

2.21 Share capital

Ordinary shares are classifi ed as equity.

Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account.

2.22 Dividends

Interim dividends are recorded in the fi nancial year in which they are declared payable. Final dividends are recorded in the fi nancial year in which the dividends are approved by the shareholders.

2.23 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting to the Executive Committee whose members are responsible for allocating resources and assessing performance of the operating segments.

2.24 Fair value estimation of fi nancial assets and liabilities

The carrying amounts of current fi nancial assets and liabilities, carried at amortised cost approximate their fair values.

The fair values of fi nancial liabilities carried at amortised cost are estimated by discounting the future contractual cash fl ows at the current market interest rates that are available to the Group for similar fi nancial liabilities.

2.25 Government grants

Grants from the government are recognised as a receivable at their fair value when there is reasonable assurance that the grant will be received and the Group will comply with all the attached conditions.

Government grants receivable are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis.

Government grants relating to expenses are deducted against the related expenses.

3. CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS

Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defi nition, seldom exactly equal the related actual results. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below.

(i) Estimated impairment of goodwill and brands

Goodwill and brands with indefi nite useful lives are tested for impairment annually, in accordance with the accounting policy stated in Note 2.13. The recoverable amount of these brands and cash generating units comprising goodwill have been determined based on Royalty Relief Approach and Value-In-Use calculations respectively. Estimating the recoverable amounts requires the Group to estimate future cash fl ows and suitable royalty and discount rates in order to calculate the present value of those cash fl ows (Note 24).




3. CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS (CONTINUED)

(i) Estimated impairment of goodwill and brands (continued)

If management’s estimated pre-tax discount rate applied to the discounted cash fl ows at 31 December 2010 is raised by 1%, the recoverable amount of goodwill and one of the brands will be reduced by US$8,539,000 and US$337,000 respectively. However, this change in assumption will not cause the carrying amount of goodwill and one of the brands to exceed their recoverable amount.

If management’s estimated royalty rate of certain brands at 31 December 2010 is lowered by 1%, the recoverable amount of brands will be reduced by US$2,715,000. However, this change in assumption will not cause the carrying amount of brands to exceed their recoverable amount.

(ii) Income taxes

The Group is subject to income taxes in numerous jurisdictions. In determining the income tax liabilities, management is required to estimate the amount of capital allowances and the deductibility of certain expenses (“uncertain tax positions”) at each tax jurisdiction. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such fi nal determination is made. The carrying amount of the Group’s income tax recoverable (net of tax payable) at 31 December 2010 was US$4,056,000 (2009: US$508,000).

(iii) Deferred income tax assets

The Group recognises deferred income tax assets on carried forward tax allowances and tax losses to the extent there are suffi cient estimated future taxable profi ts and/or temporary differences against which the tax credit can be utilised and the Group is able to satisfy any relevant legislation affecting the ability of the losses to be carried forward. As of 31 December 2010, the Group recognised deferred tax assets of US$17,464,000 (2009: US$14,805,000) relating to certain entities based on the anticipated future use of tax allowances and tax losses carried forward by those entities. If those entities are unable to generate suffi cient taxable profi ts to utilise the tax allowances and tax losses, the deferred income tax assets will have to be written off against income tax expense.

(iv) Tax recoverable

The Group had made instalment payments amounting to Indonesian Rupiah (“IDR”) 71.9 billion (approximately US$7.4 million) in relation to an additional tax assessment arising from one of the Indonesian subsidiaries. These payments are recorded as tax recoverable in the balance sheet. Based on advice from Indonesian tax advisers, the Group has valid grounds to contest the additional tax assessment and has fi led an appeal with the Indonesian Tax Court against this additional tax assessment. The recoverability of the tax paid or any provision for additional tax liability is dependent on the court’s decision (Note 16).

(v) Fair valuation for derivative fi nancial instruments

The Group carries derivatives at fair value, which requires extensive use of valuation techniques or dealer quotes for similar instruments. This determination requires signifi cant judgement and the use of observable market data. The fair value of these derivatives would differ if the Group used different base of fair valuation, which would affect the fi nancial performance of the Group.

4. REVENUE AND OTHER OPERATING INCOME

The Group

2010US$’000

2009US$’000

Sales of goods 1,547,341 1,228,205Processing fees 18,679 16,264Total revenue 1,566,020 1,244,469Other operating income:– Interest income 249 182– Miscellaneous income 5,421 4,508Total other operating income 5,670 4,690

1,571,690 1,249,159




5. COST OF SALES

The Group

2010US$’000

2009US$’000

Cost of goods sold 1,373,253 1,089,373Cost of processing services rendered 15,131 12,652

1,388,384 1,102,025

Transfer from cash fl ow hedge reserve – cocoa bean and foreign exchange derivatives (18,874) (16,137)1,369,510 1,085,888

Other adjustments to cost of sales:– Fair value (gain)/loss on cocoa bean derivatives (6,805) 10,865– Fair value loss on foreign exchange derivatives 5,123 5,592Net foreign exchange gain (1,411) (61)

1,366,417 1,102,284

6. EMPLOYEE BENEFITS EXPENSES

The Group

2010US$’000

2009US$’000

Wages and salaries 64,358 55,869Employer’s contribution to defi ned contribution plans, including Central Provident Fund 3,846 2,625Defi ned benefi t plans (Note 30(a)) 2,321 2,935Less: Government grant – Jobs credit scheme (80) (389)

70,445 61,040

The Jobs Credit Scheme is a cash grant introduced in the Singapore Budget 2009 to help businesses preserve jobs in the economic downturn. The amount an employer can receive depends on the fulfi lment of the conditions as stated in the scheme. The Jobs Credit Scheme ended on 30 June 2010.

7. FINANCE COSTS

The Group

2010US$’000

2009US$’000

Interest expense:– bank loans and overdrafts 8,168 7,742– trade fi nance and short term advances 10,086 5,288– medium term notes 4,231 3,210– fi nance lease liabilities 72 72

22,557 16,312Transfer from cash fl ow hedge reserve – interest rate swaps 3,640 2,324

26,197 18,636Less: Interest costs capitalised as cost of property, plant and equipment – (524)

26,197 18,112Net foreign exchange (gain)/loss (306) 59

25,891 18,171




8. EXPENSES BY NATURE

The Group

2010US$’000

2009US$’000

Other fees paid/payable to: Auditor of the Company – Current fi nancial year 33 127 – Under provision of prior fi nancial year – 1 Other auditors * 10 20

43 148Amortisation of intangible assets (Note 23(b) & 23(c)) 433 483Allowance made for inventory obsolescence 3,258 1,849Cost of purchases recognised as an expense 1,347,910 1,040,172Depreciation of property, plant and equipment (Note 22) 23,235 21,062Employee benefi ts expenses (Note 6) 70,445 61,040Fair value loss on interest rate derivatives not designated for hedge accounting 345 428Foreign exchange loss/(gain) 4,340 (28)Transfer from cash fl ow hedge reserve – cross currency interest rate swaps (6,542) (1,944)

(2,202) (1,972)(Gain)/loss on disposal of property, plant and equipment (622) 135Inventories written off 2,668 808Inventory written down to net realisable value – 1,317Impairment loss on trade receivables 81 140Logistics and insurance 33,099 24,322Professional fees 1,829 2,036Rental on operating leases 4,430 3,867Travelling expenses 4,448 3,547

* Includes the network of member fi rms of PricewaterhouseCoopers International Limited




9. INCOME TAX

(a) Income tax expense

The Group

2010US$’000

2009US$’000

Tax expense attributable to profi t is made up of:Current income tax– Singapore – 2,068– Foreign 17,806 10,597

17,806 12,665Deferred income tax (3,300) (5,772)

14,506 6,893Under/(over) provision in preceding fi nancial years:– Current income tax 102 670– Deferred income tax (620) 19

13,988 7,582

The tax expense on profi t differs from the amount that would arise using the Singapore standard rate of income tax due to the following:

The Group

2010US$’000

2009US$’000

Profi t before tax 58,461 27,319

Tax calculated at a tax rate of 17% (2009: 17%) 9,939 4,644Tax concessions (3,506) (2,918)Effects of:– Change in tax rates 118 (282)– Different tax rates in other countries 5,155 2,006– Income not subject to tax (581) (255)– Expenses not deductible for tax purposes 1,642 2,335– Withholding tax on dividends paid by foreign subsidiaries 1,879 1,629– Deferred tax assets not recognised 215 445– Utilisation of previously unrecognised tax losses and tax allowances (355) (711)Tax charge 14,506 6,893




9. INCOME TAX (CONTINUED)

(b) Movements in current income tax liabilities (net of tax recoverable)


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Beginning of fi nancial year (508) 2,719 2,116 1,476Currency translation differences 159 346 – –Income tax paid (21,615) (16,908) (5,388) (3,845)Tax payable on profi t for the current fi nancial year 17,806 12,665 3,086 4,453Under provision in preceding fi nancial years 102 670 186 32End of fi nancial year (4,056) (508) – 2,116

The amounts are shown in the balance sheets as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Tax recoverable (Note 16) 9,205 5,323 – –

Current income tax liabilities 5,149 4,815 – 2,116

(c) Deferred income taxes

Deferred income tax assets and deferred income tax liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same fi scal authority. The amounts, determined after appropriate offsetting, are shown in the balance sheets as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Deferred income tax assets 17,464 14,805 – –

Deferred income tax liabilities 5,917 7,046 330 1,051

Deferred income tax assets are recognised for tax allowances and tax losses carried forward to the extent that realisation of the related tax benefi ts through future taxable profi ts is probable.

The Group has unrecognised tax allowances of US$2,146,000 (2009: US$13,443,000) and unrecognised tax losses of US$6,283,000 (2009: US$6,211,000) at the balance sheet date, which can be carried forward and used to offset against future taxable income subject to meeting certain statutory requirements in the respective countries of incorporation of those companies with unrecognised tax allowances and tax losses. These tax allowances and tax losses do not have any expiry dates, except for tax losses of US$945,000 (2009: US$1,665,000) incurred by certain subsidiaries which will expire between 2011 and 2019.

The movement in the deferred income tax (assets)/liabilities account is as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Beginning of fi nancial year (7,759) 966 1,051 418Effect of change in tax rates 118 (282) – (33)Tax (credited)/charged to:– Profi t or loss (4,038) (5,471) (163) (93)– Equity (553) (2,430) (558) 759Currency translation differences 685 (542) – –End of fi nancial year (11,547) (7,759) 330 1,051





(c) Deferred income taxes (continued)

The movement in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction) during the year is as follows:

The Group

Deferred income tax liabilities

Fair value gains

US$’000

Accelerated tax

depreciationUS$’000

Other taxable temporary

differencesUS$’000

TotalUS$’000

At 1 January 2010 546 11,669 314 12,529Charged/(credited) to: – Profi t or loss – 1,460 991 2,451– Equity (64) – – (64)Currency translation differences – 108 22 130At 31 December 2010 482 13,237 1,327 15,046

At 1 January 2009 2,567 14,673 404 17,644Effect of change in tax rates – (365) (23) (388)Credited to: – Profi t or loss – (3,439) (68) (3,507)– Equity (2,019) – – (2,019)Currency translation differences (2) 800 1 799At 31 December 2009 546 11,669 314 12,529

Deferred income tax assets

Fair valuelosses

US$’000Provisions

US$’000

Unutilised tax losses &

tax allowancesUS$’000

Unrealised exchange

lossesUS$’000

TotalUS$’000

At 1 January 2010 (635) (3,485) (15,832) (336) (20,288)Effect of change in tax rates 1 – 117 – 118Credited to: – Profi t or loss – (962) (5,135) (392) (6,489)– Equity (489) – – – (489)Currency translation differences 21 (92) 642 (16) 555At 31 December 2010 (1,102) (4,539) (20,208) (744) (26,593)

At 1 January 2009 (213) (1,440) (12,955) (2,070) (16,678)Effect of change in tax rates – 48 56 2 106Charged/(credited) to: – Profi t or loss – (1,744) (2,624) 2,404 (1,964)– Equity (411) – – – (411)Currency translation differences (11) (349) (309) (672) (1,341)At 31 December 2009 (635) (3,485) (15,832) (336) (20,288)





(c) Deferred income taxes (continued)

The Company

Deferred income tax liabilities

Fair value gains

US$’000

Accelerated tax

depreciationUS$’000

Other taxable temporary

differencesUS$’000

TotalUS$’000

At 1 January 2010 546 336 214 1,096(Credited)/charged to:– Profi t or loss – 4 (161) (157)– Equity (546) – – (546)At 31 December 2010 – 340 53 393

At 1 January 2009 – 338 332 670Effect of change in tax rate – (15) (19) (34)Charged/(credited) to:– Profi t or loss – 13 (99) (86)– Equity 546 – – 546At 31 December 2009 546 336 214 1,096

Deferred income tax assets

Fair valuelosses

US$’000Provisions

US$’000Total

US$’000

At 1 January 2010 – (45) (45)Credited to:– Profi t or loss – (6) (6)– Equity (12) – (12)At 31 December 2010 (12) (51) (63)

At 1 January 2009 (213) (39) (252)Effect of change in tax rate – 1 1Charged/(credited) to:– Profi t or loss – (7) (7)– Equity 213 – 213At 31 December 2009 – (45) (45)




10. EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (“EBITDA”)

EBITDA is a measure of profi t determined by management as follows:

The Group

2010US$’000

2009US$’000

Profi t before tax 58,461 27,319

Adjustments for:Fair value loss on interest rate derivatives not designated for hedge accounting (Note 8) 345 428Interest expense (Note 7) 26,197 18,112Interest income (Note 4) (249) (182)Depreciation of property, plant and equipment (Note 22) 23,235 21,062Amortisation of intangible assets (Note 23(b) & 23(c)) 433 483EBITDA 108,422 67,222

11. EARNINGS PER SHARE

(a) Basic earnings per share

Basic earnings per share is calculated by dividing the net profi t attributable to equity holders of the Company by the weighted average number of ordinary shares on issue during the fi nancial year.

The Group

2010 2009

Net profi t attributable to equity holders of the Company (US$’000) 44,473 24,625

Weighted average number of ordinary shares (’000) 575,283 532,277

Basic earnings per share (US cents) 7.73 4.63

(b) Diluted earnings per share

Diluted earnings per share for fi nancial years 2010 and 2009 are the same as basic earnings per share as there were no potentially dilutive ordinary shares.




12. CASH AND CASH EQUIVALENTS


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Cash at bank and on hand 20,822 11,527 14,275 928Short-term bank deposits 21,960 6,811 13,100 5,831

42,782 18,338 27,375 6,759

The carrying amounts of cash and cash equivalents approximate their fair values.

For the purposes of presenting the consolidated cash fl ow statement, the consolidated cash and cash equivalents comprise the following:

The Group

2010US$’000

2009US$’000

Cash and bank balances (as above) 42,782 18,338Less: Bank overdrafts (Note 28) (47,415) (46,384)Cash and cash equivalents per consolidated cash fl ow statement (4,633) (28,046)

13. TRADE RECEIVABLES


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Trade receivables– third parties 161,552 131,945 36,305 31,521– subsidiaries – – 214,999 151,518– associated companies – 106 – –– related parties 3,686 2,212 – –

165,238 134,263 251,304 183,039Less: Accumulated impairment loss – third parties (274) (241) – (5)

164,964 134,022 251,304 183,034

Related parties represent corporations in which certain directors have substantial fi nancial interests. The carrying amounts of current trade receivables approximate their fair values.

Trade receivables of US$36,043,000 (2009: US$20,495,000) of the Group have been pledged as security for loans and trade fi nance obtained from banks for its European operations. No trade receivables of the Company were pledged.




14. INVENTORIES


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Raw materials 212,104 152,448 – 1,162Work-in-progress 11,206 8,653 – –Finished goods 241,900 172,524 9,397 5,904Packaging materials & others 26,152 21,171 – –

491,362 354,796 9,397 7,066

As at 31 December 2010, there was no write down of fi nished goods to net realisable value (2009: US$1,317,000).

The cost of purchases recognised as an expense and included in cost of sales amounted to US$1,347,910,000 (2009: US$1,040,172,000).

Inventories of US$94,484,000 (2009: US$90,505,000) of the Group have been pledged as security for loans and trade fi nance obtained from banks and other creditors for its European operations. No inventories of the Company were pledged.

Forward purchase and sales commitments

As at 31 December 2010, the forward purchases of cocoa beans and forward sales of cocoa products relating to price-fi xed contracts are as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Forward purchases:– cocoa beans from third parties 134,556 92,613 63,310 60,078– cocoa products from subsidiaries* – – 125,313 107,354

Forward sales:– cocoa products to third parties 275,873 137,059 114,455 67,889– cocoa beans to subsidiaries* – – 63,310 60,078

* The forward purchases of beans by the Company will be sold to its subsidiaries for processing into cocoa products. The Company commits to purchase these cocoa products from subsidiaries in order to support the Company’s forward sales commitments.




15. DERIVATIVE FINANCIAL INSTRUMENTS

Derivative assets or derivative liabilities represent the fair values on the following outstanding derivatives.

The GroupFair Values

The CompanyFair Values

AssetsUS$’000

LiabilitiesUS$’000

AssetsUS$’000

LiabilitiesUS$’000

2010(a) Foreign exchange forwards

– Cash fl ow hedge – 2,540 – 502– Not designated for hedge accounting – 2,759 – 1,036

(b) Interest rate derivatives(i) Cross currency interest rate swaps – Cash fl ow hedge 10,889 – 10,889 –(ii) Interest rate swaps – Cash fl ow hedge 562 3,984 562 3,770 – Not designated for hedge accounting – 1,692 – 1,692

Total 11,451 10,975 11,451 7,000

2009(a) Foreign exchange forwards

– Cash fl ow hedge 76 – – –– Not designated for hedge accounting 1,226 – 880 –

(b) Interest rate derivatives(i) Cross currency interest rate swaps – Cash fl ow hedge 2,860 – 2,860 – – Not designated for hedge accounting 139 – 139 –(ii) Interest rate swaps and caps – Cash fl ow hedge 208 4,142 208 3,792 – Not designated for hedge accounting – 1,465 – 1,465

Total 4,509 5,607 4,087 5,257




15. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

(a) Foreign exchange forwards

The notional amounts of the Group’s and the Company’s foreign exchange forwards denominated in the following currencies are as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Sterling Pound– Long 216,464 47,497 42,639 –– Short 103,943 7,590 1,646 –

Euro– Long 16,220 14,048 15,596 14,048– Short 61,540 61,211 60,706 61,211

Australian Dollar– Long 170 – – –– Short 2,081 1,697 2,081 1,697

Swiss Franc– Long 6,967 – – –– Short 29,798 13,687 2,458 1,573

USD– Long 13,506 14,015 – –– Short 31,548 12,021 – –

Others– Short 1,917 – – –

(b) Interest rate derivatives

The notional amount and maturity dates of the respective interest rate derivative instruments are as follows:

The Group

2010 2009

Notional AmountUS$’000

Maturity Dates

Notional AmountUS$’000

MaturityDates

Cross currency interest rate swaps

– cash fl ow hedge 72,337 2011 – 2013 65,158 2011 – 2012– not designated for hedge accounting – – 4,846 2010

Interest rate swaps

– cash fl ow hedge 186,357 2011 – 2017 117,084 2011 – 2013– not designated for hedge accounting 20,000 2013 20,000 2013

Interest rate caps– not designated for hedge accounting – – 20,000 2010




15. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

(b) Interest rate derivatives (continued)

The Company

2010 2009

NotionalAmountUS$’000

Maturity Dates

NotionalAmountUS$’000

MaturityDates

Cross currency interest rate swaps– cash fl ow hedge 72,337 2011 – 2013 65,158 2011 – 2012– not designated for hedge accounting – – 4,846 2010

Interest rate swaps– cash fl ow hedge 107,385 2011 – 2017 64,000 2011 – 2013– not designated for hedge accounting 20,000 2013 20,000 2013

Interest rate caps– not designated for hedge accounting – – 20,000 2010

(c) Cocoa bean futures and foreign exchange futures

The net amounts receivable or payable with brokers are included in other third party receivables (Note 17) or other third party payables (Note 27). These refl ect changes in fair values of exchange traded futures contracts used for hedging, which are subject to daily mark-to-market valuation, and are offset against margin or credit lines maintained with brokers.

The notional amounts of exchange traded futures contracts of the Group and the Company are as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Exchange traded cocoa bean futures purchases 696,041 280,080 382,247 148,585Exchange traded cocoa bean futures sales 500,552 337,731 352,764 184,704Foreign exchange futures– purchases 154,280 63,145 154,280 63,145– sales 128,587 24,710 128,587 24,710

For accounting of cocoa bean futures and foreign exchange futures, please refer to Note 2.14(a) and 2.14(b).

16. TAX RECOVERABLE

The Group’s tax recoverable mainly relates to instalment payments amounting to IDR71.9 billion, approximately US$7.4 million (2009: IDR42.7 billion, approximately US$4.1 million) by one of the Indonesian subsidiaries to its local tax authority.

In 2009, the Indonesian Director General of Taxation (“DGT”) imposed an additional tax assessment amounting to IDR71.9 billion (approximately US$7.4 million) on PT General Food Industries (“GFI”), a wholly owned Indonesian subsidiary of the Company, pertaining to the issue of transfer pricing.

GFI is contesting this additional tax assessment on the grounds that the transfer pricing between GFI and the Company is done at arm’s length based on the methods prescribed in the OECD Transfer Pricing Guidelines.

GFI has been advised by its Indonesian tax advisers that there are valid grounds to contest the additional tax assessment by DGT. Accordingly, GFI has fi led an appeal with the Indonesian Tax Court against this additional assessment and has not made any provision in its accounts with respect to this additional tax liability. The proceedings ended in September 2010 and are now pending the court’s decision. As of balance sheet date, it is still too preliminary to provide an assessment of the outcome.




17. OTHER CURRENT ASSETS


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Other receivables– third parties 22,912 26,304 611 2,136– subsidiaries (non-trade) – – 11,620 15,308– associated companies (non-trade) 131 – – –– related parties (non-trade) 305 84 – –

23,348 26,388 12,231 17,444Less: Accumulated impairment loss – third parties (36) (33) – –

23,312 26,355 12,231 17,444Deposits 2,049 1,511 1 8Prepayments 8,157 4,143 736 354

33,518 32,009 12,968 17,806

Other non-trade receivables due from subsidiaries, associated companies and related parties are unsecured, interest free and repayable upon demand.

The carrying amounts of other receivables and deposits approximate their fair values.

18. INVESTMENTS IN SUBSIDIARIES

The Company

2010US$’000

2009US$’000

Equity investments, at cost 126,368 105,390Impairment charge (2,276) (2,276)End of fi nancial year 124,092 103,114

On 29 January 2010, the Company acquired the remaining 32% of the issued share capital of Petra Armajaro Holdings Pte Ltd from its non-controlling shareholder for a cash consideration of EUR 9.4 million (US$13,187,000). As a result, the Group’s effective interest in Delfi Cocoa (Europe) B.V., Delfi Cocoa (Europe) GmbH and Delfi Nord Cacao SAS has also increased from 68% to 100%. On 5 May 2010, Petra Armajaro Holdings Pte Ltd changed its name to Petra Europe Holdings Pte Ltd.

On 29 November 2010, the Company increased its investment in its wholly owned subsidiary, Delfi Cocoa Investments 1 Pte Ltd (“DCI 1”) by US$5,991,000 through capitalising part of the amount owed by DCI 1 to the Company.

On 17 December 2010, a subsidiary, Delfi Marketing Inc. (“DMI”) increased its paid up capital by PHP79 million through issuing 790,000 new ordinary shares. The Company subscribed for 790,000 ordinary shares in DMI for a cash consideration of US$1,800,000. The subscription was funded through internal fi nancial resources.




18. INVESTMENTS IN SUBSIDIARIES (CONTINUED)

The details of subsidiaries are as follows:

Name of subsidiary/Country of incorporation Principal activities

Country of business

Equity holding

2010%

2009%

Held by the Company

McKeeson Consultants Private Limited ^

(Singapore)Management consultants Singapore 100 100

PT Perusahaan Industri Ceres*(Indonesia)

Investment holding, manufacturing and marketing of consumer confectionery

Indonesia 99.999 99.999

PT General Food Industries*(Indonesia)

Manufacturing and marketing of industrial cocoa ingredients

Indonesia 99.998 99.998

PT Nirwana Lestari*(Indonesia)

Marketing and distribution of chocolate confections and other consumer products

Indonesia 99.990 99.990

Delfi Cocoa (Malaysia) Sdn. Bhd.*(Malaysia)


Malaysia 100 100

Ceres Sime Confectionery Sdn Bhd ∞

(Malaysia)Dormant Malaysia 100 100

Cocoa Specialities, Inc.*(Philippines)


Philippines 100 100

Siam Cocoa Products Co. Ltd*(Thailand)


Thailand 100 100

Delfi Chocolate Manufacturing S.A.*(Switzerland)

Administrative services Switzerland 100 100

Petra-SPT Marketing Pte Ltd ^

(Singapore)Dormant Singapore 100 100

Delfi Cocoa Investments 1 Pte Ltd ^ (Singapore)

Investment holding Singapore 100 100

Delfi Cocoa USA, Inc. +

(USA)Marketing of industrial cocoa ingredients USA 100 100

Delfi Singapore Pte Ltd ^

(Singapore)Marketing and distribution of healthcare, liquor and other consumer products

Singapore 100 100




18. INVESTMENTS IN SUBSIDIARIES (CONTINUED)

Name of subsidiary/Country of incorporation Principal activities

Country of business

Equity holding

2010%

2009%

Delfi Marketing Sdn Bhd* (Malaysia)

Marketing and distribution of healthcare and other consumer products

Malaysia 100 100

Delfi Foods, Inc.*(Philippines)

Manufacturing of fi nished chocolate confectionery products

Philippines 100 100

Delfi Marketing, Inc.*(Philippines)

Marketing and distribution of chocolate confections and other consumer products

Philippines 100 100

Petra Europe Holdings Pte Ltd ^ (formerly known as Petra Armajaro Holdings Pte Ltd)(Singapore)

Investment holding Singapore 100 68

Held by Ceres Sime Confectionery Sdn Bhd

Brands of Hudsons Sdn Bhd ∞

(Malaysia)Marketing of consumer confectionery Malaysia 100 100

Held by Delfi Cocoa Investments 1 Pte Ltd

DCMX Cocoa, S.A. de C.V.*(Mexico)


Mexico 100 100

Petra Management Services, S.A. de C.V.*(Mexico)

Provision of manpower services Mexico 100 100

Delfi Cacau Brasil Ltda.*(Brazil)


Brazil 100 100

Held by Petra Europe Holdings Pte Ltd

Delfi Cocoa (Europe) B.V.*(Netherlands)

Marketing of industrial cocoa ingredients Netherlands 100 100

Held by Delfi Cocoa (Europe) B.V.

Delfi Cocoa (Europe) GmbH*(Germany)

Manufacturing of industrial cocoa ingredients Germany 100 100

Delfi Nord Cacao SAS*(France)

Manufacturing of industrial cocoa ingredients France 100 100

Held by McKeeson Consultants Private Limited

PT Perusahaan Industri Ceres*(Indonesia)

Investment holding, manufacturing and marketing of consumer confectionery

Indonesia 0.001 0.001

PT General Food Industries*(Indonesia)



PT Nirwana Lestari*(Indonesia)

Marketing and distribution of chocolate confections and other food products


^ Audited by PricewaterhouseCoopers LLP, Singapore. * Audited by PricewaterhouseCoopers fi rms outside Singapore. ∞ Audited by Ernst & Young, Malaysia. + Not required to be audited by law in country of incorporation.




19. INVESTMENTS IN ASSOCIATED COMPANIES AND JOINT VENTURE


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Equity investments, at cost 3,265 3,000

Beginning of fi nancial year 2,363 1,773Currency translation differences 139 268Investment in joint venture 265 –Share of profi ts 298 322End of fi nancial year 3,065 2,363

The summarised fi nancial information of associated companies, not adjusted for the proportion ownership interest held by the Group, is as follows:

2010US$’000

2009US$’000

– Assets 12,320 11,049– Liabilities (6,732) (6,256)– Revenue 10,854 7,550– Net profi t 582 622

The details of the associated companies are as follows:

Name of companyCountry ofincorporation Principal activities Equity holding

2010%

2009%

Held by the CompanyPT Ceres – Meiji Indotama *# Indonesia Manufacturing and marketing of snacks

and food products40 40

Held by Cocoa Specialities, Inc.Alsa Industries, Inc. Philippines Leasing of property 40 40

* Audited by PricewaterhouseCoopers fi rms outside Singapore.# The Group’s effective interest is 50%, including 10% held by PT Perusahaan Industri Ceres.

The summarised fi nancial information of the joint venture, not adjusted for the proportion ownership interest held by the Group, is as follows:

2010US$’000

2009US$’000

Current assets 795 –

The details of the joint venture are as follows:

Name of companyCountry ofincorporation Principal activities Equity holding

2010%

2009%

Held by the CompanyPACTS SA Switzerland Quality and supply control of high

quality fermented cocoa beans 33.33 –




19. INVESTMENTS IN ASSOCIATED COMPANIES AND JOINT VENTURE (CONTINUED)

On 19 May 2010, the Company entered into a joint venture agreement with Blommer Chocolate Company and Cemoi SAS to build, own and operate 30 cocoa bean fermentation centres in the Ivory Coast over a 3-year period. On 19 November 2010, the Company subscribed to 1,000 shares in PACTS SA (“PACTS”), a new company formed in Switzerland under the joint venture agreement for a cash consideration of US$265,000 (EUR195,000) This represents 33.33% of the share capital of PACTS.

20. RECEIVABLES FROM SUBSIDIARIES

Current

The Company

2010US$’000

2009US$’000

Loans to subsidiaries – 10,000

Non-current

The Company

2010US$’000

2009US$’000

Loans to a subsidiary 74,956 54,519

The loans to a subsidiary are unsecured and repayable from 2014 to 2017. The loans bear interest at variable rates, and the weighted average effective interest rate as at balance sheet date is 3.6796% (2009: 3.142%) per annum. The interest charges were waived during the year.

The loans to a subsidiary of US$74,956,000 (2009: US$54,519,000) are subordinated to bank borrowings of the subsidiary.

The carrying amounts of the loans approximate their fair values.

21. LOAN TO ASSOCIATED COMPANY

The loan to an associate is unsecured and not expected to be repaid within the next 12 months. The loan bears interest at 2.5% (2009: 2.5%) per annum. The carrying amount approximates its fair value.




22. PROPERTY, PLANT AND EQUIPMENT

LandUS$’000

Buildings &improvements

US$’000

Machinery& equipment

US$’000

MotorvehiclesUS$’000

Offi ceequipment

US$’000

Constructionin progress

US$’000Total

US$’000

The Group Cost At 1 January 2010 17,036 83,586 242,108 7,680 17,140 5,227 372,777Currency translation

differences (18) (1,578) (3,178) 226 449 (13) (4,112)Additions 355 1,511 3,074 1,846 1,453 6,249 14,488Disposals/written off – (65) (1,086) (1,593) (151) (6) (2,901)Reclassifi cation 177 2,020 7,499 (8) 317 (10,005) –At 31 December 2010 17,550 85,474 248,417 8,151 19,208 1,452 380,252

Accumulated depreciationAt 1 January 2010 576 13,062 71,824 5,125 12,141 – 102,728Currency translation

differences (24) 132 269 141 377 – 895Disposals/written off – (62) (519) (1,481) (148) – (2,210)Depreciation charge 405 3,326 16,174 1,106 2,224 – 23,235Reclassifi cation (351) 351 – – – – –At 31 December 2010 606 16,809 87,748 4,891 14,594 – 124,648

Net book valueAt 31 December 2010 16,944 68,665 160,669 3,260 4,614 1,452 255,604

Cost At 1 January 2009 11,410 54,826 176,514 6,744 14,701 52,916 317,111Currency translation

differences 711 3,136 10,142 629 1,223 397 16,238Additions 4,246 5,506 6,923 939 1,179 22,547 41,340Disposals/written off – (32) (1,192) (632) (56) – (1,912)Reclassifi cation 669 20,150 49,721 – 93 (70,633) –At 31 December 2009 17,036 83,586 242,108 7,680 17,140 5,227 372,777

Accumulated depreciationAt 1 January 2009 398 9,621 55,138 4,297 9,106 – 78,560Currency translation

differences 11 502 2,725 404 908 – 4,550Disposals/written off – (11) (815) (564) (54) – (1,444)Depreciation charge 167 2,950 14,771 988 2,186 – 21,062Reclassifi cation – – 5 – (5) – –At 31 December 2009 576 13,062 71,824 5,125 12,141 – 102,728

Net book valueAt 31 December 2009 16,460 70,524 170,284 2,555 4,999 5,227 270,049




22. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Buildings & improvements

US$’000

Machinery & equipment

US$’000

MotorvehiclesUS$’000

Offi ceequipment

US$’000

Constructionin progress

US$’000Total

US$’000

The CompanyCost At 1 January 2010 395 70 1,163 2,780 87 4,495Additions 11 – 618 59 – 688Disposals – (2) (510) (41) – (553)Reclassifi cation – – – 87 (87) –At 31 December 2010 406 68 1,271 2,885 – 4,630

Accumulated depreciationAt 1 January 2010 319 59 753 2,230 – 3,361Disposals – (1) (436) (41) – (478)Depreciation charge 21 2 212 337 – 572At 31 December 2010 340 60 529 2,526 – 3,455

Net book valueAt 31 December 2010 66 8 742 359 – 1,175

Cost At 1 January 2009 395 70 1,232 2,745 13 4,455Additions – – 242 63 74 379Disposals – – (311) (28) - (339)At 31 December 2009 395 70 1,163 2,780 87 4,495

Accumulated depreciationAt 1 January 2009 227 56 824 1,827 – 2,934Disposals – – (260) (26) – (286)Depreciation charge 92 3 189 429 – 713At 31 December 2009 319 59 753 2,230 – 3,361

Net book valueAt 31 December 2009 76 11 410 550 87 1,134

(a) Included in the carrying amount of land of the Group is the cost of freehold land amounting to US$3,623,000 (2009: US$5,219,000).

(b) In 2010, the additions of plant and equipment under fi nance leases (where the Group is the lessee) amounted to US$989,000 (2009: US$1,766,000).

(c) The carrying amount of plant and equipment of the Group and the Company held under fi nance leases at 31 December 2010 amounted to US$3,761,000 (2009: US$2,762,000) and US$731,000 (2009: US$411,000) respectively.

(d) Bank borrowings are secured on property, plant and equipment of the Group with a carrying value of US$112,332,000 (2009: US$120,606,000).

(e) The borrowing costs capitalised as cost of plant and equipment of the Group during the year ended 31 December 2010 were nil (2009: US$524,000).




23. INTANGIBLE ASSETS


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Goodwill arising on consolidation (Note (a)) 10,841 10,841 – –Brands, patents and trademarks (Note (b)) 8,155 8,564 1,784 1,784Customer list (Note (c)) 2,109 2,627 – –

21,105 22,032 1,784 1,784

(a) Goodwill arising on consolidation

CostBeginning and end of fi nancial year 11,196 11,196 – –

Accumulated impairmentBeginning and end of fi nancial year (355) (355) – –Net book value 10,841 10,841 – –

(b) Brands, patents and trademarks

Beginning of fi nancial year 8,564 8,408 1,784 1,784Additions 53 74 – –Currency translation differences (369) 209 – –Amortisation (93) (127) – –End of fi nancial year 8,155 8,564 1,784 1,784

Cost 9,079 9,171 1,784 1,784Accumulated amortisation (924) (607) – –Net book value 8,155 8,564 1,784 1,784

Brands that are regarded as having indefi nite useful lives are not amortised and are tested for impairment annually (Note 2.13(b)). These brands have a long heritage and are protected in all of the markets where they are sold by trademarks, which are renewed indefi nitely without involvement of signifi cant cost.

(c) Customer list

Beginning of fi nancial year 2,627 2,907 – –Currency translation differences (178) 76 – –Amortisation (340) (356) – –End of fi nancial year 2,109 2,627 – –

Cost 3,420 3,655 – –Accumulated amortisation (1,311) (1,028) – –Net book value 2,109 2,627 – –

(d) Amortisation expense included in the income statement

The Group

2010US$’000

2009US$’000

Other operating expense 433 483




24. IMPAIRMENT TESTS

(a) Goodwill

Goodwill acquired through business combinations has been allocated to two individual cash-generating units (“CGU”) for impairment testing as follows:

• Far East; and • Latin America

Carrying amount of goodwill is allocated to each of the Group’s CGUs as follows:

Far East Latin America Total

2010US$’000

2009US$’000

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Carrying amount of goodwill 3,355 3,355 7,486 7,486 10,841 10,841

The recoverable amounts of both CGUs are determined based on value-in-use calculations. These calculations use discounted cash fl ow projections based on fi nancial budgets approved by management covering a 4-year period. Cash fl ows beyond the 4th year are extrapolated using estimated growth rates. The growth rate does not exceed the long-term average growth rate for the cocoa business in which the CGU operates.

Key assumptions used for value-in-use calculations:

2010 2009

Far East%

Latin America%

Far East%

Latin America%

Gross margin 1 4.0 6.7 6.7 6.7

Growth rate 2 2.5 2.5 2.8 2.5

Discount rate 3 10.0 8.9 10.1 9.5

1 Budgeted gross margin2 Weighted average growth rate used to extrapolate cash fl ows beyond the budget period3 Based on weighted average cost of capital

These assumptions have been used for the analysis of each CGU within the business segment. Management determined budgeted gross margin based on past performance and its expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and refl ect specifi c risks relating to the segments.

(b) Brands

The carrying value of brands that are regarded as having indefi nite useful lives is US$7,469,000 (2009: US$7,469,000). The recoverable amounts of these brands are determined based on the Royalty Relief Approach.

Key assumptions used for the Royalty Relief Approach:

2010%

2009%

Royalty rates 0.2 to 4.1 0.2 to 4.1Growth rate 1 1.5 to 3.0 1.5 to 3.0Discount rate 2 9.3 to 11.4 8.0 to 11.1

1 Weighted average growth rate used to extrapolate cash fl ows beyond the budget period2 Based on weighted average cost of capital, adjusted for country risk premium and brand risk premium

Management determined a royalty rate for each brand based on a benchmarking study of royalty agreements in the confectionery and food processing sector by an independent valuer. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and refl ect specifi c risks relating to the principal countries of the brands.




25. OTHER NON-CURRENT ASSETS

These comprise principally long term prepaid operating rentals.

26. TRADE PAYABLES


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Trade payables:– third parties 119,575 84,102 33,676 24,374– subsidiaries – – 18,037 9,872– associated companies 1,056 656 – –– related parties 1,686 1,006 – –– non-controlling interest – 29,264 – –

122,317 115,028 51,713 34,246

Related parties represent corporations in which certain directors have substantial fi nancial interests.

The carrying amounts of current trade payables approximate their fair values.

27. OTHER PAYABLES


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Other payables:– third parties 25,669 10,567 2,424 993– subsidiaries – – 2,920 2,828– related parties – 319 – –

25,669 10,886 5,344 3,821Accrued operating expenses 30,291 27,440 6,576 6,724

55,960 38,326 11,920 10,545

Related parties represent corporations in which certain directors have substantial fi nancial interests.

The carrying amounts of other payables approximate their fair values.




28. BORROWINGS

Current


2010US$’000

2009US$’000

2010US$’000

2009US$’000

SecuredBank borrowings 20,597 19,935 – –Finance lease liabilities (Note 29) 943 971 155 132Trade fi nance and short term advances 143,564 84,698 – –

165,104 105,604 155 132

UnsecuredBank overdrafts 47,415 46,384 672 580Bank borrowings 33,279 23,166 18,467 5,848Medium term notes 29,406 – 29,406 –Trade fi nance and short term advances 166,320 120,777 112,885 78,870

276,420 190,327 161,430 85,298

Total borrowings (current) 441,524 295,931 161,585 85,430

Non-current


2010US$’000

2009US$’000

2010US$’000

2009US$’000

SecuredBank borrowings 27,437 43,187 – –Finance lease liabilities (Note 29) 726 800 411 203

28,163 43,987 411 203

UnsecuredBank borrowings 11,311 38,805 1,545 17,315Medium term notes 68,117 83,584 68,117 83,584

79,428 122,389 69,662 100,899

Total borrowings (non-current) 107,591 166,376 70,073 101,102

Total borrowings 549,115 462,307 231,658 186,532



Notes to the Financial StatementsNotes to the Financial Statements

28. BORROWINGS (CONTINUED)

The exposure of the borrowings of the Group and of the Company to interest rate changes and the contractual repricing dates at the balance sheet dates are as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

6 months or less 419,864 302,065 141,350 79,4716 – 12 months 19,117 31 19,113 221 – 5 years 110,068 160,211 71,129 107,039Over 5 years 66 – 66 –

549,115 462,307 231,658 186,532

To hedge the cash fl ow interest rate risk and foreign exchange risk arising from borrowings, the Group entered into interest rate swaps and cross currency interest rate swaps (Note 15(b)). These interest rate derivatives enable the Group to effectively swap its fl oating rate borrowings into fi xed rate borrowings.

(a) Security granted

Bank borrowings of certain subsidiaries are secured by inventories, trade receivables, and property, plant and equipment. Finance lease liabilities of the Group are secured by the rights to the leased property, plant and equipment (Note 22), which would revert to the lessor in the event of default by the Group.

(b) Maturity of non-current borrowings

The non-current borrowings (excluding fi nance lease liabilities (Note 29)) have the following maturity:

The Group

2010US$’000

2009US$’000

Between one to two years 68,047 68,473Between two to fi ve years 38,817 97,103

106,864 165,576

(c) Carrying amounts and fair value

The fair value is determined from discounted cash fl ows analysis using discount rates ranging from 3.48% to 4.24% (2009: 6.00% to 6.36%) based on the borrowing rates which the directors expect to be available to the Group at the balance sheet date. The carrying amounts of borrowings approximate their fair values.



Notes to the Financial StatementsNotes to the Financial Statements

29. FINANCE LEASE LIABILITIES


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Minimum lease payment due:– Not later than one year 989 1,020 176 145– Between two to fi ve years 751 834 425 215– Later than fi ve years 16 – 16 –

1,756 1,854 617 360Less: Future fi nance charges (87) (83) (51) (25)Present value of fi nance lease liabilities 1,669 1,771 566 335

The present value of fi nance lease liabilities is analysed as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Not later than one year 943 971 155 132Between two to fi ve years 711 800 396 203Later than fi ve years 15 – 15 –

1,669 1,771 566 335 30. PROVISIONS FOR OTHER LIABILITIES AND CHARGES

Non-current

The Group

2010US$’000

2009US$’000

Employee post-employment benefi t plans (Note (a)) 9,188 7,659Others 1,126 688

10,314 8,347

(a) Employee post-employment benefi t plans

Certain subsidiaries of the Group operate defi ned benefi t pension plans for severance and service benefi ts required under the labour laws of the country in which they operate. These pension plans are unfunded.

The amounts recognised in profi t or loss are as follows:

The Group

2010US$’000

2009US$’000

Current service cost 946 718Interest cost 951 593

1,897 1,311Amortisation of past service costs 284 1,600Actuarial loss recognised during the year 140 24Total, included in employee benefi ts expenses (Note 6) 2,321 2,935




30. PROVISIONS FOR OTHER LIABILITIES AND CHARGES (CONTINUED)

(a) Employee post-employment benefi t plans (continued)

The movement in the liability recognised in the balance sheet:

The Group

2010US$’000

2009US$’000

Beginning of fi nancial year 7,659 4,113Total, included in employee benefi ts expenses (Note 6) 2,321 2,935Benefi ts paid (1,164) (294)Currency translation differences 372 905End of fi nancial year 9,188 7,659

The amounts recognised in the balance sheet are determined as follows:

The Group

2010US$’000

2009US$’000

Present value of unfunded obligations 11,326 9,048Unrecognised past service costs (125) (468)Unrecognised actuarial losses (2,013) (921)Liability in balance sheet 9,188 7,659

As at 31 December2010

US$’0002009

US$’0002008

US$’0002007

US$’0002006

US$’000

Present value of unfunded obligations 11,326 9,048 5,225 5,339 4,359

The principal actuarial assumptions used were as follows:

The Group

2010%

2009%

Discount rates (per annum) 4.5 to 9.4 6.0 to 11.0Future salary increases (per annum) 1.2 to 9.0 2.0 to 10.0

31. SHARE CAPITAL

Issued share capital

Number of shares

’000

Share capital

US$’000

2010Beginning of fi nancial year 532,277 95,767Shares issued 78,880 61,143Share issue expenses – (959)

611,157 155,951

2009Beginning and end of fi nancial year 532,277 95,767

All issued shares are fully paid. There is no par value for these ordinary shares.




31. SHARE CAPITAL (CONTINUED)

On 16 June 2010, the Company issued 78,880,000 ordinary shares for a total cash consideration of US$61,143,000. The cash proceeds provide the Group with fi nancial capacity to pursue strategic growth opportunities and to increase its fi nancial resources for current operations. The intention is to use about 50% of the net proceeds to pursue strategic alliances, mergers and acquisitions, joint ventures and investments as and when they may arise; and the remaining for working capital and general purposes of the Group.

As at balance sheet date, pending utilisation of proceeds allocated for strategic alliances, mergers and acquisitions, joint ventures or investments, the Group has utilised all proceeds to reduce bank borrowings.

The newly issued shares rank pari passu in all respects with the previously issued shares.

32. FOREIGN CURRENCY TRANSLATION RESERVE

The Group

2010US$’000

2009US$’000

Beginning of fi nancial year (3,079) (13,089)Net currency translation differences of fi nancial statements of foreign subsidiaries 1,117 10,010End of fi nancial year (1,962) (3,079)

33. RETAINED EARNINGS

Subsidiaries in France, Indonesia and Thailand are required under their local laws to set aside an amount from their net profi t to a general reserve until this reserve accumulates to amounts ranging from 10% to 20% of their fully paid capital. Such reserves are not distributable.

(a) Retained earnings of the Group and the Company are distributable except for retained earnings of certain subsidiaries amounting to US$3,341,000 (2009: US$3,586,000) which are included in the Group’s retained earnings.

(b) Movement in retained earnings for the Company is as follows:

The Company

2010US$’000

2009US$’000

Beginning of fi nancial year 51,886 32,524

Profi t for the year 20,300 30,300Dividends paid (Note 34) (12,743) (10,938)End of fi nancial year 59,443 51,886

Movement in retained earnings for the Group is shown in the Consolidated Statement of Changes in Equity.




34. DIVIDENDS

The Group

2010US$’000

2009US$’000

Declared and paid during the yearFinal dividend for 2009: 1.02 US cents or 1.43 Singapore cents

(2009: 1.02 US cents) per share 5,429 5,429Interim dividend for 2010: 1.17 US cents or 1.60 Singapore cents

(2009: 1.02 US cents) per share 7,314 5,50912,743 10,938

At the forthcoming Annual General Meeting on 28 April 2011, a fi nal dividend of 1.72 US cents or 2.18 Singapore cents per share amounting to a total of US$10.5 million will be recommended. These fi nancial statements do not refl ect this dividend, which will be accounted for in shareholders’ equity as an appropriation of retained earnings in the fi nancial year ending 31 December 2011.

35. IMMEDIATE AND ULTIMATE HOLDING CORPORATIONS

The Company’s immediate and intermediate holding corporations are Springbright Investment Limited and Aerodrome International Limited respectively. Both corporations are incorporated in the British Virgin Islands. The Company’s ultimate holding corporation is Credit Suisse Trust Limited, incorporated in Singapore, in its capacity as trustee of Johnsonville Assets Limited and Johnsonville Holdings Limited.

36. CONTINGENT LIABILITIES

As of balance sheet date, the Company has issued corporate guarantees for the amount of US$74,268,000 (2009: US$58,785,000) to banks for its subsidiaries’ bank borrowings.




37. COMMITMENTS FOR EXPENDITURE

(a) Capital commitments

Capital expenditures contracted for at the balance sheet date but not recognised in the fi nancial statements are as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Expenditure for property, plant and equipment– Approved and contracted for 6,318 566 – 32

(b) Operating lease commitments

The Group and the Company lease various factories, warehouses and offi ce premises under operating lease agreements. The leases have varying terms and renewal rights.

The future aggregate minimum lease payments under non-cancellable operating leases contracted for at the reporting date but not recognised as liabilities, are as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Not later than one year 2,344 1,993 685 549Later than one year but not later than fi ve years 2,111 3,299 652 1,203Later than fi ve years 168 339 – –

4,623 5,631 1,337 1,752




38. FINANCIAL RISK MANAGEMENT

Overview

The Group’s activities expose it to a variety of fi nancial risks, including the effect of changes in foreign currency exchange rates, interest rates and cocoa bean prices. The Group’s overall risk management strategy seeks to minimise adverse effects from the unpredictability of fi nancial markets on the Group’s fi nancial performance. The Group uses derivative fi nancial instruments such as foreign exchange forwards and futures contracts, cross currency interest rate swaps, exchange traded cocoa bean futures contracts, interest rate swaps and interest rate caps to manage certain risk exposures. Derivatives are used strictly for risk management purposes and where they meet hedge accounting requirements under Singapore accounting standards, they are designated as hedging instruments. Derivatives that do not qualify for hedge accounting are designated as fair value through profi t or loss.

Risk management is carried out jointly by the Commercial Department which is primarily responsible for hedging price risk and the Treasury Department which is responsible for hedging foreign currency and interest rate risk in accordance with established policies and guidelines. Both departments identify, evaluate and hedge commodity price risk and fi nancial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specifi c areas, such as foreign exchange risk, interest rate risk, credit risk, and the use of derivative and non-derivative fi nancial instruments. The fi nance team measures the actual exposures against the limits set and prepares regular reports for review by senior management.

(a) Market risk

(i) Foreign exchange risk

The Group operates globally and, therefore, has various currency exposures, primarily with respect to Singapore Dollar (“SGD”), Sterling Pound (“GBP”), Euro (“EUR”), Australian Dollar (“AUD”), Indonesian Rupiah (“IDR”), Thailand Baht (“THB”), Philippine Peso (“PHP”), Mexican Peso (“MXP”) and Brazilian Reais (“BRL”). Currency risk arises when transactions are denominated in a currency that is not the entity’s functional currency.

The Group manages its foreign exchange exposure on a net basis by monitoring the receipts and payments in each individual currency. The Treasury Department also uses foreign exchange forward contracts to hedge certain net currency exposure arising from transactions denominated in foreign currencies. Such contracts allow the Group to sell or buy currencies at pre-determined forward rates, depending on forecast requirements, with a tenure of up to a maximum of 6 months.

The Company also entered into cross currency interest rate swaps to hedge against the currency risks and interest rate risks arising from its Singapore Dollar medium term notes. This involves an exchange of principal and interest receipts in the foreign currency in which the borrowing is denominated, for principal and interest payments in the Company’s functional currency.

In addition, the Group is exposed to currency translation risk on the net assets of its foreign operations. Currency exposure arising from the Group’s foreign operations in Indonesia, the Philippines and Europe are managed primarily through borrowings denominated in the relevant foreign currencies.




38. FINANCIAL RISK MANAGEMENT (CONTINUED)

(a) Market risk (continued)

(i) Foreign exchange risk (continued)

The Group’s currency exposure based on the information provided to key management is as follows:

USDUS$’000

GBPUS$’000

SGDUS$’000

BRLUS$’000

EURUS$’000

OthersUS$’000

TotalUS$’000

At 31 December 2010Financial assets 300,964 58,267 10,161 16,909 150,958 110,850 648,109Financial liabilities (516,685) (42,317) (100,827) (12,992) (342,893) (137,908) (1,153,622)Net fi nancial (liabilities)/

assets (215,721) 15,950 (90,666) 3,917 (191,935) (27,058) (505,513)Less: Net fi nancial liabilities

denominated in own/functional currency 215,450 – 1,304 – 248,359 34,927 500,040

Currency exposure of fi nancial (liabilities)/assets net of those denominated in the respective entities’ functional currencies (271) 15,950 (89,362) 3,917 56,424 7,869 (5,473)

Firm commitments in foreign currencies 20,216 (9,511) (74) – (19,777) 30,914 21,768

Derivative fi nancial instruments

Cross currency interest rate swaps – – 85,200 – – – 85,200

Exchange traded cocoa bean futures/foreign exchange futures (2,889) (146,485) – – – – (149,374)

Foreign exchange forwards (17,717) 136,261 – – (43,652) (28,333) 46,559

Currency Exposure (661) (3,785) (4,236) 3,917 (7,005) 10,450 (1,320)

At 31 December 2009Financial assets 217,084 44,018 8,199 9,518 152,750 81,614 513,183Financial liabilities (408,793) (73,818) (90,901) (9,165) (256,953) (120,576) (960,206)Net fi nancial (liabilities)/

assets (191,709) (29,800) (82,702) 353 (104,203) (38,962) (447,023)Less: Net fi nancial liabilities

denominated in own/functional currency 182,855 – 1,223 – 149,817 43,209 377,104

Currency exposure of fi nancial (liabilities)/assets net of those denominated in the respective entities’ functional currencies (8,854) (29,800) (81,479) 353 45,614 4,247 (69,919)

Firm commitments in foreign currencies (4,113) (13,953) (40) – 15,109 21,577 18,580

Derivative fi nancial instruments

Cross currency interest rate swaps – – 76,385 – – – 76,385

Exchange traded cocoa bean futures/foreign exchange futures (300) 12,708 – – – – 12,408

Foreign exchange forwards 1,994 39,907 – – (47,163) (15,383) (20,645)

Currency Exposure (11,273) 8,862 (5,134) 353 13,560 10,441 16,809







The Company’s currency exposure based on the information provided to key management is as follows:

USDUS$’000

GBPUS$’000

SGDUS$’000

OthersUS$’000

TotalUS$’000

At 31 December 2010Financial assets 254,501 32,852 3,003 76,095 366,451Financial liabilities (160,521) (30,042) (92,195) (17,975) (300,733)Net fi nancial assets/(liabilities) 93,980 2,810 (89,192) 58,120 65,718Less: Net fi nancial assets

denominated in functional currency (93,980) – – – (93,980)Currency exposure of fi nancial assets/

(liabilities) net of those denominated in functional currency – 2,810 (89,192) 58,120 (28,262)

Firm commitments in foreign currencies – (11,070) – (7,930) (19,000)

Derivative fi nancial instrumentsCross currency interest rate swaps – – 85,200 – 85,200Exchange traded cocoa bean

futures/foreign exchange futures – (63,900) – – (63,900)Foreign exchange forwards – 66,686 – (49,649) 17,037

Currency Exposure – (5,474) (3,992) 541 (8,925)

At 31 December 2009Financial assets 187,683 28,049 2,056 57,176 274,964Financial liabilities (124,731) (18,690) (83,310) (9,846) (236,577)Net fi nancial assets/(liabilities) 62,952 9,359 (81,254) 47,330 38,387Less: Net fi nancial assets

denominated in functional currency (62,952) – – – (62,952)Currency exposure of fi nancial assets/

(liabilities) net of those denominated in functional currency – 9,359 (81,254) 47,330 (24,565)

Firm commitments in foreign currencies – (19,728) – 2,912 (16,816)

Derivative fi nancial instrumentsCross currency interest rate swaps – – 76,385 – 76,385Exchange traded cocoa bean

futures/foreign exchange futures – 12,935 – – 12,935Foreign exchange forwards – – – (50,433) (50,433)

Currency Exposure – 2,566 (4,869) (191) (2,494)







Sensitivity Analysis to foreign exchange movement

Assuming that all other variables, in particular interest rates, remain constant, a strengthening of United States Dollar against the following currencies and a strengthening of Euro against the Sterling Pound at reporting date would increase/(decrease) equity and profi t/(loss) after tax by the amounts shown below.

2010 2009

Profi t/(loss)after taxUS$’000

EquityUS$’000

Profi t/(loss)after taxUS$’000

EquityUS$’000

The GroupUSD against GBP– strengthened 2% (2009: 4%) 695 (2,722) (1,581) (461)– weakened 2% (2009: 4%) (695) 2,722 1,581 461

USD against BRL– strengthened 2% (2009: 3%) (78) – (11) –– weakened 2% (2009: 3%) 78 – 11 –

USD against EUR– strengthened 3% (2009: 3%) 257 713 1 –– weakened 3% (2009: 3%) (257) (713) (1) –

USD against SGD– strengthened 2% (2009: 2%) 114 (58) 120 (70)– weakened 2% (2009: 2%) (114) 58 (120) 70

EUR against GBP– strengthened 4% (2009: 6%) (96) (2,316) 1,081 (1,071)– weakened 4% (2009: 6%) 96 2,316 (1,081) 1,071

The CompanyUSD against GBP– strengthened 2% (2009: 4%) 693 (2,722) (1,602) (461)– weakened 2% (2009: 4%) (693) 2,722 1,602 461

USD against SGD– strengthened 2% (2009: 2%) 66 (58) 88 (70)– weakened 2% (2009: 2%) (66) 58 (88) 70

USD against EUR– strengthened 3% (2009: 3%) (42) (233) (106) –– weakened 3% (2009: 3%) 42 233 106 –






(ii) Price risk

The manufacturing of the Group’s cocoa ingredients products require raw materials such as cocoa beans and cocoa butter. The Group seeks to protect itself from the volatility of cocoa bean price risk through the use of cocoa bean futures contracts in a cost effective manner.

On an ongoing basis the Group carries suffi cient stock of cocoa beans to ensure that there is un-interrupted supply to its facilities for the manufacture of cocoa ingredients for delivery. The Group uses cocoa bean futures to manage its price risk pertaining to forecasted requirements (including cost of carry) and uses cocoa bean futures and foreign exchange futures to manage the inter market price differentials.

For cocoa bean futures accounted for as cash fl ow hedges, an increase of cocoa bean price by 5% at the reporting date would increase the Group’s and the Company’s equity (net of tax) by US$7,181,000 and US$4,455,000 respectively (2009: increase the Group’s and the Company’s equity (net of tax) by US$795,000 and US$1,221,000 respectively).

For cocoa bean futures not designated for hedge accounting as at the reporting date, an increase of cocoa bean price by 5% at the reporting date would decrease the Group’s and the Company’s profi t after tax by US$2,993,000 and US$3,380,000 respectively (2009: decrease the Group’s and the Company’s profi t after tax by US$3,550,000 and US$3,093,000 respectively).

For the above, a decrease by 5% would have an equal but opposite effect. The analysis assumes all other variables, in particular, foreign exchange rates, remain constant.

(iii) Cash fl ow and fair value interest rate risks

As the Group has no signifi cant interest-bearing assets, the Group’s income and operating cash fl ows are substantially independent of changes in market interest rates.

The Group’s interest rate risks arise primarily from its debt obligations. Borrowings are mainly at variable rates and these expose the Group and the Company to cash fl ow interest rate risk.

Generally, the Group manages its interest rate risk from its borrowings subject to fl oating rates by entering into interest rate derivatives. These interest rate derivatives have the economic effect of protecting the Group against rising interest rates on variable rate borrowings by placing a limit on maximum interest rates payable by the Group.

Sensitivity Analysis to variable interest rate movements

For borrowings and loans to a subsidiary at fl oating interest rates

The Group’s and Company’s borrowings at variable rates on which effective hedges have not been entered into, are denominated mainly in US Dollar, Euro and Indonesian Rupiah. The Company has loans to a subsidiary at variable rates which are denominated in Euro and the interest charges were waived during the fi nancial year ended 31 December 2010.

Assuming all other variables including tax rates are held constant, a 50 basis points increase in interest rates will lower the Group’s and Company’s profi t after tax by US$805,000 (2009: US$909,000) and US$29,000 (2009: increased by US$65,000) respectively. Conversely, a decrease in interest rates by 50 basis points would have an equal but opposite effect.

For interest rate swaps and caps not designated for hedge accounting

Assuming all other variables including tax rate are held constant, a 50 basis points increase in interest rates will increase the Group’s and Company’s profi t after tax by US$228,000 (2009: US$360,000). A decrease in interest rates by 50 basis points would lower the Group’s and Company’s profi t after tax by US$232,000 (2009: US$254,000).






(iii) Cash fl ow and fair value interest rate risks (continued)

Sensitivity Analysis to variable interest rate movements (continued)

For interest rate swaps accounted for as cash fl ow hedges

Assuming all other variables including tax rate are held constant, a 50 basis points increase in interest rates will increase the Group’s and Company’s equity (net of tax) by US$2,200,000 (2009: US$1,470,000) and US$1,652,000 (2009: US$1,090,000) respectively. A decrease in interest rates by 50 basis points would lower the Group’s and Company’s equity (net of tax) by US$3,004,000 (2009: US$1,220,000) and US$2,363,000 (2009: US$839,000) respectively.

For cross currency interest rate swaps accounted for as cash fl ow hedges

Assuming all other variables including tax rate are held constant, a 50 basis points increase in fl oating interest rates will increase the Group’s and Company’s equity (net of tax) by US$53,000 (2009: US$91,000). A decrease in interest rates by 50 basis points would lower the Group’s and Company’s equity (net of tax) by US$78,000 (2009: US$89,000).

(b) Credit risk

Credit risk refers to the risk that a customer or counterparty will default on its contractual obligations resulting in fi nancial loss to the Group. For trade receivables, the Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history, and where possible, the Group has obtained suffi cient security to mitigate credit risk.

Concentrations of credit risk with respect to trade receivables are limited due to the Group’s customers being internationally dispersed and having a variety of end markets in which they sell. Due to these factors, management believes that no additional credit risk beyond the amount of allowance for impairment made is necessary.

The credit exposure and credit terms granted to our customers are continuously monitored at the entity level by the respective management and at the Group level by the Treasury Department.

For derivatives, the Group adopts the policy of entering into derivative transactions only with high credit quality fi nancial institutions. The Group has policies that limit the amount of credit exposure to any fi nancial institution.

The maximum exposure to credit risk for each class of fi nancial instruments is the carrying amount of that class of fi nancial instruments presented on the balance sheet, except as follows:

The Company

2010US$’000

2009US$’000

Corporate guarantees provided to banks on subsidiaries’ loans 74,268 58,785

The Group’s and Company’s major classes of fi nancial assets are bank deposits and trade receivables.





(b) Credit risk (continued)

The credit risk for trade receivables based on the information provided to key management is as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

By geographical areasIndonesia 34,022 28,864 15 –Japan 4,757 2,983 3,445 2,983Singapore 9,489 9,777 2,559 4,035Philippines 11,923 11,113 11,169 6,817Thailand 4,425 3,323 19,606 14,402Malaysia 19,771 16,985 133,168 77,450China 4,763 2,187 4,763 2,187Middle East 4,999 3,907 4,999 3,907Other countries in Asia 2,769 1,047 2,767 1,031Europe 28,448 25,119 10,327 4,618Australia 1,652 3,863 1,652 3,863North America 10,804 7,243 14,092 10,490South America 23,759 15,461 39,359 49,101Africa 3,383 2,150 3,383 2,150

164,964 134,022 251,304 183,034

By types of customersSubsidiaries – – 214,999 151,518Related parties and associated companies 3,686 2,316 – –Non-controlling interests – 2 – –Non-related parties:– International Food and Beverage Companies 93,137 59,676 25,505 17,184– Retail Chains 31,890 27,137 – –– Wholesalers & Distributors 30,147 38,574 10,800 14,332– Others 6,104 6,317 – –

164,964 134,022 251,304 183,034






(i) Financial assets that are neither past due nor impaired

Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit ratings assigned by international credit-rating agencies. Trade receivables that are neither past due nor impaired are substantially companies with a good collection track record with the Group.

(ii) Financial assets that are past due and/or impaired

There is no other class of fi nancial assets that is past due and/or impaired except for trade receivables.

The age analysis of trade receivables past due but not impaired is as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Past due 0 to 1 month 46,323 35,620 37,997 35,943Past due 1 to 3 months 10,344 6,729 41,334 13,366Past due 3 to 6 months 1,492 658 6,753 4,971Past due over 6 months 949 606 6,366 23,257

59,108 43,613 92,450 77,537

The carrying amount of trade receivables individually determined to be impaired and the movement in the related allowance for impairment are as follows:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Gross amount 274 241 – 5Less: Allowance for impairment (274) (241) – (5)

– – – –

Beginning of fi nancial year 241 112 5 –Currency translation difference 19 7 – –Allowance made 81 140 – 5Allowance utilised (67) (18) (5) –End of fi nancial year 274 241 – 5






Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in signifi cant fi nancial diffi culty and have defaulted on payments. These receivables are not secured by collaterals or credit enhancement.

(c) Liquidity risk

Due to the dynamic nature of the underlying business, the Group adopts prudent liquidity risk management policies by maintaining suffi cient cash and having an adequate amount of committed credit facilities to meet the forecast net cash requirement of the Group’s operations.

The table below analyses the Group’s and Company’s non-derivative fi nancial liabilities into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash fl ows. Balances due within 12 months equal their carrying balances as the impact of discounting is not signifi cant.

Less than

1 yearUS$’000

Between 1 and 2 years

US$’000


US$’000

Over 5 years

US$’000Total

US$’000

The GroupAt 31 December 2010Trade and other payables (175,220) – – – (175,220)Borrowings (449,799) (71,377) (40,108) (16) (561,300)

(625,019) (71,377) (40,108) (16) (736,520)

At 31 December 2009Trade and other payables (150,647) – – – (150,647)Borrowings (304,119) (76,075) (101,040) – (481,234)

(454,766) (76,075) (101,040) – (631,881)

The CompanyAt 31 December 2010Trade and other payables (61,633) – – – (61,633)Borrowings (166,159) (49,780) (22,884) (15) (238,838)Financial guarantee contracts (74,268) – – – (74,268)

(302,060) (49,780) (22,884) (15) (374,739)

At 31 December 2009Trade and other payables (42,814) – – – (42,814)Borrowings (90,229) (46,783) (60,442) – (197,454)Financial guarantee contracts (58,785) – – – (58,785)

(191,828) (46,783) (60,442) – (299,053)





(c) Liquidity risk (continued)

The table below analyses the Group’s and the Company’s derivative fi nancial instruments for which contractual maturities are essential for an understanding of the timing of the cash fl ows into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash fl ows. Balances due within 12 months equal their carrying balances as the impact of discounting is not signifi cant.

Less than 1 year

US$’000


US$’000


US$’000

Over 5 years

US$’000Total

US$’000

The GroupAt 31 December 2010Net-settled interest rate swap (3,278) (2,423) (624) 432 (5,893)Gross-settled foreign exchange forwards

and cross currency interest rate swaps– Payments (516,818) (40,737) (7,358) – (564,913)– Receipts 514,423 48,188 7,952 – 570,563

(5,673) 5,028 (30) 432 (243)

At 31 December 2009Net-settled interest rate swap (3,375) (1,837) (315) 414 (5,113)Gross-settled foreign exchange forwards


(3,002) (1,472) 3,218 414 (842)

The CompanyAt 31 December 2010Net-settled interest rate swap (3,021) (2,201) (624) 432 (5,414)Gross-settled foreign exchange forwards


(1,649) 5,251 (30) 432 4,004

At 31 December 2009Net-settled interest rate swap (2,843) (1,855) (517) 414 (4,801)Gross-settled foreign exchange forwards


(2,657) (1,595) 3,016 414 (822)





(d) Capital risk

The Group’s objectives when managing capital are to minimise overall cost of capital and to achieve an optimal capital structure so as to maximise shareholder value. The Group leverages on its credit profi le and business standing in broadening its fi nancing options to include the capital markets. In December 2006, the Company established a S$300 million Multicurrency Medium Term Note (“MTN”) programme which enabled the Group to reduce dependence on bank fi nancing; provide fl exibility and currency-matched fi nancing of short and long term assets and reduce effective interest cost over the longer term. As at 31 December 2010, US$97,523,000 (2009: US$83,584,000) has been drawn down from the MTN programme (Note 28).

Management monitors capital based on gearing ratio. The gearing ratio is calculated as net debt divided by the Group’s total equity. Net debt is calculated as borrowings less cash and cash equivalents.

As it is a common feature in the cocoa industry to carry inventory levels of cocoa beans that are suffi cient to mitigate the impact of seasonality and varieties of crops, the bean inventory is fi nanced through trade fi nance and working capital facilities. The interest cost of this is recouped and imputed through cocoa product pricing.

During the year, the Company repaid a portion of its working capital facilities from the funds obtained from the issuance of MTNs (Note 28). In order to better refl ect the Group’s gearing position, the net debt is adjusted to exclude trade fi nance and short term advances and MTNs which are used to fi nance cocoa bean/raw material inventories.


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Net debt 506,333 443,969 204,283 179,773Adjusted net debt 98,927 154,910 (6,125) 17,319Total equity 294,102 220,069 215,167 152,556

Gearing ratio (times) 1.72 2.02 0.95 1.18Adjusted gearing ratio (times) 0.34 0.70 NM 0.11

The Group and the Company are in compliance with all externally imposed capital requirements for the fi nancial years ended 31 December 2010 and 2009.

(e) Fair value measurements

Effective 1 January 2010, the Group adopted the amendment to FRS 107 which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

(i) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);(ii) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as is

prices) or indirectly (i.e. derived from prices) (Level 2);(iii) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).





(e) Fair value measurements (continued)

The following table presents the assets and liabilities measured at fair value:

Level 1US$’000

Level 2US$’000

Level 3US$’000

TotalUS$’000

The GroupAt 31 December 2010AssetsDerivative assets– Cross currency interest rate swaps – 10,889 – 10,889– Interest rate swaps – 562 – 562

– 11,451 – 11,451

LiabilitiesDerivative liabilities– Foreign exchange forwards – 5,299 – 5,299– Interest rate swaps – 5,676 – 5,676

– 10,975 – 10,975

At 31 December 2009AssetsDerivative assets– Foreign exchange forwards – 1,302 – 1,302– Cross currency interest rate swaps – 2,999 – 2,999– Interest rate swaps and caps – 208 – 208

– 4,509 – 4,509

LiabilitiesDerivative liabilities– Interest rate swaps and caps – 5,607 – 5,607

The CompanyAt 31 December 2010AssetsDerivative assets– Cross currency interest rate swaps – 10,889 – 10,889– Interest rate swaps – 562 – 562

– 11,451 – 11,451

LiabilitiesDerivative liabilities– Foreign exchange forwards – 1,538 – 1,538– Interest rate swaps – 5,462 – 5,462

– 7,000 – 7,000

At 31 December 2009AssetsDerivative assets– Foreign exchange forwards – 880 – 880– Cross currency interest rate swaps – 2,999 – 2,999– Interest rate swaps and caps – 208 – 208

– 4,087 – 4,087

LiabilitiesDerivative liabilities– Interest rate swaps and caps – 5,257 – 5,257





(e) Fair value measurements (continued)

The fair value of fi nancial instruments that are not traded in an active market is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. The fair value of interest rate swaps is calculated at the present value of the estimated future cash fl ows discounted at actively quoted interest rates. The fair value of cross currency interest rate swaps is determined using the discounted cash fl ow analysis based on the appropriate interest rates and forward exchange rates. The fair value of foreign exchange forward contracts is determined using forward exchange rates at the balance sheet date. These instruments are included in Level 2. There are no fi nancial instruments classifi ed as Level 3 as the Group has not applied valuation techniques that are based on signifi cant unobservable inputs.

(f) Financial instruments by category

The carrying amount of the different categories of fi nancial instruments is as disclosed on the face of the balance sheets and in Note 15 to the fi nancial statements, except for the following:


2010US$’000

2009US$’000

2010US$’000

2009US$’000

Loans and receivables 235,638 182,637 365,867 271,764

Financial liabilities at amortised cost 726,849 614,578 294,725 230,988

39. RELATED PARTY TRANSACTIONS

(a) Sales and purchases of goods and services

In addition to other related party information included elsewhere in the fi nancial statements, the following related party transactions took place between the Group and related parties during the fi nancial year:

The Group

2010US$’000

2009US$’000

Revenue: Sales to associated companies – 4 Sales to related parties 23,206 14,585 Sales to a non-controlling shareholder who had signifi cant infl uence in a subsidiary 8,047 17,232 Interest income from associated companies 61 58 Other income from a related party 1,350 317

Expenditure: Purchases from associated companies 9,091 5,995 Purchases from related parties 12,293 7,618 Purchases from a non-controlling shareholder who had signifi cant infl uence in a subsidiary 23,748 251,840 Purchase of fi xed asset from related party 10 – Rental payable to associated companies 64 6 Rental payable to related parties 85 127 Professional fees paid to a fi rm/company in which a director is a member – 48 Directors’ fees 306 257

Related parties represent corporations in which certain directors have substantial fi nancial interests. The related party transactions between the Group and related parties were conducted at arm’s length and on normal commercial terms.

The non-controlling shareholder who had signifi cant infl uence in a subsidiary ceased to be a shareholder after the Company acquired the remaining 32% of the issued share capital of the subsidiary (Note 18).




39. RELATED PARTY TRANSACTIONS (CONTINUED)

(b) Key management compensation

Key management compensation is as follows:

The Group

2010US$’000

2009US$’000

Salaries and other short-term employee benefi ts 5,351 4,867Post employment benefi ts – contribution to CPF 32 32Defi ned benefi t plans 91 –

5,474 4,899

Included above is total compensation to directors of the Company amounting to US$2,064,000 (2009: US$1,746,000).

40. SEGMENT INFORMATION

Management has determined the operating segments based on the reports reviewed by the Executive Committee that are used to make strategic decisions. The Executive Committee comprises the Executive Directors.

The Executive Committee considers the business from both a geographical and business segment perspective.

Inter-segment transactions are determined on an arm’s length basis. The revenue from external parties reported to the Executive Committee is measured in a manner consistent with that in the income statement.

Management manages and monitors its business in two main reportable segments:

• Cocoa ingredients – manufacture and marketing of a wide range of speciality cocoa butter, liquor and powder under the Delfi brand; and

• Branded consumer – manufacture and marketing of chocolate confectionery products under a variety of brands and distribution of a wide range of food and other consumer products, including third party brands.

Segment assets

The amounts provided to the Executive Committee with respect to total assets are measured in a manner consistent with that of the fi nancial statements. For the purposes of monitoring segment performance and allocating resources between segments, the Executive Committee monitors the property, plant and equipment, intangible assets, inventories, receivables and operating cash attributable to each segment. All assets are allocated to reportable segments other than deferred income tax assets and tax recoverable.

Segment liabilities

The amounts provided to the Executive Committee with respect to total liabilities are measured in a manner consistent with that of the fi nancial statements. These liabilities are allocated based on the operation of the segment. All liabilities are allocated to the reportable segments other than income tax liabilities and borrowings.

Capital expenditure

Capital expenditure comprises mainly additions to property, plant and equipment directly attributable to the segment.




40. SEGMENT INFORMATION (CONTINUED)

The segment information provided to the Executive Committee for the reportable segments for the year ended 31 December 2010 is as follows:

Cocoa ingredients

US$’000

Brandedconsumer

US$’000Total

US$’000

Sales:– Total segment sales 1,225,288 366,884 1,592,172– Inter-segment sales (26,152) – (26,152)Sales to external parties 1,199,136 366,884 1,566,020

EBITDA 53,978 54,444 108,422

Finance costs (25,891)

Share of profi t of associated companies 298

Income tax expense (13,988)

Assets and liabilitiesSegment assets 806,792 217,323 1,024,115Associated companies and joint venture 3,065Unallocated assets 26,669Consolidated total assets 1,053,849

Segment liabilities 141,586 57,980 199,566Unallocated liabilities 560,181Consolidated total liabilities 759,747

Other segment informationDepreciation and amortisation 16,944 6,724 23,668Capital expenditure 7,977 6,511 14,488

Sales of Branded Consumer is analysed as:– Own Brand 192,066– Third Party 174,818Total 366,884





The segment information provided to the Executive Committee for the reportable segments for the year ended 31 December 2009 is as follows:

Cocoa ingredients

US$’000

Brandedconsumer

US$’000Total

US$’000

Sales:– Total segment sales 965,408 299,843 1,265,251– Inter-segment sales (20,782) – (20,782)Sales to external parties 944,626 299,843 1,244,469

EBITDA 27,902 39,320 67,222

Finance costs (18,171)

Share of profi t of associated companies 322

Income tax expense (7,582)

Non-controlling interest 4,888

Assets and liabilitiesSegment assets 639,673 199,381 839,054Associated companies 2,363Unallocated assets 20,128Consolidated total assets 861,545

Segment liabilities 108,594 58,714 167,308Unallocated liabilities 474,168Consolidated total liabilities 641,476

Other segment informationDepreciation and amortisation 15,855 5,690 21,545Capital expenditure 32,369 8,971 41,340

Sales of Branded Consumer is analysed as:– Own Brand 156,033– Third Party 143,810Total 299,843

Sales between segments are carried out at arm’s length. The revenue from external parties reported to the Executive Committee is measured in a manner consistent with that in the income statement.





A reconciliation of EBITDA to profi t before tax is set out below:

The Group

2010US$’000

2009US$’000

EBITDA 108,422 67,222

Adjustments for:Fair value loss on interest rate derivatives not designated for hedge accounting (Note 8) (345) (428)Interest expense (Note 7) (26,197) (18,112)Interest income (Note 4) 249 182Depreciation of property, plant and equipment (Note 22) (23,235) (21,062)Amortisation of intangible assets (Note 23(b) & 23(c)) (433) (483)Profi t before tax 58,461 27,319

Geographical information

Sales are based on the country in which the customer is located. Capital expenditure is shown by the geographical area where the assets are located. The Group’s two reportable segments operate in the following main geographical areas:

Revenue Capital expenditure

2010US$’000

2009US$’000

2010US$’000

2009US$’000

Indonesia 306,848 232,211 6,687 8,920Singapore 67,293 77,021 690 443Philippines 61,636 44,673 441 432Thailand 23,655 13,543 190 237Malaysia 84,234 58,663 976 4,008Japan 63,513 72,639 – –China 34,689 19,311 – –Middle East 56,371 40,165 – –Other countries in Asia 36,926 18,023 – –Australia 54,246 42,308 – –Europe 529,563 438,776 4,833 26,630North America 68,567 64,139 3 1South America 136,887 101,601 668 669Africa 41,592 21,396 – –

1,566,020 1,244,469 14,488 41,340




41. EVENT OCCURRING AFTER BALANCE SHEET DATE

On 10 February 2011, the Company issued a 3-year fi xed rate S$52 million Medium Term Note to refi nance its borrowings due in 2011. The Note is swapped into US$40.6 million bearing a fi xed interest rate of 4.88% per annum and due in 2014.

42. NEW OR REVISED ACCOUNTING STANDARDS AND INTERPRETATIONS

Below are the mandatory standards, amendments and interpretations to existing standards that have been published, and are relevant for the Group’s accounting periods beginning on or after 1 January 2011 or later periods and which the Group has not early adopted:

• Amendments to FRS 24 – Related party disclosures (effective for annual periods beginning on or after 1 January 2011) • Amendments to FRS 32 Financial instruments: Presentation – classifi cation of rights issues (effective for annual periods

beginning on or after 1 February 2010)• Amendments to INT FRS 114 – Prepayments of a minimum funding requirement (effective for annual periods commencing

on or after 1 January 2011)• INT FRS 119 Extinguishing fi nancial liabilities with equity instruments (effective for annual periods commencing on and after

1 July 2010)

The management anticipates that the adoption of the above FRSs, INT FRSs and amendments to FRS in the future periods will not have a material impact on the fi nancial statements of the Group and of the Company in the period of their initial adoption.

43. AUTHORISATION OF FINANCIAL STATEMENTS

These fi nancial statements were authorised for issue in accordance with a resolution of the Board of Directors of Petra Foods Limited on 24 March 2011.


Appendix (Shareholders’ Mandate)

This Appendix is circulated to Shareholders of Petra Foods Limited together with the Company’s annual report. Its purpose is to provide Shareholders with the relevant information relating to, and to seek Shareholders’ approval to renew the Shareholders’ Mandate to be tabled at the Annual General Meeting to be held on 28 April 2011 at 2:00 p.m. at Grand Hyatt Singapore, Magnolia 4, Level 3, 10 Scotts Road, Singapore 228211.

The Notice of Annual General Meeting and a Proxy Form are enclosed with the Annual Report.

The Singapore Exchange Securities Trading Limited takes no responsibility for the correctness of any of the statements made, reports contained/referred to, or opinions expressed, in this Appendix.

PETRA FOODS LIMITED(Incorporated in the Republic of Singapore)

Company Registration Number: 198403096C

APPENDIX IN RELATION TO THE PROPOSED RENEWAL OF

THE SHAREHOLDERS’ MANDATE FOR INTERESTED PERSON TRANSACTIONS

Appendix (Shareholders’ Mandate)118 Petra Foods Limited Annual Report 2010


DEFINITIONS

In this appendix (Appendix), the following defi nitions apply throughout unless otherwise stated:

AGM : The annual general meeting of the Company to be convened on 28 April 2011, notice of which is set out in the Annual Report 2010 despatched together with this Appendix;

Audit Committee : An audit committee of the Company comprising of Mr Anthony Michael Dean (Chairman), Ms Josephine Price, Mr Pedro Mata-Bruckmann and Mr Davinder Singh;

CDP : The Central Depository (Pte) Limited;

Company : Petra Foods Limited;

Companies Act : Companies Act, Chapter 50 of Singapore;

Directors : The directors of the Company as at the date of this Appendix;

Executive Directors : The executive directors as at the date of this Appendix, unless otherwise stated;

Group : The Company and its subsidiaries;

Independent Director(s) : The independent director(s) of the company as at the date of this Appendix unless otherwise stated;

Interested Person : A director, chief executive offi cer or controlling shareholder of the Company or an associate of such director, chief executive offi cer or controlling shareholder;

Interested Person Transaction : A transaction proposed to be entered into between the Group and any Interested Person;

John Chuang : Chuang Tiong Choon also known as Ma Wei Lin

Joseph Chuang : Chuang Tiong Liep also known as Chit Ko Ko

Latest Practicable Date : The latest practicable date prior to the printing of this Appendix, being 17 March 2011;

Listing Manual : The listing manual of the SGX-ST;

Rp or Rupiah : Indonesian Rupiah;

Securities Account : A securities account maintained by a Depositor with CDP but does not include a securities sub-account;

SGX-ST : Singapore Exchange Securities Trading Limited;

Shareholders : Registered holders of Shares, except that where the registered holder is CDP, the term Shareholders shall, where the context admits, mean the Depositors whose Securities Accounts are credited with Shares;

Shares : Ordinary shares in the capital of the Company;

Substantial Shareholder : A person who has an interest in Shares which is 5% or more of the total votes attached to all the voting ;

S$ : Singapore Dollars;

US$ and cents : United States Dollars and Cents, respectively;

William Chuang : Chuang Tiong Kie also known as Maung Lu Win; and

% or per cent. : Per centum or percentage.

The terms Depositor and Depository Register shall have the meanings ascribed to them respectively in Section 130A of the Companies Act.

Words importing the singular shall, where applicable, include the plural and vice versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall include corporations.

Any reference in this Appendix to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defi ned under the Companies Act, the Listing Manual or any modifi cation thereof and not otherwise defi ned in this Appendix shall have the same meaning assigned to it under the Companies Act, the Listing Manual or any modifi cation thereof, as the case may be.

Any reference to a time of day in this Appendix is made by reference to Singapore time unless otherwise stated.

Appendix (Shareholders’ Mandate)Petra Foods Limited Annual Report 2010 119


1. INTRODUCTION

The purpose of this Appendix is to provide Shareholders with the relevant information relating to, and to seek Shareholders’ approval at the AGM to renew the general mandate (Shareholders’ Mandate) that will enable the Group to enter into transactions with the Interested Persons in compliance with Chapter 9 of the Listing Manual.

Chapter 9 of the Listing Manual applies to transactions which a listed company or any of its subsidiaries or associated companies propose to enter into with an interested person of the listed company. An interested person is defi ned as a director, chief executive offi cer or controlling shareholder of the listed company or an associate of such director, chief executive offi cer or controlling shareholder.

Chapter 9 of the Listing Manual allows a listed company to seek a Shareholders’ Mandate for recurrent transactions of a revenue or trading nature or those necessary for its day-to-day operations, which may be carried out with the listed company’s interested persons.

The Shareholders’ Mandate was approved at the annual general meeting of the Company held on 28 April 2010 and will be effective until the next annual general meeting is held or required by law to be held, whichever is the earlier. Accordingly, the Directors propose that the general mandate be renewed at the AGM to be held on 28 April 2011, to take effect until the next annual general meeting of the Company.

General information relating to Chapter 9 of the Listing Manual, including the meanings of terms such as interested person, associate, associated company and controlling shareholder, are set out in the Annexure of this Appendix.

2. THE RENEWAL OF THE SHAREHOLDERS’ MANDATE FOR INTERESTED PERSON TRANSACTIONS

2.1 Classes of Interested Persons

The Shareholders’ Mandate will apply to the Group’s interested person transactions including PT Tri Keeson Utama, PT Fajar Mataram Sedayu, PT Freyabadi Indotama and PT Sederhana Djaja and each of their associates. Please refer to the section “Potential Confl icts of Interest” in the Company’s prospectus dated 28 October 2004 for more details.

Transactions with Interested Persons which do not fall within the ambit of the proposed Shareholders’ Mandate shall be subject to the relevant provisions of Chapter 9 of the Listing Manual of the SGX-ST.

2.2 Scope of Interested Person Transactions

The interested persons transactions with the Interested Persons which will be covered by the Shareholders’ Mandate are the following:-

(a) Transactions with PT Tri Keeson Utama

By virtue of their aggregate interest in 99.9% of the shareholding in PT Sederhana Djaja, the Executive Directors, Mr John Chuang, Mr Joseph Chuang and Mr William Chuang are deemed to be interested in 100.0% of the issued share capital of PT Tri Keeson Utama held by PT Sederhana Djaja. Please refer to the section “Potential Confl icts of Interest” in the Company’s Prospectus dated 28 October 2004 for more details. Accordingly, transactions between the Group and PT Tri Keeson Utama are deemed to be interested person transactions.

PT Tri Keeson Utama is principally engaged in the business of mixing and blending cocoa cakes and cocoa powder. The Company’s subsidiary, PT General Food Industries, has been selling cocoa products such as cocoa powder and cocoa cakes to PT Tri Keeson Utama. The value of the Company’s sales to PT Tri Keeson Utama for the period from 1 January 2010 up to the Latest Practicable Date are as set out below:-

For the period from 1 January 2010 up to the Latest Practicable Date

Value of sales to PT Tri Keeson Utama (US$’000) 13,764

These transactions were entered into on a willing buyer and willing seller basis. The provision of cocoa products to PT Tri Keeson Utama is a recurrent interested person transaction. The Company intends to continue providing the Company’s cocoa products to PT Tri Keeson Utama.



2. THE RENEWAL OF THE SHAREHOLDERS’ MANDATE FOR INTERESTED PERSON TRANSACTIONS (CONTINUED)

2.2 Scope of Interested Person Transactions (continued)

(b) Transactions with PT Fajar Mataram Sedayu

By virtue of their indirect interest in 99.9% of the shareholding in PT Sederhana Djaja, the Executive Directors, Mr John Chuang, Mr Joseph Chuang and Mr William Chuang are deemed to be interested in 51.0% of the issued share capital of PT Fajar Mataram Sedayu. The Company’s Executive Offi cer, Mr Poritjo Susanto Widjaja, has an interest of 5.0% in PT Fajar Mataram Sedayu. The remaining shareholding interest in PT Fajar Mataram Sedayu is held by unrelated third parties. Please refer to the section “Potential Confl icts of Interest” in the Company’s Prospectus dated 28 October 2004 for more details. Accordingly, transactions between the Group and PT Fajar Mataram Sedayu are deemed to be interested person transactions.

PT Fajar Mataram Sedayu is principally engaged in the manufacture and sale of compound chocolate rice primarily for industrial use, as well as the manufacture and sale of consumer chocolate targeted at the lower segment of the Indonesian consumer chocolate market.

(i) Sale of materials by the Group to PT Fajar Mataram Sedayu

The Company’s subsidiaries, PT Perusahaan Industri Ceres and PT General Food Industries, have been undertaking the sale of products such as cocoa liquor, cocoa butter and vegetable fats to PT Fajar Mataram Sedayu. The value of the Company’s sales to PT Fajar Mataram Sedayu for the period from 1 January 2010 up to the Latest Practicable Date are as set out below:-


Value of sales to PT Fajar Mataram Sedayu (US$’000) 376

These transactions were entered into on a willing buyer and willing seller basis. The provision of products such as cocoa liquor, cocoa butter and vegetable fats to PT Fajar Mataram Sedayu is a recurrent interested person transaction. The Company intends to continue providing the Company’s products to PT Fajar Mataram Sedayu.

(ii) Purchase of goods from PT Fajar Mataram Sedayu

The Company’s subsidiary, PT Nirwana Lestari, has been undertaking the purchase of products from PT Fajar Mataram Sedayu, for distribution in Bali, Indonesia. PT Nirwana Lestari intends to continue purchasing such products from PT Fajar Mataram Sedayu. The quantum of the Company’s purchases from PT Fajar Mataram Sedayu for the period 1 January 2010 to the Latest Practicable Date are set out below:-

For the period from 1 January 2010

up to the Latest Practicable Date

Value of purchases from PT Fajar Mataram Sedayu (US$’000) 563

(c) Transactions with PT Freyabadi Indotama

By virtue of their aggregate interest in 100% of the shareholding in Berlian Enterprises Limited, the Executive Directors, Mr John Chuang, Mr Joseph Chuang and Mr William Chuang are deemed to be interested in 49% of the issued share capital of PT Freyabadi Indotama held in aggregate by McKeeson Investments and PT Sederhana Djaja. Accordingly, transactions between the Group and PT Freyabadi Indotama are deemed to be interested person transactions.

PT Freyabadi Indotama is a joint venture entity, in which Fuji Oil Ltd, an unrelated third party, McKeeson Investments and PT Sederhana Djaja own 51.0%, 30.0% and 19.0% of its issued share capital respectively. PT Freyabadi Indotama is principally engaged in the manufacture and sale of industrial chocolate.





(c) Transactions with PT Freyabadi Indotama (continued)

(i) Sale of materials by the Group to PT Freyabadi Indotama

The Company’s subsidiaries, PT Perusahaan Industri Ceres and PT General Food Industries have been undertaking the sale of products such as cocoa powder, cocoa butter, chocolate rice, cocoa liquor and other products to PT Freyabadi Indotama. The value of the Company’s sales to PT Freyabadi Indotama for the period from 1 January 2010 up to the Latest Practicable Date are set out below:-


Revenue received from PT Freyabadi Indotama (US$’000) 10,416

These transactions were entered into on a willing buyer and willing seller basis. The provision of products such as cocoa powder, cocoa butter, chocolate rice, cocoa liquor and other products to PT Freyabadi Indotama is a recurrent interested person transaction. The Company intends to continue providing the Company’s products to PT Freyabadi Indotama.

(ii) Purchase of products from PT Freyabadi Indotama

The Company’s subsidiaries, PT Nirwana Lestari, PT Perusahaan Industri Ceres and associated company, PT Ceres Meiji Indotama, have been undertaking the purchase of chocolate coating and plastic packaging products from PT Freyabadi Indotama. The value of the Company’s purchases from PT Freyabadi Indotama for the period from 1 January 2010 up to the Latest Practicable Date are as set out below:-


Purchases from PT Freyabadi Indotama (US$’000) 13,262

These transactions were entered into on a willing buyer and willing seller basis. The purchase of chocolate coating and plastic packaging products from PT Freyabadi Indotama is a recurrent interested person transaction. The Company intends to continue purchasing such products from PT Freyabadi Indotama.

(d) Transactions with PT Sederhana Djaja

By virtue of their aggregate interest in 100% of the shareholding in Berlian Enterprises Limited, the Executive Directors, Mr John Chuang, Mr Joseph Chuang and Mr William Chuang are deemed to be interested in 99.9% of the issued share capital of PT Sederhana Djaja held by McKeeson Investments. Accordingly, transactions between the Group and PT Sederhana Djaja are deemed to be interested person transactions.

PT Sederhana Djaja is an investment holding company. The Group has entered into various lease agreements with PT Sederhana Djaja in relation to the properties described below. Please refer to “Appendix B – Properties and Fixed Assets” in the Company’s Prospectus dated 28 October 2004 for more details.

Name of propertyLand area

(sq m)Present annual

rental (Rp) US$

Four Seasons Apartment Jakarta, Indonesia

200 390,000,000 42,801 1

Kondominium Simpruk Teras Jakarta, Indonesia

228 240,000,000 25,710

Notes:1 The conversion of Indonesian Rupiah into US Dollars is based on the weighted average exchange rate of Rp9,112 per US Dollar as at the Latest Practicable Date.





(d) Transactions with PT Sederhana Djaja (continued)

The total annual rental paid by the Group to PT Sederhana Djaja for the period from 1 January 2010 up to the Latest Practicable Date are as set out below:-


Total annual rental paid to PT Sederhana Djaja (US$’000) 69

These transactions were entered into on a willing buyer and willing seller basis. The Company intends to continue with the lease of these properties from PT Sederhana Djaja.

2.3 Rationale for and Benefi ts of the Shareholders’ Mandate

Shareholders’ Mandate

In the ordinary course of the Group’s business activities, the Group and the Interested Persons may enter into transactions with each other from time to time. Further, it is likely that such transactions will occur with some degree of frequency and could arise at any time.

The Directors are of the view that it will be benefi cial to the Group to transact or continue to transact with the Interested Persons, especially since the transactions are to be entered into on normal commercial terms.

Due to the time-sensitive nature of commercial transactions, the Company is seeking Shareholders’ approval pursuant to Chapter 9 of the Listing Manual for the renewal of the Shareholders’ Mandate to enable the Group to enter into transactions with the Interested Persons, provided that such transactions are entered into in the Group’s ordinary course of business, are on normal commercial terms and are not prejudicial to the interests of the Company and its minority Shareholders.

The Shareholders’ Mandate is intended to enhance the Group’s ability to pursue business opportunities which are time-sensitive in nature, and will eliminate the need for the Company to announce, or to announce and convene separate general meetings on each occasion to seek Shareholders’ prior approval for the entry by the Group into such transactions. This will substantially reduce administrative time and expenses associated with the making of such announcements or the convening of general meetings from time to time, and allow resources to be focused towards other corporate and business opportunities.

The Shareholders’ Mandate will not cover any transactions between the Group and the Interested Persons which have a value below S$100,000 as the threshold and aggregation requirements under Chapter 9 of the Listing Manual do not apply to such transactions. In addition, the transactions will not include the purchase or sale of assets, undertakings or businesses that are not in the Group’s ordinary course of business.

Transactions with the Interested Persons that do not fall within the ambit of the Shareholders’ Mandate will be subject to the provisions of Chapter 9 and/or other applicable provisions of the Listing Manual.

If approved at the AGM, the Shareholders’ Mandate will take effect from the date of the passing of the resolution to be proposed at the AGM and will continue to be in force until the next annual general meeting. The Company will seek the approval of Shareholders for the renewal of the Shareholders’ Mandate annually.

Pursuant to Rule 920(1)(a) of the Listing Manual, the Company is required to:-

(a) disclose the Shareholders’ Mandate in the Company’s annual report, giving details of the aggregate value of transactions conducted pursuant to the Shareholders’ Mandate during the fi nancial year under review, (in the form set out in Rule 907 of the Listing Manual); and

(b) announce the aggregate value of transactions conducted pursuant to the Shareholders’ Mandate for the fi nancial periods which it is required to report on within the time period required for the announcement of the fi nancial results of the Group (in the form set out in Rule 907 of the Listing Manual).




2.4 Review Procedures for Interested Person Transactions

The Company has established the following guidelines and procedures to ensure that all Interested Persons Transactions are made on the Company’s normal commercial terms and are consistent with the Group’s usual business practices and policies, which are generally no more favourable to the Interested Person than those extended to unrelated third parties:-

(a) All Interested Person Transactions will be documented and submitted periodically to the Audit Committee for their review to ensure that such transactions are carried out on an arm’s length basis and on normal commercial terms and are not prejudicial to the Company. In the event that a member of the Audit Committee is deemed to have an interest in an Interested Person Transaction, he will abstain from reviewing that particular transaction. The Audit Committee will include the review of Interested Person Transactions as part of the standard procedures during the Audit Committee’s examination of the adequacy of the Group’s internal controls.

(b) In respect of any purchase of products or procurement of services from Interested Persons, quotes received from at least two unrelated third parties in respect of the same or substantially the same types of transactions are to be used as a comparison wherever possible. The Audit Committee will review these comparables, taking into account pertinent factors, including but not limited to:

(i) whether the pricing is in accordance with the Company’s usual business practice and policies;

(ii) quality of the products offered;

(iii) delivery time;

(iv) track record; and

(v) whether the terms are no more favourable to the Interested Persons than those extended by unrelated third parties.

In cases where it is not possible to obtain comparables from other unrelated third parties, the Company may enter into the transaction with the Interested Person provided that the price and terms received from the Interested Person are no less favourable than those extended by the Interested Person to the unrelated third parties, taking into account all pertinent factors including, but not limited to business practices, industry norms, volume, quality, delivery time and track record.

(c) In respect of any sale of products to Interested Persons, the Audit Committee will review the terms of the sale to ensure that they are not prejudicial to the interest of the Shareholders, taking into account pertinent factors, including but not limited to whether transactions with Interested Persons have been carried out at the prevailing market rates or prices on terms which are no more favourable to the Interested Person than the usual commercial terms extended to unrelated third parties.

Where the prevailing market rates or prices are not available due to the nature of the product to be sold, the Company may

enter into the transaction with the Interested Person provided that the pricing policies are consistent with the usual margin obtained by the Group for the same or substantially similar type of transaction with unrelated third parties. In determining the transaction price payable by Interested Persons for such products, factors such as, but not limited to, quantity, volume, consumption, customer requirements, specifi cations and duration of contract will be taken into account.




2.4 Review Procedures for Interested Person Transactions (continued)

The Group will implement the following procedures for the identifi cation of interested persons and the recording of all the Company’s interested person transactions:

(aa) By the tenth day of each month, the heads of the various departments are required to submit details of all Interested Person Transactions entered into during the previous month to the Chief Financial Offi cer, such as the actual value of the transactions. A “nil” return is expected if there are no Interested Person Transactions for the month;

(bb) the Chief Financial Offi cer will maintain a register of interested person transactions carried out with Interested Persons; and

(cc) following the review of the list by the Chief Financial Offi cer, the list will be submitted to the Company’s Chief Executive Offi cer for approval prior to the submission to the Audit Committee for review and approval.

The Directors will ensure that all disclosure requirements on the Interested Person Transactions, including those required by prevailing legislation, the Listing Manual and accounting standards, are complied with. In addition, such transactions will be subject to Shareholders’ approval if required by the Listing Manual. The Company will disclose in its Annual Report the aggregate value of the Interested Person Transactions conducted during the fi nancial year.

The Company will maintain a register of transactions carried out with the Interested Persons pursuant to the Shareholders’ Mandate (recording the basis, including the quotations obtained to support such basis, on which they were entered into), and the Company’s internal audit plan will incorporate a review of all transactions entered into in the relevant fi nancial year pursuant to the Shareholders’ Mandate.

The Audit Committee shall review these internal audit reports on the Interested Person Transactions annually to ascertain that the established review procedures to monitor the Interested Person Transactions have been complied with.

If, during these periodic reviews by the Audit Committee, the Audit Committee is of the view that the review procedures as stated above have become inappropriate or insuffi cient in view of changes to the nature of, or the manner in which, the business activities of the Group are conducted, the Company will revert to Shareholders for a fresh mandate based on new guidelines and review procedures to ensure that Interested Person Transactions will be conducted at arm’s length, on normal commercial terms and not prejudicial to the interests of the Company and its minority Shareholders.



3 DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS

The interests of the Directors and the substantial Shareholders in Shares as at the Latest Practicable Date are set out below:

Direct Interest Deemed Interest

Numberof Shares

% Numberof Shares

%

Substantial ShareholdersLim Mee Len 270,000 0.04 311,557,000 1 50.97John Chuang 52,000 0.008 311,999,000 2 51.05Credit Suisse Trust Limited – – 311,407,000 3 50.95Johnsonville Assets Limited – – 311,407,000 4 50.95Johnsonville Holdings Limited – – 311,407,000 5 50.95Aerodrome International Limited – – 311,407,000 6 50.95Joseph Chuang 70,000 0.011 308,741,000 7 50.51Maplegold Assets Limited – – 308,741,000 8 50.51Berlian Enterprises Limited – – 308,741,000 9 50.51Springbright Investments Limited – – 291,964,000 10 47.77Genesis Asset Management LLP – – 31,902,000 11 5.21Mason Hill Advisors, LLC – – 38,684,285 12 6.32Tiger Global Management, LLC – – 39,100,000 13 6.39Charles P. Coleman III – – 39,100,000 14 6.39

DirectorsPedro Mata-Bruckmann – – 277,000 15 0.04John Chuang 52,000 0.008 311,999,000 2 51.05Joseph Chuang 70,000 0.011 308,741,000 7 50.51William Chuang 110,000 0.01 – –Anthony Michael Dean – – 50,000 15 0.008Davinder Singh 100,000 0.01 – –Josephine Price 55,000 0.008 264,000 15 0.04Chua Koon Chek 700,000 0.11 – –



3 DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS (CONTINUED)

Notes:1 Mdm Lim Mee Len (wife of Mr John Chuang) is deemed to be interested in the Shares held by Aerodrome International Limited (Aerodrome), Berlian

Enterprises Limited (Berlian), Springbright Investments Limited (Springbright), McKeeson Investments Pte Ltd (McKeeson) and Honeychurch International Limited (Honeychurch). Mdm Lim’s interests arise as she is the benefi ciary of the Johnsonville Asset Trust (JAT) and Johnsonville Holdings Trust (JHT) of which Credit Suisse Trust Limited (CST) has been appointed as the trustee. CST owns 100% of Johnsonville Asset Limited (JAL) and Johnsonville Holdings Limited (JHL), which in turns own (70%) and (30%) of the issued and paid-up share capital of Aerodrome. Accordingly, she is deemed to be interested in all the shares held (directly & indirectly) by Aerodrome and Honeychurch.

2 Mr John Chuang is deemed to be interested in all the shares held (directly and indirectly) by his wife, Mdm Lim Mee Len, including his shares which are held by his nominee, United Overseas Bank Nominees Pte Ltd. He is also one of the benefi ciaries of JHL.

3 CST is a Singapore registered public trust company and deemed interest arises from its 100% shareholding of Aerodrome as the trustees of JAL and JAH. Accordingly, CST is deemed to be interested in all the shares held indirectly by Aerodrome.

4 JAL has a 70% shareholding in Aerodrome. Accordingly, JAL is deemed to be interested in all the shares held (directly & indirectly) by Aerodrome.5 JHL has a 30% shareholding in Aerodrome. Accordingly, JHL is deemed to be interested in all the shares held (directly & indirectly) by Aerodrome.6 Aerodrome is the holding company of Berlian Enterprises Limited (Berlian). Accordingly, Aerodrome is deemed to be interested in all the shares held (directly

& indirectly) by Berlian. 7 Mr Joseph Chuang is the sole shareholder of Maplegold Assets Limited (Maplegold). Accordingly, he is deemed to be interested in all the shares held

(directly and indirectly) by Maplegold. 8 Maplegold has a 30% shareholding in Berlian. Accordingly, Maplegold is deemed to be interested in all the shares held (directly & indirectly) by Berlian.9 Berlian is the sole shareholder of McKeeson and Springbright. Accordingly, Berlian is deemed to be interested in all the shares held (directly and indirectly)

by McKeeson and Springbright. In addition, Berlian’s shares in the Company are held by its nominee, Citibank Nominees Singapore Private Limited.10 Springbright’s shares in the Company are held by its nominee, HSBC (Singapore) Nominees Pte Ltd. 11 Genesis Asset Management, LLP is deemed to be interested in the shares held by Genesis Smaller Companies, SICAV and Genesis Smaller Companies. 12 Mason Hill Advisors, LLC is deemed to be interested in the shares held by Equinox Partners, LP and Kuroto Fund, LP. 13 Tiger Global Management, LLC is deemed to be interested in the shares held by Tiger Global, L.P., Tiger Global Master Fund, L.P. and Tiger Global II SPV II,

Ltd. 14 Charles P. Coleman III is deemed to be interested in the shares held by Tiger Global, L.P., Tiger Global Master Fund, L.P. and Tiger Global II SPV II, Ltd. 15 Mr Pedro Mata-Bruckmann’s and Mr Anthony Michael Dean’s shares in the Company are held by their nominees, Merrill Lynch (Singapore) Pte Ltd and DBS

Nominees Pte Ltd, respectively. Ms Josephine Price’s shares in the Company are held by her nominees, Kim Eng Securities Pte. Ltd. and OCBC Securities Private Ltd.


4. AUDIT COMMITTEE’S STATEMENT

The Audit Committee has reviewed the terms of the Shareholders’ Mandate subject to the renewal. Having considered, inter alia, the scope, the guidelines on review procedures, the rationale and the benefi ts of the Shareholders’ Mandate, the Audit Committee confi rms that (a) the review procedures for determining the prices of Interested Person Transactions have not changed since approval for the Shareholders’ Mandate was last given; and (b) the review procedures set out in paragraph 2.4 of this Appendix are suffi cient to ensure that the Interested Person Transactions will be transacted on normal commercial terms and will not be prejudicial to the interests of the Company and its minority Shareholders.

If, during the periodic reviews by the Audit Committee, it is of the view that the established review procedures are no longer appropriate or adequate to ensure that the Interested Person Transactions will be transacted on normal commercial terms and will not be prejudicial to the interests of the Company and minority Shareholders, the Company will seek a fresh mandate from Shareholders based on new review procedures.

5. DIRECTORS’ RECOMMENDATIONS

The Independent Directors are of the opinion that the entry into of the Interested Person Transactions by the Group in the ordinary course of its business will enhance the effi ciency of the Group and is in the best interests of the Company. For the reasons set out in paragraph 2.3 of this Appendix, the Independent Director recommends that Shareholders vote in favour of Resolution 11, being the Ordinary Resolution relating to the proposed renewal of the Shareholders’ Mandate at the forthcoming AGM.

6. ANNUAL GENERAL MEETING

The AGM, notice of which is set out in the Annual Report 2010 of the Company, will be held on 28 April 2011 at Grand Hyatt Singapore, Magnolia 4, Level 3, 10 Scotts Road, Singapore 228211 at 2:00 p.m. for the purpose of considering and, if thought fi t, passing with or without any modifi cations, the Ordinary Resolution relating to the renewal of the Shareholders’ Mandate at the AGM as set out in the Notice of AGM.

7. ACTION TO BE TAKEN BY SHAREHOLDERS

If a Shareholder is unable to attend the AGM and wishes to appoint a proxy to attend and vote on his behalf, he should complete, sign and return the Proxy Form attached to the Notice of AGM in accordance with the instructions printed thereon as soon as possible and, in any event, so as to reach the Company at 111 Somerset Road, #16-01 TripleOne Somerset, Singapore 238164, not later than 48 hours before the time fi xed for the AGM. Completion and return of the Proxy Form by a Shareholder will not prevent him from attending and voting at the AGM if he so wishes.

8. INSPECTION OF DOCUMENTS

Copies of the audited fi nancial statements of the Company for the last two fi nancial years ended 31 December 2009 and 2010 are available for inspection at the registered offi ce of the Company at 111 Somerset Road, #16-01, TripleOne Somerset Singapore 238164, during normal business hours from the date of this Appendix up to the date of the AGM.

9. DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors collectively and individually accept full responsibility for the accuracy of the information given in this Appendix and confi rm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed in this Appendix are fair and accurate and that there are no material facts the omission of which would make any statement in this Appendix misleading.



AnnexureGeneral information relating to Chapter 9 of the Listing Manual

SCOPE

Chapter 9 of the Listing Manual applies to transactions which a listed company or any of its subsidiaries (which are not listed on the SGX-ST or an approved stock exchange) or associated companies (which are not listed on the SGX-ST or an approved stock exchange, provided that the listed group, or the listed group and its interested person(s) has control over) proposes to enter into with a counter-party which is an interested person of the listed company.

DEFINITIONS

An interested person means a director, chief executive offi cer or controlling shareholder of the listed company or an associate of such director, chief executive offi cer or controlling shareholder.

An associate includes an immediate family member (that is, the spouse, child, adopted child, stepchild, sibling or parent) of such director, chief executive offi cer or controlling shareholder, and any company in which the director/his immediate family, the chief executive offi cer/his immediate family or controlling shareholder/his immediate family has an aggregate interest (directly or indirectly) of 30% or more, and, where a controlling shareholder is a corporation, its subsidiary or holding company or fellow subsidiary or a company in which it and/or they have (directly or indirectly) an interest of 30% or more.

An associated company means a company in which at least 20% but not more than 50% of its shares are held by the listed company or the group.

A controlling shareholder means a person who holds (directly or indirectly) 15% or more of the nominal amount of all voting shares in the listed company or one who in fact exercises control over the listed company.

GENERAL REQUIREMENTS

Except for certain transactions which, by reason of the nature of such transactions, are not considered to put the listed company at risk to its interested persons and are hence excluded from the ambit of Chapter 9 of the Listing Manual, immediate announcement or, immediate announcement and shareholders’ approval would be required in respect of transactions with interested persons if certain fi nancial thresholds (which are based on the value of the transaction as compared with the listed company’s latest audited consolidated NTA), are reached or exceeded. In particular, shareholders’ approval is required where:

(a) the value of such transaction when aggregated with the value of all other transactions previously entered into with the same interested person in the same fi nancial year of the listed company is equal to or exceeds 5% of the latest audited consolidated NTA of the listed company; or

(b) the value of such transaction is equal to or exceeds 5% of the latest audited consolidated NTA of the listed company.

Immediate announcement of a transaction is required where:

(a) the value of such transaction when aggregated with the value of all other transactions previously entered into with the same interested person in the same fi nancial year of the listed company is equal to or exceeds 3% of the latest audited consolidated NTA of the listed company; or

(b) the value of such transaction is equal to or exceeds 3% of the latest audited consolidated NTA of the listed company.

GENERAL MANDATE

A listed company may seek a general mandate from its shareholders for recurrent transactions of a revenue or trading nature or those necessary for its day-to-day operations such as the purchase and sale of supplies and materials but not in respect of the purchase or sale of assets, undertakings or businesses. A general mandate is subject to annual renewal.

AnnexurePetra Foods Limited Annual Report 2010 129

Disclosure Under SGX-ST Listing Manual Requirementsfor the fi nancial year ended 31 December 2010

ADDITIONAL SINGAPORE EXCHANGE SECURITIES TRADING LISTING MANUAL REQUIREMENTS

(a) Corporate information

Company Secretaries

Chuang Yok Hoa, ACIS Lian Kim Seng, ACIS

Registered Offi ce

111 Somerset Road #16-01 TripleOne Somerset Singapore 238164 Tel: (65) 6477 5600 Fax: (65) 6887 5181 Email address: [email protected] Registrar and Share Transfer Offi ce

M & C Services Private Limited 138 Robinson Road #17-00 The Corporate Offi ce Singapore 068906

Auditors

PricewaterhouseCoopers LLP 8 Cross Street #17-00 PWC Building Singapore 048424 Partner-in-charge (since 2006): Deborah Ong

(b) Material contracts

Chuang Tiong Choon, Chuang Tiong Liep and Chuang Tiong Kie who are the Company’s executive directors, are deemed to have an aggregate interest of 49.0% in the issued share capital of PT Freyabadi Indotama (“Freyabadi”) held in aggregate by McKeeson Investments Pte Ltd and PT Sederhana Djaja by virtue of their aggregate interest in 100% of the shareholding in Berlian Enterprises. Chuang Tiong Kie is also the President Director of Freyabadi.

By virtue of their aggregate interest in 99.9% of the shareholding in PT Sederhana Djaja, Chuang Tiong Choon, Chuang Tiong

Liep and Chuang Tiong Kie who are the Company’s executive directors, are deemed to be interested in 100% of the issued share capital of PT Tri Keeson Utama (“TKU”) held by PT Sederhana Djaja.

(i) Call Option Agreement

On 22 September 2004, the Company entered into a call option agreement with PT Sederhana Djaja and McKeeson Investments Pte Ltd (collectively, the “Grantors”) pursuant to which the Grantors granted to the Company the right to require the Grantors to sell to the Company ordinary shares, representing 49%, 100% and 51% of the issued and paid-up share capital of Freyabadi, TKU and PT Fajar Mataram Sedayu (“FMS”) respectively.

(ii) Deed of Undertaking

On 22 September 2004, each of Chuang Tiong Choon, Chuang Tiong Liep and Chuang Tiong Kie (the “Covenantors”) entered into a deed of undertaking with the Company to undertake and agree to dispose of their respective shareholding interests in Freyabadi, TKU and FMS in the event that the Audit Committee determines that a potential confl ict of interest may arise between the Group, Freyabadi and TKU and between the Group and FMS; and the Group’s acquisition of each Covenantor’s shareholding interests in Freyabadi, TKU and FMS is not in the Group’s commercial interest.

Disclosure Under SGX-ST Listing Manual Requirements 130 Petra Foods Limited Annual Report 2010

Disclosure Under SGX-ST Listing Manual Requirements for the fi nancial year ended 31 December 2010

ADDITIONAL SINGAPORE EXCHANGE SECURITIES TRADING LISTING MANUAL REQUIREMENTS (CONTINUED))

(c) Directors’ remuneration

A breakdown showing the level and mix of each director’s remuneration (including salary, bonus, directors’ fees and benefi ts in kind) paid and payable for this fi nancial year is as follows:

Directors

Directors’ Fee(%)

Basic Salary

(%)

Variable or Bonuses

(%)Total

(%)

S$1,250,000 and S$1,499,999– Chuang Tiong Choon – 64 36 100

S$750,000 to S$999,999– Chuang Tiong Liep – 65 35 100

S$250,000 to S$499,999– Chuang Tiong Kie – 72 28 100

Below S$250,000– Chua Koon Chek – 80 20 100– Anthony Michael Dean 100 – – 100– Pedro Mata-Bruckmann 100 – – 100– Davinder Singh 100 – – 100– Josephine Price 100 – – 100

Number of directors of the Company receiving remuneration from the Group during the fi nancial year:

Remuneration bands 2010 2009

ExecutiveS$1,250,000 to S$1,499,999 1 –S$1,000,000 to S$1,249,999 – 1S$750,000 to S$999,999 1 –S$500,000 to S$749,999 – 1S$250,000 to S$499,999 1 1Below S$249,999 1 1

Non-executiveBelow S$250,000 4 4

8 8

Disclosure Under SGX-ST Listing Manual Requirements Petra Foods Limited Annual Report 2010 131

ADDITIONAL SINGAPORE EXCHANGE SECURITIES TRADING LISTING MANUAL REQUIREMENTS (CONTINUED)

(c) Directors’ remuneration (continued)

Remuneration of executive offi cers

Year ended 31 December 2010 1

Year ended31 December 2009 1

Ee Kim Seng C BChin Koon Yew C BFrancis Benedict Ryan B BSusanto Widjaja B BNancy Florensia C BSusanto Purwo 2 A AFerry Haryanto B BNg Sin Heng C BLim Seok Bee C BChris Oo Hoe Hee B BMarc Donaldson 3 NA B

Notes:1 Remuneration bands: “A” refers to remuneration below S$250,000 “B” refers to remuneration between S$250,000 and S$499,999 “C” refers to remuneration between S$500,000 and above2 With effect from 1 July 2010, Susanto Purwo retired and ceased to be an Executive Offi cer of the Company3 With effect from 31 October 2009, Marc Donaldson ceased to be an Executive Offi cer of the Company

The Company does not have any employee who is an immediate family member of a Director or Chief Executive Offi cer and whose remuneration exceeded S$150,000.





(d) Properties of the Group

Held by LocationLand Area

(sq m) Tenure Existing use

Leasehold Land and Buildings

PT Perusahaan Industri Ceres

Village: Pasawahan,Sub district: Dayeuh Kolot, No. 92Regency: Bandung, Province: West JavaIndonesia

4,378 30 years fromFebruary 2003

Chocolate factory, warehouse, offi ce

Village: Pasawahan,Sub district: Dayeuh Kolot, No. 92Regency: Bandung,Province: West JavaIndonesia

24,185 30 years from September 2004

Chocolate factory, warehouse, offi ce


3,840 30 years from November 2008

Raw material warehouse


14,610 30 years from March 2009

Factory

Village: Pasawahan,Sub district: Dayeuh Kolot,No. 86Regency: Bandung,Province: West JavaIndonesia


Factory

Village: Pasawahan,Sub district: Dayeuh Kolot,No. 90Regency: Bandung,Province: West JavaIndonesia


Factory




(d) Properties of the Group (continued)



Leasehold Land and Buildings

PT Nirwana Lestari

Village: Bojong MentengSub District: East Bekasi, Jln Raya Narogong, Km 7Regency: BekasiProvince: West JavaIndonesia

19,450 20 years from December 2008

Offi ce, warehouse

Denpasar, Bali 80116Jl. Cargo Permai I no.188

1,515 27 years from May 2002

Warehouse

PT General Food Industries

Village: Pasawahan Sub District: Dayeuh KolotNo. 1, Jln Mengger,Regency: BandungProvince: West JavaIndonesia

25,190 30 yearsleasehold from November 2007

Factory, warehouse

Village: Pasawahan,Sub district: WatesNo. 84, Jln Raya Dayeuh KolotRegency: Bandung, Province: West JavaIndonesia

8,075 20 years from January 2008

Factory, warehouse, offi ce

Delfi Cocoa (Malaysia)

Sdn Bhd

PLO No. 700, Pasir Gudang Johor Malaysia

40,469 60 years fromDecember 2000

Manufacturing plant

PLO No. 732, Pasir Gudang Johor Malaysia

16,186 60 years fromApril 2009

Manufacturing plant




(d) Properties of the Group (continued)



Freehold Land and Buildings

DCMX Cocoa S.A. de C.V.

Lago Muritz No. 55, 61,63, 65, 67, 73 and 228 Col. Anahuac, Delegacion Miguel Hidalgo, Mexico, Federal District

6,096 Freehold Manufacturing plant

Cocoa Specialities Inc.

Barrio Guyong, Sta. Maria, Bulacan


118 Herrera St., LegaspiVillage, Makati

426 Freehold Offi ce

Siam Cocoa Products Inc.

Land title deed no.11164Tambol Takam(North Bangpakong), Amphur Bangkapong,Chachoengsao province


Land title deed no. 11234 Tambol Takam (North Bangpakong), Amphur Bangpakong,Chachoengsao province


Delfi Cacau Brasil Ltda.

Itabuna, Bahia 68,139 Freehold Production &storage facilities

Delfi Foods, Inc. Barangay Parang, Marikina City, Metro Manila, Philippines

25,296 Freehold Factory, warehouse and offi ce building

Delfi Cocoa (Europe) GmbH

Einsiedeldeich 7-920539 Hamburg, Germany


Delfi Nord Cacao SAS

ZI La LeuretteRoute du Developpement59820 Gravelines,France

31,639 Freehold Factory, warehouse and offi ce building




(e) Interested person transactions and confl icts of interest (“IPT”)

Pursuant to Rule 920(2) of the Listing Manual, the Company has obtained a Shareholders’ Mandate for it to enter into certain categories of interested person transactions with PT Tri Keeson Utama, PT Fajar Mataram Sedayu, PT Freyabadi Indotama and PT Sederhana Djaja and each of their associates. Transactions with interested persons which do not fall within the Shareholders’ Mandate shall be subject to the relevant provisions of Chapter 9 of the Listing Manual of the SGX-ST.

As at 31 December 2010, the total IPT of US$38.5 million was recorded, as shown below.

1 Aggregate value of all interested person transactions during the fi nancial year under review (excluding transactions

conducted under shareholders’ mandate pursuant to Rule 920)

1 Aggregate value of all interested person transactions

conducted under a shareholders’ mandate pursuant to Rule 920

2010

US$’0002010

US$’000

PT Freyabadi Indotama– Sales of goods – 10,416

– Purchase of products – 13,262

– 23,678

PT Tri Keeson Utama– Sales of goods – 13,764

PT Fajar Mataram Sedayu– Sales of goods – 376

– Purchase of goods – 563

– 939

PT Sederhana Djaja– Lease of properties – 69

Megawati Leman– Lease of premises 16 –

PT Freyabadi Indotama– Purchase of property, plant and equipment 10 – 1 Includes transactions less than S$100,000

(f) Compliance with Rule 716 of the Listing Rules of SGX-ST

Both Audit Committee and Board are satisfi ed that the appointment of different auditors of its subsidiaries would not compromise the standard and effectiveness of the audit of the Company. Accordingly, the Company is in compliance with Rule 716 of the Listing Rules of the SGX-ST.


Shareholdings Statisticsas at 17 March 2011

Total number of ordinary shares : 611,157,000

Total number of voting shares : 611,157,000

Total issued and paid-up capital : S$247,805,757.00

Total number of treasury shares held : Nil

Class of shares : Ordinary shares

Voting rights : 1 vote per ordinary share

ANALYSIS OF SHAREHOLDINGS

Size of ShareholdingsNo. of

Shareholders %No. of

Shares %

1 – 999 15 3.58 1,076 0.00 1,000 – 10,000 263 62.77 1,116,256 0.18 10,001 – 1,000,000 127 30.31 10,297,453 1.69

1,000,001 and above 14 3.34 599,742,215 98.13 419 100.00 611,157,000 100.00

TOP 21 SHAREHOLDERS

No. Name of Shareholder No. of Shares %

1 HSBC (Singapore) Nominees Pte Ltd 341,261,200 55.842 Citibank Nominees Singapore Pte Ltd 73,076,472 11.963 DBS Nominees Pte Ltd 66,644,243 10.914 Raffl es Nominees (Pte) Ltd 50,547,000 8.275 BNP Paribas Securities Services Singapore 20,994,000 3.446 Morgan Stanley Asia (S) Securities Pte Ltd 13,084,000 2.147 United Overseas Bank Nominees Pte Ltd 9,332,000 1.538 Mckeeson Investments Pte Ltd 6,000,000 0.989 DBSN Services Pte Ltd 4,933,000 0.8110 Kie Saw Sim 3,708,000 0.6111 UOB Kay Hian Pte Ltd 3,037,000 0.5012 Chuang Yok Hoa 2,800,000 0.4613 Merrill Lynch (S) Pte Ltd 2,497,300 0.4114 Chuang Mying Hwa 1,828,000 0.3015 Chin Koon Yew 910,000 0.1516 Chua Koon Chek 700,000 0.1117 Mayban Nominees (S) Pte Ltd 700,000 0.1118 DBS Vickers Securities (S) Pte Ltd 676,000 0.1119 Ang Lily 471,000 0.0820 Nova Tjie 318,000 0.0521 Tjie Nancy Florensia 318,000 0.05

603,835,215 98.82

SHAREHOLDINGS HELD IN HANDS OF PUBLIC

Based on information available to the Company, approximately 29.10% of the Company’s shares listed on the Singapore Exchange Securities Trading Limited were held in the hands of the public. Therefore the Company has complied with Rule 723 of the Listing Manual.

Shareholdings StatisticsPetra Foods Limited Annual Report 2010 137

Substantial Shareholders’ Interests as at 17 March 2010 (As recorded in the Register of Substantial Shareholders)

Substantial Shareholders’ Interests

Direct Interest Deemed Interest

Numberof Shares

% Numberof Shares

%

Substantial ShareholdersLim Mee Len 270,000 0.04 311,557,000 1 50.97John Chuang 52,000 0.008 311,999,000 2 51.05Credit Suisse Trust Limited – – 311,407,000 3 50.95Johnsonville Assets Limited – – 311,407,000 4 50.95Johnsonville Holdings Limited – – 311,407,000 5 50.95Aerodrome International Limited – – 311,407,000 6 50.95Joseph Chuang 70,000 0.011 308,741,000 7 50.51Maplegold Assets Limited – – 308,741,000 8 50.51Berlian Enterprises Limited – – 308,741,000 9 50.51Springbright Investments Limited – – 291,964,000 10 47.77Genesis Asset Management LLP – – 31,902,000 11 5.21Mason Hill Advisors, LLC – – 38,684,285 12 6.32Tiger Global Management, LLC – – 39,100,000 13 6.39Charles P. Coleman III – – 39,100,000 14 6.39

Notes:1 Mdm Lim Mee Len (wife of Mr John Chuang) is deemed to be interested in the Shares held by Aerodrome International Limited (Aerodrome), Berlian Enterprises Limited

(Berlian), Springbright Investments Limited (Springbright), McKeeson Investments Pte Ltd (McKeeson) and Honeychurch International Limited (Honeychurch). Mdm Lim’s interests arise as she is the benefi ciary of the Johnsonville Asset Trust (JAT) and Johnsonville Holdings Trust (JHT) of which Credit Suisse Trust Limited (CST) has been appointed as the trustee. CST owns 100% of Johnsonville Asset Limited (JAL) and Johnsonville Holdings Limited (JHL), which in turns own (70%) and (30%) of the issued and paid-up share capital of Aerodrome. Accordingly, she is deemed to be interested in all the shares held (directly & indirectly) by Aerodrome and Honeychurch.

2 Mr John Chuang is deemed to be interested in all the shares held (directly and indirectly) by his wife, Mdm Lim Mee Len, including his shares which are held by his nominee, United Overseas Bank Nominees Pte Ltd. He is also one of the benefi ciaries of JHL.

3 CST is a Singapore registered public trust company and deemed interest arises from its 100% shareholding of Aerodrome as the trustees of JAL and JAH. Accordingly, CST is deemed to be interested in all the shares held indirectly by Aerodrome.

4 JAL has a 70% shareholding in Aerodrome. Accordingly, JAL is deemed to be interested in all the shares held (directly & indirectly) by Aerodrome. 5 JHL has a 30% shareholding in Aerodrome. Accordingly, JHL is deemed to be interested in all the shares held (directly & indirectly) by Aerodrome. 6 Aerodrome is the holding company of Berlian Enterprises Limited (Berlian). Accordingly, Aerodrome is deemed to be interested in all the shares held (directly & indirectly)

by Berlian. 7 Mr Joseph Chuang is the sole shareholder of Maplegold Assets Limited (Maplegold). Accordingly, he is deemed to be interested in all the shares held (directly and

indirectly) by Maplegold. 8 Maplegold has a 30% shareholding in Berlian. Accordingly, Maplegold is deemed to be interested in all the shares held (directly & indirectly) by Berlian.9 Berlian is the sole shareholder of McKeeson and Springbright. Accordingly, Berlian is deemed to be interested in all the shares held (directly and indirectly) by

McKeeson and Springbright. In addition, Berlian’s shares in the Company are held by its nominee, Citibank Nominees Singapore Private Limited.10 Springbright’s shares in the Company are held by its nominee, HSBC (Singapore) Nominees Pte Ltd. 11 Genesis Asset Management, LLP is deemed to be interested in the shares held by Genesis Smaller Companies, SICAV and Genesis Smaller Companies. 12 Mason Hill Advisors, LLC is deemed to be interested in the shares held by Equinox Partners, LP and Kuroto Fund, LP. 13 Tiger Global Management, LLC is deemed to be interested in the shares held by Tiger Global, L.P., Tiger Global Master Fund, L.P. and Tiger Global II SPV II, Ltd. 14 Charles P. Coleman III is deemed to be interested in the shares held by Tiger Global, L.P., Tiger Global Master Fund, L.P. and Tiger Global II SPV II, Ltd.


Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Annual General Meeting of PETRA FOODS LIMITED (Company) will be held at Grand Hyatt Singapore, Magnolia 4, Level 3, 10 Scotts Road, Singapore 228211 on Thursday, 28 April 2011 at 2:00 p.m. for the following purposes:-

AS ORDINARY BUSINESS

1. To receive and adopt the directors’ report and audited accounts for the year ended 31 December 2010, together with the auditors’ report thereon. (Resolution 1)

2. To re-elect the following directors who are retiring by rotation under article 104 of the Company’s Articles of Association and who, being eligible, offer themselves for re-election:-

a. Ms Josephine Price (Resolution 2)

b. Mr Chuang Tiong Liep (Resolution 3) c. Mr Chuang Tiong Kie (Resolution 4)

(See explanatory notes.)

3. To approve directors’ fees of US$276,000 for the year ending 31 December 2011. (2010: US$276,000) (Resolution 5)

4. To declare a tax exempt one-tier fi nal dividend of 1.72 US cents or 2.18 Singapore cents per ordinary share for the year ended 31 December 2010 (FYE 2009: 1.02 US cents or 1.43 Singapore cents). (Resolution 6)

5. To re-appoint Messrs PricewaterhouseCoopers LLP as auditors of the Company for the fi nancial year ending 31 December 2011 and to authorise the directors to fi x their remuneration. (Resolution 7)

6. To transact any other ordinary business that may properly be transacted at an annual general meeting.

AS SPECIAL BUSINESS

To consider and, if thought fi t, to pass, with or without, modifi cations, the following resolutions as ordinary resolutions:-

7. Authority to allot and issue shares (Resolution 8)

That, pursuant to section 161 of the Companies Act, Chapter 50 (Act) and the Listing Manual of the Singapore Exchange Securities Trading Limited (SGX-ST), authority be and is hereby given to the directors of the Company to:-

(a) (i) issue shares in the Company (Shares) whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements, or options (collectively, Instruments) that might or would require Shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible or exchangeable into Shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the directors may in their absolute discretion deem fi t; and

(b) (notwithstanding that the authority conferred by this resolution may have ceased to be in force) issue Shares in pursuance of any Instrument made or granted by the directors while this Resolution was in force,

provided that:-

(1) the aggregate number of Shares to be issued pursuant to this resolution (including Shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) does not exceed 50 per cent of the total number of issued Shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of Shares to be issued other than on a pro rata basis to shareholders of the Company (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed 20 per cent of the Company’s total number of issued Shares (excluding treasury shares) (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such manner of calculation and adjustments as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of Shares that may be issued under sub-paragraph (1) above, the total number of issued Shares (excluding treasury shares, if any) shall be calculated based on the total number of issued Shares excluding treasury shares at the time of the passing of this Resolution, after adjusting for:-

(a) new Shares arising from the conversion or exercise of convertible securities;

(b) new Shares arising from the exercise of share options or vesting of share awards which are outstanding or subsisting at the time this Resolution is passed; and

(c) any subsequent bonus issue, consolidation or subdivision of Shares;

Notice of Annual General MeetingPetra Foods Limited Annual Report 2010 139


7. Authority to allot and issue shares (continued)

(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Act, the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the articles of association for the time being of the Company; and

(4) (unless revoked or varied by the Company in general meeting) the authority conferred by this Resolution shall continue in force until the conclusion of the next annual general meeting of the Company or the date by which the next annual general meeting of the Company is required by law to be held, whichever is the earlier.

8. Authority to grant and issue shares under the Petra Foods Share Option Scheme and Petra Foods Share Incentive Plan (Resolution 9)

That approval be and is hereby given to the directors:-

(i) to offer and grant options and/or awards from time to time in accordance with the provisions of the Petra Foods Share Option Scheme and Petra Foods Share Incentive Plan (Petra Schemes); and

(ii) pursuant to section 161 of the Act, to allot and issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options and/or to the vesting of awards under the Petra Schemes, provided that the aggregate number of new shares to be issued pursuant to the Petra Schemes, shall not exceed 10 per cent of the total number of issued shares (excluding treasury) shares from time to time.

9. Authority to allot and issue new ordinary shares under the Petra Foods Limited Scrip Dividend Scheme (Resolution 10)

That pursuant to section 161 of the Act, authority be and is hereby given to the directors to allot and issue from time to time such number of new ordinary shares in the capital of the Company as may be required to be allotted and issued pursuant to the Petra Foods Limited Scrip Dividend Scheme.

10. The Proposed Renewal of the Mandate for Interested Person Transactions (Resolution 11)

That:-

(a) approval be and is hereby given (IPT Mandate), for the purposes of Chapter 9 of the Listing Manual of the SGX-ST, for the Company, its subsidiaries and its associated companies which are entities at risk as defi ned in Chapter 9 of the Listing Manual of the SGX-ST, or any of them, to enter into any of the transactions falling within the types of interested person transactions, particulars of which are set out in the Annual Report of the Company for the fi nancial year ended 31 December 2010 (Appendix) with any person who falls within the class of interested persons described in the Appendix, provided that such transactions are made at arm’s length and on normal commercial terms, will not be prejudicial to the interests of the Company and its minority shareholders, and will be subject to the review procedures for interested person transactions as set out in the Appendix;

(b) the IPT Mandate shall, unless revoked or varied by the Company in general meeting, continue in force until the next annual general meeting of the Company is held or is required by law to be held, whichever is the earlier; and

(c) the directors of the Company be and are hereby authorised to do all such acts and things (including, without limitation, executing all such documents as may be required) as they may consider expedient or necessary in the interests of the Company to give effect to the IPT Mandate and/or this Resolution.

By Order of the Board of Directors

Lian Kim Seng / Chuang Yok Hoa Company Secretaries

Singapore, 12 April 2011

Notes:

(1) A member of the Company entitled to attend and vote at the above meeting may appoint not more than two proxies to attend and vote on his behalf.

(2) A proxy need not be a member of the Company and where there is more than one proxy, the proportion (expressed as a percentage of the whole) of his shareholding to be represented by each proxy must be stated.

(3) The instrument appointing a proxy must be deposited at the registered offi ce of the Company at 111 Somerset Road, #16-01, TripleOne Somerset, Singapore 238164, not less than 48 hours before the time appointed for holding the meeting.

Notice of Annual General Meeting140 Petra Foods Limited Annual Report 2010


EXPLANATORY NOTES & STATEMENT PURSUANT TO ARTICLE 64 OF THE COMPANY’S ARTICLES OF ASSOCIATION

Ordinary Resolution 2: If re-elected, Ms Josephine Price, an independent director, shall remain as Chairperson of the Nominating Committee, a member of the Audit Committee and Remuneration Committee of the Company.

Ordinary Resolution 3: If re-elected, Mr Chuang Tiong Liep, an executive director, shall remain as a member of the Executive Committee of the Company.

Ordinary Resolution 4: If re-elected, Mr Chuang Tiong Kie, an executive director, shall remain as a member of the Executive Committee of the Company.

Ordinary Resolution 8: The proposed Resolution 8, if passed, will empower the directors, from the date of the Annual General Meeting until the next annual general meeting, to issue Shares and/or Instruments up to an aggregate number not exceeding 50 per cent of the total number of issued Shares excluding treasury shares, with a sub-limit of 20 per cent for Shares issued other than on a pro rata basis to Shareholders.

Ordinary Resolution 9:The proposed Resolution 9, if passed, will empower the directors to offer and grant options and/or awards under the Petra Schemes (which was approved at the extraordinary general meeting of the Company held on 22 September 2004) and to allot and issue shares in the capital of the Company, pursuant to the exercise of options and/or awards under the Petra Schemes, provided that the aggregate number of shares to be issued under the Petra Schemes does not exceed 10 per cent of the total number of issued shares excluding treasury shares of the Company for the time being.

Ordinary Resolution 10:The proposed Resolution 10, if passed, will empower the directors to allot and issue shares in the Company pursuant to the Petra Foods Limited Scrip Dividend Scheme to members who, in respect of a qualifying dividend, have elected to receive scrip in lieu of the cash amount of that qualifying dividend.

Ordinary Resolution 11:The proposed Resolution 11, if passed, will renew the IPT Mandate (which was approved at the annual general meeting of the Company held on 28 April 2010) to facilitate the Company, its subsidiaries and associated companies which are entities at risk as defi ned in Chapter 9 of the Listing Manual of the SGX-ST, to enter into Interested Persons Transactions, the details of which are set out in the Annual Report. The authority pursuant to the renewed IPT Mandate will, unless revoked or varied by the Company in general meeting, expire at the conclusion of the next annual general meeting of the Company, or the date by which the next annual general meeting is required by law to be held, whichever is the earlier.

Notice of Annual General MeetingPetra Foods Limited Annual Report 2010 141


NOTICE OF BOOKS CLOSURE AND PAYMENT DATE FOR FINAL DIVIDEND

NOTICE IS ALSO HEREBY GIVEN that, subject to the approval of the shareholders to the fi nal dividend at the Company’s annual general meeting held on 28 April 2011, the Transfer Books and the Register of Members of the Company will be closed at 5:00 p.m. on 6 May 2011 (Books Closure Date) for the preparation of dividend warrants.

Duly completed registrable transfers received by the Company’s Share Registrar, M&C Services Private Limited, at 138 Robinson Road, #17-00 The Corporate Offi ce, Singapore 068906 up to 5:00 p.m. on the Books Closure Date will be registered to determine shareholders’ entitlements to the fi nal dividend. In respect of ordinary shares in securities accounts with The Central Depository (Pte) Limited (CDP), the fi nal dividend will be paid by the Company to CDP which will, in turn, distribute the fi nal dividend entitlements to the CDP account holders in accordance with its normal practice.

The fi nal dividend, if so approved by shareholders, will be paid on 20 May 2011.

By Order of the Board of Directors

Lian Kim Seng / Chuang Yok Hoa Company Secretaries

Singapore, 12 April 2011

Notice of Annual General Meeting142 Petra Foods Limited Annual Report 2010

Petra Foods LimitedRegistration No. 198403096C(Incorporated In the Republic of Singapore)

Proxy Form(Please see notes overleaf before completing this Form)

Dated this day of 2011

Signature(s) of member(s)/Common Seal

Total number of Shares in: No. of Shares

(a) CDP Register(b) Register of MembersTotal

IMPORTANT1. For investors who have used their CPF monies to buy the

Company’s shares, this Report is forwarded to them at the request of their CPF approved nominees and is sent solely FOR THEIR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

IMPORTANT – PLEASE READ NOTES OVERLEAF

I/We (NRIC / Passport No.) of

(Address) being a member/members of Petra Foods Limited (Company), hereby appoint:-

Name Address NRIC/Passport Number Proportion of Shareholdings (%)

And/or (delete as appropriate)

as my/our proxy/proxies to attend and vote for me/us on my/our behalf and if necessary, to demand a poll, at the AGM of the Company to be held at Grand Hyatt Singapore, Magnolia 4, Level 3, 10 Scotts Road, Singapore 228211 on Thursday, 28 April 2011 at 2:00 p.m. and at any adjournment thereof.

I/We direct my/our proxy/proxies to vote for or against the Resolutions to be proposed at the AGM as indicated hereunder. If no specifi c direction as to voting is given or in the event of any event of any other matter arising at the AGM and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/their discretion.

(If you wish to exercise all your votes “For” or “Against”, please tick with “ √ ” within the box provided. Alternatively, please indicate the number of votes “For” or “Against” each resolution.)

No. Resolutions For Against

Ordinary Business

1. To adopt Directors’ Report and Audited Accounts for the year ended 31 December 2010.

2. To re-elect Ms Josephine Price as a Director.

3. To re-elect Mr Chuang Tiong Liep as a Director.

4. To re-elect Mr Chuang Tiong Kie as a Director.

5. To approve Directors’ fees for the year ending 31 December 2011.

6. To declare a fi nal dividend.

7. To re-appoint Messrs PricewaterhouseCoopers LLP as auditors and to authorise Directors to fi x their remuneration.

Special Business

8. To authorise Directors to issue shares and/or Instruments pursuant to Section 161 of the Companies Act, Chapter 50.

9. To authorise Directors to offer and grant options and/or awards and to issue shares pursuant to the Petra Foods Share Option Scheme and Petra Foods Share Incentive Plan.

10. To authorise Directors to issue new ordinary shares pursuant to the Petra Foods Limited Scrip Dividend Scheme.

11. To renew the Mandate for Interested Person Transactions.

Proxy Form

Notes:-

1. A member should insert the total number of ordinary shares in the capital of the Company (Shares) held. If the member has Shares entered against his name in the Depository Register (as defi ned in Section 130A of the Companies Act, Cap. 50), he should insert that number of Shares. If the member has Shares registered in his name in the Register of Members, he should insert that number of Shares. If a member has Shares entered against his name in the Depository Register and Shares registered in his name in the Register of Members, he should insert the aggregate number of Shares entered against his name in the Depository Register and registered in his name in the Register of Members. If no number is inserted, this instrument appointing a proxy or proxies will be deemed to relate to all Shares held by the member.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote instead of him. A proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he specifi es the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy.

4. This instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 111 Somerset Road, #16-01, TripleOne Somerset, Singapore 238164 not less than 48 hours before the time appointed for the Annual General Meeting.

5. The instrument appointing a proxy or proxies must be under the hand of the appointer or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an offi cer or attorney duly authorised.

6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative at the Annual General Meeting, in accordance with Section 179 of the Companies Act, Cap. 50.

7. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointer are not ascertainable from the instructions of the appointer specifi ed in this instrument appointing a proxy or proxies.

8. In the case of members whose Shares are entered against their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have Shares entered against their names in the Depository Register as at 48 hours before the time appointed for holding the Annual General Meeting as certifi ed by The Central Depository (Pte) Limited to the Company.

Financial Calendar

SingaporeTripleOne Somerset111 Somerset Road, #16-01Singapore 238164

7 Gul Circle, #02-01 Keppel DistricentreSingapore 629563

IndonesiaBandungJln Raya Dayeuhkolot no. 84Pesawahan, Kabupaten Bandung 40256,Indonesia

Jln Raya Dayeuhkolot no. 92Pesawahan, Kabupaten Bandung 40256,Indonesia

BekasiJln Raya Narogong Km 7,Bojong MentengBekasi 17117, Jawa Barat, Indonesia

MalaysiaKuala LumpurLevel 10, West Wing, Wisma Consplant 2, 47500 Subang Jaya, Selangor,Malaysia

Annual General Meeting April 2011Payment of Final Dividend May 2011Announcement of First Quarter Results May 2011Announcement of Half Year Results August 2011Announcement of Third Quarter Results November 2011

Locations

Registered OfficeTripleOne Somerset111 Somerset Road, #16-01Singapore 238164

AuditorsPricewaterhouseCoopers LLP8 Cross Street#17-00 PWC BuildingSingapore 048424

Partner-in-charge (since 2006):Deborah Ong

Stock CodesSGX: PetraBloomberg: PETRA SPReuters: PEFO.SI

Company SecretariesChuang Yok Hua, ACISLian Kim Seng, ACIS

Corporate InformationPrincipal BankersBNP Paribas20 Collyer Quay #03-00 Tung CentreSingapore 049319

United Overseas Bank Limited80 Raffles PlaceUOB PlazaSingapore 048624

Rabobank International77 Robinson Road#09-00 SIA BuildingSingapore 068896

PT Bank Central Asia TbkWisma BCA / Lantai 11Jl Jend Sudirman Kav 22-23Jakarta 12920, Indonesia

Malayan Banking BerhadMenara Maybank100 Jalan Tun Perak50050 Kuala LumpurMalaysia

DBS Bank Ltd6 Shenton Way#23-03 DBS Building Tower OneSingapore 068809

ABN-AMRO (Nederland) N.V.P.O. Box 2931000 AG AmsterdamThe Netherlands

KBC Bank Nederland N.V.Watermanweg 923067 GG RotterdamThe Netherlands

Registrar and Share Transfer OfficeM&C Services Private Limited138 Robinson Road #17-00The Corporate OfficeSingapore 068906

Websitehttp://www.petrafoods.com

Johor523706, PLO 700, Jalan Keluli 8,Kawasan Perindustrian, Pasir Gudang81700 Pasir Gudang, Johor Darul Ta’zin,Malaysia

The PhilippinesNo. 23 M. Tuazon St., Parang,Marikina City 1809, Philippines

Unit 004 Luwasan StreetBrgy GuyongSta Maria Bulacan 3022, Philippines

Unit 501, Prestige TowerDon Francisco Ortigas Jr. RoadOrtigas Center, 1605 Pasig City,Philippines

Thailand140 Soi Thong Lor 4, Sukhumvit 55 Road,Klongton Nua Subdistrict, Wattana District, Bangkok

MexicoLago Muritz #73 Col AnahuacDelegacion Miguel HidalgoMexico DF CP 11320

BrazilRod. BR-415 – KM 3645600-000 Itabuna, BA Brazil

United StatesPanther Valley Village SquareRoute 517, Allamuchy, NJ 07820

FranceRoute de DeveloppementSite Industriel Leurette59820 GravelinesFrance

GermanyEinsiedeldeich 7-920539 HamburgGermany

The NetherlandsProvincialeweg 33C1506 MA ZaandamThe Netherlands

strategic communicator and visual creatorgreymatter williams and phoa (asia)

Petra Foods Limited111 Somerset Road TripleOne Somerset#16-01Singapore 238164

Phone +65 6477 5600Fax +65 6887 [email protected]

Company Registration No.: 198403096(Incorporated in the Republic of Singapore)

www.petrafoods.com

Documents

listed companypetrafoods.listedcompany.com/misc/ar2010.pdf · OUR GROWTH Revenue has increased three-fold as our businesses have deepened and broadened their global and regional footprints