Freedom Foods Group Limited Annual Report 2007

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FY2007 Annual Report · Freedom Foods Group Limited

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Freedom Nutritional
Products Limited

Annual Report

2007

Contents

Financial Highlights and Five Year Summary

Chairman’s Letter

Chief Executive’s Review of Operations

Directors’ Report

Lead Auditor’s Independence Declaration

Corporate Governance

Consolidated Income Statement

Consolidated Balance Sheet

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

Notes to the Financial Statements

Directors’ Declaration

Independent Audit Report

Shareholder Statistics

Corporate Directory

ANNUAL GENERAL MEETING

Date

Venue

25 October, 2007.

Time

11.30 am

Deloitte Touche Tohmatsu
Level 9, Grosvenor Place,
225 George Street,
Sydney, NSW, 2000

Freedom Nutritional Products Limited
ABN 41 002 814 235
Annual Report for the year ended 30 June 2007

Financial Highlights and Five Year Summary

Sales Revenue ($000’s)

EBITDA ($000’s)*
EBIT

Net Profi t / (Loss) before Tax ($000’s)

Profi t attributable to members of the parent ($000’s)

Basic Earnings per Share (cents)

Number of ordinary shares issued (000’s)

Dividend per Share (cents)

Dividend Paid ($000’s)

Total Assets ($000’s)

Shareholders Equity ($000’s)

Net Tangible Asset Backing (cents)

*E
*Earnings before interest, tax, depreciation and amortisation

2003
2003

21,957

1,599

745

564

2.6

26,689

233

26,121

14,109

2004
2004

32,940

360

(1,237)

(749)

(2.6)

32,689

Nil

30,581

17,362

2005
2005

37,954

2,090

643

310

0.8

2006
2006

46,963

2,921

1,595

1,434

3.2

2007
2007

48,683

3,173

1,789

1,174

2.6

44,485

44,527

Nil

41,137

21,538

Nil

43,548

22,844

445

47,428

23,654

N
Note:

2003 and 2004 were prepared under Australian Accounting Standards (AGAAP)
2005, 2006 and 2007 were prepared under Australian Equivalents to International Financial Reporting
Standards (AIFRS)

2007 Annual Report | 1

Chairman’s Letter

Dear Shareholder,

During the year the name of the company was changed from “So Natural Foods Australia Limited” to “Freedom
Nutritional Products Limited” (FNP).

Special dietary products,

The Directors believe the new name better refl ects the broadened activities of the group which now covers:
•
•
•
•

Low GI food and beverages.

Soy and rice beverages,

Canned seafood, and

FNP reported a net profi t after tax of $1,174,000 for the year. The Chief Executive Offi cer’s report provides a
commentary on operations. The fi nancial performance allowed the directors to pay a fully franked one cent dividend
during the year and we have now declared an initial 2008 fully franked one cent dividend payable in December 2007.
This represents a 4.2% dividend yield on the year end share price.

As foreshadowed in my 2006 Chairman’s letter, we said farewell to Messrs Graham Reaney and Maurice van Ryn from
the Board. In November we welcomed Mel Miles as a new independent Director.

Mr Higgs has decided to step down as a director from the October Board meeting. I extend my thanks to him for his
contribution as a director over the years. He has accepted my invitation to join our new International Advisory Board.

The company sold the Taren Point land and buildings to our Contract Beverage Packers of Australia joint venture in
May. This allowed FNP to pay down debt and CBPA to have control over its manufacturing location.

Management continued to implement our strategic plan to become a leader in special nutrition which included an
investment in A2 Dairy Products of Australia and the acquisition of baking assets for Freedom Foods. During the year
we issued 4.9 million options to senior management to further align management compensation to the stock price
performance of the company.

The Board thanks Geoff Babidge and his management team for their contributions and we look forward to a solid
fi nancial performance for 2008 fi nancial year.

Perry Gunner
Chairman
5 September 2007

2 | Freedom Nutritional Products Limited

Chief Executive’s Review of Operations

The company achieved net profi t after tax of $1,174,000 for the 12 months ended 30 June 2007.

Whilst sales and EBITDA were higher than the previous year, higher interest costs and tax together with the costs
associated with the Arrovest takeover and non-cash executive option expenses resulted in NPAT being marginally
belo
below the previous year. EBITDA excluding takeover costs and non-cash expense of executive options was up 8% to
$
$3,343,000 compared to the prior corresponding period.

O
Other key highlights of the year included:
•
•

Management continuing to implement the strategic plan to become a leader in special nutrition in the domestic
market and developing growth options in international markets,

•

•
•

•

•
•

Establishment of the joint venture A2 Dairy Products Australia Pty Ltd and the acquisition of the assets of Cookie
Man Pty Ltd to increase Freedom Foods free from manufacturing capability,

Improved operating performance for each division including Thorpedo Foods with the exception of Soy and Rice
which experienced a declining overall market in the second half,

Growth in consolidated gross sales to $60,045,000 up 4% on the previous year primarily from organic growth,

Operating EBIT return on funds employed improved to 9%.

Functional Foods

S
Seafood

T
The Paramount Seafood division comprising Paramount salmon and Brunswick sardine and specialty seafood
T
p
products performed ahead of plan for the year.

Paramount salmon sales were signifi cantly above last year given growth of red salmon share from additional
ra
ranging and Brunswick sardines maintained its brand leadership position in Australia and New Zealand. We were
re
required to signifi cantly lift our selling prices of pink salmon due to an abnormally reduced catch in Alaska and
a
also experienced increases in sardine prices from lower catches in Canada. Our
p
procurement partner Bumble Bee Foods again assisted in sourcing our requirements
a
at competitive prices. We are hopeful of an improved catch of pink salmon for the
coming year whereas the supply environment for sardines is not expected to change
in
in the immediate term.

B
By year end, Paramount Seafoods had grown its domestic share in the red and pink
salmon segment to approximately 20% by volume and Brunswick’s share of the
d
domestic sardine segment approximated 35% by volume.

Thorpedo Foods
During the year, Thorpedo Foods focused its activities on supporting the launch of the fi rst Thorpedo branded
product by Yakult Honsha in Japan. The launch was successful in introducing a Thorpedo Low GI beverage into the
J
Ja
Japanese functional beverages market. Sales in the fi rst year for Yakult Honsha were approximately
U
US$24 million.

With the launch of the second summer season in June 2007 and a new marketing campaign to build awareness of
t
the unique health benefi ts of a low glycemic index product with the Japanese consumers,
Yakult are confi dent of improved sales in FY 2008.

The license fee income resulted in a positive contribution for the company for the year. In Australia, the domestic
strategy remains on accessing distribution of children’s beverages in schools and the grocery channel. Following
Ian Thorpe’s decision to retire from competitive swimming, we are jointly reviewing new initiatives for the business
moving forward.

2007 Annual Report | 3

Chief Executive’s Review Of Operations
(continued)

Special Dietary Foods

Freedom Foods

Freedom Foods, the leading provider of Special Dietary Food products performed
credibly with sales growth of 25% and contribution increased by 20%. This growth
was a function of broadening the product range with the launch of a number of
frozen gluten free products and a new “100 healthy calories” range of cereals, biscuits
and snacks for consumers managing calorie intake.

The acquisition of the baking assets of Cookie Man in May 2007 has provided
the company with increased manufacturing capacity and the opportunity to
signifi cantly expand its successful range of free from biscuits and cookies into

decadent style and savory products. This initiative also allows Freedom Foods to undertake contract packing for key
grocery customers previously serviced by Cookie Man. Following the acquisition, the biscuit manufacturing activities
of the company in Cheltenham (Vic) were consolidated into the new Hornsby (NSW) facilities with associated
reduction in duplicated overhead costs.

During the past year, Freedom Foods has been progressively refi ning its brand and product portfolio within the key
segments of biscuits, cereals and snacks and this will continue during the coming year. In addition, the company
will continue to review ways to enhance the cost and quality of third party manufacturers and further bolt-on
acquisitions to increase market share and capabilities.

The special dietary foods market provides consumers a solution for specifi c dietary or medical conditions including
gluten free, wheat free, low sugar or salt or highly fortifi ed. This market has signifi cant growth potential both
domestically and internationally and is a key focus for our growth plans.

Soy and Rice

Soy and Rice Beverages under-performed given ongoing competitive activity and a signifi cant decline in the overall
market.

The total UHT soy beverage market showed a volume decline of 8% MAT to June 2007 due primarily to the impact
of erroneous negative publicity in January of the risks of soy beverage consumption. The major industry participants
have since been discussing ways to better communicate the benefi ts of soy beverages within a balanced diet to
consumers.

The returns from soy and rice had been improving through a focus on a reduced range of products and lowering
the cost base through the CBPA joint venture. This year, a key initiative has been the introduction of a signifi cantly
improved whole bean taste for the proprietary range of soy beverages. Since year end, soy and rice beverages have
been integrated within the Freedom Foods special nutrition business to better leverage marketing and promotion
across the combined portfolio.

Integrated Activities

Contract Beverage Packers of Australia Pty Ltd (CBPA)

CBPA (50% owned) performed below budget given lower contract packing than planned and the impact of
unplanned maintenance activities in the second half. Notwithstanding this, CBPA has been successful in securing
additional contract packing volume from October 2007 which together with an upgrade to its processing and screw
cap packaging capabilities now underway will further reduce unit costs of the business.

The CBPA partners have deferred a decision on relocating to larger premises and CBPA purchased the Taren Point
manufacturing facility from FNP in May 2007.

4 | Freedom Nutritional Products Limited

Chief Executive’s Review Of Operations
(continued)

A2 Dairy Products Australia

In June 2007 the company invested in a new joint venture company A2 Dairy Products Australia (A2DP), with
exclusive rights for the production and sale of a2 milk™ products in Australia and Japan in association with
A2 C
A2 Corporation Limited of New Zealand. FNP has the right to convert to a 50% equity interest in A2DP.

A
A2 Corporation Limited was established in 2000 to commercialize potentially important benefi ts
a
associated with milk. a2 milk™ is obtained naturally from cows specially selected for their genetic
makeup to produce milk containing predominantly A2 protein. Certain evidence suggests that
d
drinking a2 milk™ rather than regular milk may reduce disease risks for some individuals who are
p
predisposed towards certain conditions. There have been anecdotal reports from consumers
w
who have switched to a2 milk™ that it has led to noticeable diff erences in the symptoms of
certain conditions.

F
FNP’s investment in A2DP was made through a convertible note instrument and future capital
r
requirements are to be jointly funded by the respective partners. FNP will provide the joint
v
venture with industry knowledge and strategy planning, support in retail grocery sales, fi nance
a
and administration services and access to milk supply through its majority shareholder. In
A
Australia, a2 milk™ products will share branding with the Freedom Foods brand.

T
This is a signifi cant growth opportunity for FNP and draws on the company’s unique
competencies within the special nutrition and dairy segments of the food industry. The
b
business plan focuses on building a specialist drinking milk business domestically together with
d
developing milk powders and formulas for off shore markets.

O
Outlook
O

T
The plan for FY 2008 is to continue to build scale and effi ciency in each of the core business units of Freedom Foods
S
Special Dietary, A2 Dairy Products Australia and Seafood.

W
We will continue to explore opportunities for growth by investment and or acquisition of innovative businesses in
s
specialised segments of the Nutrition Market. To support this strategy, management and board are developing an
in
innovative plan for capital raising to fund organic growth and complementary acquisitions.

S
Subject to fi nancial performance and capital management being to plan, the budget assumes continuation of
d
dividend payments during the coming fi nancial year.

Geoff Babidge
C
CEO
5
5 September 2007

2007 Annual Report | 5

Directors’ Report

Your directors submit the fi nancial report of Freedom Nutritional Products Limited (the Parent) for the year ended
30 June 2007.

Directors

For the names and particulars of the Directors of the Parent during or since the end of the fi nancial year, refer the
Corporate Governance Statement.

Company Secretary

Mr M Jenkins, B Comm., LLB (Hons), ACA, ACIS has been Company Secretary and Chief Financial Offi cer for over fi ve
years. He has been a Chartered Accountant for over 25 years and a Company Secretary for over 15 years.

Principal activities

manufacture and distribution of long life soy and other beverages;

The principal activities of the consolidated entity during the fi nancial year were:
•
•
•
•

manufacture, distribution and marketing of natural foods;

distribution and marketing low GI energy waters.

distribution and marketing canned seafood;

There were no signifi cant changes in the nature of the principal activities during the fi nancial year.

Operating results

The consolidated entity’s profi t, after providing for income tax, amounted to $1,174,000 (2006 profi t : $1,434,000).

Refer commentary in Chief Executive’s Review of Operations.

Dividends paid or recommended

A one cent per share fully franked interim dividend was paid on 18 May 2007 in respect of the year ended
30 June 2007. The dividend was franked to 100% at 30% corporate income tax rate.

In respect of the fi nancial year ending 30 June 2008, the directors recommend the payment of a fi rst interim dividend
of one cent per share franked to 100% at 30% corporate income tax rate to the holders of fully paid ordinary shares
on 18 December 2007.

Signi(cid:192) cant changes in state of affairs

There were no signifi cant changes to the state of aff airs of the consolidated entity that occurred during the fi nancial
year under review, not otherwise disclosed in this report.

Events subsequent to balance date

No other matters or circumstances have arisen since the end of the fi nancial year which signifi cantly aff ected or may
signifi cantly aff ect the operations of the consolidated entity, the results of those operations, or the state of aff airs of
the consolidated entity in subsequent fi nancial years.

Future developments

Likely developments in the operation of the consolidated entity and the expected results of these operations have
not been included in this report as the Directors believe, on reasonable grounds, that inclusion of such information
would be likely to result in unreasonable prejudice to the consolidated entity.

Environmental issues

The consolidated entity’s operations are subject to environmental regulation under the law of the Commonwealth
(AQIS) and the State (Workcover, EPA, Sydney Water, Safe Food NSW) and local council regulations.

The consolidated entity operates under a Dangerous Goods Licence issued by Workcover.

6 | Freedom Nutritional Products Limited

Directors’ Report
(continued)

There were no breaches of environmental laws, regulations or permits during the period.

The consolidated entity is currently operating in accordance with local council consent in regard to hours of
operation.

Indemnifying of(cid:192) cer or auditor

T
The Parent has not, during or since the fi nancial year, in respect of any person who is or has been an offi cer or auditor
of the Parent or a related body corporate:
•
•

indemnifi ed or made any relevant agreement for indemnifying against liability incurred as an offi cer, including
costs and expenses in successfully defending legal proceedings; or

•
•

paid or agreed to pay, a premium in respect of a contract insuring against a liability incurred as an offi cer for the
costs or expenses to defend legal proceedings;

w
with the exception of the following matter:

D
During the fi nancial year the Parent paid premiums to insure each of the Directors against liabilities for costs and
e
expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the
c
capacity of offi cer of the Parent. The average premium of each person was $2,286.

R
Rounding of the accounts

The Parent is an entity to which ASIC Class Order 98/0100 applies. Accordingly amounts in the fi nancial report have
been rounded off to the nearest thousand dollars.

M
Meetings of directors

D
During the fi nancial year 19 meetings of directors (including committees) were held. Mr Higgs took leave of absence
fo
for a period during the year. Attendances were as follows:

Directors Meeting
Directors Meeting

Audit, risk &
Audit, risk &
compliance
compliance
committee meetings
committee meetings

Remuneration
Remuneration
& nomination
& nomination
committee meetings
committee meetings

Acquisition
Acquisition
committee meeting
committee meeting

Eligible to
attend

Attended

Eligible to
attend

Attended

Eligible to
attend

Attended

Eligible to
attend

Attended

P.
P. R. Gunner

G. H. Babidge
G

A. M. Perich
A

R. Perich
R.

S. F. Higgs

M. Miles

B. W. Bootle (alternate director)
B

C. C. Grubb
C

M. Van Ryn

G. J. Reaney
G

The Board on 29 March 2007 resolved to terminate the Acquisition Committee as the function of the committee was
being undertaken by the full Board.

Directors’ shareholding

Refer to Corporate Governance Statement.

2007 Annual Report | 7

Directors’ Report
(continued)

Remuneration Report

This report details the nature and amount of remuneration for each Director and the executives receiving the
highest remuneration.

Remuneration policy
Remuneration arrangements for Directors and executives of the Parent and Group (“the Directors and executives”)
are set competitively to attract and retain appropriately qualifi ed and experienced Directors and executives. As part
of its agreed mandate, the Remuneration and Nomination Committee obtains independent advice when required
on the appropriateness of remuneration packages given trends in comparable companies and the objectives of the
consolidated entity’s remuneration strategy.

The remuneration structures explained below are designed to attract suitably qualifi ed candidates, reward the
achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The
remuneration structures take into account:
•
•
•

the Directors and executives’ ability to control the relevant operational performance; and

the amount of incentives within each Director and executive’s remuneration.

the capability and experience of the Directors and executives;

Executive director and executives
Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any
FBT charges related to employee benefi ts including motor vehicles), as well as employer contributions to
superannuation funds.

Executive director and executives remuneration levels are reviewed annually by the Remuneration and Nomination
Committee through a process that considers the overall performance of the Group. In addition the individual
performance of each senior manager is measured against each individual’s Key Performance Indicators (KPI’s) as agreed
annually with the senior manager to ensure buy-in. KPI’s are based on the profi tability of the entity and are reviewed
annually by the Remuneration and Nomination Committee and the Managing Director/Chief Executive Offi cer (CEO).

Performance based remuneration
Performance based remuneration are at the discretion of the Remuneration and Nomination Committee. These can
take the form of share options or cash payments. During the year the following options were issued 1,700,000 to G.H.
Babidge, 1,700,000 to R.J.F. Macleod, 900,000 to B.W. Bootle, 300,000 to P. J. Nathan and 300,000 to M. E. Jenkins.

Options are valued using the bi-nomial method.

Non-executive directors
The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval
by shareholders at the Annual General Meeting. Total fees for all non-executive directors, last voted upon by
shareholders was in October 2006, was not to exceed $300,000 in total. Total fees for 2007 were $122,315. To align
director interests with shareholder interests, the directors are encouraged to hold shares in the Parent.

The Chairman receives twice the base fee of non-executive directors. Non-executive directors do not receive
performance related remuneration. Directors’ fees cover all main Board activities. Non-executive directors who sit on
the Remuneration and Nomination Committee and the Audit, Risk and Compliance Committee receive an additional
payment of $1,000 and the Chairman of each receives $2,000. There are no termination or retirement benefi ts for
non-executive directors.

Service agreements
It is the Group’s policy that service contracts are entered into for the CEO which was extended on 1 February 2007.
The key terms and conditions are as follows:

•
•

the contract is for a fi xed term to 30 November 2011

the remuneration comprises a fi xed component which includes the cost to the consolidated entity of any
superannuation contributions made by the consolidated entity on behalf of the CEO; and

8 | Freedom Nutritional Products Limited

Directors’ Report
(continued)

•

the Parent can terminate employment at any time without prior notice if the CEO commits any serious breach of
any provisions of his agreement or is guilty of an act of serious misconduct or wilful neglect in the discharge of their
duties. The CEO may terminate this agreement with one month’s notice and the Parent with three month’s notice. In
the event of dismissal by the Parent, other than for breach, the CEO is also entitled to one year’s total remuneration.

P
Parent performance, shareholder wealth and directors and senior management remuneration
T
The remuneration policy has been tailored to increase goal congruence between shareholders and executives. The
method applied in achieving this aim is the issue of options to executives to encourage alignment of personal and
shareholder interests.
s

The following table shows the revenue, profi ts and dividends for the past fi ve years for the Parent.
TT

Revenue ($000s)

Net Profi t / (loss) after tax ($000s)

Dividends paid (cents)

2003
2003

21,957

564

2004
2004

32,940

(749)

Nil

2005
2005

37,954

310

Nil

2006
2006

47,654

1,434

Nil

2007
2007

49,952

1,174

T
The Remuneration and Nomination Committee considers that the Parent’s performance-linked remuneration
st
structure is appropriate to building shareholder value in the medium term.

Directors and executive of(cid:192) cers emoluments
T
The benefi ts of each director who held offi ce and fi ve highest paid executive offi cers for the year ended 30 June 2007
are as follows:
a

Short-tem employee benefi ts
Short-tem employee benefi ts

Post employment
Post employment
Benefi ts
Benefi ts

Share based
Share based
payment
payment

P. R. Gunner

G. H. Babidge

A. M. Perich

R. Perich

S. F. Higgs

M. Miles

B. W
B. W. Bootle

C. C. Grubb

G. J. Reaney

M. Van Ryn

Executive Offi cers

R. J. F. Macleod

P. J. Nathan (1)

M. E. Jenkins

H. A. Hurwitz

B. A. O’Brien

Salary

Directors’
Fees

Committee
Fees

Non-cash
Benefi t

Superannuation
Contributions

28,167

3,000

223,487

187,314

137,325

150,933

137,821

41,761

24,167

25,000

3,633

6,667

2,000

1,833

2,000

182

666

1,513

1,367

15,500

25,695

100,000

2,175

2,430

2,415

17,620

660

7,993

12,686

32,829

27,700

12,179

93,805

Options

25,045

13,259

25,045

1,500

Total

56,862

350,045

26,342

29,430

29,248

19,620

13,259

3,815

7,993

225,045

171,654

181,500

150,000

151,066

(1) appointed 11 September, 2006.

2007 Annual Report | 9

Directors’ Report
(continued)

During and since the end of the fi nancial year an aggregate of 4,900,000 share options were granted to the following
directors and executives of the Parent and consolidated entity as part of their remuneration:

Directors and executive of(cid:192) cers options

Directors and Executives
Directors and Executives

Number of options
Number of options
granted
granted

Issuing entity
Issuing entity

Number of ordinary
Number of ordinary
shares under option
shares under option

Value of Options
Value of Options
$000
$000

G. H. Babidge

B. W. Bootle

R. J. F. Macleod

M. E. Jenkins

P. J. Nathan

1,700,000

900,000

1,700,000

300,000

Parent

1,700,000

900,000

1,700,000

300,000

170

Details of unissued shares or interests under option as at the date of this report are:

Issuing entity
Issuing entity

Number of shares
Number of shares
under option
under option

Class of shares
Class of shares

Exercise price
Exercise price
of option
of option

Freedom Nutritional Products Limited

200,000

1,000,000

4,300,000

600,000

Ordinary

$0.80

$0.50

Expiry date
Expiry date
of options
of options

29 January 2008

27 July 2010

30 November 2011

26 April 2010

The holders of these options do not have the right by virtue of the option, to participate in any share issue or interest
issue of any other body corporate or registered scheme.

There were no shares or interests issued during the or since the end of the fi nancial year as a result of exercise of
an option.

Directors’ shareholding
Refer to Principle 2 “Structure of the Board to add value” in Corporate Governance Statement.

Non-audit services
During the year PKF, the Parent’s previous auditors, have performed certain other services in addition to their
statutory duties. During the year Deloitte, the Parent’s current auditors, have performed certain other services in
addition to their statutory duties.

With respect to the non-audit services provided during the year by the auditor, the Board has considered written advice
provided and a recommendation of the Audit, Risk and Compliance Committee. The Board is satisfi ed that the provision
of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor
independence requirements of the Corporation Act 2001 for the following reasons:

•

all non-audit services were subject to the corporate governance procedures adopted by the Parent and have been
reviewed by the Audit, Risk and Compliance Committee to ensure they do not impact the integrity and objectivity
of the auditor; and

the non-audit services provided do not undermine the general principles relating to auditor independence as
set out in the Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by The Accounting
Professional & Ethical Standards Board.

A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act follows
the Directors’ Report.

Details of the amounts paid to the ex-auditor of the consolidated entity, PKF for audit and non-audit services
provided during the year are set out below:

10 | Freedom Nutritional Products Limited

Directors’ Report
(continued)

Aud
Audit Services

Ex-auditors of the Parent PKF

•
•
•

audit and review of fi nancial reports

adoption of AIFRS

technical assistance re accounting principles and fi nancial reports

Consolidated
Consolidated

2007
$

70,000

Details of the amounts paid to the auditor of the consolidated entity, Deloitte Touche Tohmatsu for audit and
non-audit services provided during the year are set out below:
n

Audit Services

Auditors of the Parent Deloitte Touche Tohmatsu

•
•

•

audit and review of fi nancial reports

taxation advice

accounting advice

Consolidated
Consolidated

2007
$

100,000

281,531

25,625

407,156

2006
$

136,000

20,000

13,000

169,000

2006
$

P
Proceedings on Behalf of Parent
No person has applied for leave of Court to bring proceedings on behalf of the Parent or intervene in any
N
proceedings to which the Parent is a party for the purpose of taking responsibility on behalf of the Parent for all of
p
t
those proceedings.

S
Signed in accordance with a resolution of the Board of Directors

Perr
Perry Gunner

Geoff Babidge

D
Dated at Sydney this fi fth day of September 2007.

2007 Annual Report | 11

Lead Auditor’s Independence Declaration

The Board of Directors
Freedom Nutritional Products Limited
80 Box Road
TAREN POINT NSW 2229

5 September 2007

Dear Board Members

Deloitte Touche Tohmatsu
ABN 74 490 121 060

The Barrington
Level 10
10 Smith Street
Parramatta NSW 2150
PO Box 38
Parramatta NSW 2124 Australia

DX 28485
Tel: +61 (0) 2 9840 7000
Fax: +61 (0) 2 9840 7001
www.deloitte.com.au

Freedom Nutritional Products Limited

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of Freedom Nutritional Products Limited.

As lead audit partner for the audit of the financial statements of Freedom Nutritional Products
Limited for the financial year ended 30 June 2007, I declare that to the best of my knowledge
and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to

the audit; and

(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

P G Forrester
Partner
Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation.

12 | Freedom Nutritional Products Limited

Corporate Governance Statement

This section of the Annual Report is in conformance with
the “Principles of Good Corporate Governance” issued
by the Australian Stock Exchange (ASX). Each of the ten
pr
principles are listed in turn

performance. The Board adopts a three-year business
plan and a 12 month operating plan for the Parent.
Financial results and general performance are closely
monitored against the operating plan objectives.

P
Principle 1

Lay solid foundations for management and
L
oversight by the Board
o
T
The Board’s responsibilities are encompassed in a charter
which is published on www.fnpl.com.au (the Parent’s
w
website).

The Board is responsible for, and has the authority to
T
determine, all matters relating to the strategic direction,
d
policies, practices, establishing goals for management
p
and the operation of the Parent. Without intending to
a
limit this general role of the Board, the specifi c functions
li
and responsibilities of the Board include:
a

(1) oversight of the Parent, including its control and
(1

accountability systems;

(2) appointing and removing the CEO (or equivalent)
(2
for the ongoing management task of developing
and implementing suitable strategies consistent
with the Parent’s policies and strategic direction,
including approving remuneration of the CEO and
remuneration policy and succession plans for the
CEO;

(3) ratifying the appointment and, where appropriate,
(3
the removal of the CFO (or equivalent) and the
Company Secretary;

(4) reviewing and determining the strategic direction
(

and policies of the Parent, the allocation of
resources, planning for the future and succession
planning;

(5) reviewing and ratifying systems of risk management
and internal compliance and control, codes of
conduct and legal compliance;

(6) monitoring executives performance and
implementation of strategy and ensuring
appropriate resources are available;

(7) approving and monitoring the progress of major
(7
capital expenditure, capital management and
acquisitions and divestitures;

(8) continuously monitoring and overseeing the
(8

Parent’s fi nancial position; and

(9) approving and monitoring fi nancial and other

reporting.

Key responsibilities of the Board include the overseeing
of the strategic direction of the Parent, determining its
policies and objectives and monitoring management

To assist in carrying out its responsibilities, the Board has
established the following committees of its members.
They are:

(1) Audit, Risk and Compliance Committee; and

(2) Remuneration and Nomination Committee.

The Board on 29 March 2007 resolved to terminate the
Acquisition Committee as the function of the committee
was being undertaken by the full Board.

The Board on 31 August 2007 resolved to establish
an International Advisory Board to assist Directors and
Management in evolving the company’s strategic plan.
Members shall be both board and non-board members
and Mr Higgs has agreed to join as an advisor.

The responsibilities delegated by the Board to the
Parent’s management, as set out in the Parent’s
Statement of Delegated Authority, include managing the
day-to-day operations of the Parent.

The Chief Executive Offi cer has a service contract setting
out his duties, responsibilities, conditions of service and
termination entitlements.

Principle 2

Structure of the Board to add value

The Board determines the Boards size and composition,
subject to limits imposed by the Parent’s Constitution.
The Constitution provides for a minimum of three
Directors and a maximum of ten. At this time the Board
has determined that there are six directors fi ve of whom,
are non-executive, including the Chairman.

The names and particulars of the Directors of the Parent
during or since the end of the fi nancial year are:

Mr. P. R. Gunner
Chairman (Non-executive), Age 60

B.Ag.Sc – was former Chairman and CEO of Orlando
Wyndham Wine Group. Also Chairman of ABB Grain
Limited and director of McGuigan Simeon Wines.
Appointed Director April 2003 and Chairman July
2006. Chairman of the Remuneration & Nomination
Committee and member of the Audit, Risk and
Compliance Committee.

Interest in shares and options are 321,017 ordinary shares
and nil options.

2007 Annual Report | 13

Corporate Governance Statement
(continued)

Mr. G. H. Babidge
Managing Director (Executive), Age 54

B.Comm., ACA – extensive public company experience
within the food industry. Former CEO of the major
milling and baking group, Bunge Defi ance and
many years Managing Director of the dairy interests
of National Foods Limited. Appointed director in
January 2002.

Interest in shares and options are 69,217 ordinary shares
and 2,400,000 options.

Mr. A. M. Perich
Director (Non-executive), Age 66

Joint Managing Director of Arrovest Pty Limited,
Leppington Pastoral Company, one of Australia’s largest
dairy producers, and various other entities associated
with Perich Enterprises Pty Limited. He is also a property
developer, motor car racing promoter, farmer and
business entrepreneur. Mr Perich is Past President of the
Dairy Research Foundation, a member of the Narellan
Rotary club, member of Western Sydney Development
Board, Vice President of the Narellan Chamber
of Commerce and is actively involved in charity
fundraising for cancer research. Appointed director
July 2006.

Interest in shares and options are 35,044,006 ordinary
shares and nil options.

Mr. R. Perich
Director (Non-executive), Age 64

Joint Managing Director of Arrovest Pty Limited,
Leppington Pastoral Company, one of Australia’s
largest dairy producers, and various other entities
associated with Perich Enterprises Pty Limited. He is
also a property developer, motor car racing promoter,
farmer and business entrepreneur. Former Director of
United Dairies Limited. Appointed director April 2005.
Member of the Audit, Risk & Compliance Committee
and member of the Remuneration & Nomination
committee.

Interest in shares and options are 35,044,006 ordinary
shares and nil options.

Mr. S. F. Higgs
Director (Non-executive), Age 60

B Ec. – was founder and former director of UBS Australia.
Also director of Primary Health Care Company Limited,
Peet & Co. and Chairman of Juvenile Diabetes Research
Foundation. Appointed director April 2003. Mr Higgs has
advised of his intention to retire as a director following
the October 2007 Board meeting.

Mr. M. Miles
Director (Non-executive), Age 58
B.Sc(Hons) F.I.B.D. – former Vice President of Carlton and
United Breweries and Foster’s Group, former director of
Carlton & United Breweries & its subsidiaries and former
Chairman South Pacifi c Distilleries, Fiji. Member of the
Strategic Planning Committee of the Institute of Brewing
and Distilling Asia Pacifi c. Appointed director November
2006. Chairman of Audit, Risk & Compliance Committee.
Interest in shares and options are 51,069 ordinary shares
and nil options.

Mr. B. W. Bootle
Alternate Director (Non-executive), Age 42
B.Ag.Ec, M.Ag.Ec, Nuff .Sch, MAICD – Chief Executive
Offi cer of Arrovest Pty Limited, Leppington Pastoral
Company one of Australia’s largest dairy producers and
various other entities associated with Perich Enterprises
Pty Limited. Appointed alternate director for Mr Ron
Perich and Mr Tony Perich July 2006.
Interest in shares and options are 40,855 ordinary shares
and 900,00 options.

Mr. M. van Ryn
Former director (Non-executive), Age 52
AASA – CPA, CEO of Tatura Milk Industries Limited. Also
director Probiotec Limited and Medical Developments
International Limited. Appointed director November
1993. Retired as a director October 2006.
Interest in shares and options are nil ordinary shares and
nil options.

Mr. G. J. Reaney
Former director (Non-executive), Age 64
B. Comm., CPA – was formerly Managing Director
National Foods Limited and has over 30 years experience
in large Australian and overseas Corporations. Also
director of AGL Energy Limited, St George Bank Limited
and Chairman of PMP Limited. Appointed director
February 2001. Retired as director October 2006.
Interest in shares and options are 14,005 ordinary shares
and nil options.

Mr. C. C. Grubb
Former director (Non-executive), Age 60

B. A., B. Comm. – extensive experience in the securities
and investment banking industry in Australia and Asia.
Also director of LIM Asia Arbitrage, Coupland Cardiff
Absolute Return Fund and Chirin Asia Pacifi c Fund.
Director Odyssey House, McGrath Foundation and former
director Jardine Fleming Ord Minnett Limited. Appointed
director February 1996. Retired as director July 2006.

Interest in shares and options are 384,615 ordinary
shares and nil options.

Interest in shares and options are 10,000 ordinary shares
and nil options.

14 | Freedom Nutritional Products Limited

Corporate Governance Statement
(continued)

The Remuneration & Nomination Committee of the
Board comprises Messrs P. R. Gunner and R. Perich being
two non-executive directors. Its functions are to review
and report to the Board on:
a
•

Remuneration policy for the entire consolidated
R
entity (including executive offi cers and non-executive
directors);

•
•

identifying nominees for directorships and other key
executive appointments;

(iv) employees are encouraged to discuss concerns
and ethical behaviour with directors and senior
executives.

(e) share trading policy for Directors, CEO and Executives.
A copy is available on the Corporate governance
website (http://www.freedomnutritional.com.au/
corporategovernance.asp)

Principle 4

assessing director competencies;

remuneration policies and practices.

evaluating the Board’s performance; and

•
•
•
•
Principle 2.1 of the Best Practice Recommendations
P
recommends that a majority of the Board should be
independent directors. The Board currently has a majority
in
of independent directors with an independent chairman.
o

In order to facilitate independent judgement in
In
decision making each Director may seek independent
d
professional advice at the Parent’s expense. If advice is
sought by the Chairman, he must obtain Board approval
if the fees for such advice exceed $10,000 (exclusive of
if
GST), such approval not to be unreasonably withheld.
G
Where advice is sought by the other directors, prior
WW
written approval by the Chairman is required but
w
approval will not be unreasonably withheld. If the
Chairman refuses to give approval, the matter must be
C
referred to the Board. All directors are made aware of the
r
professional advice sought and obtained.
p

P
Principle 3

Promote ethical and responsible
decision-making
d
The directors acknowledge the need for and continued
T
maintenance of a high standard of corporate
m
g
governance practices and ethical conduct by all directors
a
and employees. In maintaining its ethical standards, the
Pare
Parent will:
(a) behave with integrity in all its dealings with

customers, shareholders, employees, suppliers,
business partners and the community;

(b
(b) ensure its actions comply with applicable laws and

regulations;

Safeguard integrity in (cid:192) nancial reporting

As part of the structure of fi nancial review and
authorisation both the Chief Executive Offi cer and
Chief Financial Offi cer are required to provide written
assurances that the fi nancial reports present a true and
fair view of the Parent’s fi nancial position in all material
respects.

This is designed to raise the level of management
accountability for fi nancial reporting. Further, executives
provide half yearly and yearly a letter of representation on
operational, fi nancial, regulatory and commercial matters.

The Board has established an Audit, Risk and Compliance
Committee comprising three non-executive directors,
with appropriate experience. They are Mr M. Miles
(Chairman), Mr R. Perich and Mr P. R .Gunner. Their
qualifi cations are listed under Principle 2.

The Chief Executive Offi cer, Chief Financial Offi cer and
external audit partner attend Committee meetings at the
discretion of the Committee.

The minutes of each Committee meeting are reviewed
at the subsequent Board meeting and signed as an
accurate record of proceedings. At the subsequent Board
meeting the Chairman of the Committee reports on the
Committees conclusions and recommendations. The
Committee meets at least twice per year.

The external auditors have a direct line of communication
at any time to either the Chairman of the Audit, Risk and
Compliance Committee or the Chairman.

The role and responsibilities of the Audit, Risk and
Compliance Committee includes:

(c)

not engage in any activity that could be construed
to involve an improper inducement;

(d) achieve a working environment where:

(a) reviews and reports to the Board on the half yearly
and annual reports and fi nancial statements of the
Parent and associated entities;

(i) equal opportunity is rigorously practised;

(ii)

harassment and other off ensive forms of
behaviour are not tolerated;

(iii) confi dentiality of commercially sensitive

information is protected; and

(b) is responsible for nominating the external auditor

and reviewing the adequacy, scope and quality of the
annual statutory audit and half yearly statutory review;

(c)

reviews the eff ectiveness of the Parent’s internal
control systems;

2007 Annual Report | 15

Corporate Governance Statement
(continued)

(d) monitors and reviews the reliability of fi nancial

Principle 6

reporting;

(e) monitors and reviews the compliance of the Parent

with applicable laws and regulations;

(f )

monitors the Australian Accounting Standards and
Urgent Issues Group consensus views;

(g) monitors fi nancial risks and exposure of Parent assets;

(h) monitors business continuity ;

(i)

reviews the Parent’s Occupational Health and Safety
obligations and the Parent’s compliance; and

(j) the Parent’s insurance policies and coverage.

The external auditors have advised the following, after
consultation with the Parent that the audit engagement
partner shall be rotated every fi ve years.

Principle 5

Make timely and balanced disclosure

The purpose of the continuous disclosure policy is to
ensure that there are mechanisms in place to provide
all investors with equal and timely access to material
information concerning the Parent. Such information
must be presented in a clear and balanced way so as not
to omit any material information.

These policies are designed to ensure that the Parent
meets its continuous disclosure obligations under the
ASX Listing Rules.

Type of information that needs to be disclosed

Listing Rule 3.1 states that any information that
a reasonable person would consider to have a
material eff ect on the value of the Parent securities
must be disclosed. Examples of such information
include a change in revenue, asset values or
signifi cant transactions. Directors receive copies of all
announcements immediately after notifi cation to the
ASX. All announcements are posted to the Parent’s
website. A report is submitted to each Board meeting
of disclosures to the ASX since last meeting with the
Disclosure File available for review.

Respect the rights of shareholders
The Parent aims to keep shareholders informed of the
Parent’s performance in an ongoing manner. Apart from
information provided pursuant to the Parent’s legal and
ASX Listing Rules obligations regarding continuous
disclosure of information, the Parent also communicates
with shareholders through the:

(1) Annual Report which is available to all shareholders
. The Annual Report includes relevant information
about the Parent’s operations and performance;

(2) invitation to the annual general meeting and all

accompanying papers;

(3) the Parent’s web site;

(4) Reports to the ASX and the press;

(5) Half yearly profi t announcements; and

(6) information and presentations to analysts (which are

released to the ASX).

The Annual General Meeting provides an important
opportunity for shareholders to express their views and
respond to initiatives being proposed by the Board.

The Parent also requests that the external auditor
attend the Annual General Meeting and be available to
answer shareholder questions about the audit and the
preparation and content of the audit reports.

Principle 7

Recognise and manage risk
1.1 The Audit, Risk and Compliance Committee:
(a) reviews the eff ectiveness of the Parent’s internal

control systems;

(b) monitors and reviews the compliance of the Parent

with applicable laws and regulations;

(c)

monitors fi nancial risks and exposure of Parent assets;

(d) monitors business continuity;

(e) reviews the Parent’s Occupational Health and Safety

obligations and the Parent’s compliance; and

(f ) the Parent’s insurance policies and coverage.

Disclosure Offi cer

The Board has appointed the Company Secretary
to act as the Disclosure Offi cer, responsible for
communications with the ASX and deciding what
information must be disclosed. The Disclosure Offi cer
holds the primary responsibility for ensuring that the
Parent complies with its disclosure obligations. In
addition, Directors, employees or consultants are all
responsible for reporting price sensitive information that

is not generally available to the Disclosure Offi cer.

1.2 Risk oversight and management policies

The Committee is responsible for providing the
Board with advice and recommendations regarding
the ongoing development of risk oversight and
management policies that set out the roles and
respective accountabilities of the Board, the Committee
and management.

The policies cover the areas of oversight, risk profi le, risk
management, compliance and control and assessment
of eff ectiveness.

16 | Freedom Nutritional Products Limited

Corporate Governance Statement
(continued)

1.3 Risk management and risk profi le

(2) the remuneration packages and other terms

The Committee is responsible for:

(1) providing the Board with advice and

recommendations regarding the establishment and
implementation of:

(a) a risk management system; and

(b)

a risk profi le for the Parent that describes
the material risks (including fi nancial and non-
fi nancial risks) which the Parent faces;

(2) reviewing the eff ectiveness of the Parent’s
(

implementation of the risk management system at
least once a year; and

(3) regularly reviewing and updating the Parent’s risk
(3

profi le.

The Committee is responsible for ensuring that
T
the appropriate executives have established and
implemented a system for identifying, assessing,
im
monitoring and managing risk throughout the
m
organisation. The system is to include the Parent’s
internal compliance and control systems.
in

In order to help give the Audit, Risk and Compliance
In
Committee the ability to exercise independent
C
judgement it is structured so that it consists of:
ju

(1) only non-executive directors;

(2) at least 1 independent director; and
(2

(3) a Chairman, who is not the Chairman of the Board.
(3

P
Principle 8

E
Encourage enhanced performance.
In
In respect of remuneration issues, the responsibilities of
the Remuneration and Nomination Committee include
t
determining, evaluating and reporting to the Board with
d
respect to:

(1) executive remuneration and incentive policies,
(1

including ensuring that the remuneration policies
and practices of the Parent are consistent with its
strategic goals and human resource objectives;

(2
(2) the Parent’s recruitment, retention and termination

policies and procedures for executives;

(
(3) incentive schemes;

(4) superannuation arrangements; and

(5
(5) the remuneration framework for directors.

The Remuneration and Nomination Committee operates
independently of the senior management of the Parent
in its recommendations to the Board in relation to:

(1) reviewing on an annual basis the performance and
salary of the CEO and other executives including
Executive and Employee Share Option Plan
participation;

and conditions of appointment and continuing
employment of senior executives; and

(3) reviewing non-executive Directors’ remuneration
within the maximum amount approved by
shareholders. The Board believes that directors are
properly rewarded through payment of a fee which
is reviewed annually in the light of market conditions
and has regard to the responsibilities placed on the
Directors by the legal and fi nancial framework within
which they act.

The Remuneration and Nomination Committee is
responsible for ensuring that the Board is of a size and
composition that allows for:

(1) decisions to be made expediently;

(2) a range of diff erent perspectives to be put forward

regarding issues before the Board;

(3) a range of diff erent skills to be bought to Board

deliberations; and

(4) Board decisions to be made in the best interests
of the Parent as a whole rather than of individual
shareholders or interest groups.

The Remuneration and Nomination Committee is
responsible for the:

(1) evaluation and review of the performance of the

Board (excluding the Chairman);

(2) evaluation and review of the performance of

individual directors;

(3) review of and making of recommendations on the

size and structure of the Board; and

(4) review of the eff ectiveness and programme of Board

meetings.

The evaluation and review of the performance of the
Chairman is undertaken by all Board members.

Subject to normal privacy requirements, Directors have
direct access to Parent records and information and to
senior offi cers. They receive regular detailed reports on
fi nancial and operational aspects of the Parent’s business
and may request elaboration or explanation of these
reports at any time.

Individual Directors are entitled to independent
professional advice at the Parent’s expense in the
furtherance of their duties, refer Principle 2.

Directors and executives are encouraged to broaden
their knowledge of the Parent’s business and to keep
abreast of developments in business more generally by
attendance at relevant courses, seminars, conferences,
etc. The Parent meets expenses involved in such activities.

2007 Annual Report | 17

Corporate Governance Statement
(continued)

Principle 9

Remunerate fairly and responsibly
The Board has established a Remuneration and
Nomination Committee to consider and report on,
among other matters, remuneration policies and
packages applicable to Board members and to senior
managers of the Parent. Two non-executive directors
Mr P. R. Gunner and Mr R. Perich are members of the
Committee which meets at least once per year. The
Committee’s main functions include:

(1) Conditions of service and remuneration of the Chief

Executive and his direct reports:

(2) Performance of the Chief Executive and executives;

(3) Ensure that the remuneration policy achieves both a
level and composition of remuneration that is both
competitive and reasonable. Remuneration policies
are designed to attract and maintain talented and
motivated directors and employees as well as raising
the level of performance of the Parent.

(4) Recommendation to the Board, which has the

discretion to reward eligible employees with the
payment of bonuses, share options and other
incentive payments. These incentive payments are
designed to link reward to performance and are
determined by both fi nancial and non-fi nancial
imperatives.

The Chief Executive attends meetings of the
Remuneration and Nomination Committee by invitation
when required to report on, and discuss, senior
management performance, remuneration matters, etc.

Non-executive Directors receive fees determined by
the Board, but within the aggregate limit approved by
Shareholders at a General Meeting.

The remuneration packages of non-executive directors
are generally fee based. Non-executive directors are able
to participate in the 2006 Employee Share Option Plan
(with the exception of Ron and Tony Perich). No options
have been issued to them at the date of this report.
Non-executive directors do not participate in bonus
payments or any retirement benefi ts other than statutory
superannuation.

The Nomination and Remuneration Committee
is responsible for ensuring that any equity-based
executive or non-executive director remuneration is
made in accordance with the thresholds approved by
shareholders.

Principle 10

Recognise the legitimate interests of
stakeholders
1.1 Code of ethics

(1) The Directors acknowledge the need for and
continued maintenance of a high standard of
corporate governance practices and ethical conduct
by all directors and employees. A Code of Ethics has
been adopted. Its details are set out below.

(2) The Parent aims to maintain a high standard of

ethical business dealings.

Objectives
In maintaining its ethical standards, the Parent will:

(a)

(b)

(c)

behave with integrity in all its dealings with
customers, shareholders, employees, suppliers,
business partners and the community;

ensure its actions comply with applicable laws
and regulations;

not engage in any activity that could be
construed to involve an improper inducement;

(d)

achieve a working environment where:

(i)

equal opportunity is rigorously practised;

(ii)

harassment and other off ensive forms of
behaviour are not tolerated;

(iii) confi dentiality of commercially sensitive

information is protected; and

(iv) employees are encouraged to discuss
concerns and ethical behaviour with
directors and senior executives.

(3) The Parent will take into account the principles in this
Code of Ethics in every venture in which it participates.
Directors and the executives team must comply with
the Code of Ethics and demonstrate commitment to
the Code and consistency in its execution.

(4) Responsibilities

The CEO will be responsible to the Board for
establishing, implementing and reviewing the
eff ectiveness of the Code of Ethics.

The CEO will be responsible for seeking to ensure
that all of the Parent’s employees and contractors
understand, and act in accordance with these
principles.

1.2 Confl icts of interest resolution

The Board has implemented a range of procedures
designed to ensure that the Parent complies with
the law and achieves high ethical standards in
identifying and resolving or managing confl icts of
interest. All directors must advise the Chairman of all
business dealings with the Parent.

1.3 Reporting obligations

As part of the active promotion of ethical behaviour
any behaviour that does not comply with this code
must be duly reported. Protection will be provided
for those who report violations in good faith.

18 | Freedom Nutritional Products Limited

Consolidated Income Statement
for the (cid:192) nancial year ended 30 June 2007

Notes
Notes

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

Con
Continuing operations

Revenue

Cost of sales

Gross profi t

Other income

Marketing expenses

Selling and distribution expenses

Administrative expenses

Profi t from continuing operations before tax, fi nance costs and
equity accounted investments

Finance costs

Share of loss of joint venture accounted for using the
equity method

Share of loss of jointly controlled entity accounted for using the
equity method

Profi t / (loss) before income tax

Income tax expense

Profi t / (loss) after income tax

Loss attributable to minority interest

Profi t / (loss) attributable to members of the parent

Earnings per share

From continuing operations:

Basic earnings per share (cents per share)

Diluted earnings per share (cents per share)

Dividends per share paid (cents per share)

N
Notes to the fi nancial statement are included on pages 23 to 62

14,947

(9,390)

5,557

124

(604)

(2,393)

(1,476)

1,208

(1,191)

(135)

(118)

(14)

(132)

16,791

(10,636)

6,155

(593)

(2,549)

(1,430)

1,593

(1,096)

(71)

426

(225)

201

49,952

(35,633)

14,319

176

(2,332)

(6,017)

(2,999)

3,147

(1,222)

(135)

(1)

1,789

(620)

1,169

1,174

2.6

1.0

47,654

(33,158)

14,496

244

(2,970)

(6,090)

(2,853)

2,827

(1,161)

(71)

1,595

(289)

1,306

128

1,434

3.2

3.0

0.0

2007 Annual Report | 19

Consolidated Balance Sheet
as at 30 June 2007

ASSETS
Current Assets

Cash and cash equivalents
Trade and other receivables
Other fi nancial assets
Inventories
Current tax asset
Prepayments

Non-current assets classifi ed as held for sale

Total Current Assets
Non-Current Assets

Other fi nancial assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Total Non-Current Assets

TOTAL ASSETS
LIABILITIES
Current Liabilities

Trade and other payables
Borrowings
Current tax liabilities
Provisions

Liabilities directly associated with non-current assets classifi ed as
held for sale
Total Current Liabilities
Non-Current Liabilities

Borrowings
Deferred tax liability
Provisions

Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Equity attributable to equity holders of the parent

Issued capital
Reserves
Retained earnings

Parent interests
Minority interests
TOTAL EQUITY

Notes to the fi nancial statement are included on pages 23 to 62.

20 | Freedom Nutritional Products Limited

Notes
Notes

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

22(a)
10
11
12
7

11
7
14
13

15
16
7
17

16
7
17

18
19
20

4
10,824
1,476
10,642
84
685
23,715
-
23,715

2,347
2,092
1,795
17,479
23,713

47,428

9,741
10,090
425
641
20,897
-

20,897

2,612
35
230
2,877
23,774
23,654

22,078
66
2,956
25,100
(1,446)
23,654

656
8,934
155
9,812
-
359
19,916
3,321
23,237

450
2,214
500
17,147
20,311

43,548

9,856
641
309
518
11,324
93

11,417

9,054
114
119
9,287
20,704
22,844

22,058
-
2,227
24,285
(1,441)
22,844

3
3,284
1,476
2,155
84
310
7,312
-
7,312

30,384
711
364
-
31,459

38,771

3,157
10,111
392
164
13,824
-

13,824

2,612
28
113
2,753
16,577
22,194

22,078
66
50
22,194
-
22,194

578
3,545
155
1,987
-
278
6,543
3,321
9,864

24,065
811
202
-
25,078

34,942

2,985
11
267
204
3,467
93

3,560

8,504
100
93
8,697
12,257
22,685

22,058
-
627
22,685
-
22,685

Consolidated Cash Flow Statement
for the (cid:192) nancial year ended 30 June 2007

Notes
Notes

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

Cas
Cash fl ows from operating activities

Receipts from customers

Payments to suppliers and employees

Interest and other costs of fi nance paid

Income tax paid

Receipt of government grant

Net cash fl ows used in operating activities

22(b)

Cash fl ows from investing activities

Proceeds from sale of property, plant and equipment

Purchase of property, plant and equipment

22(d)

Interest received

Investment in jointly controlled entity

Unlisted investment in Joint Venture

Payment for Business Acquisition

Loan from related party

Advance (to) / from Joint Venture

Loan to controlled entities

Payments for intangible assets

Net cash used in investing activities

Cash fl ows from fi nancing activities

Payment of fi nance lease liabilities

Repayment of borrowings

Dividends paid

Net cash fl ows used in fi nancing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of fi nancial year

Cash and cash equivalents at end of fi nancial year

22(a)

N
Notes to the fi nancial statement are included on pages 23 to 62.

46,808

(46,725)

(1,119)

(485)

(1,521)

3,520

(315)

(1,579)

(453)

(1,765)

268

(1,321)

46,267

(45,676)

(1,161)

(85)

137

(518)

(189)

(129)

(1,084)

(7)

(597)

(33)

14,084

(14,648)

(1,088)

(381)

(2,033)

3,500

(268)

1,162

(453)

268

(1,321)

(5,120)

(1,614)

(1,966)

(2,232)

(1,605)

(415)

(2,020)

(5,155)

(5,072)

(32)

(2,516)

2,599

(992)

(415)

(1,407)

(5,672)

578

(5,094)

15,787

(15,190)

(1,096)

(499)

(148)

1,038

(129)

(6)

(604)

(524)

(367)

(866)

1,444

578

2007 Annual Report | 21

Consolidated Statement of Changes in Equity
for the (cid:192) nancial year ended 30 June 2007

Attributable to equity holders of the parent
Attributable to equity holders of the parent

Minority
Minority
Interest
Interest

Total Equity
Total Equity

Fully paid
ordinary shares
$000

Equity - settled employee
benefi ts reserve
$000

Retained
Earnings
$000

Total
$000

22,851

1,434

24,285

1,174

(445)

$000

(1,313)

(128)

(1,441)

(5)

21,538

1,306

22,844

1,169

(445)

793

1,434

2,227

1,174

(445)

2,956

25,100

(1,446)

23,654

426

201

627

(132)

(445)

22,484

201

22,685

(132)

(445)

22,194

22,484

201

22,685

(132)

(445)

22,194

CONSOLIDATED

At 1 July 2005

Profi t for the year

At 30 June 2006

Profi t / (Loss) for the year

Dividend paid

Recognition of share-based
payments

Equity issues

At 30 June 2007

PARENT

At 1 July 2005

Profi t for the year

At 30 June 2006

Profi t for the year

Dividend paid

Recognition of share-based
payments

Equity issues

At 30 June 2007

22,058

22,078

22,058

22,078

Notes to the fi nancial statement are included on pages 23 to 62.

22 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007

1 Corporate Information

The fi nancial report of Freedom Nutritional Products Limited for the year ended 30 June 2007 was authorised for
issue in accordance with resolution of directors on 5 September 2007.

The Parent changed its name from So Natural Foods Australia Limited to Freedom Nutritional Products Limited in
accordance with a resolution of shareholders on 1 February 2007.

Freedom Nutritional Products Limited is a company incorporated in Australia whose shares are publicly traded on
the Australian stock exchange.

The nature of the operations and principal activities of the Group are described in note 4.

2 Adoption of New and Revised Accounting Standards

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the
Australian Accounting Standards Board (the AASB) that are relevant to its operations and eff ective for the current
annual reporting period.

•

•
•

investments classifi ed as at fair value through profi t or loss (AASB 2005-04 ‘Amendments to Australian
Accounting Standards’);

fi nancial guarantee contracts (AASB 2005-09 ‘amendments to Australian Accounting Standards’); and

rights to cash reimbursement for expenditure required to settle a provision (AASB 2005-5 ‘amendments to
Australian Accounting Standards’).

There has been no material impacts of these changes on the Group’s accounting policies as a result of the
adoption of these new and revised standards and interpretations.

The adoption of these new and revised Standards and Interpretations has resulted in a change to the Group’s
accounting policies in relation to business combinations involving entities under common control. Such
business combinations were formerly within the scope of AASB 3 ‘Business Combinations’, but are now scoped
out of that standard by AASB 2005-6 ‘Amendments to Australian Standards’.

At the date of authorisation of the fi nancial report, a number of Standards and Interpretations were in issue but
not yet eff ective.

Initial application of the following Standards is not anticipated to aff ect any of the amounts recognised in the
fi nancial report, but will change the disclosures presently made in relation to the consolidated entity’s and the
parent’s fi nancial report:

Standard
dard

AASB 7 ‘Financial Instruments: Disclosures’ and consequential
amendments to other accounting standards resulting from its issue

AASB 101 ‘Presentation of Financial Statements’ – revised standard

AASB 2007-7 ‘Amendments to Australian Accounting Standards’

AASB 8 ‘Operating Segments’

Eff ective for annual reporting
Eff ective for annual reporting
periods beginning on or after
periods beginning on or after

Expected to be initially applied
Expected to be initially applied
in the fi nancial year ending
in the fi nancial year ending

1 January 2007

30 June 2008

1 January 2007

1 July 2007

1 January 2009

30 June 2008

30 June 2010

Initial application of the following Standards and Interpretations is not expected to have any material impact to the
fi nancial report of the consolidated entity and the parent:

2007 Annual Report | 23

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

Standard/Interpretation
Standard/Interpretation

AASB Interpretation 10 ‘Interim Financial Reporting and Impairment’

AASB Interpretation 11 ‘AASB 2 – Group and Treasury Share Transactions’

AASB 2007-1 ‘Amendments to Australian Accounting Standards arising from AASB
Interpretation 11’

AASB Interpretation 12 ‘Service Concession Arrangements’

AASB 2007-2 ‘Amendments to Australian Accounting Standards arising from AASB
Interpretation 12’

AASB 2007-4 ‘Amendments to Australian Accounting Standards arising from ED
151 and Other Amendments’

AASB Interpretation 13 ‘Customer Loyalty Programmes’

AASB Interpretation 14 ‘AASB 119 – The Limit on a Defi ned Benefi t Asset, Minimum
Funding Requirements and their Interaction’

AASB 123 ‘Borrowing Costs’ – revised standard

AASB 2007-6 ‘Amendments to Australian Accounting Standards arising from AASB 123’

Eff ective for annual
Eff ective for annual
reporting periods
reporting periods
beginning on or after
beginning on or after

Expected to be initially
Expected to be initially
applied in the fi nancial year
applied in the fi nancial year
ending
ending

1 November 2006

1 March 2007

1 January 2008

30 June 2008

30 June 2009

1 July 2007

30 June 2008

1 July 2008

1 January 2008

1 January 2009

30 June 2009

30 June 2010

3 Signi(cid:192) cant Accounting Policies

(a) Statement of compliance

The fi nancial report is a general-purpose fi nancial
report which has been prepared in accordance with
the Corporations Act 2001, Australian Accounting
Standards and Interpretations, and complies with
other requirements of the law.

The fi nancial report includes the separate fi nancial
statements of the Parent and the consolidated
fi nancial statements of the Group.

Accounting Standards include Australian equivalents
to International Financial Reporting standards
(‘A-IFRS’). Compliance with A-IFRS ensures that the
fi nancial statements and notes of the Parent and the
Group comply with International Financial Reporting
standards (‘IFRS’).

(b) Basis of preparation

Limited and its subsidiaries as at 30 June each year
(‘the Group’).

The fi nancial statements of subsidiaries are prepared
for the same reporting period as Parent, using
consistent accounting policies.

Adjustments are made to bring into line any
dissimilar accounting policies that may exist.

All intercompany balances and transactions,
including unrealised profi ts arising from intra-
group transactions, have been eliminated in full.
Unrealised losses are eliminated unless costs cannot
be recovered.

Subsidiaries are consolidated from the date on
which control is transferred to the Group and cease
to be consolidated from the date on which control
is transferred out of the Group. A list of controlled
entities is contained in Note 31.

The fi nancial report has been prepared on a
historical cost basis. Cost is based on the fair values
of the consideration given in exchange for assets.

Minority interest represent the interests in Thorpedo
Foods Pty Limited and Thorpedo Seafoods Pty
Limited, not held by the Group companies.

The fi nancial report is presented in Australian dollars
and all values are rounded to the nearest thousand
dollars ($000) unless otherwise stated under the
option available to the Parent under ASIC Class
Order 98/0100, dated 10 July 1998. The Parent is an
entity to which the class order applies.

The consolidated fi nancial statements comprise the
fi nancial statements of Freedom Nutritional Products

(d) Business combinations

Acquisitions of subsidiaries and businesses are
accounted for using the purchase method. The cost
of the business combination is measured as the
aggregate of the fair values (at the date of exchange)
of assets given, liabilities incurred or assumed, and
equity instruments issued by the Group in exchange
for control of the acquiree, plus any costs directly
attributable to the business combination.

24 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

3 Signi(cid:192) cant Accounting Policies

(g) Property, plant and equipment

(continued)

The acquiree’s identifi able assets, liabilities and
contingent liabilities that meet the conditions for
recognition under AASB 3 ‘Business Combinations’ are
recognised at their fair values at the acquisition date,
except for non-current assets (or disposal groups) that
are classifi ed as held for sale in accordance with AASB
5 ‘Non-current Assets Held for Sale and Discontinued
Operations’, which are recognised and measured at
fair value less costs to sell.

Goodwill arising on acquisition is recognised as
an asset and initially measured at cost, being the
excess of the cost of the business combination
over the Group’s interest in the net fair value of the
identifi able assets and liabilities recognised. If, after
reassessment, the Group’ interest in the net fair
value of the acquiree’s identifi able assets, liabilities
and contingent liabilities exceeds the cost of the
business combination, the excess is recognised
immediately in profi t or loss.

The interest of minority shareholders in the acquiree
is initially measured at the minority’s proportion
of the net fair value of the assets, liabilities and
contingent liabilities recognised.

Land and buildings, plant and equipment, motor
vehicles and equipment under fi nance lease are
stated at cost less depreciation and impairment.
Cost includes expenditure that is directly
attributable to the acquisition of the item, In the
event that settlement of all or part of the purchase
consideration is deferred, cost is determined by
discounting the amounts payable in the future to
their present value as at the date of acquisition.

Depreciation is provided on property, plant and
equipment, including freehold buildings but
excluding land. Depreciation is calculated on a
straight line basis so as to write off the net cost
of each asset over its expected useful life to its
estimated residual value. The estimated useful
lives, residual values and depreciation method
are reviewed at the end of each annual reporting
period, with the eff ect of any changes recognised
on a prospective basis.

Class of Fixed Assets
Class of Fixed Assets

Depreciation Rate
Depreciation Rate

Buildings

Plant and equipment

Leased plant and equipment

Motor vehicles

4-6%

5-20%

5-10%

15-33%

(
(e) Interest in joint venture

The Group’s interest in joint ventures represent jointly
controlled entities which have been measured by
applying the equity method of accounting. Under
the equity method of accounting the carrying
amounts of interests in joint venture entities are
increased or decreased to recognise the Group’s
share of the post acquisition profi ts or losses and
other changes in net assets of the joint ventures.
The interests in joint ventures have been measured
by applying the cost method in the Parent’s own
fi nancial report.

(
(f) Foreign currency translation

Both the functional and presentation currency
of Freedom Nutritional Products Limited and its
Australian subsidiaries is Australian dollars (AUD).

Transactions in foreign currencies are initially
recorded in the functional currency at the exchange
rates ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign
currencies are reinstated at the rate of exchange
ruling at the balance sheet date.

(h) Non-current assets classi(cid:192) ed as held

for sale
Non-current assets (and disposal groups) classifi ed
as held for sales are measured, with certain
expectations, at the lower of carrying amount and
fair value less costs to sell.

Non-current assets and disposal groups are
classifi ed as held for sale if their carrying amount
will be recovered principally through a sale
transaction rather than through continuing use.
This condition is regarded as met only when the
asset (or disposal group) is available for immediate
sale in its present condition subject only to terms
that are usual and customary for such a sale and the
sale is highly probable.

The sale of the asset (or disposal group) must be
expected to be completed within one year from the
date of classifi cation, except in the circumstances
where sale is delayed by events or circumstances
outside the Group’s control and the Group remains
committed to a sale.

(i) Borrowing costs

Exchange diff erences are recognised in the income
statement in the period in which they arise.

Borrowing costs directly attributable to the
acquisition, construction or production of qualifying

2007 Annual Report | 25

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

3 Signi(cid:192) cant Accounting Policies

(l)

(continued)

assets, which are assets that necessarily take a
substantial period of time to get ready for their
intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially
ready for their intended use or sale. Investment
income earned on the temporary investment of
specifi c borrowings pending their expenditure on
qualifying assets is deducted from the borrowing
costs eligible for capitalisation.

All other borrowing costs are recognised in profi t or
loss in the period in which they are incurred.

(j) Goodwill

Goodwill acquired in a business combination
is initially measured at cost, being the excess of
the other cost of the business combination over
the acquirer’s interest in the net fair value of the
identifi able assets, liabilities and contingent liabilities
recognised. Goodwill is subsequently measured at
its cost less any impairment losses.

For the purpose of impairment testing, goodwill is
allocated to each of the Group’s cash-generating units
(CGUs) or groups of CGUs, expected to benefi t from
the synergies of the business combination. CGUs
(or groups of CGUs) to which goodwill has been
allocated are tested for impairment annually, or more
frequently if events or changes in circumstances
indicate that goodwill might be impaired.

If the recoverable amount of the CGU (or group of
CGUs) is less than the carrying amount of the CGU
(or groups of CGUs), the impairment loss is allocated
fi rst to reduce the carrying amount of any goodwill
allocated to the CGU (or groups of CGUs pro-rata
on the basis of the carrying amount of each asset
in the CGU (or groups of CGUs). An impairment loss
recognised for goodwill is recognised immediately
in profi t or loss and is not reversed in a subsequent
period.

On disposal of an operation within a CGU, the
attributable amount of goodwill is included in the
determination of the profi t or loss on disposal of the
operation.

(k) Brand names

Brand names recognised by the company have an
indefi nite useful life and are not amortised. Each
period, the useful life of this asset is reviewed to
determine whether events and circumstances
continue to support an indefi nite useful life
assessment for the asset. Such assets are tested for
impairment in accordance with the policy in note 3(l).

26 | Freedom Nutritional Products Limited

Impairment of assets
At each reporting date the Group reviews the
carrying amounts of its tangible and intangible
assets to determine whether there is any indication
that those assets have suff ered an impairment loss.
If any such indication exists, the recoverable amount
of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where
the asset does not generate cash fl ows that are
independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit
to which the asset belongs.

Where a reasonable and consistent basis of
allocation can be identifi ed, corporate assets are
also allocated to individual cash-generating units, or
otherwise they are allocated to the smallest group
of cash-generating units for which a reasonable and
consistent allocation basis can be identifi ed.

Intangible assets with indefi nite useful lives and
intangible assets not yet available for use are tested
for impairment annually and whenever there is an
indication that the asset may be impaired.

Recoverable amount is the higher of fair value less
costs to sell and value in use. In assessing value in
use, the estimated future cash fl ows are discounted
to their present value using a pre-tax discount rate
that refl ects current market assessments of the time
value of money and the risks specifi c to the asset
for which the estimates of future cash fl ows have
not been adjusted. If the recoverable amount of an
asset (or cash-generating unit) is estimated to be
less than its carrying amount, the carrying amount
of the asset (cash-generating unit) is reduced to
its recoverable amount. An impairment loss is
recognised in profi t or loss immediately.

(m) Inventories

Inventories are measured at the lower of cost and
net realisable value.

Costs incurred in bringing each product to its
present location and condition are accounted for
as follows:

Raw materials – purchase cost on a fi rst-in, fi rst-out
basis;

Manufactured fi nished goods – cost of direct
materials, direct labour and an appropriate portion
of manufacturing variable and fi xed overheads
based on normal operating capacity but excluding
borrowing costs.

Purchased fi nished goods – purchase cost on a
weighted average cost basis.

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

3 Signi(cid:192) cant Accounting Policies

(r) Convertible note

(continued)

Net realisable value is the estimated selling price in
the ordinary course of business, less estimated costs
of completion and the estimated costs necessary to
make the sale.

(
(n) Loans and receivables

Trade receivables, loans, and other receivables that
have fi xed or determinable payments that are not
quoted in an active market are classifi ed as ‘loans
and receivable’. Loans and receivables are measured
at amortised cost using the eff ective interest
method less impairment.

Interest is recognised by applying the eff ective
interest rate.

The component parts of convertible notes
(compound instruments) are classifi ed separately as
fi nancial liabilities and equity in accordance with the
substance of the contractual arrangement. At the
date of issue, the fair value of the liability component
is estimated using the prevailing market interest
rate for a similar non-convertible instrument. This
amount is recorded as a liability on an amortised
cost basis until extinguished on conversion or
upon the instruments reaching maturity. The
equity component initially brought to account is
determined by deducting the amount of the liability
component from the fair value of the compound
instrument as a whole. This is recognised and
included in equity, net of income tax eff ects and is
not subsequently remeasured.

(
(o) Cash and cash equivalents

(s) Provisions

Cash and short-term deposits in the balance sheet
comprise cash at bank and in hand and short-term
deposits with an original maturity of three months
or less.

For the purposes of the Cash Flow Statement,
cash and cash equivalents consist of cash and
cash equivalents as defi ned above, net of
outstanding bank overdrafts. Bank overdrafts are
shown within borrowings in current liabilities in
the balance sheet.

(
(p) Other (cid:192) nancial liabilities

Other fi nancial liabilities, including borrowings, are
initially measured at fair value, net of transaction
costs.

Other fi nancial liabilities are subsequently measured
at amortised cost using the eff ective interest
method, with interest expense recognised on an
eff ective yield basis.

The eff ective interest method is a method of
calculating the amortised cost of a fi nancial liability
and of allocating interest expense over the relevant
period. The eff ective interest rate is the rate that
exactly discounts estimated future cash payments
through the expected life of the fi nancial liability, or,
where appropriate, a shorter period.

(
(q) Trade and other payables

Liabilities for trade and other payables are carried
at cost which is the fair value of the consideration
to be paid in the future for goods and services
received, whether or not billed to the Group.

Payables to related parties are carried at the
principal amount.

Provisions are recognised when the Group has
a present obligation (legal or constructive) as a
result of a past event, it is probable that the Group
will be required to settle the obligation, and a
reliable estimate can be made of the amount of the
obligation.

The amount recognised as a provision is the best
estimate of the consideration required to settle the
present obligation at reporting date, taking into
account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the
cashfl ow estimated to settle the present obligation,
its carrying amount is the present value of those
cashfl ows. When some or all of the economic
benefi ts required to settle a provision are expected
to be recovered from a third party, the recoverable
is recognised as an asset if it is virtually certain that
reimbursement will be received and the amount of
the receivable can be measured reliably.

(t) Employee bene(cid:192) ts

A liability is recognised for benefi ts accruing to
employees in respect of wages and salaries, annual
leave and long service leave when it is probable that
settlement will be required and they are capable of
being measured reliably.

Liabilities recognised in respect of employee
benefi ts expected to be settled within 12 months,
are measured at their nominal values using the
remuneration rate expected to apply at the time of
settlement.

Liabilities recognised in respect of employee
benefi ts which are not expected to be settled within
12 months are measured as the present value of the

2007 Annual Report | 27

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

3 Signi(cid:192) cant Accounting Policies

(continued)

estimated future cash outfl ows to be made by the
Group in respect of services provided by employees
up to reporting date.

Defi ned contribution plans
Contributions to defi ned contribution
superannuation plans are expensed when incurred.

(u) Share-based payments

Equity-settled payments with employees and others
providing similar services are measured at the fair
value of the equity instrument at the grant date. Fair
value is measured by use of a binomial model. The
expected life used in the model has been adjusted,
based on management’s best estimate, for the
eff ects of non-transferability, exercise restrictions,
and behavioural considerations. Further details on
how the fair value of equity-settled share-based
transactions has been determined can be found in
note 29.

The fair value determined at the grant date of the
equity-settled share-based payments is expensed
on a straight-line basis over the vesting period,
based on the Group’s estimate of shares that will
eventually vest.

The above policy is applied to all equity-settled
share based payments that were granted after 7
November 2002, that vested after 1 January 2005.
No amount has been recognised in the fi nancial
statements in respect of the other equity-settled
share-based payments.

(v) Leases

Leases are classifi ed as fi nance leases when the
terms of the lease transfer substantially all the risks
and rewards incidental to ownership of the leased
asset to the lessee. All other leases are classifi ed as
operating leases.

Group as lessee
Assets held under fi nance leases are initially
recognised at their fair value or, if lower, at amounts
equal to the present value of the minimum lease
payments, each determined at the inception of
the lease. The corresponding liability to the lessor
is included in the balance sheet as a fi nance lease
obligation.

Lease payments are apportioned between fi nance
charges and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining
balance of the liability. Finance charges are charged

directly against income, unless they are directly
attributable to the qualifying assets, in which case
they are capitalised in accordance with the Group’s
general policy on borrowing costs. Refer to note 3(i).
Contingent rentals are recognised as expenses in the
periods in which they are incurred.

Finance leased assets are amortised on a straight
line basis over the estimated useful life of the asset.

Operating lease payments are recognised as an
expense on a straight-line basis over the lease
term, except where another systematic basis
is more representative of the time pattern in
which economic benefi ts from the leased asset
are consumed. Contingent rentals arising under
operating leases are recognised as an expense in the
period in which they are incurred.

Lease incentives
In the event that lease incentives are received to
enter into operating leases, such incentives are
recognised as a liability. The aggregate benefi ts of
incentives are recognised as a reduction of rental
expense on a straight-line basis, except where
another systematic basis is more representative of
the time pattern in which economic benefi ts from
the leased asset are consumed.

(w) Revenue

Revenue is measured at the fair value of the
consideration received or receivable. Revenue is
reduced for estimated customer returns, stock
rotation, price protection, rebates and other similar
allowances.

Sale of goods
Revenue from the sale of goods is recognised when
all the following conditions are satisfi ed:
•

the Group has transferred to the buyer the
signifi cant risks and rewards of ownership of the
goods;

•

•
•

•

the Group retains neither continuing managerial
involvement to the degree usually associated
with ownership nor eff ective control over the
goods sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefi ts
associated with the transaction will fl ow to the
entity; and

the costs incurred or to be incurred in respect of
the transaction can be measured reliably.

Licensing fees
Revenue is recognised on an accrual basis in
accordance with the substance of the relevant

28 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

3 Signi(cid:192) cant Accounting Policies

(continued)

agreement. Revenue is determined on a time basis
are recognised on a straight-line basis over the
period of the agreement. Revenue arrangements
that are based on sales are recognised by reference
to the underlying arrangement.

Interest revenue
Interest is accrued on a time basis, by reference
to the principal outstanding and at the eff ective
interest rate applicable, which is the rate that exactly
discounts estimated future cash receipts through
the expected life of the fi nancial asset to that asset’s
net carrying amount.

(x
(x) Government grants

Government grants are assistance by the
government in the form of transfers of resources to
the Group in return for past or future compliance
with certain conditions relating to the operating
activities of the entity. Government grants
include government assistance where there are
no conditions specially relating to the operating
activities of the group other than the requirement to
operate in certain regions or industry sectors.

Government grants are not recognised until there
is reasonable assurance that the Group will comply
with the conditions attaching to them and the
grants will be received.

Government grants whose primary condition is that
the Group should purchase, construct or otherwise
acquire long-term assets are recognised as deferred
income in the balance sheet and recognised as
income on a systematic and rational basis over the
useful lives of the related assets.

Other government grants 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 that are receivable as
compensation for expenses or losses already
incurred or for the purpose of giving immediate
fi nancial support to the Group with no future related
costs are recognised as income of the period in
which it becomes receivable.

(
(y) Income tax
Current tax
Current tax is calculated by reference to the amount
of income taxes payable or recoverable in respect
of the taxable profi t or loss for the period. It is
calculated using tax rates and tax laws that have
been enacted or substantively enacted by reporting

date. Current tax for current and prior periods is
recognised as a liability (or asset) to the extent that it
is unpaid (or refundable).

Deferred tax
Deferred tax is accounted for using the balance
sheet liability method. Temporary diff erences are
diff erences between the tax base of an asset or
liability and its carrying amount in the balance sheet.
The tax base of an asset or liability is the amount
attributed to that asset or liability for tax purposes.

In principle, deferred tax liabilities are recognised for
all taxable temporary diff erences. Deferred tax assets
are recognised to the extent that it is probable
that suffi cient taxable amounts will be available
against which deductible temporary diff erences or
unused tax losses and tax off sets can be utilised.
However, deferred tax assets and liabilities are not
recognised if the temporary diff erences giving rise
to them arise from the initial recognition of assets
and liabilities (other than as a result of a business
combination) which aff ects neither taxable income
nor accounting profi t. Furthermore, a deferred
tax liability is not recognised in relation to taxable
temporary diff erences arising from the initial
recognition of goodwill.

Deferred tax liabilities are recognised for taxable
temporary diff erences associated with investments
in subsidiaries, branches and associates and interests
in joint ventures except where the Group is able to
control the reversal of the temporary diff erences
and its probable that the temporary diff erences will
not reverse in the foreseeable future. Deferred tax
assets arising from deductible temporary diff erences
associated with these investments and interests are
only recognised to the extent that it is probable that
there will be suffi cient taxable profi ts against which to
utilise the benefi ts of the temporary diff erences and
they are expected to reverse in the foreseeable future.

Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply to the period(s)
when the asset and liability giving rise to them are
realised or settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted
by reporting date. The measurement of deferred tax
liabilities and assets refl ects the tax consequences
that would follow from the manner in which the
Group expects, at the reporting date, to recover or
settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are off set when
they relate to income taxes levied by the same
taxation authority and the company/Group intends
to settle its current tax assets and liabilities on a
net basis.

2007 Annual Report | 29

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

3 Signi(cid:192) cant Accounting Policies

(continued)

Current and deferred tax for the period
Current and deferred tax is recognised as an
expense or income in the income statement, except
when it relates to items credited or debited directly
to equity, in which case the deferred tax is also
recognised directly in equity, or where it arises from
the initial accounting for a business combination,
in which case it is taken into account in the
determination of goodwill or excess.

Tax consolidation
The Parent and all its wholly-owned Australian
resident entities are part of a tax-consolidated
group under Australian taxation law. The Parent is
the head entity in the tax-consolidated group. Tax
expense/income, deferred tax liabilities and deferred
tax assets arising from temporary diff erences of
the members of the tax-consolidated group are
recognised in the separate fi nancial statements of
the members of the tax-consolidated group using
the ‘separate tax payer within group’ approach by
reference to the carrying amounts in the separate
fi nancial statements of each entity and the tax
values applying under tax consolidation. Current tax
liabilities and assets and deferred tax assets arising
from unused tax losses and relevant tax credits of
the members of the tax-consolidated group are
recognised by the company (as head entity in the
tax-consolidated group).

Due to the existence of a tax funding arrangement
between the entities in the tax-consolidated group,
amounts are recognised as payable to or receivable
by the company and each member of the group
in relation to the tax contribution amounts paid
or payable between the parent entity and the
other members of the tax-consolidated group
in accordance with the arrangement. Further
information about the tax funding arrangement
is detailed in note 7 to the fi nancial statements.
Where the tax contribution amount recognised by
each member of the tax-consolidated group for a
particular period is diff erent to the aggregate of the
current tax liability or asset and any deferred tax
asset arising from unused tax losses and tax credits
in respect of that period, the diff erence is recognised
as a contribution from (or distribution to) equity
participants.

(z) Goods and services tax

Revenues, expenses and assets are recognised net of
the amount of goods and services tax (‘GST’) except:
•

where the GST incurred on the purchase of goods
and services is not recoverable from the taxation

authority, in which case the GST is recognised as
part of acquisition of the asset or as part of the
expense item as applicable; and

•

receivables and payables are stated with the
amount of GST included.

The net amount of GST recoverable from, or payable
to, the taxation authority is included as part of
receivables or payables in the balance sheet.

Cash fl ows are included in the Cash Flow Statement
on a gross basis and the GST component of cash
fl ows arising from investing and fi nancing activities,
which is recoverable from, or payable to, the taxation
authority are classifi ed as operating cash fl ows.

(aa) Financial instruments

Recognition
Financial instruments are initially measured at fair
value, net of transaction costs, except for those
fi nancial assets carried at fair value through profi t
and loss, which are initially measured at fair value
when the related contractual rights or obligations
exist. Subsequent to initial recognition these
instruments are measured as set out below.

Financial assets at fair value through profi t
and loss
A fi nancial asset is classifi ed in this category if
acquired principally for the purpose of selling in the
short term of if so designated by management and
within the requirements of AASB 139: Recognition
and Measurement of Financial

Instruments. Derivatives are also categorised as held
for trading unless they are designated as hedges.
Realised and unrealised gains and losses arising
from changes in their fair value of these assets are
included in the income statement in the period in
which they arise.

Loans and receivables
Loans and receivables are non-derivative fi nancial
assets with fi xed or determinable payments that
are not quoted in an active market and are stated
at amortised cost using the eff ective interest rate
method.

Held-to maturity investments
These investments have fi xed maturities, and it is
the group’s intention to hold these investments to
maturity. Any held-to-maturity investments held
by the group are stated at amortised cost using the
eff ective interest rate method less impairment.

Available-for-sale fi nancial assets

Available-for-sale fi nancial assets include any
fi nancial assets not included in the above categories.

30 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

3 Signi(cid:192) cant Accounting Policies

(continued)

Available-for-sale fi nancial assets are refl ected at
fair value. Unrealised gains and loses arising from
changes in fair value are taken directly to equity.

Financial liabilities
Non-derivative fi nancial liabilities are recognised
at amortised cost, comprising original debt less
principal payments and amortisation.

(
(ab) Derivative (cid:192) nancial instruments

The Group enters into a variety of derivative fi nancial
instruments to manage its exposure to foreign
exchange rate risk, including foreign exchange
forward contracts. Further details of derivative
fi nancial instruments are disclosed in note 26 to the
fi nancial statements.

at each reporting date. The resulting gain or loss
is recognised in profi t or loss immediately unless
the derivative is designated and eff ective as a
hedging instrument, in which event, the timing
of the recognition in profi t or loss depends on the
nature of the hedge relationship. The Group has not
adopted hedge accounting during the fi nancial year
or previous corresponding period.

Embedded derivatives
Derivatives embedded in other fi nancial instruments
or other host contracts are treated as separate
derivatives when their risks and characteristics are
not closely related to those of host contracts are
not measured at their fair value with changes in fair
value recognised in profi t or loss.

(ac) Comparative (cid:192) gures

Derivatives are initially recognised at fair value at
the date a derivative contract is entered into and
are subsequently remeasured to their fair value

Where required by Accounting Standards
comparative fi gures have been adjusted to conform
to changes in presentation for the current year.

4
4

Business and Geographical Segments

The Group is organised into three business segments which is the basis on which the Group reports. The
principal products and services of these segments are as follows:

Seafood

Freedom Foods

A range of canned seafood covering sardines, salmon, tuna and specialty seafood.
These products are produced overseas and sold in Australia and overseas.

A range of products for consumers requiring a solution to specifi c dietary or medical
conditions including gluten free, wheat free, low sugar or salt or highly fortifi ed. The
product range covers breakfast cereals, cookies, snack bars, soy and rice beverage, frozen
prepared foods and other complimentary products. These products are produced and sold
in Australia and overseas.

Thorpedo Foods

Thorpedo range of low GI beverages. These products are produced and sold in Australia
and overseas.

External sales
External sales

Other
Other

2007
$000

2006
$000

2007
$000

2006
$000

Total
Total

2007
$000

2006
$000

Segment revenue

Continuing operations

Seafood

Freedom Foods

Thorpedo Foods

Total of all segments

Eliminations

Unallocated

Consolidated revenue

20,902

26,823

1,117

18,785

26,095

2,327

1,238

626

20,902

26,823

2,355

50,080

18,785

26,095

2,953

47,833

50,128

47,898

2007 Annual Report | 31

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

Business and Geographical Segments (continued)

Segment result

Continuing operations

Seafood

Freedom Foods

Thorpedo Foods

Unallocated

Profi t before income tax

Income tax expense

Profi t for the year from continuing operations

Segment assets and liabilities

Continuing operations

Seafood

Freedom Foods

Thorpedo Foods

Total of all segments

Eliminations

Unallocated

Consolidated

Total
Total

2007
$000

2006
$000

1,966

838

2,864

(1,075)

1,789

(620)

1,169

1,731

1,338

(540)

2,529

(934)

1,595

(289)

1,306

Assets
Assets

2007
$000

Liabilities
Liabilities

2006
$000

2007
$000

2006
$000

22,790

44,034

4,909

71,733

21,715

42,552

5,197

69,464

16,321

21,998

7,447

45,766

16,792

18,631

7,696

43,119

(26,535)

(27,575)

(23,945)

(23,973)

2,230

47,428

1,659

43,548

1,953

23,774

1,558

20,704

Other segment information

Carrying value of investments accounted for using
the equity method

Share of net profi t/(loss) of jointly controlled entities
accounted for under the equity method

Acquisition of segment assets

Depreciation and amortisation of segment assets

Seafood
Seafood

Freedom Foods
Freedom Foods

Thorpedo Foods
Thorpedo Foods

2007
$000

2006
$000

2007
$000

1,097

(136)

1,539

162

2006
$000

450

(71)

195

181

2007
$000

2006
$000

The Group operates principally in the Australian geographical area.

32 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

48,683

46,963

13,785

1,162

15,753

973

626

47,654

14,947

16,791

237

244

124

1,238

49,952

129

176

5 Revenue

Continuing operations

•

Sale of goods

Interest received from other persons

Interest received from subsidiaries of parent entity

Licence fee

Other income

•

Government grant - refer below

Gain on disposal of property

Exchange gain

Management fee received

The above government grant is the Export Market Development Grant received for 2006 and receivable for 2007.

6
6 Pro(cid:192) t for the year

Continuing operations

(i) Losses

Profi t for the year was arrived at after charging the following losses

Loss on disposal of plant and equipment

(7)

(4)

(ii) Expenses:

Finance costs

Interest on bank overdrafts and loans

Interest on obligations under fi nance leases

Interest on convertible notes

Total borrowing costs

Depreciation on property, motor vehicles plant and equipment

Rental expense on operating leases

Research and development costs expensed

Impairment of trade receivables

486

261

475

1,148

455

261

475

1,091

1,222

1,161

1,191

1,096

162

129

116

165

100

272

113

117

204

2007 Annual Report | 33

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

6 Pro(cid:192) t for the year (continued)

Employee benefi t expense

Post employment benefi ts - defi ned contribution plans

Share-based payments - equity-settled share-based payments

Other employee benefi ts

Total employee benefi t costs

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

417

5,470

5,953

379

4,846

5,225

154

1,909

2,129

157

1,986

2,143

The following expense items are relevant in explaining the fi nancial performance:

Bid response costs

104

175

104

175

Operating EBITDA (being EBITDA adjusted for bid response costs and equity settled share-based payments) was
$3,343,000 (2006: $3,096,000)

Income taxes

Income tax recognised in profi t or loss

Tax expense comprises:

Current income tax expense

Adjustments recognised in the current year in relation to the current tax of
prior years.

Deferred tax expense/(income) relating to the origination and reversal of
temporary diff erences

Income tax expense /(income)

Attributable to continuing operations

457

120

620

404

(26)

(89)

289

(14)

225

The prima facie income tax expense on pre-tax accounting profi t from operations reconciles to the income tax
expense in the fi nancial statements as follows:

Profi t from continuing operations

Income tax expense calculated at 30%

Eff ect of expenses that are not deductible in determining taxable profi t

Eff ect of tax concessions (research and development)

Previously unrecognised and unused tax losses and tax off sets now
utilised.

Adjustments recognised in the current year in relation to the current tax of
prior years

1,789

537

156

(116)

620

1,595

478

(18)

(171)

289

(118)

(35)

176

(113)

(14)

426

128

(8)

132

(27)

225

The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate
entities on taxable profi ts under Australian tax law. There has been no change in the corporate tax rate when
compared with the previous reporting period.

34 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

Income taxes (continued)

Current tax assets and liabilities

Current tax assets

Entities in the tax-consolidated group

Current tax liabilities

Income tax payable attributable to

Entities in the tax-consolidated group

Other

392

425

267

309

392

Opening
Opening
Balance
Balance

Charged to
Charged to
income
income

Acquisitions
Acquisitions

$000

209

207

(114)

368

1,635

1,732

2,100

(207)

118

(35)

(11)

(167)

(109)

(120)

Deferred tax balances

Deferred tax assets/(liabilities) arise from the following:

Consolidated 2007

Temporary diff erences:

Provisions

Doubtful debts

Formation costs

Property plant & equipment

Finance leases

Other

Unused tax losses and credits:

Tax losses

Withholding tax paid

Presented in the balance sheet as follows:

Deferred tax (liability) - non-current

Deferred tax asset - non-current

267

Closing
Closing
balance
balance

$000

371

434

1,468

155

1,623

2,057

(35)

2,092

2,057

2007 Annual Report | 35

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

Income taxes (continued)

Consolidated 2006

Temporary diff erences:

Provisions

Doubtful debts

Formation costs

Property plant & equipment

Finance leases

Prepayments derecognised

Other

Unused tax losses and credits:

Tax losses

Withholding tax paid

Presented in the balance sheet as follows:

Deferred tax (liability) - non-current

Deferred tax asset - non-current

Parent 2007

Temporary diff erences:

Provisions

Doubtful debts

Formation Costs

Property plant & equipment

Finance leases

Other

Unused tax losses and credits:

Tax losses

Presented in the balance sheet as follows:

Deferred tax (liability) - non-current

Deferred tax asset - non-current

36 | Freedom Nutritional Products Limited

Opening Balance
Opening Balance

$000

188

206

(169)

365

633

1,378

2,011

(100)

650

711

Charged to
Charged to
income
income

$000

(365)

(13)

(265)

257

354

(4)

(42)

104

(18)

145

(173)

(28)

Closing balance
Closing balance

$000

209

207

(114)

368

1,635

1,732

2,100

(114)

2,214

2,100

104

206

477

683

(28)

711

683

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

Opening Balance
Opening Balance

Charged to
Charged to
income
income

Closing balance
Closing balance

$000

142

(76)

170

766

936

(49)

(1)

(24)

(93)

(2)

(109)

(116)

(225)

(100)

650

711

(100)

811

711

Income taxes (continued)

Parent 2006

Temporary diff erences:

Provisions

Doubtful debts

Formation costs

Property plant & equipment

Finance leases

Prepayments derecognised

Other

Unused tax losses and credits:

Tax losses

Presented in the balance sheet as follows:

Deferred tax (liability) - non-current

Deferred tax asset - non-current

Tax consolidation
Relevance of tax consolidation to the Group
The company and its wholly-owned Australian resident entities have formed a tax-consolidated group with
eff ect from 1 July 2003 and are therefore taxed as a single entity from that date. The head entity within the
tax-consolidated group is Freedom Nutritional Products Limited. The members of the tax-consolidated group
are identifi ed at note 31.

Nature of tax funding arrangements and tax sharing agreements
Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing
agreement with the head entity. Under the terms of the tax funding arrangement, Freedom Nutritional Products
Limited and each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to or
from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are refl ected
in amounts receivable from or payable to other entities in the tax-consolidated group. The tax sharing agreement
entered into between members of the tax-consolidated group provides for the determination of the allocation
of income tax liabilities between the entities should the head entity default on its tax payment obligations or if
an entity should leave the tax-consolidated group. The eff ect of the tax sharing agreement is that each member’s
liability for tax payable by the tax-consolidated group is limited to the amount payable to the head entity under the
tax funding arrangement.

2007 Annual Report | 37

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

8 Auditors remuneration

Current year

adoption of AIFRS

auditing and reviewing the fi nancial report

Remunerations of the auditors of the Group for:
•
•
•
•
•

accounting advice

taxation advice

technical assistance re accounting principles and fi nancial report disclosure

The auditor of the consolidated entity is Deloitte Touche Tohmatsu (2006: PKF)

Past years

Remuneration of past auditors of the Group to settle excess fee claim
•

auditing and reviewing the fi nancial report

9 Earnings per share

(a) Earnings used in the calculation of basic EPS ($000)

(b) Earnings used in the calculation of dilutive EPS ($000)

Consolidated
Consolidated
$$

Parent
Parent
$$

2007

2006

2007

2006

100,000

281,531

25,625

407,156

136,000

19,750

13,250

43,584

43,645

136,000

13,750

5,250

169,000

87,229

155,000

70,000

2007
2007

$000

2006
2006

$000

1,174

1,434

Number ‘000

44,490

44,485

(number)

Add weighted average number of options outstanding

Weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted EPS

During 2007 the Parent issued 4,900,000 options over ordinary shares.

44,490

2,892

47,377

10 Trade and other receivables

Current

Trade receivables (i)

Allowance for doubtful trade receivables

Other receivables

38 | Freedom Nutritional Products Limited

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

9,921

(67)

9,854

970

10,824

8,293

(46)

8,247

687

8,934

2,874

(30)

2,844

440

3,284

3,369

(5)

3,364

181

3,545

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

10 Trade and other receivables (continued)

(i) The average credit period on sales of goods is 60 days. No interest is charged on trade receivables. An
allowance has been made for estimated irrecoverable trade receivable amounts arising from past sale of goods,
determined by reference to past default experience. During the current fi nancial year, the allowance for doubtful
debts increased by$21,000 (2006: increased by $26,000) in the Group and increased by $25,000 (2006: increased
by $25,000 ) in the Parent. The movement was recognised in the income statement for the year.

11 Other (cid:192) nancial assets

Current

Loans to joint venture

Non-current

Loans to subsidiaries

Investment in jointly controlled entity (i)

Investment in joint venture entity - refer note 33

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

1,476

1,579

768

2,347

155

450

1,476

155

29,616

23,615

768

450

30,384

24,065

(i) As part of the investment in a jointly controlled entity, the Group holds non-listed unsecured redeemable
notes returning 7%p.a. The notes are redeemable at par value on 1 June 2012.

1
12 Inventories

Current

Raw materials

Finished goods

1,505

9,137

10,642

1,439

8,373

9,812

953

1,202

2,155

1,206

781

1,987

In
Inventories of $nil (2006: $nil) are expected to be recovered after more than twelve months.

13 Intangibles

Year ended 30 June 2006

Cost (gross carrying amount)

Costs incurred during the year

Net carrying amount

Year ended 30 June 2007

At 1 July, 2006

Costs incurred during the year

Net carrying value

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

Goodwill

Brand name

Total

6,628

302

6,930

10,486

10,519

10,549

17,114

17,147

332

17,479

2007 Annual Report | 39

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

13 Intangibles (continued)

Goodwill and brand name are initially recorded at cost. The useful life of the brand name asset was estimated
as indefi nite.

No impairment loss was charged for operations in the 2007 fi nancial year (2006: NIL).

Allocation of goodwill to cash-generating units
Goodwill has been allocated for impairment testing purposes to three cash-generating units as follows:

Seafood

Freedom Foods

Thorpedo Foods

Consolidated
Consolidated
$000
$000

2007

1,982

3,170

1,778

2006

1,982

2,868

1,778

The recoverable amounts of the cash generating units are determined based on a value in use calculation which
uses cash fl ow projections based on fi nancial budgets approved by management covering a fi ve-year period, and a
discount rate of 12% pa (2006: 8% pa). Cash fl ow projections during the budget period for the cash-generating units
are also based on the same expected gross margins during the budget period.

Key assumptions
Key assumptions

Cash-generating units
Cash-generating units

Budgeted market share

Budgeted gross margin

Average market share in the period immediately before the budget period plus a growth of up to 1% of market share
per year. Management believes that the planned market share growth per year for the next fi ve years is reasonable.

Average gross margins achieved in the period immediately before the budget period is consistent with that used by
management.

Impairment of cash-generating units including goodwill
There was no impairment loss recognised or reversed during the period for an individual asset or cash generating unit.

14 Property, plant and equipment

NON-CURRENT ASSETS - classifi ed as held for sale

Freehold land and buildings for sale

•

at fair value less costs to sell

Total Land and Buildings

The Parent sold its land and buildings on 30 May 2007.

NON-CURRENT

Freehold land and buildings

•

at cost

Accumulated depreciation

Total Land and Buildings

40 | Freedom Nutritional Products Limited

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

3,321

117

(106)

117

(102)

3,321

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

2,667

(1,070)

1,597

1,612

(27)

190

(39)

151

1,795

1,290

(964)

326

347

(23)

157

(44)

113

500

783

(562)

221

166

(23)

143

364

662

(520)

142

(5)

202

14
14 Property, plant and equipment (continued)

Plant and Equipment

•

at cost

Accumulated depreciation

Capital work in progress

Total Owned Plant and Equipment

Plant and Equipment under fi nance lease

Capitalised leased assets

Accumulated depreciation

Total Leased Plant and Equipment

Motor Vehicles under fi nance leases

•

at cost

Accumulated depreciation

Total Motor Vehicles

TOTAL PROPERTY, PLANT AND EQUIPMENT

M
Movement in the carrying amounts of each class of property, plant and equipment between the beginning and the
end of the current fi nancial year:
e

Parent 2007

Balance at beginning of year

Additions

Depreciation expense

Disposals

Carrying amount at the end of year

Group 2007

Balance as at beginning of year

Additions

Acquisitions through business combinations

Depreciation expense

Disposals

Carrying amount at the end of year

Land and
Land and
Buildings
Buildings

$000

(4)

Plant and
Plant and
Equipment
Equipment

Motor
Motor
Vehicles
Vehicles

$000

142

167

(50)

(38)

221

372

214

1,224

(119)

(58)

1,633

$000

101

(18)

143

113

101

(39)

(24)

151

Total
Total

$000

202

268

(68)

(38)

364

500

315

1,224

(162)

(82)

1,795

2007 Annual Report | 41

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

Parent 2006

Land and
Land and
Buildings
Buildings

$000

Plant and
Plant and
Equipment
Equipment

Motor
Motor
Vehicles
Vehicles

Total
Total

$000

14 Property, plant and equipment (continued)

Balance at beginning of year

Additions

Depreciation expense

Carrying amount at the end of year

Group 2006

Balance at beginning of year

Additions

Disposals

Depreciation expense

Carrying amount at the end of year

$000

(5)

170

(112)

142

$000

410

130

(168)

372

(5)

$000

(25)

113

170

149

(117)

202

$000

495

195

(25)

(165)

500

Aggregate depreciation allocated, whether recognised as an expense or capitalised as part of the carrying amount of
other assets during the year:

Freehold land and buildings

Plant and equipment

Motor vehicles

15 Trade and other payables

Current

Trade payables (i)

Other payables and accruals

Due to related parties

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

119

162

7,168

2,302

271

9,741

2006

168

(8)

165

7,252

2,601

9,856

2007

2,153

733

271

3,157

2006

112

117

2,069

913

2,985

(i)

The average credit period on purchases of certain goods from North America is 2 months. Additional trade
payables are paid within 60 days of invoice date. No interest is charged on trade payables.

42 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

16 Borrowings

Current - at amortised cost

Bank overdrafts - secured (i)

Finance leases - secured (iii) (note 24)

Convertible Notes - unsecured (ii)

Non-current - at amortised cost

Loan payable - secured (i)

Convertible Notes - unsecured (ii)

Finance leases - secured (iii) (note 24)

5,076

4,981

10,090

2,500

112

2,612

573

641

4,128

4,877

9,054

5,097

4,981

10,111

2,500

112

2,612

(i) The bank overdraft and loans payable are secured as detailed in note 34.
(ii) The Parent has issued 8,333,333 unsecured convertible notes at $0.60 each, with a coupon rate of 9.5%

per annum maturing on 1 September 2007.

(iii) Secured by the asset leased.

17 Provisions

Current

Employee benefi ts

Non-current

Employee benefi ts

Aggregate employee benefi ts

Employee benefi t movement

Balance at beginning of year

Additional provision recognised

Transfer

Amounts used

1
18 Issued capital

Fully paid ordinary shares

641

230

871

637

598

(364)

871

518

119

637

576

384

(323)

637

164

113

277

297

108

(128)

277

3,578

4,877

8,504

204

297

475

104

(144)

(138)

297

44,527,343 (2006: 44,485,010) ordinary shares fully paid

22,078

22,058

22,078

22,058

Issued during the year

Balance at beginning of year

May 2007 - 42,333 ordinary shares for 46.8 cents per share

Balance at end of year

22,058

22,078

22,058

22,078

22,058

2007 Annual Report | 43

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

18 Issued capital (continued)

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to
share capital from 1 July 1998.

Therefore, the company does not have a limited amount of authorised capital and issued shares do not have a
par value.

The Dividend Reinvestment Plan provides shareholders with the opportunity to receive ordinary shares, in lieu
of cash dividends, at a discount (set by the directors) from the market price at time of issue.

Options
(i)

For information relating to the Freedom Nutritional Products Limited Employee Share Option Plan,
including details of options issued, exercised and lapsed during the fi nancial year and the options
outstanding at year-end, refer note 29.

(ii)

For information relating to share options issued to key management personnel during the fi nancial year,
refer note 28

At 30 June 2007, there were 6,100,000 (30 June 2006: 2,975,000) unissued ordinary shares for which options
were outstanding.

19 Reserves

Equity-settled employee benefi ts reserve

Balance at beginning of fi nancial year

Share based payment

Balance at end of fi nancial year

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

The equity-settled employee benefi ts reserve arises on the grant of share options to executives and senior
employees under the Employee Share Option Plan. Amounts are transferred out of the reserve and into issued
capital when the options are exercised. Further information about share-based payments to employees is made
in note 29 to the fi nancial statements.

20 Retained pro(cid:192) ts

Retained profi ts at the beginning of the fi nancial year

Net profi t

Dividends paid for current year

Retained profi ts at end of fi nancial year

2,227

1,174

(445)

2,956

793

1,434

2,227

627

(132)

(445)

426

201

627

44 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

2007
2007

2006
2006

Cents per share

Total
$000

Cents per share

Total
$000

21 Dividends

Recognised amounts

Fully paid ordinary shares

Interim dividend: fully franked at a 30% tax rate

1.0

445

Unrecognised amounts
On 31 August 2007, the directors declared a fully franked interim dividend of 1.0 cents per share to the holders of
fully paid ordinary shares in respect of the fi nancial year ending 30 June 2008, to be paid to shareholders on 18
December 2007. The dividend will be paid to shareholders on the Register of Members on 3 December 2007. The
total estimated dividend to be paid is $445,000.

Adjusted franking account balance

2
22 Cash flow information

(a) Reconciliation of cash and cash equivalents

Parent
Parent
$000
$000

2007

222

2006

For the purposes of the statement of cash fl ows, cash and cash equivalents includes cash on hand, funds
held in cash management account and cheque account net of bank overdrafts. Cash at the end of the
fi nancial year as shown in the statement of cash fl ows is reconciled to the related items in the balance
sheet as follows:-

Cash

Overdraft

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

(5,076)

(5,072)

2006

656

(573)

2007

(5,097)

(5,094)

Reconciliation of net cash provided by operating activities to operating profi t after income tax

(b) Operating profi t after income tax

Depreciation

Provision for employee entitlements

Write off of inventory

Gain on disposal of assets

Foreign currency revaluation

Share based payments

Interest received

Loss in jointly controlled entity

1,169

162

235

(2)

(120)

(23)

(31)

136

1,306

165

(132)

(19)

(27)

(124)

(1,162)

135

2006

578

201

117

(178)

2007 Annual Report | 45

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

22 Cash (cid:193) ow information (continued)

Changes in Assets and Liabilities

(Increase) in receivables

(Increase) / Decrease in inventory

(Increase) / Decrease in other assets

Decrease / (Increase) in deferred tax assets

Decrease / (Increase) in accounts payable

Decrease in provision for income tax

(Decrease) / Increase in provision for deferred income tax

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

(2,000)

(828)

(626)

122

264

(79)

(1,521)

(629)

(2,679)

(147)

(543)

1,255

197

452

(518)

(1,038)

(141)

333

100

(61)

(72)

(2,033)

(772)

258

(16)

191

(370)

(499)

Details of credit stand-by arrangements available and unused loan facilities are shown in note 23 to the
fi nancial statements.

During the current fi nancial year, the Group acquired $101,000 of motor vehicles under fi nance leases.
These acquisitions will be refl ected in the cash fl ow statement over the term of the fi nance lease via lease
repayments.

(d) Business acquired

During the fi nancial year 100% of the Cookie Man baking operations was acquired.

During the previous fi nancial year, consideration deferred at 30 June 2005, was paid in respect of the
acquisition of the remaining 20% of Freedom Foods Pty Limited.

Details of this transaction are:

Purchase consideration

Incidental costs

Deferred consideration for Freedom Foods acquisition

Cash consideration

Assets and liabilities held at acquisition date

Prepayments

Inventories

Deferred tax assets

Property, plant and equipment

Employee entitlements

Rent received in advance

Outside equity interest

Goodwill on acquisition

46 | Freedom Nutritional Products Limited

1,247

432

1,765

412

1,224

(196)

(64)

1,463

302

1,765

1,084

(6)

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

23 Standby arrangements and unused credit facilities

Credit Facility

Bank

Amount utilised at 30 June

Unused credit/facility

Loans facilities

Amount utilised at 30 June

Unused loan facilities

7,650

(5,076)

2,574

2,500

(2,500)

2,574

1,100

(573)

527

4,950

(4,128)

822

1,349

7,650

(5,076)

2,574

2,500

(2,500)

2,574

1,100

4,400

(3,578)

822

1,922

Credit and Loan Facilities
The bank overdraft and multi-option facilities are arranged with Westpac Banking Corporation with the general
terms and conditions and is subject to annual review.

The bank facilities of the Group are secured by a fi rst registered mortgage over all the Group’s property and a
fi rst equitable mortgage over the whole of the Group’s assets and undertakings including uncalled capital. The
mortgage is held by Westpac Banking Corporation.

Interest rates are variable and subject to adjustment.

2
24 Capital and leasing commitments

Finance leases
Leasing arrangements
Finance leases relate to motor vehicles and equipment with lease terms of 5 years. The Group has options to
purchase the equipment for an agreed amount at the conclusion of the lease agreements.

Minimum future lease payments
Minimum future lease payments

Present value of minimum future lease
Present value of minimum future lease
payments
payments

Consolidated
Consolidated

Parent
Parent

Consolidated
Consolidated

Parent
Parent

2007
$000

2006
$000

2007
$000

2006
$000

2007
$000

2006
$000

2007
$000

2006
$000

131

181

(36)

145

128

(11)

117

131

181

(36)

145

(10)

112

145

112

145

117

112

145

112

145

Finance lease liabilities

Payable:

•
•

not longer than one year

one to fi ve years

Minimum lease payments

Less future fi nance charges

Present value of minimum lease payments

Included in the fi nancial statements as: (note 16)

Current borrowings

Non-current borrowings

2007 Annual Report | 47

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

24 Capital and leasing commitments (continued)

Operating leases

Leasing arrangements
Operating leases relate to offi ce space with lease terms of between two and two and a half years.
The Parent/Group does not have an option to purchase the leased asset at the expiry of the lease period.

Consolidated
Consolidated
$000
$000

Parent
Parent
$000
$000

2007

2006

2007

2006

146

135

281

395

158

146

135

281

147

Consolidated
Consolidated

Parent
Parent

2007
2007

2006
2006

2007
2007

2006
2006

Number

137

Number

Non-cancellable operating lease commitments

•

not longer than one year

one to fi ve years

Group’s share of jointly controlled entities capital commitments

Not longer than 1 year

25 Personnel Note

The entity employs casual and full time staff numbering

26 Financial instruments

(a) Financial risk management objectives

The Group’s Corporate Treasury function provides services to the business, co-ordinates access to domestic and
international fi nancial markets, monitors and manages the fi nancial risks relating to the operations of the Group
through internal risk reports which analyses exposures by degree magnitude of risks.

These risks include market risk (including currency risk and price risk), credit risk and liquidity risk.

The Group seeks to minimise the eff ects of these risks, by using derivative fi nancial instruments to hedge these
risk exposures. The use of fi nancial derivatives is governed by the Group’s policies approved by the board of
directors, which provide written principles on foreign exchange risk, credit risk and the investment of excess
liquidity. The Group does not enter into trade fi nancial instruments, including derivative fi nancial instruments,
for speculative purposes.

The Group’s activities expose it primarily to the fi nancial risks of changes in foreign currency exchange rates.
The Group enters into foreign exchange forward contracts to manage exposure to foreign currency risk for its
imports. There has been no change to the Group’s exposure to market risks or the manner in which it manages
and measures the risk.

The Corporate Treasury function reports monthly to the board which monitors risks and policies implemented to
mitigate risk exposure.

(b) Signi(cid:192) cant accounting policies

Details of the signifi cant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis on which income and expenses are recognised, in respect of each class of
fi nancial asset, fi nancial liability and equity instrument are disclosed in note 3 to the fi nancial statements.

48 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

26 Financial instruments (continued)

The Group enters into forward exchange contracts to buy specifi ed amounts of foreign currencies in the future at
stipulated exchange rates. The objective of entering into the forward exchange contracts is to protect the Group
against unfavourable exchange rate movements for the contracted purchases undertaken in foreign currencies.

Average exchange
Average exchange
raterate

2007
2007

2006
2006

Foreign currency
Foreign currency

Contract value
Contract value

Fair value
Fair value

2007
2007

FC’000

2006
2006

FC’000

2007
2007

$000

2006
2006

$000

2007
2007

$000

2006
2006

$000

Outstanding contracts

Consolidated

Buy US Dollars

Less than 3 months

3 to 6 months

Over 6 months

Buy Canadian Dollars

Less than 3 months

3 to 6 months

Over 6 months

0.7566

0.7951

0.8406

0.9128

0.9090

0.9069

0.7470

0.7511

976

927

525

1,973

1,750

550

3,443

2,650

1,290

1,166

625

2,161

1,925

606

4,609

3,528

(140)

(74)

(6)

(152)

The Group has entered into contracts to purchase fi nished goods from suppliers in the United States, Canada and
Thailand. The Group has entered into forward exchange contracts (for terms not exceeding 8 months) to hedge the
exchange rate risk arising from these anticipated future transactions. The Group does not adopt hedge accounting
and therefore movements in the fair value of forward exchange contracts are recorded in the income statement.

As at reporting date, the aggregate amount of unrealised gains under forward foreign exchange contracts
reported in the profi t and loss relating to these anticipated future transactions is $23,000 (2006: unrealised gains
of $23,000).

(d)
(d) Credit risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance sheet
date, to recognised fi nancial assets of the Group which have been recognised on the Balance Sheet is the
carrying amount, net of any allowance for doubtful debts.

The Group does not have signifi cant risk exposure to any one debtor, however 87% (2006 - 81%) of sales and 79%
(2006 - 87%) of year end receivables are concentrated in major supermarkets throughout Australia. The Parent
has 91% (2006 - 91%) of sales and 80% (2006 - 88%) of year end receivables concentrated in major supermarkets
throughout Australia.

(e) Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors, who has built an
appropriate liquidity risk management framework for the management of the Group’s short, medium and
long-term funding and liquidity management requirements. The Group manages risk by maintaining adequate
reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecasts and actual cash
fl ows and matching the maturity profi les of fi nancial assets and liabilities.

2007 Annual Report | 49

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

26 Financial instruments (continued)

(f) Interest rate risk

The Parent and Group’s exposures to interest rate risk, which is the risk that a fi nancial instrument’s value will
fl uctuate as a result of changes in market interest rates, and the eff ective weighted average interest rates on
those fi nancial assets, are set out below:

Group
Group

Fixed rate maturing in
Fixed rate maturing in

Financial Instrument
Financial Instrument

NoteNote

Weighted
Weighted
average
average
eff ective
eff ective
interest
interest
rate %rate %

Variable
Variable
RateRate

Less than 1
Less than 1
year
year

1 to 5 years
1 to 5 years

Non Interest
Non Interest
Bearing
Bearing

Total
Total

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

656

1,250

5.3

7.0

7.3

8.2

7.5

656

9,854

8,247

9,854

8,247

970

1,476

687

155

970

1,476

1,250

687

155

768

450

768

450

13,068

9,539

14,322

10,195

7,168

7,252

7,168

7,252

2,302

2,601

2,302

2,601

271

145

5,076

117

573

2,500

4,128

4,981

4,877

112

5,076

573

2,500

4,128

9.5

4,981

4,877

7,576

4,701

5,014

112

4,926

9,741

9,856

22,443

19,551

Financial Assets

Cash and cash equivalents

Trade receivables

Other receivables

Due from joint venture

Redeemable notes

Investment in joint venture entity

Total Financial Assets

Financial Liabilities

Trade payables

Other payables

Due to related parties

Finance leases

Bank overdrafts

Loan payable

Convertible notes

Total Financial Liabilities

50 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

26 Financial instruments (continued)

Parent
nt

Fixed rate maturing in
Fixed rate maturing in

Financial Instrument
ncial Instrument

NoteNote

Weighted
Weighted
average
average
eff ective
eff ective
interest
interest
rate %rate %

Variable
Variable
RateRate

Less than 1
Less than 1
year
year

1 to 5 years
1 to 5 years

Non Interest
Non Interest
Bearing
Bearing

Total
Total

2007

2006

2007

2006

2007

2006

2007

2006

2007

2006

Fi
Financial Assets

Cash

Trade receivables

Other receivables

Due from joint venture

Due from controlled entities

Investment in joint venture
entity

Total Financial Assets

F
Financial Liabilities

Trade payables

Other payables

Due to related parties

Bank overdrafts

Finance leases

Loan payable

Convertible notes

Total Financial Liabilities

5.3

8.5

8.2

7.3

7.5

9.5

5,097

578

2,500

3,578

4,981

7,597

3,578

5,014

29,616

23,615

578

2,844

3,364

2,844

3,364

440

1,476

768

181

155

440

1,476

181

155

29,616

23,615

450

768

450

29,616

23,615

5,528

4,150

35,147

28,343

112

4,877

2,153

2,069

2,153

2,069

733

271

913

733

271

5,097

145

913

2,500

3,578

4,981

4,877

112

4,926

3,157

2,985

15,880

11,500

(
(g) Fair value of (cid:192) nancial instruments

The fair values of fi nancial assets and fi nancial liabilities are determined as follows:
•

the fair value of fi nancial assets and fi nancial liabilities with standard terms and conditions and traded on
active liquid markets are determined with reference to quoted market prices; and

•

the fair value of other fi nancial assets and fi nancial liabilities (excluding derivative instruments) are determined
in accordance with generally accepted pricing models based on discounted cash fl ow analysis; and

the fair value of derivative instruments are calculated using quoted prices. Where such prices are not
available use is made of discounted cash fl ow analysis using the applicable yield curve for the duration of the
instruments for non-optional derivatives, and option pricing models for optional derivatives.

(h) Options

In May 2004, the Group entered into arrangements with Ian Thorpe whereby both a wholly owned subsidiary of
the Parent (TFG) and Ian Thorpe entered into two joint ventures relating to food and beverages and seafood.

The fi rst of these ventures has been formed as Thorpedo Foods Pty Limited (TFG interest 50.01%).

Under the arrangements TFG has a call option to acquire up to 75% in Thorpedo Foods Pty Limited until 30
September 2009. The consideration payable is to be calculated based upon EBITDA multiples and will be satisfi ed

2007 Annual Report | 51

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

26 Financial instruments (continued)

by exercise of a call option held by Ian Thorpe for shares in the Parent. These fi nancial instruments do not have a
value at 30 June 2007.

On 30 June 2005, TFG exercised a call option and acquired an additional 25.01% in Thorpedo Foods Pty Limited
bringing its interest in Thorpedo Foods Pty Limited at 30 June 2005 to 50.01%. The additional 25.01% was
acquired for $20.

27 Key management personnel compensation

This report details the nature and amount of remuneration for each Director and the executives receiving the
highest remuneration.

Remuneration policy
Remuneration arrangements for Directors and executives of the Parent and Group (“the Directors and
executives”) are set competitively to attract and retain appropriately qualifi ed and experienced Directors and
executives. As part of its agreed mandate, the Remuneration and Nomination Committee obtains independent
advice when required on the appropriateness of remuneration packages given trends in comparable companies
and the objectives of the consolidated entity’s remuneration strategy.

•
•
•

The capability and experience of the Directors and executives;

The Directors and executives’ ability to control the relevant operational performance; and

The amount of incentives within each Director and executive’s remuneration.

Executive director and executives remuneration levels are reviewed annually by the Remuneration and
Nomination Committee through a process that considers the overall performance of the Group. In addition the
individual performance of each senior manager is measured against each individual’s Key Performance Indicators
(KPI’s) as agreed annually with the senior manager to ensure buy-in. KPI’s are based on the profi tability of the
entity and are reviewed annually by the Remuneration and Nomination Committee and the Managing Director/
Chief Executive Offi cer (CEO).

Performance based remuneration
Performance based remuneration are at the discretion of the Remuneration and Nomination Committee.
These can take the form of share options or cash payments. During the year the following options were issued
1,700,000 to G.H. Babidge, 1,700,000 to R.J.F. Macleod, 900,000 to B.W. Bootle, 300,000 to P. J. Nathan and 300,000
to M. E. Jenkins.

Options are valued using the bi-nomial method.

Non-executive directors
The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by
shareholders at the Annual General Meeting.

Total fees for all non-executive directors, last voted upon by shareholders in October 2006, was not to exceed
$300,000 in total.

Total fees for 2007 were $122,315. To align director interests with shareholder interests, the directors are
encouraged to hold shares in the Parent.

52 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

27 Key management personnel compensation (continued)

The Chairman receives twice the base fee of non-executive directors. Non-executive directors do not receive
performance related remuneration.

Directors’ fees cover all main Board activities. Non-executive directors who sit on the Remuneration and
Nomination Committee and the Audit, Risk and Compliance Committee receive an additional payment of
$1,000 and the Chairman of each receives $2,000. There are no termination or retirement benefi ts for
non-executive directors.

Service agreements
It is the Group’s policy that service contracts are entered into for the CEO which was extended on 1 February
2007. The key terms and conditions are as follows:

•

The contract is for a fi xed term to 30 November 2011

The remuneration comprises a fi xed component which includes the cost to the Parent of any superannuation
contributions made by the Parent on behalf of the CEO; and

The Parent can terminate employment at any time without prior notice if the CEO commits any serious breach
of any provisions of his agreement or is guilty of an act of serious misconduct or wilful neglect in the discharge
of their duties. The CEO may terminate this agreement with one month’s notice and the Parent with three
month’s notice. In the event of dismissal by the Parent, other than for breach, the CEO is also entitled to one
year’s total remuneration.

Parent performance, shareholder wealth and directors and senior management
remuneration
The remuneration policy has been tailored to increase goal congruence between shareholders and executives.
The method applied in achieving this aim is the issue of options to executives to encourage alignment of
personal and shareholder interests.

The following table shows the revenue, profi ts and dividends for the past fi ve years for the Parent.

Revenue ($000s)

Net Profi t / (loss) after tax ($000s)

Dividends paid (cents)

2003
2003

21,957

564

2004
2004

32,940

(749)

Nil

2005
2005

37,954

310

Nil

2006
2006

47,654

1,434

Nil

2007
2007

49,952

1,174

The Remuneration and Nomination Committee considers that the Parent’s performance-linked remuneration
structure is appropriate to building shareholder value in the medium term.

The aggregate compensation made to directors and other members of key management personnel of the
Parent and the Group is set out below:

Short-term employee benefi ts

Post-employment benefi ts

Share-based payment

Other long term benefi ts

Consolidated
Consolidated

Parent
Parent

2007
2007

1,019,335

338,187

66,350

2006
2006

1,113,016

103,088

1,423,872

1,216,104

2007
2007

122,315

58,988

66,350

247,653

2006
2006

128,780

30,360

159,140

2007 Annual Report | 53

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

27 Key management personnel compensation (continued)

Details of key management personnel
The directors and other members of key management personnel of the Group during the year were:
P. R. Gunner (Chairman, non-executive director)
G. H. Babidge (Managing Director, Chief Executive Offi cer)
A. M. Perich (Non-executive director), appointed July 2006
R. Perich (Non-executive director)
S. Higgs (Non-executive director)
M. Miles (Non-executive director), appointed November 2006
B. W. Bootle (alternate director), appointed July 2006
C. C. Grubb (Non-executive director), resigned July 2006
M. Van Ryn (Non-executive director), resigned October 2006
G. J. Reaney (Non-executive director), resigned October 2006
R. J. F. Macleod (Strategic Development Director)
P. J. Nathan (General Manager Sales) (appointed September 2006)
M. E. Jenkins (Chief Financial Offi cer & Company Secretary)
H. A. Hurwitz (Marketing Manager)
B. A. O’Brien (Product Development Manager)

Determination of remuneration of speci(cid:192) ed directors
Remuneration of non-executive directors comprise fees determined having regard to industry practice and the
need to obtain appropriately qualifi ed independent persons. Fees do not contain any non-monetary elements.

Remuneration of the executive directors is determined by the Remuneration & Nomination Committee (refer
statement of Corporate Governance Practices for further details). In this respect, consideration is given to normal
commercial rates of remuneration for similar levels of responsibility.

Options are granted to acquire ordinary shares in Freedom Nutritional Products Limited to the executive directors.

The compensation of each member of the key management personnel of the Group is set out below:

2007
2007

$ $

P. R. Gunner

G. H. Babidge
(i)

A. M. Perich

R. Perich

S. F. Higgs

M. Miles

B. W. Bootle
(i)

C. C. Grubb

Short term benefi ts

Salaries and fees

31,167

223,487

24,167

27,000

26,833

Non monetary

1,513

2,000

Post employment benefi ts

Superannuation

25,695

100,000

2,175

2,430

2,415

17,620

Equity compensation

Options

Total

25,045

56,862

350,045

26,342

29,430

29,248

19,620

13,259

3,815

54 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

27 Key management personnel compensation (continued)

M. van Ryn

G. J. Reaney

R. J. F. Macleod
(i)

P. J. Nathan
(ii)

M. E. Jenkins
(ii)

H. A. Hurwitz

B. A. O’Brien

Total

Shor
Short term benefi ts

Salaries and fees

Non monetary

Post employment benefi ts

7,333

187,314

137,325

150,933

137,821

41,761

1,000,956

1,367

15,500

18,380

Superannuation

7,993

660

12,686

32,829

27,700

12,179

93,805

338,187

Equity compensation

Options

Total

2006

Short term benefi ts

Salaries and fees

Non monetary

Post employment benefi ts

7,993

25,045

1,500

66,349

225,045

171,654

181,500

150,000

151,066

1,423,872

P. R. Gunner

G. H. Babidge
(iii)

R. Perich

S. F. Higgs

C. C. Grubb

21,000

286,795

20,000

Superannuation

1,890

12,140

1,800

Equity compensation

Options

Total

22,890

298,935

21,800

45,780

M. van Ryn

G. J. Reaney

R. J. F. Macleod
(iii)

H. A. Hurwitz

M. E. Jenkins

Dr V.
Lakshminarayana

B. A. O’Brien

Total

S
Short term benefi ts

Salaries and fees

Non monetary

Post employment benefi ts

22,000

147,860

123,853

147,788

130,298

117,642

1,083,016

15,000

30,000

Superannuation

22,890

1,980

12,140

11,147

15,000

11,727

10,574

103,088

E
Equity compensation

Options

Total

22,890

23,980

160,000

150,000

162,788

142,025

143,216

1,216,104

(i)

(ii)

On 30 November 2006 share options were granted under the employee share option plan. Further details of the options
granted are contained in notes 28 and 29.

On 26 April 2007 share options were granted under the employee share option plan. Further details of the options
granted are contained in notes 28 and 29.

(iii)

On 27 July 2005 share options were granted under the employee share option plan. Further details of the options
granted are contained in notes 28 and 29.

2007 Annual Report | 55

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

28 Related party transactions

(a) Equity interests in related parties
(i) Equity interests in subsidiaries

Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 31 to the fi nancial
statements.

(ii) Equity interest in joint ventures

Details of interests in joint ventures are disclosed in note 33 to the fi nancial statements.

(b) Transactions with key management personnel
(i) Key management personnel compensation

Details of key management personnel compensation are disclosed in note 27 to the fi nancial statements.

(ii) Key management personnel equity holdings

Fully paid ordinary shares of the Parent

Balance at 1 July
Balance at 1 July

Granted as
Granted as
compensation
compensation

Received on
Received on
exercise of
exercise of
options
options

Net other change
Net other change

Balance at 30 June
Balance at 30 June

2007

P. R. Gunner

G. H. Babidge

A. M. Perich (1) (2)

R. Perich (2)

S. F. Higgs

M. Miles

B. W. Bootle

M. van Ryn

C. C. Grubb

G. J. Reaney

R. J. F. Macleod

P. Nathan

M. E. Jenkins

H. A. Hurwitz

B. A. O’Brien

No.

204,346

69,217

8,771,289

384,615

172,074

8,068,435

156,108

30,326

No.

116,671

26,130,510

51,069

40,855

(172,074)

(8,058,435)

(8,054,430)

40,000

No.

321,017

69,217

34,901,799

384,615

51,069

40,855

10,000

14,005

156,108

40,000

30,326

(1)

Mr A. M. Perich joined the board as a non-executive director in July 2006. He is joint managing director with Mr R. Perich
of Arrovest Pty Ltd. At the date of his appointment Arrovest Pty Ltd already held shares consistent with those shown for
Mr R. Perich.

(2)

Messrs A. M. Perich and R. Perich each hold an interest in Arrovest Pty Limited which is a registered holder of shares in
the Parent.

56 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

28 Related party transactions (continued)

Balance at 1 July
Balance at 1 July

Granted as
Granted as
compensation
compensation

Received on
Received on
exercise of
exercise of
options
options

Net other change
Net other change

Balance at 30 June
Balance at 30 June

No.

2006

P. R. Gunner

G. H. Babidge

R. Perich

S. F. Higgs

M. van Ryn

C. C. Grubb

G. J. Reaney

R. J. F. Macleod

M. E. Jenkins

H. A. Hurwitz

B. A. O’Brien

Dr V. Lakshminarayana

Share options of the Parent

101,942

69,217

6,474,528

384,615

46,133

8,068,435

156,108

30,326

102,404

2,296,761

125,941

204,346

69,217

8,771,289

384,615

172,074

8,068,435

156,108

30,326

Balance
Balance
at 1 July
at 1 July

Granted as
Granted as
compensation
compensation

Exercised Net other
Net other
Exercised
change
change

Balance
Balance
at 30
at 30
June
June

Balance
Balance
vested at
vested at
30 June
30 June

Vested
Vested
but not
but not
exercisable
exercisable

Vested and
Vested and
exercisable
exercisable

Options
Options
vested
vested
during year
during year

No.

2007

G.H. Babidge

1,925,000

1,700,000

- (1,225,000)

2,400,000

700,000

B. W. Bootle

900,000

R. J. F. Macleod

650,000

1,700,000

P. Nathan

M. E. Jenkins

Dr V. Lakshminarayana

H. A. Hurwitz

2006

100,000

50,000

G. H. Babidge

1,225,000

R. J. F. Macleod

M. E. Jenkins

Dr V. Lakshminarayana

H. A. Hurwitz

350,000

100,000

50,000

300,000

700,000

300,000

900,000

(350,000)

2,000,000

300,000

400,000

100,000

50,000

1,925,000

650,000

100,000

50,000

700,000

300,000

100,000

50,000

1,925,000

650,000

100,000

50,000

925,000

650,000

100,000

50,000

2007 Annual Report | 57

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

28 Related party transactions (continued)

All share options issues to key management personnel were made in accordance with the provisions of the
Employee Share Option Plan.

During the fi nancial year nil options (2006: nil) were exercised by key management personnel.

Further details of the Employee Share Option Plan and of share options granted during 2007 and 2006 fi nancial
years are contained in note 29 to the fi nancial statements.

(iii) Other transactions with key personnel of the Group

Profi t for the year includes $124,000 (2006: nil) on the sale of land and buildings to Contract Beverage Packers
of Australia Pty Ltd (CBPA) which is a 50: 50 joint venture with Leppington Pastoral Company which is owned by
members of the Perich family.

For further transactions with key personnel of the Group, refer to transactions between Parent and its related
parties below.

Other related parties include:

•
•
•
•
•

the parent entity

entities with joint control or signifi cant infl uence over the Group

joint ventures in which the entity is a venturer

subsidiaries

other related parties

(i) Transactions between Parent and its related parties

During the fi nancial year, the following transactions occurred between the Parent and its related parties:

•

the Parent recognised tax payable in respect of the tax liabilities of its wholly-owned subsidiaries. Payments
to/from the Parent are made in accordance with the terms of the tax funding arrangement.

the Parent made dividend payments totalling $348,000 to its ultimate parent entity (2006: nil). The ultimate
parent entity Arrovest Pty Ltd holds 78% of the fully paid ordinary shares of Freedom Nutritional Products
Limited (2006: 20%)

the Parent received interest income of $1,162,000 (2006: $973,000) from controlled entities. The interest rate on
loans is 9.5% or 8% (2006: 9.5% or 8%). Interest is receivable on the last business day of the fi nancial year.

the Parent made payments of $1,562,000 (2006: $1,372,000) to a controlled entity for selling, corporate and
fi nancial services. The amount is payable on the last day of the fi nancial year.

The following balances arising from transactions between the Parent and its other related parties are
outstanding at reporting date:

•
•
•

Non-current loans totalling $29,616,000 are receivable from subsidiaries (2006: $23,615,000)

Current loans totalling $1,476,000 are receivable from joint ventures (2006: $155,000)

Current loans totalling $271,000 are repayable to the associate of the ultimate parent (2006: $3,000)

All amounts advanced to or payable to related parties are unsecured and are subordinated to other liabilities.

The amounts outstanding will be settled in cash. No guarantees have been given or received. No expense has
been recognised during the fi nancial year for bad or doubtful debts in respect of the amounts owed by related
parties.

Transactions and balances between the Parent and its subsidiaries were eliminated in the preparation of the
consolidated fi nancial statements of the Group.

58 | Freedom Nutritional Products Limited

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

28 Related party transactions (continued)

(ii) Transactions between the Group and its related parties
CBPA provided contract beverage packing services at cost $2,134,000 (2006: $2,348,000).

These services are provided under normal terms and conditions.

Current loans totalling $1,476,000 are receivable from joint ventures (2006: $155,000)

The following balances arising from transactions between the Group and its other related parties are outstanding
at reporting date:
•
•
All amounts advanced to or payable to related parties are unsecured and are subordinated to other liabilities.

Current loans totalling $271,000 are repayable to the associate of the ultimate parent (2006: $3,000)

The amounts outstanding will be settled in cash. No guarantees have been given or received. No expense has been
recognised during the fi nancial year for bad or doubtful debts in respect of the amounts owed by related parties.

(iii) Guarantee
The Parent has guaranteed half bank debt up to $1m for the debts of a jointly controlled entity.
The amount of the potential exposure is $nil (2006: $nil).

(
(d) Parent entities

The Parent entity of the Group is Freedom Nutritional Products Limited and the ultimate parent entity is Arrovest
Pty Ltd which is incorporated in Australia.

2
29 Share based payments – Employee Share Option Plan

Senior employees are eligible to participate in the share scheme under which executives are issued options
to acquire shares in the Parent. Each employee share option converts into one ordinary share of the Parent on
exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither
rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date
of their expiry.

The options granted expire within fi ve years of their issue, or one year of the resignation of the senior employee,
whichever is the earlier. In relation to options issued during the current fi nancial years option series 7 vest in four
equal tranches over a period of 4 years and option series 8 vests in two equal tranches over two years.

The following share-based payment arrangements were in existence during the current and comparative
reporting periods:

Option series

(1) Issued 1 January 2002

(2) Issued 1 January 2002

(3) Issued 1 January 2002

(4) Issued 29 January 2003

(5) Issued 3 September 2003

(6) Issued 27 July 2005

(7) Issued 30 November 2006

(8) Issued 26 April 2007

Number
Number

Grant date
Grant date

Expiry date
Expiry date

Exercise price
Exercise price

Fair value at
Fair value at
grant
grant

333,334

333,333

700,000

275,000

1,000,000

4,300,000

600,000

1/01/02

29/01/03

3/09/03

27/07/05

30/11/06

26/04/07

28/03/07

29/01/08

3/09/08

27/07/10

30/11/11

26/04/10

0.90

1.00

1.10

0.80

0.85

0.50

0.10

The weighted average fair value of the share options granted during the fi nancial year is $0.10 (2006: $nil).
Options were priced using a binomial option pricing model. Where relevant, the expected life used in the model
has been adjusted on management’s best estimate for the eff ects of non-transferability, exercise restrictions and
behavioural considerations.

2007 Annual Report | 59

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

29 Share based payments – Employee Share Option Plan (continued)

Inputs into the model
Inputs into the model

Series 1
Series 1

Series 2
Series 2

Series 3
Series 3

Series 4
Series 4

Series 5
Series 5

Series 6
Series 6

Series 7
Series 7

Series 8
Series 8

Grant date share price

Exercise price

Expected volatility

Option life

Dividend yield

Risk-free interest rate

0.72

0.90

15%

0.72

1.00

15%

0.72

1.10

15%

0.60

0.80

15%

0.80

0.85

15%

0.38

0.50

15%

0.50

20%

0.48

0.50

20%

5.25 years

5 years

3 years

Nil

6.0%

Nil

6.0%

Nil

6.0%

2007
2007

Nil

6.0%

Nil

6.0%

Nil

6.0%

2.5%

2006
2006

Number of options

Weighted average exercise
price $

Number of options

Weighted average exercise
price $

Balance at beginning of fi nancial year

Granted during fi nancial year

Forfeited during fi nancial year

Cancelled during fi nancial year

Exercisable at end of fi nancial year

2,975,000

4,900,000

(200,000)

(1,575,000)

6,100,000

1,200,000

0.77

0.50

0.84

0.93

0.51

0.55

1,975,000

1,000,000

2,975,000

Balance at end of the fi nancial year
The share options outstanding at the end of the fi nancial year had an average exercise price of $0.51
(2006: $0.77), and a weighted average remaining contractual life of 1,501 days (2006: 374 days).

30 Contingent liabilities

Bank guarantee given to a supplier arising out of the normal course of
business. No liability is expected to accrue.

Consolidated
Consolidated
$000
$000

2007

2006

Parent
Parent
$000
$000

2007

0.91

0.50

0.77

2006

A statement of claim has been received from a customer relating to products provided in 1998 and 1999. The
Parent is defending this claim and believes it will be successful. The claim is for $392,000 plus interest.

31 Controlled entities

Controlled Entity

Paramount Seafoods Pty Limited

Nutrition Ventures Pty Limited

Freedom Foods Pty Limited

Australian Natural Foods Holdings Pty Limited

Thorpedo Foods Group Pty Limited

Thorpedo Foods Pty Limited

Thorpedo Seafoods Pty Limited

60 | Freedom Nutritional Products Limited

Country of Incorporation
Country of Incorporation

Percentage of shares held
Percentage of shares held

Australia

2007

100%

50.01%

75%

2006

100%

50.01%

75%

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

31 Controlled entities (continued)

The consolidated income statement and balance sheet of the entities party to the deed of cross guarantee is the
consolidated income statement and balance sheet included in the 2007 fi nancial report.

On 22 March 2007 Functional Food Investments Pty Limited changed its name to Nutrition Ventures Pty Limited.

3
32 Companies party to deed of cross guarantee

The following have entered into a deed of cross guarantee as a condition to obtaining relief under ASIC Class
Order 98/1418 from the Corporations Act 2001 requirements to prepare and lodge an audited fi nancial report
and a directors’ report.

Members of the closed group are:

•
•
•
•
•
•
•
•

Freedom Nutritional Products Limited

Nutrition Ventures Pty Limited

Freedom Foods Pty Limited

Paramount Seafoods Pty Limited

Australian Natural Foods Holdings Pty Limited

Thorpedo Foods Group Pty Limited

Thorpedo Foods Pty Limited

Thorpedo Seafoods Pty Limited

Each party to the deed of cross guarantee, guarantees to each creditor in the group payment in full of any debt
upon winding up under the provisions of the Corporations Act 2001 or, in any other case, if six months after a
resolution or order for winding up, any debt of a creditor that has not been paid in full.

3
33 Joint venture

Freedom Nutritional Products Limited has a 50% (2006: 50%) interest in Contract Beverage Packers of
Australia Pty Limited (CBPA) for an opening investment cost of $974,000 (2006: $521,000). CBPA acquired the
manufacturing equipment of Freedom Nutritional Products Limited at book value and provides contract
beverage packing services.

The Group’s share of CBPA loss for the year ended 30 June 2007 was $136,000 (2006: $71,000) which has been
equity accounted for and consequently reduces the investment cost in CBPA to $768,000 (2006: $450,000).

Freedom Nutritional Products Limited’s share of the assets employed in the joint venture is:

Current assets

Non-current assets

Total assets

Current liabilities

Non-current liabilities

Net assets

Shareholder funds

Revenue

Loss after income tax

$000
$000

2007

1,699

4,905

6,604

2,609

3,700

6,309

295

1,088

(136)

2006

275

3,064

3,339

1,102

2,256

3,358

(19)

191

(71)

2007 Annual Report | 61

Notes to the Financial Statements
For the year ended 30 June 2007 (continued)

34 Assets pledged as security

In accordance with the security arrangements of liabilities, as disclosed in note 16 to the fi nancial statements,
all non-current assets of the Group, except goodwill and deferred tax assets, have been pledged as security. The
holder of the security does not have the right to sell or repledge the assets. The Group does not hold title to the
equipment under fi nance lease pledged as security.

35 Acquisition of business

Name of business acquired
Name of business acquired

Principal activity
Principal activity

Date of acquisition
Date of acquisition

Proportion of shares
Proportion of shares
acquired (%)
acquired (%)

Cost of acquisition
Cost of acquisition
$000
$000

Cookieman baking assets

Biscuit baking

18-May-07

Nil

1,679

Net Assets Acquired

Assets

Prepayments

Inventory

Deferred tax assets

Plant and equipment

Liabilities

Employee entitlements

Income in advance

Goodwill

Cookieman baking assets
Cookieman baking assets

Book Value
$000

Fair Value Adjustment
$000

Fair Value on Acquisition
$000

412

1,008

(196)

(64)

1,247

216

412

1,224

(196)

(64)

1,463

216

1,679

The initial accounting for the acquisition of the Cookieman baking assets has only been provisionally determined
at reporting date. At the date of fi nalisation of this report, the necessary valuation of separately identifi able
intangibles has not been fi nalised and goodwill noted above has therefore only been provisionally determined
based on the directors’ best estimate.

Included in the net profi t for the period is $44 thousand attributable to the additional business generated by
Cookieman baking assets.

36 Subsequent events

No matters or circumstances have arisen since the end of the fi nancial year which signifi cantly aff ected or may
signifi cantly aff ect the operations of the consolidated entity, the results of those operations, or the state of aff airs
of the consolidated entity in subsequent fi nancial years.

62 | Freedom Nutritional Products Limited

Directors’ Declaration
For the year ended 30 June 2007

Freedom Nutritional Products Limited

Directors’ Declaration

For The Year Ended 30 June 2007
or

The directors declare that:
•
•

in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts
as and when they become due and payable;

•
•

•

in the directors’ opinion, the attached fi nancial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the
fi nancial position and performance of the company and the consolidated entity; and

the directors have been given the declarations required by s.295A of the Corporations Act 2001.

At the date of this declaration, the company is within the class of companies aff ected by ASIC Class Order 98/1418.
T
The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each
c
creditor payment in full of any debt in accordance with the deed of cross guarantee.

In
In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which
t
the ASIC Class Order applies, as detailed in note 32 to the fi nancial statements will, as a group, be able to meet any
obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee.

S
Signed in accordance with a resolution of the directors made pursuant to s.295 (5) of the Corporations Act 2001.

On behalf of the directors
O

P. R. Gunner
P. R.
Chairman
Ch

Sydney, 5 September 2007

G.H. Babidge
Managing Director

2007 Annual Report | 63

Independent Audit Report

Independent Auditor’s Report to the
members of Freedom Nutritional
Products Limited

Deloitte Touche Tohmatsu
ABN 74 490 121 060

The Barrington
Level 10
10 Smith Street
Parramatta NSW 2150
PO Box 38
Parramatta NSW 2124 Australia

DX 28485
Tel: +61 (0) 2 9840 7000
Fax: +61 (0) 2 9840 7001
www.deloitte.com.au

We have audited the accompanying financial report of Freedom Nutritional Products
Limited, which comprises the balance sheet as at 30 June 2007, and the income statement,
cash flow statement and statement of changes in equity for the year ended on that date, a
summary of significant accounting policies, other explanatory notes and the directors’
declaration of the consolidated entity comprising the company and the entities it controlled at
the year’s end or from time to time during the financial year as set out on pages 19 to 63.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the
financial report in accordance with Australian Accounting Standards (including the
Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility
includes establishing and maintaining internal control relevant to the preparation and fair
presentation of the financial report that is free from material misstatement, whether due to
fraud or error; selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances. In Note 3, the directors also
state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that compliance with the Australian equivalents to International Financial
Reporting Standards ensures that the financial report, comprising the financial statements
and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the
financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the financial
report, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of the financial
report 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 control.
An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the
overall presentation of the financial report.

Liability limited by a scheme approved under Professional Standards Legislation.

64 | Freedom Nutritional Products Limited

Independent Audit Report
(continued)

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

Auditor’s Independence Declaration

In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.

Auditor’s Opinion

In our opinion:

the financial report of Freedom Nutritional Products Limited is in accordance with
the Corporations Act 2001, including:

ii)

giving a true and fair view of the company’s and consolidated entity’s
financial position as at 30 June 2007 and of their performance for the year
ended on that date; and
complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001; and

the financial report also complies with International Financial Reporting Standards
as disclosed in Note 3.

DELOITTE TOUCHE TOHMATSU

P G Forrester
Partner
Chartered Accountants
P
Parramatta, 5 September 2007

2007 Annual Report | 65

Shareholder Statistics

Shareholding

Substantial shareholders
The number of shares held by the substantial shareholder is listed in the Parent’s register as at 31 August 2007 is:

Shareholder
Shareholder

Arrovest Pty Limited

Number
Number

35,044,006

Class of shares and voting rights
Class of shares and voting rights

At 31 August 2007, there were 44,527,343 ordinary shares of the Parent on issue.

The Parent’s listed ordinary shares are of one class with equal voting rights and all are quoted on a Member Exchange
of the Australian Stock Exchange Limited (the home exchange being the Australian Stock Exchange (Sydney) Limited).

DISTRIBUTION OF SHAREHOLDERS AS AT 31 August 2007

Category
Category

1 - 1,000

1,001 - 5,000

5,001 - 10,000

10,001 - 100,000

100,001 - and over

Ordinary
Ordinary

334

307

112

157

928

Non marketable securities which are holdings of less than 1,042 ordinary shares are held by 352 shareholders. This
statistic is based on the share register as at 31 August 2007.

66 | Freedom Nutritional Products Limited

Shareholder Statistics
(continued)

20 LARGEST ORDINARY SHAREHOLDERS AS AT 31 August 2007

Name

Arrovest Pty Limited

East Coast Rural Holdings Pty Limited

Mr S Higgs ATF SF Higgs Superannuation Fund

National Nominees Limited

Mr & Mrs P Gunner ATF Perry Gunner Superannuation Fund

Mr & Mrs J Perry

Mr T E Morris

Rakzirre Pty Limited

Anisam Pty Limited

Economic Consultancy Services Pty Ltd

Berzins Asset Management Pty Limited

Gallium Pty Limited

Cebourn Partners Pty Limited

14 Mr L Lip & Ms Y F Chong

Symspur Pty Limited

16 Mr Gary Douglas Spence

RD & KA McGavin Pty Limited ATF RD & KA McGavin Superannuation Fund

18 Mr & Mrs C Tuckwell ATF CRT Superannuation Fund

19 Mr & Mrs E Dally ATF E J Dally Superannuation Fund

20 Mr James Marsden & Mr John Adam

Number of
Number of
Ordinary Shares
Ordinary Shares
HeldHeld

% Held of
% Held of
Ordinary Capital
Ordinary Capital

35,044,006

78.70%

405,279

384,615

336,499

321,017

200,000

195,137

192,308

170,000

162,180

156,108

144,732

140,871

120,851

115,385

100,000

97,030

0.91%

0.87%

0.76%

0.72%

0.45%

0.44%

0.43%

0.38%

0.36%

0.35%

0.33%

0.32%

0.27%

0.26%

0.22%

The proportion of ordinary shares held by the 20 largest shareholders is 87.09%

Stock exchanges that have granted quotation to the securities of the Parent quoted in Australia:

All Member Exchanges.
A

38,778,326

87.09%

2007 Annual Report | 67

Company Secretary

Michael Jenkins

Prin
Principal Registered Of(cid:192) ce

8
80 Box Road Taren Point, NSW 2229

T
Tel: (02) 9526 2555

F
Fax: (02) 9525 5406

S
Share Registry

Registries Limited

L
Level 2, 28 Margaret Street, Sydney NSW 2000

T
Tel: (02) 9279 0677

F
Fax: (02) 9279 0664

n
Insurance Brokers

InterRisk Australia Pty Limited

L
Level 1, 7 Macquarie Place, Sydney NSW 2000

T
Tel: (02) 9346 8050

F
Fax: (02) 9346 8051

M
Management

G
Geoff Babidge – Managing Director

Corporate Directory

Solicitors

Gilbert & Tobin

2 Park Street, Sydney NSW 2001

Tel: (02) 9263 4000

Fax: (02) 9263 4111

Mallesons Stephen Jaques

Level 60, Governor Phillip Tower,

1 Farrer Place, Sydney NSW 2000

Tel: (02) 9296 2000

Fax: (02) 9296 3999

Banker

Westpac Banking Corporation

344-346 The Kingsway, Caringbah NSW 2229

Tel: (02) 9540 1077

Fax: (02) 9540 3134

Auditor

Deloitte Touche Tohmatsu

Chartered Accountants

The Barrington, Level 10

R
Rory Macleod – Strategic Development Director

10 Smith Street, Parramatta NSW 2150

G
Greg Hughes – Chief Operating Offi cer

M
Michael Jenkins – Chief Financial Offi cer and

Company Secretary

Tel: (02) 9840 7060

Fax: (02) 9840 7001

2007 Annual Report | 68

Freedom Nutritional Products Limited

ABN 41 002 814 235 | Ph: 02 9526 2555 | Fax: 02 9525 5406
80 Box Road Taren Point NSW 2229 | PO Box 2531 Taren Point NSW 2229