Freedom Foods Group Limited Annual Report 2012

FY2012 Annual Report · Freedom Foods Group Limited

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Freedom Foods Group Limited

Annual Report 2012

Contents

Financial Highlights and Five Year Summary ..........................................................................................................................1

Chairman’s Letter ......................................................................................................................................................................................2

Managing Director’s Review of Operations .............................................................................................................................3

Directors’ Report ........................................................................................................................................................................................9

Lead Auditor’s Independence Declaration............................................................................................................................17

Corporate Governance Statement .............................................................................................................................................18

Consolidated Statement of Comprehensive Income .....................................................................................................26

Consolidated Statement of Financial Position ....................................................................................................................27

Consolidated Statement of Cash Flows ..................................................................................................................................28

Consolidated Statement of Changes in Equity ...................................................................................................................29

Notes to the Financial Statements ..............................................................................................................................................30

Directors’ Declaration ..........................................................................................................................................................................77

Independent Auditor’s Report ......................................................................................................................................................78

Shareholder Statistics ..........................................................................................................................................................................80

Corporate Directory .............................................................................................................................................................................83

Annual General Meeting

Date

26 October, 2012

Time

11.30 am

Venue

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

FREEDOM FOODS GROUP LIMITED
ABN 41 002 814 235
Annual Report for the year ended 30 June 2012

Financial Highlights and Five Year Summary

n Financial Highlights and Five Year Summary

Sales Revenue ($000's)
OPERATING EBDITA ($000's)*
Net Profit after Tax ($000's)**
Basic Earnings per Share (cents)
Number of Ordinary Shares Issued (000's)
Number of Convertible Redeemable Preference Shares Issued (000's)
Ordinary Dividend per Share (cents)
Convertible Redeemable Preference Dividend per Share (cents)
Dividend Paid ($000's)
Total Assets ($000's)
Shareholders Equity ($000's)
Net Assets Per Share (cents)
Net Tangible Asset Backing (cents)

2012
58,132
5,447
3,012
3.9
77,996
19,415
0.50
3.40
1,020
103,881
47,270
49
24

2011
45,256
4,041
4,387
5.7
77,497
19,415
0.50
1.00
405
75,456
49,983
52
29

2010
44,071
3,816
3,357
5.0
77,435
-
-
-
-
71,090
40,263
52
22

2009
48,596
3,494
1,320
2.4
54,660
-
1.00
-
545
63,659
30,161
55
13

2008
54,082
3,203
956
2.0
54,607
-
2.00
-
891
56,295
29,239
54
13

* Earnings before depreciation, interest, tax and amortisation
** Net Profit after Tax in 2010 and 2011 had an income tax benefit of $263,000 and $138,000 respectively compared to an income
tax expense in FY 2012 of $238,000.

Freedom Foods Group Limited

Chairman’s Letter

n Chairman’s Letter

Dear Shareholder

In the 2012 financial year, Freedom Foods Group Limited (“FFG”) achieved Operating EBDITA of
$5.4m, an increase of 34.7% against the prior corresponding period, reflecting the consolidation of
Pactum Australia for 3 months, improving sales in the Freedom Foods business, and a contribution
from Specialty Seafood in line with prior year.

Operating Pre-tax Profit was $3.5 million for the 12 months ended 30th June 2012, reflecting a 36%
increase on the previous corresponding 12 month period.

The Reported Net Profit of $3.0 million included non-operating expenses relating to non-recurring
acquisition costs for the Pactum acquisition ($120k pre-tax) and employee share option expense
($106k pre-tax). The previous corresponding 12 month period included non-operating items that
contributed $1.78 million to Net Profit, comprising primarily the profit on sale of the Company’s 50%
interest in A2 Dairy Products Australia Pty Ltd (A2DPA), and a write-down in the carrying value of
Thorpedo Foods.

The result included strong sales growth for Freedom Cereals of 19%, compared to the previous
corresponding period, with business unit EBDITA in line with FY 2011 given increased marketing
investment. Dairy alternative beverage sales continued their trend from the half year with sales
growth of 35% compared to the previous corresponding period.

Speciality Seafood business unit maintained its share of the Salmon and Sardine categories, with the
Paramount brand growing its share to the No 1 branded position in Pink Salmon segment.

Pactum Australia contributed a strong sales and business contribution and provides a significant
growth platform for the Company.

While the Board is pleased with these results, we are focussed on achieving continued improvement
in Freedom Foods’ to deliver an improved business contribution in FY 13 and meeting our benchmark
15% return on funds employed in the medium term.

The Managing Director’s report provides further commentary on operations.

In April 2012, the Company completed the acquisition of the 50% of the shares in Pactum not owned
by the Company for $6 million. As part of its growth strategy, Pactum is nearing completion of an
approximate $7 million capital program to expand its packaging capability at its southern Sydney
site to provide portion pack UHT (200-330ml configuration) for value added beverages, with initial
customer production to commence in November 2012.

During the year, the Company under the terms of an option agreement between A2C and FNP,
subscribed for 18.7 million fully paid ordinary shares in A2C at a price of NZ$0.13 (A$0.11) for a total
consideration of A$2.06 million, which resulted in the Company becoming the largest single shareholder
in A2C. The strategic investment in A2C provides the Company and its shareholders with potentially
significant value creation opportunity through A2C’s growth in Australia and international markets.

With improving profitability, the Board has recommended payment of a final fully franked dividend
of $0.01 per ordinary share in November 2012, consistent with the total dividend paid (comprising
interim and final) for the FY 2011 financial year. Dividend priority remains with the converting
preference shareholders, with a further dividend to be paid in accordance with the terms of the
converting preference shares in early November 2012.

The Board thanks the senior management team, our employees, suppliers, customers and shareholders
for the contribution they have made to our Company, and we look forward to the year ahead.

Perry Gunner
Chairman

Annual Report 2012Managing Director’s Review of Operations

n Managing Director’s Review of Operations

Group Summary Result

Year ended 30th June

Gross Sales Revenues (1)
Net Sales Revenues
EBDITA (Operating) (2)
EBITA (Operating) (2)
Equity Associates Share of Profit
Pre Tax Profit (Operating)
Pre Tax Profit (Reported)
Net Profit (Operating)
Net Profit (Reported)
Interim Ordinary Dividend (cps)
Final Ordinary Dividend (cps)
Interim CRPS Dividend (cps)
Final CRPS Dividend (cps) (3)
EPS (cents per share)( Fully Diluted for CRPS)
Net Debt / Equity
Net Assets per Share
Net Tangible Assets per Share

Notes:

2012
$’000
72,556
58,134
5,447
4,075
1,214
3,476
3,250
3,305
3,012
-
$0.010
$0.014
$0.014
3.03
82%
$0.49
$0.26

2011
$’000
57,664
45,353
4,041
2,949
1,136
2,556
4,249
3,735
4,387
$0.005
$0.005
-
$0.020
4.90
36%
$0.52
$0.29

% Change

+25.8%
+28.2%
+34.7%
+38.1%
+6.8%
+36.0%
-23.5%
-11.5%
-31.3%
-
-
-
-
-38.1%
+125%
-5.7%
-10.3%

(1) Gross Sales Revenues excludes Royalty income received from Yakult and does not include revenues from group

associate entities, a2 Dairy Products, A2 Corporation. Includes Pactum for 3 months April to June 2012.

(2) Operating EBDITA and EBITA, excludes abnormal or non-operating charges with an add back of non cash

employee share option expense of $106k and Pactum acquisition costs expense of $120k.

(3) CRPS dividend in 2011 of $0.02 included 6 month period and catch up period for 4 months based on issue date

of CRPS of Dec 2010

The company achieved an Operating EBDITA of $5.4 million, reflecting consolidation of Pactum
Australia for 3 months, improving sales in the Freedom Foods business, and a contribution from
Specialty Seafood in line with prior year.

Operating Pre-tax Profit was $3.5 million for the 12 months ended 30th June 2012, reflecting a 36%
increase on the previous corresponding 12 month period.

The Reported Net Profit of $3.0 million included non-operating expenses relating to non-recurring
acquisition costs for Pactum acquisition ($120k pre-tax) and employee share option expense ($106k
pre-tax). The previous corresponding 12 month period included non-operating items that
contributed $1.78 million to Net Profit, comprising primarily the profit on sale of the Company’s
50% interest in A2 Dairy Products Australia Pty Ltd (A2DPA), and write-down in the carrying value of
Thorpedo Foods.

Equity Associates contributions of $1.2m reflected profitability from the Pactum Australia (JV basis)
for 9 months and increased share of estimated year end profits from A2 Corporation.

Net assets at 30 June 2012 were impacted by the accounting for the Pactum acquisition under
common control accounting principles. No goodwill is recognised on going in the Company’s
balance sheet for the Pactum acquisition. The excess of cost over net assets acquired is treated as
a debit to reserves.

Freedom Foods Group LimitedManaging Director’s Review of Operations (continued...)

HIGHLIGHTS

Highlights for the year included:

•

Group Operating EBDITA of $5.4 million, a 35% increase on the previous corresponding
period.

Operating Pre-tax Profit was $3.5 million for the 12 months ended 30th June 2012, reflecting
a 36% increase on the previous corresponding 12 month period.

Sales growth in Freedom Cereals of 19%, compared to the previous corresponding period,
with business unit EBDITA in line with FY 2011 given increased marketing investment.

Dairy alternative beverage sales continued their trend from the half year with sales growth of
35% compared to the previous corresponding period.

Speciality Seafood business unit maintained its share of the Salmon and Sardine categories,
with the Paramount brand growing its share to the No 1 branded position in Pink Salmon
segment.

Pactum Australia contributed a strong sales and business contribution and provides a
significant growth platform for the Company:

•

In April 2012, the Company completed the acquisition of the 50% of the shares in
Pactum not owned by the Company for $6 million; and

Pactum is nearing completion of an approximate $7 million capital program to expand
its packaging capability to provide portion pack UHT (200-330ml configuration) for
value added beverages, with production to commence in November 2012.

A2 Corporation (25.8% FNP shareholding) reported continued strong growth in the
Australian fresh milk business with market share by value in grocery increasing above 5%.
A2C current market capitalisation (at 25 September 2012) implies a value for the Company’s
25.8% investment of approximately A$79 million (NZ$0.65 cents per FNP ordinary share),
materially above book value and in excess of the Company’s current market capitalisation.

•

Net Debt / Equity at 82% from 36% at June 2012,
reflecting the financing of A2C share option subscription
in July 2011, acquisition of 50% of Pactum Australia and
assumption of Pactum Australia financing. On the basis
that a planned exercise of outstanding share options by
the Perich Group for $6.3m had been affected at year
end, Net Debt / Equity would have materially reduced to
60%.

Net assets per share at $0.49 and net tangible assets of
$0.26 per share, with A2C investment recorded at book
value of $12.3m.

The Company is to pay a final dividend for FY 2012
commensurate with the total dividend of $0.01 per
ordinary share paid in the FY 2011 financial year. A fully
franked converting preference share dividend to be paid
in October 2012.

Annual Report 2012Managing Director’s Review of Operations (continued...)

BUSINESS UNITS - WHOLLY OWNED

Freedom Foods

The Freedom Foods business unit continued to build momentum from
the prior financial year, delivering overall gross sales growth of 21%
compared to the previous corresponding period.

The business invested significantly during the year in driving the Freedom
branded portfolio through a focus on effective promotional price points,
new product innovation and a marketing campaign comprising national
radio and selected state based television campaign.

As a result, the business recorded volume growth in its core Cereals
category of 22% and gross sales growth of 19%, compared to the previous
corresponding period. Overall the impact of this increased investment
during the year resulted in business unit EBDITA in line with FY 2011.

A key contributor to Freedom’s growth during the year was the ongoing
benefits of the dedicated gluten, wheat and nut free manufacturing
facility near Leeton NSW, a facility which the Company believes is the only
integrated scale manufacturing capability in Australia and overseas for
cereals and snacks “free from” key allergens such as gluten, nuts and dairy.

In the later part of the 2012 year, Freedom completed the commissioning
of its snack bar line, consistent with the strategy to leverage its Cereal
base into breakfast snack alternatives, as well as meeting demand for “nut
free” snacks. New product innovation and reformulation of existing snack
bar lines is expected to deliver sales growth and efficiencies in the near
term.

Dairy alternative beverage sales (soy, rice and almond) continued the
trend from FY 2011 with volume growth of 27% and sales growth of 35%
compared to the previous corresponding period reflected increased
market share of the Australia’s Own Organic brand from marketing
investment and improved distribution.

As part of a focus on developing its range of beverages, the business
launched an Australia’s Own Organic branded Almond Milk reflecting
increasing consumer awareness of health benefits of Almond based
products.

In addition, in conjunction with Pactum Australia and Blue Diamond
Growers of California, the business launched under licence the Blue
Diamond Almond Breeze Milk range into the mainstream market in
Australia. This product range has become the fastest growing Almond
milk product in the Australian market.

In late June, the business secured ranging for 3 cereal products in Whole
Food’s Stores in USA, reflecting Freedom’s unique point of differentiation
in offering a Cereal range free of all common allergens to lowest
detectable standards globally.

The focus for the business remains on increasing sales through growth in
distribution channels and increased awareness of the brand and products
across a broader consumer market. The business will continue to drive

Freedom Foods Group LimitedManaging Director’s Review of Operations (continued...)

category leadership of the health channel and support
private label development that is complimentary to this
both in Australia and internationally.

Aligned with the increasing sales base is a strong focus on
improving sales margins and operational efficiencies at the
Leeton site with the business progressing to meeting our
benchmark 15% return on funds employed in the medium
term.

Specialty Seafood

The Speciality Seafood business performed in line compared to the previous corresponding period,
notwithstanding an inventory shortfall in Salmon in the 1st quarter, lower sales in New Zealand and
increased competitor activity.

In Salmon, Paramount as the No 2 proprietary brand in the
category, increased its share to the No 1 branded position
in Pink Salmon segment ahead of John West and Own
Brand labels.

Brunswick sardines maintained its No 1 brand leadership
position in Australia and New Zealand.

While the business has seen the benefit of higher exchange
rates on inventories purchased in $USD and $CAD, this has
continued to assist in managing cost increases in salmon
and sardine procurement, while facilitating increased trade
investment.

The business continued to utilise the procurement power of Bumble Bee Foods of North America,
with Bumble Bee securing inventory requirements through priority access to Salmon catch volumes.
The business is focussed on driving category leadership of the speciality seafood channel through
introducing new product opportunities from the Bumble Bee Foods procurement base and
supporting private label supply in Specialty Seafood.

Pactum Australia

Pactum Australia which provides contract manufacture of
long life (UHT) beverages for private label and proprietary
customers delivered a strong sales and business EBDITA
contribution.

Pactum Australia production volumes increased during the year to support the growth of the
Freedom dairy alternative beverage range. The business continued to focus on increasing its mix of
value added UHT products to a range of private label and proprietary customers.

As part of its growth strategy, Pactum is nearing completion of an approximate $7 million capital program to
expand its packaging capability at its southern Sydney site to provide portion pack UHT (200-330ml
configuration) for value added beverages, with initial customer production to commence in November 2012.

The expansion positions Pactum as the only independent low cost contract manufacturer of a broad
range of UHT products on the east coast of Australia, with capability to meet the increasing demands
from its private label and proprietary customer base.

As foreshadowed in April, Pactum is investigating establishment of a new state-of-the-art UHT
processing plant in South East Australia.

The primary focus of the new capacity will be on supply of high quality UHT dairy milk for export
markets to proprietary and private label customers in South East Asia, including China. The new
production capacity would enable the business to meet growing demand for UHT dairy milk, while

Annual Report 2012Managing Director’s Review of Operations (continued...)

providing additional capacity for value added beverages at its Sydney facility. Pactum expects final
feasibility to be completed by November 2012.

As a significant strategic growth platform going forward, the Company completed in April 2012 the
acquisition of the 50% of the shares in Pactum, held by the Perich Group for $6 million.

The business currently delivers financial returns above the Company’s benchmark 15% return on
funds employed.

The Group equity accounted 50% of the NPAT of Pactum for the nine months of 2012 for $564K
($841K 2010) and consolidated Pactum’s EBDITA for three months.

STRATEGIC EQUITY ASSOCIATES

A2 Corporation Limited (A2C), 25.8% Equity Interest

The Company is the largest single shareholder in A2 Corporation (A2C). A2C owns
and commercialises unique and comprehensive intellectual property rights
relating to a2™ brand milk and related dairy products in international markets.

a2™ brand milk is the fastest growing milk brand in the Australian market and the
major driver of category growth nationally, accounting for in excess of 5.0% of
grocery channel market share by value.

A2C recently took important steps towards the marketing of its products in the
UK and Ireland by forming a partnership with Robert Wiseman Dairies, Britain’s
largest fresh milk company. A launch of a2™ brand milk in the UK has been
scheduled for September 2012.

A2C is separately advancing plans to launch an a2™ infant formula product
into the Chinese market, in conjunction with a strong local marketing partner.

In March, A2C successfully raised NZ$5.2m in capital at an issue price of
NZ$0.37 cents per share to provide additional flexibility for growth.

A2C announced in April that it is undertaking a strategic review of its options to
accelerate growth and maximise shareholder value. This review is being carried
out in light of the Company’s strong growth options as well as approaches
received from parties potentially interested in partnering with A2C.

In July 2011, FNP announced that under the terms of an option agreement
between A2C and FNP, FNP subscribed for 18.7million fully paid ordinary shares in
A2C at a price of NZ$0.13 (A$0.11) for a total consideration of A$2.06 million, which
resulted in FNP increasing its shareholding in A2C to become the largest single
shareholder in A2C.

A2C is listed on the alternative market (NZAX) of the New Zealand Stock Exchange (NZX:ATM), with
a market capitalisation (based on average price of NZ$0.49 between 30 June and 27 September
2012) of approximately NZ$299 million (A$233 million), implying a value for FNP’s 25.8% investment
of approximately A$60 million, materially above the book value of approximately A$12.3 million and
in excess of FNP’s current quoted market capitalisation.

The Company equity accounted 25.8% of the estimated NPAT of A2C for the twelve months of
$650K ($295K 2011).

Capital Management

The Company’s Net Debt / Equity at year end was 82% from 36% at June 2012, reflecting the
financing of A2C share option subscription in July 2011, acquisition of 50% of Pactum Australia and
assumption of Pactum’s finance facilities including financing for new processing and packaging
capacity coming on line in FY13.

Freedom Foods Group LimitedManaging Director’s Review of Operations (continued...)

The Company has received notification from the Perich Group that they intend to exercise 15.9m
ordinary share options with an exercise price of $0.40 cents for a total consideration of $6.3m. The
consideration will be applied to reduction of the outstanding short term loans with the Perich
Group.

The Perich Group is expected to exercise its options on or before 31st October 2012.

On the basis that the Company was in receipt of the option exercise funds at 30th June 2012, the net
debt / equity ratio at 30th June would have materially reduced from 82% to 60%. The Company
continues to repay debt through amortisation of bank facilities of approximately $3.5 million per
annum.

The Company had $10.7 million of debtor finance facilities classified under accounting standards as
current debt. The debtor finance facilities form part of the Company’s medium term financing
facilities not due until December 2013.

Dividends
As foreshadowed at the half year, with the continued improvement in group business units’
performance, the Company will pay a final fully franked dividend for FY 2012 of $0.01 per ordinary
share, consistent with the total dividend (comprising interim and final) paid for the FY 2011 financial
year. The dividend will be paid in November 2012.

Ordinary share dividend growth will be in line with the improving financial returns of the Company.

The Company will pay a fully franked converting preference share dividend to be paid in accordance
with the terms of the converting preference shares in early November 2012.

Outlook
The Company continues to make good progress in the development of its unique business platforms
in specialised areas of the food market, with two key growth opportunities in Freedom Foods and
Pactum Australia, a stable business base in Specialty Seafood and a strategic opportunity in A2C.

The expansion of packaging capabilities in Pactum provides opportunity to increase sales and
profitability through meeting the increasing demands of its private label and proprietary customer
base. Additional opportunities are being explored to increase exposure to value added beverages
for growing export markets in China and SE Asia. The consolidation of Pactum will assist in building
more critical mass in earnings and cashflow of the group.

The strategic investment in A2C provides the Company and its shareholders a potentially significant
value creation opportunity through A2C’s growth in Australia and international markets.

Overall the Company anticipates improved sales,
operating profitability and return on funds
employed in the FY 13 financial year.

Rory J F Macleod
Managing Director
Freedom Foods Group Limited
+612 9526 2555

Annual Report 2012n Directors’ Report
Your Directors submit the financial report of Freedom Foods Group Limited (the Company) for the
year ended 30 June 2012. In order to comply with the provisions of the Corporations Act 2001, the
Directors’ report is as follows:

Directors

For the names and particulars of the Directors of the Company during or since the end of the
financial year, refer to the Corporate Governance Statement.

Company Secretary

Mr Rory J F Macleod held the position of Company Secretary during and at the end of the financial
year. He has been with the Company for over 9 years and is the Managing Director.

Principal activities

The principal activities of the consolidated entity during the financial year were:

• manufacture, distribution and marketing of allergen free cereals, nutritional snacks and

biscuits;

• manufacture and distribution of long life beverages;

•

distribution and marketing of canned seafood;

investment in branded dairy milk manufacture, marketing and distribution activities.

There were no significant changes in the nature of the principal activities during the financial year.

Review of operations

The consolidated entity’s profit attributable to equity holders of the Company, after providing for
income tax, amounted to $3,012,000 (2011 profit: $4,387,000).

Refer to the commentary in the Managing Director’s Review of Operations.

Dividends paid or recommended

In respect of the financial year ended 30 June 2012, the Directors are recommending that a final
ordinary dividend of $0.01 per share be paid in November 2012 and a converting preference share
(CRPS) dividend of $0.014 per CRPS be paid at the beginning of November 2012.

Significant changes in state of affairs

During the financial year, Pactum Australia (Pactum) was consolidated into the Company through
the acquisition of the 50% of the shares in Pactum held by the Perich Group. The net purchase
consideration for the shares was $6m. The Company believes Pactum represents a significant
strategic growth opportunity as well as providing synergies in servicing common customers and
materials purchasing with the Company’s Freedom Foods business.

The acquisition is expected to provide the Company with a number of benefits including:

•

full consolidation of the financial results and access to 100% of the cashflows of Pactum;

participate in potential sales and earnings growth opportunities provided by the expansion
of Pactum’s packaging capabilities at its southern Sydney site from late 2012;

simplify the Group’s reporting and corporate structure; and

the transaction is expected to be earnings accretive in its first year of full ownership in FY
2013.

Directors’ Report

Freedom Foods Group LimitedDirectors’ Report (continued...)

Subsequent Events

No matters or circumstances have arisen since the end of the financial year which significantly
affected or may significantly affect the operations of the consolidated entity, the results of those
operations, or the state of affairs of the consolidated entity.

Future developments

Likely developments in the operations 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 regulations

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.

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

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

Indemnification of officers and auditors

The Company has not, during or since the financial year, in respect of any person who is or has been
an officer or auditor of the Company or a related body corporate:

•

indemnified or made any relevant agreement for indemnifying against liability incurred as an
officer, 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 officer for the costs or expenses to defend legal proceedings; with the exception of the
following matter:

During the financial year the Company paid premiums to insure each of the Directors against
liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of
their conduct while acting in the capacity of an officer of the Company. The contract of insurance
prohibits disclosure of the nature of the liability and the amount of the premium.

Rounding off of amounts

The Company is an entity to which ASIC Class Order 98/0100 applies. Accordingly amounts in the
financial report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Meetings of Directors

During the financial year 14 meetings of Directors (including committees) were held.

Annual Report 2012The following persons acted as Directors of the company during or since the end of the financial
year with attendances to meetings of Directors as follows:

Directors’ Report (continued...)

Directors Meeting

Remuneration & nomination
committee meetings

Audit, risk & compliance
committee meetings
Eligible to attend Attended Eligible to attend Attended Eligible to attend Attended
2
1
-
2
-
-
-

10
10
10
10
10
10
10

10
9
7
9
10
10
9

-
2
-
2
2
2
-

-
1
-
2
2
-
-

2
1
-
2
-
-
-

P.R. Gunner
G.H. Babidge
A.M. Perich
R. Perich
M. Miles
R.J.F. Macleod
M.R. Perich (alternate director)

Remuneration report - audited

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

Key management personnel include:

P.R. Gunner - Chairman and Non-Executive Director

R.J.F. Macleod - Managing Director

G.H. Babidge - Non-Executive Director

A.M. Perich - Non-Executive Director

R. Perich - Non-Executive Director

M. Miles - Non-Executive Director

M. Bracka - CEO Freedom Brands

A. Haddad - CEO Pactum Australia

M. Gauci, Operations Manager Pactum Australia

P. Brown - Executive General Manager Sales, Freedom Brands

P. Bartier - National Supply Chain Manager, Freedom Brands

Remuneration policy

Remuneration arrangements for key management personnel of the Company and Group (“the
Directors and Executives”) are set competitively to attract and retain appropriately qualified 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 entities remuneration strategy.

The remuneration structures explained below are designed to attract suitably qualified candidates.
The remuneration structures take into account:

•
•
•

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.

Freedom Foods Group LimitedDirectors’ Report (continued...)

Managing 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 benefits including motor vehicles), as well as employer
contributions to superannuation funds.

The Managing 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.

Performance based remuneration

Performance based remuneration is at the discretion of the Remuneration and Nomination
Committee. These can take the form of share options or cash bonuses. During the year, cash bonuses
were paid to A Haddad (Pactum Australia) and M Gauci (Pactum Australia) and 6,250,000 options
were granted to RJF Macleod, M Bracka and A Haddad under the Company’s Employee Share Option
Plan (ESOP).

The ESOP allows the Company to grant options over shares to all directors (excluding Ron and Tony
Perich) and permanent full time or part time employees, or their respective nominees, of a company
in the group (Group Companies), which includes related bodies corporate of the Company and a
body corporate in which the Company has voting power of 20% or more, whom the Board determines
to be eligible to participate. The Board believes that Options granted are appropriate to aligning key
executive performance with long term performance and growth of the Company.

Options are valued using the binomial 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 paid to Non-Executive Directors for 2012 was $181,033 (2011: $158,800). To align
director interests with shareholder interests, the Directors are encouraged to hold shares in the
Company.

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 benefits for Non-Executive Directors.

Service agreements

Neither the Managing Director or any other Executive has a fixed term contract. All senior executive
management are employed under contract. The agreements outline the components of the
remuneration paid to executives including annual review. The agreements do not obligate the
business to increase fixed remuneration, pay a short term incentive, make termination benefits or
offer a long term incentive in any given year. The Company may terminate the contract at any time
without notice if serious misconduct has occurred. Where termination with cause occurs, the
executive is only entitled to that portion of remuneration that is fixed, and only up to the date of
termination. The agreements may be terminated by written notice from either party or by the
employing entity within the Group making a payment in lieu of notice. The notice periods are 9
months for the Managing Director and 6 months for CEO Freedom Brands and CEO Pactum Australia.
Other notice periods for other executives is between 1 and 2 months.

Annual Report 2012Directors’ Report (continued...)

Company performance, shareholder wealth and directors and senior management
remuneration

The remuneration policy of the company and group through short term (cash bonuses) and long term incentive structures
(employee share options) aligns the remuneration of the Managing Director and senior Executives to long term
performance and growth of the Company and development of shareholder wealth.

The following table shows the revenue, profits, dividends and earnings per share for the past five years for the consolidated entity.

Revenue ($000s)
Net Profit / (Loss) After Tax ($000s)
Ordinary Dividends Per Share (cents)
CRPS Dividends Per Share (cents)
Basic Earnings per Share (cents)

2012
58,132
3,012
0.50
3.40
3.9

2011
45,256
4,387
0.50
1.00
5.7

2010
44,071
3,357
-
-
5.0

2009
48,596
1,320
1.00
-
2.4

2008
54,082
956
2.00
-
2.0

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

Directors and executive officers emoluments

The benefits of each Director who held office and other key management personnel for the year ended 30 June 2012 are as follows:

Short-term employee benefits

Post employ-
ment benefits

Share
based
payments

% of
total
being

Non-cash
Benefits
$

Superannuation
Contributions
$

2012

Directors

P.R. Gunner

R.J.F. Macleod

G.H. Babidge

A.M. Perich

R. Perich

M. Miles
Executive Officers
M Bracka

(CEO, Freedom Brands)

A. Haddad (1)

(CEO, Pactum Australia)

P. Brown

(Executive General Manager Sales)

P. Bartier

(National Supply Chain Manager)

M. Gauci (2)

(Operations Manager)

Salary

259,800

309,800

59,150

164,220

159,204

33,935

Directors'
Fees
$

Committee
Fees
$

61,000

20,333

31,700

30,000

2,000

1,000

2,000

Other

62,000

31,200

986,109

173,033

8,000

93,200

Options

Total

Options

68,670

76,088

351,663

24,213

32,700

34,880

22%

5,670

15,775

2,880

15,775

60,870

386,445

16%

5,066

53,261

179,477

30%

14,780

13,056

3,800

179,000

172,260

68,935

82,562

190,219

1,533,123

12%

(1) Salary is for the period from 1 April 2012 to 30 June 2012 during which Pactum was a subsidiary of the Group.

Other is bonus of $62,000.

(2) Salary is for the period from 1 April 2012 to 30 June 2012 during which Pactum was a subsidiary of the Group.

Other is bonus of $31,200.

Freedom Foods Group LimitedDirectors’ Report (continued...)

2011

Short-term employee benefits

Directors

P.R. Gunner

R.J.F. Macleod

G.H. Babidge (1)
A.M. Perich
R. Perich
M. Miles

Executive Officers
M Bracka (2)
(Chief Operating Officer)
P. Wilson (3)
(General Manager Leeton Manufactur-
ing Operations)
P. Bartier
(National Supply Chain Manager)
P. Brown
(Executive General Manager Sales)
C. Pensini (4)
(Manufacturing and Operations
Manager)

Salary

Directors'
Fees

Committee
Fees

Other

$
-

259,800

64,133
-
-
-

232,351

151,000

148,409

162,385

137,614

$
60,000

-
31,800
30,000
30,000

$
3,000

-
-
2,000
2,000

$
-

75,425
-
-
-

1,155,692

151,800

7,000

75,425

Non-
cash
Benefits
$
-

-
-
-
-

Post employ-
ment benefits

Share
based
payments

% of
total
being

Superannuation
Contributions

Options

Total Options

$
5,670

15,199

2,533
1,125
2,880
2,880

11,399

11,890

12,444

11,728

$
-

43,680

43,680
-
-
-

$
68,670

318,679

185,771
32,925
34,880
34,880

243,750

151,000

160,299

174,829

149,342

14%

10%
-
-
-

77,748

87,360

1,555,025

(1) Other is payment for leave and other statutory entitlements relating to change in role from executive to non

executive director in September 2010

(2) Commenced 17 October 2010

(3) Resigned April 2011

(4) Resigned 30 June 2012

No Director or senior management person appointed during the year received a payment as part of his or her consideration
for agreeing to hold the position.

Bonus payments as compensation for the current financial year

Bonus payments are payable to Pactum Australia Pty Limited employees with respect to the financial year ended 30 June
2012.

Annual Report 2012Directors’ Report (continued...)

Employee share options

During the financial year share options have been granted to key management personnel of the
Company and consolidated entity as part of their remuneration.

Details of unissued shares or interests under option granted to key management personnel as at
the date of this report are:

Issuing entity

Freedom Foods Group Limited (i)

Grant date
(i) Issued 1 February 2012

Recipients (i)
Issued 1 February 2012
Issued 1 February 2012
Issued 1 February 2012

Number of shares
under option
6,250,000

Class of shares

Ordinary

Exercise price of
options
$0.40

Expiry date of
options
1 February 2017

Name
R.J.F. Macleod
M. Bracka
A. Haddad

Number
2,500,000
2,000,000
1,750,000

Fair Value ($)
300,000
240,000
210,000

Fair value at grant

$0.12

Conditions
Employment
Employment
Employment

There are no further performance criteria that need to be met in relation to options granted.
Options vest over a period of 3 years and relate to an employee’s service period only.

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.

Directors’ shareholding

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

Non-audit services

During the year Deloitte Touche Tohmatsu, the 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 satisfied 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 Company 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, including reviewing or auditing the auditor’s own work, acting in a management
or decision-making capacity for the company, acting as advocate for the company or
jointly sharing economic risks and rewards.

Freedom Foods Group LimitedDirectors’ Report (continued...)

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

Audit Services
Auditors of the Company - Deloitte Touche Tohmatsu
- audit and review of financial reports
- taxation advice
- research and development advice

Consolidated
2012
$

209,010
72,937
34,504
316,451

2011
$

171,740
58,952
19,751
250,443

Auditor’s independence declaration

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

Proceedings on behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the Company or
intervene in any proceedings to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all of those proceedings.

Signed in accordance with a resolution of the Board of Directors made pursuant to s.298(2) of the
Corporations Act 2001.

On behalf of the Directors

Perry Gunner
Chairman
Dated at Sydney 28 September 2012

Rory J F Macleod
Managing Director

Annual Report 2012
Lead Auditor’s Independence Declaration

n Lead Auditor’s Independence Declaration

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

The Board of Directors
Freedom Foods Group Limited
80 Box Road
TAREN POINT NSW 2229

Dear Board Members

Freedom Foods Group 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 Foods Group Limited.

As lead audit partner for the audit of the financial statements of Freedom Foods Group Limited for
the financial year ended 30 June 2012, 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

Catherine Hill
Partner
Chartered Accountants
Sydney, 28 September 2012

Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited

Freedom Foods Group LimitedCorporate Governance Statement

n Corporate Governance Statement

Freedom Foods Group Limited (the Company) is committed to implementing the highest possible standards of corporate
governance and ensures, wherever possible, that its practices are consistent with the Second Edition of the Australian
Securities Exchange (ASX) Corporate Governance Council’s Principles and Recommendations.

Each of the eight principles are listed in turn. In certain circumstances, due to the size and stage of development of the
Company and its operations, it may not be practicable or necessary to implement the ASX Principles in their entirety. In
such instances, the Company will identify the areas of divergence. The Corporate Governance Statement, policies and
Charters are published on the Company’s website: http://www.ffgl.com.au.

Principle 1

Lay solid foundations for management and oversight by the Board

The Board’s responsibilities are encompassed in a charter
which
(the
is published on http://www.ffgl.com.au
Company’s website). The Board is responsible for, and has
the authority to determine, all matters relating to the
strategic direction, policies, practices, establishing goals
for management and the operation of the Company.
Without intending to limit this general role of the Board,
the specific functions and responsibilities of the Board
include:

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

accountability systems;

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

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

(4) reviewing and determining the strategic direction
and policies of the Company, 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 executive management performance
and implementation of strategy and ensuring
appropriate resources are available;

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

(8) continuously monitoring and overseeing the

Company’s financial position; and

(9) approving and monitoring financial and other

reporting.

Key responsibilities of the Board include the overseeing of
the strategic direction of the Company, determining its
policies and objectives and monitoring executive
management performance. The Board adopts a three-year
business plan and a 12 month operating plan for the
Company. Financial results and general performance are
closely monitored against the operating plan objectives.

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 responsibilities delegated by the Board to the Company’s
management, as set out in the Company’s Statement of
Delegated Authority, include managing the day-to-day
operations of the Company and Consolidated entities. The
Statement of Delegated Authority has been posted to the
Company’s website (http://www.ffgl.com.au).

The Managing Director and Senior Executive management
service contracts and position descriptions
have
respectively setting out their duties, responsibilities, and
conditions of service and termination entitlements. Any
new Directors appointed will receive formal letters of
appointment setting out the key terms, conditions and
expectations of their appointment.

The Managing Director and Senior Executive management
are subject to a formal performance review process on an
annual basis. The Remuneration and Nomination
Committee reviews the performance of the Managing
Director and Senior Executive management against clear
secondary
performance objectives. Principal and
objectives for the financial year have been established

Annual Report 2012

which are evaluated against and
includes monthly
monitoring of performance. A performance evaluation
was undertaken in August 2012 in accordance with the
process disclosed.

Principle 2

Structure of the Board to add value

The Board determines the Board’s size and composition,
subject to limits imposed by the Company’s Constitution.
The Constitution provides for a minimum of three Directors
and a maximum of ten. At this time the Board comprises of
six Directors (excluding alternate Director),two of whom
are non-executive independent Directors including the
Chairman. A Director is deemed to be independent if he or
she is a Non-Executive Director and:

(1) is not a substantial shareholder;

(2) has not been employed in an executive capacity in

the Company in the last three years;

(3) has not acted as a material consultant to the

Company in the last three years;

(4) is not a material supplier or customer of the

Company;

(5) has no material contractual relationship with the

Company;

(6) has not served on the Board for a period which

could materially interfere with his or her ability to act
in the best interests of the Company; and

(7) is free from any interest which could materially
interfere with his or her ability to act in the best
interests of the Company.

The test of independence for Directors is set out in detail
under section 4 of the Board Charter, which has been
posted on the website of the Company: (http://www.ffgl.
com.au). Materiality thresholds referred to above are
assessed on a case-by-case basis.

Whilst the Board is not structured with a majority of
independent directors in terms of the ASX Corporate
Governance Council’s discussion of independent status,
the Board believes that the Directors are able, and do
make, quality and independent judgement in the best
interests of the Company on all relevant issues before the
Board. The Board considers that the Company is not
currently of a size, nor are its affairs of such complexity to
justify the expense of the appointment of a majority of
independent Directors.

The Board aims to attract and maintain a Board which has
an appropriate mix of skills, experience, expertise and
diversity.

Corporate Governance Statement (continued...)

The names and particulars of the Directors of the Company
during or since the end of the financial year are:

Mr P.R. Gunner
Chairman (Non-Executive), Age 65. Appointed in April 2003, Director
9 years.

B.Ag.Sc - is former Chairman and CEO of Orlando Wyndham
Wine Group, a current Director of A2 Corporation, Deputy
Chairman of Viterra Inc and Director of Australian Vintage
Ltd. Appointed Chairman in July 2006. Chairman of the
Remuneration & Nomination Committee.

Interest in shares and options are 510,732 ordinary shares,
159,604 convertible redeemable preference shares and
159,604 $0.40 options over ordinary shares. Measured
independence criteria adopted by the
against the
Company, Mr. Gunner is considered an independent
Director.

Mr R.J.F. Macleod
Managing Director Age 44. Appointed Director in May 2008, Director
4 years.

B.Econ (Hons) - currently Managing Director and director
of all Group entities. Mr Macleod has been with the group
for the past 9 years, responsible for strategic and corporate
development and finance and administration. Former
Senior Director, corporate finance for UBS in Australasia
and Europe where he gained extensive experience in
strategy and commercial development, mergers and
acquisitions and corporate analysis.

Interest in shares and options are 182,775 ordinary shares,
6,666 convertible redeemable preference shares, 6,666
$0.40 options over ordinary shares and 2,500,000 options
(exercisable at $0.40) under the group employee share
option scheme. Mr Macleod, being Managing Director of
the Company, is not considered independent.

Mr G.H. Babidge
Non Executive Director, Age 59. Appointed Director in January 2002,
Director 10 years.

B.Comm., ACA – extensive public company experience
within the food industry. Currently Managing Director of
A2 Corporation Limited. Former Managing Director of
Freedom Foods Group Limited, former CEO of the major
milling and baking group, Bunge Defiance and many
years Managing Director of the dairy interests of National
Foods Limited.

Interest in shares and options are 98,057 ordinary shares,
30,643 convertible redeemable preference shares, 30,643
$0.40 options over ordinary shares. Mr Babidge, being a
former Executive Officer of the Company within the past 3
years, is not considered independent.

Freedom Foods Group Limited

Corporate Governance Statement (continued...)

Mr A.M. Perich
Director (Non-Executive), Age 71. Appointed Director in July 2006,
Director 6 years.

Member of the Order of Australia - 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, farmer and business
entrepreneur. Outside of the Perich Group Mr. A.M. Perich
holds a number of other directorships which include,
Greenfields Narellan Holdings, East Coast Woodshavings
Pty Limited, Breeders Choice Woodshavings Pty Limited,
Austral Malaysian Mining Limited, Pulai Mining Sdn Bhd
(Malaysia) and
Institute.
Memberships include Narellan Chamber of Commerce,
Narellan Rotary Club, Urban Development Institute of
Australia, Urban Taskforce, Property Council of Australia,
past President of Narellan Rotary Club and Past President
of Dairy Research at Sydney University.

Inghams Health Research

Interest in shares and options are 51,620,094 ordinary
shares, 15,995,142 convertible redeemable preference
shares and 15,995,142 $0.40 options over ordinary shares.
Being a substantial shareholder of the Company, Mr. A.M.
Perich is not considered an independent Director.

Mr R. Perich
Director (Non-Executive), Age 69. Appointed Director in April 2005,
Director 7 years.

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, farmer and business entrepreneur. Former
Director of United Dairies Limited. Appointed Director in
April 2005. Member of the Audit, Risk & Compliance
Committee and member of
the Remuneration &
Nomination Committee.

Interest in shares and options are 51,620,094 ordinary
shares, 15,995,142 convertible redeemable preference
shares and 15,995,142 $0.40 options over ordinary shares.
Being a substantial shareholder of the Company, Mr. R.
Perich is not considered an independent Director.

Mr M. Miles
Director (Non-Executive), Age 63. Appointed Director in November
2006, Director 5 years.

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 of South Pacific Distilleries, Fiji. Member of the

Strategic Planning Committee of the Institute of Brewing
and Distilling Asia Pacific. Chairman of Audit, Risk &
Compliance Committee and member of the Remuneration
and Nomination Committee.

Interest in shares and options are 212,812 ordinary shares,
64,584 convertible redeemable preference shares and
64,584 $0.40 options over ordinary shares. Measured
against the
independence criteria adopted by the
Company, Mr. Miles is considered an independent director.

Mr M.R. Perich
Alternate Director (Non-Executive), Age 37. Appointed Alternate
Director for A.M Perich and R. Perich in March 2009, Director 3 years.

B AppSci (SysAg), 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. Former Director of Contract
Beverages Packers of Australia Pty Limited, a joint venture
controlled equally by the Company and Arrovest, Director
of Australian Dairy Conference and Dairy NSW, Vice
President of Dairy Research Foundation and Graduate
Member of the Australian Institute of Company Directors
post nominals.

Interest in shares and options are 51,620,094 ordinary
shares, 15,995,142 convertible redeemable preference
shares and 15,995,142 $0.40 options over ordinary shares.
Being a substantial shareholder of the Company, Mr. M.
Perich is not considered an independent Director.

In order to facilitate independent judgement in decision
making, each Director may seek independent professional
advice at the Company’s expense. If advice is sought by
the Chairman, he must obtain board approval if the fees
for such advice exceeds $50,000 (exclusive of GST), such
approval is not to be unreasonably withheld. Where
advice is sought by the other Directors, prior written
approval by the Chairman is required but approval will not
be unreasonably withheld. If the Chairman refuses to give
approval, the matter must be referred to the Board. All
Directors are made aware of the professional advice
sought and obtained.

There is a clear division of responsibility between the
Chairman and Managing Director.

The Remuneration and Nomination Committee of the
Board comprises of three Non-Executive Directors-Messrs.
P.R Gunner, R.Perich and G Babidge. Two out of three
committee members are independent. Mr Gunner, who is
an independent Director, is the Committee Chairman. The
Committee Charter which has been posted on the website
of the Company: http://www.ffgl.com.au details out the

Annual Report 2012process and timing for re election of directors. The Board’s
policy for nomination and appointment of Directors also
forms part of the Charter.

The Company Constitution states that at each Annual
General Meeting (AGM) one-third of the Directors for the
time being, or if their number is not three or a multiple of
three, then the nearest number greater than one-third,
shall retire from office. A retiring Director shall be eligible
for re-election. No Director (other than a Managing
Director) may hold office without re-election past the
third annual general meeting following their appointment
or three years, whichever is longer or, in the case of a
Director appointed by the Directors as an additional
Director or to fill a casual vacancy, past the next annual
general meeting of the company. Any Director appointed
by the Board since the 1st AGM must stand for election at
the next AGM.

is
The Remuneration and Nomination Committee
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 different perspectives to be put forward

regarding issues before the Board;

(3) a range of different skills to be brought to Board

deliberations; and

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

The Committee’s functions are to review and report to the
Board on:

remuneration policy for the entire consolidated
entity (including Managing Director, Senior
Executives and Non-Executive Directors);

identifying nominees for Directorships and other key
Executive appointments;

assessing Director competencies;

evaluating the Board’s performance annually; and

remuneration policies and practices.

The Remuneration and Nomination Committee
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 effectiveness and programme of Board

meetings.

Corporate Governance Statement (continued...)

A review of the performance of the individual Directors
occurs each year. The Board undertook an evaluation of
itself and its committees in August 2012, with all Directors
providing input as to the effectiveness of the board
processes, meetings, composition and reporting with
Directors having an opportunity to discuss and comment
on such matters with the Chairman. The Board review its
performance and composition on an annual basis to
ensure that it has the appropriate mix of expertise and
experience. The Board also reviews the performance and
composition of its committees on an annual basis.

The Committee meets as frequently as required and at
least once a year. The quorum for such meetings is two
members, at least one of whom shall be independent.
Details of the Committee members’ attendance at
Committee meetings are set out in the Directors’ Report.

Subject to normal privacy requirements, each Director has
the right of access to all of the Company’s records,
information and senior Executives. They receive regular
detailed reports on financial and operational aspects of
the Company’s business and may request elaboration or
explanation of these reports at any time. New Directors
undergo an induction process in which they are given a
full briefing of the operations of the Company. Where
possible, this includes meetings with key Executives, tours
of the operating sites (if practicable), provision of an
induction package containing key corporate information
and presentations. Directors and Executives are
encouraged to broaden their knowledge of the Company’s
business and to keep abreast of developments in business
more generally by attendance at relevant courses,
seminars, conferences, etc. The Company meets expenses
involved in such activities.

Names of Members of Committees

Remuneration
and Nomination
Committee
3
3
-
3
-
-

Audit Risk and
Compliance
Committee
-
3
-
3
3
-

P.R. Gunner
G.H. Babidge
A.M. Perich
R. Perich
M. Miles
R.J.F. Macleod

Principle 3

Promote ethical and responsible decision-making

The Directors acknowledge the need for, and continued
maintenance of, a high standard of corporate governance

Freedom Foods Group Limited
Corporate Governance Statement (continued...)

practices and ethical conduct by all Directors and
employees.
its ethical standards, the
Company will:

In maintaining

(1) behave with integrity in all its dealings with

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

(2) ensure its actions comply with applicable laws and

regulations;

(3) not engage in any activity that could be construed

to involve an improper inducement;

(4) achieve a working environment where:

b. within the period of 1 month prior to the issue of a

prospectus; and

c. where there is price sensitive information that has
not been disclosed because of an ASX Listing Rule
exemption; and

d. any additional period arising from time to time that
the Board imposes a prohibition on trading by Key
Management Personnel as an ‘ad-hoc’ prohibition on
trading of Securities. Further details of the policies
are available on the website of the Company:
http://www.ffgl.com.au.

(i)

equal opportunity is rigorously practised;

Diversity Policy

(ii) harassment and other offensive forms of

behaviour are not tolerated;

(iii) confidentiality of commercially sensitive

information is protected; and

(iv) employees are encouraged to discuss concerns
and ethical behaviour with Directors and senior
Executives.

The Board, senior Executives and all employees of the
Company are committed to implementing this Code of
Ethics and each
is accountable for such
compliance. A copy of the Code is made available to
Directors, employees, contractors and relevant personnel
on the Company’s website: http://www.ffgl.com.au.

individual

implementing

for
Senior Executive management
establishing,
the
effectiveness of the Code of Ethics as well as for overseeing
that all of the Company’s employees and contractors
understand, and act in accordance with the Code.

responsible
reviewing

is
and

The Board has implemented a range of procedures
designed to oversee that the Company complies with the
law and achieves high ethical standards in identifying and
resolving or managing conflicts of interest. All Directors
must advise the Chairman of all business dealings with the
Company.

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

The Company’s Securities Trading Policies for Directors
and senior executives generally allow Directors and senior
executives to deal in the Company’s securities other than
the following:

from 1 month prior to the release of the annual or
half yearly accounts;

In accordance with the ASX Corporate Governance
Recommendations on diversity, the Board established a
diversity policy in the 2012 financial year which includes:

a requirement that the Board establish measurable
objectives for achieving gender diversity; and

b. a requirement for the Board to assess annually both
the gender objectives and the progress in achieving
them.

This policy once adopted will be available on the website
of the Company http://www.ffgl.com.au and assessments
will be reported in the annual report.

The Company acknowledges the positive outcome that
can be achieved through a diverse workforce and is
committed to actively managing diversity as a means of
enhancing the Company’s performance.

for
The Board will establish measurable objectives
achieving gender diversity in the upcoming financial year
and will report on the progress in achieving them in the
following years annual report.

As at 30 June 2012, the proportion of women employed
by the Company was as follows:

Board of Directors: 0%

Senior Executive positions: 0%

Total Company workforce: 35%

Principle 4

Safeguard integrity in financial reporting

The Board has established an Audit, Risk and Compliance
Committee comprising three Non-Executive Directors,
with appropriate experience. Every member of the
Committee must be able to read and understand financial

Annual Report 2012Corporate Governance Statement (continued...)

statements with experience in financial and accounting
matters. Currently, the Committee comprises of Mr M. Miles
(Chairman), Mr R. Perich and Mr G H Babidge. One out of
the three Committee members are independent. The
Chairman of the Committee is an independent Director
and is not Chairman of the Board.

The Managing Director, other senior management and
external audit partner attend Committee meetings at the
discretion of the Committee.

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 of the Board.

record of proceedings. At the subsequent Board meeting
the Chairman of the Committee
reports on the
Committee’s conclusions and recommendations.

The candidates for the position of external auditor must
be able to demonstrate complete independence from the
Company and an ability to maintain independence
throughout the engagement period. The external auditors
have advised, after consultation with the Company, that
the audit engagement partner shall be rotated every five
years. The Board may select an external auditor based on
the criteria relevant to the business of the Company such
as experience in the industry in which the Company
operates, references, costs, and any other matters deemed
relevant by the Board.

The Audit, Risk and Compliance Committee is responsible
for:

Principle 5

(1) reviewing and reporting to the Board on the half

Make timely and balanced disclosure

yearly and annual reports and financial statements of
the Company and consolidated entities;

(2) nominating the external auditor and reviewing the
adequacy, scope and quality of the annual statutory
audit and half yearly statutory review;

(3) reviewing the effectiveness of the Company’s

internal control systems;

(4) monitoring and reviewing the reliability of financial

reporting;

(5) monitoring and reviewing the compliance of the

Company with applicable laws and regulations;

(6) monitoring the Australian Accounting Standards and

Interpretations;

(7) monitoring financial risks and exposure of the

Company’s assets;

(8) monitoring the risk management policy and plans;

(9) reviewing the Company’s Occupational Health and
Safety obligations and the Company’s compliance;

(10) reviewing the Company’s insurance policies and

coverage; and

(11) overseeing the independence of external auditors

and annually reviewing the Company’s policy on
maintaining the independence of external auditor.

The Committee has a formal Charter which is posted on
the website of the Company http://www.ffgl.com.au. The
Committee meets as frequently as required and at least
twice a year. The quorum for such meetings is two
members, at least one of whom shall be independent.
Details of the Committee members’ attendance at
Committee meetings are set out in the Directors’ Report.
The minutes of each Committee meeting are reviewed at
the subsequent Board meeting and signed as an accurate

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 Company. Such information
must be presented in a clear and balanced way so as not
to omit any material information.

This Policy is designed to ensure that the Company meets
its continuous disclosure obligations under the ASX
Listing Rules and has been posted to the website of the
Company http://www.ffgl.com.au.

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
effect on the value of the Company securities must be
disclosed. Examples of such information include a change
in revenue, asset values or significant transactions.

Directors receive copies of all announcements immediately
after notification to the ASX. All announcements are
posted to the Company’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.

Disclosure Officer

The Board has appointed the Company Secretary to act as
the Disclosure Officer, responsible for communications
with the ASX. The Company Secretary in discussion with
the Managing Director and Chairman (as required) decides
what information must be disclosed. The Disclosure
Officer holds the primary responsibility for ensuring that
the Company complies with its disclosure obligations. In
addition, Directors, employees or consultants are all

Freedom Foods Group LimitedCorporate Governance Statement (continued...)

responsible for reporting price sensitive information that is
not generally available to the Disclosure Officer.

To enhance clarity and balance of reporting and to enable
investors to make an
informed assessment of the
Company’s performance, financial results are accompanied
by commentary.

Principle 6

Respect the rights of shareholders

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

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

(2)

Invitation to the annual general meeting and all
accompanying papers;

(3) The Company’s website at http://www.ffgl.com.au;

(4) Reports to the ASX and the press;

(5) Half year and full year profit 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 Company 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.

In accordance with Principle 6 of the ASX Principles, the
Company will establish a Communications with Shareholder
Policy, incorporating matters disclosed above. The policy
once adopted will be available on the website of the
Company http://www.ffgl.com.au.

Principle 7

Recognise and manage risk

Risk oversight and management policies

The Company’s Risk Management Policy is available on its
website http://www.ffgl.com.au. The Policy covers the
areas of oversight, risk management, risk profile, compliance
and control and assessment of effectiveness. The Audit,

Risk and Compliance Committee (details and composition
of which have been set out earlier) is responsible for
providing the Board with advice and recommendations
regarding the ongoing development of the Policy.

Risk management and risk profile

The Committee is responsible for:

(1) providing the Board with advice and

recommendations regarding the Company’s:

(i)

(ii)

risk management system; and

risk profile that describes the material risks
(including financial and non-financial risks)

(2)

reviewing the effectiveness of the Company’s
implementation of the risk management system at
least once a year;

(3)

regularly reviewing and updating the Company’s risk
profile; and

(4) ensuring that the appropriate Executives have
established and implemented a system for
identifying, assessing, monitoring and managing risk
throughout the organisation. The system is to
include the Company’s internal compliance and
control systems.

Executive management provide the Committee and
Board with regular reports on operational, financial,
regulatory and commercial matters within their business
divisions. This ensures Management accountability.
Executive management is responsible for designing and
implementing a risk management and internal control
system to manage the Company’s material business risks.
Executive management identifies and reviews the major
risks impacting each area of the business and develops
strategies to effectively mitigate these risks.

As required by the ASX Principles, Executive management
has reported to the Board on the effectiveness of the
management of its material business risks. The ultimate
responsibility for risk oversight and management rests
with the Board.

Due to the size and scale of operations of the Company,
there is no separate internal audit function.

Executive Management Assurances

As part of the structure of financial review and
authorisation, the Managing Director and Senior Executive
management are required to provide written assurances
that the financial reports present a true and fair view of the
Company’s and consolidated entities financial position in
all material aspects and that the integrity of the financial
statements is founded on a system of risk management

Annual Report 2012Corporate Governance Statement (continued...)

and internal compliance and control which implements
the policies adopted by the Board and is operating
efficiently and effectively in all material aspects in relation
to financial reporting risks. As part of internal management
reporting policy relevant senior personnel provide written
assurances regarding the integrity of the financial reports
to support the Managing Director and Senior Executive
management assurances to the Board. The Board received
the written assurances with respect to the 2012 financial
year.

Principle 8

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 executives of the
Company. The Committee is responsible for ensuring that
any equity-based Executive or Non-Executive Director
remuneration is made in accordance with any thresholds
approved by shareholders. The composition and details of
the Committee have been detailed earlier
in this
Statement.

In respect of remuneration issues, the responsibilities of
the Committee
include determining, evaluating and
reporting to the Board with respect to:

(1) executive remuneration and incentive policies,

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
financial framework within which they act.

The Committee’s main functions include:

(1) Conditions of service and remuneration of Executive

management and their direct reports:

(2) Performance of the Executive management;

(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 Company.

(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 financial and non-financial
imperatives.

Executive management attend meetings of
the
Remuneration and Nomination Committee by invitation
report on, and discuss, senior
when
management performance, remuneration matters, etc.

required to

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

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

(2)

(3)

(4)

(5)

the Company’s recruitment, retention and
termination policies and procedures for executives;

incentive schemes;

superannuation arrangements; and

the remuneration framework for Directors.

The Committee operates independently of the senior
management of the Company in its recommendations to
the Board in relation to:

(1)

(2)

(3)

reviewing on an annual basis the performance and
salary of the Executive management group
including Executive and Employee Share Option
Plan participation;

the remuneration packages and other terms and
conditions of appointment and continuing
employment of senior Executives; and

reviewing Non-Executive Directors’ remuneration
within the maximum amount approved by
shareholders.

The structure of remuneration for Non-Executive Directors
and Managing Director is different. As explained in the
Remuneration Report, the Managing Director and key
management personnel receive fixed remuneration,
employer contributions to superannuation funds and
options. Options are valued using the binomial method
and are not linked to the performance of the Company,
but to the personnel’s employment. The Securities
Trading Policy for Directors and senior executives restricts
entering into transactions with securities in associated
products which operate to limit the economic risk of any
unvested entitlements under any equity based
remuneration scheme offered by
the Company.
Remuneration packages of Non-Executive Directors are
fee based. Non-Executive Directors do not participate in
bonus payments or any retirement benefits other than
statutory superannuation.

Freedom Foods Group Limited
Consolidated Statement of Comprehensive Income

n Consolidated Statement of Comprehensive Income

For the financial year ended 30 June 2012

Notes

Consolidated
$000

37
34
35

9
9

2012
58,137
(40,549)
17,588
468
(2,419)
(6,746)
(3,550)
(1,372)
(1,813)
-
-
(120)
564
650
3,250
(238)
3,012
-
3,012

3,012
-
3,012

3.88
3.03
0.50
2.00
1.40

2011
45,353
(31,262)
14,091
403
(2,042)
(5,338)
(3,160)
(1,092)
(1,529)
3,884
(1,778)
(326)
841
295
4,249
138
4,387
-
4,387

4,387
-
4,387

5.67
4.90
0.50
-
1.00

Revenue from sale of goods
Cost of sales
Gross profit

Other income
Marketing expenses
Selling and distribution expenses
Administrative expenses
Depreciation
Finance costs
Profit on sale of A2DP shares
Impairment of Goodwill
Write off of legal expense and unrecoverable amounts
Share of profit of joint ventures accounted for using the equity method
Share of profit of associates accounted for using the equity method

Profit before tax

Income tax (expense)/benefit

Profit for the year
Other comprehensive income
Total comprehensive income for the year

Profit attributable to:
Owners of the company
Non-controlling interests

Total comprehensive income attributable to:

Owners of the company
Non-controlling interests

Earnings per share

From continuing operations:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Ordinary Dividends per share paid - Final 2011 (cents per share)
CRPS Dividends per share paid - Final 2011(cents per share)
CRPS Dividends per share paid - Interim 2012 (cents per share)

Notes to the statement of comprehensive income are included on pages 30 to76.

Annual Report 2012Consolidated Statement of Financial Position

n Consolidated Statement of Financial Position

For the financial year ended 30 June 2012

ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Prepayments
Total Current Assets
Non-current assets
Investments in associates
Deferred tax assets
Property, plant and equipment
Goodwill
Other intangible assets
Total non-current assets
TOTAl ASSETS
lIABIlITIES
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Loans payable to related parties
Other liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Provisions
Total non-current liabilities
TOTAl lIABIlITIES
NET ASSETS
EquITY
Capital and Reserves
Equity attributable to owners of the company
Issued capital
Reserves
Retained earnings
TOTAl EquITY

Notes to the statement of comprehensive income are included on pages 30 to 76.

Notes

22(a)
10
11
12

11
7
14
13
13

15
16
7
16
11
17

15
16
17

18
19
20

Consolidated
$000

2012

2011

767
17,746
81
13,144
644
32,382

12,357
2,035
35,619
5,214
16,274
71,499
103,881

15,196
19,001
816
8,064
-
902
43,979

73
12,395
164
12,632
56,611
47,270

39,508
(3,901)
11,663
47,270

182
10,097
-
5,349
665
16,293

11,440
2,140
24,095
5,214
16,274
59,163
75,456

5,579
10,357
-
-
53
855
16,844

504
7,995
130
8,629
25,473
49,983

39,288
1,006
9,689
49,983

Freedom Foods Group LimitedConsolidated Statement of Cash Flows

n Consolidated Statement of Cash Flows

For the financial year ended 30 June 2012

Notes

Consolidated
$000

2012

2011

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Cash generated from operations

Interest paid

Income tax (paid)/received

Receipt of government grants

Net cash generated by operating activities

22(b)

Cash flows from investing activities

Proceeds from disposal of property, plant and equipment

Payment for property, plant and equipment

Investment in Equity Interest

Net cash inflow on acquisition of subsidiary

Costs associated with Sale of Joint Venture

Advance to Joint Venture

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issue of equity instruments of the company

Payment of share issue costs

Dividends paid

Proceeds from borrowings

Repayment of borrowings

Proceeds from related parties

Net cash provided by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of financial year

Cash and cash equivalents at end of financial year

Notes to the statement of comprehensive income are included on pages 30 to 76.

22(a)

55,926

(50,495)

5,431

(1,808)

(119)

182

3,686

(5,144)

(2,064)

168

(1,438)

(8,460)

211

(6)

(1,020)

7,511

(3,401)

2,064

5,359

585

182
767

44,143

(40,061)

4,082

(1,612)

152

2,697

(2,460)

(812)

(383)

(356)

(4,011)

5,825

(192)

(359)

11,108

(13,520)

2,862

1,548

(1,366)
182

Annual Report 2012Consolidated Statement of Changes in Equity

n Consolidated Statement of Changes in Equity

For the financial year ended 30 June 2012

ATTRIBuTABlE TO EquITY hOlDERS OF ThE PARENT

Notes

Fully paid
ordinary
shares
$’000

CRPS
Shares

Retained
earnings

$’000

Equity - settled
employee
benefits reserve
$’000

Other
Reserve

$’000

Asset
revaluation
reserve
$’000

Total

$’000

Non
controlling
interest
$’000

Total
Equity

$’000

5,707

446

CONSOlIDATED

Balance as at 30 June 2010

Equity issues

Share issue costs

Related income tax

Profit for the year

Other comprehensive income
for the year

Total comprehensive income for
the year

Recognition of share-based
payments

Dividends paid

Balance as at 30 June 2011

Equity issues

Share issue costs

Related income tax

Acquisition of subsidiary under
common control

Profit for the year

Other comprehensive income
for the year

Total comprehensive income for
the year

Recognition of share-based
payments

Dividend paid

33,655

5,633

33,637

229

(9)

5,824

(272)

4,387

(405)

9,689

3,012

(1,038)

11,663

(5,013)

533

106

473

40,263

5,842

(272)

4,387

40,263

5,842

(272)

4,387

(405)

473

49,983

229

(9)

(5,013)

3,012

229

(9)

(5,013)

3,012

106

(1,038)

Balance as at 30 June 2012

33,875

5,633

639

(5,013)

473

47,270

Notes to the statement of comprehensive income are included on pages 30 to 76.

106

(1,038)

47,270

Freedom Foods Group Limited

Notes to the Financial Statements

n Notes to the Financial Statements
For the financial year ended 30 June 2012

1. General Information

The financial report of Freedom Foods Group Limited (“Group” or “Company”) for the year ended 30
June 2012 was authorised for issue in accordance with resolution of Directors on 28th September
2012.

Freedom Foods Group Limited is a company incorporated in Australia whose shares are publicly
traded on the Australian securities exchange. The company is trading under the symbol ‘FNP’.

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

2. Adoption of New and Revised Accounting Standards

2.1 Standards and Interpretations affecting amounts reported in the current

period (and/or prior periods)
The following new and revised Standards and Interpretations have been adopted in the
current year and have affected the amounts reported in these financial statements. Details of
other Standards and Interpretations adopted in these financial statements but that have had
no effect on the amounts reported are included in section 2.2.

Standards affecting presentation and disclosure

Amendments to AASB 7 ‘Financial Instruments: Disclosure’

Amendments to AASB 101 ‘Presentation of Financial Statements’

AASB 1054 ‘Australian Additional Disclosures’ and AASB 2011-1 ‘Amendments to Australian
Accounting Standards arising from Trans-Tasman Convergence Project’

AASB 124 ‘Related Party Disclosures’ (revised December 2009)

2.2 Standards and Interpretations adopted with no effect on financial

statements

The following new and revised Standards and Interpretations have also been adopted in these
financial statements. Their adoption has not had any significant impact on the amounts
reported in these financial statements but may affect the accounting for future transactions or
arrangements.

AASB 2009-12 ‘Amendments to Australian Accounting Standards’
AASB 2010-5 ‘Amendments to Australian Accounting Standards’
AASB 2010-6 ‘Amendments to Australian Accounting Standards – Disclosures on Transfers of
Financial Assets’

2.3 Standards and Interpretations in issue not yet adopted

At the date of authorisation of the financial statements, the Standards and Interpretations listed
below were in issue but not yet effective.

Annual Report 2012

Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

2. Adoption of New and Revised Accounting Standards

(continued...)

Standard/Interpretation

AASB 2010-8 ‘Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets’
AASB 2011-9 ‘Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income’
AASB 9 ‘Financial Instruments’
AASB 2009-11 ‘Amendments to Australian Accounting Standards arising from AASB 9’
AASB 2010-7 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)’
AASB 10 'Consolidated Financial Statements'
AASB 11 'Joint Arrangements'
AASB 12 'Disclosure of Interests in Other Entities'
AASB 128 'Investments in Associates and Joint Ventures'
AASB 13 ‘Fair Value Measurement’
AASB 2011-8 ‘Amendments to Australian Accounting standards arising from AASB 13’
AASB 119 ‘Employee Benefits’
AASB 2011-10 ‘Amendments to Australian Accounting Standards arising from AASB 119 (2011)’
AASB 2011-7 ‘Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements
standards’
Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)
AASB 127 ‘Separate Financial Statements’
AASB 2011-4 ‘Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure
Requirements’
Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)
Mandatory Effective Date of IFRS 9 and Transition Disclosures (Amendments to IFRS 9 and IFRS 7)

Effective for
annual reporting
periods beginning
on or after
1 January 2012
1 July 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013

Expected to be
initially applied
in the financial
year ending
30 June 2013
30 June 2013
30 June 2014
30 June 2014
30 June 2014
30 June 2014
30 June 2014
30 June 2014
30 June 2014
30 June 2014
30 June 2014
30 June 2014
30 June 2014

1 January 2013

30 June 2014

1 January 2013
1 January 2013

30 June 2014
30 June 2014

1 July 2013

30 June 2014

1 January 2014
1 January 2015

30 June 2015
30 June 2016

3. Significant Accounting Policies

The following significant accounting policies have
been adopted in the preparation and presentation of
the financial report:

(a) Statement of compliance

These financial statements are general purpose
financial statements which have been prepared in
the Corporations Act 2001,
accordance with
Accounting Standards and
Interpretations, and
comply with other requirements of the law. The
financial statements comprise the consolidated
financial statements of the Group. For the purposes
of preparing the consolidated financial statements,
is a for-profit entity. Accounting
the Company
Standards include Australian Accounting Standards.
Compliance with Australian Accounting Standards
ensures that the financial statements and notes of
the company and
the Group comply with
International Financial Reporting Standards (‘IFRS’).

The financial statements were authorised for issue by
the directors on 28th September 2012.

(b) Basis of preparation

The financial report has been prepared on the
historical cost basis, except for the revaluation of
certain non-current assets and financial instruments.
Cost is based on the fair values of the consideration
given in exchange for assets.

The financial 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.

As at balance date the Group’s current liabilities
exceeded its current assets by $11,598,000. This resulted
from the use of current liabilities in financing the
acquisition of non-current assets, as well as the existence
of $10,662,000 of debtor finance facility debt which, in
line with the Accounting Standards, is required to be
shown as a current liability but not expected to be
payable until at least 31 December 2013.

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

3. Significant Accounting Policies

(continued...)

intangible assets of the consolidated entity are set
out in note 13.

The directors consider the going concern basis of
accounting is appropriate for the preparation of the
financial report for the following reasons:

•

the Group will continue to use the debtor
finance facility through normal trading, which
will have the effect of retaining $10-11 million
of debt throughout the next year,

the exercise of unlisted share options held by
Arrovest Pty Limited which is expected to
contribute $6.2 million in cash within 6 months
from the balance date.

(d) Critical accounting judgments and key
sources of estimation uncertainty

required

to make

In the application of the Group’s accounting policies,
judgments,
management
estimates and assumptions about carrying values of
assets and liabilities that are not readily apparent from
other
sources. The estimates and associated
assumptions are based on historical experience and
other factors that are considered to be relevant. Actual
results may differ from these estimates. The estimates
and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is
revised if the revision affects only that period, or in the
period of the revision and future periods if the revision
affects both current and future periods.

Key sources of estimation uncertainty:

Impairment of goodwill and other intangible assets

Determining whether goodwill or other intangible
assets are impaired requires an estimation of the
value in use of the cash generating units to which the
goodwill or other
intangible assets have been
allocated. The value in use calculation requires the
directors to estimate the future cash flows expected
to arise from the cash generating unit and a suitable
discount rate in order to calculate the present value.

The value of the goodwill as at the end of the financial
year was $5,214,000, with $1,778,000 impairment loss
charged against this goodwill in 2011.

The value of other intangible assets as at the end of the
financial year was $16,274,000, with no impairment loss
charged against the other intangible assets.

Further details in relation to the goodwill and other

(e) Basis of consolidation

The consolidated financial statements incorporate
the financial statements of Freedom Foods Group
Limited and its subsidiaries as at 30 June each year
(‘the Group’). Control is achieved where the Company
has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its
activities. The results of subsidiaries acquired or
disposed of during the year are included in the
consolidated statement of comprehensive income
from the effective date of acquisition or up to the
effective date of disposal, as appropriate.

Where necessary, adjustments are made to the
financial statements of subsidiaries to bring their
accounting policies into line with those used by
other members of the Group.

All intra-group transactions, balances, income and
expenses are eliminated in full on consolidation.

(f) Business combinations

liabilities

Acquisitions of subsidiaries and businesses are
accounted for using the acquisition method. The cost of
the business combination is measured as the aggregate
of the fair values (at the date of exchange) of assets
given,
incurred or assumed, and equity
instruments issued by the group in exchange for control
of the acquiree. Acquisition related costs are recognised
in profit and loss as incurred. The acquiree’s identifiable
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 classified 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 identifiable
assets, liabilities and contingent liabilities recognised.
If, after reassessment, the Group’s interest in the net
fair value of the acquiree’s identifiable assets, liabilities
and contingent liabilities exceeds the cost of the
business combination, the excess
is recognised
immediately in profit or loss.

Annual Report 2012Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

3. Significant Accounting Policies

(i) Property, plant and equipment

(continued...)

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.

Acquisition of Pactum Australia Pty Limited

The acquisition of Pactum Australia Pty Limited
(“Pactum”) has been accounted for as a common
control transaction as at the time of this transaction
both Freedom Foods Group Limited and Pactum
Australia Pty Limited were controlled by the same
shareholder group. As a common control transaction,
the acquisition does not reflect the fair value of assets
and liabilities acquired or any recording of additional
goodwill at the time of the acquisition of Pactum. The
acquisition balance sheet of Pactum reflects the
values for assets and liabilities acquired from Pactum’s
accounting records. The difference between the fair
value of the consideration given and the carrying
value of the assets and
is
recognised as a common control reserve in the
consolidated financial statements.

liabilities acquired

(g) Interests in joint ventures

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 profits or losses and
other changes in net assets of the joint ventures.

(h) Foreign currency translation

Both the functional and presentation currency of
Freedom Foods Group 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
restated at the rate of exchange ruling at the end of
each reporting period. Exchange differences are
recognised in the profit or loss in the period in which
they arise.

Plant and equipment, motor vehicles and equipment
less
under finance
accumulated depreciation and impairment.

lease are stated at cost

and

less any

fair value,

impairment

depreciation

losses. Fair value

Land and Buildings held for use in the production of
goods, are carried in the statement of financial
subsequent
position at
subsequent
accumulated
accumulated
is
determined on the basis of an independent valuation
prepared by external valuation experts, based on
discounted cash flows or capitalisation of net income,
as appropriate. Revaluations are performed with
sufficient regularity such that the carrying amounts
do not differ materially from those that would be
determined using fair values at the end of each
reporting period. Any revaluation increase arising on
the revaluation of land and buildings is credited to a
revaluation reserve, except to the extent that it
reverses a revaluation decrease for the same asset
previously recognised as an expense in the profit or
loss, in which case the increase is credited to the
profit or loss to the extent of the decrease previously
charged. A decrease in carrying amount arising on
the revaluation of land and buildings is charged as an
expense in profit or loss to the extent that it exceeds
the balance, if any, held in the revaluation reserve
relating to a previous revaluation of that asset.

Construction in progress is stated at cost. Cost
includes expenditure that is directly attributable to
the acquisition or construction 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.

including

Depreciation is provided on property, plant and
freehold buildings but
equipment,
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 effect
of any changes recognised on a prospective basis.
Assets held under finance leases are depreciated over
their expected useful lives on the same basis as
owned assets or, where shorter, the term of the
relevant lease.

The gain or loss arising on disposal or retirement
of an item of property, plant and equipment is

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

3. Significant Accounting Policies

(l) Goodwill

(continued...)

determined as the difference between the sales
proceeds and the carrying amount of the asset and is
recognised in profit or loss.

The following depreciation rates are used in the
calculation of depreciation:

Class of Fixed Assets
Buildings
Plant and equipment
Leased plant and equipment
Motor vehicles

Depreciation Rate
2-6%
4-20%
4-20%
15-33%

(j) Non-current assets classified as held for

sale

Non-current assets and disposal groups classified as
held for sale are measured at the lower of carrying
amount and fair value less costs to sell.

Non-current assets and disposal groups are classified
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 classification, 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.

(k) Borrowing costs

the
Borrowing costs directly attributable
acquisition, construction or production of qualifying
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
specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing
costs eligible for capitalisation.

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

Goodwill acquired in a business combination is
initially measured at its cost, being the excess of the
cost of the business combination over the Group’s
interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised at the
is subsequently
date of acquisition. Goodwill
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 benefit
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 first to
reduce the carrying amount of any goodwill allocated
to the CGU (or groups of CGUs) and then to the other
assets of the cash-generating units 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 profit 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 profit or loss on disposal of the operation.

(m) Intangible assets

Brand names

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

indefinite useful

to support an

Intangible assets acquired in a business
combination

Intangible assets acquired in a business combination
are
from
identified and recognised separately
goodwill where they satisfy the definition of an
intangible asset. Subsequent to initial recognition,
intangible assets acquired in a business combination
are reported at cost less accumulated amortisation
and accumulated impairment losses, on the same
basis as intangible assets acquired separately.

Annual Report 2012Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

3. Significant Accounting Policies

(continued...)

(n) Impairment of long-lived assets excluding

goodwill

At each reporting date the Group reviews the
carrying amounts of its assets to determine whether
there is any indication that those assets have suffered
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 flows
that are independent from other assets, the Group
estimates the recoverable amount of the CGU to
which the asset belongs. Where a reasonable and
consistent basis of allocation can be identified,
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
identified.

that

the asset may be

Intangible assets with indefinite useful lives and
intangible assets not yet available for use are tested
for impairment annually and whenever there is an
indication
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 flows are discounted to
their present value using a post-tax discount rate that
reflects current market assessments of the time value
of money and the risks specific to the asset for which
the estimates of future cash flows have not been
adjusted. If the recoverable amount of an asset (or
CGU) is estimated to be less than its carrying amount,
the carrying amount of the asset (CGU) is reduced to
its recoverable amount. An
is
recognised in profit or loss immediately.

impairment

loss

Where an impairment loss subsequently reverses, the
carrying amount of the asset (CGU) is increased to
the revised estimate of its recoverable amount, but
only to the extent that the increased carrying amount
does not exceed the carrying amount that would
have been determined had no impairment loss been
recognised for the asset (CGU) in prior years. A
reversal of an
recognised
immediately in profit or loss.

impairment

loss

(o) 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 first-in, first-out
basis;

Manufactured finished goods: cost of direct materials,
direct
labour and an appropriate portion of
manufacturing variable and fixed overheads based
on normal operating capacity but excluding
borrowing costs;

Purchased finished goods: purchase cost on a
weighted average cost basis.

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.

(p) Cash and cash equivalents

Cash and short-term deposits in the statement of
financial position comprise cash at bank and in hand
and cash equivalents, which are short-term deposits
with an original maturity of three months or less.

For the purposes of the Statement of Cash Flows,
cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding
bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities in the statement of
financial position.

(q) Other financial liabilities

Other financial liabilities, including borrowings, are
initially measured at fair value, net of transaction
costs. Other financial liabilities are subsequently
measured at amortised cost using the effective
interest method, with interest expense recognised
on an effective yield basis.

interest method

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

(r) Provisions

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.

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

3. Significant Accounting Policies

(continued...)

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
cash flow estimated to settle the present obligation,
its carrying amount is the present value of those cash
flows. When some or all of the economic benefits
required to settle a provision are expected to be
recovered from a third party, the recoverable amount
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.

(s) Employee benefits

A liability is recognised for benefits 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 short term employee benefits are
measured at
the
remuneration rate expected to apply at the time of
settlement. Liabilities recognised in respect of long
term employee benefits are measured at the present
value of the estimated future cash outflows to be
made by the Group in respect of services provided by
employees up to reporting date.

their nominal values using

Defined contribution plans

Contributions to defined contribution superannuation
plans are expensed when incurred.

(t) 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 effects
of non-transferability, exercise
restrictions, and
behavioural considerations. Further details on how
share-based
the
transactions has been determined can be found in
note 29.

fair value of equity-settled

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.

At each reporting date, the Group revises its estimate
of the number of equity instruments expected to
vest. The impact of the revision of the original
estimates, if any, is recognised in profit or loss over
the remaining vesting period, with corresponding
adjustment to the equity-settled employee benefits
reserve.

(u) Leased Assets

Group as lessor

Rental income from operating leases is recognised
on a straight-line basis over the term of the relevant
lease. However, contingent rentals arising under
operating leases are recognised as income in a
manner consistent with the basis on which they are
determined. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the
carrying amount of the leased asset and recognised
on a straight-line basis over the lease term.

Leases are classified as finance 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 classified as
operating leases.

Group as lessee

leases are

Assets held under finance
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 statement of financial position as a
finance lease obligation.

Lease payments are apportioned between finance
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(k).
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.

Annual Report 2012Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

3. Significant Accounting Policies

Interest revenue

(continued...)

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
leased asset are consumed.
benefits from the
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 benefits 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 benefits from
the leased asset are consumed.

(v) Revenue

Revenue
is measured at the fair value of the
consideration received or receivable. Revenue is
reduced
rebates and other similar
allowances.

for terms,

Sale of goods

Revenue from the sale of goods is recognised when
all the following conditions are satisfied:

•

the Group has transferred to the buyer the
significant risks and rewards of ownership of
the goods

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

the amount of revenue can be measured
reliably;

it is probable that the economic benefits
associated with the transaction will flow to the
entity; and

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

Licensing fees

is recognised on an accrual basis

Revenue
in
accordance with the substance of the relevant
agreement. Revenue is calculated on the basis of the
turnover of the licensee.

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

Rental income

Revenue from operating leases is recognised in
accordance with the Group’s accounting policy
outlined in note 3(u).

(w) 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 specifically
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 statement of
financial position 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.

are

receivable

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

(x) Income tax

Current tax

Current tax is calculated by reference to the amount
of income taxes payable or recoverable in respect of

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

3. Significant Accounting Policies

(continued...)

the taxable profit 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 on the basis of
temporary differences between the tax base of an
asset or liability and its carrying amount in the
statement of financial position. 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 differences. Deferred tax assets
are recognised to the extent that it is probable that
sufficient taxable amounts will be available against
which deductible temporary differences or unused tax
losses and tax offsets can be utilised. However, deferred
tax assets and liabilities are not recognised if the
temporary differences giving rise to them arise from
the initial recognition of assets and liabilities (other
than as a result of a business combination) which
affects neither taxable income nor accounting profit.
Furthermore, a deferred tax liability is not recognised
in relation to taxable temporary differences arising
from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable
temporary differences associated with investments
in branches and associates and interests in joint
ventures except where the Group is able to control
the reversal of the temporary differences and its
probable that the temporary differences will not
reverse in the foreseeable future. Deferred tax assets
arising
temporary differences
associated with these investments and interests are
only recognised to the extent that it is probable that
there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and
they are expected to reverse in the foreseeable future.

from deductible

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 reflects 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 offset 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.

Current and deferred tax for the period

Current and deferred tax is recognised as an expense
or income in profit or loss, 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.

(y) Goods and services tax

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

• where the amount of GST incurred 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; or

•

for receivables and payables which 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 statement of financial
position.

Cash flows are included in the Statement of Cash
Flows on a gross basis and the GST component of
cash flows arising from investing and financing
activities, which is recoverable from, or payable to,
the taxation authority are classified within operating
cash flows.

(z) Financial instruments

Recognition of investments

Investments are initially measured at fair value, net of
transaction costs, except for those financial assets
carried at fair value through profit and loss, which are
initially measured at fair value when the related
contractual rights or obligations exist. Subsequent to
initial recognition these investments are measured as
set out below.

Financial assets at fair value through profit and
loss

A financial asset is classified in this category if
acquired principally for the purpose of selling in the

Annual Report 2012Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

3. Significant Accounting Policies

(continued...)

Recognition

short term if so designated by management and
within the requirements of AASB 139 Financial
Instruments:
and Measurement.
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
statement of comprehensive income in the period in
which they arise.

asset expire, or it transfers the financial asset and
substantially all the risks and rewards of ownership of
the asset to another entity. If the Group neither
transfers nor retains substantially all the risks and
rewards of ownership and continues to control the
transferred asset, the Group recognises its retained
interest in the asset and an associated liability for
amounts it may have to pay. If the Group retains
substantially all the risks and rewards of ownership of
a transferred financial asset, the Group continues to
recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.

Effective interest method

Impairment of financial assets

interest method

The effective
is a method of
calculating the amortised cost of a financial asset and
of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly
discounts estimated future cash receipts (including
all fees on points paid or received that form an
integral part of the effective interest rate, transaction
costs and other premiums or discounts) through the
expected
life of the financial asset, or, where
appropriate, a shorter period.

Income is recognised on an effective interest rate
basis for debt instruments other than those financial
assets ‘at fair value through profit or loss’.

Loans and receivables

Loans and receivables have fixed or determinable
payments that are not quoted in an active market
and are stated at amortised cost using the effective
interest rate method
Interest
less
income is recognised by applying the effective
interest rate.

impairment.

Held-to maturity investments

These investments have fixed 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
effective interest rate method less impairment.

Available-for-sale financial assets

Available-for-sale financial assets include any financial
assets not included in the above categories. Available-
for-sale financial assets are reflected at fair value.
Unrealised gains and losses arising from changes in
fair value are taken directly to equity.

Derecognition of financial assets

The Group derecognises a financial asset only when
the contractual rights to the cash flows from the

Financial assets, other than those at fair value through
profit or loss, are assessed for indicators of impairment
at the end of each reporting period. Financial assets
are impaired where there is objective evidence that
as a result of one or more events that occurred after
the initial recognition of the financial asset the
estimated future cash flows of the investment have
been impacted.

Financial liabilities

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

(aa) Derivative financial instruments

The Group enters into a variety of derivative financial
instruments to manage its exposure to foreign
exchange rate risk, including foreign exchange
forward contracts. Further details of derivative
financial instruments are disclosed in note 26 to the
financial
initially
statements. Derivatives are
recognised at fair value at the date a derivative
contract is entered into and are subsequently
remeasured to their fair value at each reporting
date. The resulting gain or loss is recognised in profit
is
or
designated and effective as a hedging instrument,
in which event, the timing of the recognition in
profit or loss depends on the nature of the hedge
relationship. The Group has not adopted hedge
accounting during the financial year or previous
corresponding period.

immediately unless the derivative

loss

Embedded derivatives

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

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

4. Operating Segments

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

Freedom Brands

Freedom Foods: A range of products for consumers requiring a solution to specific dietary or medical conditions
including gluten free, wheat free, nut free, low sugar or salt or highly fortified. The product range covers breakfast
cereals, cookies, snack bars, soy, almond and rice beverages and other complimentary products. These products are
produced and sold in Australia and overseas.

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

Pactum Australia: A range of long life beverages including soy, rice, almond and dairy milk beverages, chicken, beef
and vegetable stocks.

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

Operating segments are identified on the basis of internal reports about components of the Group that are regularly
reviewed by the Board of Directors in order to allocate resources to the segments and assess their performance.

Information regarding these segments is presented below. The following is an analysis of the Group’s revenue and
results by reportable operating segment for the periods under review:

Segment revenue
Continuing operations
Seafood
Freedom Foods
Pactum
Thorpedo Foods
Other
Total revenue of the consolidated group

External sales
2012
$’000

2011
$’000

Other revenue
2012
$’000

2011
$’000

Total

2012
$’000

17,958
31,085
9,030
59
-

18,914
26,256
-
85
-

-
-
-
-
-

-
-
-
72
-

17,958
31,085
9,030
59
473
58,605

2011
$’000

18,914
26,256
-
157
429
45,756

Revenue generated by equity accounted associates from external sales is not consolidated, instead under the
equity method of accounting, the carrying amounts of interest in joint venture entities are increased or decreased
to recognise the Group’s share of post acquisition profits or losses and other changes in net assets of the joint
venture/minority interest.

95% of total external sales of the consolidated group and equity accounted associates are generated in Australia
(2011: 97%) and more than 80% of total external sales are through major Australian retailers.

Annual Report 2012

Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

4. Operating Segments

(continued...)

Segment result
Continuing operations
Seafood
Freedom Foods
Pactum
Thorpedo Foods

Group share of equity accounted associates
Shared services
Finance costs
Depreciation
Profit before income tax
Profit on sale of A2DP shares
Write off of non recurring legal expense and unrecoverable amounts
Income tax expense
Profit for the year from continuing operations

2012
$’000

2011
$’000

3,953
3,237
1,452
(13)
8,629
1,214
(3,288)
(1,813)
(1,372)
3,370
-
(120)
(238)
3,012

3,978
3,249
-
(1,748)
5,479
1,136
(3,303)
(1,529)
(1,092)
691
3,884
(326)
138
4,387

Total profit from equity accounted associates for the period totalled $4,553,000 (2011: $2,422,000). The consolidated
entities share of these profits was $1,214,000 (2011: $1,136,000).

Segment assets
Seafood
Freedom Foods
Pactum
Thorpedo Foods

Unallocated (Shared Services)
Total assets of the Group

Segment liabilities

Seafood
Freedom Foods
Pactum
Thorpedo Foods

Unallocated (Shared Services)
Total liabilities of the Group

2012
$’000

2011
$’000

21,644
44,857
22,284
1,162
89,947
13,934
103,881

10,028
14,068
20,117
5
44,218
12,393
56,611

17,724
43,149
-
1,426
62,299
13,157
75,456

5,418
14,820
-
30
20,268
5,205
25,473

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

4. Operating Segments

(continued...)

Other segment information

Seafood
Freedom Foods
Pactum
Thorpedo Foods

Unallocated (Shared Services)

Depreciation and Amortisation
2011
$’000
-
1,092
-
-
1,092
-
1,092

2012
$’000
-
1,170
280
-
1,450
(78)
1,372

Additions to non-current assets
2011
$’000
-
2733
-
-
2,733
-
2,733

2012
$’000
-
1,941
10,939
-
12,880
-
12,880

The add back of depreciation in the unallocated line relates to motor vehicles which were fully depreciated and disposed
of during the year.

5. Revenue

Segment revenue
Continuing operations
Sale of goods
Interest received

• Loans and receivables
• Cash and Cash equivalents

License fee

Other income

• Government/State grants - refer below
• Gain on disposal of fixed assets
• Payroll Tax Refund
• Rental income
• Management fee received

Total Revenue

Consolidated
$000

2012

2011

58,132

45,256

-
5
-
58,137

120
21
75
-
252
468
58,605

-
25
72
45,353

81
-
70
14
238
403
45,756

The above grants are the Export Market Development Grant received or receivable for 2012 and 2011 (2012: $51,000, 2011:
$20,000), State Training Grant (2012: $6,000, 2011: $30,000) and Department of Education, Employment and Workplace
Relations Grant (2012: $63,500, 2011: $31,000).

Annual Report 2012
Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

6. Profit for the year before tax

Profit for the year was arrived at after charging the following expenses:
Finance costs

• Interest on bank overdrafts and loans
• Interest on related party loan
• Interest capitalised as addition to the cost of qualifying assets
• Interest on obligations under finance leases

Total borrowing costs
Depreciation on property, motor vehicles, plant and equipment
Rental expense on operating leases (equipment)
Rental expense on operating leases (property)
Research and development costs expensed
Impairment of trade receivables

Employee benefit expense
Post employment benefits - defined contribution plans
Share-based payments - equity settled share based payments
Other employee benefits
Total employee benefit costs

Consolidated
$000

2012

1,840
261
(360)
72
1,813
1,372
221
159
330
(14)

1,349
106
6,692
8,147

2011

1,730
118
(346)
27
1,529
1,092
145
73
500
(27)

580
87
4,959
5,626

(i)

The Group uses derivative financial instruments to hedge its exposure to foreign exchange risks arising from
operational, financing and investment activities.

In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading
purposes.

During the financial year the Group utilised foreign exchange contracts for the purchase of inventory. The foreign
exchange contracts were denominated in USD and CAD. As at 30 June 2012 the Group held foreign exchange
contracts totalling USD1,502,000 and CAD652,000.

The contracts related to highly probable forecasted transactions for the purchase of inventory for the Specialty
Seafood business (Salmon and Sardines) and the Freedom Foods business (Spreads and Almond paste) with the
purchase consideration being settled in the above currencies. The Group’s objective in entering into foreign exchange
contracts is to provide certainty to the income and cash flow implications for the designated foreign currency
purchase, relating to purchase of inventory.

As the Group does not utilise hedge accounting, derivative financial instruments held by the Group are required
under the Australian Accounting Standards to be valued at fair value as at balance date. A valuation at fair value
assumes that the Group would settle the contracts at a specific date and recognise a gain or loss depending on the
prevailing spot rate at value date, even though the intention of the Group is to settle the contract at contract expiry
in relation to the purchase of inventory or an asset required for manufacturing.

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

7. Income Taxes

Income tax recognised in profit or loss

Tax expense comprises:

Current tax expense in respect of the current year

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 differences

Total expense/(income) tax recognised in the current year relating to continuing operations

Consolidated
$000

2012

497

(293)

238

The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in the financial statements as follows:

Profit before tax from continuing operations

Income tax expense calculated at 30%

Effect of revenue/expenses that are not deductible in determining taxable profit

Effect of tax concessions (research and development)

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

Prior year R&D claim

Other

3,250

975

(345)

(99)

(293)

238

2011

1,342

(1,330)

(150)

(138)

4,249

1,275

(150)

(951)

(379)

(138)

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

Income tax recognised directly in equity
An amount of $Nil was credited to equity in relation to share issue costs during the year (2011 $81,000).

Income tax recognised in other comprehensive income
No current or deferred tax amounts were charged/(credited) directly to the other comprehensive income during the year.

Current tax assets/(liabilities)

Income tax receivable/payable attributable to:

• Entities in the tax-consolidated group

Consolidated
$000

2012

(816)

2011

Annual Report 2012Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

7. Income Taxes
(continued...)

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

Consolidated 2012

Temporary differences:

Provisions
Doubtful debts
Property plant & equipment
Other

unused tax losses and credits:

Tax losses (i)
Withholding tax paid

Opening Balance
$’000

Recognised
on acquisition
of common
controlled entity
$’000

Charged to
income
$’000

Closing balance
$’000

329
4
(9)
(1,031)
(707)

2,503
344
2,847
2,140

7
-
(197)
118
(72)

-
-
-
(72)

12
(4)
(141)
903
770

(497)
(306)
(803)
(34)

348
-
(347)
(10)
(9)

2,006
38
2,044
2,035

(i) Current year earnings together with forecast future earnings support the recognition of carried forward losses

as deferred tax assets

Consolidated 2011

Temporary differences:

Provisions
Doubtful debts
Property plant & equipment
Other

unused tax losses and credits:

Tax losses
Withholding tax paid

Opening Balance
$’000

Charged to
income
$’000

Closing balance
$’000

337
12
(24)
165
490

1,161
340
1,501
1,991

(8)
(8)
15
(1,196)
(1,197)

1,342
4
1,346
149

329
4
(9)
(1,031)
(707)

2,503
344
247
2,140

The company and its wholly-owned Australian subsidiaries have formed a tax-consolidated group and are therefore taxed
as a single entity. The head entity within the tax consolidated group is Freedom Foods Group Limited. Tax expense/
income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-
consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group
using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial
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).

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

7. Income Taxes
(continued...)

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 Foods Group 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.

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 effect 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.

8. Auditors remuneration

Current year

Remunerations of the auditors of the Group for:
• audit or review of the financial report

• taxation advice and preparation of tax returns

• research and development advice and preparation of the return

The auditor of the consolidated entity is Deloitte Touche Tohmatsu.

9. Earnings per share

Basic earnings per share from continuing operations
Diluted earnings per share from continuing operations
The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings
per share are as follows:

(a) Earnings used in the calculation of basic EPS
(b) Earnings used in the calculation of diluted EPS

Shares deemed to be issued for no consideration in respect of:
• CRPS
• unlisted options

(d) Weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted

EPS including CRPS

Consolidated
$

2012

209,010

72,937

34,504
316,451

Consolidated
Cents per share

2012
3.88
3.03

$000

3,012
3,012
Number ‘000
77,599

19,415
2,504

99,518

2011

171,740

58,952

19,751
250,443

2011
5.67
4.90

4,387
4,387

77,435

12,021
-

89,456

19,414,800 Convertible Redeemable Preference Shares were in issue.
At 30 June 2012, 19,222,791 (2011: 19,376,362) ordinary share options and 6,250,000 (2011: Nil) employee share options
were outstanding (Exercisable at $0.40 per share)

Annual Report 2012Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

10. Trade and other receivables

Current

Trade receivables
Allowance for doubtful debts

Other receivables

Consolidated
$000

2012

16,738
-
16,738
1,008
17,746

2011

9,513
(14)
9,499
598
10,097

The average credit period on sales of goods is 34 days (2011: 34 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 financial year, the allowance for doubtful debts decreased by
$14,000 (2011: decreased by $28,000) in the Group. There is no allowance for doubtful debts/impaired trade receivables as
at 30 June 2012 (2011: $14,000). The Group does not hold any collateral over these balances.

Current (i)
Past due but not impaired (ii)

Consolidated
$000

2012

15,779
959

2011

9,218
281

(i)

(ii)

The current receivables for the Group are with a weighted average of 29 days (2011: 38 days). Management
considers that there are no indications as of the reporting date that the debtors will not meet their payment
obligations..

(ii) The past due but not impaired receivables for the Group are with a weighted average of 69 days (2011: 61 days).
These relate to a number of customers for whom there is no recent history of default and other indicators of
impairment. Management considers that no provision is required on these balances.

The Group does not have significant risk exposure to any one debtor, however 84% (2011: 83%) of sales and 81%
(2011: 82%) of year end receivables are concentrated in major supermarkets throughout Australia.

Movement in the allowance for doubtful debts

Balance at the beginning of the year
Impairment losses recognised on receivables
Amounts written off as uncollectable
Amounts recovered during the year
Impairment losses reversed
Balance at the end of the year

Consolidated
$000

2012
14
-
-
-
(14)
-

2011
43
-
(1)
-
(28)
14

Other receivables
These amounts generally arise from transactions outside the usual operating activities of the Group. Management has
assessed that these are all recoverable and no impairment has been taken.

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

11. Other financial assets / (liabilities)

Current

Payables to related parties - refer Note 28 Related party transactions
Receivables from related parties - refer Note 28 Related party transactions

Non-current

Investment in joint venture entities - refer note 34 Jointly controlled operations and assets
Investment in associates - refer Note 35 Related party transactions

12. Inventories

Current

Raw materials
Finished goods
Provision for stock obsolescence

Consolidated
$000

2012

-
81

-
12,357
12,357

Consolidated
$000

2012

4,029
9,191
(76)
13,144

2011

(53)
-

1,882
9,558
11,440

2011

1,484
3,985
(119)
5,349

All inventories of the Group are expected to be recovered within a 12 month period.
The cost of inventories recognised as an expense during the year in respect of continuing operations was $40,549,000
(2011: $31,262,000).

13. Intangibles

2012

Balance at 1 July 2011
Impairment of Goodwill
Balance at 30 June 2012

2011

Balance at 1 July 2010
Impairment of Goodwill
Balance at 30 June 2011

Goodwill
$’000

Brand Names
$’000

Total
$’000

5,214
-
5,214

6,992
(1,778)
5,214

16,274
-
16,274

21,488
-
21,488

23,266
(1,778)
21,488

Goodwill and brands are initially recorded at cost. All brands have been assessed as having indefinite useful lives because
there is no expiration date and all brands are profitable.

There were no impairment losses in the current year (2011: $1,778,000)

Allocation of goodwill to cash-generating units

Goodwill has been allocated for impairment testing purposes to the following cash-generating units:
Seafood
Freedom Foods

Annual Report 2012Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

13. Intangibles

(continued...)

Impairment of cash-generating units including goodwill

There was an impairment loss recognised of $1,778,000 during the 2011 financial year for Thorpedo Foods cash generating
unit.

The consolidated entity carries an amount of $16,274,000 of brand names with indefinite useful lives allocated between
the Seafood and Freedom Foods cash generating units. The brand names relate to major brands purchased as part of
business combinations that have long establishment and are considered to be market leaders within their market
segment. The brand names operate in a stable industry with a strong positioning in the consumer functional foods market.
There is no goodwill associated to the Group’s acquisition of Pactum Australia Pty Limited.

The carrying amount of goodwill has been allocated to the identified cash-generating units as follows:

Seafood
Freedom Foods

Consolidated
$000

2012
1,982
3,232
5,214

2011
1,982
3,232
5,214

The recoverable amounts of the cash generating units are determined based on a value in use calculation which uses cash
flow projections based on financial budgets approved by management covering a five-year period, and a discount rate of
10.5% pa (2011: 10.3% pa). Cash flow 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

Cash-generating units

Budgeted market share

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 four years is reasonable.

Budgeted gross margin

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

14. Property, plant and equipment

Non-current

Freehold land (at fair value)
Accumulated depreciation
Total Land
Buildings (at fair value)
Accumulated depreciation
Total Buildings
Total Land and Buildings

Consolidated
$000

2012

254
-
254
4,850
(505)
4,345
4,599

2011

160
-
160
4,850
(384)
4,466
4,626

Freedom Foods Group Limited
Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

14. Property, plant and equipment

(continued...)

Plant and Equipment (at cost)
Accumulated depreciation

Capital work in progress at cost
Total Owned Plant and Equipment
Motor Vehicles (under finance leases)
Accumulated depreciation
Total Motor Vehicles

Total property, plant and equipment

Consolidated
$000

2012
21,215
(4,326)
16,889
14,122
31,011
30
(21)
9
35,619

2011
16,481
(2,997)
13,484
5,976
19,460
108
(99)
9
24,095

Movements in the carrying amounts of each class of property, plant and equipment between the beginning and the end
of the current financial year:

Group 2012

Balance at 1 July 2011
Additions
Additions through acquisition of subsidiary
Disposals
Depreciation expense
Balance at 30 June 2012

Group 2011

Balance at 1 July 2010
Additions
Disposals
Depreciation expense
Balance at 30 June 2011

Freehold land
$000

Buildings
$000

Plant & Equipment
$000

Motor Vehicles
$000

160
94
-
-
-
254

150
10
-
-
160

4,466
-
-
-
(121)
4,345

4,587
-
-
(121)
4,466

19,460
5,417
7,463
-
(1,329)
31,011

17,685
2,723
23
(971)
19,460

9
-

(78)
78
9

9
-
-
-
9

Total
$000

24,095
5,511
7,463
(78)
(1,372)
35,619

22,431
2,733
23
(1,092)
24,095

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

Consolidated
$000

2012
121
1,329
(78)
1,372

2011
121
955
16
1,092

Freehold land and buildings
Plant and equipment
Motor vehicles

Annual Report 2012
Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

15. Trade and other payables

Current

Trade payables (i)
Other payables and accruals (ii)
Payables from joint ventures and related parties - refer Note 28 Related party transactions

Non-current

Other payables and accruals (ii)

Consolidated
$000

2012

11,330
3,443
423
15,196

73
73

2011

3,079
2,500
-
5,579

504
504

(i) Trade payables are paid on average within 60 days of invoice date. No interest is charged on trade payables.

(ii)

Included in other payables and accruals is an amount due to the vendor of $562,000 (2011: $1,113,000) for the
purchase of the Leeton property. The portion of this payable due to be settled within 12 months is $562,000 (2011:
$551,000).

16. Borrowings and loans from related parties

Borrowings

Secured - at amortised cost
Current

Bank overdrafts (i)
Loan payable (i)
Finance leases (ii) (iii)
Finance Facility (i)

Non-current

Loan payable (i)
Finance leases (ii) (iii)

Disclosed in the financial statements as:
Current borrowings
Non-current borrowings

Consolidated
$000

2012

-
5,578
2,761
10,662

7,532
4,863
31,396

19,001
12,395
31,396

2011

-
2,913
1,396
6,048

3,150
4,845
18,352

10,357
7,995
18,352

(i) Secured by assets as detailed in note 36.

(ii) Secured by leased assets as detailed in note 24.

(iii) Included as part of the finance leases is the Equipment Financing utilised to purchase equipment for Leeton and

Taren Point 3rd Line.

loans from related parties
Loans from Leppington Pastoral Company - refer Note 28 Related party transactions

During the year the above loan attracted interest payable at 10% per annum.

Consolidated
$000

2012
8,064

2011
-

Freedom Foods Group Limited
Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

17. Provisions

Current

Employee benefits (i)

Non-current

Employee benefits

Employee benefits movement
Balance at 1 July 2011
Additional provision recognised
Amounts used
Balance at 30 June 2012

Consolidated
$000

2012

902

164
1,066

985
671
(590)
1,066

2011

855

130
985

1,122
726
(863)
985

(i) The current Group provision for employee benefits includes $87,000 of annual leave and vested long service leave

entitlements accrued but not expected to be taken within 12 months (2011: $107,000).

18. Issued capital

Fully paid ordinary shares

77,995,731 (2011: 77,496,602) ordinary shares fully paid

Balance at 1 July 2011
Issue of shares (i)(ii)
Balance at 30 June 2012

Consolidated
$000

2012

33,878

33,655
220
33,875

2011

33,655

33,637
18
33,655

(i)

(i) During the year there were a total of 499,129 ordinary shares issued as a result of exercise of options and the
dividend reinvestment plan (DRP); 153,571 ordinary shares at $0.40 per share, 300,000 ordinary shares at $0.50 per
share and 45,558 at $0.389 per share under the DRP. No costs were incurred.

(ii) During the prior year there were 873 ordinary shares issued as a result of exercise of options at $0.40 per share and
60,347 ordinary shares issued under the dividend reinvestment plan (DRP) at $0.30 per share. No costs were
incurred.

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.

Convertible Redeemable Preference Shares

The CRPS are perpetual with no maturity, but redeemable after 3 years at the option of the Company. The CRPS are
transferable. The dividend rate is 9.0% p.a. on the issue price of $0.30. It is a preferred, discretionary and non cumulative
dividend and CRPS holders have no claim or entitlement in respect of a non payment.

Annual Report 2012
Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

18. Issued capital
(continued...)

Dividends are to be payable half-yearly in arrears. CRPS holders who convert their CRPS prior to a dividend payment date
will not be entitled to any dividend for that part period in respect of that CRPS. However upon conversion to ordinary
shares a holder who is on the register on the record date for a dividend payable in respect of ordinary shares will be
entitled to the full ordinary dividend for that period. Dividends on the CRPS will be payable in April and October each year
until converted or redeemed. CRPS holders are entitled to receive dividends in priority to holders of ordinary shares and
equally with the holders of other CRPS that may be issued by Company on these terms.

CRPS are convertible into fully paid ordinary shares in Company on the basis that each CRPS is convertible at the election
of the CRPS holder into one ordinary share, subject to any restrictions imposed by the Corporations Act and ASX Listing
Rules. There is no time limit within which CRPS must be converted. No additional consideration is payable on conversion.

Notwithstanding the right of holders of CRPS to convert at any time, all CRPS will convert into ordinary shares automatically
on the occurrence of certain trigger events including certain transactions involving a change in control of Company, such
as a takeover of Company or a scheme or merger between Company and another body.

From the date that is 3 years from the date of issue of the CRPS, the Company may redeem the CRPS at its option for the
payment per CRPS of the higher of:

•

the issue price of $0.30; and

an amount determined by the Board of the Company with reference to the value of a CRPS as determined by an
independent expert appointed by the Board.

19,414,800 (2011: 19,414,800) convertible redeemable preference shares

Balance at 1 July 2011
Issue of shares
Balance at 30 June 2012

Consolidated
$000

2012
5,633
5,633
-
5,633

2011
5,633
-
5,633
5,633

Share options granted under the employee share option plan

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

19. Reserves

Equity-settled employee benefits
Asset revaluation
Other reserves

Equity-settled employee benefits

Balance at 1 July 2011
Share based payment
Balance at 30 June 2012

Consolidated
$000

2012
639
473
(5,013)
(3,901)

533
106
639

2011
533
473
-
1,006

446
87
533

The equity-settled employee benefits 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 financial
statements.

Freedom Foods Group Limited

Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

19. Reserves
(continued...)

Asset revaluation

Balance at 1 July 2011
Revaluation increment
Balance at 30 June 2012

Consolidated
$000

2012
473
-
473

2011
473
-
473

The asset revaluation reserve arises on the revaluation of land and buildings. Where a revalued land or building is sold that
portion of the asset revaluation reserve which relates to the asset, and is effectively realised, is transferred directly to
retained earnings.

Other reserve

Balance at 1 July 2011
Acquisition of subsidiary under common control
Balance at 30 June 2012

Consolidated
$000

2012
-
(5,013)
(5,013)

2011
-
-
-

As described in Note 3(f ), the acquisition of Pactum by the Company is accounted for as a common control transaction.
As a consequence, the difference between the fair value of the consideration paid and the existing book values of assets
& liabilities of Pactum has been debited to a common control reserve ($5,013,000). Upon disposal of all interests in Pactum
by the Group this reserve would be transferred to retained earnings.

20. Retained earnings

Balance at 1 July 2011
Profit attributable to owners of the company
Dividends paid
Balance at 30 June 2012

21. Dividends

Recognised amounts

Fully paid ordinary shares
Final dividend: fully franked at 30% tax rate
Interim dividend: fully franked at 30% tax rate
Dividends reinvested: fully franked at 30% tax rate
Convertible Redeemable Preference Shares
Final dividend: fully franked at 30% tax rate
Interim dividend: fully franked at 30% tax rate

Consolidated
$000

2012
9,689
3,012
(1,038)
11,663

2012

Cents per share

0.50
-
0.39

2.00
1.40

2011

Cents per share

-
0.5
-

-
1.00

Total
$000

370
-
18

388
262
1,038

2011
5,707
4,387
(405)
9,689

Total
$000

-
386
-

-
19
405

Annual Report 2012

Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

21. Dividends
(continued...)

On 31 August 2012, the directors declared a fully franked final dividend of $0.01 per share to the holders of fully paid
ordinary shares in respect of the financial year ending 30 June 2012 to be paid to shareholders (registered as at 31st
October 2012) on 30th November 2012 and dividends for the converting preference shareholders (registered on 2nd
October 2012) on 2nd November 2012. The total estimated dividend to be paid is $780,000 for ordinary dividend and
$272,000 for the CRPS dividend.

Adjusted franking account balance
Impact on franking account balance of dividends not recognised

22. Notes to the statement of cash flows

(a) Reconciliation of cash and cash equivalents

Parent ($000)
2012
27
451

2011
298
334

For the purposes of the statement of Cash Flows, cash and cash equivalents includes cash on hand and funds held in
cash management and cheque accounts net of bank overdrafts. Cash at the end of the financial year as shown in the
statement of cash flows is reconciled to the related items in the statement of financial position as follows:

Cash

Consolidated
$000

2012
767
767

(b) Reconciliation of profit for the period to net cash flows from operating activities

Profit for the year
Depreciation of non current assets
Movement in provision for employee entitlements
Gain on disposal of assets
Goodwill write off
Profit on Sale of A2DP shares
Interest recognised regarding Leeton facility using amortised cost method
Share based payments
Interest received
Interest capitalised
Gain in associates
Gain in jointly controlled entity

Movements in Working Capital

Increase in trade and other receivables
(Increase)/Decrease in inventory
Increase in other assets
Increase in deferred tax assets
Increase/(Decrease) in trade and other payables
Increase in provision for income tax
Increase in provision for deferred income tax liability
Net cash from operating activities

3,012
1,372
(81)
(21)
-
-
299
106
(5)
(360)
(650)
(564)

(830)
(3,157)
266
(192)
4,434
57
-
3,686

2011
182
182

4,387
1,092
136
-
1,778
(3,884)
239
87
(25)
(346)
(406)
(730)

(651)
1,671
(42)
(1,379)
(579)
135
1,214
2,697

Freedom Foods Group Limited

Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

22. Notes to the statement of cash flows

(continued...)

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

Acquisition of common controlled entity, Pactum

Consolidated
$000

2012
6,000

2011
-

During the year the Group acquired 50% of interest in Pactum for $6,000,000 (refer note 37). This was a non cash
transaction which resulted in a recognition of a loan payable to the related party (refer note 16).

23. Standby arrangements and unused credit facilities

Financing Facility

Secured loan facilities
- amount used
- amount unused

Secured finance facilities
- amount used
- amount unused

Unused financing facilities

Consolidated
$000

2012

13,110
822
13,932

18,286
2,038
20,324
2,860

2011

6,063
987
7,050

12,289
1,452
13,741
2,439

The bank finance facilities are arranged with HSBC Australia with general terms and conditions and certain facility
components are subject to annual review. The bank facilities of the Group are secured by a first registered mortgage over
all the Group’s property, excluding items specifically discharged under the Freedom Foods equipment finance arrangement,
and a first equitable mortgage over the whole of the Group’s assets and undertakings including uncalled capital. The
mortgage is held by HSBC Australia.

The equipment finance facilities relate to specific equipment operating at the Freedom Foods Leeton facility and Pactum
Taren Point facility, arranged with National Australia Bank and Westpac. These facilities are secured over the assets financed
under the facility, which have been specifically discharged from the first registered mortgage held over all the Group’s
property.

Interest rates are variable and subject to adjustment.

24. Capital and leasing commitments

Finance leases

Leasing arrangements

Finance leases relate to motor vehicles and equipment with lease terms of up to 5 years. The Group has options to purchase
the equipment for an agreed amount at the conclusion of the lease agreements. The Group’s obligation under finance
leases are secured by the lessor’s title to the leased assets.

Annual Report 2012

Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

24. Capital and leasing commitments

(continued...)

Finance lease liabilities

Payable:

• No later than 1 year
• Later than 1 year but not later than 5 years

Minimum future lease payments (i)
Less future finance charges
Present value of minimum lease payments
Included in the financial statements as: (note 16)
Current borrowings
Non-current borrowings

Minimum future lease payments

Present value of minimum future lease
payments

Consolidated
$000
2012

2,818
5,465
8,283
(659)
7,624

Total
$000
2011

1,844
5,207
7,051
(810)
6,241

Consolidated
$000
2012

2,761
4,863
7,624
-
7,624

2,761
4,863
7,624

Total
$000
2011

1,396
4,845
6,241
-
6,241

1,396
4,845
6,241

(i) Minimum future lease payments includes the aggregate of all lease payments and any guaranteed residual.

Operating leases

Disclosure for lessees

Leasing arrangements

Operating leases relate to office equipment with lease terms of between one and two and a half years. The Group does
not have an option to purchase the leased asset at the expiry of the lease period.

Non-cancellable operating lease commitments

- Not longer than 1 year (i)
- Longer than 1 year but not longer than 5 years

Group’s share of jointly controlled entities capital commitments

- Not longer than 1 year

Consolidated
$000

2012

340
30
370

2011

87
18
105

593

(i) Operating leases not longer than 1 year include rental payments to Leppington Pastoral Company (a related party) as a
result of the acquisition of Pactum Australia Pty Limited.

25. Personnel note

The entity employs casual and full time staff numbering

Consolidated
$000

2012
143

2011
133

Freedom Foods Group Limited

Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

26. Financial instruments

(a) Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of debt and equity balances.

The Group’s overall strategy remains unchanged from 2011. The capital structure of the Group consists of debt, which
includes the borrowings disclosed in note 16, cash and cash equivalents and equity attributable to equity holders of the
parent comprising issued capital, reserves and retained earnings as disclosed in notes 18, 19 and 20 respectively.

Operating cash flows are used to maintain and expand the group’s manufacturing and distribution assets, as well as to
make the routine outflows of tax, dividends and repayment of maturing debt. The Group’s policy is to borrow centrally,
using a variety of capital market issues and borrowing facilities, to meet anticipated funding requirements.

Gearing ratio

The Group’s financial management team reviews the capital structure on a regular basis. As a part of this review
management considers the cost of capital and the risks associated with each class of capital.

Financial liabilities

Debt (i)
Cash and cash equivalents
Net debt
Equity (ii)
Net debt to equity ratio

Consolidated
$000

2012

39,460
(767)
38,693
47,270
82%

2011

18,352
(182)
18,170
49,983
36%

(i) Debt is defined as long and short-term borrowings, as detailed in note 16.
(ii) Equity includes all capital and reserves.

(b) Financial risk management objectives

The Group’s financial management team provides services to the each of the group businesses, co-ordinates access to
domestic and international financial markets, monitors and manages the financial risks relating to the operations of the
Group through internal risk reports which analyse 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 effects of these risks, by using derivative financial instruments to hedge these risk
exposures. The use of financial 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 or trade financial instruments, including derivative financial instruments, for speculative purposes.

The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest
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.

Annual Report 2012
Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

26. Financial instruments

(continued...)

(d) Significant accounting policies

Details of the significant 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 financial asset,
financial liability and equity instrument are disclosed in note 3 to the financial statements.

(e) Foreign currency risk management

The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate
fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign
exchange contracts.

The carrying amount of the Group’s foreign currency denominated financial assets and financial liabilities at the reporting
date is as follows:

Consolidated

US dollars (USD)
Canadian dollars (CAD)

Financial assets
$000

Financial liabilities
$000

2012

7
374

2011

9
310

2012

1,218
835

2011

227
215

There have been no changes to the group’s exposure to foreign currency risks or the manner in which it manages and
measures the risks from the previous period.

Forward Exchange Contracts

The Group enters into forward exchange contracts to buy specified 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.

The Group had entered into contracts (for terms not exceeding 12 months) to purchase finished goods from suppliers in
the United States and Canada. The contracts related to highly probable forecasted transactions for the purchase of
inventory for the Specialty Seafood business (Salmon and Sardines) and the Freedom Foods business (Spreads and
Almond paste) with the purchase consideration being settled in the above currencies. The Group’s objective in entering
into foreign exchange contracts is to provide certainty to the income and cash flow implications for the designated
foreign currency purchase, relating to purchase of inventory or other capital assets. The Group had USD1,502,000 and
CAD652,000 outstanding foreign exchange contracts as at 30 June 2012.

The Group does not adopt hedge accounting. The following table details the forward foreign currency contracts
outstanding as at reporting date:

Average exchange rate

Foreign currency

2012

2011

2012

2011

Contract value
2012

2011

Fair value

2012

2011

FC'000

$’000

Outstanding contracts
Consolidated

Buy US Dollars
Less than 3 months

Consolidated

Buy CA Dollars
Less than 3 months

0.959

1.036

1,502

590

1,566

569

(89)

(18)

0.998

652

653

(26)

Freedom Foods Group Limited
Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

26. Financial instruments

(continued...)

Foreign currency sensitivity analysis
The following table details the sensitivity to an increase / decrease in the Australian dollar against the relevant currencies
in relation to foreign exchange exposures. Sensitivity rates of 10% (USD) and 13% (CAD) have been used as these represent
management’s assessment of a likely maximum change in foreign exchange rates.

A positive number indicates an increase in profit where the Australia Dollar strengthens against the respective currency.
For a weakening of the Australia Dollar against the respective currency there would be an equal and opposite impact on
the profit and the balances below would be negative.

Consolidated

US dollars (USD) impact
AUD appreciates by 10%
AUD depreciates by 10%

Canadian dollars (CAD) impact
AUD appreciates by 13%
AUD depreciates by 13%

Profit or loss
$000

2012

112
(138)

105
(137)

2011

(16)
22

(22)
29

This is mainly attributable to the exposure outstanding on foreign currency receivables and payables at year end in the
consolidated entity and the parent.

Interest rate risk management

(f)
The Group is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The Group manages
this risk by maintaining an appropriate mix between fixed and floating rate borrowings.

Exposures to interest rate risk, which is the risk that a financial instrument’s value, its borrowing costs and interest income
will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on those
financial instruments are set out below:

Fixed rate maturing in

Financial Instrument

Note

Weighted average effective
interest rate
%

Variable Rate
2012
$ ‘000

2011
$ ‘000

Financial Assets

Cash and cash equivalents
Total Financial Assets

Financial liabilities
Finance leases
Other payable
Due to related parties
Finance facilities
Loan payable
Total Financial Liabilities

16
15
16
16
16

8%
11%
10%
6%
6%

767
767

-
-
-
10,662
13,110
23,772

182
182

-
-
-
6,048
6,063
12,111

less than 1 year

2012
$ ‘000

-
-

2,761
562
8,064
-
-
11,387

2011
$ ‘000

-
-

1,396
608
-
-
-
2,004

1 to 5 years
2012
$ ‘000

2011
$ ‘000

-
-

4,863
-
-
-
-
4,863

-
-

4,845
504
-
-
-
5,349

During the financial year there has been no change to the group’s interest rate risk exposure or the manner in which it
manages and measures these risks.

Annual Report 2012
Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

26. Financial instruments

(continued...)

Interest rate sensitivity analysis

The sensitivity analysis below has been determined based on the impact of 150 basis point increase in interest rates on
the exposure to interest rates as detailed in the above table.

The impact of a 150 basis point interest rate movement during the year with all other variables being held constant will be:

•

a decrease on the consolidated entity’s net profit of $173,000 (2011: $89,000) respectively.

This is mainly attributable to the consolidated entity’s exposure to interest rates on its variable rate borrowings.

A 150 basis point movement represents management’s assessment of the possible change in interest rates.

(g) Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has adopted the policy of only dealing with credit worthy counterparties as a means of mitigating the
risk of financial loss from defaults. The Group’s exposure and the credit ratings of its counterparties are continuously
monitored and the aggregate value of transactions concluded are spread amongst approved counterparties.

Quality of Trade and Other Receivables and Other Financial Assets have been disclosed in notes 10 and 11 respectively.

Credit risk from balances with banks and financial institutions is managed by Group Treasury in accordance with a Board
approved policy. Investments of surplus funds are made only with approved counterparties and within credit limits
assigned to each counterparty.

Counterparty credit limits are reviewed by the Board on an annual basis and may be updated throughout the year subject
to approval of the Board. The limits are set to minimise the concentration of risks and therefore mitigate financial loss
through potential counterparty failure. The credit risk on liquid funds is limited because the counterparties are banks with
high credit ratings assigned by international credit rating agencies.

The maximum exposure to credit risk, excluding the value of any collateral or other security, at statement of financial
position date, to recognised financial assets of the Group which have been recognised on the statement of financial
position is the carrying amount, net of any allowance for doubtful debts.

(h) Liquidity risk management

Liquidity risk arises from the possibility that the Group may be unable to settle a transaction on the due date. The 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 flows and matching the maturity profiles of
financial assets and liabilities.

The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by
continuously monitoring forecast and actual cash flows and matching profiles of financial assets and liabilities. Included
in Note 23 is a listing of additional undrawn facilities that the company and the consolidated entity has at their disposal to
further reduce liquidity risk.

Liquidity risk tables

The following table details the consolidated entity’s remaining contractual maturity for its financial liabilities. The table has
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
consolidated entity can be required to pay. The table includes both interest and principal cash flows.

Freedom Foods Group Limited

Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

26. Financial instruments

(continued...)

Consolidated
Financial liabilities
Trade payables
Other payables and accruals
Other payables
Due to related parties
Finance leases
Finance facilities
Loan payable

Total Financial liabilities

Weighted average
effective interest rate
%

less than 1 year

2012
$ ‘000

2011
$ ‘000

1 to 5 years
2012
$ ‘000

2011
$ ‘000

More than 5 years

2012
$ ‘000

2011
$ ‘000

-
-
11%
10%
8%
6%
6%

11,330
2,881
928
8,605
2,818
11,334
5,935
43,831

3,079
1,892
944
-
1,844
6,493
3,220
17,472

-
-
-
-
5,465
-
8,014
13,479

-
-
944
-
5,207
-
3,626
9,777

-
-
-
-
-
-
-
-

(i) Fair value of financial instruments

The carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their fair values.
The fair values of financial assets and financial liabilities are determined as follows:

•

the fair value of financial assets and financial 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 financial assets and financial liabilities (excluding derivative instruments) are determined in
accordance with generally accepted pricing models based on discounted cash flow 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 flow analysis using the applicable yield curve for the duration of the instruments for
non-optional derivatives, and option pricing models for optional derivatives.

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 qualified 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 qualified candidates. The remuneration
structures take into account:
•
•
•

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.

Managing 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 benefits including motor vehicles), as well as employer contributions to superannuation funds.

The Managing 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.

Annual Report 2012Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

27. Key management personnel compensation

(continued...)

Performance based remuneration

Performance based remuneration is at the discretion of the Remuneration and Nomination Committee. These can take
the form of share options or cash bonuses. During the year, cash bonuses were paid to A Haddad (Pactum Australia) and
M Gauci (Pactum Australia) and 6,250,000 options were granted to RJF Macleod, M Bracka and A Haddad under the
Company’s Employee Share Option Plan (ESOP).

The ESOP allows the Company to grant options over shares to all directors (excluding Ron and Tony Perich) and permanent
full time or part time employees, or their respective nominees, of a company in the group (Group Companies), which
includes related bodies corporate of the Company and a body corporate in which the Company has voting power of 20%
or more, whom the Board determines to be eligible to participate. The Board believes that Options granted are appropriate
to aligning key executive performance with long term performance and growth of the Company.

Options are valued using the binomial 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 paid to Non-Executive Directors for 2012 was $181,033 (2011: $158,800).
To align director interests with shareholder interests, the Directors are encouraged to hold shares in the Company.

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 benefits for Non-Executive Directors.

Service agreements

All senior executive management are employed under contract. The agreements outline the components of the
remuneration paid to executives including annual review. The agreements do not obligate the business to increase fixed
remuneration, pay a short term incentive, make termination benefits or offer a long term incentive in any given year. The
Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination
with cause occurs, the executive is only entitled to that portion of remuneration that is fixed, and only up to the date of
termination. The agreements may be terminated by written notice from either party or by the employing entity within the
Group making a payment in lieu of notice. The notice periods are 9 months for the Managing Director and 6 months for
CEO Freedom Brands and CEO Pactum Australia. Other notice periods for other executives is between 1 and 2 months.

Parent performance, shareholder wealth and directors and senior management remuneration

The following table shows the revenue, profits and dividends for the past five years for the Group.

Sales Revenue ($000's)
Net Profit After Tax ($000s)
Ordinary Dividends per share paid - Interim (cents)
CRPS Dividends per share paid ( cents)
Basic Earnings per Share (cents)

2012
58,132
3,012
0.50
1.40
3.88

2011
45,256
4,387
0.50
1.00
5.67

2010
44,071
3,357
-
-
5.0

2009
48,596
1,320
1.0
-
2.4

2008
54,082
956
2.0
-
2.0

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

27. Key management personnel compensation

(continued...)

The Remuneration and Nomination Committee considers that the Parent’s 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 benefits
Post-employment benefits
Share-based payment
Bonus payment (paid in FY 13)
Termination payment

Consolidated
$000

2012
1,167,142
82,562
190,219
93,200
-
1,533,123

2011
1,314,492
77,748
87,360
-
75,425
1,555,025

Details of key management personnel

Key management personnel (incorporating the Group and Company Executive who receive the highest remuneration for
the year) include:

P.R. Gunner - Chairman and Non-Executive Director

R.J.F. Macleod - Managing Director

G.H. Babidge - Non Executive Director

A.M. Perich - Non-Executive Director.

R. Perich - Non-Executive Director

M. Miles - Non-Executive Director

M. Bracka - CEO Freedom Brands

A. Haddad - CEO Pactum Australia

P. Brown - Executive General Manager Sales, Freedom Brands

P. Bartier - National Supply Chain Manager, Freedom Brands

M. Gauci - Operations Manager, Pactum Australia

Determination of remuneration of specified directors

Remuneration of Non-Executive Directors comprise fees determined having regard to industry practice and the need to
obtain appropriately qualified independent persons. Fees do not contain any non-monetary elements.

Remuneration of the Executive Director is determined by the Remuneration & Nomination Committee. In this respect,
consideration is given to normal commercial rates of remuneration for similar levels of responsibility.

Options have been granted to the Managing Director to acquire ordinary shares in Freedom Foods Group Limited.

Annual Report 2012
Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

27. Key management personnel compensation

(continued...)

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

2012
Short term benefits
Salaries and fees
Bonus
Non monetary
Other

Post employment benefits

Superannuation
Equity compensation

Options
Total

Short term benefits
Salaries and Fees
Bonus
Non-monetary
Other

Post employment benefits

Superannuation
Equity compensation

Options
Total

P. R. Gunner
$

R.J.F. Macleod
$

G.h. Babidge
$

A. M. Perich
$

R. Perich
$

M. Miles
$

63,000
-
-
-

259,800
-
-
-

21,333
-
-
-

32,700
-
-
-

32,000
-
-
-

5,670

15,775

2,880

-
68,670

76,088
351,663

-
24,213

-
32,700

-
34,880

M. Bracka
$

A. haddad (i)
$

P. Brown
$

P. Bartier
$

M. Gauci (ii)
$

309,800
-
-
-

59,150
62,000
-
-

164,220
-
-
-

159,204
-
-
-

33,935
31,200
-
-

-
34,880

Total
$

1,167,142
93,200
-
-

15,775

5,066

14,780

13,056

3,800

82,562

60,870
386,445

53,261
179,477

-
179,000

-
172,260

-
68,935

190,219
1,533,123

(i)

Salary is for the period from 1 April 2012 to 30 June 2012 during which Pactum was a subsidiary of the Group.

(ii) Salary is for the period from 1 April 2012 to 30 June 2012 during which Pactum was a subsidiary of the Group.

2011
Short term benefits
Salaries and fees
Bonus
Non monetary
Other

Post employment benefits

Superannuation
Equity compensation

Options
Total

P. R. Gunner
$

R.J.F. Macleod G.h. Babidge (i)
$

A. M. Perich
$

R. Perich
$

M. Miles
$

63,000
-
-
-

259,800
-
-
-

64,133
-
-
75,425

31,800
-
-
-

32,000
-
-
-

5,670

15,199

2,533

1,125

2,880

-
68,670

43,680
318,679

43,680
185,771

-
32,925

-
34,880

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

27. Key management personnel compensation

(continued...)

M. Bracka (ii)
$

P. Wilson (iii)
$

P. Bartier
$

P. Brown
$

C. Pensini (iv)
$

Short term benefits
Salaries and Fees
Bonus
Non monetary
Other

Post employment benefits

Superannuation
Equity compensation

Options
Total

232,351
-
-
-

11,399

-
243,750

Total
$

1,314,492
-
-
75,425

151,000
-
-
-

148,409
-
-
-

162,385
-
-
-

137,614
-
-
-

11,890

12,444

11,728

77,748

-
151,000

-
160,299

-
174,829

-
149,342

87,360
1,555,025

(i) Other is payment for leave and other statutory entitlements relating to change in role from executive to non

executive director in September 2010

(ii) M. Bracka commenced 17 October 2010

(iii) P. Wilson resigned April 2011

(iv) Resigned 30 June 2012

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 financial statements.

(ii) Equity interest in joint ventures and associates

Details of interests in joint ventures are disclosed in note 34 and associates note 35 to the financial 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 financial statements.

(ii) Key management personnel equity holdings

Fully paid ordinary shares of the Group

Annual Report 2012

Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

28. Related party transactions

(continued...)

2012

P. R. Gunner
R.J.F Macleod
G.H Babidge
A. M. Perich (1)
R. Perich (1)
M. Miles
M.Perich (1)
M Bracka (2)
A. Haddad (3)
M. Gauci (3)
P. Bartier
P. Brown

2011

P. R. Gunner
R.J.F Macleod
G.H Babidge
A. M. Perich (1)
R. Perich (1)
M. Miles
M.Perich (1)
M Bracka (2)
P. Bartier
P. Brown
C. Pensini

Balance at 1 July
2011
No.

510,732
182,775
98,057
51,465,265
51,465,265
210,110
51,465,265
220,436
-
-
-
-
Balance at 1 July
2010
No.

510,732
182,775
98,057
51,164,454
51,164,454
206,667
51,164,454
-
-
-
-

Granted as
compensation
No.

Received on exercise
of options
No.

Net other
change (4)
No.

Balance at 30 June
2012
No.

-
-

-
-
-
-
-
-
-
-
-
Granted as
compensation
No.

-
-
-
-
-
-
-
-
-
-
-
-
Received on exercise
of options
No.

-
-
-
-
-
-
-
-
-
-
-

-
-
-
154,829
154,829
2,702
154,829
107,166
80,384
-
-
-
Net other
change (4)
No.

510,732
182,775
98,057
51,620,094
51,620,094
212,812
51,620,094
327,602
80,384
-
-
-
Balance at 30 June
2011
No.

-
-
-
300,811
300,811
3,443
300,811
220,436
-
-
-

510,732
182,775
98,057
51,465,265
51,465,265
210,110
51,465,265
220,436
-
-
-

(1) Mr A.M. Perich Mr R. Perich and Mr M. Perich (as their alternate) are Joint Managing Directors of Arrovest Pty Limited,

the entity holding a direct interest in the Group.

(2) Mr M. Bracka commenced employment with Group in October 2011.

(3) Mr A. Haddad and Mr M. Gauci commenced employment with Pactum (Formerly Contract Beverage Packers of

Australia) in August 2008 and October 2007 respectively.

(4) Subscribed to during the year.

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

28. Related party transactions

(continued...)

Convertible Redeemable Preference shares of the Group (Issued in FY 2011)

2012

P. R. Gunner
R.J.F. Macleod
G.H. Babidge
A. M. Perich (1)
R. Perich (1)
M. Miles
M. Perich (1)
M. Bracka (2)
A. Haddad (3)
P. Bartier
P. Brown
M. Gauci (3)

Balance at 1 July
2011
No.

Granted as
compensation
No.

Received on exercise
of options
No.

Net other change

No.

Balance at 30 June
2012
No.

159,604
6,666
30,643
15,995,142
15,995,142
64,584
15,995,142
50,391
-
-
-
-

-
-
-
-
-
-
-
-
-
-
-
-

159,604
6,666
30,643
15,995,142
15,995,142
64,584
15,995,142
50,391
-
-
-
-

(1) Mr A.M. Perich Mr R. Perich and Mr M. Perich (as their alternate) are Joint Managing Directors of Arrovest Pty Limited,

the entity holding a direct interest in the Group.

(2) Mr M. Bracka commenced employment with Group in October 2011.

(3) Mr A. Haddad and Mr M. Gauci commenced employment in August 2008 and October 2007 respectively.

Option over ordinary shares of the Group (exercisable at $0.40 cents ) (Issued in FY 2011)

Balance at 1 July
2011
No.

Granted as
compensation
No.

Received on exercise
of options
No.

Net other change

No.

Balance at 30 June
2012
No.

2012

P. R. Gunner
R.J.F. Macleod
G.H. Babidge
A. M. Perich (1)
R. Perich (1)
M. Miles
M. Perich (1)
M. Bracka (2)
A. Haddad (3)
P. Bartier
P. Brown
M. Gauci (3)

159,604
6,666
30,643
15,995,142
15,995,142
64,584
15,995,142
50,391
-
-
-
-

-
-
-
-
-
-
-
-
-
-
-
-

159,604
6,666
30,643
15,995,142
15,995,142
64,584
15,995,142
50,391
-
-
-
-

(1) Mr A.M Perich Mr R. Perich and Mr M. Perich (as their alternate) are Joint Managing Directors of Arrovest Pty Limited,

the entity holding a direct interest in the Group.

(2) Mr M. Bracka commenced employment with Group in October 2011.

(3) Mr A. Haddad and Mr M. Gauci commenced employment in August 2008 and October 2007 respectively.

Annual Report 2012Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

28. Related party transactions

(continued...)

Employee Share Options in the Group

Balance at
1 July
No.

lapsed
No.

1,700,000
1,700,000
-
-
300,000

(1,700,000)
(1,700,000)
-
-
-

Granted
as
compen-
sation
No.

2,500,000
-
1,750,000
2,000,000
-

-
-
-
-
300,000

2,000,000
2,400,000
300,000

(300,000)
(700,000)
-

-
-
-

2012
R. J. F. Macleod
G.H. Babidge
A Haddad
M Bracka
P. Nathan

2011
R. J. F. Macleod
G.H. Babidge
P. Nathan

Exercised
No.

Net other
change
No.

Balance at
30 June
No.

Balance
vested at
30 June
No.

Vested
but not
exercisable
No.

Vested and
exercisable
No.

Options
vested
during
year
No.

-
-
-
-
-

1,700,000
1,700,000
300,000

425,000
425,000
-

-
-
-
-
-

-
-
-

2,500,000
-
1,750,000
2,000,000
-

-
-
-
-
-

1,700,000
1,700,000
300,000

-
-
-
-
-

-
-
-

(i) As at 27 July 2010 700,000 vested options relating to G.H. Babidge and 300,000 vested options relating to R.J.F.

Macleod expired in accordance with the provisions of the Employee Share Option Plan.

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

Further details of the Employee Share Option Plan are contained in note 29 to the financial statements.

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

Other related parties include:

•

entities with joint control or significant influence over the Group

joint ventures in which the entity was a venturer

subsidiaries

other related parties

(i) Transactions between the Group and its related parties

During the financial year, the following transactions occurred between the Group and its other related parties:

•

Pactum Australia Pty Limited is now a 100% owned subsidiary and as such has no related party transactions
with the Group. In the 9 months to 31 March 2012 goods totalling $6,461,000 (2011: $5,523,000) were sold to
the Group at cost.

The Group entered into unsecured loan agreements with Arrovest Pty Limited and Leppington Pastoral
Company (a subsidiary of Arrovest Pty Limited) for $8,064,000 (includes $6,000,000 related to the acquisition of
Pactum Australia Pty Limited with a 12 month term and interest at 10% per annum; refer to note 37). Interest
payments of $264,000 (2011: $118,000) were made to Leppington Pastoral Company. The weighted average
interest rate on the loans is 10.5%.

Freedom Foods Group Limited
Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

28. Related party transactions

(continued...)

•

The Group entered into a lease commitment with Leppington Pastoral Company on 1 April 2012. The Group
made payments of $85,000 in the last 3 months of the current financial year.

The Group was reimbursed by A2DP $43,000 (2011: $440,000) for labour and other administrative services
provided.

These services are provided under normal terms and conditions.

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.

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

(ii) Transactions between joint ventures in which the entity is a venturer and other related parties of the

Group

During the financial year, the following transactions occurred between joint ventures in which the entity is a
venturer and other related parties of the Group:

•

Leppington Pastoral Company sold goods and services totalling $931,000 in the 3 months to 30 June 2012
(2011: $Nil) to Pactum at cost.

These services are provided under normal terms and conditions.

(d) Parent entities

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

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. There are no vesting
conditions attached to these options other than continuing employment within the Group.

The options granted expire within five 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 financial year ended 30 June 2012, the options vest in three equal
tranches over a period of 3 years.

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

Option series

Senior Executive Grant

Number

Grant date

Expiry date

6,250,000

1/02/12

1/02/17

Exercise price
$
0.40

Fair value at grant
$
0.12

The weighted average fair value of the share options granted during the financial year is $0.12 (2011: $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 effects of non-transferability, exercise restrictions and behavioural considerations.

Annual Report 2012

Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

29. Share based payments - Employee Share Option Plan

(continued...)

Expected volatility is based on historical share price volatility over the past 2 years. It is expected that options will be
exercised only in the event of market price exceeding exercise price.

Inputs into the model
Grant date share price
Exercise price
Expected volatility
Option life
Dividend yield
Risk-free interest rate

Executive Options
0.46
0.40
20%
5 years
2.5%
5%

The following reconciles the outstanding share options granted under the employee share option plan at the beginning
and end of the financial year:

Balance at beginning of the financial year
Granted during financial year
Lapsed during financial year
Cancelled during financial year

Exercisable at end of financial year

2012

Number of options

3,700,000
6,250,000
(3,700,000)
-
6,250,000

3,750,000

Weighted average
exercise price $
0.50
0.40
0.50
-
0.40

2011

Number of options

4,700,000
-
(1,000,000)
-
3,700,000

Weighted average
exercise price $
0.50
-
0.50
-
0.50

0.40

3,700,000

0.50

Balance at end of the financial year
The share options outstanding at the end of the financial year had an average exercise price of $0.40 (2011: $0.50), and a
weighted average remaining contractual life of 1,648 days (2011: 170 days). No options were exercised during the financial year.

30. Contingent liabilities

Bank guarantee arising from rental of office premises. No liability is expected to accrue.

Consolidated
$000

2012
14

31. Controlled entities

Controlled Entity

Paramount Seafoods Pty Limited (i)
Nutrition Ventures Pty Limited (i)
Nutrition Ventures Financing Pty Limited (i)
Freedom Foods Pty Limited (i)
Pactum Australia Pty Limited
Australian Natural Foods Holdings Pty Limited (i)
Thorpedo Foods Group Pty Limited (i)
Thorpedo Foods Pty Limited
Thorpedo Seafoods Pty Limited

Country of Incorporation

Ownership interest

Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia

2012
100%
100%
100%
100%
100%
100%
100%
75%
75%

2011
14

2011
100%
100%
100%
100%
50%
100%
100%
75%
75%

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

31. Controlled entities

(continued...)

The consolidated statement of comprehensive income and statement of financial position of the entities party to the
deed of cross guarantee is the consolidated statement of comprehensive income and statement of financial position
included in the 2012 financial report.

(i) These companies are members of the tax consolidated group.

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 financial report and a directors’
report.

Members of the closed group are:

•

Freedom Foods Group Limited

Paramount Seafoods Pty Limited

Nutrition Ventures Pty Limited

Nutrition Ventures Financing Pty Limited

•

Freedom Foods Pty Limited

Australian Natural Foods Holdings Pty Limited

Thorpedo Foods Group 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. The consolidated financial report of the closed group
would not be materially different from the report of the group as a whole.

33. Parent entity disclosures

(a) Financial position

Parent

$000
2012

2,117
59,657
61,774

8,507
1,309
9,816

51,958

39,508
638
11,812
51,958

$000
2011

129
53,575
53,704

442
1,321
1,763

51,941

39,288
532
12,121
51,941

Assets

Current assets
Non-current assets

Total assets
liabilities

Current liabilities
Non-current liabilities

Total liabilities
Net Assets

Equity

Issued capital
Reserves
Retained earnings

Total equity

Annual Report 2012Notes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

33. Parent entity disclosures

(continued...)

(b) Financial performance

Profit for the year
Other comprehensive income
Total comprehensive income

Bank guarantee

Parent

$000
2012
729
-
729

$000
2012
14

(d) Commitments for the acquisition of property, plant and equipment by the parent entity

Plant and equipment, PV of minimum future lease payments

Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years

34. Jointly controlled operations and assets

The Group is a venturer in the following jointly controlled operations and assets:

$000
2012

8
27
-

Output interest
(%)

$000
2011
9,176
-
9,176

$000
2011
14

$000
2011

8
39
-

Name of venture
Pactum Australia Pty Limited

Country of incorporation
Australia

Principal activity
Contract beverage packing services

2012
100

2011
50

On 1st April 2012, Pactum Australia Pty Limited became a wholly owned subsidiary of the group.

The acquisition of Pactum Australia Pty Limited (“Pactum”) has been accounted for as a common control transaction as at
the time of this transaction both Freedom Foods Group and Pactum Australia Pty Limited were controlled by the same
shareholder. As a common control transaction, the acquisition does not reflect the fair value of assets and liabilities
acquired or any recording of additional goodwill at the time of the acquisition of Pactum. The acquisition balance sheet of
Pactum reflects the values for assets and liabilities acquired from Pactum’s accounting records. The difference of $5,013,000
between the fair value of the consideration given and the carrying value of the assets and liabilities acquired is recognised
as a common control reserve in the consolidated financial statements.

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

34. Jointly controlled operations and assets

(continued...)

Reconciliation of movement in investments accounted for using the equity method:

Balance at 1 July
Share of profits for the year
Acquisition of Pactum Australia Pty Limited
Balance at 30 June

$’000

2012
1,882
564
(2,446)
-

2011
1,152
730
-
1,882

Summarised financial information in respect of Freedom Foods Group Limited’s share in the joint venture is set out below:

Current assets
Non current assets
Total assets
Current liabilities
Non current liabilities
Total Liabilities
Net assets
Shareholder funds
Revenue
Profit after income tax

35. Share in associate entity

$’000

2012
-
-
-
-
-
-
-
-
12,379
564

2011
5,302
4,453
9,755
4,052
4,294
8,346
1,409
1,409
16,551
730

Output interest (fully diluted)
(%)

Name of associate
A2C

Country of incorporation
New Zealand

Principal activity
Sale of a2 milk in Australia

2012
25.8

2011
24.0

At the end of July 2010, the group sold its shareholding of 50% ownership in A2DP to A2C in consideration for 120,376,950 fully
paid ordinary shares in A2C. The group holds 149,877,219 ordinary shares and 6,158,910 partly paid shares in A2C at 30 June 2012.

Reconciliation of movement in investment accounted for using the equity method:

Balance at 1 July
Share of profits/(losses) for the year (i)

Dividends
Equity investment
Costs associated with investment
Balance at 30 June

(i) An extra $245,000 was booked to the investment in A2C post year end

A2C
$’000

2012
9,558
650
10,208
-
2,064
85
12,357

2011
-
295
295
-
9,256
7
9,558

Annual Report 2012Directors’ Declaration (For the financial year ended 30 June 2012)

35. Share in associate entity

(continued...)

Summarised financial information in respect of Freedom Foods Group Limited’s share in the associate is set out below:

Current assets
Non current assets
Total assets
Current liabilities
Non current liabilities
Total Liabilities
Net assets
Shareholder funds
Revenue
Profit / (loss) after income tax

A2C
$’000

2012
5,064
5,032
10,096
2,497
7
2,503
7,593
7,593
12,694
895

2011
3,732
2,365
6,097
1,395
10
1,405
4,692
4,692
7,936
295

36. Assets pledged as security

In accordance with the security arrangements of liabilities, as disclosed in note 16 to the financial statements, all non-
current assets of the Group, 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 finance lease pledged as security.

During 2009, Freedom Foods Pty Limited entered into an equipment lease with National Australia Bank to assist in
financing equipment requirements for the Freedom manufacturing site at Leeton. The maximum facility limit is for
financing amounts of up to $8 million with a lease term of 5 years with a 20% residual. The facility is secured by the
financed equipment and Freedom Foods obligations under the lease are guaranteed by Freedom Foods Group Limited.

The Group now also holds equipment leases with Westpac relating to it’s acquisition of Pactum Australia Pty Limited.
These leases have a maximum lease term of 5 years with residual payments of between 20% and 50%. The facility is
secured by the financed equipment at our Taren Point site and Pactums obligations under the leases are guaranteed by
Leppington Pastoral Company, a related party.

37. Acquisition of common controlled entities

On 1st April 2012, Pactum Australia Pty Limited became a wholly owned subsidiary of the group.

The acquisition of Pactum Australia Pty Limited (“Pactum”) has been accounted for as a common control transaction as at
the time of this transaction both Freedom Foods Group Limited and Pactum Australia Pty Limited were controlled by the
same shareholder. As a common control transaction, the acquisition does not reflect the fair value of assets and liabilities
acquired or any recording of additional goodwill at the time of the acquisition of Pactum. The acquisition balance sheet
of Pactum reflects the values for assets and liabilities acquired from Pactum’s accounting records. The difference of
$5,013,000 between the fair value of the consideration given and the carrying value of the assets and liabilities acquired is
recognised as a common control reserve in the consolidated financial statements.

Freedom Foods Group LimitedNotes to the Financial Statements (For the financial year ended 30 June 2012) (continued...)

37. Acquisition of common controlled entities

(continued...)

Net assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Property, plant and equipment
Trade and other payables
Borrowings
Current tax liabilities
Deferred tax liabilities
Total net assets
Common control reserve
Book value of net assets
Consideration
Derecognition of equity accounted investment in the joint venture
Common control reserve
Cash flows
Net cash acquired within subsidiary

Consolidated
$000

2012

288
7,133
3,389
207
7,462
(6,209)
(8,171)
(594)
(72)
3,433

3,433
(6,000)
(2,446)
(5,013)

288

Acquisition costs

During the year, the Group incurred acquisition related costs of $120,000 relating to external legal fees, independent
exports report and shareholder communications. These costs have been written off against the Group’s consolidated
income.

Annual Report 2012Directors’ Declaration (For the financial year ended 30 June 2012)

n Directors’ Declaration

FREEDOM FOODS GROUP LIMITED

DIRECTORS’ DECLARATION

FOR THE YEAR ENDED 30 JUNE 2012

The directors declare that:

(a)

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;

(b) the attached financial statements are in compliance with International Financial Reporting Standards, as stated in

note 3 to the financial statements.

(c)

in the directors’ opinion, the attached financial 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
financial position and performance of the consolidated entity; and

(d) 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 affected by ASIC Class Order 98/1418. The
nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor
payment in full of any debt in accordance with the deed of cross guarantee.

In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which the ASIC
Class Order applies, as detailed in note 32 to the financial 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.

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

P R Gunner
Chairman

Rory J F Macleod
Managing Director

Sydney, 28 September 2012

Freedom Foods Group Limited

Independent Audit Report

n Independent Audit Report

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

Independent Auditor’s Report
to the Members of Freedom Foods Group
Limited

Report on the Financial Report
We have audited the accompanying financial report of Freedom Foods Group Limited, which comprises the statement of
financial position as at 30 June 2012, the statement of comprehensive income, the statement of cash flows and the
statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting
policies and other explanatory information, 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
30 to 77.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of
the financial report that is free from material misstatement, whether due to fraud or error. In Note 3a, 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.

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

Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited

Annual Report 2012Independent Audit Report (continued...)

Auditor’s Independence Declaration

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We
confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of Freedom
Foods Group Limited on 28 September 2012 would be in the same terms if provided to the directors as at the date of this
auditor’s report.

Opinion

In our opinion:

(a) the financial report of Freedom Foods Group Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of their

performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

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

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 11 to 16 of the directors’ report for the year ended 30 June
2012. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Freedom Foods Group Limited for the year ended 30 June 2012, complies
with section 300A of the Corporations Act 2001.

DELOITTE TOUCHE TOHMATSU

Catherine Hill
Partner
Chartered Accountants
Parramatta, 28 September 2012

Freedom Foods Group Limited

Shareholder Statistics

n Shareholding

Class of shares and voting rights

At 31 August 2012, there were:

Substantial shareholders

77,995,731 ordinary shares of the Parent on issue.
19,414,800 convertible redeemable preference shares of the

Parent on issue.

The number of shares held substantial shareholders as listed in the Parent’s register as at 31 August 2012 are:

Ordinary Shares

Arrovest Pty Limited
Telunapa Pty Ltd

Convertible Redeemable Preference Shares

Arrovest Pty Limited
Mr Stephen Francis Higgs & Mrs Rosemary Jean Higgs

Number

51,620,094
12,729,144

15,995,142
1,599,999

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 ordinary shareholders as at 31 August 2012

1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over

Ordinary
300
253
84
130
35
802

Non marketable securities which are holdings of less than 1,666 ordinary shares are held by 362 shareholders. This statistic
is based on the share register as at 31 August 2012.

Annual Report 2012

Substantial shareholders
(continued...)

20 largest ordinary shareholders as at 31 August 2012

Name

1 Arrovest Pty Ltd
2 Telunapa Pty Ltd
3 National Nominees Limited
4 East Coast Rural Holdings Pty Limited
5 Mr Perry Richard Gunner & Mrs Felicity Jane Gunner
6 Mr Stephen Francis Higgs & Mrs Rosemary Jean Higgs
7 Mr Michael Andris Bracka & Mrs Janine Elizabeth Bracka
8 J P Morgan Nominees Australia Limited
9 Mr Lawrence Lip & Mrs Sabina Lip
10 Mr Terence Edward Morris C/- Ord Minnett Ltd -Pars Dept
11 Mr Clifford Andrew Smith & Mrs Susan Lee Smith
12 Mr Lawrence Rose & Mrs Jennifer Rose
13 Bond Street Custodians Limited
14 Mr Melvyn Miles & Mrs Joanna Miles
15 Australian Food Holdings Pty Limited
16 Mr Legh Davis & Mrs Helen Davis
17 Mr Kenneth Francis Smith & Mrs Margaret Lorraine Smith
18 Mr John Wien-Smith C/- RBS Morgans Wealthplus
19 Economic Consultancy Services Pty Limited
20 Moorebank Property Management Pty Limited

Shareholder Statistics (continued...)

Number of Ordinary
Shares held
51,620,094
12,729,144
999,904
648,729
510,732
434,615
327,602
322,670
317,506
274,910
266,273
259,184
230,000
212,812
210,426
200,000
200,000
200,000
192,308
187,747
70,344,656

% held of
Ordinary Capital
66.18%
16.32%
1.28%
0.83%
0.65%
0.56%
0.42%
0.41%
0.41%
0.35%
0.34%
0.33%
0.29%
0.27%
0.27%
0.26%
0.26%
0.26%
0.25%
0.24%
90.19%

The proportion of ordinary shares held by the 20 largest shareholders is 90.19%

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

All Member Exchanges.

Distribution of convertible redeemable preference shareholders as at 31 August 2012

1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over

Ordinary
24
23
15
35
5
102

Freedom Foods Group LimitedShareholder Statistics (continued...)

Substantial shareholders
(continued...)

20 largest convertible redeemable preference shareholders as at 31 August 2012

Name

1 Arrovest Pty Ltd
2 Mr Stephen Francis Higgs & Mrs Rosemary Jean Higgs
3 Mr Perry Richard Gunner & Mrs Felicity Jane Gunner
4 Mr Lawrence Lip & Mrs Sabina Lip
5 Mr Alexander MacDonald
6 Dr John Warwick Cox
7 Mr Lawrence Rose & Mrs Jennifer Rose
8 Mr Melvyn Miles & Mrs Joanna Miles
9 Australian Food Holdings Pty Limited
10 Mr Robert John Perry & Mrs Jennifer Joy Perry
11 Connaught Consultants (Finance) Pty Limited
12 Mr Michael Andris Bracka & Mrs Janine Elizabeth Bracka
13 Mr Legh Davis & Mrs Helen Davis
14 Mr Richard James Wishart & Mrs Jillian Rosemary Wishart
15 Mr Steven Kalyk & Mrs Mirjana Kalyk
16 Mr Ralph Stuart Bruce & Mrs Christine Ann Bruce
17 Mr Mathew John
18 Mrs Kathleen Alice O'Shea
19 Mr Robert William Owen & Mrs Yvonne Owen
20 Mr John Wien-Smith C/- RBS Morgans Wealthplus

Number of Ordinary
Shares held
15,995,142
1,599,999
159,604
150,000
133,333
100,000
80,995
64,584
63,860
62,500
57,929
50,391
40,869
40,625
36,835
35,920
34,720
33,300
31,559
31,250
18,803,415

% held of
Ordinary Capital
82.39%
8.24%
0.82%
0.77%
0.69%
0.52%
0.42%
0.33%
0.33%
0.32%
0.30%
0.26%
0.21%
0.21%
0.19%
0.19%
0.18%
0.17%
0.16%
0.16%
96.85%

The proportion of convertible redeemable preference shares held by the 20 largest shareholders is 96.85%

Annual Report 2012n Corporate Directory

Company Secretary
Rory J F Macleod

Assistant Company Secretary
Sharon Maguire

Principal Registered Office
80 Box Road
Taren Point NSW 2229
Tel: (02) 9526 2555
Fax: (02) 9525 5406

Share Registry
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Tel: (02) 8280 7111
Fax: (02) 9287 0303

Insurance Brokers
InterRisk Australia Pty Limited
Level 1, 7 Macquarie Place
Sydney NSW 2000
Tel: (02) 9346 8050
Fax: (02) 9346 8051

Solicitors
Gilbert & Tobin
2 Park Street
Sydney NSW 2000
Tel: (02) 9263 4000
Fax: (02) 9263 4111

Addisons
Level 12, 60 Carrington Street
Sydney NSW 2000
Tel: (02) 8915 1000
Fax: (02) 8916 2000

Bankers
HSBC Australia Limited
Level 32, 580 George Street
Sydney NSW 2000
Tel: 1300 308 188 (toll free)
Fax: (02) 9255 2647

National Australia Bank Ltd.
Level 3, 255 George Street
Sydney NSW 2000
Tel: (02) 9237 1171
Fax: (02) 9237 1400

Westpac Banking Corporation
Level 20, 275 Kent Street
Sydney NSW 2000
Tel: (02) 6760 0000
Fax: (02) 6766 7215

Auditor
Deloitte Touche Tohmatsu
Chartered Accountants
The Barrington, 10 Smith Street
Parramatta NSW 2150
Tel: (02) 9840 7000
Fax: 02) 9840 7001

Management
Rory J F Macleod
Michael Bracka
Amine Haddad
Peter Brown
Peter Bartier
Mark Gauci

- Managing Director
- CEO Freedom Brands
- CEO Pactum Australia
- Executive General Manager Sales, Freedom Brands
- National Supply Chain Manager, Freedom Brands
- Operations Manager, Pactum Australia

Corporate Directory

Freedom Foods Group Limited

Freedom Foods Group 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