Freedom Foods Group Limited Annual Report 2013

FY2013 Annual Report · Freedom Foods Group Limited

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Freedom Foods Group Limited

Annual Report 2013

For personal use onlyContents

Financial Highlights and Five Year Summary ..........................................................................................................................2

Chairman’s Letter ......................................................................................................................................................................................3

Managing Director’s Review of Operations .............................................................................................................................5

Directors’ Report .....................................................................................................................................................................................13

Lead Auditor’s Independence Declaration............................................................................................................................21

Corporate Governance Statement .............................................................................................................................................22

Consolidated Statement of Profit and Loss and Other Comprehensive Income ..........................................30

Consolidated Statement of Financial Position ....................................................................................................................31

Consolidated Statement of Cash Flows ..................................................................................................................................32

Consolidated Statement of Changes in Equity ...................................................................................................................33

Notes to the Financial Statements ..............................................................................................................................................34

Directors’ Declaration ..........................................................................................................................................................................79

Independent Auditor’s Report ......................................................................................................................................................80

Shareholder Statistics ..........................................................................................................................................................................82

Corporate Directory .............................................................................................................................................................................85

Annual General Meeting

Date

1 November, 2013

Time

12.00 pm

Venue

DLA Piper Australia
201 Elizabeth Street
Sydney
NSW 2000

FREEDOM FOODS GROUP LIMITED
ABN 41 002 814 235
Annual Report for the year ended 30 June 2013

For personal use only

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)
Net Operating 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)

2013
88,831
11,600
13,722
6,351
14.7
113,754
17,219
2.00
2.80
2,327
126,839
82,395
63
47

2012
58,132
5,447
3,012
3,305
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
2,607
5.7
77,497
19,415
0.50
1.00
405
75,456
49,983
52
29

2010
44,071
3,816
3,357
3,929
5.0
77,435
-
-
-
-
71,090
40,263
52
22

2009
48,596
3,494
1,320
2,642
2.4
54,660
-
1.00
-
545
63,659
30,161
55
13

* Earnings before depreciation, interest, tax and amortisation

Annual Report 2013

For personal use only

n Chairman’s Letter

Dear Shareholder

In the 2013 financial year, Freedom Foods Group Limited (“FFG”) achieved Operating EBDITA of
$11.6 million, an increase of 113% against the prior corresponding period, reflecting increased sales
and profitability in the Freedom Foods business, consolidation of Pactum Australia for 12 months
and a contribution from Specialty Seafood.

Operating Pre-tax Profit was $7.5 million for the 12 months ended 30th June 2013, reflecting a 117%
increase on the previous corresponding 12 month period.

The Reported Net Profit of $13.7 million included non-operating after tax profit of $8 million from
the sale of 40 million shares in A2 Corporation, employee share option expense of $246k (after tax),
bad debts provision of $205k (after tax) and resolution of a long term employee claim of $140k (after
tax). The Company is utilising future income tax benefits to reduce cash tax payable on the sale of
the A2C shareholding.

The result included strong sales growth in Freedom Cereals of 41%, compared to the previous
corresponding period, with business unit EBDITA increase reflecting sales growth and improved
operating efficiencies at Leeton. Dairy alternative beverage sales continued their trend with sales
growth of 28% compared to the previous corresponding period.

In the Speciality Seafood business, the Brunswick Sardine brand maintained its No 1 brand leadership
position in Australia and New Zealand.

Pactum Australia contributed a strong sales result in its first full twelve month period as a consolidated
entity. Pactum’s expansion into portion pack UHT, for value added beverages, was completed in
December 2012 and the business unit made a material contribution in FY13. The establishment of the
new Pactum Dairy Group (PDG) UHT dairy facility was progressed during the year.

The Board is pleased with these results and the Company has continued the positive trend in the
development of its unique business platforms in specialised areas of the food market. It has two key
growth opportunities in Freedom Foods and Pactum Australia, a stable business base in Specialty
Seafood and a strategic opportunity in A2C.

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

The Company completed 2 capital raisings;

•

in April 2013 we raised $17.4 million (gross proceeds) at $1.04 per share from a placement
and entitlements offer; and

in September 2013 we raised $27 million which, together with a small entitlement offer for
$3 million (currently underway), will complete this $30 million capital raising.

Both capital raisings were significantly oversubscribed.

A2 Corporation (A2C) (18.04% FNP shareholding) reported continued strong growth in the Australian
fresh milk business with sales up 48% over the prior year. In December 2012, the Company sold 40
million shares in A2C for a total net consideration of $15.4 million, recording a pre tax profit of $11.8
million, which brought our shareholding in A2C down to 18.04%. A2C’s market capitalisation at 27
September 2013 of A$403 million implies a value for the Company’s shareholding of approximately
A$73 million, materially above the book value of A$9.9 million.

Chairman’s Letter

Freedom Foods Group LimitedFor personal use onlyChairman’s Letter (continued...)

With improving profitability, the Board has recommended payment of a final fully franked dividend
of $0.01 per ordinary share in November 2013. The total dividend for the year represents a dividend
payout ratio of 39% of operating net profit in FY 2013, which includes the dividends paid out on the
preference shares. 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 2013.

I would also like to pay tribute to Mr Geoff Babidge, who retired from the Board in June this year.

Geoff joined the Company in 2002, as Managing Director. He has played a leading role through this
period in building the Company growth platform in Freedom Foods and Pactum Australia, and in
particular driving the significant value creation opportunity in A2 Milk through A2 Corporation, of
which the Company is the largest shareholder. His contribution has been crucial in transforming the
Company to target a range of exciting growth opportunities both domestically and offshore. Since
stepping down as Managing Director in 2010, he has displayed a keen interest in all aspects of the
Company and has been a strong contributor to the Board, in particular providing support to the
senior management team under Rory Macleod, Managing Director.

The Board and Management wish him well in his ongoing role as Managing Director and CEO of A2
Corporation and to creating further value for FNP shareholders

As a consequence of Geoff’s retirement and to ensure process of renewal at the Board, Mr Trevor
Allen has joined the Board as an independent non-executive director, effective 1 July 2013.

Trevor brings extensive experience in business, corporate finance and capital markets and we look
forward to his contribution as a director.

On behalf of the Board, I would like to thank all employees for their dedication and hard work
throughout the year. There is much to be done and a great deal of confidence about Freedom Foods
Group long-term prospects.

Perry Gunner
Chairman

Annual Report 2013For personal use onlyManaging 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) On Adjusted Reported Net Profit
EPS (cents per share)( Fully Diluted for CRPS) On Operating Net Profit
Net Debt / Equity
Net Assets per Share

Notes:

2013
$’000
115,514
88,831
11,600
8,972
819
7,524
18,524
6,351
13,722
1.00
1.00
1.40
1.40
11.96
5.40
10%
$0.63

2012
$’000
72,556
58,132
5,447
4,075
1,214
3,476
3,250
3,305
3,012
-
1.00
1.40
1.40
3.11
3.32
82%
$0.49

% Change

+59.21%
+52.81%
+112.96%
+120.17%
-32.54%
+116.46%
+469.97%
+92.16%
+355.58%
-
-
-
-
+284.57%
+62.56%
-87.80%
+29.69%

(1) Gross Sales Revenues does not include revenues from the group associate entity, A2 Corporation.

(2) Operating EBDITA and EBITA, excludes abnormal or non-operating charges with an add back of non cash
employee share option expense of $352k, bad debts written off expense of $293k and employee claim
settlement expense of $200k.

The company achieved an Operating EBDITA of $11.6 million, an increase of 113%, reflecting
increased sales and profitability in the Freedom Foods business, consolidation of Pactum Australia
for 12 months and a contribution from Specialty Seafood.

Operating Pre-tax Profit was $7.5 million for the 12 months ended 30th June 2013, reflecting a 117%
increase on the previous corresponding 12 month period.

The Reported Net Profit of $13.7 million included non-operating after tax profit of $8 million from
the sale of 40 million shares in A2 Corporation (A2C), employee share option expense of $246k
(after tax), bad debts provision of $205k (after tax) and resolution of a long term employee claim
settlement of $140k (after tax). The Company is utilising future income tax benefits to reduce cash
tax payable on the sale of the A2C shareholding.

Net Operating Profit was $6.4 million, an increase of 92%, including an increase in operating income
tax expense of $1.2 million for this period against $185k for the last period.

Equity Associates contributions of $0.8 million reflected the share of estimated 2013 profits from
A2C. In addition to a share of equity profits from A2C from 2012 not previously recognised.

Net assets at 30 June 2013 increased to $0.63 per share from $0.49 at June 2012, reflecting the
impact of the sell down of the A2C shareholding, exercise of options by shareholders and the
capital raising undertaken in April 2013.

Freedom Foods Group LimitedFor personal use onlyManaging Director’s Review of Operations (continued...)

HIGHLIGHTS

Highlights for the year included:

•

Group Operating EBDITA of $11.6 million, a 35% increase on the previous corresponding
period.

Operating Net Profit was $6.4 million for the 12 months ended 30th June 2013, reflecting a
93% increase on the previous corresponding 12 month period.

Sales growth in Freedom Cereals of 41%, compared to the previous corresponding period,
with business unit EBDITA increase reflecting sales growth and improved operating
efficiencies at Leeton.

Dairy alternative beverage sales continued their trend with sales growth of 28% compared to
the previous corresponding period.

In the Speciality Seafood business, the Brunswick Sardine brand maintained its No 1 brand
leadership position in Australia and New Zealand.

Pactum Australia contributed a strong sales result in its first full twelve month period as a
consolidated entity. Pactum’s expansion into portion pack UHT, for value added beverages,
was completed in December 2012 and the business unit made a material contribution in FY
13. The establishment of the new Pactum Dairy Group (PDG) UHT dairy facility was
progressed during the year.

A2C (18.04% FNP shareholding) reported continued strong growth in the Australian fresh
milk business with sales up 48% over the prior year. In December 2012, the Company sold 40
million shares in A2C for a total net consideration of $15.4 million, recording a pre tax profit of
$11.8 million, which brought our shareholding in A2C down to 18.04%. A2C’s market
capitalisation at 27 September 2013 of A$403 million implies a value for the Company’s
shareholding of approximately A$73 million, materially above the book value of A$9.9 million.

•

The Company completed a capital raising of $17.4 million
(gross proceeds) at $1.04 per share from a placement and
entitlements offer in April 2013. The capital raising was
significantly oversubscribed with strong demand from a
broad range of high quality institutional investors and
existing shareholders.

Net Debt / Equity at 10% from 82% at June 2012,
reflected the sell down of the A2C shareholding and
exercise of options by shareholders as well as the $17.4
million capital raising during the period.

Net assets per share at $0.63 and net tangible assets of
$0.47 per share, with A2C investment recorded at a book
value of $9.9 million.

The Company is to pay a final dividend for the year of
$0.01 per ordinary share (fully franked) in November
2013, equating to a total ordinary share dividend of $0.02
for the year. A fully franked converting preference share
dividend will be paid in November 2013.

Annual Report 2013For personal use onlyManaging 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 29%
compared to the previous corresponding period.

During this period the business drove the Freedom branded portfolio
with a focus on effective promotional price points, new product
in major retailers and
increased merchandising
innovation and
independent channels to improve distribution and stock weights.

As a result, the business sold 1 million Cereal cases, equal to volume
growth of 50% and gross sales growth of 41%, compared to the previous
corresponding period.

Cereal volume growth contributed to increased efficiencies at the Leeton
manufacturing facility, with further benefits from management focus on
improving efficiencies in labour, supply chain and distribution. The
Leeton facility is the only integrated large scale manufacturing capability
in Australia (and overseas) producing cereals and snacks “free from” key
allergens such as gluten, nuts and dairy to the lowest detectable
standards.

Freedom Foods continued its focus on leveraging its Cereal base into
breakfast snack alternatives, as well as meeting demand for “nut free”
snacks, with growth in volumes of 127%, albeit from a small base.

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

Dairy alternative beverage sales (soy, rice and almond) continued the
trend from FY 2012 with volume growth of 14% and sales growth of 24%
compared to the previous corresponding period, reflecting increased
market share of Australia’s Own Organic and Blue Diamond Almond
Breeze Milk brands.

The business continued its development of export markets, with volume
growth
in North America reflecting Freedom’s unique point of
differentiation in offering a Cereal range free of all common allergens and
from non genetically modified sources. With the US gluten free market
estimated at US$3.4 billion and growing at 15% CAGR per annum,
Freedom Foods is increasing its development activities in North America
to grow sales of Freedom branded and contract pack supply from its
Leeton facility.

The previously announced expansion of Freedom Foods into North
America has commenced under a new wholly owned subsidiary and the
relocation of a senior commercial executive, Michael Bracka to North
America to lead the commercialisation activities of the North American
business. Freedom’s long term target is to develop a sales base of up to

Freedom Foods Group LimitedFor personal use onlyManaging Director’s Review of Operations (continued...)

1 million cases of Freedom branded Cereals and Cereal snacks. The retail
sales channel focus is on specialty or natural product retailers in key
demographic regions in the USA, namely around California, Texas, Mid West,
New York, Florida and into Canada.

The impact of sales and efficiency improvements during the period resulted
in significantly increased business unit EBDITA.

The focus for the business into FY 2014, remains on increasing sales through
growth in distribution channels and building awareness of the brand and
products across a broader consumer market open to healthier digestive and
nutritional products. The business will continue to drive category leadership
of the health channel and support private label development that is
complimentary to the business both in Australia and internationally.

As part of this and meeting growth demands, the business has commenced
a number of major capital programs including:

•

$3.5 million investment on downstream cereal packaging capabilities
to improve efficiencies and provide for increased capacity in range
and format, with new capabilities on stream from January 2014; and

$2.5 million investment in additional Cereal extrusion capacity to
meet ongoing growth requirements in Australian and International
markets in relation to Cereals and Cereal based products such as bars
and ingredients, with new capabilities on stream from June 2014.

The total
production capability, with no material net increase in cash overheads.

investment will materially

increase Freedom Foods Cereal

The business is also well progressed on plans to upgrade its nutritional snack
manufacturing capabilities in calendar 2014, to improve efficiencies and
meet demand for nutritious allergen free snacks in a range of consumption
formats in Australia and internationally.

Specialty Seafood

The Speciality Seafood business performed below the previous corresponding
period, reflecting lower sales in New Zealand and increased cost of Salmon.

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

In Salmon, Paramount increased its share in the Pink Salmon segment,
although the brand suffered some SKU ranging reductions in the 2nd half.

While the business has seen the benefit of higher exchange rates on
inventories purchased in $USD and $CAD, this was not sufficient to meet cost
increases in salmon, compared to the previous corresponding period. 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 and Sardine catch volumes.

The business is focussed on driving category leadership of the speciality seafood
channel through introducing new product opportunities (including value added
and snacking offerings) and revitalised packaging for the Brunswick brand, while
continuing to utilise Bumble Bee Foods procurement base.

Annual Report 2013For personal use onlyManaging Director’s Review of Operations (continued...)

Pactum Australia

Pactum Australia, which provides
innovative contract manufacture
solutions in long life (UHT) food beverages for private label and proprietary
customers, delivered a strong sales and business EBDITA contribution in
its 12 months as a consolidated entity.

Pactum Australia non-dairy production volumes increased during the
year to support the growth of Freedom Foods Australia’s Own and Blue
Diamond brands, in particular focussed on the fast growing almond
beverage category.

The business continued to see benefit at its Sydney facility of increasing its
mix of value added UHT products to a range of private label and proprietary
customers, while migrating out of standard dairy milk production.

As part of its growth strategy, Pactum finalised commissioning in
December 2012 of an approximate $7.5 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. Initial
customer production commenced in January 2013, with the new capacity
operating on a 3 shift operation to meet customer demands.

Pactum Dairy Group (PDG)

In December 2012, Pactum announced that it intended to build a state-
of-the-art UHT processing plant to meet demand for high quality dairy
milk in export and domestic markets. Pactum will operate the new plant
through a joint venture, Pactum Dairy Group Pty Limited (PDG), to be
owned jointly (50/50) with Australian Consolidated Milk (ACM), a major
Australian dairy milk supply group.

The primary market focus of the new capacity is 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 facility will enable
Pactum to meet growing demand for UHT dairy milk, while providing
additional capacity for value added beverages and food at its Sydney
facility.

The location of the new plant at Shepparton in Victoria, will provide for
long term access to sustainable and economic sources of dairy milk. The
initial capabilities of the plant will be 200ml portion pack and 1 Litre UHT
configuration. Initial capacity will be up to 100m litres, with capability to
significantly increase this capacity in the longer term.

Pactum has made an initial investment contribution of up to $4.5 million
as equity funds to PDG (being 50% of total proposed equity contribution
of $9 million), funded through internal sources. National Australia Bank is
providing finance facilities to PDG.

The new UHT dairy facility at Shepparton is well progressed with trial
production to commence in December 2013.

The business is well advanced in securing volumes to meet its base
business plan for 2014, with a phased development over 3 years. The
business recently established a dedicated sales office in China.

Freedom Foods Group LimitedFor personal use onlyManaging Director’s Review of Operations (continued...)

Packaging Capabilities Expansion

As part of its focus on providing innovative contract packaging solutions, Pactum will expand its
packaging formats to meet the increasing demands from its private label and proprietary customer
base. From July 2014, Pactum will expand its capabilities to include 250ml Prisma format and 330ml
Prisma Dreamcap format.

These formats are increasingly being utilised to provide premium packaging for food and beverage
products. Prisma 250ml is the leading format for premium beverages, while the Prisma Dreamcap
will be the first installation of this format in the Australian market for broad contract packaging
application, with its use being for premium consumption formats as a more versatile and
environmentally friendly alternative to plastic.

Both capabilities will be available for domestic customers and dairy based export customers.

The packaging capability will be owned by Pactum Australia and operated at PDG’s Shepparton
facility. It is expected that certain volume from Pactum’s Sydney facility will be transferred to the
new capability to free up existing capacity for new customers in the Sydney facility.

The total investment for the packaging capabilities will be approximately $15 million, with an initial
earnings contribution from FY 2015 and phased development over 3 years.

Exclusive Supply Agreement for a2 UHT Dairy Milk

Pactum and A2C have agreed the key terms of an agreement for the exclusive supply of a2 UHT milk
for Australian and Asian markets utilising Pactum’s capabilities at its Sydney and soon to be
completed Shepparton facility.

The agreement will provide for an initial term of 5 years, with renewal options and requires agreement
from A2C shareholders as a result of Freedom and A2C sharing two common directors.

Strategic Alliance for China Dairy Milk Market

As part of its strategy to develop long term value added supply relationships into China and SE Asia,
Freedom Foods and Pactum have agreed to enter into a licence and supply agreement with
Shenzhen JLL Group (JLL) in China. JLL will work with Freedom to take dairy products into the China
market under Freedoms long standing brands.

JLL will invest in brand marketing and distribution. JLL is owned by Chinese nationals associated
with the development of significant consumer beverage brands in the China market.

Annual Report 2013For personal use only
Managing Director’s Review of Operations (continued...)

STRATEGIC EQUITY ASSOCIATES

A2 Corporation Limited (A2C), 18.04% Equity Interest

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

A2C reported for the FY 2013 year, sales of NZD$94.3 million, an increase of
51% over the prior year and Net Profit After Tax of NZD $4.1 million. Operating
EBITDA (before share of associate earnings and unusual items) was NZD$10.6
million, an increase of 125% over the prior year.

a2™ branded milk is the fastest growing milk brand in the Australian market and the major driver of
category growth nationally, accounting for in excess of 7.4% of grocery channel market share by
value. Sales growth in Australia increased 48% over the previous corresponding period.

A2C launched a2™ brand milk in the UK market in October 2012 in partnership with Müller Wiseman
Dairies, Britain’s largest fresh milk company and by June 2013, had established distribution in 1000
retail outlets in the UK.

The Company progressed its plan for the launch of a2™ Platinum™ infant formula into China, which
is expected in September 2013.

In December 2012, A2C completed an equity raising for NZ$20 million, including a partial sell down
by the Company’s three largest shareholders. As part of this, the Company sold 40m shares in A2C
at NZ$0.50, for a total net consideration of $15.4 million, recording a pre tax profit of $11.8 million.

Post the capital raising and sell down, FNP remains the largest single shareholder in A2C with a fully
diluted shareholding of 18.04%. A2C is listed on the main board of the New Zealand Stock Exchange
(NZX: ATM), with a market capitalisation as at 27 September 2013 of approximately NZ$454 million
(A$403 million) implying a value for FNP’s 18.04% investment of around A$73 million, materially
above the book value of A$9.9 million.

The Company equity accounted profit of $0.8 million. This reflects it’s share of estimated year end
profits from A2C, and it’s share of profits from 2012 not previously recognised.

Capital Management

The Company’s Net Debt / Equity ratio at the year end was 10%, compared to 82% as at 30 June
2012, reflecting the sell down of the A2C shareholding, exercise of options by shareholders and
capital raising in April 2013.

Net cashflow from operations during the period increased to $5.9m, compared to $5.4m in the
previous corresponding period, reflecting consolidation of Pactum Australia. Capital expenditure of
$5.9 million comprised, operating capital expenditure, the balance of the Pactum packaging
expansion and initial commitments to expansion at Freedom’s Leeton facility.

The Company completed a capital raising of $17.4 million (gross proceeds) from a placement and
entitlements offer in April 2013. The capital raising was significantly oversubscribed with strong
demand from a broad range of high quality institutional investors and existing shareholders. The
proceeds of the Placement and Entitlement Offer are being utilised to fund the Company’s growth
strategy including acceleration of capital projects within Freedom Foods and Pactum Australia, new
product initiatives, acceleration and expansion of international sales activities and additional
working capital requirements.

The Company had $10.5 million of debtor finance facilities classified under accounting standards as
current debt. The debtor finance facilities form part of the Company’s financing facilities which are
part of a rolling annual review.

Freedom Foods Group LimitedFor personal use onlyManaging Director’s Review of Operations (continued...)

The Company intends to maintain a conservative gearing with net debt to equity not to exceed 50%.

The Company completed a buy-back of all unmarketable parcels of shares in the Company in April
2013. The buyback resulted in 42,930 shares being held by 209 shareholders being bought back and
cancelled by the Company for a consideration of $40k.

The Company has on issue approximately 5.2m convertible redeemable preference shares (CRPS),
which are convertible 1 for 1 into ordinary shares at election of the holder at any time. The Company
has a buy back option from December 2013, which it intends to proceed with for any CRPS not
converted into ordinary shares prior to this date.

Dividends

Consistent with the continued improvement in group performance, the Company will pay a final
fully franked dividend for FY 2013 of $0.01 per ordinary share, consistent with the interim dividend
paid in April 2013. The dividend will be paid in November 2013. The record date for determining
entitlements is 1 October 2013 and the payment date is 1 November 2013.

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 2013. The record date for
determining entitlements is 1 October 2013 and the payment date is 1 November 2013.

The total dividend for the year represents a dividend payout ratio of 39% of operating net profit in FY
2013, which includes the dividends paid out on the preference shares.

Outlook

The Company has continued the positive trend 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.

Freedom Foods is expected to continue to deliver improved results from growth in existing
distribution channels and international markets, aligned with increasing manufacturing efficiencies
at its Leeton facility.

The expansion of packaging capabilities in Pactum will result in an increase in sales and profitability
in FY 2014, with further growth opportunities through meeting the increasing demands of its private
label and proprietary customer base. The investment in Pactum Dairy Group provides a potential
medium term opportunity to increase exposure to the growing demand for high quality and safe
dairy products from South East Asia, including China.

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 growth in sales, operating profitability and improving return on
funds employed in FY 2014.

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

Annual Report 2013For personal use onlyn Directors’ Report
Your Directors submit the financial report of Freedom Foods Group Limited (the Company) for the
year ended 30 June 2013. In order to comply with the provisions of the Corporations Act 2001, the
Directors report 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 10 years and is the Managing Director. Sharon
Maguire is the Assistant Company Secretary.

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 $13,722,000 (2012 profit: $3,012,000).

Refer to the commentary in the Managing Directors Review of Operations.

Dividends paid or recommended

In respect of the financial year ended 30 June 2013, the Directors are recommending that a final
ordinary dividend of 1 cent per share be paid at the beginning of November 2013 and a converting
preference share (CRPS) dividend of 1.4 cents per CRPS to be paid at the begining of November
2013.

Significant changes in state of affairs

There are no significant changes in the state of affairs for the current financial year.

Subsequent Events

Apart from items disclosed in Note 27, there are no further subsequent events.

Future developments

In future financial years, the consolidated entity expects to further its growth through expansions to
other territories, and forming strategic alliances and partnerships.

Directors’ Report

Freedom Foods Group LimitedFor personal use onlyDirectors’ Report (continued...)

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 13 meetings of Directors (including committees) were held.

The following persons acted as Directors of the company during the financial year, with attendances
to meetings of Directors as follows:

Directors Meeting

Remuneration & nomination
committee meetings

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

10
10
10
10
10
10
10

10
9
9
9
10
10
8

-
2
-
2
2
2
-

1
1
-
1
-
-
-

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

Annual Report 2013For personal use onlyRemuneration report - audited

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

Directors’ Report (continued...)

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 Foods North America

A. Haddad - CEO, Pactum Australia

M. Gauci - Operations Manager, Pactum Australia

P. Brown - General Manager, Sales, Freedom Brands

T. Moses - General Manager, Leeton Operations

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 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.

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) relating to FY
2012 performance and 600,000 options at 60 cents per option exercise price were granted to RJF
Macleod, M Bracka and A Haddad under the Company’s Employee Share Option Plan (ESOP).

Freedom Foods Group LimitedFor personal use onlyDirectors’ Report (continued...)

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 an Annual or Extraordinary General Meeting. Total fees for all
Non-Executive Directors, last voted upon by shareholders was in June 2013, was not to exceed
$500,000 in total. Total fees paid to Non-Executive Directors for 2013 was $223,179 (2012:
$195,343). To align director interests with shareholder interests, the Directors are encouraged to
hold shares in the Company.

The Chairman receives approximately twice the base fee of Non-Executive Directors. Non-Executive
Directors do not receive performance related remuneration. Directors’ fees cover all main Board
activities including Committee Fees. 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, 6 months for CEO Pactum
Australia and 12 months for CEO Freedom Foods North America. Other notice periods for other
executives are between 1 and 2 months.

Company performance, shareholder wealth and directors and senior
management remuneration

The remuneration policy of the company and group is at the discretion of the Remuneration and
Nomination Committee. These can take the form of share options or cash bonuses.

Annual Report 2013For personal use onlyDirectors’ Report (continued...)

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 After Tax ($000s)
Ordinary Dividends Per Share (cents)
CRPS Dividends Per Share (cents)
Basic Earnings per Share (cents)

2013
88,831
13,722
2.00
2.80
14.7

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

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 2013 are
as follows:

2013

Directors

P.R. Gunner

R.J.F. Macleod (1)

G.H. Babidge

A.M. Perich

R. Perich

M. Miles
Executive Officers
M. Bracka

(CEO, Freedom Foods North America)

A. Haddad (2)

(CEO, Pactum Australia)

P. Brown

(General Manager, Sales)

T. Moses

(General Manager, Leeton Operations)

M. Gauci (2)

(Operations Manager)

Salary

350,460

317,493

276,226

173,570

145,414

149,020

68,250

34,667

35,425

36,779

34,667

1,412,183

209,788

Short-term employee benefits

Post employ-
ment benefits

Share
based
payments

% of
total
being

Directors'
Fees
$

Committee
Fees
$

Non-cash
Benefits
$

Superannuation
Contributions
$

Other

62,000

25,000

87,000

Options

Total

Options

74,393

151,605

517,739

37,787

35,425

37,787

29%

6,143

15,674

3,120

1,008

3,120

17,046

122,628

457,167

27%

25,106

108,139

471,471

23%

15,124

15,242

14,336

188,694

160,656

188,356

115,919

382,372

2,207,262

17%

(1) RJF Macleod remuneration included pay out of accrued leave during the financial year

(2) Other is a bonus for performance relating to FY2012

Freedom Foods Group LimitedFor personal use onlyShort-term employee benefits

Post employ-
ment benefits

Share
based
payments

% of
total
being

Non-cash
Benefits
$

Superannuation
Contributions
$

Directors’ Report (continued...)

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

(General Manager, Sales)

T. Moses (2)

(General Manager, Leeton Operations)

M. Gauci (3)

(Operations Manager)

Salary

259,800

309,800

59,150

164,220

43,366

33,935

Directors'
Fees
$

Committee
Fees
$

61,000

20,333

31,700

30,000

2,000

1,000

2,000

Other

59,000

31,200

870,271

173,033

8,000

90,200

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

4,681

3,800

179,000

48,047

68,935

74,187

190,219

1,405,910

14%

(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 a bonus relating to FY2011.

(2) Commenced 12 March 2012.

(3) Salary is for the period from 1 April 2012 to 30 June 2012 during which Pactum was a

subsidiary of the Group. Other is a bonus relating to FY2011.

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 Group employees with respect to the financial year ended 30 June
2013.

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 pesonnel as at the
date of this report are:

Annual Report 2013For personal use onlyDirectors’ Report (continued...)

Issuing entity

Freedom Foods Group Limited (i)
Freedom Foods Group Limited (ii)

Number of shares
under option
6,250,000
2,200,000

Class of shares

Ordinary
Ordinary

Exercise price of
options
$0.40
$0.60

Expiry date of
options
2 February 2017
30 August 2017

Grant date
(i) Issued 2 February 2012
(i) Issued 30 August 2012

Recipients (i)
Issued 2 February 2012
Issued 2 February 2012
Issued 2 February 2012
Issued 30 August 2012
Issued 30 August 2012

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

Number
2,500,000
2,000,000
1,750,000
200,000
2,000,000

Fair Value ($)
305,000
244,000
213,500
13,200
132,000

Fair value at grant

$0.122
$0.066

Conditions
Employment
Employment
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 either 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 LimitedFor personal use onlyDirectors’ 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
2013
$

219,810
125,429
59,872
405,111

2012
$

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

The directors are satisfied that the provision of non-audit services, during the year, by the auditor
(or by another person or firm on the auditor’s behalf ) is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. s.300(11B)(c) The directors are
of the opinion that the services as disclosed in note 8 to the financial statements do not compromise
the external auditor’s independence, based on advice received from the Audit Committee, for the
following reasons:

•

all non-audit services have been reviewed and approved to ensure that they do not impact
the integrity and objectivity of the auditor; and

none of the services undermine the general principles relating to auditor independence as
set out in 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.

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 30 September 2013

Rory J F Macleod
Managing Director

Annual Report 2013For personal use only
Lead Auditor’s Independence Declaration

n Lead Auditor’s Independence Declaration

Deloitte Touche Tohmatsu
ABN 74 490 121 060

Eclipse Tower
60 Station 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 2013, 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, 30 September 2013

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

Freedom Foods Group LimitedFor personal use onlyCorporate 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 is 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 available by contacting the Company on +612 9526 2555 whilst the corporate website is under construction.

Principle 1

Lay solid foundations for management and oversight by the Board

The Board’s responsibilities are encompassed in a Charter
which is available by contacting the Company on +612
9526 2555 whilst the corporate website
is under
construction. 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;

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:

(2) appointing and removing the Managing Director

(1) Audit, Risk and Compliance Committee; and

(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.

(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 is available
by contacting the Company on +612 9526 2555 whilst the
corporate website is under construction.

The Managing Director and Senior Executive management
have service contracts and position descriptions, setting
out their duties, responsibilities, and conditions of service
termination entitlements. Any new Directors
and
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
performance objectives. Principal and
secondary
objectives for the financial year have been established
which are evaluated against and
includes monthly
monitoring of performance. A performance evaluation
was undertaken in August 2012 in accordance with the
process disclosed.

Annual Report 2013For personal use onlyCorporate Governance Statement (continued...)

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), three 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.

Mr P.R. Gunner
Chairman (Non-Executive), Age 66. Appointed in April 2003, Director
10 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 526,009 ordinary shares,
159,604 convertible redeemable preference shares and
159,604 $0.40 options over ordinary shares. Measured
against the
independence criteria adopted by the
Company, Mr Gunner is considered an independent
Director.

Mr R.J.F. Macleod
Managing Director Age 45. Appointed Director in May 2008, Director
5 years.

B.Econ (Hons) - currently Managing Director and director
of all Group entities. Mr Macleod has been with the group
for the past 10 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.

The test of independence for Directors is set out in detail
under section 4 of the Board Charter, which is available by
contacting the Company on +612 9526 2555 whilst the
corporate website is under construction. Materiality
thresholds referred to above are assessed on a case-by-
case basis.

Interest in shares and options are 193,792 ordinary shares,
6,666 $0.40 options over ordinary shares and 2,700,000
options (2,500,000 exercisable at $0.40 and 200,000
exercisable at $0.60) under the group employee share
option scheme. Mr Macleod, being Managing Director of
the Company, is not considered independent.

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.

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

Mr G.H. Babidge
Non Executive Director, Age 60. Appointed Director in January 2002
and resigned in June 2013, Director 11 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 100,391 ordinary shares,
30,643 convertible redeemable preference shares, 30,643
$0.40 options over ordinary shares.

Freedom Foods Group LimitedFor personal use onlyCorporate Governance Statement (continued...)

Mr A.M. Perich
Director (Non-Executive), Age 72. Appointed Director in July 2006,
Director 7 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 69,225,112 ordinary
shares and 15,995,142 convertible redeemable preference
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 70. Appointed Director in April 2005,
Director 8 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. Member of the Audit,
Risk & Compliance Committee and member of the
Remuneration & Nomination Committee.

Interest in shares and options are 69,225,112 ordinary
shares and 15,995,142 convertible redeemable preference
shares. Being a substantial shareholder of the Company,
Mr. R. Perich is not considered an independent Director

Mr M. Miles
Director (Non-Executive), Age 64. Appointed Director in November
2006, Director 6 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, current
Director of A2C and Brewtique Pty Limited and former
Chairman of South Pacific Distilleries, Fiji. Member of the
Strategic Planning Committee of the Institute of Brewing
and Distilling Asia Pacific. Member of the Remuneration
and Nomination Committee and the Audit, Risk &
Compliance Committee.

against the
independence criteria adopted by the
Company, Mr. Miles is considered an independent director.

Mr T.J. Allen
Director (Non-Executive), Age 57. Appointed Director July 2013.

B Comm (Hons), CA, FF, MAICD – former partner of KPMG
and the National Head of its Mergers and Acquisitions
business. With over thirty years experience in the
corporate advisory sector including senior positions at
SBC Warburg (now part of UBS), Baring Brothers and KPMG.
He is a non-executive director of Peet Limited, where he
chairs its Remuneration Committee, a non-executive
director and honorary treasurer of the Juvenile Diabetes
Research Foundation and an executive director of ICS
Advisory Limited, a boutique corporate advisory firm. He is
Chairman of the Audit Risk & Compliance Committee.

Interest in shares are 16,000 ordinary shares. Measured
against the
independence criteria adopted by the
Company, Mr. Allen is considered an independent director.

Mr M.R. Perich
Alternate Director (Non-Executive), Age 38. Appointed Alternate
Director for A.M Perich and R. Perich in March 2009, Director 4 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 69,225,112 ordinary
shares and 15,995,142 convertible redeemable preference
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 unreasonable 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.

Interest in shares and options are 222,413 ordinary shares,
64,584 convertible redeemable preference shares and
64,584 $0.40 options over ordinary shares. Measured

The Remuneration and Nomination Committee of the
Board comprises of three Non-Executive Directors-Messrs.
P.R Gunner, R. Perich and G.H Babidge, up until his

Annual Report 2013For personal use onlyresignation in June 2013 when he was replaced on the
committee by T Allen. Two out of three committee
members are independent. Mr Gunner, who is an
independent Director, is the Committee Chairman. The
Committee Charter which is available by contacting the
Company on +612 9526 2555 whilst the corporate website
is under construction, details the process 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 last AGM must stand for election at
the next AGM.

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

(1) decisions to be made expediently;

(2) a range of 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;

Corporate Governance Statement (continued...)

(3)

(4)

review of and making of recommendations on the
size and structure of the Board; and

review of the effectiveness and programme of Board
meetings.

A review of the performance of the individual Directors
occurs each year. The Board undertook an evaluation of
itself and its committees in June 2013, 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 reviews 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 Remuneration and Nomination 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.

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

P.R. Gunner
G.H. Babidge (up until
resignation in June 2013)
A.M. Perich
R. Perich
M. Miles
R.J.F. Macleod
T.J. Allen (from
appointment in July 2013)

Remuneration
and Nomination
Committee
3

Audit Risk and
Compliance
Committee
-

-
3
-
-

-
3
3
-

Freedom Foods Group LimitedFor personal use onlyCorporate Governance Statement (continued...)

Principle 3

Promote ethical and responsible decision-making

The Directors acknowledge the need for, and continued
maintenance of, a high standard of corporate governance
practices and ethical conduct by all Directors and
its ethical standards, the
employees.
Company will:

In maintaining

(1) behave with integrity in all its dealings with

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;

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

prospectus;

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

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:

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 by contacting the Company on +612
9526 2555 whilst the corporate website is under
construction.

(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
and is available by contacting the Company on +612 9526
2555 whilst the corporate website is under construction.

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

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

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 by contacting
the Company on +612 9526 2555 whilst the corporate
website is under construction 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.

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

As at 30 June 2013, the proportion of women employed
by the Company was as follows:

Board of Directors: 0%

Senior Executive positions: 0%

Total Company workforce: 36%

Workplace Gender Equality

The Workplace Gender Equality Act 2012 (WGE Act) puts a
focus on promoting and improving gender equality and
outcomes for both women and men in the workplace. All
non-public sector employers with 100 or more employees
are required to report annually under the WGE Act.

Annual Report 2013For personal use onlyThe Company has submitted its 2013 report to the
Workplace Gender Equality Agency. A copy of this report
is available by contacting the Company on +612 9526
2555 whilst the corporate website is under construction.

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
statements with experience in financial and accounting
matters. Currently, the Committee comprises of Mr T Allen
(Chairman), Mr R Perich and Mr M Miles. Mr G H Babidge
resigned from the Committee in June 2013 when he was
replaced on the committee by Mr T Allen. Up until June
2013, one out of the three Committee members were
independent. The Chairman of the Committee is an
independent Director and is not Chairman of the Board.

The Managing Director, other senior management and
the 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.

The Audit, Risk and Compliance Committee is responsible
for:

(1)

reviewing and reporting to the Board on the half
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

Corporate Governance Statement (continued...)

(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 available by
contacting the Company on +612 9526 2555 whilst the
corporate website is under construction. 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 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.

Principle 5

Make timely and balanced disclosure

The purpose of the Continuous Disclosure Policy is to
ensure that there are mechanisms in place to provide all
investors with equal and timely access to material
information concerning the 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 is available by contacting the Company
on +612 9526 2555 whilst the corporate website is under
construction.

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.

Freedom Foods Group LimitedFor personal use onlyCorporate Governance Statement (continued...)

Disclosure Officer

Principle 7

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
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
legal and ASX Listing Rules obligations
regarding
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) by contacting the Company on +612 9526 2555

whilst the corporate website is under construction;

(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 by contacting
the Company on +612 9526 2555 whilst the corporate
website is under construction.

Recognise and manage risk

Risk oversight and management policies

The Company’s Risk Management Policy is available by
contacting the Company on +612 9526 2555 whilst the
corporate website is under construction. 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)

risk management system; and

(ii)

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.

Annual Report 2013For personal use onlyExecutive 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 entity’s financial position in
all material aspects and that the integrity of the financial
statements is founded on a system of risk management
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,

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

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

incentive schemes;
superannuation arrangements; and
the remuneration framework for Directors.

(2)

(3)
(4)
(5)

The Committee operates independently of the senior
management of the Company in its recommendations to
the Board in relation to:
(1)

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.

(2)

(3)

Corporate Governance Statement (continued...)

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; and

(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

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

The structure of remuneration for Non-Executive Directors
and the 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.

In accordance with the securities trading policy, Senior
Executives and Directors are prohibited from entering into
limit the
transactions
economic risk of participating in unvested entitlements
under any equity based remuneration schemes offered by
the Company.

in associated products which

Freedom Foods Group LimitedFor personal use onlyConsolidated Statement of Profit and Loss and Other Comprehensive Income

n Consolidated Statement of Profit and Loss and Other Comprehensive
Income

For the financial year ended 30 June 2013

Notes

Consolidated
$000

9
9

2013
88,922
(60,522)
28,400
108
(2,433)
(10,157)
(5,072)
(2,628)
(2,356)
11,843
-
819
18,524
(4,802)
13,722
-
13,722

13,722
-
13,722

14.73
11.96
1.00
1.40
1.00
1.35

2012
58,137
(40,549)
17,588
468
(2,419)
(6,746)
(3,670)
(1,372)
(1,813)
-
564
650
3,250
(238)
3,012
-
3,012

3,012
-
3,012

3.88
3.11
0.50
2.00
-
1.40

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 A2C shares
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

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 2012 (cents per share)
CRPS Dividends per share paid - Final 2012 (cents per share)
Ordinary Dividends per share paid - Interim 2013 (cents per share)
CRPS Dividends per share paid - Interim 2013 (cents per share)

Notes to the financial statements are included on pages 34 to 78.

Annual Report 2013For personal use onlyConsolidated Statement of Financial Position

n Consolidated Statement of Financial Position

For the financial year ended 30 June 2013

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 financial statements are included on pages 34 to 78.

Notes

22(a)
10
11
12

11
7
14
13
13

15
16
7
16
15
17

15
16
17

18
19
20

Consolidated
$000

2013

2012

14,106
19,076
148
14,886
918
49,134

9,909
1,146
45,162
5,214
16,274
77,705
126,839

15,847
14,282
4,375
-
472
1,217
36,193

63
8,066
122
8,251
44,444
82,395

62,978
(3,549)
22,966
82,395

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

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

14,773
19,001
816
8,064
423
902
43,979

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

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

Freedom Foods Group LimitedFor personal use onlyConsolidated Statement of Cash Flows

n Consolidated Statement of Cash Flows

For the financial year ended 30 June 2013

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Cash generated from operations

Interest paid

Income tax paid

Receipt of government grants

Net cash generated by operating activities

Cash flows from investing activities

Proceeds from disposal of property, plant and equipment

Payment for property, plant and equipment

Purchase of shares in associated entity

Proceeds from sale of shares in associated entity

Net cash inflow on acquisition of subsidiary

Advance to Joint Venture

Net cash provided by/(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

Repayment of related party loan

Proceeds from related parties

Net cash provided by financing activities

Cash and cash equivalents at beginning of financial year

Net increase in cash and cash equivalents

Cash and cash equivalents at end of financial year

Notes to the financial statements are included on pages 34 to 78.

Notes

Consolidated
$000

2013

2012

87,480

(81,605)

5,875

(1,979)

(353)

115

3,658

(10,193)

(20)

15,277

5,064

24,109

(722)

(2,327)

4,201

(12,257)

(8,387)

4,617

767

13,339
14,106

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

22(b)

22(a)

Annual Report 2013For personal use onlyConsolidated Statement of Changes in Equity

n Consolidated Statement of Changes in Equity

For the financial year ended 30 June 2013

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

CONSOlIDATED

Balance as at 30 June 2011

33,655

5,633

9,689

533

Equity issues

Share issue costs

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

Dividends paid

Balance as at 30 June 2012

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

Dividend paid

229

(9)

33,875

24,851

(1,026)

308

3,012

5,633

(659)

(4)

(1,038)

11,663

13,722

(2,419)

22,966

(5,013)

106

639

(5,013)

352

473

49,983

229

(9)

(5,013)

3,012

49,983

229

(9)

(5,013)

3,012

473

106

(1,038)

47,270

24,192

(1,030)

308

13,722

106

(1,038)

47,270

24,192

(1,030)

308

13,722

352

(2,419)

Balance as at 30 June 2013

58,008

4,970

991

(5,013)

473

82,395

Notes to the financial statements are included on pages 34 to 78.

352

(2,419)

82,395

Freedom Foods Group LimitedFor personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013)

n Notes to the Financial Statements
For the financial year ended 30 June 2013

1. General Information

The financial report of Freedom Foods Group Limited (“Group” or “Company”) for the year ended 30
June 2013 was authorised for issue in accordance with resolution of Directors on 30th September
2013.

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.

Amendments to AASB 101 ‘Presentation of Financial Statements’ part of AASB 2011-9
‘Amendments to Australian Accounting Standards - Presentation of Items of Other
Comprehensive Income’

Amendments to AASB 101 ‘Presentation of Financial Statements’ part of AASB 2012-5 ‘Further
Amendments to Australian Accounting Standards arising from Annual Improvements
2009-2011 Cycle

2.2 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. The reported results and position of the Group will not
change on adoption of these pronouncements as currently there are no transactions that will
be materially impacted by these pronouncements. Adoption of these pronouncements will
however, result in changes to information currently disclosed in the financial statement. The
Group does not intend to adopt any of these pronouncements before their effective dates.

Standard/Interpretation
AASB 10 Consolidated Financial Statements
AASB 11 Joint arrangements
AASB 12 Disclosure of Involvement with Other Entities
AASB 13 Fair Value Measurement and related AASB 2011-8 Amendments to Australian Accounting
Standards arising from AASB 13
Note: the requirements of AASB 13 are to be applied prospectively, with comparatives for prior years not
required on initial adoption
AASB 119 Employee Benefits (2011), AASB 2011-10 Amendments to Australian Accounting Standards
arising from AASB 119 (2011) and AASB 2011-11 Amendments to AASB 119 (2011) arising from
Reduced Disclosure Requirements

Effective Date
30 June 2014
30 June 2014
30 June 2014

30 June 2014

Annual Report 2013For personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

3. Significant Accounting Policies

Key sources of estimation uncertainty:

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,
the Company is a for-profit entity. Accounting
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 30th September 2013.

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.

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

(b) Basis of preparation

(d) Basis of consolidation

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 28 June 2013. The Parent is an entity
to which the class order applies.

required

to make

In the application of the Group’s accounting policies,
management
judgments,
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.

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 profit and loss and other
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.

(e) Business combinations

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
incurred or assumed, and equity
given,

liabilities

Freedom Foods Group LimitedFor personal use only
Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

3. Significant Accounting Policies

(f) Interests in joint ventures

(continued...)

instruments issued by the Group in exchange for
control of the acquiree. Acquisition related costs are
recognised in the 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 the profit or loss.

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

Acquisition of Pactum Australia Pty Limited

The acquisition of Pactum Australia Pty Limited
(“Pactum”) in April 2012 was 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 liabilities
acquired is recognised as a common control reserve
in the consolidated financial statements.

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.

(g) 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 recorded initially 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.

(h) Property, plant and equipment

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

lease are stated at cost

less any

fair value,

Land and Buildings held for use in the production of
goods, are carried in the statement of financial
position at
subsequent
accumulated depreciation. Fair value 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

Annual Report 2013For personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

3. Significant Accounting Policies

(continued...)

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
equipment,
freehold buildings but
excluding land. Depreciation is calculated on a
straight line basis so as to write off the net cost of
each asset over its expected useful life to its estimated
residual value. The estimated useful lives, residual
values and depreciation method are reviewed at the
end of each annual reporting period, with the 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
is
item of property, plant and equipment
determined as the difference between the sales
proceeds and the carrying amount of the asset and is
recognised in the profit or loss.

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

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

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

(i) 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
in the
from the date of classification, except
circumstances where sale is delayed by events or
circumstances outside the Group’s control and the
Group remains committed to a sale.

(j) Borrowing costst

Borrowing costs directly attributable
the
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.

(k) Goodwill

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
date of acquisition. Goodwill
is subsequently
measured at its cost less any impairment losses.

For the purpose of impairment testing, goodwill is
allocated to each of the Group’s cash-generating
units (CGUs) or groups of CGUs, expected to 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

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

3. Significant Accounting Policies

(continued...)

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 the 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.

(l) 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(m).

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.

(m) 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
recognised
reversal of an
immediately in the profit or loss.

impairment

loss

(n) 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;

Annual Report 2013For personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

3. Significant Accounting Policies

(continued...)

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.

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.

(o) Cash and cash equivalents

(r) Employee benefits

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.

(p) 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.

(q) 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. 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

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
the
measured at
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.

(s) 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 30.

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.

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

3. Significant Accounting Policies

(continued...)

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 the profit or loss over
the remaining vesting period, with corresponding
adjustment to the equity-settled employee benefits
reserve.

(t) Leased Assets

Group as lessee

leases are

initially
Assets held under finance
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(j).
Contingent rentals are recognised as expenses in the
periods in which they are incurred. Finance leased
assets are amortised on a straight line basis over the
estimated useful life of the asset.

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

Lease incentives

In the event that lease incentives are received to
enter into operating leases, such incentives are
recognised as a liability. The aggregate 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.

(u) Revenue

is measured at the fair value of the
Revenue
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.

Interest revenue

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

(v) 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
include government
entity. Government grants
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.

Annual Report 2013For personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

3. Significant Accounting Policies

(continued...)

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
is that the Group should purchase,
condition
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.

(w) Income tax

Current tax

Current tax is calculated by reference to the amount
of income taxes payable or recoverable in respect of
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 the 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
temporary
differences arising from the initial recognition of
goodwill.

relation

taxable

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 the 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

Freedom Foods Group LimitedFor personal use only
Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

3. Significant Accounting Policies

(continued...)

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.

(x) 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.

(y) 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 the 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
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

Recognition

unrealised gains and losses arising from changes in
their fair value of these assets are included in the
consolidated statement of profit and loss and other
comprehensive income in the period in which they
arise.

Effective interest method

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
asset expire, or it transfers the financial asset and

Annual Report 2013For personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

3. Significant Accounting Policies

Embedded derivatives

(continued...)

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.

Impairment of financial assets

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.

(z) Derivative financial instruments

are

is entered

statements. Derivatives

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
recognised at fair value at the date a derivative
contract
into and are subsequently
remeasured to their fair value at each reporting date.
The resulting gain or loss is recognised in profit or
loss immediately unless the derivative is 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.

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.

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 allergen free (ie gluten free,
wheat free, nut free) low sugar or salt or highly
fortified. The product range covers breakfast cereals,
biscuits, 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 UHT (long life) food and
beverage products including liquid stocks, soy, rice,
almond and dairy milk beverages . These products
are produced and sold in Australia and overseas.

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

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
their capacity as the chief operating decision maker
of the group in order to allocate resources to the
segments and assess their performance.

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

4. Operating Segments

(continued...)

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

External sales
2013
$’000

40,070
15,787
32,943
31
-
88,831

2012
$’000

31,085
17,958
9,030
59
-
58,132

Total

2013
$’000

40,070
15,787
32,943
31
199
89,030

2012
$’000

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

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.

96% of total external sales of the consolidated group and equity accounted associates are generated in Australia
(2012: 95%) and 72% of total external sales (2012: 84%) are through major Australian retailers.

Segment result
Continuing operations
Freedom Foods
Seafood
Pactum
Thorpedo Foods

FNPL share of equity accounted associates
Shared services
Finance costs
Depreciation
Profit on sale of A2C shares
Write off of non recurring legal expense and unrecoverable amounts
Income tax expense
Profit for the year from continuing operations

2013
$’000

2012
$’000

6,124
2,717
6,427
(12)
15,256
819
(3,917)
(2,356)
(2,628)
11,843
(493)
(4,802)
13,722

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

Total profit from equity accounted associates for the period totalled $3,482,000 (2012: $4,553,000). The consolidated
entities share of these profits was $819,000 (2012: $1,214,000).

Annual Report 2013For personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

4. Operating Segments

(continued...)

Segment assets

Freedom Foods
Seafood
Pactum
Thorpedo Foods

Unallocated (Shared Services)
Total assets of the Group

Segment liabilities
Freedom Foods
Seafood
Pactum
Thorpedo Foods

Unallocated (Shared Services)
Total liabilities of the Group

Other segment information

Freedom Foods
Seafood
Pactum
Thorpedo Foods

Unallocated (Shared Services)

2013
$’000

2012
$’000

48,858
19,905
33,236
885
102,884
23,955
126,839

13,462
4,463
24,780
4
42,709
1,735
44,444

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

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

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

2013
$’000
1,793
-
829
-
2,622
6
2,628

Additions to non-current assets
2012
$’000
1,941
-
10,939
-
12,880
94
12,974

2013
$’000
1,522
-
10,538
-
12,060
105
12,165

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

Information about major customers

Included in revenues arising from external sales of $88.8 million (2012: $58.1 million) (see segment revenue above) are
revenues of approximately $69.1 million (2012: $60.6 million) which arose from sales to the Group’s two largest customers.
No other single customers contributed 10% or more to the Group’s revenue for both 2013 and 2012.

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

5. Revenue

Segment revenue
Continuing operations
Sale of goods
Interest received

• Loans and receivables
• Cash and Cash equivalents

Other income

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

Total Revenue

Consolidated
$000

2013

2012

88,831

58,132

-
91
88,922

33
-
75
-
108
89,030

-
5
58,137

120
21
75
252
468
58,605

The above grants are the Export Market Development Grant received or receivable for 2013 and 2012 (2013: $23,000,
2012: $20,000), State Training Grant (2013: $5,000, 2012: $6,000) and Department of Education, Employment and Workplace
Relations Grant (2013: $5,000, 2012: $63,500).

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

2013

1,485
360
-
511
2,356
2,628
329
623
375
29

1,029
352
8,162
9,543

2012

1,397
261
(360)
515
1,813
1,372
221
159
330
(14)

1,349
106
6,692
8,147

The Group uses derivative financial instruments to hedge its exposure to foreign exchange risks arising from
operational, financing and investment activities. Refer to Note 26.

Annual Report 2013For personal use only
Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

6. Profit for the year before tax

(continued...)

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 and capital
equipment. The foreign exchange contracts were denominated in USD, CAD and NZD. As at 30 June 2013 the Group
held foreign exchange contracts totalling USD 168,480, CAD 677,771 and NZD 967,290.

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 adopt 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.

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

Tax on sale of shares in investment

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

2013

4,384

(858)

387

889

4,802

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

18,524

5,557

253

(150)

(858)

4,802

2012

497

(293)

238

3,250

975

(345)

(99)

(293)

238

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 $308,000 was credited to equity in relation to share issue costs during the year (2012: $Nil).

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

7. Income Taxes
(continued...)

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

Current tax assets/(liabilities)

Income tax receivable/payable attributable to:

• Entities in the tax-consolidated group

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

Consolidated 2013

Temporary differences:

Provisions
Doubtful debts
Property plant & equipment
Other

unused tax losses and credits:

Tax losses (i)
Withholding tax paid

Consolidated
$000

2013

(4,375)

2012

(816)

Opening Balance
$’000

Recognised
on acquisition
of common
controlled entity
$’000

Charged to income
$’000

Closing balance
$’000

348
-
(347)
(10)
(9)

2,006
38
2,044
2,035

-
-
-
-
-

-
-
-
-

95
9
(51)
68
121

(1,010)
-
(1,010)
(889)

443
9
(398)
58
112

996
38
1,034
1,146

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

as deferred tax assets

Annual Report 2013For personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

7. Income Taxes
(continued...)

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

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).

Entities within the tax-consolidated group have entered into a tax funding arrangement and a taxsharing 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

Remuneration 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.

Consolidated
$’000

2013

220

125

60
405

2012

209

34
316

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

9. Earnings per share

Basic earnings per share from continuing operations
Diluted earnings per share from continuing operations
The earnings and weighed 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
- ESOP
- unlisted options

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

EPS including CRPS

17,219,015 Convertible Redeemable Preference Shares were in issue.

Consolidated
Cents per share
2013
14.73
11.96

$000

13,722
14,074
Number ‘000
93,155

18,741
4,345
1,433

117,674

2012
3.88
3.03

3,012
3,012

77,599

19,415
-
2,504

99,518

At 30 June 2013, 2,492,384 (2012: 19,222,791) ordinary share options and 8,450,000 (2012: 6,250,000) employee share
options were outstanding (6,250,000 Exercisable at 40 cents per share and 2,200,000 Exercisable at 60 cents per share)

10. Trade and other receivables

Current

Trade receivables
Allowance for doubtful debts

Other receivables

Consolidated
$000

2013

18,750
(29)
18,721
355
19,076

2012

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

The average credit period on sales of goods is 32 days (2012: 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 increased by
$29,000 (2012: decreased by $14,000) in the Group. The allowance for doubtful debts/impaired trade receivables as at 30
June 2013 is $29,000 (2012: $Nil). The Group does not hold any collateral over these balances.

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

Consolidated
$000

2013

17,853
868

2012

15,779
959

Annual Report 2013For personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

10. Trade and other receivables

(continued...)

(i)

The current receivables for the Group are with a weighted average of 26 days (2012: 29 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 (2012: 69 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 72% (2012: 84%) of sales and 63%
(2012: 81%) 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
Impairment losses reversed
Balance at the end of the year

Consolidated
$000

2013
-
322
(293)
-
29

2012
14
-
-
(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.

11. Other financial assets

Current

Receivables from related parties - refer Note 29 Related party transactions

Non-current

Investment in associates - refer Note 35 Related party transactions

12. Inventories

Current

Raw materials
Finished goods
Provision for stock obsolescence

Consolidated
$000

2013

148

9,909

Consolidated
$000

2013

5,662
9,361
(137)
14,886

2012

12,357

2012

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

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 $60,522,000
(2012: $40,549,000).

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

13. Intangibles

2013

Balance at 1 July 2012
Balance at 30 June 2013

2012

Balance at 1 July 2011
Balance at 30 June 2012

Goodwill
$’000

Brand Names
$’000

Total
$’000

5,214
5,214

16,274
16,274

21,488
21,488

Allocation of goodwill to cash-generating units

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

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 wasn’t any 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

2013
1,982
3,232
5,214

2012
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
10.1% pa post tax and 13.1% pa pre tax (2012: 10.5% pa post tax and 13.7% pa pre tax). 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.

Annual Report 2013For personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

14. Property, plant and equipment

Non current

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

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

2013

254
254
4,850
(626)
4,224
4,478

Consolidated
$000

2013
45,644
(13,204)
32,440
8,235
40,675
21
(12)
9
45,162

2012

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

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

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 2013

Balance at 1 July 2012
Additions
Disposals
Depreciation expense
Balance at 30 June 2013

Group 2012

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

Freehold land
$000

Buildings
$000

Plant & Equipment
$000

Motor Vehicles
$000

254
-
-
-
254

160
94
-
-
-
254

4,345
-
-
(121)
4,224

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

31,011
12,165
-
(2,501)
40,675

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

9
-
6
(6)
9

9
-
-
(78)
78
9

Total
$000

35,619
12,165
6
(2,628)
45,162

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

Freedom Foods Group LimitedFor personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

14. Property, plant and equipment

(continued...)

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

Freehold land and buildings
Plant and equipment
Motor vehicles

15. Trade and other payables

Current

Trade payables (i)
Other payables and accruals (ii)

Payables from joint ventures and related parties - refer Note 29 Related party transactions

Non-current

Other payables and accruals (ii)

Consolidated
$000

2013
121
2,501
6
2,628

Consolidated
$000

2013

9,238
6,609
15,847

472

63
63

2012
121
1,329
(78)
1,372

2012

11,330
3,443
14,773

423

73
73

(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 for 2012 was an amount due to the vendor of $562,000 for the purchase of
the Leeton property. This has now been fully paid.

Annual Report 2013For personal use only
Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

16. Borrowings and loans from related parties

Borrowings

Secured - at amortised cost
Current

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

2013

1,741
4,079
8,462

-
8,066
22,348

14,282
8,066
22,348

2012

5,578
2,761
10,662

7,532
4,863
31,396

19,001
12,395
31,396

(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 29 Related party transactions

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

17. Provisions

Current

Employee benefits (i)

Non-current

Employee benefits

Employee benefits movement
Balance at 1 July 2012
Additional provision recognised
Amounts used
Balance at 30 June 2013

Consolidated
$000

2013
-

2012
8,064

Consolidated
$000

2013

1,217

122
1,339

1,066
821
(548)
1,339

2012

902

164
1,066

985
671
(590)
1,066

(i) The current Group provision for employee benefits includes $122,000 of annual leave and vested long service leave

entitlements accrued but not expected to be taken within 12 months (2012: $87,000).

Freedom Foods Group LimitedFor personal use only
Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

18. Issued capital

Fully paid ordinary shares

113,754,106 (2012:77,995,731) ordinary shares fully paid

Balance at 1 July 2012
Issue of shares (i)(ii)
Balance at 30 June 2013

Consolidated
$000

2013

58,008

33,875
24,133
58,008

2012

33,878

33,655
220
33,875

(i) During the year there were a total of 35,758,375 ordinary shares issued as a result of exercise of options, CRPS

converted to ordinary shares, new ordinary shares issued as part of a capital raising, a buy back of unmarketable
parcels and the dividend reinvestment plan (DRP); 16,730,407 ordinary shares at $0.40 per share, 2,195,785 ordinary
shares at $0.30 per share, 16,788,190 ordinary shares at $1.04 per share, (42,930) ordinary shares at $0.95 per share,
59,749 at $0.722 per share under the DRP and 27,174 at $1.418 per share under the DRP. Costs incurred totalled
$721,000 after tax.

(ii) During the prior 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. Costs incurred totalled $6,000 after tax.

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 the 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.

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.

•

Annual Report 2013For personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

18. Issued capital
(continued...)

Convertible Redeemable Preference Shares

17,219,015 (2012: 19,414,800) convertible redeemable preference shares

Balance at 1 July 2012
Conversion to ordinary shares (i)
Balance at 30 June 2013

Consolidated
$000

2013

4,970

5,633
(663)
4,970

2012

5,633

5,633
-
5,633

(i) During the year there were a total of 2,198,785 CRPS converted to ordinary shares at $0.30 cents per share. Costs

incurred totalled $4,000.

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 30.

19. Reserves

Equity-settled employee benefits
Asset revaluation
Other reserves

Equity-settled employee benefits

Balance at 1 July 2012
Share based payment
Balance at 30 June 2013

Consolidated
$000

2013
991
473
(5,013)
(3,549)

639
352
991

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

533
106
639

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 30 to the financial
statements.

Asset revaluation

Balance at 1 July 2012
Revaluation increment
Balance at 30 June 2013

Consolidated
$000

2013
473
-
473

2012
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.

Freedom Foods Group LimitedFor personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

19. Reserves
(continued...)

Other reserve

Balance at 1 July 2012
Acquisition of subsidiary under common control
Balance at 30 June 2013

Consolidated
$000

2013
(5,013)
-
(5,013)

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

As described in Note 3(e), 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 2012
Profit attributable to owners of the company
Dividends paid
Balance at 30 June 2013

21. Dividends

Recognised amounts

Fully paid ordinary shares
Final dividend: fully franked at 30% tax rate
Dividends reinvested: 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

2013
11,663
13,722
(2,419)
22,966

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

2013

Cents per share

2012

Total
$’000

Cents per share

1.00
72.00
1.00
142.00

1.40
1.35

898
43
931
39

272
236
2,419

0.50
-
-
39.00

2.00
1.00

Total
$’000

370
-
-
18

388
262
1,038

On 31 August 2013, the directors declared a fully franked final dividend of 1.00 cents per share to the holders of fully paid
ordinary shares in respect of the financial year ending 30 June 2013 to be paid to shareholders (registered as at 1st October
2013) on 1st November 2013 and dividends for the converting preference shareholders (registered on 1st October 2013)
on 1st November 2013. The total estimated dividend to be paid is $1,148k for ordinary dividend and $241k for the CRPS
dividend.

Annual Report 2013For personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

21. Dividends
(continued...)

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)
2013
373
(592)

2012
230
(451)

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

2013
14,106
14,106

(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
Profit on Sale of A2C 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 in inventory
Decrease in other assets
Decrease/(Increase) in deferred tax assets
(Decrease)/Increase in trade and other payables
(Decrease)/Increase in provision for income tax
Net cash from operating activities

13,722
2,628
(273)
-
(11,843)
288
352
(91)
-
(819)
-

(1,474)
(3,429)
1,412
5,525
(1,352)
(988)
3,658

2012
767
767

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

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

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

Freedom Foods Group LimitedFor personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

22. Notes to the statement of cash flows

(continued...)

Acquisition of common controlled entity, Pactum

Consolidated
$000

2013
-

2012
6,000

During the prior year the Group acquired 50% of interest in Pactum for $6,000,000 (refer note 38). 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

2013

1,741
7,959
9,700

20,607
5,238
25,845
13,197

2012

13,110
822
13,932

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

The bank facilities are arranged with HSBC Bank Australia Limited with general terms and conditions and certain facility
components that are subject to annual review. The bank facilities of the Group are secured by a first equitable mortgage
over the whole of the Group’s assets and undertakings (including uncalled capital), (except items specifically discharged
under the Freedom Foods and Pactum Australia equipment finance arrangements), and a first registered mortgage over
the Group’s Leeton property.

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 2013For personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013) (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
2013

4,700
9,142
13,842
(1,697)
12,145

Total
$000
2012

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

Consolidated
$000
2013

4,079
8,066
12,145
-
12,145

4,079
8,066
12,145

Total
$000
2012

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

2,761
4,863
7,624

(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

2013

526
16
542

2012

340
30
370

(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

2013
178

2012
143

Freedom Foods Group LimitedFor personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013) (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 2012. 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

2013

22,348
(14,106)
8,242
82,395
10%

2012

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

(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 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 and 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.

(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.

Annual Report 2013For personal use only
Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

26. Financial instruments

(continued...)

(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)
New Zealand dollars (NZD)

Financial assets
$000

Financial liabilities
$000

2013

481
389
-

2012

7
374
-

2013

228
272
388

2012

1,218
835
-

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 and equipment from New Zealand. 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 USD 168,480, CAD 677,771 and NZD 967,290 outstanding foreign exchange contracts as at 30 June 2013.

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

2013

2012

2013

2012

Contract value
2013

2012

Fair value

2013

2012

FC'000

$’000

Outstanding contracts
Consolidated

Buy US Dollars
Less than 3 months

Consolidated

Buy CA Dollars
Less than 3 months

Consolidated

Buy NZ Dollars
Less than 3 months

1.024

0.959

168

1,502

165

1,566

0.982

0.998

678

652

690

653

1.190

967

813

(89)

(26)

Freedom Foods Group LimitedFor personal use only
Notes to the Financial Statements (For the financial year ended 30 June 2013) (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 14% (USD), 17% (CAD) and 15% (NZD) 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 Australian Dollar strengthens against the respective currency.
For a weakening of the Australian 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 14%
AUD depreciates by 14%
Canadian dollars (CAD) impact
AUD appreciates by 17%
AUD depreciates by 17%
New Zealand dollars (NZD) impact
AUD appreciates by 15%
AUD depreciates by 15%

Profit or loss
$000

2013

(33)
44

(20)
28

44
(60)

2012

112
(138)

105
(137)

-
-

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:

Group

Financial Instrument

Financial Assets

Cash and cash equivalents
Total Financial Assets

Financial liabilities

Due to related parties
Finance facilities
Loan payable
Total Financial Liabilities

Note

Weighted average
effective interest rate
%

16
16
16

10%
5%
6%

Amount

2013
$ ‘000

14,106
14,106

-
8,463
1,741
10,204

2012
$ ‘000

767
767

8,064
10,662
13,110
31,836

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 2013For personal use only
Notes to the Financial Statements (For the financial year ended 30 June 2013) (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:

•

an increase on the consolidated entity’s net profit of $29,000 (2012: decrease of $173,000).

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 LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (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

2013
$ ‘000

2012
$ ‘000

1 to 5 years
2013
$ ‘000

2012
$ ‘000

More than 5 years

2013
$ ‘000

2012
$ ‘000

-
-
0%
10%
8%
5%
6%

9,238
6,609
288
-
4,700
8,463
1,741
31,039

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

-
63
-
-
9,142
-
-
9,205

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

-
-
-
-
-
-
-
-

(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. Subsequent Events

On the 17th July 2013 the group incorporated a subsidiary in North America, Freedom Foods North America Inc, to
distribute allergen free cereals and cereal snack bars.

On 16th September the group completed a capital raising through a placement. The placement resulted in 12,857,143 new
ordinary shares being placed to institutional and sophisticated investors. The group intends to proceed with an entitlements
issue to existing shareholders to raise $3 million. The entitlements issue is expected to close in mid October 2013.

28. Key management personnel compensation

Remuneration policy

Remuneration arrangements for Directors and executives 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
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.

Annual Report 2013For personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

28. Key management personnel compensation

(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) relating to FY 2012 performance and 600,000 options at 60 cents per option exercise price
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 an Annual or Extraordinary General Meeting. Total fees for all Non-Executive Directors (last voted upon by shareholders in
June 2013), is not to exceed $500,000 in total. Total fees paid to Non-Executive Directors for 2013 were $223,179 (2012:
$195,343). To align director interests with shareholder interests, the Directors are encouraged to hold shares in the Company.

The Chairman receives approximately twice the base fee of Non-Executive Directors. Non-Executive Directors do not
receive performance related remuneration. Directors’ fees cover all main Board activities including Committee Fees. 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, 6 months for CEO Pactum Australia and 12 months for
CEO Freedom Foods North America. Other notice periods for other executives are between 1 and 2 months.

Parent 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.

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

28. Key management personnel compensation

(continued...)

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 and Final (cents)
CRPS Dividends per share paid ( cents)
Basic Earnings per Share (cents)

2013
88,831
13,722
2.00
2.75
14.73

2012
58,132
3,012
0.50
3.40
3.88

2011
45,256
4,387
0.50
1.00
5.67

2010
44,071
3,357
-
-
5.00

2009
48,596
1,320
1.00
-
2.40

The Remuneration and Nomination Committee considers that the Parents 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:

Consolidated
$000

2013
1,621,971
115,919
382,372
87,000
2,207,262

2012
1,167,142
82,562
190,219
90,200
1,530,123

Short-term employee benefits
Post-employment benefits
Share-based payment
Bonus payment (paid in FY13)

Details of key management personnel

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 Foods North America

A. Haddad - CEO, Pactum Australia

M. Gauci - Operations Manager, Pactum Australia

P. Brown - General Manager, Sales, Freedom Brands

T. Moses - General Manager, Leeton Operations

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 Managing 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 2013For personal use only
Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

28. Key management personnel compensation

(continued...)

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

2013
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(i)
$

G.h. Babidge
$

A. M. Perich
$

R. Perich
$

M. Miles
$

68,250
-
-
-

350,460
-
-
-

34,667
-
-
-

35,425
-
-
-

36,779
-
-
-

34,667
-
-
-

6,143

15,674

3,120

1,008

3,120

-
74,393

151,605
517,739

-
37,787

M. Bracka
$

A. haddad
$

P. Brown
$

317,493
-
-
-

276,226
62,000
-
-

173,570
-
-
-

-
35,425

T. Moses
$

145,414
-
-
-

-
37,787

M. Gauci
$

149,020
25,000
-
-

-
37,787

Total
$

1,621,971
87,000
-
-

17,046

25,106

15,124

15,242

14,336

115,919

122,628
475,167

108,139
471,471

-
188,694

-
160,656

-
188,356

382,372
2,207,262

Notes (i) RJF Macleod remuneration included pay out of accrued leave during the financial year.

2012
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

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

28. Key management personnel compensation

(continued...)

Short term benefits
Salaries and Fees
Bonus
Non monetary
Other

Post employment benefits

Superannuation
Equity compensation

Options
Total

M. Bracka
$

A. haddad (i)
$

P. Brown
$

T. Moses (ii)
$

M. Gauci (iii)
$

309,800
-
-
-

59,150
59,000
-
-

164,220
-
-
-

43,366
-
-
-

33,935
31,200
-
-

Total
$

1,051,304
90,200
-
-

15,775

5,066

14,780

4,681

3,800

74,187

60,870
386,445

53,261
176,477

-
179,000

-
48,047

-
68,935

190,219
1,405,910

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

is a bonus relating to FY2011.

(ii) Commenced 12 March 2012.

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

is a bonus relating to FY2011.

29. 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 32 to the financial statements.

(ii) Equity interest in associates

Details of interests in associates is disclosed in 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 28 to the financial statements.

(ii) Key management personnel equity holdings

Fully paid ordinary shares of the Group

Annual Report 2013For personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

29. Related party transactions

(continued...)

2013

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

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
A. Haddad
M. Gauci
T. Moses
P. Brown

Balance at 1 July
2012
No.

510,732
182,775
98,057
51,620,094
51,620,094
212,812
51,620,094
327,602
80,384
-
-
-
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
-
-
-
-

Granted as
compensation
No.

Received on exercise
of options
No.

Net other
change (2)
No.

Balance at 30 June
2013
No.

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

-
-
-
15,995,142
15,995,142
-
15,995,142
50,391
-
-
-
-
Received on exercise
of options
No.

-
-

-
-
-
-
-
-
-
-
-

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

15,277
11,017
2,334
1,609,886
1,609,886
9,601
1,609,886
80,088
3,627
-
-
60,643
Net other
change (2)
No.

526,009
193,792
100,391
69,225,122
69,225,122
222,413
69,225,122
458,081
84,011
-
-
60,643
Balance at 30 June
2012
No.

-
-
-
154,829
154,829
2,702
154,829
107,166
80,384
-
-
-

510,732
182,775
98,057
51,620,094
51,620,094
212,812
51,620,094
327,602
80,384
-
-
-

(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) Subscribed to during the year.

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

29. Related party transactions

(continued...)

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

2013

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

Balance at 1 July
2012
No.

Granted as
compensation
No.

Received on exercise
of options
No.

Net other
change (2)
No.

Balance at 30 June
2013
No.

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

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

-
(6,666)
-
-
-
-
-
-
-
-
-
-

159,604
-
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) Converted to Ordinary shares during the year.

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.

2013

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

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

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

Net other change

No.

-
-
-
(15,995,142)
(15,995,142)
-
(15,995,142)
(50,391)
-
-
-
-

Balance at 30 June
2012
No.

159,604
6,666
30,643
-
-
64,584
-
-
-
-
-
-

(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) Options exercised during the year

Annual Report 2013For personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

29. Related party transactions

(continued...)

Employee Share Options in the Group

Balance at
1 July
No.

lapsed
No.

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

-
-
-
-
-

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

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

2013
R. J. F. Macleod
G.H. Babidge
A. Haddad
M. Bracka
Senior Employees
2012
R. J. F. Macleod
G.H. Babidge
A. Haddad
M. Bracka
P. Nathan

Granted
as
compen-
sation
No.

200,000
-
200,000
200,000
1,600,000

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

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.

-
-
-
-
-

-
-
-
-
300,000

-
-
-
-
-

2,700,000
-
1,950,000
2,200,000
1,600,000

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

833,333
-
583,333
666,666
-

-
-
-
-
-

833,333
-
583,333
666,666
-

-
-
-
-
-

(i) 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 30 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 related party transactions with
the Group. In the 12 months to 30 June 2013 goods totalling $9,886,000 (2012: $7,323,000) were sold to the
Group at cost and have been excluded from revenues.

The Group entered into a lease commitment with Leppington Pastoral Company on 1 April 2012. The Group
made payments of $340,000 in the current financial year and $85,000 in the last 3 months of the prior financial
year.

The Group was reimbursed by A2DP $19,000 (2012: $43,000) for labour and other administrative services
provided.

These services are provided under normal terms and conditions.

Freedom Foods Group LimitedFor personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

29. Related party transactions

(continued...)

(ii) Transactions between other related parties of the Group

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

•

Leppington Pastoral Company sold goods and services totalling $6,071,000 in the current financial year (2012:
$4,576,000) 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.

30. 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 the options issued, 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
Senior Executive and Management Grant

6,250,000
2,200,000

2/02/12
30/08/12

2/02/17
30/08/17

Number

Grant date

Expiry date

Exercise price
$
0.40
0.60

Fair value at grant
$
0.122
0.066

The weighted average fair value of the share options granted during the financial year is $0.066 (2012: $0.122). 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.

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.

Executive Options
2 February 2012
0.46
0.40
20%
5 years
2.5%
5%

Executive and Management Options
30 August 2012
0.65
0.60
5%
5 years
2.5%
5%

Inputs into the model

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

Annual Report 2013For personal use only

Notes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

30. Share based payments - Employee Share Option Plan

(continued...)

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
Exercised during financial year
Lapsed during financial year

Exercisable at end of financial year

2013

Number of options

6,250,000
2,200,000
-
-
8,450,000

2,083,332

Weighted average
exercise price $
0.40
0.60
-
-
0.45

2012

Number of options

3,700,000
6,250,000
(300,000)
(3,400,000)
6,250,000

Weighted average
exercise price $
0.50
0.40
0.50
0.50
0.40

0.40

Balance at end of the financial year
The share options outstanding at the end of the financial year had an average exercise price of $0.45 (2012: $0.40), and a
weighted average remaining contractual life of 1,522 days (2012: 1,648 days). No options were exercised during the financial
year.

31. Contingent liabilities

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

Consolidated
$000

2013
14

32. 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 (i)
Pactum Dairy Group 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
Australia

2013
100%
100%
100%
100%
100%
100%
100%
100%
75%
75%

2012
14

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

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 2013 financial report.

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

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

33. 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

Pactum Australia 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.

34. Parent entity disclosures

(a) Financial position

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

(b) Financial performance

Profit for the year
Other comprehensive income
Total comprehensive income

Parent

$000
2013

15
85,360
85,375

3,027
669
3,696

81,679

63,022
965
17,692
81,679

Parent

$000
2013
8,387
-
8,387

$000
2012

2,117
59,657
61,774

8,595
1,309
9,904

51,870

39,508
638
11,724
51,870

$000
2012
640
-
640

Annual Report 2013For personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

34. Parent entity disclosures

(continued...)

Bank guarantee

$000
2013
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

35. Share in associate entity

$000
2013

26
-
-

$000
2012
14

$000
2012

8
27
-

Name of associate
A2C

Country of incorporation
New Zealand

Principal activity
Sale of a2 milk in Australia

2013
18.0

2012
25.8

The group holds 110,535,140 ordinary shares and 6,000,989 partly paid shares in A2C at 30 June 2013. There are two common
directors on the A2C board, Mr Melvyn Miles and Mr Perry Gunner.

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

Output interest (fully diluted)
(%)

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

Dividends
Costs of shares sold
Equity investment
Costs associated with investment
Balance at 30 June

(i) Included in the share of profits is $245,000 that related to a post year end adjustment for 2012

A2C
$’000

2013
12,357
819
13,176
-
(3,303)
20
16
9,909

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

Freedom Foods Group LimitedFor personal use onlyNotes to the Financial Statements (For the financial year ended 30 June 2013) (continued...)

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

2013
7,273
3,766
11,039
1,890
12
1,901
9,138
9,138
14,378
628

2012
5,064
5,032
10,096
2,497
7
2,503
7,593
7,593
12,694
895

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.
In June 2013, Pactum Australia Pty Limited entered into an equipment lease with National Australia Bank to assist in
financing equipment requirements for it’s 3rd line at the Taren Point site. The lease term is 5 years with a 35% residual. The
facility is secured by the financed equipment and Pactum Australia’s obligations under the lease are guaranteed by
Freedom Foods Group Limited.

The Group now also holds equipment leases with Westpac relating to its 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.

Annual Report 2013For personal use onlyDirectors’ Declaration (For the financial year ended 30 June 2013)

n Directors’ Declaration

FREEDOM FOODS GROUP LIMITED

DIRECTORS’ DECLARATION

FOR THE YEAR ENDED 30 JUNE 2013

The director’s 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 33 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, 30 September 2013

Freedom Foods Group LimitedFor personal use only

Independent Audit Report

n Independent Audit Report

Deloitte Touche Tohmatsu
ABN 74 490 121 060

Eclipse Tower
60 Station 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 consolidated
statement of financial position as at 30 June 2013, the consolidated statement of profit and loss and other comprehensive
income, the consolidated statement of cash flows and the consolidated 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 34 to 78.

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 2013For personal use onlyIndependent 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 30 September 2013 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 2013 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 15 to 20 of the directors’ report for the year ended 30 June
2013. 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 2013, complies
with section 300A of the Corporations Act 2001.

DELOITTE TOUCHE TOHMATSU

Catherine Hill
Partner
Chartered Accountants
Parramatta, 30 September 2013

Freedom Foods Group LimitedFor personal use only

Shareholder Statistics

n Shareholding

Class of shares and voting rights

At 31 August 2013, there were:

Substantial shareholders

114,797,363 ordinary shares of the Parent on issue.
17,219,015 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 2013 are:

Ordinary Shares

Arrovest Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
Citicorp Nominees Pty Limited
UBS Nominees Pty Ltd

Convertible Redeemable Preference Shares

Arrovest Pty Limited

Number

69,225,122
6,860,798
6,700,354
5,770,000

15,995,142

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 2013

1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over

Ordinary
211
431
143
209
39
1,033

Non marketable securities which are holdings of less than 500 ordinary shares are held by 80 shareholders. This statistic is
based on the share register as at 31 August 2013.

Annual Report 2013For personal use only

Substantial shareholders
(continued...)

20 largest ordinary shareholders as at 31 August 2013

Name

1 Arrovest Pty Ltd
2 RBC Investor Services Australia Nominees Pty Limited
3 Citicorp Nominees Pty Limited
4 UBS Nominees Pty Ltd
5 National Nominees Limited
6 Mirrabooka Investments Limited
7 BNP Paribas Noms Pty Ltd
8 Telunapa Pty Ltd
9 UBS Wealth Management Australia Nominees Pty Ltd
10 Mr Stephen Francis Higgs & Mrs Rosemary Jean Higgs
11 East Coast Rural Holdings Pty Limited
12 J P Morgan Nominees Australia Limited
13 Aust Executor Trustees Sa Ltd
14 Mr Perry Richard Gunner & Mrs Felicity Jane Gunner
15 Sea Change Consulting Pty Ltd
16 Mr Lawrence Lip & Mrs Sabina Lip
17 Mr Lawrence Lip
18 Connaught Consultants (Finance) Pty Ltd
19 Moorebank Property Management Pty Ltd
20 Mr Lawrence Rose & Mrs Jennifer Rose

Shareholder Statistics (continued...)

Number of Ordinary
Shares held
69,225,122
6,860,798
6,700,354
5,770,000
4,251,132
1,850,000
1,479,723
1,225,000
937,652
823,714
682,007
642,868
606,278
526,009
458,081
327,002
304,486
300,000
296,247
266,937
103,533,410

% held of
Ordinary Capital
60.30%
5.98%
5.84%
5.03%
3.70%
1.61%
1.29%
1.07%
0.82%
0.72%
0.59%
0.56%
0.53%
0.46%
0.40%
0.28%
0.27%
0.26%
0.26%
0.23%
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 2013

1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over

Ordinary
24
20
11
27
2
84

Freedom Foods Group LimitedFor personal use onlyShareholder Statistics (continued...)

Substantial shareholders
(continued...)

20 largest convertible redeemable preference shareholders as at 31 August 2013

Name

1 Arrovest Pty Ltd
2 Mr Perry Richard Gunner & Mrs Felicity Jane Gunner
3 Donwood Pty Ltd
4 Mr Lawrence Rose & Mrs Jennifer Rose
5 Mr Melvyn Miles & Mrs Joanna Miles
6 Mr Robert John Perry & Mrs Jennifer Joy Perry
7 Sea Change Consulting Pty Ltd
8 Mr Legh Davis & Mrs Helen Davis
9 Mr Richard James Wishart & Mrs Jillian Rosemary Wishart
10 Mr Mathew John
11 Mrs Kathleen Alice O'Shea
12 Mr Robert William Owen & Mrs Yvonne Owen
13 Mr Kenneth Francis Smith & Mrs Margaret Lorraine Smith
14 Mr John Wien-Smith
15 Mr Geoffrey Howard Babidge & Mrs Catherine Mary Babidge
16 R & M Gugliotta Pty Ltd
17 Mr Roger Leo Henry & Mrs Patricia Margaret Henry
18 Mr Benjamin Gerst
19 Borlas Pty Limited
20 Lewis Little River Pty Ltd

Number of Ordinary
Shares held
15,995,142
159,604
100,000
80,995
64,584
62,500
50,391
40,869
40,625
34,720
33,300
31,559
31,250
31,250
30,643
30,000
25,000
25,000
24,039
23,438
16,914,909

% held of
Ordinary Capital
92.89%
0.93%
0.58%
0.47%
0.38%
0.36%
0.29%
0.24%
0.24%
0.20%
0.19%
0.18%
0.18%
0.18%
0.18%
0.17%
0.15%
0.15%
0.14%
0.14%
98.23%

The proportion of convertible redeemable preference shares held by the 20 largest shareholders is 98.23%

Annual Report 2013For personal use onlyn 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
Eclipse Tower, 60 Station Street
Parramatta NSW 2150
Tel: (02) 9840 7000
Fax: 02) 9840 7001

Management
Rory J F Macleod Managing Director
Amine Haddad
Michael Bracka
Peter Brown
Timothy Moses
Mark Gauci

CEO, Pactum Australia
CEO, Freedom Foods North America
General Manager, Sales, Freedom Brands
General Manager, Leeton Operations
Operations Manager, Pactum Australia

Corporate Directory

Freedom Foods Group LimitedFor personal use only

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

For personal use only