CharoenCharoen Pokphand Pokphand Foods FoodsPublic PublicCompany Company Limited LimitedAnnual AnnualReport Report Charoen Pokphand Foods Public Company Limited Foods Charoen Pokphand Charoen Pokphand Foods Public Company Limited Foods Charoen Pokphand 2 0 21 09 1 9 Charoen CharoenPokphand Pokphand Foods Public Foods Company Public Company Limited Limited 313 C.P.313 Tower C.P. Building, Tower Building,Silom Road, Silom Bangrak, Road, Bangrak, BangkokBangkok 10500, 10500, Thailand Thailand Tel Tel: 02 766: 02 8000 766 8000 Fax Fax: 02 638: 02 2139 638 2139 www.cpfworldwide.comwww.cpfworldwide.com Annual Report 2019 Annual Report 2019 backcoverbackcover annual annualCPF 21x29.7 CPF 21x29.7 cm cm 1.6 cm1.6 cm CMYK CMYK cover annualcover annualCPF 21x29.7 CPF 21x29.7 cm cm Table of Contents Page Part 1 Business Operation 1. Business Overview 1-20 2. Nature of Business Operations 21-35 3. Risk Factors 36-47 4. General Information 48-49 Part 2 Management and Corporate Governance 5. Securities and Shareholders Information 50-61 6. Management 62-79 7. Corporate Governance 80-99 8. CSR towards Sustainability 100-108 9. Internal Control and Risk Management 109 10. Related Transactions 110-112 Part 3 Financial Status and Performance 11. Key Financial Information 113-115 12. Management Discussion and Analysis 116-121 Attachment Attachment 1 Details of Directors, Executives and Company Secretary Attachment 2 Report of the Audit Committee Attachment 3 Report of the Remuneration and Nominating Committee Attachment 4 Report of the Corporate Governance Committee Attachment 5 Report of the Corporate Social Responsibility and Sustainable Development Committee Attachment 6 Report of the Board of Directors Responsibility on the Financial Statements Attachment 7 Financial Statements for the Year 2019 Definition : The Company mentioned in Part 1-3 refers to Charoen Pokphand Foods Plc. (CPF) and its subsidiaries (companies which CPF has direct and indirect control) Investors may see more information of the Company in Annual Registration Statements (Form 56-1) on www.sec.or.th or www.cpfworldwide.com Charoen Pokphand Foods Public Company Limited Part 1 Business Operation Chareon Pokphand Foods Plc. Part 1 Business Operation 1. Business Overview 1.1 Vision, Goal and Business Strategies With the vision of becoming the Kitchen of the World, the Company continuously develops and operates integrated agro-industrial and food businesses, by adhering to its objectives on offering products of high quality in terms of nutritional, taste, safety and traceability. The Company strives to operate businesses by focusing on modern production process with international standards. With the aim of competing in the front line of the food industry, we use resources properly and environmental friendly. The Company also takes into account the interests of all stakeholders to ensure sustainable growth, while being able to generate appropriate return to shareholders. To push forward the Companys vision and aforementioned mission to fulfill its goals, the Board of Directors reviews and approves the Companys strategies annually. The strategies for 2020 have been defined into 3 main strategies which include Sustainable growth, Aiming for excellence, and Building solid foundation along with building a corporate value called the CPF Way under good management framework, including corporate governance structure, internal audits and enterprise-wide comprehensive risks management. The Company believes in the potential of growth and development of the agro-industrial and food industry worldwide as well as consumption growth in a long term. Therefore, the Company has set the strategy to expand businesses to foreign countries. At the same time, to respond to changes in consumer behavior, the Company has set the strategy to add value in its business such as producing ready-to-eat and processed foods under the CP Brand and other brands of the Company, as well as expanding distribution channels and export base. The Company also creates innovation to enhance efficiency, strives to develop and foster its people, and manages its business with good corporate governance, in order to promote the Companys sustainable growth. (1) Business Overview Page 1 Chareon Pokphand Foods Plc. Part 1 Business Operation 1.2 History and Key Milestones History CPF was registered as a limited company on January 17, 1978 under the name Charoen Pokphand Feedmill Company Limited, with initial registered capital of Baht 5 million, engaging in livestock feed and livestock farming business in Thailand. Then, in December 1987, CPF was listed on the Stock Exchange of Thailand with stock code CPF. The Company had expanded its business to integrated shrimp farming business in 1988 and converted to a public company limited in January 1994. In 1998, CPF acquired the agro-industry and meat processing companies from Charoen Pokphand Group to be under CPF umbrella; whereas, the business acquisitions were completed in early 1999. CPF then renamed as Charoen Pokphand Foods Public Company Limited and announced the vision to become Kitchen of the World for its integrated agro-industry business operation to produce meat products and quality food products to consumers around the world. After that the Company has continuously expanded its businesses and investment internationally. In 2005, the Company has started to use brand for its basic processed meat products and entered into ready-to-eat food business under the said brand for distribution in Thailand and for export as well as expanded the product distribution channels to retail and food outlets. In addition to business operations in Thailand, CPF has expanded its businesses to foreign countries which are full of business potentials and opportunities. CPF has brought its knowledge and expertise on integrated agro-industrial, food business and modern technologies used in its businesses in Thailand to develop animal husbandry standards and agro-industrial efficiency to promote meat and food productions with safety standards in various countries. CPF has also expanded processed and ready-to-eat foods as well as distribution channels in such countries, whereas work processes, production processes and product characteristics are adjusted in accordance with each countrys geosocial. Presently, CPF has production bases in 16 countries, namely, China, Vietnam, England, India, United States of America, Cambodia, Russia, Turkey, Philippines, Malaysia, Laos, Belgium, Sri Lanka, Poland, Brazil and Canada. As of December 31, 2019, CPF had paid-up capital of Baht 8,611,242,385, comprising of 8,611,242,385 shares, and its market capitalization was Baht 211,837 million. Key milestones in 2019 - Establishment of new shrimp farm in the USA In January 2019, Charoen Pokphand Foods Public Company Limited (CPF) established its new subsidiary under the name Homegrown Shrimp (USA) LLC. Its authorised capital is USD 6.6 million, whereas CPF holds 100% of its shares. - Investment in Korean restaurant in Thailand In April 2019, CPF Restaurant and Food Chain Co., Ltd. (CPF RF), a 99.98% owned subsidiary of CPF, acquired newly issued ordinary shares of Dak Galbi Group Co., Ltd. (Dak Galbi), representing 41.35% of total capital stock of Dak Galbi on a fully diluted basis after giving effect to the transaction. Upon the completion of the transaction, Dak Galbi became an associate of CPF. Moreover, CPF RF made the agreement to buy Dak Galbis shares for the second time. The investment value is based on the performance of Dak Galbi shown in the financial statement for the year ended December 31, 2019, according to detail, criteria and method of calculation of value as specified in the subscription and joint investment agreement. Upon the completion of both transactions, the shareholding of CPF RF in Dak Galbi reached 60.00% of its total capital stock and Dak Galbi became indirect subsidiary of CPF. Dak Galbi operates real time cooking restaurants by cooking foods in front of customers. These transactions were the investments in restaurant business which is one among the Companys distribution channels promoting value-adds of products from the Companys farm products. (1) Business Overview Page 2 Chareon Pokphand Foods Plc. Part 1 Business Operation - Investment in the entire interests in Charoen Pokphand Foods Canada Inc. In April 2019, CPF Investment Ltd. (CPFI) a 99.98% owned subsidiary of CPF, acquired the remaining shares of Charoen Pokphand Foods Canada Inc. (CPF Canada) representing 30.00% of the total issued shares of CPF Canada, resulting to the increase in ownership interests in CPF Canada from 70.00% to 100.00% upon the completion of the transaction. Since CPF Canada has operated import and export of foods, CPF Canada can use networks in CPF Group to grow its business faster and more efficiently. - Investment in restaurant business in Vietnam In May 2019, C.P. Vietnam Corporation (CPV), a 66.18% indirectly owned subsidiary of CPF, acquired the interests in AHM Lifestyles Creative Hospitality Co., Ltd. (AHM) representing 70% of the authorised capital of AHM. AHM operates restaurant business in Vietnam. Upon the completion of the transaction, AHM became subsidiary of CPF. - Investment in the entire interests in Berice LLC. In July 2019, CPF Restaurant and Food Chain Co., Ltd. (CPF RF) acquired the entire interests in Berice LLC. (Berice). Berice was the company registered in the USA for studying investment opportunities in related businesses such as restaurants which can become the Companys meat distribution