Great People Distinctive Performance Annual Report 2010 Great People Distinctive Performance Hard work alone is not enough to guarantee sustained high performance. Here in F&N, besides our discipline, fierce commitment and determination to deliver our personal best – which is a given – it is the mastery of our capabilities that makes us distinctive. F&N’s rich legacy has successfully transformed the Group into an enterprise with unparalleled domain expertise. It has also provided F&N with a compelling blueprint for the future. Today, there is a palpable sense of expectation as our Great People work to lift this enterprise to new heights of distinction. Ahead, our firm purpose is to build on past efforts and achievements. Working hand in hand with you, our stakeholders, we are poised to deliver Distinctive Performance now and beyond. Vision To be a world-class multinational enterprise with an Asian base, providing superior returns with a focus on Food & Beverage, Properties and Publishing & Printing businesses. TOTAL NUMBER OF OPERATING PRESENCE IN EMPLOYEES WORLDWIDE NUMBER OF COUNTRIES >17,000 >20 TOTAL ASSET EMPLOYED SHAREHOLDERS FUND >$13 >$6 BILLION BILLION Contents Distinctive Results Investor Relations 53 – 10-Year Performance at a Glance 02 Treasury Highlights 54 – Our 3 Businesses 03 Corporate Social Responsibility – Group Financial Highlights 04 – Environment 56 Distinctive Leadership – Community 58 – Message from Chairman 06 – Consumer 60 – Board of Directors 10 – Human Capital Management 61 Corporate Information 16 Enterprise-wide Risk Management 64 Corporate Structure 17 Corporate Governance Report 65 Our Growth Drivers 18 Index to Financial Report 80 Group Financial Performance 19 Financial Calendar IBC Distinctive Portfolio CEO Business Review – Food & Beverage 20 – Properties 30 – Publishing & Printing 46 02 DISTINCTIVE RESULTS 10-Year Performance at a Glance REVENUE EARNINGS PER SHARE1 $5,697M 41.8 cents • Increased 175% from FY00’s $2,069m • Increased 243% from FY00’s 12.2 cents • Broad-based growth across key businesses • EPS growth outpaced attributable profit due to a series of capital reduction and capital distribution exercises in 2000-2003 that the Group undertook to reduce share capital by about 24% PROFIT BEFORE IMPAIRMENT, INTEREST AND TAX1 DISTRIBUTION $1,071M 17.0 cents • Increased 227% from FY00’s $328m • Increased 372% from FY00’s 3.6 cents • Crossed $1b mark for the first time • Comprising a proposed final dividend of 12.0 cents and • 10-year compounded annual growth rate of 13% interim dividend of 5.0 cents paid earlier • Dividend payout ratio remains in line with the Group’s policy of paying up to 50% of Attributable Profit1 ATTRIBUTABLE PROFIT1 MARKET CAPITALISATION2 $584M $9,127M • Increased 221% from FY00’s $182m • Increased 347% from FY00’s $2,043m • 10-year compounded annual growth rate of 12% 1 Before discontinued operations, fair value adjustment and exceptional items 2 Based on issued shares as at 28 Oct 2010 and share price at the close of business on the first trading day after preliminary announcement of results Share Price ($) $ 7 $6.50 30 Sep 2010 6 5 4 3 2 1 $1.20 30 Sep 2000 0 Jun Jun Jun Jun Jun Jun Jun Jun Jun Jun Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Mar Mar Mar Mar Mar Mar Mar Mar Mar Mar 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Fraser and Neave, Limited & Subsidiary Companies Annual Report 2010 03 Our 3 Businesses Food & Beverage Properties A household name to many, F&N has established itself Frasers Centrepoint Limited (“FCL”) is a wholly- as a leader in the Food & Beverage arena in Singapore owned subsidiary of F&N. From a single shopping and Malaysia since the 1930s. Beyond soft drinks, it has mall along Orchard Road, FCL is now a leading successfully ventured into brewing beer in 1931 and integrated Singapore-based property company with dairies in 1959. The Group’s Soft Drinks and Dairies a strong foothold in property development, property business, with operations and investments in Singapore, investment, serviced residences and investment Malaysia, Thailand, China and Vietnam, are operated funds. Its global footprint spans Australia, China, primarily through Fraser & Neave Holdings Bhd; while Japan, Hong Kong, Korea, New Zealand, Philippines, our Beer business, executed mainly through Asia Thailand, UAE, Vietnam and the UK. With the Pacific Breweries Limited, operates 37 breweries in objective to continue delivering sustainable earnings 14 countries in the Asia Pacific. Today, the Group owns to our shareholders, the Group shall remain focused on a portfolio of reputable brands including F&N, 100PLUS building the integrated commercial real estate model and SEASONS for Soft Drinks; Magnolia, Nutrisoy, Fruit and balancing its portfolio by diversifying overseas and Tree Fresh and NutriTea for Dairies; and Tiger, Anchor, across multiple sectors. Baron’s and ABC for Beer. The Group’s consistent leading market shares across various products have led to F&N being conferred numerous brand awards. Through established distribution networks and joint Publishing & Printing partnerships, F&N aims to reinforce its foothold in the The rich intellectual capital of Times Publishing paved F&B industry geographically across the Asia Pacific, the Group’s entry into the knowledge-based economy. further expand its portfolio of brands and strengthen As Singapore’s largest publishing and printing company, its research and development capabilities. Times Publishing has a well-established track record in publishing, printing, direct sales, distribution and retailing of books, magazines and the provision of educational services. It operates a global network spanning South-East Asia, Hong Kong, China, Japan, Australia, Europe and the USA. 04 DISTINCTIVE RESULTS Group Financial Highlights Profit Before Taxation, Impairment, Fair Value Adjustment Revenue ($ M) and Exceptional Items (cents per share1) FY10 5,697 FY10 72.2 FY09 5,146 FY09 53.0 FY08 4,990 FY08 50.5 FY07 4,731 FY07 50.0 FY06 3,802 FY06 45.9 Profit Before Taxation, Impairment, Fair Value Adjustment and Exceptional Items ($ M) Attributable Profit2 (cents per share1) FY10 1,009 FY10 41.8 FY09 737 FY09 33.2 FY08 701 FY08 26.8 FY07 661 FY07 28.6 FY06 537 FY06 25.3 Net Asset Value ($ M) Net Asset Value ($ per share) FY10 6,143 FY10 4.38 FY09 5,585 FY09 4.01 FY08 5,283 FY08 3.80 FY07 5,221 FY07 3.77 FY06 3,600 FY06 3.07 Total Asset Employed ($ M) Dividend - Net (cents per share) FY10 13,523 FY10 17.0 FY09 13,868 FY09 13.5 FY08 13,526 FY08 13.5 FY07 12,873 FY07 13.5 FY06 9,667 FY06 12.0 1 Weighted average number of shares 2 Before discontinued operations, fair value adjustment and exceptional items 3 FY2006 to FY2008 figures are as previously reported. FY2009 and FY2010 figures are based on Continued Operations Fraser and Neave, Limited & Subsidiary Companies Annual Report 2010 05 Revenue Revenue FY10: $5,697M FY10: $5,697M FY09: $5,146M FY09: $5,146M FY10 FY10 58% 7% 34% 1% 36% 21% 21% 10% 11% 1% FY09 FY09 55% 8% 36% 1% 38% 20% 18% 12% 11% 1% Profit Before Interest and Taxation Profit Before Interest and Taxation FY10: $1,071M FY10: $1,071M FY09: $799M FY09: $799M FY10 FY10 42% 3% 55% 46% 14% 22% 10% 9%-1% FY09 FY09 42% 57% 1% 62% 14% 22% 8% 8% -14% Attributable Profit before Fair Value Adujstment and Exceptional Items Asset Allocation FY10: $584M FY10: $11,799M FY09: $462M FY09: $12,201M FY10 FY10 31% 3% 69% -3% 51% 6% 11% 14% 14% 4% FY09 FY09 28% 71% 1% 49% 6% 11% 16% 13% 5% By Business Segment (%) By Geographical Segment (%) Food & Beverage Singapore Publishing & Printing Malaysia Properties Rest of South-East Asia Others Other Asia South Pacific Europe & USA 06 DISTINCTIVE LEADERSHIP Message From Chairman distinctive leadership “Our results for FY were buoyed by stronger- than-expected economic recovery in Singapore and the region. I am pleased to report that the Group delivered a consecutive year of record profi t in FY.” MR LEE HSIEN YANG CHAIRMAN Fraser and Neave, Limited & Subsidiary Companies Annual Report 2010 07 REVENUE INCREASED 11% TO $5.7B PBIT INCREASED 34% TO $1.1B * before discontinued operations, fair value MR LEE HSIEN YANG adjustment and exceptional items CHAIRMAN Corporate Developments In November 2009, the Group embarked This is a defining period for us as on a strategic review of its long-held we gear up to meet the challenge Structural Changes Underway to glass containers business, which had of a new competitive landscape. Transform the Group expanded over the years to encompass Our bottling agreements with The Coca- In our financial year ended 30 September four glass factories in Malaysia, Cola Company (“TCCC”) in Singapore, 2010, we made good progress in our Vietnam, Thailand and China under the Malaysia and Brunei (the earliest of ongoing efforts to strengthen the ownership of Malaya Glass Products which dates back to 1936) expired in Group’s foundation for sustainable Sdn Bhd (“MGP”). Our Malaysian January 2010. F&NHB continues to growth in shareholder value. Outlined subsidiary, Fraser & Neave Holdings bottle, distribute and sell TCCC brands below are the major structural changes Bhd (“F&NHB”), which owned MGP, in Malaysia, while TCCC continues to and strategic initiatives that were decided to exit this business in order bottle, distribute and sell brands from implemented. to sharpen its focus on the Group’s F&NL in the Singapore and Brunei Food & Beverage (“F&B”) business. markets under transition agreements Arising from an agreement reached Conducive conditions in FY2010 that will expire on 30 September 2011. between the Company and Heineken, resulted in attractive tender bids, our partner in Asia Pacific Breweries which enabled the Group to realise For our Soft Drinks business, FY2010 Limited (“APB”), APB was able to good value from this divestment.In was characterised by substantially divest its fledgling Indian operations to May 2010, F&NHB announced the higher brand investments, a faster Heineken and simultaneously acquire divestment of its 100 per cent stake pace of new product introductions, Heineken’s controlling interests in in MGP for a cash consideration a new distribution agreement for PT Multi Bintang Indonesia (“MBI”) of $310m.