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FEEDING

EMERGING ASIA
JAPFA LTD.
(Company Registration Number: 200819599W)
(Incorporated in Singapore on October 8, 2008)

248,000,000 Offering Shares


(subject to the Over-allotment Option (as defined herein))
Offering Price: S$0.80 per Offering Share

PROSPECTUS DATED AUGUST 7, 2014


(Registered by the Monetary Authority of Singapore on
August 7, 2014)
This document is important. If you are in any doubt as to the
action you should take, you should consult your legal, financial,
tax or other professional adviser.
This is the initial public offering of our ordinary shares (the Shares). Japfa Ltd.
(the Company) is issuing an aggregate of 248,000,000 Shares (the Offering
Shares) for subscription and/or purchase at the Offering Price (as defined
below) (the Offering). The Offering consists of (i) an international placement
of 231,200,000 Offering Shares (the International Offer) to investors,
including institutional and other investors in Singapore, including 22,500,000
Offering Shares reserved for our directors, employees and business associates
and others who have contributed to the success and development of our Group
(the Reserved Shares) and (ii) a public offer of 16,800,000 Offering Shares in
Singapore (the Singapore Public Offer). The Offering Shares offered may be
re-allocated between the International Offer and the Singapore Public Offer,
at the discretion of the Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters (as defined below), subject to any applicable
law. See Plan of Distribution.
Credit Suisse (Singapore) Limited and DBS Bank Ltd. are the joint global
coordinators, joint issue managers, joint bookrunners and underwriters for
the Offering (the Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters or the Joint Global Coordinators).
Coperatieve Centrale Raiffeisen-Boerenleenbank B.A. (trading as Rabobank
International), Singapore Branch is the co-lead manager (the Co-Lead
Manager) for the Offering.
In connection with the Offering, we have granted Credit Suisse (Singapore)
Limited as stabilizing manager (the Stabilizing Manager), on behalf of
the Joint Global Coordinators, Joint Issue Managers, Joint Bookrunners and
Underwriters, an over-allotment option (the Over-allotment Option) to
purchase up to an aggregate of 37,200,000 Shares (the Additional Shares)
(representing 15.0 per cent. of the total Offering Shares) at the Offering
Price, exercisable in whole or in part by the Stabilizing Manager, on its own
behalf and on behalf of the Joint Global Coordinators, Joint Issue Managers,
Joint Bookrunners and Underwriters, on one or more occasions, from the
commencement of the dealing of the Shares (the Listing Date) on the
Singapore Exchange Securities Trading Limited (the SGX-ST) until the earlier
of (i) the date falling 30 days from the Listing Date, and (ii) the date when
the Stabilizing Manager or its appointed agent has bought on the SGX-ST
an aggregate of 37,200,000 Shares, representing 15.0 per cent. of the total
Offering Shares, to undertake stabilizing actions, solely to cover the overallotment of the Offering Shares, if any.
Prior to the Offering, there has been no public market for our Shares.
Application has been made to the SGX-ST for permission to list for quotation
on the Main Board of the SGX-ST all our issued Shares, the Offering Shares,
the Additional Shares and the Shares which may be issued upon the release of
the share awards to be granted under the Japfa Performance Share Plan (the
Plan Shares), and we have received a letter of eligibility from the SGX-ST
for permission to list all our issued Shares, the Offering Shares, the Additional

Shares and the Plan Shares on the Main Board of the SGX-ST. Acceptance of
applications for the Offering Shares will be conditional upon, among other
things, permission being granted by the SGX-ST to deal in and for quotation
of all our issued Shares, the Offering Shares, the Additional Shares and the
Plan Shares on the Official List of the SGX-ST. Such permission will be granted
when we have been admitted to the Official List of the SGX-ST. Monies paid
in respect of any application accepted will be returned, at each investors own
risk, without interest or any share of revenue or other benefit arising therefrom,
and without any right or claim against us or the Joint Global Coordinators,
Joint Issue Managers, Joint Bookrunners and Underwriters, if the Offering is not
completed because this permission is not granted or for any other reason. The
dealing in and quotation of our Shares will be in Singapore dollars.
The SGX-ST assumes no responsibility for the correctness of any statements or
opinions made or reports contained in this Prospectus. Our eligibility to list and
our admission to the Official List of the SGX-ST is not an indication of the merits
of the Offering, our Company, our Group or our Shares (including the Offering
Shares, the Additional Shares and the Plan Shares).
Investing in our Shares involves certain risks. See Risk Factors beginning
on page 23.
OUR SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES
ACT), AND THEY MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
ACCORDINGLY, OUR SHARES ARE BEING OFFERED AND SOLD OUTSIDE
THE UNITED STATES IN OFFSHORE TRANSACTIONS IN RELIANCE ON
REGULATION S UNDER THE SECURITIES ACT (REGULATION S) OR
PURSUANT TO ANOTHER EXEMPTION FROM, OR IN TRANSACTIONS NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. OUR SHARES ARE NOT TRANSFERABLE EXCEPT IN ACCORDANCE
WITH THE RESTRICTIONS DESCRIBED UNDER TRANSFER RESTRICTIONS.
A copy of this Prospectus was lodged on July 29, 2014 with and registered
by the Monetary Authority of Singapore (the Authority) on August 7, 2014.
The Authority assumes no responsibility for the contents of this Prospectus.
Registration of this Prospectus by the Authority does not imply that the
Securities and Futures Act, Chapter 289 of Singapore, or any other legal or
regulatory requirements, have been complied with. The Authority has not, in
any way, considered the merits of our Shares being offered for investment (or of
the Additional Shares, where the Over-allotment Option is exercised).
No Shares will be allotted or allocated on the basis of this Prospectus later than
six months after the date of registration of this Prospectus by the Authority.
Investors applying for Offering Shares by way of Application Forms or
Electronic Applications in the Singapore Public Offer will pay the Offering Price
on application, subject to the refund of the full amount or, as the case may
be, the balance of the application monies in each case without interest or any
share of revenue or other benefit arising therefrom and without any right or
claim against us or the Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters, where (i) an application is rejected or accepted
in part only, or (ii) the Offering does not proceed for any reason.

Joint Global Coordinators, Joint Issue Managers, Joint Bookrunners and Underwriters

Co-Lead Manager

This overview section is qualified in its entirety by, and should be read in conjunction with, the full text of this Prospectus.
Meanings of capitalised terms may be found in the sections Certain Defined Terms and Conventions and Appendix
M - Definitions and Abbreviations.

C O R P O R AT E P R O F I L E
We are a leading agri-food company that produces
multiple protein foods, with operations in five highgrowth emerging Asian markets. We have, over 40 years,
developed core competencies across the agri-food value
chain, including animal feed production, animal breeding,
livestock fattening and consumer food.
We are a market leader across multiple classes of
protein foods, with an emphasis on milk, poultry and
beef, complemented by growing businesses in swine
and aquaculture. In Indonesia, we are one of the two
largest producers of poultry, and we have replicated our
industrialized, vertically integrated business model for
poultry production in Vietnam, India and Myanmar. In China,
we successfully replicated our Indonesian dairy business
and are, today, one of a small group of leading producers
of premium milk that is of the highest quality available in
the market and that commands premium prices in China.
Given the growing affluence of the populations in our
target middle- and lower-income consumer groups, we
expect protein food consumption in these markets to

rise. We intend to capitalize on this trend by increasing


our production capabilities for premium milk and animal
proteins across our markets.
We have an industrialized approach to farming and food
production. This allows us to consistently produce highquality proteins and to replicate our business model as we
expand our existing protein operations in and across our
existing markets.
In addition, the vertical integration of our animal protein
business from animal feed production to breeding and
commercial farming to slaughtering and food processing
creates more opportunities to capture value at different
points in the value chain. It also provides us with greater
food security and traceability, which is important as we
grow our downstream consumer food brands.
We leverage the high quality of our raw materials to
produce premium and mass market consumer branded
food products under leading brands such as So Good
and Greenfields.

OUR BUSINESS LOCATIONS


CHINA
DAIRY1
DAIRY FARMING
ANIMAL PROTEIN
BEEF

EMERGING ASIAN MARKETS

POPULATION: 3 BILLION
VIETNAM
ANIMAL PROTEIN
POULTRY
SWINE

MYANMAR

INDIA

ANIMAL PROTEIN3
POULTRY

ANIMAL PROTEIN
POULTRY

CONSUMER FOOD
CHICKEN
BEEF

SINGAPORE
CORPORATE HQ
REGIONAL PROCUREMENT
1 Dairy: 61.9% owned through AustAsia Investment
Holdings Pte. Ltd.
2 Indonesia Animal Protein: 57.5% owned through
PT Japfa Comfeed Indonesia Tbk
3 Myanmar Animal Protein: 85.0% owned

INDONESIA
DAIRY1
DAIRY FARMING
MILK PROCESSING
BRANDED MILK DISTRIBUTION

ANIMAL PROTEIN2
POULTRY
BEEF
AQUACULTURE

CONSUMER FOOD
CHICKEN
BEEF
SEAFOOD

OUR BUSINESS
We have a vertically integrated business model that covers the entire value chain for many of our protein products, from
feed production and breeding to commercial farming and processing. In addition, we are able to leverage our premium
protein production operations through our high-growth downstream consumer food business.

VERTICALLY INTEGRATED BUSINESS MODEL


UPSTREAM:

MIDSTREAM:

DOWNSTREAM:

ANIMAL FEED AND


BREEDING

MILKING AND
FATTENING

PROCESSING AND
DISTRIBUTION

MILKING

ANIMAL FEED

DAIRY PRODUCTS

POULTRY BREEDING

POULTRY

DAIRY BREEDING

SWINE BREEDING

BEEF

PROCESSED MEATS

OUR GREENFIELDS BRAND WAS THE MARKET LEADER FOR PREMIUM


FRESH MILK IN INDONESIA IN 2013 WITH AN ESTIMATED MARKET
SHARE OF 38.4%1 BY VALUE
1 According to Frost & Sullivans Industry Report set out in Appendix F Independent Market Research on Selected Food Markets in Indonesia, China, India, Vietnam, and Myanmar

OUR BUSINESS

DAIRY

We are one of a small group of leading, industrialized


producers of premium raw milk in Indonesia and China. Our
raw milk is of the highest quality in terms of nutritional and
safety standards, and rates at the top of the market in terms
of price.
As of March 31, 2014, we had approximately 47,500 heads of
cattle and 19,500 milking cows across our farms in Indonesia
and China.

Rotary Milking Parlour

Parallel Milking Parlour

CHINA

INDONESIA

Focus on producing premium raw milk that is sold to


leading dairies in China, such as Yili, Mengniu, Bright
Dairy and Nestle, at premium prices

Operate a vertically integrated dairy business, comprising


one milk-producing dairy farm and one dairy processing
plant, in Malang, East Java, Indonesia, at an altitude that
is conducive to raising high-quality dairy cows

Recently passed the audit process of Starbucks China to


supply them with milk processed and packaged from raw
milk produced at Farm 2 in China
Our raw milk consistently exceeds Chinese
international standards for nutrition and safety

and

Well positioned to benefit from substantial shortfall in


the supply of premium milk and expected growth in dairy
consumption in the Chinese market
Operate a five-farm hub of dairy farms in Shandong
province, China with four of the farms in the operational stage.
Construction of the fifth farm is expected to be completed by
the end of 2014 with milk production in early 2015
Average selling price of our milk in 2013 was RMB 4.51
per kilogram, which was approximately 25% higher than
the average price of milk from 10 major milk production
regions in China1

Use our raw milk in our downstream businesses to produce


fresh milk, UHT milk and cheeses marketed under our
Greenfields brand to consumers in Indonesia and other
countries in Asia
Export a portion of our downstream dairy products to key
strategic customers such as Starbucks and Cold Storage in
markets such as Singapore, Hong Kong and the Philippines
Our Greenfields brand was the market leader for premium
fresh milk in Indonesia in 2013 with an estimated market
share of 38.4%1 by value

KEY FIGURES
As of or for the three months ended March 31, 2014

Approximately 5,700 heads of cattle

KEY FIGURES
As of or for the three months ended March 31, 2014

Approximately 2,900 milking cows

Approximately 41,800 heads of cattle

Produced over 6,600

Approximately 16,700 milking cows


Produced over 45,000

tons of raw milk

Average milk yield per milking cow was 9.4

tons

tons of raw milk

Average milk yield per milking cow was 12.4


Average selling price of milk was RMB

tons

5.25 per kg

1 According to Frost & Sullivans Industry Report set out in Appendix F


Independent Market Research on Selected Food Markets in Indonesia, China,
India, Vietnam, and Myanmar

WE PRODUCE
APPROXIMATELY 1.5 MILLON
DAY-OLD CHICKS PER DAY

OUR BUSINESS

ANIMAL PROTEIN
We produce multiple high-quality animal proteins (poultry,
swine, beef and aquaculture) as well as premium speciallyformulated animal feed.
We sold over 3.5 million tons of animal feed in 2013 in Indonesia,
Vietnam and Myanmar, both for our own poultry, swine and
aquaculture operations, as well as for sale to third parties. Our
feed brands are among the most recognized in Indonesia.
We also breed high-performance day-old chicks (DOCs),
swine and beef cattle based on an industrialized approach
to ensure the consistency, quality and conversion ratio of
our breeds. Our commercial farming operations involve
feedlotting or growing out of our commercial broiler chicken,
swine and cattle which are then typically sold to third parties.
POULTRY
One of the two largest poultry and poultry feed
manufacturers in Indonesia, with over 40 years of
experience in poultry production1, and produce
approximately 1.5 million DOCs per day
Operate over 70 breeding farms and over 30 hatcheries
to produce DOCs, primarily in Indonesia, as well as in
Vietnam, Myanmar and India, and sold almost 600 million
DOCs across our markets in 2013
25% market share in Indonesia in 2013 by production
capacity of DOCs, and 22% by volume of animal feed
(excluding aquafeed) sold which is 16.4 percentage points
higher than the next producer1
Source most of our grand-parent stock for chicken from
Aviagen, one of the worlds leading poultry genetics
companies, and our industrialized approach results in
premium quality DOCs and feed conversion ratios that are
among the highest in the industry in Indonesia

BEEF
One of the largest beef cattle feedlot operators in Indonesia
Breed, fatten and process beef cattle in Serang, West Java,
Indonesia, where our four feedlots have a total production
capacity of 165,000 heads of cattle per year
Beef business in Indonesia is fully integrated with our
cattle breeding operations in Northern Territory, Australia
which have a carrying capacity of 45,000 heads of cattle
and a production capacity of approximately 12,000 heads
of cattle per year that are sent to our feedlots in Indonesia
for fattening and processing
Developing a 30,000 head feedlot in Shandong province, China
SWINE
Swine breeding and distribution operations in Vietnam,
where we sold approximately 72,700 piglets in 2013
Entered into a joint venture in 2012 with Hypor, one of the
worlds leading suppliers of swine genetics, which enables
us to operate great-grand-parent farms
Produces swine feed, including piglet feed in all five
feedmills in Vietnam with total production capacity of
approximately 245,000 tons of feed per annum, as at
December 31, 2013
AQUACULTURE
Aquaculture operations are managed by our subsidiary,
which is a leading producer of aqua-feed in Indonesia with
minor interest in fish and shrimp ponds
Operate five aqua-feed feedmills and intend to commence
operations at one additional feedmill by the end of 2015,
to meet the growing demand for our feed products
Produce small amounts of fish and shrimp in Indonesia

1 According to Frost & Sullivans Industry Report set out in Appendix F Independent Market Research on Selected Food Markets in Indonesia, China, India, Vietnam, and Myanmar

OUR BUSINESS

CONSUMER FOOD
We use the milk and animal protein products that we
produce in-house as raw materials for our own downstream
consumer food segment.
We can trace the quality of the ingredients in our food
products through the production chain, which provides a
high degree of confidence in the quality and reliability of
our products.
We make ambient-temperature and chilled/frozen food
products from chicken, beef and seafood for the Indonesia

SO GOOD BRAND WON THE TOP


BRAND AWARD FROM 2008 TO 2013
AND SO NICE WON THE TOP BRAND
AWARD FROM 2010 TO 20131
1 Awarded by Marketing magazine and Frontier research in Indonesia

and Vietnam markets. Our So Good (for chicken nuggets,


beef/chicken/fish/shrimp balls), So Good Sozzis (shelf stable
sausages) and So Nice (shelf stable sausages) brands are
leading brands in Indonesia for premium processed meats2.
In Indonesia, our consumer food segment has the secondlargest market share in frozen consumer food and the thirdlargest market share in ambient temperature food.
We also manufacture and market small-pack UHT liquid milk
under the Real Good brand in Indonesia, as well as branded
shelf-stable sausages under the So Yumm brand in Vietnam.

2 According to Frost & Sullivans Industry Report set out in Appendix F Independent Market Research on Selected Food Markets in Indonesia, China, India, Vietnam, and Myanmar

OUR PRODUCTS
Brand

Industry Category

Products

So Good and So Good Sozzis

Branded Chilled/Frozen and


Ambient Temperature

Chicken nuggets, beef/chicken/fish/


shrimp balls, shelf stable sausages

So Nice

Branded Chilled/Frozen and


Ambient Temperature

Chicken nuggets, beef/chicken/fish/


shrimp balls, shelf stable sausages

So Fresh

Chilled

Dressed and cut-up chicken, fresh


beef/meat balls
VIETNAM

INDONESIA
4 meat processing plants
Capacity of 6,462 tons per month

1 UHT milk processing plant


Capacity of 3,500 tons per month

6 poultry slaughterhouses
Capacity of 47.6 million birds per year

Distribution network
5 regional sales branches, 32 regional sales
depots and direct distribution coverage
of over 50,000 regular customers

1 meat processing plant


producing ambient temperature
sausage products
Capacity of 6,652 tons per year

OUR STRENGTHS
Industrialized approach to agri-food production and
vertical integration
Large-scale standardized approach to our operations
creates efficiencies and facilitates replication, use of
superior breeds, and a sophisticated approach to
animal husbandry, animal health and nutrition, including
a strong focus on bio-security
Advantages of industrialized approach compared to
traditional farming include economies of scale and cost
savings, resources and technology to develop management
and operation expertise, consistently high-quality animal
protein products, and cost effective market expansion
Advantages of vertically-integrated business include
opportunities to capture value and diversify our business,
greater food security and traceability, and better ability to
target our market entry point
Operations in five large, high-growth emerging Asian
markets where protein consumption is low and expected
to increase
Growing affluence of our target middle- and lowerincome consumer groups who are focused on food
quality and willing to pay higher prices for trusted brands
Positive correlation between a countrys economic
development and the consumption of protein foods1
Chicken meat consumption in Indonesia is projected to
increase by 14.9% per year over the next two years and
dairy consumption in China is projected to increase by
5.7% per year from 2013 20181
Leading market positions across multiple protein segments
Focus on developing operational and technical expertise
to create leading market positions, and replicate our
successes in other markets and classes of proteins
Focus on protein segments where there are significant
opportunities:
- Chicken is an affordable and halal source of protein
for middle- and lower-income consumers in Asian
emerging markets
- Demand for raw milk in China is outpacing

Feedmill

production, and structural supply shortage is


expected to continue until 20181
- Swine is the largest protein segment in Asian
emerging economies such as Vietnam
- Beef consumption increases with rising wealth,
particularly in Indonesia and China
Established, leading premium dairy business in China
and Indonesia, which is poised for substantial growth
Our success factors include the scale, design
and location of our farms, and our advanced and
industrialized farm management practices and highyielding livestock
Our success is reflected by our milk quality, premium
pricing, milk yields and strong customer relationships
Leading downstream consumer food brands, which we
expect to be a key driver for future growth
Leveraged the high quality of the raw material we
produce to establish leading and reputable downstream
consumer food brands
Increased consumption of processed meat in Indonesia
due to increasing income levels and changing lifestyles
Our experience in managing, marketing and distributing
downstream brands in Indonesia will support our
expansion into downstream dairy business in China
Built a strong reputation for quality and reliability

1 According to Frost & Sullivans Industry Report set out in Appendix F Independent
Market Research on Selected Food Markets in Indonesia, China, India, Vietnam,
and Myanmar

WE HAVE A
VERTICALLY INTEGRATED
BUSINESS MODEL
COVERING THE ENTIRE VALUE CHAIN
FOR MANY OF OUR PROTEIN PRODUCTS

O U R S T R AT E G Y
Expand our dairy business in China through the continued
replication of our successful business model
Intend to build another five-farm hub with an aggregate
holding capacity of 60,000 cattle in Inner Mongolia, which will
replicate our current farm designs and operating systems
Intend to begin construction on the first farm of this new
hub before the end of 2014 and to complete the second
five-farm hub in 2018
Expect the second hub to increase our total herd size in China
to approximately 120,000 heads of cattle by the end of 2018
Capitalise on the current supply deficit for premium milk in
China and enlarge our footprint as a leading premium milk
producer in Asia
Continue to grow and enhance the profitability of our core
poultry business in Indonesia
A profitable, growing and cash-flow generative business
segment which gives us a strong foundation
Plan to increase our feed capacity, our DOC production
and the reach of our downstream consumer brands
Plan to build breeding farms and expand our production
of DOCs from almost 600 million in 2013 by at least 30%
in the next two years, as well as expand our feed capacity
and production in tandem
Plan to increase the capacity of our existing slaughterhouses
and build additional slaughterhouses

Expand our animal protein business in our target markets


Intend to replicate our industrialized approach to farming
to create a market-leading position for swine in Vietnam
and to expand poultry operations in Myanmar
Intend to draw upon synergies with the expansion of our
dairy business in China to grow our beef operations
Consider acquiring existing businesses across our various
business lines and geographic markets, on a case-bycase basis
Further invest into our high-growth consumer food brands
Continue to invest over the medium- to long-term into our
consumer food business, both for ambient temperature
products and chilled or frozen products
Seek to expand the reputation and market reach of our
consumer food brands, including Real Good for massmarket UHT milk and So Good, So Nice and Best Chicken
for processed meats
Intend to increase our manufacturing and processing
capacity in Indonesia and Vietnam, and to expand our
distribution capabilities in Indonesia, Vietnam and Myanmar

I P O T I M E TA B L E
August 8, 2014, 9.00 a.m.

Opening date and time of the


Singapore Public Offer
Closing date and time of the
Singapore Public Offer
Commencement of trading on
the SGX-ST

August 13, 2014, 12.00 p.m.


August 15, 2014, 9.00 a.m.

FINANCIAL HIGHLIGHTS
REVENUE (US$ in millions)

EBITDA AND EBITDA MARGIN


EBITDA (US$ in millions)

2,697.3

EBITDA MARGIN (%)

2,321.8

9%

2,029.8

10%
241.2

10%

11%

7%

258.6

175.1
675.8

2011

2012

2013

FOR THE YEAR ENDED DECEMBER 31

2013

690.1

2014

FOR THE THREE MONTHS


ENDED MARCH 31

PROFIT, NET OF TAX AND PROFIT ATTRIBUTABLE TO


JAPFA LTD.1

73.1

2011

2012

PROFIT MARGIN (%)

TOTAL ASSETS (US$ in millions)

PROFIT ATTRIBUTABLE TO JAPFA LTD. (US$ in millions)

PROFIT MARGIN (%)

TOTAL EQUITY (US$ in milions)

2%

5%

2%

3%

2%

4%

3%

3%

2%

1,963.6

1,220.4

81.4

79.5
53.3

41.8
25.4

2011

2,108.5

1,701.2

110.4

44.5

2013

2012

2013

FOR THE YEAR ENDED DECEMBER 31

17.8

2013

22.0

599.9

496.2

696.9

763.9

13.6

2014

FOR THE THREE MONTHS


ENDED MARCH 31

2011

2012

AS AT DECEMBER 31

2014

FOR THE THREE MONTHS


ENDED MARCH 31

TOTAL ASSETS AND TOTAL EQUITY

PROFIT, NET OF TAX (US$ in millions)

4%

2013

FOR THE YEAR ENDED DECEMBER 31

50.5

2013

2014
AS AT MARCH 31

1 Profit, Net of Tax is after accounting for US$30.1 million of foreign exchange losses in 2013, arising mainly from the depreciation of the Indonesian Rupiah in 2013.
Profit Attributable to Japfa Ltd. was similarly affected.

TABLE OF CONTENTS
Page

NOTICE TO INVESTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY OF THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDICATIVE TIMETABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY COMBINED FINANCIAL INFORMATION AND OTHER INFORMATION. . . . . . . . . . . . . . .
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CAPITALIZATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXCHANGE RATES AND EXCHANGE CONTROLS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SELECTED COMBINED FINANCIAL INFORMATION AND OTHER INFORMATION . . . . . . . . . . . . . .
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CORPORATE STRUCTURE AND OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MANAGEMENT AND CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MATERIAL INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JAPFA LTD. SHARE-BASED INCENTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SHARE CAPITAL AND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTERESTED PERSON TRANSACTIONS AND CONFLICTS OF INTERESTS . . . . . . . . . . . . . . . . . . . .
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CLEARANCE AND SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GENERAL AND STATUTORY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX A INDEPENDENT AUDITORS REPORT ON THE COMBINED FINANCIAL
STATEMENTS FOR THE REPORTING YEARS ENDED DECEMBER 31, 2011, 2012 AND
2013 OF JAPFA LTD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX B INDEPENDENT AUDITORS REPORT ON THE UNAUDITED INTERIM
COMBINED FINANCIAL STATEMENTS FOR THE REPORTING PERIOD ENDED
MARCH 31, 2014 OF JAPFA LTD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX C REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX D OUR SUBSIDIARIES AND ASSOCIATED COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX E DESCRIPTION OF OUR SHARES AND SUMMARY OF SELECTED ARTICLES
OF ASSOCIATION OF OUR COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX F INDEPENDENT MARKET RESEARCH ON SELECTED FOOD MARKETS IN
INDONESIA, CHINA, INDIA, VIETNAM AND MYANMAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX G LIST OF PRESENT AND PAST PRINCIPAL DIRECTORSHIPS . . . . . . . . . . . . . . . . . . . . .
APPENDIX H RULES OF THE AUSTASIA SUBSIDIARIES EMPLOYEE SHARE OPTION
SCHEME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX I RULES OF THE JAPFA PERFORMANCE SHARE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX J MATERIAL PROPERTIES AND FIXED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX K MATERIAL LICENSES AND PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX L MATERIAL INTELLECTUAL PROPERTY RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX M DEFINITIONS AND ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX N TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION FOR AND
ACCEPTANCE OF THE OFFERING SHARES IN SINGAPORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ii
x
1
13
17
19
23
53
55
56
57
58
62
66
100
108
157
173
181
190
196
209
212
230
231
233
234
235
236

A-1

B-1
C-1
D-1
E-1
F-1
G-1
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N-1

NOTICE TO INVESTORS
No person is authorized to give any information or to make any representation not contained
in this Prospectus, and any information or representation not contained in this Prospectus
must not be relied upon as having been authorized by or on behalf of us, any of the Joint
Global Coordinators, Joint Issue Managers, Joint Bookrunners and Underwriters. Neither the
delivery of this Prospectus nor any offer, sale or transfer made hereunder shall under any
circumstances imply that the information herein is correct as of any date subsequent to the
date hereof or constitute a representation that there has been no change or development
reasonably likely to involve a material adverse change in the affairs, conditions and prospects
of our Group since the date hereof. Where such changes occur and are material or required
to be disclosed by law, the SGX-ST and/or any other regulatory or supervisory body or
agency, we will make an announcement of the same to the SGX-ST and, if required, we will
issue and lodge an amendment to this Prospectus or a supplementary document or
replacement document pursuant to Section 240 or, as the case may be, Section 241 of the
Securities and Futures Act, Chapter 289 of Singapore (the Securities and Futures Act)
and take immediate steps to comply with these sections. Investors should take notice of such
announcements and documents and upon release of such announcements or documents
shall be deemed to have notice of such changes. Unless required by applicable laws
(including the Securities and Futures Act), no representation, warranty or covenant, express
or implied, is made by us, the Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters or any of our or their respective affiliates, directors, officers,
employees, agents, representatives or advisers as to the accuracy or completeness of the
information contained herein, and nothing contained in this Prospectus is, or shall be relied
upon as, a promise, representation or covenant by us, the Joint Global Coordinators, Joint
Issue Managers, Joint Bookrunners and Underwriters or our or their respective affiliates,
directors, officers, employees, agents, representatives or advisers. For the avoidance of
doubt, Coperatieve Centrale Raiffeisen-Boerenleenbank B.A. (trading as Rabobank
International), Singapore Branch, acting in its capacity as Co-Lead Manager, is not an issue
manager or underwriter for the purposes of the Securities and Futures Act.
None of us or the Joint Global Coordinators, Joint Issue Managers, Joint Bookrunners and
Underwriters or any of our or their respective affiliates, directors, officers, employees, agents,
representatives or advisers is making any representation or undertaking to any investor in our
Shares regarding the legality of an investment by such investor under applicable investment
or similar laws. In addition, investors in our Shares should not construe the contents of this
Prospectus or its appendices as legal, business, financial or tax advice. Investors should be
aware that they may be required to bear the financial risks of an investment in our Shares for
an indefinite period of time. Investors should consult their own professional advisers as to the
legal, tax, business, financial and related aspects of an investment in our Shares.
By applying for the Offering Shares on the terms and subject to the conditions in this
Prospectus, each investor in the Offering Shares represents and warrants that, except as
otherwise disclosed to the Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters in writing or in respect of the Reserved Shares, he is not (i) a
Director or substantial shareholder of the Company, (ii) an associate of any of the persons
mentioned in (i), or (iii) a connected client of any of the Joint Global Coordinators, Joint Issue
Managers, Joint Bookrunners and Underwriters or lead broker or distributor of the Offering
Shares.
We are subject to the provisions of the Securities and Futures Act and the Listing Manual of
the SGX-ST (the Listing Manual) regarding the contents of this Prospectus. In particular, if,
after this Prospectus is registered but before the close of the Offering, we become aware of:
(a)

a false or misleading statement in this Prospectus;

ii

(b)

an omission from this Prospectus of any information that should have been included in
it under Section 243 of the Securities and Futures Act; or

(c)

a new circumstance that has arisen since this Prospectus was lodged with the
Authority which would have been required by Section 243 of the Securities and
Futures Act to be included in this Prospectus if it had arisen before this Prospectus
was lodged,

that is materially adverse from the point of view of an investor, we may lodge a supplementary
or replacement document with the Authority pursuant to Section 241 of the Securities and
Futures Act.
Where applications have been made under this Prospectus to subscribe for and/or purchase
the Offering Shares prior to the lodgment of the supplementary or replacement document and
the Offering Shares have not been issued and/or transferred to the applicants, we shall either:
(a)

within seven days from the date of lodgment of the supplementary or replacement
document, provide the applicants with a copy of the supplementary or replacement
document, as the case may be, and provide the applicants with an option to withdraw
their applications; or

(b)

treat the applications as withdrawn and cancelled and return all monies paid, without
interest or any share of revenue or other benefit arising therefrom and at the
applicants own risk, in respect of any applications received, within seven days from
the date of lodgment of the supplementary or replacement document, and the
applicants will not have any claim against us or the Joint Global Coordinators, Joint
Issue Managers, Joint Bookrunners and Underwriters.

Where applications have been made under this Prospectus to subscribe for and/or purchase
the Offering Shares prior to the lodgment of the supplementary or replacement document and
the Offering Shares have been issued and/or transferred to the applicants, we shall, subject
to compliance with Singapore law, either:
(a)

within seven days from the date of lodgment of the supplementary or replacement
document, provide the applicants with a copy of the supplementary or replacement
document, as the case may be, and provide the applicants with an option to return, to
us those Offering Shares that the applicants do not wish to retain title in; or

(b)

treat the issue and/or sale of the Offering Shares as void and return all monies paid,
without interest or any share of revenue or other benefit arising therefrom, in respect of
any applications received, within seven days from the date of lodgment of the
supplementary or replacement document, and the applicants will not have any claim
against us or the Joint Global Coordinators, Joint Issue Managers, Joint Bookrunners
and Underwriters.

Any applicant who wishes to exercise his option to withdraw his application or return the
Offering Shares issued and/or sold to him shall, within 14 days from the date of lodgment of
the supplementary or replacement document, notify us whereupon we shall, within seven
days from the receipt of such notification, return the application monies without interest or any
share of revenue or other benefit arising therefrom and at the applicants own risk.
Under the Securities and Futures Act, the Authority may in certain circumstances issue a stop
order (the Stop Order) to us, directing that no or no further Offering Shares be allotted,
issued or sold. Such circumstances will include a situation where this Prospectus (i) contains
a statement which, in the opinion of the Authority, is false or misleading, (ii) omits any
information that is required to be included in accordance with the Securities and Futures Act
or (iii) does not, in the opinion of the Authority, comply with the requirements of the Securities
and Futures Act.
iii

Where the Authority issues a Stop Order pursuant to Section 242 of the Securities and
Futures Act and, subject to compliance with Singapore law:
(a)

in the case where the Offering Shares have not been issued and/or transferred to the
applicants, the applications for the Offering Shares pursuant to the Offering shall be
deemed to have been withdrawn and cancelled and we shall, within 14 days from the
date of the Stop Order, pay to the applicants all monies the applicants have paid on
account of their applications for the Offering Shares; or

(b)

in the case where the Offering Shares have been issued and/or transferred to the
applicants, the issue and/or sale of the Offering Shares shall be deemed void and we
shall, within 14 days from the date of the Stop Order, pay to the applicants all monies
paid by them for the Offering Shares.

Where monies paid in respect of applications received or accepted are to be returned to the
applicants, such monies will be returned at the applicants own risk, without interest or any
share of revenue or other benefit arising therefrom, and the applicants will not have any claim
against us or the Joint Global Coordinators, Joint Issue Managers, Joint Bookrunners and
Underwriters.
The distribution of this Prospectus and the offering, purchase, sale or transfer of our Shares in
certain jurisdictions may be restricted by law. We and the Joint Global Coordinators, Joint
Issue Managers, Joint Bookrunners and Underwriters require persons into whose possession
this Prospectus comes to inform themselves about and to observe any such restrictions at
their own expense and without liability to us or the Joint Global Coordinators, Joint Issue
Managers, Joint Bookrunners and Underwriters. This Prospectus does not constitute an offer
of, or an invitation to purchase, any of our Shares in any jurisdiction in which such offer or
invitation would be unlawful. Persons to whom a copy of this Prospectus has been issued
shall not circulate to any other person, reproduce or otherwise distribute this Prospectus or
any information herein for any purpose whatsoever nor permit or cause the same to occur.
We are entitled to withdraw the Offering at any time before closing, subject to compliance with
certain conditions set out in the Placement Agreement and the Offer Agreement (both as
defined in Plan of Distribution) relating to the Offering. We are making the Offering subject to
the terms described in this Prospectus, the Placement Agreement and the Offer Agreement
relating to the Offering Shares.
The Offering Shares have not been and will not be registered under the Securities Act and,
subject to certain exceptions, may not be offered or sold within the United States. There will
be no public offering of the Offering Shares in the United States. The Offering Shares have
not been approved or disapproved by the United States Securities and Exchange
Commission (the SEC) or any state or foreign securities commission or regulatory authority.
The foregoing authorities have not confirmed the accuracy or determined the adequacy of this
Prospectus. Any representation to the contrary is a criminal offense in the United States.
The Offering Shares are subject to restrictions on transferability and resale and may not be
offered, transferred or resold in the United States (as defined in Regulation S), except as
permitted under the Securities Act and applicable state securities laws pursuant to registration
or an exemption from, or a transaction not subject to, registration under the Securities Act and
in accordance with the restrictions under Transfer Restrictions. You should be aware that
you may be required to bear the risks of an investment in our Shares for an indefinite period
of time. Because of these restrictions, purchasers of the Offering Shares are advised to
consult legal counsel prior to making any offer, resale, pledge or other transfer of the Offering
Shares. See Transfer Restrictions for more information on these restrictions.
In connection with the Offering, we have granted the Stabilizing Manager an Over-allotment
Option to purchase up to an aggregate of 37,200,000 Additional Shares (representing 15.0
per cent. of the total Offering Shares) at the Offering Price, exercisable in whole or in part by
the Stabilizing Manager, on its own behalf and on behalf of the Joint Global Coordinators,
iv

Joint Issue Managers, Joint Bookrunners and Underwriters, on one or more occasions, from
the commencement of the Listing Date on the SGX-ST until the earlier of (i) the date falling
30 days from the Listing Date, and (ii) the date when the Stabilizing Manager or its appointed
agent has bought on the SGX-ST an aggregate of 37,200,000 Shares, representing 15.0 per
cent. of the total Offering Shares, to undertake stabilizing actions, solely to cover the overallotment of the Offering Shares, if any.
In connection with the Offering, the Stabilizing Manager or its appointed agent may over-allot
Shares or effect transactions that stabilize or maintain the market price of our Shares at levels
that might not otherwise prevail in the open market. These transactions may be effected on
the SGX-ST and in other jurisdictions where it is permissible to do so, in each case in
compliance with all applicable laws and regulations, including the Securities and Futures Act
and any regulations thereunder. However, we cannot assure you that the Stabilizing Manager
or its appointed agent will undertake any stabilization action. These transactions may
commence on or after the commencement of trading of the Shares on the SGX-ST and, if
commenced, may be discontinued at any time and may not be effected after the earlier of
(i) the date falling 30 days from the Listing Date, and (ii) the date when the Stabilizing
Manager or its appointed agent has bought on the SGX-ST an aggregate of 37,200,000
Shares, representing 15.0 per cent. of the total Offering Shares, to undertake stabilizing
actions, solely to cover the over-allotment of the Offering Shares, if any.
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus constitute forward-looking statements. All statements
other than statements of historical fact included in this Prospectus, including those regarding
our financial position and results, business strategies, plans and objectives of management
for future operations (including development plans and dividends), are forward-looking
statements. These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance or
achievements, or industry results, to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking statements. These
forward-looking statements are based on numerous assumptions regarding our present and
future business strategies and the environment in which we will operate in the future.
Forward-looking statements involve inherent risks and uncertainties. The forward-looking
statements included in this Prospectus reflect our current views with respect to future events
and are not a guarantee of future performance. A number of important factors could cause
actual results or outcomes to differ materially from those expressed in any forward-looking
statement. These include, but are not limited to:

outbreaks of livestock diseases;

operational breakdowns or stoppages at any of our farms or facilities;

fluctuations in currency exchange rates;

breakdowns in our supplies, particularly of genetics;

changes in the anticipated demand and selling prices for our products;

changes in political, economic and social conditions and the regulatory environment in
the countries in which we conduct business, particularly in Indonesia and China;

adverse general global, regional and local economic conditions;

our ability to be and remain competitive;

our financial condition, business strategy, budgets and projected financial and operating
data;
v

defects in the title or leasehold rights over our land;

generation of future receivables;

environmental compliance and remediation; and

other matters not yet known to us.

Additional factors that could cause our actual results, performance or achievements to differ
materially include, but are not limited to, those discussed under Risk Factors, Dividends,
Managements Discussion and Analysis of Financial Condition and Results of Operations,
Business and Appendix FIndependent Market Research on Selected Food Markets in
Indonesia, China, India, Vietnam and Myanmar. These forward-looking statements speak
only as of the date of this Prospectus. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We do not intend to update any of the forward-looking
statements after the date of this Prospectus to conform those statements to actual results,
subject to compliance with all applicable laws including the Securities and Futures Act and/or
rules of the SGX-ST.
ENFORCEABILITY OF CIVIL LIABILITIES
We are a limited liability company incorporated in Singapore. Most of our directors and
executive officers reside in Singapore. Substantially all of our assets are located in Indonesia,
China and Vietnam and substantially all of the assets of our Indonesian-citizen directors and
executive officers are located in Indonesia. As a result, it may be difficult for investors to effect
service of process upon us or such persons in relation to court proceedings outside
Singapore, Indonesia, China or Vietnam or to enforce against us any court judgments
obtained in such court proceedings.
PRESENTATION OF FINANCIAL AND STATISTICAL INFORMATION
This Prospectus contains our audited combined financial statements as of and for the years
ended December 31, 2011, 2012 and 2013 and our unaudited interim combined financial
statements as of and for the three months ended March 31, 2013 and 2014. Our audited
combined financial statements and unaudited interim combined financial statements have
been prepared in accordance with Singapore Financial Reporting Standards (FRS). FRS
differs in certain respects from generally accepted accounting principles in certain other
countries, including the United States.
Certain numerical figures set out in this Prospectus, including financial data presented in
millions or thousands and percentages, have been subjected to rounding adjustments, and,
as a result, the totals of the data in this Prospectus may vary slightly from the actual
arithmetic totals of such information. Percentages and amounts reflecting changes over time
periods relating to financial and other data set forth in Managements Discussion and
Analysis of Financial Condition and Results of Operations have been calculated using the
numerical data in our combined financial statements or the tabular presentation of other data
(subject to rounding) contained in this Prospectus, as applicable, and not using the numerical
data in the narrative description thereof.
NON-GAAP FINANCIAL MEASURES
We define EBITDA as profit before tax from continuing operations for the year/period before
interest, fair value changes in biological assets, foreign exchange adjustments, changes in
fair value of marketable securities, and depreciation and amortization (EBITDA). EBITDA
and profit from continuing operations excluding increases in fair value of biological assets, net
of tax presented in this Prospectus are supplemental measures of our performance and
liquidity that are not required by or presented in accordance with FRS. EBITDA and profit
vi

from continuing operations excluding increases in fair value of biological assets, net of tax are
not measurements of financial performance or liquidity under FRS and should not be
considered as alternatives to net income, operating income or any other performance
measures derived in accordance with FRS or as an alternative to cash flow from operating
activities as a measure of liquidity. In addition, EBITDA and profit from continuing operations
excluding increases in fair value of biological assets, net of tax are not standardized terms,
hence a direct comparison between companies using such terms may not be possible.
We believe that EBITDA facilitates comparisons of operating performance from period to
period and company to company by eliminating potential differences caused by variations in
capital structures (affecting interest expense and finance charges), tax positions (such as the
impact on periods or companies of changes in effective tax rates or net operating losses), the
age and accumulated depreciation and amortization of assets (affecting relative depreciation
and amortization of expense), variations in fair value of biological assets, and foreign
exchange gains or losses. EBITDA has been presented because we believe that it is
frequently used by securities analysts, investors and other interested parties in evaluating
similar companies, many of whom present such non-GAAP financial measures when
reporting their results. Nevertheless, EBITDA has limitations as an analytical tool, and you
should not consider it in isolation from, or as a substitute for analysis of, our financial
condition or results of operations, as reported under FRS. Because of these limitations,
EBITDA should not be considered as a measure of discretionary cash available to invest in
the growth of our business.
We believe that the inclusion of profit from continuing operations excluding increases in fair
value of biological assets, net of tax as profit is useful to investors because it provides a
means of evaluating our Groups operating performance and results from period to period on
a comparable basis not otherwise apparent when the impact of the changes in fair value of
biological assets under FRS 41 is included. Profit from continuing operations excluding
increases in fair value of biological assets, net of tax is not a standard measure under FRS
and has limitations as an analytical tool, and it should not be considered in isolation from, or
as a substitute for analysis of, our financial condition or results of operations, as reported
under FRS.
MARKET AND INDUSTRY INFORMATION
Market data used in this Prospectus under the captions Summary, Risk Factors,
Managements Discussion and Analysis of Financial Condition and Results of Operations,
and Business has been extracted from official and industry sources and other sources we
believe to be reliable. Sources of these data, statistics and information include
Frost & Sullivan (S) Pte Ltd (the Industry Consultant).
We commissioned the Industry Consultant to prepare the market assessment of the agri-food
industry in Indonesia, China, India, Vietnam and Myanmar included in this Prospectus.
The Industry Consultant is an independent company that carries out business research for the
agri-food industry from time to time. The Industry Consultant (and any of its directors, officers,
employees or affiliates) may, to the extent permitted by law, own or have a position in the
securities of (or options, warrants or rights with respect to, or interest in, the shares or other
securities of) the Company.
The Industry Consultant is aware of, and has consented to, the inclusion of its name and
report in this Prospectus. The data, statistics and information under the captions Summary,
Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of
Operations, and Business have been accurately reproduced, and as far as we are aware
and are able to ascertain from information published or provided by the Industry Consultant,
no facts have been omitted that would render the reproduced information, data and statistics
inaccurate or misleading. Reports and industry publications generally state that the
vii

information that they contain has been obtained from sources believed to be reliable, but that
the accuracy and completeness of that information is not guaranteed. Although we believe the
information that the Industry Consultant supplied is reliable, we and the Joint Global
Coordinators, Joint Issue Managers, Joint Bookrunners and Underwriters and our and their
affiliates and advisors, have not independently verified, and make no representation
regarding, the accuracy and completeness of this information. Similarly, internal surveys,
industry forecasts and market research, which we believe to be reliable, have not been
independently verified, and none of the Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters or the Company makes any representation as to the accuracy
or completeness of this information.
CERTAIN DEFINED TERMS AND CONVENTIONS
In this Prospectus, references to the Company are to Japfa Ltd. and, unless the context
otherwise requires, the terms we, us, our and this Group refer to Japfa Ltd. and its
subsidiaries taken as a whole. Words importing the singular shall, where applicable, include
the plural and vice versa, and words importing the masculine gender shall, where applicable,
include the feminine and neuter genders. References to persons shall include corporations.
In this Prospectus, references to S$, Singapore dollars or Singapore cent are to the
lawful currency of the Republic of Singapore, references to US$ or US dollar are to the
lawful currency of the United States of America, references to Rupiah, IDR or Rp are to
the lawful currency of Indonesia, references to RMB are to the lawful currency of the
Peoples Republic of China, references to Vietnam Dong or VND are to the lawful
currency of Vietnam, references to Rupees or INR are to the lawful currency of India,
references to AUD are to the lawful currency of Australia, and references to Kyat or
Burmese Kyat are to the lawful currency of Myanmar.
References to the Latest Practicable Date in this Prospectus are to July 15, 2014, which is
the latest practicable date prior to the lodgment of this Prospectus with the Authority.
Unless otherwise indicated, US dollar amounts in this Prospectus have been translated into
Singapore dollars based on the exchange rate of S$1.2437 : US$1.00, IDR amounts in this
Prospectus have been translated into US dollar amounts based on the exchange rate of
US$1.00 : IDR11,736.00, IDR amounts in this Prospectus have been translated into
Singapore dollars based on the exchange rate of S$1.00 : IDR9,447.33, and INR amounts in
this Prospectus have been translated into US dollar amounts based on the exchange rate of
US$1.00 : INR60.135, each as quoted by Bloomberg L.P. on the Latest Practicable Date.
Bloomberg L.P. has not provided its consent, for purposes of Section 249 of the Securities
and Futures Act, to the inclusion of the exchange rates quoted above and in Exchange Rates
and Exchange Controls in this Prospectus and is thereby not liable for such information
under Sections 253 and 254 of the Securities and Futures Act. While we and the Joint Global
Coordinators, Joint Issue Managers, Joint Bookrunners and Underwriters have taken
reasonable actions to ensure that the above exchange rates have been reproduced in their
proper form and context, neither we nor the Joint Global Coordinators, Joint Issue Managers,
Joint Bookrunners and Underwriters nor any other party has conducted an independent
review of the information or verified the accuracy of the contents of the relevant information.
These translations should not be construed as representations that US dollar amounts, IDR or
INR amounts (as the case may be) have been, would have been or could be converted into
Singapore dollars or that Singapore dollar amounts have been, would have been or could be
converted into US dollars or IDR at those rates or any other rate or at all. See Exchange
Rates and Exchange Controls for certain historical information on the exchange rate between
US dollars and Singapore dollars.
Any discrepancies in the tables included herein between the listed amounts and totals thereof
are due to rounding.
viii

The information on our websites or any website directly or indirectly linked to such websites or
the websites of any of our related corporations or other entities in which we may have an
interest is not incorporated by reference into this Prospectus and should not be relied on.
References to our management and Directors are to the management and Directors of our
Company; references to our Memorandum and Articles of Association are to the
Memorandum of Association and Articles of Association of our Company; and references to
our share capital in Share Capital and Shareholders and elsewhere are to the share capital
of our Company.
In addition, unless we indicate otherwise, all information in this Prospectus assumes that
(i) the Stabilizing Manager has not exercised the Over-allotment Option and (ii) no Offering
Shares have been re-allocated between the International Offer and the Singapore Public
Offer.
The terms Depositor, Depository Agent and Depository Register shall have the
meanings ascribed to them respectively in Section 130A of the Companies Act, Chapter 50 of
Singapore (the Singapore Companies Act).
Any reference in this Prospectus and the Application Forms to Shares being allotted to an
applicant includes allotment to CDP for the account of that applicant.
Certain Indonesian, Chinese, Vietnamese, Indian and Myanmar names and characters, such
as those of entities, properties, cities, governmental and regulatory authorities, laws and
regulations and notices, have been translated into English or from English names and
characters, solely for your convenience, and such translations should not be construed as
representations that the English names actually represent Indonesian, Chinese, Vietnamese,
Indian and Myanmar names and characters or (as the case may be) that the Indonesian,
Chinese, Vietnamese, Indian and Myanmar names actually represent the English names and
characters.
Any reference to dates or times of day in this Prospectus, including Appendix NTerms,
Conditions and Procedures for Application for and Acceptance of the Offering Shares in
Singapore, the Application Forms and, in relation to the Electronic Applications, the
instructions appearing on the screens of the ATMs or the relevant pages of the internet
banking websites of the relevant Participating Banks, are to Singapore dates and times
unless otherwise stated. Any reference in this Prospectus, Appendix NTerms, Conditions
and Procedures for Application for and Acceptance of the Offering Shares in Singapore, the
Application Forms and, in relation to the Electronic Applications, the instructions appearing on
the screens of the ATMs or the relevant pages of the internet banking websites of the relevant
Participating Banks, to any statute or enactment is to that statute or enactment as amended
or re-enacted. Any word defined in the Securities and Futures Act, the Singapore Companies
Act, or any statutory modification thereof and used in this Prospectus and the Application
Forms shall have the meaning ascribed to it under the Securities and Futures Act, the
Singapore Companies Act or any statutory modification thereof, as the case may be, unless
otherwise indicated.
Unless otherwise defined, terms used in this Prospectus shall have the meanings set forth in
Appendix MDefinitions and Abbreviations.

ix

CORPORATE INFORMATION
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goh Geok Khim (Non-Executive Independent Chairman)


Handojo Santosa @ Kang Kiem Han (Executive Deputy Chairman)
Hendrick Kolonas (Non-Executive Director)
Tan Yong Nang (Executive Director and Chief Executive Officer)
Kevin Monteiro (Executive Director and Chief Financial Officer)
Ng Quek Peng (Independent Director)
Lien Siaou-Sze (Independent Director)
Liu Chee Ming (Independent Director)

Joint Company Secretaries . . . . . .

Christina Chua Sook Ping (LLB (Hons))


Cheng Sai Hong (ACIS)

Company Registration
Number . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Registered Office and Principal
Place of Business. . . . . . . . . . . . . . . . .

Joint Global Coordinators, Joint


Issue Managers, Joint
Bookrunners and
Underwriters . . . . . . . . . . . . . . . . . . . . . .

200819599W
391B Orchard Road #18-08
Ngee Ann City, Tower B
Singapore 238874

Credit Suisse (Singapore) Limited


One Raffles Link #03-01
South Lobby
Singapore 039393
DBS Bank Ltd.
12 Marina Boulevard
Marina Bay Financial Centre Tower 3
Singapore 018982

Co-Lead Manager . . . . . . . . . . . . . . . .

Coperatieve Centrale Raiffeisen-Boerenleenbank


B.A. (trading as Rabobank International),
Singapore Branch
77 Robinson Road #08-00
Singapore 068896

Stabilizing Manager . . . . . . . . . . . . . .

Credit Suisse (Singapore) Limited


One Raffles Link #03-01
South Lobby
Singapore 039393

Legal Adviser to our Company


as to Singapore Law . . . . . . . . . . . . .

Legal Adviser to the Joint Global


Coordinators, Joint Issue
Managers, Joint Bookrunners
and Underwriters as to
Singapore Law, U.S. Federal
Securities Law and New York
Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rajah & Tann LLP


9 Battery Road #25-01
Straits Trading Building
Singapore 049910

Clifford Chance Pte Ltd


12 Marina Boulevard, 25th Floor
Marina Bay Financial Centre Tower 3
Singapore 018982
x

Legal Adviser to our Company


as to Indonesian Law . . . . . . . . . . . . .

Legal Adviser to our Company


as to PRC Law . . . . . . . . . . . . . . . . . . . .

Legal Adviser to our Company


as to Vietnamese Law . . . . . . . . . . . .

Assegaf Hamzah & Partners


Menara Rajawali 16th Floor
Jl. DR. Ide Anak Agung Gde Agung Lot #5.1
Jawasan Mega Kuningan
Jakarta 12950
Indonesia

Global Law Office


15/F Tower 1 China Central Place
No. 81 Jianguo Road
Chaoyang District
Beijing
China

Vietnam International Law Firm (VILAF), Hanoi Branch


Suite 603, HCO Building
44B Ly Thuong Kiet Street
Hanoi
Vietnam

Independent Auditors . . . . . . . . . . . .

RSM Chio Lim LLP


8 Wilkie Road #03-08
Wilkie Edge
Singapore 228095
Partner-in-charge: Peter Jacob
(Chartered Accountant of Singapore)

Receiving Bank . . . . . . . . . . . . . . . . . . .

DBS Bank Ltd.


12 Marina Boulevard
Marina Bay Financial Tower 3
Singapore 018982

Principal Bankers . . . . . . . . . . . . . . . . .

Credit Suisse AG, Singapore Branch


One Raffles Link #05-02
South Lobby
Singapore 039393
DBS Bank Ltd.
12 Marina Boulevard
Marina Bay Financial Centre Tower 3
Singapore 018982
Coperatieve Centrale Raiffeisen-Boerenleenbank
B.A. (trading as Rabobank International),
Singapore Branch
77 Robinson Road #08-00
Singapore 068896
PT Bank Central Asia Tbk
Menara BCA
Jl. MH Thamrin No. 1
Jakarta 10310
Indonesia
PT Bank Mandiri (Persero) Tbk
Jl. Jenderal Gatot Subroto Kav. 36-38
Jakarta 12190
Indonesia
xi

PT Bank Rakyat Indonesia (Persero) Tbk


Kantor Pusat
Gedung BRI 1
Jl. Jenderal Sudirman Kav.44-46
Jakarta 10210
Indonesia
Industry Consultant . . . . . . . . . . . . . . .

Share Registrar and Share


Transfer Agent . . . . . . . . . . . . . . . . . . . .

Frost & Sullivan (S) Pte Ltd


100 Beach Road #29-01/11
Shaw Tower
Singapore 189702

Boardroom Corporate & Advisory Services Pte Ltd


50 Raffles Place
#32-01 Singapore Land Tower
Singapore 048623

xii

SUMMARY
This summary highlights information contained elsewhere in this Prospectus and may not
contain all of the information that may be important to you, or that you should consider before
deciding to invest in the Offering Shares. You should read this entire Prospectus, including,
among other sections, our financial statements and related notes and the section entitled
Risk Factors, before making a decision to invest in the Offering Shares.
OVERVIEW
We are a leading agri-food company that produces multiple protein foods, with operations in
five high-growth emerging Asian markets. We have, over 40 years, developed core
competencies across the agri-food value chain, including animal feed production, animal
breeding, livestock fattening and consumer food.
We are a market leader across multiple classes of protein foods, with an emphasis on milk,
poultry and beef, complemented by growing businesses in swine and aquaculture. In
Indonesia, we are one of the two largest producers of poultry, with over 40 years of
experience, and we currently produce approximately 1.5 million day-old chicks (DOCs) per
day. We have replicated our industrialized, vertically integrated business model for poultry
production in Vietnam, India and Myanmar. In China, we successfully replicated our
Indonesian dairy business and are, today, one of a small group of leading producers of
premium milk that is of the highest quality available in the market and that commands
premium prices in China. Given the growing affluence of the populations in our target middleand lower- income consumer groups, we expect protein food consumption in these markets to
rise. We intend to capitalize on this trend by increasing our production capabilities for
premium milk and animal proteins across our markets.
We have an industrialized approach to farming and food production. This allows us to
consistently produce high-quality proteins and to replicate our business model as we expand
our existing protein operations in and across our existing markets. In addition, the vertical
integration of our animal protein business from animal feed production to breeding and
commercial farming to slaughtering and food processing creates more opportunities to
capture value at different points in the value chain. It also provides us with greater food
security and traceability, which is important as we grow our downstream consumer food
brands.
We leverage the high quality of our raw materials to produce premium and mass market
consumer branded food products under leading brands such as So Good and Greenfields.

We have three operating segments: dairy, animal protein and consumer food. The following
table shows our business activities within each segment, the geographic locations where we
operate and the percentage of Group revenue and profit after tax contributed by each
segment for the year ended December 31, 2013.

Business Segment

Business Activities

Locations

Percentage of
Revenue
(2013)

Percentage of
Profit
CAGR of
After Tax
Revenue
(2013)
(2011-2013)

Dairy

Dairy
products

Dairy farming
Milk processing
Branded milk
distribution

China (raw milk


production)
Indonesia (dairy
production and
distribution)
Southeast Asia
and Hong Kong
(distribution)

5%

32%

79%

87%

67%

15%

8%

1%

n.m.

Animal Protein

Poultry
Swine
Beef
Aquaculture

Animal feed
Breeding
Commercial
farming

Indonesia
(poultry, beef and
aquaculture)
Vietnam (poultry
and swine)
Myanmar (poultry)
India (poultry)
China (beef)

Indonesia
Vietnam

Consumer Food

Chicken
Beef
Seafood
UHT Milk

Ambienttemperature
Chilled/frozen

The following map shows the countries in which we currently operate and our principal
business activities in each of these countries.

Dairy
Dairy farming

hina
hi
Animal protein
Beef

Animal protein
Poultry

Animal protein
Poultry
Swine
Consumer Food
Chicken
Beef

India

yanmar
Dairy
Dairy farming
Milk processing
Branded milk
distribution

Animal protein
Poultry

ngapore

Corporate headquarters
International
purchasing

In ones a

Animal protein
Poultry
Beef
Aquaculture
Consumer Food
Chicken
Beef
Seafood

The table below shows the geographic breakdown of revenues for the year ended
December 31, 2013:
Country

Revenue
(US$ in millions)

Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,210.3
289.0
93.7
104.3
2,697.3

In 2011, 2012 and 2013, our total revenues amounted to US$2,029.8 million,
US$2,321.8 million and US$2,697.3 million, while our net profit after tax amounted to
US$79.5 million, US$110.4 million and US$81.4 million. Our EBITDA was US$175.1 million,
US$241.1 million and US$258.6 million in 2011, 2012 and 2013, respectively, representing a
CAGR for EBITDA of 21.6%. For the calculation of EBITDA, see Summary Combined
Financial Information and Other Information.
Dairy
We produce premium raw milk in China and Indonesia that rates at the top of each market in
terms of both quality and price. In China, we focus on producing premium raw milk that we
sell to leading dairies in China at premium prices. There is a substantial shortfall in the supply
of premium milk in China, as highlighted by several food safety scandals in recent years, and
we believe that we are well positioned to benefit from this shortfall and from the expected
growth in dairy consumption in that market. In Indonesia, we use all of our premium raw milk
in our downstream consumer dairy businesses to produce premium dairy products, in
particular premium fresh milk, marketed under our Greenfields brand to consumers in
Indonesia and other countries in Asia.
We operate a five-farm hub of dairy farms in China, with four of the farms in the operational
stage. We expect construction of the fifth farm to be completed by the end of 2014, with milk
production commencing in early 2015. We build our dairy farms pursuant to an industrialized
model of approximately 10,000 to 12,000 heads of cattle per farm. Each dairy farm is
standardized and replicable across locations and jurisdictions. In total, we invested
approximately US$300 million to build our first five-farm hub in Shandong. Our farms are part
of a small number of very large-scale farms in the PRC. According to the Industry Consultant,
as of 2013, large-scale farms (farms housing more than 1,000 heads of cattle) comprise
15.1% of the cattle population in the PRC. We sell our premium raw milk to some of the
leading dairy companies in China for their use in the production of premium fresh milk and
other dairy products. Our farms in China are located in Shandong province, and as of
December 31, 2013 and March 31, 2014, we had approximately 40,700 and 41,800 heads of
dairy cattle in China, with approximately 14,500 and 16,700 milking cows, respectively. We
produced over 130,000 tons of milk in China in 2013, and our average milk yield per milking
cow for 2013 was 11.5 tons per annum. Our premium raw milk in China is consistently at the
top of the market in terms of quality, consistently exceeding Chinese and international
standards for nutrition and safety. The quality of our raw milk is also reflected in its selling
price. In 2013, the average selling price of our milk was RMB 4.51 per kilogram, which was
approximately 25% higher than the average price of milk from ten major milk production

regions in China, according to the China Ministry of Agriculture1. In the first three months of
2014, the average price of our milk reached RMB 5.25 per kilogram. See BusinessOur
Dairy SegmentIntroduction.
We intend to expand our China dairy business and grow the number of our dairy farms in
China, commencing with the construction of another five-farm hub in Inner Mongolia. We
have entered into a framework agreement with the Chifeng City Government of Inner
Mongolia for the construction of this new five-farm hub, and we intend to begin construction
on the first additional farm before the end of 2014 and to complete the second five-farm hub
in 2018, which would bring our total herd size in China to approximately 120,000 heads of
cattle. On July 12, 2014, we entered into conditional lease agreements with local township
governments in Chifeng City for the construction of farms at two sites in Chifeng.
In Indonesia we operate a vertically integrated dairy business. We operate an industrialized
dairy farm to produce premium raw milk that we use for the production of our own
downstream dairy products, including fresh milk, UHT milk and premium cheeses. We market
and sell our downstream products under our own brands directly to customers in the retail
market, including to major food and beverage companies such as Starbucks. Our farm in
Indonesia is located in Malang, East Java, at an altitude that is conducive to raising highquality dairy cows, and as of December 31, 2013 and March 31, 2014, we had approximately
5,800 and 5,700 heads of cattle in Indonesia with approximately 3,000 and 2,900 milking
cows. We produced over 26,000 tons of raw milk in Indonesia in 2013, and our average milk
yield per milking cow for 2013 was 9.1 tons per annum. As in China, our raw milk in Indonesia
is of premium quality, which is reflected in its nutritional and safety standards, as well as in
the premium quality of and premium pricing for our downstream dairy products and the
leading market position of our Greenfields brand. We also export a portion of our downstream
dairy products to our key strategic customers, such as Starbucks and Cold Storage, in other
markets in Asia, including Singapore, Hong Kong and the Philippines. The success of our
vertically integrated Indonesian dairy operations is driving our strategy to increase our
upstream production capacity, and we have purchased land for a second dairy farm in Blitar,
East Java, which we expect to be fully operational by the end of 2016.
As of December 31, 2013 and March 31, 2014, we had a total of approximately 46,400 and
47,500 heads of dairy cattle respectively, with approximately 17,500 and 19,500 milking cows
respectively, across our farms in China and Indonesia, compared to approximately 18,300
heads of cattle, with approximately 6,400 milking cows as of December 31, 2011.
See Our BusinessOur Dairy SegmentIntroduction.
Animal Protein
We produce multiple high-quality animal proteins (poultry, swine, beef and aquaculture), as
well as high-quality animal feed, across our target markets. Our animal protein operations are
vertically integrated and cover the entire value chain of animal protein production, from animal
feed to breeding and commercial farming to slaughtering and processing livestock and
supplying the raw materials for our downstream consumer food segment (see Business
Our Consumer Food Segment). We are one of the two largest poultry and poultry feed
1

Source: China Ministry of Agriculture. China Ministry of Agriculture has not provided its consent, for purposes of
Section 249 of the Securities and Futures Act, to the inclusion of the information extracted from its website, and is
therefore not liable for such information under Sections 253 and 254 of the Securities and Futures Act. While we and the
Joint Global Coordinators, Joint Issue Managers and Joint Bookrunners and Underwriters have taken reasonable actions
to ensure that the information from China Ministry of Agricultures website has been reproduced in its proper form and
context, and that the information has been extracted accurately and fairly from such website, neither we nor the Joint
Global Coordinators, the Joint Issue Managers nor the Joint Bookrunners and Underwriters nor any other party has
conducted an independent review of the information contained in that website or verified the accuracy of the contents of
the relevant information.

manufacturers in Indonesia, with over 40 years of experience in poultry production, and in


2013 we had a domestic market share of 25% by production capacity of DOCs and 22% by
volume of animal feed (excluding aquafeed) sold. See Appendix FIndependent Market
Research on Selected Food Markets in Indonesia, China, India, Vietnam and Myanmar. We
also have poultry operations in Vietnam, Myanmar and India and beef operations in China. In
addition, we produce other classes of proteins, namely swine (in Vietnam) and aquaculture (in
Indonesia). We seek to replicate our successful industrialized operational model in Indonesia
for poultry and beef in and across our other markets and our other classes of proteins.
The following chart illustrates the fully integrated value chain for animal protein production.
Our operations include each of the steps in this value chain for certain of our proteins, such
as poultry and swine, and most of the steps for our other proteins. See also BusinessOur
Animal Protein SegmentIntroduction for a more detailed description of these steps.
Breeding Farms

Animal Feed

Commercial Farming:
poultry: grow out
cattle: feedlotting
swine: fattening

Slaughterhouse

Consumer Food

In our poultry business, we operate over 70 breeding farms and over 30 hatcheries to
produce DOCs, primarily in Indonesia, as well as in Vietnam, Myanmar and India. In 2013, we
sold almost 600 million DOCs across our markets. In 2013, we sold approximately 7% of our
DOCs produced in Indonesia internally to our own commercial farms for growing out, with the
remainder sold to contract farms or third parties. We have over 10,000 commercial farms in
our network, most of which are contract farms that are owned and operated by local farmers
who grow out the chicks on our behalf. We source most of our grandparent stock for chicken
from Aviagen, one of the worlds leading poultry genetics companies, and our industrialized
approach results in premium quality DOCs and feed conversion ratios that are among the
highest in the industry in Indonesia.
In our beef business, we are one of the largest beef cattle feedlot operators in Indonesia and
the largest importer of live beef cattle into Indonesia. We breed, fatten and process beef cattle
and have four feedlots in Indonesia with a total production capacity of 165,000 heads of cattle
per year. We also have cattle breeding operations in Australia, where our stations can hold
approximately 45,000 heads of cattle at any one time. We import the cattle bred at our
stations in Australia to Indonesia for fattening and processing, and we ship approximately
12,000 heads of cattle per year from our Australian operations to our feedlots in Indonesia.
Our beef business is operated as a fully integrated business, whereby breeding, feed,
fattening and slaughterhouse operations are carried out within our Group and are therefore
under unified control and operation.

In addition, we have swine breeding and distribution operations in Vietnam, where we sold
approximately 72,700 piglets in 2013. In 2012, we entered into a joint venture with Hypor, one
of the worlds leading suppliers of swine genetics, which enables us to operate the entire
chain of swine breeding farms, including nurseries and parent, grandparent and great
grandparent farms. In addition, we also produce small amounts of fish and shrimp in
Indonesia.
We produce premium-quality animal feed in Indonesia, Vietnam and Myanmar, both for our
own poultry, swine and aquaculture operations, as well as for sale to third parties. We sold
over 3.5 million tons of animal feed in 2013 across our markets, including both internal and
external sales. We formulate the feed to maximize its nutritional value depending on its end
use and brand it accordingly, and our feed brands are among the most recognized in
Indonesia.
Consumer Food
We use the high-quality milk and animal protein products that we produce in-house as raw
materials for our downstream consumer food segment. As a result, we are able to trace the
quality of the ingredients in our consumer food products all the way through the production
chain, which provides us with a high degree of confidence in the quality and reliability of our
consumer food products.
We make ambient-temperature and chilled/frozen meat products from chicken, beef and
seafood for the Indonesian market. Our So Good and Sozzis brands are leading brands in
Indonesia for premium processed meats, while our Real Good and So Nice brands focus on
the mass market convenience pack segment for UHT milk and meat, respectively. Due to the
high value-add element of our consumer food products and the changing consumer
preferences in our markets, we believe that our consumer food segment has significant
potential for future growth.
OUR STRENGTHS
We believe that we have the following competitive strengths:
Our industrialized approach to agri-food production and our vertical integration drive
our leadership positions and growth strategies.
Our agri-food production involves (i) large-scale standardization of our operations to create
efficiencies and facilitate replication, (ii) use of superior breeds, and (iii) a sophisticated
approach to animal husbandry, animal health and nutrition, including a strong focus on biosecurity. This approach provides us with a number of key strategic and financial advantages
compared to traditional farming, including the following:

economies of scale and cost savings that allow us to produce quality products at lower
costs, thereby driving our competitiveness and profitability. Economies of scale also
allow us to provide better animal health and nutrition, while mitigating risks of disease
outbreak through better biosecurity;

resources and technology to support and develop management and operational


expertise as well as build strategic alliances with global leaders in breeding research,
such as Aviagen for poultry and Hypor for swine. Our access to superior-quality breeding
reinforces the quality of our products and the high yields of our production processes;

consistently high-quality animal protein products that are trusted by our customers who
are willing to pay premium pricing for quality and product traceability; and

advantages when we expand our business within existing markets or into new markets.
Our experience replicating our industrialized approach provides a cost-effective model
6

for continued growth. We have executed this strategy in connection with our entry into
the poultry market in Vietnam, India and Myanmar and into the dairy market in China.
In addition, the vertical integration of our animal protein business from animal feed production
to breeding to food processing, provides us with a number of significant competitive
advantages, including the following:

more opportunities to capture value at different points on the value chain and to continue
to diversify our business, enabling us to realize favorable profit margins compared to
less integrated farming operations;

controlling the entire protein food value chain provides us with greater food security and
traceability. This is becoming increasingly important in Asia and is a key driver for
premium pricing in our protein businesses and consumer food segment as consumers
become more aware of health and safety concerns involving food; and

as we consider new market opportunities across our five target markets for our five classes
of proteins, we have a better understanding of the risks and opportunities involved at each
stage of the value chain and are better able to target our entry point into the new market
opportunity accordingly.

We operate in five large, high-growth emerging Asian markets where protein


consumption is low and expected to increase.
Our leading agri-food businesses are located in China, Indonesia, Vietnam, Myanmar and
India, which have compelling macro-economic fundamentals that drive increasing
consumption of protein foods. There are three billion people living in our target markets, and
we expect these populations to continue to grow and their levels of disposable income to
continue to rise. Income growth in these target markets is expected to be particularly strong in
the middle- and lower- income brackets, which make up the bulk of our target consumer
groups. This increasing consumer wealth is underpinned by a number of macro-economic
factors, including favorable demographics, with young, large and growing populations, and
increasing urbanization. See Appendix FIndependent Market Research on Selected Food
Markets in Indonesia, China, India, Vietnam and Myanmar.
We believe that there is significant potential for growth in protein food consumption in our
target markets. There is a positive correlation between the level of a countrys economic
development (and per capita income) and the consumption of protein foods, such that
national populations tend to consume more proteins as personal income increases. Given the
growing affluence (from a low base) of the populations in our target middle- and lowerincome consumer groups, we expect protein food consumption in these markets to rise.
According to the Industry Consultant, chicken meat consumption in Indonesia will increase by
14.9% per year over the next two years and demand for raw milk in China will increase by
5.7% per year between 2013 and 2018. See Appendix FIndependent Market Research on
Selected Food Markets in Indonesia, China, India, Vietnam and Myanmar. The positive
outlook for growth in protein consumption in our target markets is supported by the fact that
total consumption of protein staples in our target markets remains significantly lower than in
other countries. For example, per capita chicken consumption in Indonesia was 8 kilograms in
2012, compared to 47.7 kilograms in Malaysia. In addition, per capita dairy consumption in
China was 29 kilograms in 2013, compared to 58 kilograms in Japan, 85 kilograms in the EU
and 96 kilograms in the United States.
We also believe these macro-economic factors support the growth of our consumer food
business, as growth in per capita disposable income tends to drive increasing spending on
consumer goods.
7

We operate our business in multiple protein segments with leading market positions
We are a market leader across multiple classes of proteins, with an emphasis on poultry, milk
and beef, complemented by growing businesses in swine and aquaculture. We focus on
developing operational and technical expertise across each of our protein segments (which
form the bulk of animal protein consumption in Asia) to create leading market positions and
then replicate our successes as we expand our five classes of proteins in and across our five
target markets. For example, we are one of the two largest producers of poultry in Indonesia,
with over 40 years of experience, and are successfully replicating our Indonesian poultry
business model in Vietnam, Myanmar and India. We are also replicating the success of our
Indonesian dairy business in China, where we have increased our herd size by more than
three times, from 12,774 heads of cattle in 2011 to 40,691 heads of cattle in 2013.
We currently focus on the following protein segments where we believe there are significant
opportunities to strengthen our market positions:
Poultry

We have over 40 years of experience in poultry production and have developed a fully
integrated and industrialized business model across the entire value chain of poultry
production, from the manufacture of poultry feed, to breeding and commercial farming, to
the processing of chicken meat and the marketing of branded processed foods. This
business model provides us with a number of strategic and financial benefits that have
contributed to our market positions. In 2013, we had market shares in Indonesia of
25.1% by production capacity of DOCs and 21.9% by volume of poultry feed (excluding
aqua feed), which was the second-largest market share in Indonesia, with the nextlargest poultry feed producer holding a market share of 5.5%. We drew on our extensive
experience in the Indonesian poultry industry as we expanded in Vietnam, where we had
a 22% market share in 2013 by number of broilers produced. Similarly, we have also
been able to develop leading market positions for poultry in Myanmar and are developing
our poultry operations in India.

In Asian emerging markets, in particular Indonesia, chicken is an affordable source of


protein for the large and growing middle- and lower-income consumer classes. The
affordability and quality of chicken in Indonesia is driven by a number of factors,
including sophisticated genetics, sophisticated breeding and farming practices, low
transportation costs and limited cold storage facilities for other protein sources. In
addition, as protein sources in Indonesia must be halal for the predominantly Muslim
population, there is little competition from swine, the next most affordable animal protein.

Dairy

We are one of a small group of leading, industrialized producers of premium raw milk in
Indonesia and China that is of the highest quality in terms of nutritional and safety
standards. In Indonesia, we use all of our premium raw milk in our downstream
consumer dairy businesses to produce fresh milk and premium cheeses marketed under
our Greenfields brand. According to the Industry Consultant, in 2013, our Greenfields
brand was the market leader for premium fresh milk in Indonesia, with an estimated
market share of 38.4% by value. In China, we currently focus exclusively on producing
premium raw milk that we sell at premium prices to leading dairies in China. In 2013, the
average price of our milk was RMB 4.51 per kilogram, approximately 25% higher than
the average market price of milk across ten key production regions in China.

In China, there is a structural supply shortage of raw milk that the Industry Consultant
expects to continue through 2018. The demand for raw milk increased at a compounded
average growth rate of 4.8% from 2008 to 2013 and, according to the Industry
8

Consultant, the current demand growth is outpacing the growth in production. Over the
same period, Chinas raw milk supply increased from 35.6 million tons in 2008 to
37.4 million tons in 2012 but declined by 5.7% (compared to 2012) to 35.3 million tons in
2013, as a result of extended dry conditions, contagious diseases amongst cows and the
exit of some small-scale dairy farms.
Swine

Swine remains the largest protein segment in a number of Asian emerging economies,
including China and Vietnam, which presents significant opportunities for industrialized
farmers in these markets. In Vietnam, we are replicating our industrialized approach to
farming in order to create a market-leading position for swine.

Beef

We believe there are attractive opportunities in Asian markets for beef products, as beef
consumption increases with rising levels of wealth. In particular, the Indonesian market
could be a strong growth area for our Group, as there is ample supply of quality feed in
that market. In China, we also intend to draw upon synergies with the expansion of our
dairy business in order to grow our beef operations in that market.

We have established a leading premium dairy business in China and Indonesia, which
is poised for substantial growth.
We have established premium dairy businesses in both China and Indonesia that, we believe,
place us at the top of the dairy market in both of these high-growth countries and position us
for sustainable and profitable growth. In China, we sell our premium raw milk to processors in
the rapidly developing premium dairy market. In Indonesia, we have the largest dairy farm
operation by volume of premium fresh milk produced, and we use our raw milk to produce
premium fresh milk and other premium downstream dairy products that we sell directly to
consumers. We believe that our success in producing high-quality milk, generating high yields
from our milking cows and receiving premium prices for our milk and milk products is due to a
number of factors, including the following:

Scale and design of farms: we have expertise in building and operating large-scale
industrialized dairy farms, with a standardized ten- to twelve-thousand-head farm design
that maximizes operational efficiency and quality. These farms are supported by
government policies to encourage large-scale farming in both China and Indonesia. In
China, incentives include (a) tax exemptions and rebates on value-added tax and
corporate income tax, (b) providing infrastructure support, including water and power,
and (c) granting long-term land leases at rates below market rate. In Indonesia,
incentives include value-added tax exemptions and import duty exemptions on the
import of certain capital goods. The quality of raw milk supplied from our farms is
significantly higher than the overall quality of raw milk supplied in each of these
countries, as the significant majority of raw milk is sourced from small-holder farms;

Farm management: we have a depth of experienced farm managers. We follow


advanced and industrialized farm management practices to maximize our yields and
produce milk of the highest quality. These practices range from feed management and
animal nutrition to the insemination and breeding process to milking techniques,
biosecurity measures and the management of effluent. We also have experience in
sourcing local forage for cattle feed. See BusinessOur Dairy SegmentOur Farms.

High-yielding livestock: we select the most suitable semen from our suppliers to optimize
the genetic mix of our cows and breed the highest-yielding cows. In addition, we use
sex-controlled semen in order to increase the birth rate of female cows on our farms.
9

Location of farms: in China, our first five-farm hub is located in Shandong province,
which has cool and dry weather and an abundance of fertile land and is proximate to
Beijing and Shanghai. We intend to commence building our second five-farm hub in
2014 in Inner Mongolia, which will have similar operational advantages. In Indonesia, our
farm is located 1,200 meters above sea level, with cool and dry weather and good
access to water. In addition, we have purchased land for a second dairy farm in Blitar,
East Java, Indonesia and we target completion of construction of this farm in the first half
of 2016.

We believe that our consistent application of these practices is the driving factor that
underpins the success of our dairy business. This success is reflected in the following:

Milk quality: our milk is of the highest quality in both the Chinese and the Indonesian
market. The protein and fat levels of our milk exceed both Chinese and international
industry standards by substantial margins, while our microbe counts and somatic cell
counts are only about one-tenth of the maximum counts allowed by those standards.
See BusinessOur Dairy Segment. Especially in the Chinese market, with its recent
history of food quality scandals involving milk, this high quality gives us a significant
advantage over many other milk producers in the market.

Premium pricing: the premium quality of our milk results in premium prices for our milk,
as customers look to use our milk for the production of their high-end dairy products. In
the first three months of 2014, our raw milk sold for an average price of RMB 5.25 per
kilogram, compared to an average price for milk for ten key production regions in China
of RMB 4.24 per kilogram, according to the China Ministry of Agriculture.2

Milk yields: our average milk yield per cow in 2013 was 9.1 tons per annum in Indonesia
and 11.5 tons per annum in China, compared to industry averages of 3 tons per annum
and 5.5 tons per annum in these countries.

Strong customer relationships: we have established strong customer relationships with


the leading dairy companies in China, driven in large part by the quality and traceability
of our milk. Our sales volume in China increased from 62,487 tons in 2012 to
124,408 tons in 2013.

We have created leading downstream consumer food brands, which we expect to be a


key driver for future growth.
We have leveraged the high quality of the raw materials we produce to establish leading and
reputable downstream consumer food brands, and we expect this business segment to be a
driver for future growth. As a result of our vertical integration, we are able to trace the quality
of the ingredients in our consumer food products all the way through the production chain,
and since we control virtually all parts of this chain, we have a high degree of confidence in
the quality and reliability of these ingredients and of our end products.
While most meat in Indonesia is still bought and sold through traditional wet markets,
increasing income levels and changing lifestyles are leading more consumers to processed
2

Source: China Ministry of Agriculture. China Ministry of Agriculture has not provided its consent, for purposes of
Section 249 of the Securities and Futures Act, to the inclusion of the information extracted from its website, and is
therefore not liable for such information under Sections 253 and 254 of the Securities and Futures Act. While we and the
Joint Global Coordinators, Joint Issue Managers and Joint Bookrunners and Underwriters have taken reasonable actions
to ensure that the information from China Ministry of Agricultures website has been reproduced in its proper form and
context, and that the information has been extracted accurately and fairly from such website, neither we nor the Joint
Global Coordinators, the Joint Issue Managers nor the Joint Bookrunners and Underwriters nor any other party has
conducted an independent review of the information contained in that website or verified the accuracy of the contents of
the relevant information.

10

meat consumption. To capitalize on this market opportunity, we use our high-quality protein
products to make processed meat products marketed under leading brands such as So Good,
So Nice and Best Chicken. In Indonesia, our consumer food segment has the second-largest
market share in frozen consumer food and the third-largest market share in
ambient-temperature food. Further, we also source milk from third parties in Indonesia to
produce UHT milk for the mass market segment in Indonesia in ready-to-drink small
convenience packs under the Real Good brand. We expect strong growth from this market
segment. We expect that our significant experience in the management, marketing and
distribution of our downstream brands and products will be instrumental in supporting our
expansion into the downstream dairy business in China.
Because we control virtually the entire production chain for most of these products, we have a
high level of traceability and quality control for our consumer foods, which provides us with a
strong reputation for quality and reliability, in particular with international food service
customers and leading modern retailers.
We benefit from a strong management team focused on growth and driving group
synergies across our business segments.
Our senior management team consists of experienced industry executives with a long history
in our Group and a clear long-term vision of our Groups business. This team is supported by
operational leaders who are integral to our success and future growth strategies and have
extensive experience in the day-to-day operations of farms, feedmills, food processing plants,
and all other aspects of our business. This combination of long-term vision and strong
operational expertise is the key reason for our Groups success in growing from one feedmill
more than 40 years ago to our market-leading poultry business, and more recently, our
sizeable dairy business.
We believe that the structure of our organization and the manner in which the business
segments operate with each other drive synergies across our Group. For example, in each of
our business segments:

our senior management team fosters an industrialized farming culture and approach to
operations. The strength and consistency of this culture facilitates collaboration across
business segments;

the operational segment leaders are highly experienced with significant industry and
technical knowledge. They have developed best practices for their businesses, and
these competencies can be shared across our Group; and

we benefit from the expertise and experience developed in other business segments by
sharing key resources when we expand into new markets or implement new growth and
operational initiatives.

OUR STRATEGY
We intend to drive the growth of our Group through the following strategic initiatives:
Expand our dairy business in China through the continued replication of our
successful business model
We intend to expand our China dairy business and grow the number of our dairy farms in
China, commencing with the construction of another five-farm hub in Inner Mongolia. We
have entered into a framework agreement with the Chifeng City Government of Inner
Mongolia for the construction of this new five-farm hub, and we intend to begin construction of
the first farm before the end of 2014 and to complete the second five-farm hub in 2018. See
11

Use of Proceeds. We expect the second hub to increase our total herd size in China to
approximately 120,000 heads of cattle by the end of 2018. For the construction and operation
of the second hub, we plan to replicate our current farm designs and operating systems in
order to achieve similar productivity to our current farms. We believe that this expansion will
allow us to capitalize on the current supply deficit for premium milk in China and to enlarge
our footprint as a leading premium milk producer in Asia.
Continue to grow and enhance the profitability of our core poultry business in
Indonesia
Our poultry operations in Indonesia are a core part of our business, providing us with the
strong foundation of a profitable, growing and cash flow-generative business segment. We
believe there are significant opportunities for growing this business as Indonesias per capita
income continues to rise and as we increase our feed capacity, our DOC production and the
reach of our downstream consumer brands. We plan to continue to build breeding farms and
aim to expand our production of DOCs from almost 600 million in 2013 by approximately 30%
in the next two years. In 2013, we invested approximately IDR492.4 million (US$47.2 million)
into growing our production capacity for DOCs in Indonesia, which consisted primarily of
construction of new breeding farms and hatcheries. We expect that this additional capacity,
along with additional capital expenditures into our DOC production capacity in 2014, will
underpin our growth plans for DOC production in Indonesia over the next two years. As we
grow our DOC production, we also intend to increase our feed capacity and production to
support our growth in DOCs.
To cater for more DOCs and to account for a shift in consumer preferences toward highquality processed foods, we plan to increase the capacity of our existing slaughterhouses and
to build additional slaughterhouses. Depending on the extent of these developments, we may
double our processing capacity in the next several years, and we expect that our sales from
processed or dressed poultry will increase as a proportion of our total sales.
Expand our animal protein business in our target markets
As we expect consumption of animal proteins to increase in Asia, we intend to expand our
animal protein business in certain of our five target markets. For example, we intend to
replicate our industrialized approach to farming in order to establish a market-leading position
for swine in Vietnam and to expand our poultry operations in Myanmar. Similarly, in China, we
intend to draw upon synergies with the expansion of our dairy business in order to grow our
beef operations. Across our five classes of proteins and our five target markets, we may
consider opportunities for acquiring existing businesses on a case-by-case basis. We
currently have no specific plans to expand into new animal proteins or new geographies
beyond that in which we currently operate.
Build on our high-growth consumer food brands
We believe that our consumer food business has significant potential for future growth, due to
the high value-add nature of the business, our competitive advantage resulting from our
vertical integration and the shifting preferences of consumers. We intend to capitalize on this
growth potential over the medium to long term by continuing to invest in our consumer food
business, both for ambient temperature meat products and chilled or frozen meat products.
We will seek to expand the reputation and market reach of our consumer food brands,
including Real Good for mass market UHT milk and So Good and So Nice for processed
meats. To that end, we intend to increase our manufacturing and processing capacity in
Indonesia and Vietnam and to expand our distribution capabilities in Indonesia, Vietnam and
Myanmar.
12

SUMMARY OF THE OFFERING


The Issuer ......................

Japfa Ltd., a company incorporated with limited liability under


the laws of Singapore.

The Offering....................

248,000,000 Shares (subject to the Over-allotment Option)


offered by our Company through the International Offer and
the Singapore Public Offer. The completion of the
International Offer and the Singapore Public Offer are each
conditional upon the completion of the other.

The International Offer ........

We are offering 231,200,000 Offering Shares (including the


Reserved Shares) outside the United States in reliance on
Regulation S under the Securities Act and other applicable
laws concurrently with the Singapore Public Offer. The
Singapore Public Offer will, subject to certain conditions, be
underwritten by the Joint Global Coordinators, Joint Issue
Managers and Joint Bookrunners and Underwriters at the
Offering Price. See Plan of Distribution. The International
Offer will subject to certain conditions, be underwritten by the
Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters at the Offering Price.

The Singapore Public Offer ..

We are offering 16,800,000 Offering Shares in Singapore at


the Offering Price by way of an offering to the public in
Singapore.

Reserved Shares ..............

22,500,000 Shares under the International Offer have been


reserved for our directors, employees and business
associates and others who have contributed to the success
and development of our Group. In the event that the
Reserved Shares are not fully subscribed, they will be made
available to satisfy applications under the International Offer
and the Singapore Public Offer.

Offering Price ..................

S$0.80 for each Offering Share. Investors are required to pay


the Offering Price in Singapore dollars.

Clawback and
Re-allocation ...................

Application Procedures for


the Singapore Public Offer ...

The Offering Shares may be re-allocated between the


International Offer and the Singapore Public Offer by the
Joint Global Coordinators following consultation with us.
Unless we indicate otherwise, all information in this
Prospectus assumes that no Offering Shares have been reallocated between the International Offer and the Singapore
Public Offer.
Investors under the Singapore Public Offer must follow the
application procedures set out in Appendix NTerms,
Conditions and Procedures for Application for and
Acceptance of the Offering Shares in Singapore.
Applications must be paid for in Singapore dollars. The
minimum initial application is for 1,000 Offering Shares. An
applicant may apply for a larger number of Shares in integral
multiples of 1,000 Offering Shares.
13

Over-allotment Option ........

In connection with the Offering, we have granted the


Stabilizing Manager an Over-allotment Option to purchase up
to an aggregate of 37,200,000 Additional Shares
(representing 15.0 per cent. of the total Offering Shares) at
the Offering Price, exercisable in whole or in part by the
Stabilizing Manager, on its own behalf and on behalf of the
Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters, on one or more occasions,
from the commencement of the Listing Date on the SGX-ST
until the earlier of (i) the date falling 30 days from the Listing
Date, and (ii) the date when the Stabilizing Manager or its
appointed agent has bought on the SGX-ST an aggregate of
37,200,000 Shares, representing 15.0 per cent. of the total
Offering Shares, to undertake stabilizing actions, solely to
cover the over-allotment of the Offering Shares, if any.
Unless indicated otherwise, all information in this Prospectus
assumes that the Stabilizing Manager does not exercise the
Over-allotment Option. See Plan of DistributionOverallotment Option.

Stabilization ....................

In connection with the Offering, the Stabilizing Manager or its


appointed agent may over-allot Shares or effect transactions
that stabilize or maintain the market price of our Shares at
levels that might not otherwise prevail in the open market.
These transactions may be effected on the SGX-ST and in
other jurisdictions where it is permissible to do so, in each
case in compliance with all applicable laws and regulations,
including the Securities and Futures Act and any regulations
thereunder. The number of Shares that the Stabilizing
Manager may buy to undertake stabilizing action will not
exceed an aggregate 37,200,000 Shares, representing not
more than 15.0 per cent. of the total Offering Shares.
However, we cannot assure you that the Stabilizing Manager
or its appointed agent will undertake any stabilizing actions.
These transactions may commence on or after the
commencement of trading of the Shares on the SGX-ST and,
if commenced, may be discontinued at any time and shall not
be effected after the earlier of (i) the date falling 30 days from
the Listing Date, and (ii) the date when the Stabilizing
Manager or its appointed agent has bought on the SGX-ST
an aggregate of 37,200,000 Shares, representing 15.0 per
cent. of the total Offering Shares, to undertake stabilizing
actions, solely to cover the over-allotment of the Offering
Shares, if any. See Plan of DistributionPrice Stabilization.

Lock-ups .......................

We have agreed with the Joint Global Coordinators, Joint


Issue Managers, Joint Bookrunners and Underwriters,
subject to certain exceptions, that from the date of the lock-up
letter until the date falling six months from the Listing Date
(the Lock-up Period) we will not, without the written
consent of the Joint Global Coordinators, Joint Issue
Managers, Joint Bookrunners and Underwriters, (i) issue,
offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant
14

any option or right or warrant to purchase, lend, hypothecate


or encumber or otherwise transfer or dispose of, directly or
indirectly, any Shares or any securities convertible into or
exercisable or exchangeable for or which to carry rights to
subscribe or purchase any Shares, (ii) enter into any swap or
other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of
Shares or any securities convertible into or exercisable or
exchangeable for or which to carry rights to subscribe or
purchase any Shares, (iii) deposit any Shares or any
securities convertible into or exchangeable for or which carry
rights to subscribe or purchase Shares in any depository
receipt facilities, whether any such transaction described
above is to be settled by delivery of Shares or such other
securities, in cash or otherwise and whether or not such
transactions will be completed within or after the Lock-up
Period; or (iv) publicly disclose our intention to do any of the
above.
See Plan of DistributionNo Sales of Similar Securities and
Lock-up for further information on (i) our lock-up
arrangement and (ii) the lock-up arrangements agreed
between the Joint Global Coordinators, Joint Issue
Managers, Joint Bookrunners and Underwriters and our
shareholders.
Proceeds from the Offering ..

We intend to use our net proceeds from the Offering primarily


for the following purposes:

investment in our China dairy business and the


construction of a second five-farm hub in Inner
Mongolia;

investment in our animal protein business in our target


markets; and

repayment or prepayment of borrowings, including the


prepayment charges, of our Group.

For a complete description of the application of the net


proceeds, see Use of Proceeds.
Listing and Trading ............

Prior to the Offering, there has been no public market for our
Shares. Application has been made to the SGX-ST for
permission to list all our issued Shares, the Offering Shares,
the Additional Shares and the Plan Shares on the Main Board
of the SGX-ST, which will be granted when we have been
admitted to the Official List of the SGX-ST. Acceptance of
applications for the Offering Shares will be conditional upon,
among other things, permission being granted by the SGXST to deal in, and for quotation of, all our issued Shares, the
Offering Shares, the Additional Shares and the Plan Shares
on the Official List of the SGX-ST. We have not applied to
any other exchange to list our Shares.

15

We expect the Shares to commence trading on a ready


basis at 9.00 a.m. on August 15, 2014 (Singapore time). See
Indicative Timetable.
The Shares will, upon listing and quotation on the SGX-ST,
be traded on the SGX-ST under the book-entry (scripless)
settlement system of The Central Depository (Pte) Limited
(CDP). Dealing in and quotation of our Shares on the
SGX-ST will be in Singapore dollars. The Shares will be
traded in board lot sizes of 1,000 Shares on the SGX-ST.
Transfer restrictions ...........

The Shares offered in the Offering have not been, and will not
be registered under the Securities Act. Therefore, resales by
subscribers and/or purchasers of Offering Shares and by
subsequent transferees will be subject to certain restrictions
described in Transfer Restrictions.

Dividends .......................

We do not have a fixed dividend policy. Our Company will


pay dividends, if any, out of our profits as permitted under
Singapore law. Dividends will be declared and paid in
Singapore dollars. The Board of Directors of our Company
has discretion to recommend payment of dividends. Any
profits our Company declares as dividends will not be
available to be reinvested in our operations. We cannot
assure you that our Company will declare or pay any
dividends, and you should not anticipate receiving dividends
with respect to Shares that you purchase and/or subscribe in
the Offering. See Risk FactorsRisks Related to Our
Offering and Investment in Our SharesWe may not be able
to pay dividends in the future.. See Dividends for a
description of our dividend policy.

Risk Factors ...................

Prospective investors should carefully consider certain risks


connected with an investment in our Shares, as discussed
under Risk Factors.

16

INDICATIVE TIMETABLE
An indicative timetable for trading in our Shares is set out below for the reference of
applicants for our Shares:
Indicative date and time (Singapore time)

Event

August 8, 2014 at 9.00 a.m. . . . . . . . . . Opening of the Singapore Public Offer


August 13, 2014 at 12.00 p.m. . . . . . . Close of Application List
August 14, 2014 . . . . . . . . . . . . . . . . . . . . . . Balloting of applications or otherwise as may be approved by the
SGX-ST, if necessary (in the event of an over-subscription for the
Offering Shares)
August 15, 2014 at 9.00 a.m. . . . . . . . . Commence trading on a ready basis
August 20, 2014 . . . . . . . . . . . . . . . . . . . . . . Settlement date for all trades done on a ready basis on
August 15, 2014

The above timetable is indicative only and is subject to change at our discretion, with the
agreement of the Joint Global Coordinators, Joint Issue Managers, Joint Bookrunners and
Underwriters. The above timetable and procedures may also be subject to such modifications
as the SGX-ST may in its discretion decide, including the commencement date of trading on a
ready basis. The above timetable assumes (i) that the closing of the Singapore Public Offer
is August 13, 2014, (ii) that the date of admission of our Company to the Official List of the
SGX-ST is August 15, 2014, and (iii) compliance with the SGX-STs shareholding spread
requirement.
We, with the agreement of the Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters, may at our discretion, subject to all applicable laws and
regulations and the rules of the SGX-ST, agree to extend or shorten the period during which
the Offering is open, provided that the period of the Singapore Public Offer may not be less
than two Market Days.
In the event of the extension or shortening of the time period during which the Offering is
open, we will publicly announce the same:
(i)

through a SGXNET announcement to be posted on the internet at the SGX-ST website


http://www.sgx.com; and

(ii)

in one or more major Singapore newspapers, such as The Straits Times, The
Business Times or Lianhe Zaobao.

Investors should consult the SGX-ST announcement on the ready listing date on the internet
(at the SGX-ST website), or the newspapers, or check with their brokers on the date on which
trading on a ready basis will commence.
We will provide details of and the results of the Singapore Public Offer through SGXNET and
in one or more major Singapore newspapers, such as The Straits Times, The Business Times
or Lianhe Zaobao.
We reserve the right to reject or accept, in whole or in part, or to scale down or ballot any
application for the Offering Shares under the Singapore Public Offer, without assigning any
reason therefore, and no enquiry or correspondence on our decision will be entertained. In
deciding the basis of allocation, due consideration will be given to the desirability of allocating
our Shares to a reasonable number of applicants with a view to establishing an adequate
market for our Shares.
Where an application under the Singapore Public Offer is rejected, the full amount of the
application monies will be refunded (without interest or any share of revenue or other benefit
17

arising therefrom) to the applicant, at the applicants own risk, within 24 hours of the balloting
(provided that such refunds are made in accordance with the procedures set out in
Appendix NTerms, Conditions and Procedures for Application for and Acceptance of the
Offering Shares in Singapore).
Where an application under the Singapore Public Offer is accepted in part only, any balance
of the application monies will be refunded (without interest or any share of revenue or other
benefit arising therefrom) to the applicant, at the applicants own risk, within 14 Market Days
after the close of the Offering (provided that such refunds are made in accordance with the
procedures set out in Appendix NTerms, Conditions and Procedures for Application for
and Acceptance of the Offering Shares in Singapore).
In the case of the Singapore Public Offer, if the Offering does not proceed for any reason, the
full amount of application monies (without interest or any share of revenue or other benefit
arising therefrom) will be returned to the applicants at their own risk within three Market Days
after the Offering is discontinued (provided that such refunds are made in accordance with the
procedures set out in Appendix NTerms, Conditions and Procedures for Application for
and Acceptance of the Offering Shares in Singapore).
The manner and method for applications and acceptances under the International Offer will
be determined by us and the Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters.

18

SUMMARY COMBINED FINANCIAL INFORMATION AND OTHER INFORMATION


You should read the following summary combined financial information for the periods and as of
the dates indicated in conjunction with the section of this Prospectus entitled Managements
Discussion and Analysis of Financial Condition and Results of Operations and our combined
financial statements, the accompanying notes and the related independent auditors report
included in this Prospectus. The reporting currency for our financial statements is U.S. dollars,
and we prepare and present our financial statements in accordance with FRS, which may differ
in certain significant respects from generally accepted accounting principles in other countries.
The summary combined financial information as of and for the years ended December 31,
2011, 2012 and 2013 have been derived from our audited combined financial statements
included in this Prospectus and should be read together with those financial statements and
the notes thereto. The selected combined financial data as of and for the three months ended
March 31, 2013 and 2014 has been derived from our unaudited interim combined financial
statements as of and for the three months ended March 31, 2013 and 2014 included
elsewhere in this Prospectus. We have prepared the unaudited interim combined financial
statements on the same basis as our audited combined financial statements. Our historical
results for any prior or interim periods are not necessarily indicative of results to be expected
for a full fiscal year or for any future period.

Combined Statement of Comprehensive Income

For the year ended


December 31,
2011
2012
2013

For the three months


ended March 31,
2013
2014

(US$ in millions)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,029.8
2,321.8
2,697.3
Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,663.2) (1,873.8) (2,198.1)
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Items of Income
Increase in Fair Value of Biological Assets. . . . . . .
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign Exchange Adjustments Gains . . . . . . . . . . . .
Other Items of Expense
Foreign Exchange Adjustments Losses . . . . . . . . . .
Marketing and Distribution Costs . . . . . . . . . . . . . . . . . .
Administration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit before tax from continuing
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit from continuing operations, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive Income/(Loss):
Remeasurement of the Net Defined Benefits
Plan, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange differences in translating foreign
operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Comprehensive Loss for the Year, Net
of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Comprehensive Income/(Loss) . . . . . . . . . . .

675.8
(541.0)

690.1
(574.1)

366.5

448.0

499.2

134.7

116.0

7.5
3.1
9.9
4.4

6.6
5.9
7.3
-

6.3
2.9
3.5
-

(10.6)
0.8
0.3
0.6

2.4
1.0
0.8
7.6

(84.6)
(146.8)
(41.9)
(3.8)

(1.4)
(83.1)
(173.5)
(56.8)
(4.2)

(30.1)
(95.0)
(202.5)
(66.8)
(2.6)

(25.0)
(50.4)
(14.7)
(0.6)

(26.1)
(55.2)
(19.3)
(0.01)

114.4
(34.9)

148.8
(38.4)

114.8
(33.4)

35.2
(9.9)

27.2
(5.3)

79.5

110.4

81.4

25.4

22.0

(6.2)

(8.7)

7.2

(7.2)

(9.5)

(14.9)

(28.6)

(117.2)

(3.8)

37.6

(21.1)
58.4

(37.3)
73.1

(110.1)
(28.7)

(11.1)
14.3

28.1
50.1

44.5

53.3

41.8

17.8

13.6

35.0
79.5

57.2
110.4

39.6
81.4

7.6
25.4

8.4
22.0

Profit Attributable to Owners of the Parent, Net


of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit Attributable to Non-Controlling Interests,
Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

Combined Statement of Comprehensive Income

For the year ended


December 31,
2011
2012
2013

For the three months


ended March 31,
2013
2014

(US$ in millions)

Total Comprehensive Income/(Loss) Attributable


to Owners of the Parent, Net of Tax . . . . . . . . . . . .
Total Comprehensive Income/(Loss) Attributable
to Non- Controlling Interests, Net of Tax . . . . . . .
Total Comprehensive Income/(Loss) . . . . . . . . . . .

28.3

39.4

(35.3)

8.5

33.5

30.1
58.4

33.7
73.1

6.6
(28.7)

5.8
14.3

16.6
50.1

As at December 31,
2011
2012
2013

Combined Statement of Financial Position

As at March 31
2014

(US$ in millions)

Assets
Non-Current Assets
Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404.0
599.6
652.7
Investment Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.8
3.1
2.3
Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.8
10.5
10.1
Biological Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82.5
159.4
237.9
Deferred Tax Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.1
18.8
15.2
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.0
7.9
9.8
Total Non-Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526.1
799.3
928.0
Current Assets
Asset Held for Sale Under FRS 105 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332.2
486.9
543.0
Biological Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43.7
47.8
48.5
Trade and Other Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112.9
133.5
134.6
Other Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.1
4.1
2.7
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48.0
72.3
79.6
Cash and Cash Equivalents(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150.4
157.3
225.0
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694.3
901.9 1,035.6
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,220.4 1,701.2 1,963.6
Equity and Liabilities
Equity
Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
86.3
86.3
163.4
Retained Earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125.4
172.4
214.9
Other Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68.2
96.3
134.4
Translation Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16.9)
(25.3) (106.8)
Equity Attributable to Owners of the Parent, Total . . . . . . . 263.0
329.6
405.8
Non-Controlling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233.2
270.2
291.1
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496.2
599.9
696.9
Non-Current Liabilities
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66.9
85.3
67.4
Deferred Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.6
10.3
11.7
Other Financial Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163.7
304.3
468.7
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.2
0.6
1.1
Trade and Other Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2
1.5
0.6
Total Non-Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241.5
402.0
549.5
Current Liabilities
Income Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.8
13.4
8.5
Trade and Other Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87.8
131.9
190.2
Other Financial Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379.2
547.0
509.3
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.9
7.0
9.3
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482.8
699.3
717.2
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 724.2 1,101.3 1,266.7
Total Equity and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,220.4 1,701.2 1,963.6

20

717.9
2.4
11.8
259.2
21.6
5.7
1,018.6
2.2
535.9
56.5
157.9
3.0
119.9
214.7
1,089.9
2,108.5

163.4
222.9
144.1
(81.3)
449.0
314.9
763.9
87.5
15.4
516.1
1.1
0.6
620.8
8.3
159.7
549.1
6.7
723.9
1,344.7
2,108.5

Note:
(1)
Cash and cash equivalents includes cash restricted in use and pledged for bank facilities as disclosed in Note 24A in
Appendix A and Note 24A in Appendix B.
For the year ended
December 31,
2011
2012
2013

Combined Cash Flow Data

For the three months


ended March 31,
2013
2014

(US$ in millions)

Net cash flows (used in)/from operating activities . . . . . . . (23.2)


27.0
89.1
Net cash flows (used in)/from investing activities . . . . . . . (148.0) (242.2) (204.7)
Net cash flows from/(used in) financing activities . . . . . . . 213.9
221.1
184.0

13.5
(34.8)
(34.6)

(47.2)
(47.9)
83.5

Net increase/(decrease) in cash and cash


equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of the year/
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42.7

5.8

68.4

(55.9)

(11.6)

104.5

147.2

153.0

153.0

221.4

Cash and cash equivalents at the end of the year/


period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

147.2

153.0

221.4

97.1

209.8

For the year ended


December 31,
2011
2012
2013

Other Combined Financial Information

For the three months


ended March 31,
2013
2014

(US$ in millions)

EBITDA(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175.1 241.1 258.6


Profit from continuing operations excluding increases in fair
value of biological assets, net of tax(2) . . . . . . . . . . . . . . . . . . . . . . . 72.2 105.8
77.5

73.1

50.5

33.9

21.2

Notes:
(1)
We define EBITDA as profit before tax from continuing operations, less interest income, changes in fair value of biological
assets, foreign exchange adjustments gains, changes in fair value of marketable securities, plus finance cost, foreign
exchange adjustments losses, depreciation of property, plant and equipment, depreciation of investment properties and
amortization of intangibles.
For the year ended
December 31,
2011
2012
2013

For the three months


ended March 31,
2013
2014

(US$ in millions)

Profit before tax from continuing operations . . . . . . . . .


(+) Finance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(+) Foreign exchange adjustments losses . . . . . . . . . . .
(+) Depreciation of property, plant and
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(+) Depreciation of investment properties . . . . . . . . . . .
(+) Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . .
() Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
() (Increase)/decrease in fair value of biological
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
() Foreign exchange adjustments gains . . . . . . . . . . . .
() (Increase)/decrease in fair value of marketable
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

114.4
41.9
-

148.8
56.8
1.4

114.8
66.8
30.1

35.2
14.7
-

27.2
19.3
-

34.8
0.2
0.6
(3.1)

42.2
0.2
0.6
(5.9)

53.3
0.2
1.3
(2.9)

13.2
0.1
0.2
(0.8)

14.8
0.0
0.2
(1.0)

(7.5)
(4.4)

(6.6)
-

(6.3)
-

10.6
(0.6)

(2.4)
(7.6)

(1.8)

3.6

1.3

0.5

0.0

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175.1

241.1

258.6

73.1

50.5

EBITDA is not a standard measure under FRS. EBITDA should not be considered in isolation or construed as an
alternative to cash flows, net income or any other measure of performance or as an indicator of operating performance,
liquidity, profitability or cash flows generated by operating, investing or financing activities. EBITDA does not account for
taxes, interest expense or other non-operating cash expenses. In evaluating EBITDA, we believe that investors should
consider, among other things, the components of EBITDA such as revenues and operating expenses and the amount by
which EBITDA exceeds capital expenditures and other charges. EBITDA presented herein may not be comparable to
similarly titled measures presented by other companies. You should not compare EBITDA presented by us to EBITDA
presented by other companies because not all companies use the same definition. You should also note that EBITDA as
presented herein is calculated differently from Consolidated EBITDA as defined and used in the Indenture governing our

21

US dollar-denominated senior notes due 2018 and EBITDA as defined for the purposes of our other indebtedness. See
Material IndebtednessIndebtednessUS Dollar-Denominated Senior Notes Due 2018.
(2)

We define profit from continuing operations excluding increases/decrease in fair value of biological assets, net of tax as
profit from continuing operations, net of tax excluding the fair value changes of our biological assets and the taxes thereon,
calculated as follows:
For the year ended
December 31,
2011
2012
2013

For the three months


ended March 31,
2013
2014

(US$ in millions)

Profit from continuing operations, net of tax . . . . . . . . . . . . 79.5


() (Increase)/decrease in fair value of biological
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7.5)
(+) Deferred tax expense in respect of increase in fair
value of biological assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2
Profit from continuing operations excluding increases
in fair value of biological assets, net of tax . . . . . . . . . . 72.2

110.4

81.4

25.4

22.0

(6.6)

(6.3)

10.6

(2.4)

2.0

2.4

(2.1)

1.6

105.8

77.5

33.9

21.2

FRS 41 is an accounting standard that requires us to value our dairy cows, breeding cattle and swine measured on initial
recognition and at the end of the reporting year. The fair value movements from year-on-year under FRS 41 are non-cash
items and therefore are not used by us when measuring our Groups operational performance because they are not
reflective of the underlying business. We believe that the inclusion of this adjusted profitability measure (excluding FRS 41
fair value changes and the taxes thereon) is useful to investors because it provides a means of evaluating our Groups
operating performance and results from period to period on a comparable basis not otherwise apparent when the impact of
the changes in fair value of biological assets under FRS 41 is included. Profit from continuing operations excluding
increases in fair value of biological assets, net of tax is not a standard measure under FRS and should not be considered
in isolation or construed as an alternative to cash flows, net income or any other measure of performance or as an
indicator of operating performance, liquidity, profitability or cash flows generated by operating, investing or financing
activities. It may not be comparable to similarly titled measures presented by other companies and you should not
compare this measure with that of other companies because not all companies use the same definition.

22

RISK FACTORS
Prospective investors should carefully evaluate the following considerations and all other
information contained in this Prospectus before deciding to invest in our Shares. The risks
described below are not the only ones we face. There may be additional risks not described
below or not presently known to us or that we currently believe to be immaterial that turn out
to be material. Our business, financial condition, results of operations and prospects could be
materially and adversely affected by any of these risks, should they occur or turn out to be
material. The market price of our Shares could decline due to any of these risks, and
investors may lose part or all of their investment in our Shares.
This Prospectus also contains forward-looking statements that involve risks and uncertainties.
Our actual results of operations could differ materially from those anticipated in these forwardlooking statements due to a variety of factors, including the risks described below and those
discussed in the section entitled Managements Discussion and Analysis of Financial
Condition and Results of OperationsFactors Affecting Our Business, Financial Condition
and Results of Operations and elsewhere in this Prospectus. See Notice to Investors
Forward-Looking Statements.
RISKS RELATING TO OUR BUSINESS AND OPERATIONS
Outbreaks of livestock diseases could have a material adverse effect on our business,
financial condition and results of operations.
Outbreaks of diseases affecting livestock at our poultry, beef cattle, swine, aquaculture and
dairy farms or facilities could have a material effect on our business, financial condition and
results of operations.
Since 2003, the H5N1 strain of Avian Influenza, or bird flu, which is potentially lethal to
humans, has affected poultry flocks and other birds in several countries around the world,
including in Indonesia, China and Vietnam. Avian Influenza is highly contagious among birds
and can cause sickness or death of domesticated birds, including chickens, geese, ducks and
turkeys. Although we have an internal biosecurity policy and biosecurity measures in place at
all of our farms and production facilities, there can be no assurance that there will be no
outbreak in the future or that our biosecurity measures will be effective in the event of an
outbreak.
Previous outbreaks of the H5N1 strain of Avian Influenza in Indonesia have resulted in
reduced demand for chickens and a drop in the price of DOCs and chicken products we
produce and sell. In particular, the initial outbreak of H5N1 strain of Avian Influenza in
Indonesia in 2003 and 2004 resulted in a reduction in our gross profit for the first quarter of
2004 for our Indonesian poultry business of approximately 12.4% from the previous
comparative period. In March 2013, there was an outbreak of the H7N9 strain of Avian
Influenza in China, which spread to humans and resulted in deaths. The strain does not
appear to adversely affect the health of birds and, as such, it is difficult to detect prior to
human infection. Similar outbreaks could occur in the future, in Indonesia or elsewhere.
We currently source most of our grandparent stocks for DOCs from Aviagens foreign-based
operations (predominantly the United States). While no cases of Avian Influenza or other
livestock diseases have been reported in Aviagens U.S.- or Australia-based production
facilities, there can be no assurance that this will continue to be the case. Outbreaks of Avian
Influenza or other livestock diseases in the U.S. or Australia may result in a ban in imports by
the governments of the countries where we operate of grandparent stocks from these
countries. In the event of such outbreaks resulting in imposition of import bans, the cost of
breeder flocks of similar quality imported from alternative sources could be higher than the
cost of our current supplies. In addition, there can be no assurance that any such alternative
supplies would be readily available to meet our requirements or at all. Any long-term
23

interruption in supplies of breeder flocks would have a material adverse effect on our
business, financial condition, results of operations and prospects.
Similarly, a major outbreak of disease at any of our dairy farms in China or Indonesia could
have a significant adverse impact on our milk production capacity and volume. We vaccinate
our dairy cows according to the different stages of their growth at each of our dairy farms.
However, we cannot guarantee that animal diseases, including but not limited to, FMD,
brucellosis, bovine TB and bovine paratuberculosis, will not occur at our dairy farms or that
we will always be able to monitor or detect any illness or diseases among our cows or on
neighboring farms.
Our beef, swine and aquaculture operations are also vulnerable to disease and other
biological hazards. If disease outbreaks or other biological hazards are not successfully
contained by the bio-security measures we have in place, the volume of swine feed and
aqua-feed we produce and the size of our beef cattle may decrease, mortality rates could
increase and we may suffer production delays and shortages, which could have a material
adverse effect on our production and/or sales of our products, which would have a material
adverse effect on our business, financial condition, results of operations and/or prospects.
Any future outbreak of a livestock disease could result in any of the following, all of which
could have a material adverse effect on our business:

the governments in the countries in which we operate may require us to destroy one or
more of our flocks or herds;

demand for our products may decrease significantly;

our dairy farms may experience a significant shortfall in our raw milk production;

one or more of our facilities may be placed in quarantine until the threat of disease
spreading is eliminated;

the importation of grandparent stocks into the countries in which we operate may be
prohibited; and/or

governments in the countries in which we operate may introduce restrictions on the


movement and/or the sale of our unprocessed chicken products.

There may be no compensation or insufficient compensation paid by the government in the


event that livestock must be culled. In addition, any outbreak of disease in the countries in
which we operate, even if there is no outbreak at our facilities, could create adverse publicity
and any negative perception by potential customers, government authorities, lenders or
general insurance providers could harm us through a loss of customers, new regulations or
livestock culling requirements, the failure to obtain financing or the loss of insurance coverage
generally, as the case may be. Any of these consequences could have a material adverse
effect on our business, financial condition, results of operations and/or prospects.
We operate one dairy farm in Indonesia which supplies all of the premium raw milk
used as the raw material for the dairy products produced under our Greenfields
brand. Any outbreak of cattle disease at this farm or any other stoppage of operations
at this farm could materially and adversely affect our business, financial condition
and/or results of operations.
We operate one dairy farm in Indonesia and one dairy processing plant for our downstream
dairy products, both located in Malang, East Java, Indonesia. We market these downstream
dairy products under our Greenfields brand in Indonesia, and we also export a portion of
these products to other markets in Asia, including Singapore, Hong Kong, Malaysia and the
Philippines. Any outbreak of cattle disease at our dairy farm in Indonesia or any stoppage of
24

operations at this farm could lead to a stoppage of raw milk production which we would
require as a raw material for our downstream dairy products. This would materially and
adversely affect our business, financial condition, results of operations and/or prospects. In
addition, our brand value and the perception of our customers towards our brand may be
adversely affected as well.
Exchange rate fluctuations and exchange controls and policies may materially
adversely affect our business, financial condition, results of operations and/or
prospects and the foreign currency value of our Shares and any future dividend
distributions.
We are exposed to risks related to exchange rate fluctuations, particularly with respect to the
US$. Our revenues in the countries in which we operate are denominated in IDR, RMB, VND,
INR and Burmese Kyat. However, many of our borrowings are denominated in US$ and we
pay the interest accruing under such borrowings in US$. In addition, the prices of some of our
raw materials (for instance corn) are linked to international commodity index prices, which are
in US$, and hence expose us to fluctuations in the US$ exchange rate. We have not hedged
all of our foreign currency exposure in the past. Unfavorable exchange rate fluctuations may
have a material adverse effect on our business, financial condition, results of operations
and/or prospects.
In 2013, emerging market currencies (including those mentioned above) depreciated against
the US$ and there is no assurance that such currency depreciation will not continue. For
example, the IDR depreciated 21% against the US$ in 2013. In March 2014, the PRC
doubled the trading band for the RMB, which also led to the RMB further weakening against
the US$. Trading in these currencies may continue to experience significant volatility. Any
significant depreciation in the value of the currencies of the countries in which we operate will
have a material adverse effect on our business, financial condition and/or results of
operations. Please also see Selected Combined Financial Information and Other
InformationCombined Statement of Comprehensive Income for information on our foreign
exchange adjustments for FY2011, FY2012, FY2013 and 1Q2014.
Further, our Shares will be quoted in Singapore dollars on the SGX-ST. Dividends, if any, in
respect of our Shares will be paid in Singapore dollars. Exchange rate gains or losses will
arise when the assets and liabilities of our foreign subsidiaries are translated into US$ for
financial reporting and Singapore dollars for repatriation purposes. If the functional currencies
of our subsidiaries depreciate against the US$ and the Singapore dollar, this may materially
and adversely affect our Groups reported financial results and dividends, if any, respectively.
Central banks in the countries in which we operate may intervene in the currency exchange
markets in furtherance of their policies, either by selling local currency or by using their
foreign currency reserves to purchase local currency. We cannot assure you that such
currencies will not be subject to depreciation and continued volatility, or that the various
governments will take additional action to stabilize, maintain or increase the value of their
respective currencies, or that any of these actions, if taken, will be successful. Modification of
the current exchange rate policies by any of the countries in which we operate could result in
significantly higher domestic interest rates, liquidity shortages, capital or exchange controls or
the withholding of additional financial assistance by multinational lenders. This could result in
a reduction of economic activity, an economic recession, loan defaults or declining interest by
our customers, and as a result, we may also face difficulties in funding our capital expenditure
and in implementing our business strategy. Any of the foregoing consequences could have a
material adverse effect on our business, financial condition, results of operations and/or
prospects.

25

Our business is dependent upon the price and availability of corn and other feed raw
materials.
Our operations are dependent upon the price and availability of raw materials. The single
largest component of our cost of goods sold is the cost of raw materials used in the
preparation of feed, which accounted for 84.5% of our cost of goods sold in the year ended
December 31, 2013 and 88.3% of our cost of goods sold for the three months ended
March 31, 2014. We do not grow our own corn or other raw materials and do not intend to do
so in the near future. We also have not entered into any hedging transactions with respect to
the raw materials we use in our products.
The price and availability of corn and our other raw material requirements can therefore have
a significant effect on our cost of goods sold. We import a portion of our raw materials such as
corn, soybean meal, feed vitamins, animal protein meal and wheat products from the United
States, South America, China, India, Europe, Australia and Canada and purchase a
substantial amount of our corn from domestic farmers. Market prices for corn and soybean
meal may be subject to fluctuations resulting from weather, the size of harvests,
transportation and storage costs, governmental agricultural policies, currency exchange rates
and other factors and most of these suppliers deal with us on a spot basis due, in part, to
uncertainty caused by these factors. Worldwide corn prices, for example, have increased in
recent years due, in part, to increased demand for biofuels in the United States. Soybean
prices have also increased in recent years. In the event that one or all of our established
suppliers were to cease supplying to us or we are not able to negotiate a price for our key raw
materials that is acceptable to us and of sufficient quality, our business and results of
operations would be materially adversely affected.
In addition, although we have historically been able to pass on cost increases to our feed
business customers, there can be no assurance we will be able to continue doing so in the
future either on a timely basis or at all. If we are unable to pass on cost increases to our
customers and we are unsuccessful in alternatively managing our exposure to the effects of
raw material price fluctuations, our financial condition, results of operations and/or prospects
could be materially adversely affected.
We are dependent on a constant supply of good genetics.
The quality of our livestock depends initially on the supply of good genetics. There are limited
suppliers of such genetics and we may not always be able to obtain such genetics on terms
acceptable to us, or at all.
We are the sole importer into Indonesia of high-grade Indian River breed broiler from Aviagen
Inc., a U.S.-based poultry breeding company. Pursuant to our contracts with Aviagen, we
have the rights to sell and distribute Indian River breeds of DOC in Indonesia and in other
countries approved by Aviagen (including Vietnam, Myanmar and India). We import
grandparent stock for our layer hens from Lohmann Tierzucht.
We have also set up Japfa Hypor Genetics Company Limited (Japfa Hypor)1, a joint
venture with Hypor B.V., a global swine genetics company (Hypor), in Vietnam, and we
depend on Hypor to supply us with swine genetics for the production of a high performance
breed of pigs. We sell our specially formulated swine feed and high performance breed of
pigs to farmers in Vietnam. Please see Corporate Structure and OwnershipCertain
Commercial Arrangements relating to our SubsidiariesJapfa Hypor Joint Venture
Agreement.
While we have good and long working relationships with our suppliers for genetics, there can
be no assurance that we will be successful in negotiating our contracts with them in the
1

Currently 85.0% held by JCLA and 15.0% held by Hypor. Please also see Corporate Structure and OwnershipCertain
Commercial Arrangements Relating to our SubsidiariesJapfa Hypor Joint Venture Agreement.

26

future. Such suppliers may offer terms that are not commercially attractive to us or may
terminate the contracts or refuse to renew. In the event of a supply failure or the cessation of
our relationship with such suppliers, it may not be possible for us to source an alternative
supplier of high grade genetics in a timely manner or at all. In addition, we have invested
significantly in research and development, including development of complementary feed
products which may not be tailored to alternative breeds developed from genetics of other
suppliers. This may result in additional costs being incurred to redevelop complementary feed
products for alternative breeds developed from genetics of other suppliers. Any termination or
interruption of our supply relationship with suppliers of our genetics could have a material
adverse effect on our business, financial condition, results of operations and/or prospects.
We are exposed to product safety and quality-related risks that may harm our business
and reputation and subject us to product liability claims and/or regulatory action.
Product safety and quality is critical to our business and we rely heavily on our quality control
systems to ensure the safety and quality of our products. See Business for more details on
our quality control systems. While we believe that our quality control systems function
properly and we routinely inspect the safety and quality of products prior to their being
delivered to our customers, we cannot assure you that failures in our quality control systems
will not occur in the future. Such failures may occur due to technical malfunctions, including of
the instruments used to measure feed quality, chemical residue of feed, raw milk quality and
veterinary drug residue or through negligence or misconduct occurring during the production
or operating process which results in product contamination. Our safety and quality inspection
systems may not always be able to detect any such contamination or quality-related issues.
Contamination and quality-related issues may also result from residues introduced during the
storage, handling and transportation phases. Any such contamination or quality related issues
could cause us to suffer from monetary losses through product liability claims or penalties
assessed by government agencies or result in damage to our reputation, which would in turn
materially adversely affect our business, financial condition, results of operations and/or
prospects.
Our products (including raw milk and poultry) are also processed and handled by other third
party downstream manufacturers. If those downstream products are contaminated, and if the
contamination is ultimately traced back to our products, we could be subject to product liability
claims by individuals for damages, including, among other things, claims for medical
expenses, disability and even wrongful death and penalties assessed by government
agencies. In addition, our sales could be affected even if any contaminated downstream
products cannot be traced back to us, if such contaminated products cause any of our
customers to suffer reputational harm and lost sales, as this in turn could reduce demand for
our products.
We could be adversely affected if consumers lose confidence in the safety and quality of the
food supply chain. These concerns could cause shoppers to avoid purchasing certain
products from us, or to seek alternative sources of supply for their food needs, even if the
basis for the concern is not valid and/or is outside of our control. Adverse publicity about
these types of concerns, whether or not valid, could discourage consumers from buying our
products and any lost confidence on the part of our customers would be difficult and costly to
re-establish. Any product contamination involving our competitors could also impact the
reputation of the industry as a whole and have a negative effect on our business.
We have been and could in the future be subject to restrictive governmental measures,
such as price or volume controls.
We may from time to time become subject to restrictive governmental policies, such as price
or volume controls, in the jurisdictions in which we operate. In particular, in April 2014, in an
effort to support small holder broiler farmers, the Indonesian government, through the Minister
of Trade of the Republic of Indonesia issued a letter pursuant to its price policy addressed to
leading Indonesian poultry companies, including us, requesting that these companies cap the
27

sales price for their DOCs and limit their production volumes. Specifically, the letter fixed the
maximum price for DOCs at Rp.3,200 per head and asked that producers decrease their
production of broilers and layers by 15%. The terms of the letter were effective for a period of
one month (commencing on April 15, 2014), subject to weekly evaluation as well as any
adjustment from time to time. As at the Latest Practicable Date, the measures that were the
subject of the letter are no longer in force. For details, see Managements Discussion and
Analysis of Financial Condition and Results of OperationsFactors Affecting our Business,
Financial Condition and Results of OperationsRegulatory Environment and Appendix C
RegulationSummary of Relevant Indonesian Laws and RegulationsGeneral Trade.
The capped price of Rp.3,200 per DOC represented a significant discount to our prevailing
sale price for DOCs, which was Rp.4,517 per DOC in 2013.
There can be no assurance that the Indonesian government or the governments in other
jurisdictions in which we operate will not implement similar restrictive measures in the future.
The prolonged continuance of any such restrictive measures could have a material adverse
effect on our business, financial condition and/or results of operations. See also The
interpretation and application of laws and regulations in the jurisdictions in which we operate
involve uncertainty.
Failure to comply with environmental regulations, could harm our operating results,
financial condition and reputation.
We are required to comply with environmental protection, health and safety laws and
regulations. Some of these regulations govern the level of fees payable to government
entities providing environmental protection services and the prescribed standards relating to
the discharge of effluent, or liquid waste. These laws and regulations in the jurisdictions in
which we operate require us to adopt measures to effectively control and properly dispose of
waste gases, waste water, industrial waste, dust and other environmental waste materials.
We produce a certain amount of solid waste and other environmental waste in our breeding,
farming and production processes and are subject to restrictions relating to the discharge of
such waste.
Due to the scale of our operations, it is inevitable that a large quantity of waste and emissions
is produced, some of which require appropriate disposal. Although we have installed or are in
the process of installing treatment systems and have adopted measures to control the
disposal of waste gases, waste water and other environmental waste materials and to reduce
the environmental impact of the discharged waste, there is no assurance that these measures
may be sufficient now or in the future.
In the event that environmental laws, regulations or government policies are amended and
more stringent requirements are imposed on us, we may incur significantly increased costs
and expenses and may need to allocate additional resources to comply with such
requirements.
In the course of our operations, we may have unknowingly emitted pollutants or otherwise
caused environmental damage or may have been in breach of applicable environmental laws
and regulations. Even with careful and regular monitoring, such environmental issues may
continue until they are brought to our attention. Any failures to comply with environmental
laws and regulations may lead to claims, liabilities or the suspension of our operations, and
thereby materially adversely affect our business, financial condition, results of operations
and/or prospects.
If we fail to comply with any of the relevant environmental laws and regulations, depending on
the type and severity of any violation, we may be subject to, among other things, warnings
from relevant authorities, imposition of fines and/or criminal liability, being ordered to close
down our business operations and suspension of relevant permits. As a result, our reputation
28

may be harmed and our business, financial condition, results of operations and/or prospects
could be materially and adversely affected. In addition, because these laws and regulations
are becoming increasingly more stringent worldwide, there can be no assurance that we will
not be required to incur significant costs to comply with such laws and regulations in the
future.
The PRC
As at the Latest Practicable Date, Dongying Japfa (in respect of the beef feedlot in the PRC)
has not submitted its environmental impact assessment report. Dongying Japfa had
commenced construction at the beef feedlot prior to obtaining approval for its environmental
impact assessment reports. Each of DYAA, TAAA, DXAA and DSAA (in respect of Dairy
Farms 1 to 4 respectively) and Dongying Japfa (in respect of the beef feedlot) has not
obtained the official inspection and acceptance opinion from the local environmental
protection authorities as the environmental protection facilities are under construction.
Pollution discharge permits have also not been applied for due to the lack of the
aforementioned opinions.
The relevant regulations stipulate that approval should be obtained for the environmental
impact assessment report prior to construction and operations can only commence after
completing construction of the environmental protection facilities and obtaining the necessary
opinions. However, the four dairy farms and the beef feedlot began operations prior to
obtaining all necessary approvals and opinions. Under the relevant regulations, the
competent authorities may order us to suspend our production and may also impose penalties
of up to RMB100,000 per farm or feedlot for commencing operations without undergoing
inspections. In respect of Dongying Japfas failure to submit its environmental impact
assessment report, the competent environmental authority may order Dongying Japfa to
cease construction and rectify such failure within a specified time. Penalties of up to
RMB200,000 may be imposed for failing to undertake such rectification within the specified
time. Pollution discharge permits have also not been applied for and under the relevant
regulations, orders may be made for corrective measures to be undertaken within a specified
time limit and for a fine of up to RMB50,000 per farm or feedlot. There is no assurance that
the necessary approvals will be obtained in a timely manner or at all. Please see Business
Compliance.
Dairy Farms 1 to 4 accounted for approximately 28.8% of our Groups total net asset value
(the NAV) as at December 31, 2013 and contributed 3.5% and 22.3% of revenue and profit
before tax for the financial year ended December 31, 2013, respectively. Dongying Japfas
beef feedlot accounted for approximately 0.6% of our Groups total NAV as at December 31,
2013 and was not yet revenue generating.
Vietnam
As at the Latest Practicable Date, 42 of the 64 swine and poultry farms operated by Japfa
Comfeed Vietnam Limited Company (JCVN), Japfa Comfeed Long An Limited Company
(JCLA) and Japfa Comfeed Binh Thuan Limited Company (JCBT) have been leased from
lessors who, in breach of their obligations under the respective leases, have not obtained all
environmental licenses and permissions necessary for these farming activities. In addition,
JCLAs feedmill has not obtained a license to discharge waste. The lack of such licenses and
permissions may result in a suspension of the operations of the said farms, which could have
a material adverse effect on the business and financial condition of JCVN or JCLA, as the
case may be. Whilst our Vietnamese subsidiaries have commenced periodic monitoring on
the status of rectification and are working with the relevant lessors to resolve the issues
above by facilitating communication with the local and government authorities (only where
appropriate), there is no assurance that such issues will be resolved in a timely manner or at
all.
29

Our Groups animal protein business in Vietnam contributed 10.6% of our Groups revenue for
the financial year ended December 31, 2013. Please see BusinessComplianceTitles and
Licences Monitoring and Compliance.
Our title and leasehold rights over certain of the land we use may be subject to
significant legal uncertainties and defects.
There is no central title registry for real property in some of the jurisdictions we operate in.
The methods of documentation of land records in these jurisdictions have not been fully
computerized and are generally maintained at state and district level and updated manually
through physical records of all land-related documents and may not be available online for
inspection or updated in a timely manner. This could result in investigations into property
records being time consuming and/or inaccurate, which may impact our ability to rely on
them. In certain instances, there may be a discrepancy between the extent of the areas stated
in the revenue records and the areas stated in the title deeds, and the actual physical area of
some of the lands on which our farms are constructed. The land records are often handwritten and may not be legible, which make it difficult to ascertain the contents of the records.
Further, the land records are often in poor condition and at times untraceable, which impedes
the title investigation process. As a result, the validity of our title or leasehold rights over land
may not be clear or may be in doubt.
The PRC
There is no assurance that the lease contracts entered into by some of our PRC subsidiaries
in respect of approximately 12,367.5 mu of leased cropping land (ancillary to Dairy Farms 1, 2
and 3), and approximately 256.4 mu of farmland (comprising 19.33% of Dairy Farm 2) are
effective, due to incomplete supporting documents evidencing the lessors right to grant us
such leases. In addition, whilst TAAA has sub-leased collectively-owned rural land for Dairy
Farm 2 from the local government for a period of 40 years, this land was sub-leased by the
local government from villagers committees who in turn leased the land from villagers for
periods of between 17 and 40 years. As such, any lease term beyond the original underlying
lease terms between the villagers and the villagers committee may be void and require
renewal. There can be no assurance that the terms of such renewal will be on commercially
acceptable terms to any of the villagers committee, the local government and TAAA. Longterm leasing of collectively-owned rural land is subject to uncertainties, such as termination or
breach by local villagers or committees of the local villages or other relevant parties, which
are not risks associated with state-owned land. If any of the said leases are deemed to be
ineffective, we may be required to identify alternative cropping land and in the case of TAAA,
to relocate to alternative farmland and incur additional costs in doing so.
Some of our land lease contracts in the PRC stipulate a lease term of more than 20 years.
However, any period stipulated in such contract which is in excess of the initial 20-year term,
may be viewed as void under the relevant PRC laws and regulations. Our PRC subsidiaries
may be required to renew such lease contracts after the initial 20-year term has expired. If
such renewal is required, there can be no assurance that the terms of renewal will be
commercially acceptable to us.
Vietnam
JCVN, JCLA and JCBT are also operating an aggregate of 64 swine and poultry farms under
medium term leases of between five to eight years where 39 lessors are in breach of their
obligations under the relevant leases. In respect of 29 of these farms, the lessors have not
duly registered in their name such land use rights in respect of some or all of their land and/or
the leased area is larger than the land area capable of being leased under the relevant land
use right certificate. For the land portion beyond the area specified in the land use right
certificate, the lessor may not have title over such land portion and the assets attached
thereto. In the absence of a duly registered land use right certificate, the leases over the
30

respective lands may be compromised by the rights of any adverse possessors or prior
owners of the lands or other title defects that the lessees may not be aware of. In addition, the
land-use purpose for 20 farms has not yet been amended in the relevant land use right
certificates to reflect the actual purpose (swine farming or poultry farming, as the case may
be) but remain the purpose originally permitted by the State when leasing the relevant lands
to the lessors concerned. The use of land for wrong purposes may expose the lessors to the
risk of the land being confiscated by the State. Whilst these lessors are in the process of
applying to the State for a change in land-use purpose, there is no assurance that such landuse purpose may be changed. 21 farms are leased from lessors who have not been licensed
to lease farms. Under Vietnamese law, lease agreements entered into by such lessors may
be rendered null and void and we may have to source for alternative farms. In addition, in
respect of four farms leased by JCBT, the lessors have mortgaged their land use rights to
lenders. In the event these lessors fail to discharge their respective obligations to the lenders,
the leased land may be foreclosed on by such lenders for enforcement under the relevant
mortgage agreements. Whilst such foreclosure will not extend to the assets of JCBT used on
such leased farms, the leases may be terminated and JCBT may not be able to operate
further from such farms. Whilst our Vietnamese subsidiaries have commenced periodic
monitoring on the status of rectification and are working with the relevant lessors to resolve
the issues above by facilitating communication with the local and government authorities (only
where appropriate), there is no assurance that such issues will be resolved in a timely manner
or at all.
Our Groups animal protein business in Vietnam contributed 10.6% of our Groups revenue for
the financial year ended December 31, 2013.
Please see BusinessComplianceTitles and Licences Monitoring and Compliance.
Indonesia
In Indonesia, the State Land Authority (Badan Pertanahan Nasional) adopts a negative stelsel
system in relation to the land registration process. This means that the land administration
system in Indonesia enables any party to apply for the right on a plot of land by proving
required ownership evidence in the form of a document or witness which has evidentiary
value. Should the measurement process by the State Land Authority and subsequent
verification and identification against the land book maintained by the State Land Authority
show that the right does not overlap with other existing rights, the State Land Authority will
make a public announcement and issue a land ownership decree in relation to such land. In
the event that there is no objection or claim to the designated land, the State Land Authority
will issue the certificate to the applying party. However, even if our Group has registered its
lands and obtained certificates under its name, it does not prevent the land from being
claimed by a third party who may claim to have rights over our Groups lands, as under
Indonesian law the court has no competency to refuse a claim without going through a
hearing process.
We are subject
requirements.

to

applicable

governmental

regulations,

including

licensing

We hold various licenses and permits issued by various government authorities and
regulatory agencies in the countries in which we operate, and such licenses and permits are
essential for the conduct of our business. For more information, see BusinessLicenses
and Appendix CRegulation.
These licenses and permits are generally subject to a variety of conditions which are either
stipulated in the licenses and permits themselves or under the particular legislation and/or
regulations. The continuation of these licenses and permits may be subject to periodic
examinations and/or random inspections by the relevant authorities to ensure that our
premises comply with all relevant regulations of the issuing authority.
31

Any breach or material non-compliance with the regulations of the issuing authorities may
result in suspension, withdrawal or termination or the relevant licenses and permits, financial
penalties or cessation of our operations.
In the ordinary course of business, we are required to undertake the renewal of various
licences and permits. Our operations are generally in emerging market economies where
such renewal processes generally take longer. We cannot guarantee that, upon the expiration
of any of our licenses and permits, we will be able to renew all necessary licenses and
permits in the future in a timely manner or at all or that we will not be subject to suspension,
withdrawal or termination of our licenses and permits. Any failure to secure renewal, or loss,
or a required license or permit, would materially adversely affect our business, financial
condition, results of operations and/or prospects.
We are also in the process of applying for certain new regulatory licenses, approvals and
permits as most new projects commissioned by our Group would require relevant regulatory
approvals. There is no assurance that we will be able to obtain such licenses, approvals and
permits in a timely manner or at all. Certain of our business operations may already have
commenced and/or been operating for an extended period of time without the requisite
licenses, approvals and permits. Please see below and Failure to comply with
environmental regulations, could harm our operating results, financial condition and
reputation. and Our title and leasehold rights over certain of the land we use may be
subject to significant legal uncertainties and defects. Even if we are able to obtain such
licenses, approvals and permits, there is no assurance that the relevant authorities would not
hold us responsible for previous breaches as a result of operating without the relevant
licenses, approvals and permits and we may be subject to various sanctions including
monetary penalties which could materially adversely affect our financial performance and/or
results of operations. In addition, some of our land / farm lease agreements stipulate that the
lessor is responsible for obtaining the requisite licenses and approvals. There is no assurance
that such lessors have obtained the requisite licenses and approvals. In the event the relevant
authorities impose a monetary penalty on us or order us to suspend our operations, this may
materially adversely affect our business, financial condition, results of operations and/or
prospects.
Vietnam
The investment certificates of JCVN, JCLA and JCBT have not been updated to reflect the
expanded scope of business of these companies. As at the Latest Practicable Date, 60 farms
leased by these companies are located outside the designated locations under the respective
investment certificates. JCVN, JCLA and/or JCBT may be subject to an administrative fine
imposed by the licensing authorities in an amount of between VND5 million to VND7 million
(approximately US$237 to US$332). The authorities also have the power to require JCVN,
JCLA and/or JCBT to cease such non-compliance, which may result in these farm leases
being terminated, resulting in a material adverse effect on our business, financial condition,
results of operations and/or prospects .
Two of JCLAs projects and one of JCBTs projects have been delayed beyond their
respective implementation schedules. Under the laws of Vietnam, the investment certificate of
a project may be withdrawn if such a project is terminated by the competent authority as a
result of being delayed for more than 12 months. A penalty of between VND15 million to
VND20 million (approximately US$711 to US$948) may also be levied in respect of such
delay. If the delay lasts for more than 24 months, the land leased to the relevant project may
also be recovered by the local authorities and the project can no longer be carried on. As at
the Latest Practicable Date, whilst no penalties have been levied or other action taken by the
authorities in respect of these delays, if any of the above occurs, it may result in a material
adverse effect on our business, financial condition, results of operations and/or prospects.

32

Our dairy business is influenced by a number of factors, some of which are beyond our
control.
The quality of our raw milk and yield of our dairy cows are two important determinants of the
success of our dairy business. Our raw milk quality and yield are influenced by a number of
factors that are beyond our control, including, but not limited to:

feed supply factorsthe volume and quality of milk produced by dairy cows being linked
closely to the nutritional quality of the feed provided;

seasonal factorsdairy cows generally producing more milk in temperate weather than
in extremely cold or hot weather. Extended unseasonal cold or hot weather could
potentially lead to lower than expected raw milk production;

breeding factorsthe genetic quality of a dairy cow having a direct impact on the yield
and quality of milk produced by such dairy cow; and

health factorspotential outbreaks of diseases among our dairy cows and dairy cows
from neighboring farms.

The quality of our dairy cows is an important factor affecting the production of raw milk, which
is in turn dependent on the quality and supply of the Holstein Friesian dairy cows we import
from Australia. If at any time the quality of imported Holstein Friesian dairy cows we purchase
is compromised, the quality and yield of our raw milk may not be sustained at current levels or
improve at the rate we expect in the long term. Furthermore, the quality of our dairy cows has
a direct impact on the protein content and fat content of our raw milk, which in turn could
affect the price at which we can sell our raw milk.
Our animal protein business may be affected by our ability to import / export livestock.
Any unforeseen social, political or economic event in the countries from which we import our
livestock could have a negative effect upon our animal protein businesses. For example, in
Australia, a number of groups staged protests in relation to live exports of cattle which
resulted in a temporary disruption in the supply of live cattle to Indonesia. There is a risk that
such groups could become increasingly active and influence the relevant authorities to make
changes to current regulations and impose more rigorous standards upon the operations of
animal protein companies like us. Protests against live exports of livestock may also generate
negative press about animal protein companies in general.
The Indonesian government has also issued a list of beef cattle prices that are used as a
reference prices for importers and/or exporters of beef cattle (Market Reference Prices). If
the beef cattle prices in the local Indonesian market is below the applicable Market Reference
Prices, the Indonesian government can temporarily suspend the import of beef cattle. These
measures may have a material adverse effect on our ability to import cattle into Indonesia and
there is no assurance that our beef cattle business will be able to grow and/or be sustainable
in the future if such measures are maintained by the Indonesian government. In the event of a
temporary ban on the import of beef cattle into Indonesia, our business, financial condition,
results of operations and/or prospects could be materially adversely affected.
Rising operational costs could materially adversely affect our business, financial
condition, results of operations and prospects.
The emerging market economies in which we operate are especially susceptible to higher
than usual levels of inflation as compared to developed economies. For example, the rate of
inflation in Indonesia and India was in excess of 8% for 2013. Such inflation rates may lead to
unsustainable rising labor and utilities costs, without a corresponding increase in our
productivity and/or revenues.
In the past few financial years, energy prices in Indonesia have risen dramatically, which has
resulted in increased energy-related costs for our feed production activities. We have also
33

experienced a significant increase in labor costs in jurisdictions such as the PRC and
Vietnam. Laws and regulations which facilitate the forming of labor unions, combined with
weak economic conditions, may result in labor unrest and activism. Such labor laws have
increased the amount of severance, service and compensation payments payable to
employees upon termination of employment, and may contribute to rising operational costs
and lower profit margins. If more of our personnel unionize, it may become difficult for us to
maintain flexible labor policies, and may increase our costs and have a material adverse
effect on our business, financial condition, results of operations and/or prospects.
There can be no assurance that rising labor and utilities costs may not have an increasingly
adverse impact upon our operational costs and materially adversely affect our business,
financial condition, results of operations and/or prospects.
Our insurance coverage may be inadequate.
Our insurance coverage may not adequately protect us from the key risks associated with our
business. We insure our principal assets against risk of physical loss or damage caused by
accident, fire, civil disorder and/or natural disasters. However, we do not have coverage
against losses arising from key risks such as Avian Influenza, as such insurance is not
customary, and is unavailable on commercially reasonable terms in the countries in which we
operate. Insurance for our livestock is not available in several of the countries in which we
operate in and is neither customary nor available in countries such as Indonesia, Vietnam and
India. In addition, there can be no assurance that we will be able to continue to maintain our
existing insurance coverage or obtain insurance policies on economically viable terms. If we
were to suffer a loss that is not adequately covered by insurance, our business, financial
condition, results of operations and prospects could be materially adversely affected. For
more information, see BusinessInsurance.
We may not continue to benefit from favorable government policies.
We have benefited from government policies in certain jurisdictions in which we operate, such
as the PRC, Vietnam and Myanmar. Governments and local authorities have provided us
with, inter alia, preferential tax treatments, subsidies and other assistance such as access to
suitable sites for our operations, and assisted with access to infrastructure required for such
operations. For example, in the PRC, we have received preferential tax treatment and
subsidies as a result of such government policies that assist the dairy industry in order to
promote, among other things, improved industrialization and specialization levels of the
husbandry industry, accelerate the breeding and promotion of fine breeds of livestock and
increase milk yield of milking cows. In Vietnam, we have been granted preferential tax
treatments in respect of JCVN, some of which will expire in the next two years, whilst others
will be stepped-down. For more information, see Appendix CRegulation. If these
government policies change, our business, financial condition, results of operations and/or
prospects could be materially and adversely affected.
We face significant competition in the business segments in which we operate.
We face competition in each of our segments from other producers in the markets in which
we sell our products. In the animal protein segment, our primary competitor is the Charoen
Pokphand Group, which also offers a fully-integrated solution to its customers, and which
currently has a larger market share in the poultry breeding and feed production industries in
several of our key markets. For more information on the key competitors for our various
business segments, see BusinessCompetition. Key factors affecting our competitiveness
include price, product quality, brand identification, breadth of product line, distribution reach
and customer service.
For our dairy segment, we compete with other dairy players in China. Chinas dairy farming
industry, which historically has not been subject to high entry barriers or major restrictions,
34

continues to be extremely fragmented and is largely dominated by individual, small and midscale farms. However, there has been a gradual increase in the number of large-scale farms
in recent years due to the significantly higher efficiency and productivity of farms with scale,
the introduction of more favorable government policies towards such farms in the wake of the
melamine incident in 2008, and a greater focus on the safety and quality of raw milk supplies.
As such, we face competition from other large-scale domestic dairy farming companies who,
like us, produce premium raw milk for the high-end segment of the dairy products industry.
We also face competition from foreign suppliers that sell substitutes to raw milk, such as milk
powders, in the domestic China market. We cannot assure you that we will not be exposed to
increased competition from existing or future market players, some of whom may develop
products that are comparable to or superior in quality to, ours. In addition, if any of our
customers incorporates upstream dairy farming business into its operations, such customer
could cease to source raw milk supplies from us and, moreover, become one of our
competitors.
Further, as part of our integrated poultry and swine operations, we are able to bundle feed
and DOC/swine sales in order to offer an integrated package of services and products to our
farming customers, including technical advice to optimize results, productivity and the
competitive advantages of our customers. While our experience is that we gain a strategic
advantage from the integrated services and solutions that we offer, we cannot guarantee that
our integrated services and products will continue to appeal to present and future customers,
who may move to new or existing competitors who are able to offer similar products and
services more cheaply and individually, as and when required, rather than as part of an
integrated operation.
In addition, the poultry breeding and feed production business is highly competitive. The
poultry industry is still evolving technologically, particularly in relation to biotechnology
improvements in breed selection. The right breed, adjusted to local conditions, can lead to
significantly higher profits for farmers due to lower mortality, better growth rates and better
feed-to-weight conversion ratios. We exclusively use the Indian River breed, a breed which
has been specially tailored for tropical climate conditions, particularly in relation to tolerance
of heat, humidity and resistance to disease. We cannot guarantee that our competitors will not
offer new poultry breeds in the future, for example, as a result of their research and
development activities, that are genetically superior to our breeds and more appealing to
customers. Similarly, in our swine operations in Vietnam, there is no assurance that our
competitors will not be able to produce genetically superior breeds.
As Indonesia is a predominantly Muslim country, it is important that poultry be slaughtered
and maintained in a halal manner in accordance with religious requirements. Due to this and
other factors including import restrictions, imports of poultry products into Indonesia have
historically been relatively low. However, if (i) the import prohibition on chicken parts is
repealed, (ii) the regulation prohibiting chicken imports not certified as halal by the Indonesian
Council of Religious Scholars is amended, or (iii) the removal or reduction of the current 5%
import tariff on whole chickens is implemented, imports of chicken and chicken products
would be likely to increase and would adversely affect our business, financial condition,
results of operations and/or prospects. Foreign governments in markets where we export our
products may also impose quantity restrictions, introduce other non-tariff barriers or impose
higher taxes on imports to protect local producers.
Further, in the consumer food segment, we compete with other branded processed meat
producers. Increased competition may result in price reductions for our products and a loss of
market share and greater volatility in our revenues, which may, in turn, have a material
adverse effect on our business, financial condition, results of operations and/or prospects.

35

Tax disputes could expose us to liabilities.


On December 6, 2012, PT Japfa submitted a letter to the Indonesian Tax Office requesting
the utilization of net book value on asset transfers in relation to inter alia, the merger of
PT Multibreeder Adirama Indonesia Tbk, PT Multiphala Adiputra and PT Hidon into PT Japfa.
The head of the Indonesian Tax Office issued Decree No. KEP-71/WPJ.19/2013 dated
January 17, 2013 declining the utilization of net book value as the basis of calculation as such
request failed to fulfill the formal requirements under the Regulation of Ministry of Finance
No. 43/PMK.03/2008 dated March 13, 2008 on the utilization of net book value on asset
transfer in relation to merger, amalgamation, or business expansion (Decree).
On February 14, 2013, PT Japfa filed a civil law suit against the Indonesian Tax Office in
respect of the Decree. As at the Latest Practicable Date, the civil law suit is still on-going and
PT Japfa is currently waiting for Tax Court to issue its verdict in relation to the dispute.
In the event PT Japfa loses the civil law suit and has to use market value on the asset
transfer in relation to merger of PT Japfa and PT Multibreeder Adirama Indonesia Tbk, PT
Multiphala Adiputra and PT Hidon as the basis of calculation, PT Japfa may be exposed to
estimated additional tax liabilities of IDR114 billion (S$12.0 million) and a penalty of two per
cent per month on the additional tax liabilities of IDR114 billion, with a maximum capped at
48 per cent, which is calculated from the time the tax liabilities incurred and this may in turn
have a material adverse effect on our Groups consolidated financial position, results of
operations or cash flows.
Our success depends upon our management team and other key personnel, the loss of
any of whom could disrupt our business operations.
We believe that our future success is heavily dependent upon the continued service of our
senior management team who have valuable and long-standing experience in the business in
which we operate and an important depth of understanding of the demands, technicalities and
intricacies of our business and our customers needs. We do not carry key person life insurance
in respect of any of our employees. While we believe we offer competitive terms of
employment, there can be no assurance that we will retain our key management personnel or
that we will be able to attract, train or retain qualified personnel in the future. The loss of key
management personnel (particularly to one of our competitors) may adversely affect the
implementation of our business strategies, which could have a material adverse effect on our
business, financial condition, results of operations and/or prospects.
We have limited long-term contracts in relation to the sale of our products.
Many of our customers in our animal protein segment operate through purchase orders or
short-term contracts. Some of these farmers are unwilling to enter into long-term contracts,
preferring the flexibility offered by short-term contractual arrangements. Within our beef cattle
business, we either send our cattle to wet markets for sale to distributors, or to our abattoir for
processing into beef products. Within our aquaculture operations, most of the aquafeed that
we currently produce is sold directly to local farmers and independent distributors located
throughout Indonesia. As many of our arrangements with our customers and suppliers are
short-term, there can be no assurance that any or all of our suppliers or customers will
continue to do business with us in the future. Although we aim to renew contracts as they
expire, there can be no assurance that our suppliers and customers will not seek more
favorable terms from one or more of our competitors. If we are unable to renew our contracts
with our suppliers or customers, our business, financial condition, results of operations and/or
prospects could be materially adversely affected.

36

Changes in consumer preferences away from our products could materially and
adversely affect us.
Changes in consumer preferences away from our products or negative publicity regarding
consumption of any of our products (for example, consumption of poultry) may reduce the
demand for our products. Consumer preferences for dairy, animal protein or consumer food
products can change for many reasons including changes in nutritional standards, health
advisories and general economic conditions.
Further, we are engaged in the production and sale of premium raw milk in China and dairy
products in Indonesia, Singapore, Hong Kong, Malaysia, the Philippines and Brunei. If the
consumers in these countries no longer consume large quantities of dairy products that are
manufactured using premium raw milk, the demand for our raw milk could diminish, which
would in turn adversely affect our business and results of operations. In addition, in the event
that there is any outbreak of animal disease affecting cows in Indonesia and/or China,
consumer confidence and interest in dairy products may be affected, which would in turn
materially adversely affect our business, financial condition, results of operations and/or
prospects.
Our growth strategy subjects us to various risks.
We plan to pursue a growth strategy that includes expanding our dairy and animal protein
businesses and further investing in our consumer food brands. Our growth strategies include
organic growth through the construction of new facilities as well as increasing our
manufacturing and production capacities and expanding our distribution capabilities. Risks
relating to our growth strategy include the following:

we may face competition to acquire land for expansion opportunities;

we may face increased costs, supply difficulties and competition in obtaining raw
materials for our operations;

we may not be able to hire and retain workers necessary for our expanded operations or
may have to pay higher wages for these workers than we expect; and

unforeseen circumstances and problems relating to our expansion projects may distract
our management from focusing on our existing operations.

We cannot assure you that we will be able to identify, acquire, or profitably manage our
expanded businesses without incurring substantial costs, or that we will not face delays or
other operational or financial difficulties in doing so.
We have substantial indebtedness and may be unable to satisfy certain covenants
under our senior notes or other debt facilities, which could materially and adversely
affect our business, financial condition and/or results of operations.
As of March 31, 2014, our combined borrowings amounted to approximately US$1,065.2
million. For details, see Material Indebtedness.
Our high levels of indebtedness could have several important consequences, including, but
not limited to, the following:

we may be required to dedicate a portion of our cash flow toward repayment of our
existing debt, which will reduce the availability of our cash flow to fund working capital,
capital expenditures and other general corporate requirements;

our ability to obtain additional financing in the future may be adversely affected;

37

there could be a material adverse effect on our business, financial condition and/or
results of operations if we are unable to service our indebtedness or to comply with
covenants relating to such indebtedness or otherwise default on such indebtedness; and

we may be more vulnerable to economic downturns, may be limited in our ability to


withstand competitive pressures and may have reduced flexibility in responding to
changing business, regulatory and economic conditions.

On May 2, 2013, Comfeed Finance B.V., a wholly owned subsidiary of PT Japfa, issued
senior notes denominated in US dollars with a nominal value of US$225 million due 2018 (the
Notes). The Notes bear interest at 6.0% per annum and are unconditionally and irrevocably
guaranteed by PT Japfa and certain of its subsidiaries. Pursuant to the terms of the Notes,
PT Japfa and its subsidiaries are subject to certain financial and other covenants. Among
other things, these covenants limit PT Japfas (and, where applicable, its subsidiaries) ability
to:

pay dividends, unless such dividend payments do not exceed 50% of PT Japfas
consolidated net income and meet certain other conditions;

repurchase shares of capital stock of PT Japfa or its subsidiaries and make certain other
restricted payments;

incur additional indebtedness;

issue preferred stock;

sell the capital stock of PT Japfas subsidiaries or, in the case of PT Japfas subsidiaries,
issue additional capital stock;

sell, transfer or otherwise dispose of assets;

merge or enter into an amalgamation of business with another entity;

enter into transactions with related parties (which could constitute interested person
transactions for the purposes of Chapter 9 of the Listing Manual) unless such relatedparty transactions (as they are defined in the covenant) are entered into on terms that
are fair and reasonable and that are no less favorable to PT Japfa (and, where
applicable, its subsidiaries) than those that would have been obtained in a comparable
arms-length transaction with an unrelated party;

incur liens;

enter into sale and leaseback transactions; and

engage in other businesses.

As of March 31, 2014, US$225 million was outstanding on the Notes.


Our other financing arrangements also contain certain financial and other covenants,
including requiring the consent of lenders prior to declaring dividends or in certain instances
where there is a change in control or shareholding. See also Material Indebtedness. These
debt obligations are secured by a combination of security interests over our assets and
pledges over the shares of certain of our subsidiaries. If we are unable to service or repay our
indebtedness as scheduled, our creditors could take possession of these assets or shares.
Any of the foregoing could have a material adverse effect on our business, prospects,
financial condition and/or results of operations.

38

We may require additional capital in the future in order to continue to grow our
business, which may not be available on favorable terms or at all.
Our ability to grow our business and maintain our market shares in the segments in which we
operate, through the expansion of our operations and production capabilities, is dependent on
our ability to raise additional funds to implement our business strategy or to refinance our
existing debt or for working capital. There can be no assurance that such funds will be
available on favorable terms or at all. Additional debt financing may increase our financing
costs and reduce our profitability. Our financing agreements may contain terms and
conditions that may restrict our freedom to operate and manage our business, such as terms
and conditions that require us to maintain certain pre-set debt service coverage ratios and
leverage ratios and require us to use our assets, including our cash balances, as collateral for
our indebtedness. If we are unable to raise additional funds on favorable terms or at all as
and when required, our business, financial condition, results of operations and/or prospects
could be materially adversely affected.
We may encounter difficulties in projects being developed in conjunction with
business partners or held by joint venture project companies.
On occasion, we enter into joint ventures or other arrangements with other parties as part of
our business. We currently have business ventures with third parties, including Black River
Capital Partners Fund (Food) LP (BR Fund 1) and Black River CPF (Food AustAsia CoInvestment) LP (BR Co-Fund 1, and together with BR Fund 1, the BR Group) (in respect
of AIH), Hypor (in respect of Japfa Hypor) and Aviagen (in respect of Central India Poultry
Breeders). The BR Group is managed by Black River Asset Management LLC (a subsidiary
of Cargill Inc., an unrelated third party). We expect to continue collaborating with these and
other third parties in the future. The success of these joint ventures depends significantly on
our good relationship with our joint venture partners and their satisfactory fulfillment of their
obligations. Typically, our joint venture partners contribute to our business ventures in the
form of capital contributions (such as the BR Group in respect of our dairy business) or
proprietary intellectual property (such as Hypor and Aviagen in respect of animal genetics).
See Corporate Structure and Ownership.
Joint ventures involve special risks. Our joint venture partners may:

have economic or business interests or goals that are inconsistent with ours;

take actions or omit to take actions contrary to our instructions, policies or objectives or
in violation of good corporate governance practices or the law;

be unable or unwilling to fulfill their obligations under the relevant joint venture
agreements;

have disputes with us that arise out of the joint venture; or

have financial difficulties.

Depending on the extent of our interest in these joint ventures, we may not be able to control
or direct the actions of the joint venture and may need the cooperation and consent of our
partners to operate joint ventures; such consent may not always be forthcoming. For
example, the shareholders agreement for AIH requires prior concurrence between us and the
Black River funds on certain matters, such as capital expenditures, acquisitions and disposals
and the annual operating budget and business plan.
Any disagreement we may have with our joint venture partners may lead to an operational
deadlock, which could adversely affect the timing and completion of our projects. We cannot
assure you that we will be able to resolve such disagreements in a manner that will be in our
best interests, or at all, which could have an adverse effect on our business, financial
condition, results of operations and/or prospects.
39

Our unrealized fair value gains or losses on biological assets may fluctuate from
period to period, are non-cash in nature and are derived from many assumptions, and
may materially adversely affect our financial results.
Our livestock are valued at fair value less costs to sell. The fair value of livestock is
determined based on either (i) the market prices as of the end of each reporting period
adjusted with reference to the age and cost of the dairy cows, breeding cattle and swine to
reflect differences in characteristics and stages of growth of the livestock, or (ii) the present
value of expected net cash flows from the livestock discounted at a current market rate,
where market prices are unavailable.
Any changes in the estimates may affect the fair value of our livestock significantly. Upward
adjustments do not generate any cash inflow for our operations. In addition, increases in
interest rates globally or in the jurisdictions we mainly operate in may impact the discount rate
used for deriving the present value of the biological assets, which in turn may negatively
affect the fair value of our livestock. As a result, our unrealized fair value gains or losses on
biological assets may fluctuate from period to period. For the years ended December 31,
2011, 2012 and 2013 and the three months ended March 31, 2014, we had increases in fair
value of biological assets of US$7.5 million, US$6.6 million, US$6.3 million and
US$2.4 million, respectively.
Our unrealized fair value gains/losses on biological assets are also derived from many
assumptions. The principal valuation assumptions that we have adopted in applying the net
present value approach involve factors such as the culling rates of milking cows in their
various lactation cycles, the quality of dairy cows, breeding cattle and swine, the discount rate
and the expected average selling prices of raw milk, all of which are factors over which we
may not have full control. For further information, see Managements Discussion and
Analysis of Financial Condition and Results of Operations.
RISKS RELATED TO THE JURISDICTIONS IN WHICH WE OPERATE
Natural disasters and adverse weather in certain of the countries in which we operate
could disrupt the economy of such countries and our business.
Our operations, including our dairy farming, milk processing, breeding, commercial farming
and the transport and other logistics on which we are dependent may be adversely affected
and severely disrupted by climatic or geophysical conditions. Natural disasters or adverse
conditions may occur in those geographical areas in which we operate, including severe
weather, tsunamis, cyclones, tropical storms, earthquakes, floods, volcanic eruptions,
excessive rainfall and droughts as well as power outages or other events beyond our control.
In recent years, several particularly destructive natural disasters have occurred in the
countries in which we operate. Examples of these natural disasters include an underwater
earthquake that struck off the coast of Sumatra in December 2004, which caused a tsunami
that in turn caused widespread devastation in Indonesia and other Southeast Asian countries,
Cyclone Nargis which made landfall in Myanmar in May 2008, and several major earthquakes
in China in 2008 and 2013 and in Indonesia in 2009. In particular, Indonesia is located in the
convergence zone of three major lithospheric plates and is subject to significant seismic
activity that can lead to destructive earthquakes and tsunamis, or tidal waves. A significant
earthquake or other geological disturbance or natural disaster in more populated cities and
financial centers could severely disrupt that countrys economy and undermine investor
confidence and have a material adverse effect on our business, results of operations,
financial condition and/or prospects.
Adverse and severe weather conditions may also have an impact on our dairy farming,
breeding and commercial farming operations. For example, we use the Indian River breed of
DOC, a breed which has been specially tailored for tropical climate conditions, particularly in
relation to tolerance of heat and humidity. Any change in the climate may reduce the size,
40

quality, quantity and mortality of our chickens, and affect the price and demand for our
chickens and the chicken products we sell. Our Holstein Friesian dairy cows perform better in
cooler climates such as those in our farms in Shandong province in the PRC and our Gunung
Kawi farm in Malang, East Java, Indonesia. In the event heat stress is placed on our Holstein
Friesian dairy cows, yield and quality of raw milk could be affected, which may affect the price
and demand of our raw milk and processed milk products, as well as the profit margins of our
dairy business.
Labor laws in the countries in which we conduct a significant portion of our business
may affect our business, financial condition, results of operations and/or prospects.
Indonesia
Laws and regulations which facilitate the forming of labor unions, combined with weak
economic conditions, have resulted and may continue to result in labor unrest and activism in
Indonesia. In 2000, the Government issued Law No. 21 of 2000 on Labor Union (the Labor
Union Law). The Labor Union Law permits employees to form unions without employer
intervention. In March 2003, the Government enacted Law No. 13 of 2003 on Labor (the
Labor Law) which, among other things, increased the amount of severance, service and
compensation payments payable to employees upon termination of employment. If only one
labor union exists in a company, the Labor Law requires further implementation of regulations
that may substantively affect labor relations in Indonesia. The Labor Law requires bipartite
forums with participation from employers and employees and the participation of more than
50.0% of the employees of a company in order for a collective labor agreement to be
negotiated and creates procedures that are more permissive to the staging of strikes. Under
the Labor Law, employees who voluntarily resign are also entitled to payments for, among
other things, unclaimed annual leave and relocation expenses. Following the enactment,
several labor unions urged the Indonesian Constitutional Court to declare certain provisions of
the Labor Law unconstitutional and order the Government to revoke those provisions. The
Indonesian Constitutional Court declared the Labor Law valid except for certain provisions,
including relating to the right of an employer to terminate its employee who committed a
serious mistake and criminal sanctions against an employee who instigates or participates in
an illegal labor strike.
Labor unrest and activism in Indonesia could disrupt our Indonesian operations and could
affect the financial condition of Indonesian companies (including our Indonesian subsidiaries)
in general, depressing the stock prices of companies with operations in Indonesia or other
stock exchanges and the value of the Indonesian Rupiah relative to other currencies. Such
events could materially and adversely affect our business, financial condition, results of
operations and prospects.
In addition, any national or regional inflation of wages will directly and indirectly increase
operating costs and thus lead to a decrease in its profit margin.
The PRC
On June 29, 2007, the Standing Committee of the National Peoples Congress of China
enacted the Labor Contract Law, which became effective on January 1, 2008 and was
amended on December 28, 2012. The Labor Contract Law introduces specific provisions
related to fixed-term employment contracts, part-time employment, probation, consultation
with labor union and employee assemblies, employment without a written contract, dismissal
of employees, severance and collective bargaining, which together represent enhanced
enforcement of labor laws and regulations. According to the Labor Contract Law, an employer
is obliged to sign an unlimited-term labor contract with any employee who has worked for the
employer for ten consecutive years. Further, if an employee requests or agrees to renew a
fixed-term labor contract that has already been entered into twice consecutively, the resulting
contract must have an unlimited term, with certain exceptions. The employer must also pay
41

severance to an employee in nearly all instances where a labor contract, including a contract
with an unlimited term, is terminated or expires. In addition, the government has continued to
introduce various new labor-related regulations after the Labor Contract Law. Among other
things, new annual leave requirements mandate that annual leave ranging from five to 15
days is available to nearly all employees and further require that the employer compensate an
employee for any annual leave days the employee is unable to take in the amount of three
times his daily salary, subject to certain exceptions. As a result of these new measures
designed to enhance labor protection, our labor costs are expected to increase and we
cannot assure you that our employment practices do not or will not violate the Labor Contract
Law and other labor-related regulations. If we are subject to severe penalties or incur
significant liabilities in connection with labor disputes or investigations, our business and
results of operations may be materially adversely affected.
Political, economic and social conditions in the countries in which we operate may
adversely affect their economies, which in turn could have a material adverse effect on
our business, financial condition, results of operations and prospects.
Our business, prospects, financial condition and/or results of operations may be adversely
affected by political and social developments that are beyond our control in Indonesia,
Myanmar, the PRC and Vietnam. Such political and social uncertainties include, but are not
limited to, the risks of frequent changes in government and government policy, internal
conflict, nationalism, expropriation, methods of taxation and tax policy, unemployment trends
and other matters that influence continued and stable business operations and consumer
confidence and spending.
Indonesia
In the last two decades, Indonesia has experienced a process of democratic change, resulting
in political and social events that have highlighted the unpredictable nature of Indonesias
changing political landscape. These events have resulted in political instability, as well as
general social and civil unrest on certain occasions in recent years. Separatist movements and
clashes between religious and ethnic groups have resulted in social and civil unrest in parts of
Indonesia. In the provinces of Aceh and Papua (formerly Irian Jaya), there have been
numerous clashes between supporters of those separatist movements and the Indonesian
military. In Papua, continued activity by separatist rebels has led to violent incidents. In the
provinces of Maluku and West Kalimantan, clashes between religious groups and ethnic groups
have produced thousands of casualties and refugees over the past several years. The
Indonesian government has attempted to resolve problems in these troubled regions with
limited success. Political and related social developments in Indonesia have been unpredictable
in the past. There can be no assurance that social and civil disturbances will not occur in the
future or that such social and civil disturbances will not directly or indirectly, materially and
adversely affect our business, financial condition, results of operations and/or prospects.
As a result of the economic crisis in 1997, the Indonesian government has had to rely on the
support of international agencies and governments to prevent sovereign debt defaults.
Indonesia continues to have a large fiscal deficit and a high level of sovereign debt, its foreign
currency reserves are modest, the Rupiah continues to be volatile and has poor liquidity, and
the banking sector is weak and suffers from high levels of non-performing loans. Government
funding requirements to areas affected by natural disasters, as well as increasing oil prices,
may increase the governments fiscal deficits. The inflation rate (measured by the year-on-year
change in the consumer price index) remains volatile with an annual inflation rate of 3.8% in
2011, 4.3% in 2012 and 8.4% in 2013. Interest rates in Indonesia have also been volatile in
recent years, which has had a material adverse impact on the ability of many Indonesian
companies to service their existing indebtedness. The economic difficulties Indonesia faced
during the Asian economic crisis that began in 1997 resulted in, among other things, significant
volatility in interest rates, which had a material adverse impact on the ability of many Indonesian
42

companies to service their existing indebtedness. Although the policy rate set by Bank
Indonesia was 7.5% as of July 10, 2014, as compared to a peak of 70.8% in late July 1998 for
one-month Bank Indonesia certificates, there can be no assurance that the recent improvement
in economic conditions will continue or the previous adverse economic condition in Indonesia
and the rest of Asia will not occur in the future. In particular, a loss of investor confidence in the
financial systems of emerging and other markets, or other factors, may cause increased
volatility in the international and Indonesian financial markets and inhibit or reverse the growth
of the global economy and the Indonesian economy.
The PRC
The economy of the PRC differs from the economies of most developed countries in a
number of respects, including the extent of government involvement, level of development,
growth rate and control of foreign exchange. Before its adoption of reform and open door
policies beginning in 1978, the PRC was primarily a planned economy. Since then, the PRC
government has been reforming the PRC economic system, and has also begun reforming
the government structure in recent years.
These reforms have resulted in significant economic growth and social progress. Although the
PRC government still owns a significant portion of the productive assets in the PRC,
economic reform policies since the late 1970s have emphasized autonomous enterprises and
the utilization of market mechanisms, especially where these policies apply to businesses
such as ours. Although we believe these reforms will have a positive effect on our overall and
long-term development, we cannot predict whether changes in the PRCs political, economic
and social conditions, laws, regulations and policies will have any adverse effect on our future
business, results or financial condition.
Our ability to continue to expand our business is dependent on a number of factors, including
general economic and capital market conditions and credit availability from banks or other
lenders. Recently, the PRC government articulated a need to contain the build-up of a
property bubble and may tighten its bank lending policies, including increasing interest rates
on bank loans and deposits and tightening the money supply to control growth in lending.
Stricter lending policies may, among other things, affect our and our customers ability to
obtain financing which may in turn adversely affect our growth and financial condition. We
cannot give any assurances that further measures to control growth in lending will not be
implemented in a manner that may adversely affect our growth and profitability over time.
In addition, the global economic recession and market volatility that persisted in the past two
years may continue and therefore we may not be able to sustain the growth rate we have
historically achieved.
Myanmar
Myanmar is experiencing major political and socio-economic reform following decades of
military rule. This series of reforms includes the release of long-time political prisoners and
the opening up of the country to foreign investment. There can be no assurance that
Myanmar will continue with its political and socio-economic reform policy and any return to
military rule and possible consequential political and economic sanctions on Myanmar may
adversely affect our business, financial condition, results of operations and/or prospects. In
addition, in recent years, there have been several deadly conflicts in Myanmar in the northern
Rakhine State between the Rohingya Muslims and Rakhine Buddhists. The conflict has led to
the displacement of thousands of people and there can be no assurance that such violence
and conflict will not occur in the future or that such social and civil disturbances will not
directly or indirectly, materially and adversely affect our business, financial condition, results
of operations and/or prospects.

43

We conduct a large portion of our operations in emerging and developing markets


which may be more vulnerable to liquidity and credit risks.
The disruptions experienced in the international and domestic capital markets have led to
reduced liquidity and increased credit risk premiums for certain market participants and have
resulted in a reduction of available financing. Companies located in countries with emerging
markets, such as those in which we operate, may be particularly susceptible to these
disruptions and reductions in the availability of credit or increases in financing costs, which
could result in them experiencing financial difficulty. In addition, the availability of credit to
entities operating within the emerging and developing markets is significantly influenced by
levels of investor confidence in such markets as a whole and as such any factors that impact
market confidence including a decrease in credit ratings, state or central bank intervention in
a market or terrorist activity and conflict, could affect the price or availability of funding for
entities within any of these markets. There can be no assurance that there will be continued
funding for our entities within these markets or that such lack of funding will not directly or
indirectly, materially and adversely affect our business, financial condition, results of
operations and/or prospects.
Since the global economic crisis in 2008, certain emerging market economies have been, and
may continue to be, adversely affected by market downturns and economic slowdowns
elsewhere in the world. As has happened in the past, financial problems outside countries
with emerging or developing economies, or an increase in the perceived risks associated with
investing in such economies could dampen foreign investment in and adversely affect the
economies of these countries. Investments in the emerging markets in which we are present
and do business, are therefore subject to greater risks than in more developed markets,
including in some cases significant legal, fiscal, economic and political risks. Accordingly,
investors should exercise particular care in evaluating the risks involved in an investment in
us and must decide for themselves whether, in the light of those risks, their investment is
appropriate.
The countries in which we operate may suffer from governmental or business
corruption.
We operate and conduct business in countries which some perceive as having potentially
more corrupt governmental and business environments compared to certain developed
countries. Corrupt action against us could have a material adverse effect on our business,
results of operations or financial condition. It may not be possible for us to detect or prevent
every instance of fraud, bribery and corruption in every jurisdiction in which our employees,
agents, subcontractors or joint-venture partners are located. We may therefore be subject to
civil and criminal penalties and to reputational damage. Instances of fraud, bribery and
corruption, and violations of laws and regulations in the jurisdictions in which we operate,
could have a material adverse effect on our business, results of operations, financial condition
and prospects. Please see BusinessComplianceAnti-Corruption Policy.
Some of the areas in which we operate lack physical infrastructure or contain physical
infrastructure in poor condition.
Physical infrastructure in some of the countries we operate in may be obsolete or non-existent
or inadequately funded and maintained. Further deterioration of the physical infrastructure in
the areas where we operate may disrupt the transportation of goods and supplies, increase
operational costs of doing business in these areas and generally interrupt business
operations, any or all of which could have a material adverse effect on our business, results of
operations, financial condition and/or prospects.

44

The interpretation and application of laws and regulations in the jurisdictions in which
we operate involve uncertainty.
The courts in the jurisdictions in which we operate may offer less certainty as to the judicial
outcome or a more protracted judicial process than is the case in more established
economies. Businesses can become involved in lengthy court cases over simple issues when
rulings are not clearly defined, and the poor drafting of laws and excessive delays in the legal
process for resolving issues or disputes compound such problems. Accordingly, we could
face risks such as (i) effective legal redress in the courts of such jurisdictions being more
difficult to obtain, whether in respect of a breach of law or regulation, or in an ownership
dispute, (ii) a higher degree of discretion on the part of governmental authorities and therefore
less certainty, (iii) the lack of judicial or administrative guidance on interpreting applicable
rules and regulations, (iv) inconsistencies or conflicts between and within various laws,
regulations, decrees, orders and resolutions, or (v) relative inexperience or unpredictability of
the judiciary and courts in such matters.
Enforcement of laws in some of the jurisdictions in which we operate may depend on and be
subject to the interpretation placed upon such laws by the relevant local authority, and such
authority may adopt an interpretation of an aspect of local law which differs from the advice
that has been given to us by local lawyers or even previously by the relevant local authority
itself. Furthermore, there is limited or no relevant case law providing guidance on how courts
would interpret such laws and the application of such laws to our contracts, joint operations,
licenses, license applications or other arrangements.
While we are not aware of any current specific instance of uncertainty in the interpretation and
applications of laws and regulations that would materially affect our Groups business and/or
financial position, there can be no assurance that there will be no unfavorable interpretation or
application of the laws in the jurisdictions in which we operate or that such interpretation or
application will not adversely affect our contracts, joint operations, licenses, license
applications or other legal arrangements. In certain jurisdictions, the commitment of local
businesses, government officials and agencies and the judicial system to abide by legal
requirements and negotiated agreements may be less certain and more susceptible to
revision or cancellation, and legal redress may be uncertain or delayed. If the existing body of
laws and regulations in the countries in which we operate are interpreted or applied, or
relevant discretions exercised, in an inconsistent manner by the courts or applicable
regulatory bodies, this could result in ambiguities, inconsistencies and anomalies in the
enforcement of such laws and regulations, which in turn could hinder our long-term planning
efforts and may create uncertainties in our operating environment.
The PRC
A substantial part of our dairy segment operations is conducted in the PRC and is governed
by PRC laws, rules and regulations. The PRC legal system is based on written statutes and
their interpretation by the Supreme Peoples Court. Prior court decisions may be cited for
reference, but have limited weight as precedents. Since the late 1970s, the PRC government
has significantly enhanced the PRC legislation and regulations to provide protection to
various forms of foreign investments in the PRC. However, the PRC has not developed a
fully-integrated legal system, and recently-enacted laws and regulations may not sufficiently
cover all aspects of economic activity in the PRC. As many of these laws, rules and
regulations are relatively new, and because of the limited volume of published decisions, the
interpretation and enforcement of these laws, rules and regulations involve uncertainties and
may not be as consistent and predictable as in other jurisdictions. In addition, the PRC legal
system is based in part on government policies and administrative rules that may have a
retroactive effect. As a result, we may not be aware of our violations of these policies and
rules until some time after the violation. Furthermore, the legal protection available to us
under these laws, rules and regulations may be limited. Any litigation or regulatory
45

enforcement action in the PRC may be protracted and may result in substantial costs and the
diversion of resources and management attention.
Vietnam
The legal and regulatory framework in Vietnam is not as developed as in other more mature
economies. Furthermore, policy changes and interpretations of applicable laws can produce
unexpected consequences which could have a material adverse effect on domestic business
operators. Vietnam experienced severe hyperinflation and related economic difficulties in the
1980s resulting in the Vietnamese government adopting the doi moi comprehensive reform
program in 1986. The laws and regulatory apparatus affecting the economy and regulating
commercial and business activities have been developing since the doi moi policy and are in
a relatively early stage of development. As Vietnams legal system develops, it is expected
that inconsistencies and uncertainties in laws and regulations will be addressed as new laws
are interpreted and refined and older laws are repealed or updated. As such, it is difficult to
predict when Vietnams legal system will obtain the level of certainty and predictability
applicable in other jurisdictions that have a legal system that is more developed. Furthermore,
recognition and enforcement of legal rights through Vietnam courts, arbitration centres and
administrative agencies in the event of dispute is uncertain.
Terrorist attacks and terrorist activities and certain destabilizing events have led to
substantial and continuing economic and social volatility, which may materially and
adversely affect our business and/or property.
In Indonesia during the last ten years there have been numerous bombing incidents directed
towards the Indonesian government and foreign governments and public and commercial
buildings frequented by foreigners, including the Jakarta Stock Exchange Building and
Jakartas Soekarno-Hatta International Airport. There have also been other high profile
bombings in Bali in October 2002 and October 2005 and at the JW Marriott Hotel in Jakarta in
August 2003 and the JW Marriott Hotel and Ritz-Carlton Hotel in Jakarta in July 2009.
There have also been numerous bombing incidents across India in the last ten years,
including the 2006 Mumbai train bombings and at the Delhi High Court in 2011. A coordinated
series of attacks also took place in Mumbai in 2008, targeting high profile locations including
the Oberoi Trident and the Taj Mahal Palace & Tower.
In March 2014, a group of knife-wielding attackers stabbed people to death at a train station
in Kunming in the PRC.
Such terrorist activities could destabilize these countries and increase internal divisions
between their people. While in response to these terrorist attacks, the various governments
have institutionalized certain security improvements and undertaken certain legal reforms
which seek to better implement anti-terrorism measures and some suspected key terrorist
figures have been arrested and tried, there can be no assurance that further terrorist acts will
not occur in the future. Future acts of terrorism, violent acts and adverse political
developments may have a material adverse effect on us, our business, financial condition,
results of operations and/or prospects.
Domestic, regional or global economic changes may adversely affect our business.
The global economic crisis that began in 2008 has resulted in the global financial markets
experiencing significant turbulence originating from the liquidity shortfalls in the U.S. credit
and sub-prime residential mortgage markets, which have caused liquidity problems resulting
in bankruptcy for many institutions, and unprecedented major government bailout packages
for banks and other institutions. Any further government intervention, restrictions or regulation
could have a material adverse effect on our business, financial performance, results of
operations and prospects. The global economic crisis has also resulted in a shortage in the
46

availability of credit, a reduction in foreign direct investment, the failure of global financial
institutions, a drop in the value of global stock markets, a slowdown in global economic
growth and a drop in demand for certain commodities.
This economic situation is further exacerbated by the recent debt crises in the Eurozone
(namely in Greece, Portugal, Spain, Ireland and Italy) and the potential impact of these crises
on the rest of Europe and the world. The global financial markets have also recently
experienced volatility as a result of the downgrade of U.S. sovereign debt and concerns over
the debt crises in the Eurozone. Uncertainty over the outcome of the U.S. and Eurozone
governments financial support and quantitative easing programs and worries about sovereign
finances generally are ongoing. It is difficult to predict the extent to which global markets are
affected by these conditions and the extent and nature of such effects on our markets,
products and business. Any prolonged downturn in general economic conditions would
present risks for our business, such as a potential slowdown in our sales to customers.
Although there are signs that the financial markets and economies in Singapore, Asia and the
global economy may be improving, whether a full and sustainable recovery will occur, and the
pace of the recovery, if any, or whether the global economy or parts of it will relapse into
recessionary conditions, remains uncertain. Any adverse economic developments in the
markets that we operate in or that have an indirect impact on the demand for our products
and our business could have material and adverse effects on our business, results of
operations, financial performance and prospects. In addition, the general lack of available
credit and lack of confidence in the financial markets associated with any market downturn
could adversely affect our access to capital as well as our suppliers and customers access to
capital, which in turn could adversely affect our ability to fund our working capital
requirements and capital expenditures.
Any limitations on the ability of our subsidiaries to pay dividends to us could have a
material adverse effect on our ability to conduct our business.
We are a holding company incorporated in Singapore and operate a significant part of our
businesses through our operating subsidiaries in Indonesia, the PRC, Vietnam, India and
Myanmar. Therefore, the availability of funds to pay dividends to our Shareholders depends
upon dividends received from these subsidiaries. If our subsidiaries incur debts or losses,
such indebtedness or loss may impair their ability to pay dividends or other distributions to us.
As a result, our ability to pay dividends to our Shareholders will be restricted. Local laws and
regulations have differing requirements and restrictions on the ability of a company to pay
dividends to its shareholders.
The PRC
The principal laws and regulations governing distributions of dividends of foreign holding
companies include the PRC Company Law (
), the Foreign Investment
Enterprise Law (
) and the Administrative Rules under the Foreign
Investment Enterprise Law (
).
Under these laws and regulations, the Companys PRC subsidiaries, as wholly foreigninvested enterprises in China (WFOE), may pay dividends only out of their accumulated
after-tax profits, if any, determined based on PRC accounting principles, which differ in many
aspects from generally accepted accounting principles in other jurisdictions, including
International Financial Reporting Standards. The PRC laws and regulations also require
WFOEs to set aside at least 10% of their accumulated profits each year, if any, as statutory
reserve funds, unless such reserves have reached 50% of the registered capital of the
respective WFOE. These statutory reserves are not available for distribution as cash
dividends. Profits of a WFOE shall not be distributed before the losses in the previous
accounting years have been made up. Any undistributed profit for the previous accounting
years may be distributed together with the distributable profit for the current accounting year.
47

In addition, restrictive covenants in bank credit facilities or other agreements that we or our
subsidiaries have entered into or may enter into in the future may also restrict the ability of our
subsidiaries to provide capital or declare dividends to us and our ability to receive
distributions. For instance, under the facility agreement entered between our Groups PRC
dairy farm subsidiaries and (1) Rabobank Nederland Beijing Branch, (2) DBS Bank (China)
Limited, Tianjin Branch and (3) PT Bank Mandiri (Persero) TBK Shanghai Branch on
December 20, 2013, our Groups PRC dairy farm subsidiaries shall not declare, distribute or
make any dividends or payments to their shareholders until the ratio of the combined
Financial Indebtedness (as defined therein) of these subsidiaries to their combined EBITDA is
equal to or lower than 1x. The aforementioned restrictions on the availability and usage of our
major source of funding may impact our ability to pay dividends to our Shareholders. See
Material Indebtedness.
In addition, under the Enterprise Income Tax Law of the PRC (
) and
the Regulation on the Implementation of the Enterprise Income Tax Law of the PRC
(
), which took effect on January 1, 2008, dividends payable
by a foreign-invested enterprise to its foreign corporate investors who are not deemed as a
PRC resident enterprise are subject to a 10% withholding tax, unless such foreign investors
jurisdiction of incorporation has a tax treaty with the PRC that provides for a different
withholding tax arrangement. See Appendix CRegulationSummary of Relevant Chinese
Laws and Regulations. In our case, such withholding tax has historically amounted to 5%, as
a result of tax treaty arrangements.
Vietnam
Circular 186/2010/TT-BTC (Circular 186), issued by Vietnams Ministry of Finance and
which took effect on January 3, 2011, restricts the remittance of profits by our Vietnamese
subsidiaries to our Company. Circular 186 restricts the remittance of profits by companies
established in Vietnam to foreign shareholders to once each calendar year and only if the
Vietnamese company has paid corporate income taxes in Vietnam and has no accumulated
losses. The maximum allowable amount of remittance would be calculated based on the
declared dividends from the total net profits after tax for the particular financial year in the
Vietnamese companys audited financial statements, together with any declared dividends of
previous years which have not been remitted, less the amount of investment that the foreign
investor has committed to re-invest in Vietnam and less any costs or expenses incurred by or
for the foreign parent company which the Vietnamese subsidiary may have paid. The
company or foreign shareholder must file a notice with the tax authorities seven business
days prior to a remittance.
Government control of currency conversion may have a material adverse effect on
your investment.
At present, the RMB, VND, Burmese Kyat and INR are not freely convertible to other foreign
currencies, and conversion and remittance of foreign currencies are subject to the relevant
foreign exchange regulations. Under current PRC laws and regulations, payments of current
account items, including profit distributions may be made in foreign currencies without prior
approval from State Administration of Foreign Exchange (SAFE), but are subject to
procedural requirements including presenting relevant documentary evidence of such
transactions and conducting such transactions at designated foreign exchange banks within
the PRC that have the licenses to carry out foreign exchange business. Strict foreign
exchange control continues to apply to capital account transactions. These transactions must
be approved by or registered with SAFE or a local branch and repayment of loan principal
and investment in negotiable instruments are also subject to restrictions.
Under our current corporate structure, our source of funds will consist of dividend payments
from our subsidiaries in the PRC, Vietnam, Myanmar and India denominated in RMB, VND,
Burmese Kyat and INR respectively. We cannot assure you that we will be able to meet all of
48

our foreign currency obligations or to remit payments out of these countries. If our
subsidiaries in the PRC are unable to obtain SAFE approval to repay loans to our Company,
or if future changes in relevant regulations place restrictions on the ability of the subsidiaries
to remit dividend payments to our Company, our Companys liquidity and ability to satisfy its
third-party payment obligations, and its ability to distribute dividends in respect of the Shares,
could be materially and adversely affected.
Regulation of direct investment and loans by offshore holding companies may delay or
limit us from using the net proceeds from the Offering to make additional capital
contributions or loans to our major overseas subsidiaries.
Any capital contributions or loans that we, as an offshore entity, make to our overseas
subsidiaries, including from the net proceeds from the Offering, may be subject to foreign
direct investment regulations in the respective jurisdictions.
For example, any of our loans to our PRC subsidiaries cannot exceed the difference between
the total amount of investment our PRC subsidiaries are approved to make under relevant
PRC laws and the registered capital of our major PRC subsidiaries, and such loans must be
registered with the local branch of SAFE. In addition, our capital contributions to our major
PRC subsidiaries must be approved by the Ministry of Commerce (MOFCOM) or its local
counterpart. We may also not be able to make long-term loans to our Vietnamese
subsidiaries unless we make additional contributions to the investment capital of these
subsidiaries. Additional contributions require the amendment of the investment certificates of
these subsidiaries and prior approval from the Ministry of Planning and Investment in
Vietnam.
We cannot assure you that we will be able to obtain these approvals on a timely basis, or at
all. If we fail to obtain such approvals, our ability to make equity contributions or provide loans
to our overseas subsidiaries or to fund their operations may be negatively affected, which
may adversely affect our liquidity and ability to fund their working capital and expansion
projects and meet their obligations and commitments and would have a material adverse
effect on our business, financial condition, results of operations and/or prospects.
RISKS RELATED TO OUR OFFERING AND INVESTMENT IN OUR SHARES
Our Directors and Substantial Shareholders will retain significant control over our
Company after the Offering, which will allow them to influence the outcome of matters
submitted to Shareholders for approval.
Upon the completion of the Offering, our Directors1, Substantial Shareholders and their
associates will beneficially own in aggregate approximately 83.84% of our Companys postOffering issued Shares (assuming the Over-allotment Option is exercised in full). Therefore,
these persons will be able to exercise significant influence over matters requiring
Shareholders approval, including the election of directors and the approval of significant
corporate transactions. If they act together, they will also have veto power with respect to any
shareholder action or approval requiring a majority vote except where they are required by the
rules of the Listing Manual to abstain from voting. Such concentration of ownership may also
have the effect of delaying, preventing or deterring a change in control of our Company, or
otherwise discourage a potential acquirer from attempting to obtain control of our Company
through corporate actions such as merger or takeover attempts notwithstanding that the same
may be synergistic or beneficial to our Group or our Shareholders.

Not including any Reserved Shares allocated to the Directors.

49

Our Shares may not be a suitable investment for all investors.


Each prospective investor in the Offering Shares must determine the suitability of that
investment in light of its own circumstances. In particular, each prospective investor should:

have sufficient knowledge and experience to make a meaningful evaluation of the


Offering Shares, the Company, the merits and risks of investing in the Offering Shares
and the information contained in this Prospectus;

have access to, and knowledge of, appropriate analytical tools to evaluate, in the context
of its particular financial situation, an investment in the Offering Shares and the effect the
Offering Shares will have on its overall investment portfolio;

have sufficient financial resources and liquidity to bear all of the risks of an investment in
the Offering Shares, including where the currency of the Offering Shares is different from
the prospective investors currency;

understand thoroughly the terms of the Offering Shares; and

be able to evaluate (either alone or with the help of a financial adviser) possible
scenarios for economic and other factors that may affect its investment and its ability to
bear the applicable risks.

Any future sales of our Shares by our Substantial Shareholders following the Offering
could adversely affect our Share price.
Following the Offering, we will have 1,727,470,391 issued Shares, of which 1,055,082,615
and 282,527,085 Shares, or 61.08% and 16.35% of our outstanding Shares, will be owned by
the Scuderia Trust and the Capital Two Trust, respectively (assuming the Over-allotment
Option is not exercised) Our Shares will be traded on the Main Board of the SGX-ST following
listing. For varying periods after the Listing Date, we and certain of our shareholders are
restricted from selling Shares. For more information, see Plan of Distribution.
Any future sale or an increased availability of our Shares may have a downward pressure on
our Share price. The sale of a significant number of Shares in the public market after the
Offering, including by our Controlling Shareholders, or the issuance of further new Shares by
us, or the perception that such sales may occur, could materially affect the market price of our
Shares. These factors also affect our ability to sell additional equity securities at a time and at
a price favorable to us. Except as otherwise described in the section entitled Plan of
DistributionNo Sales of Similar Securities and Lock-up in this Prospectus, there are no
restrictions on the ability of our Substantial Shareholders to dispose of their shareholdings.
There has been no prior market for our Shares.
Prior to the Offering, there has been no public market for our Shares. Although we have
applied for our Shares to be listed on the Main Board of the SGX-ST, there is no assurance
that an active public market for our Shares will develop or, if it develops, be sustained, or that
the market price of our Shares will not decline below the Offering Price.
The Offering Price of our Shares may not be indicative of prices that will prevail in the trading
market. You may not be able to resell our Shares at the Offering Price or at a price that is
attractive to you. The trading prices of our Shares could be subject to fluctuations in response
to variations in our results of operations, changes in general economic conditions, changes in
accounting principles or other developments affecting us, our customers or our competitors,
changes in financial estimates by securities analysts, the operating and stock price
performance of other companies and other events or factors, many of which are beyond our
control. Volatility in the price of our Shares may be caused by factors outside of our control or
may be unrelated or disproportionate to our results of operations.
50

Although it is intended that our Shares will remain listed on the SGX-ST, there is no
guarantee of the continued listing of our Shares.
Our Share price may fluctuate following the Offering.
The market price of our Shares may fluctuate as a result of, among others, the following
factors, some of which are beyond our control:

variations in our operating results;

changes in research analysts recommendations, perceptions or estimates of our


financial performance;

announcements by our competitors or ourselves of the gain or loss of significant


acquisitions, strategic partnerships, joint ventures or capital commitments;

involvement in litigation or arbitration;

changes in market valuations and share prices of companies with similar business to our
Group which are listed and/or based in Singapore or the countries in which we operate;

changes in conditions affecting the industry, the general economic conditions or stock
market sentiments or other events or factors;

success or failure of our management team in implementing business and growth


strategies;

additions or departures of key personnel;

fluctuations in stock market prices and volume; and

negative publicity involving our Company, any of our Directors, Executive Officers or
Substantial Shareholders, whether or not it is justified. Some examples are unsuccessful
attempts in joint ventures, takeovers or involvement in insolvency proceedings.

There are relatively few agri-livestock companies listed on the SGX-ST and as a result there
may be greater volatility in the price of our Shares due to various factors, including a lack of
knowledge on the part of investors in evaluating companies in this sector. A decline in any of
the factors listed above could adversely affect the price of our Shares.
Investors in our Shares will suffer immediate dilution, and may experience further
dilution, in the net asset value of our Shares.
The Offering Price of our Shares is higher than our net asset value per Share after adjusting
for the estimated net proceeds from the Offering and based on the post-Offering share
capital. If we were liquidated immediately following the Offering, each investor subscribing to
the Offering may receive less than the price paid for their Shares. Please refer to the section
Dilution of this Prospectus for details.
Singapore law contains provisions that could discourage a take-over of our Company.
The Singapore Code on Take-overs and Mergers and Sections 138, 139 and 140 of the
Securities and Futures Act (collectively, the Singapore Take-over and Merger Provisions)
contain certain provisions that may delay, deter or prevent a future take-over or change in
control of our Company for so long as our Shares are listed for quotation on the SGX-ST.
Except with the consent of the Securities Industry Council, any person acquiring an interest,
whether by a series of transactions over a period of time or otherwise, either on his own or
together with parties acting in concert with him, in 30% or more of our voting Shares is
required to extend a take-over offer for our remaining voting Shares in accordance with the
51

Singapore Take-over and Merger Provisions. Except with the consent of the Securities
Industry Council, such a take-over offer is also required to be made if a person holding
between 30% and 50% (both inclusive) of our voting Shares (either on his own or together
with parties acting in concert with him) acquires additional voting Shares representing more
than 1% of our voting Shares in any six-month period. While the Singapore Code on Takeovers and Mergers seeks to ensure an equality of treatment among shareholders, its
provisions could substantially impede the ability of shareholders to benefit from a change of
control and, as a result, may adversely affect the market price of our Shares and their ability
to realize any benefit from a potential change of control.
We may not be able to pay dividends in the future.
Our ability to declare dividends in relation to the Shares will depend on, amongst others, our
operating results, financial condition, other cash requirements including capital expenditures,
the terms of borrowing arrangements, the ability of our subsidiaries to pay dividends to us,
other contractual restrictions and other factors deemed relevant by our Directors. This, in turn,
depends on our strategy, the successful implementation of our strategy and on financial,
competitive, regulatory, general economic conditions and other factors that may be specific to
us or specific to our industry, many of which are beyond our control.
In addition, our Company is a holding company and we operate our business through our
subsidiaries. Therefore, our ability to pay dividends will be affected by the ability of our
subsidiaries to declare and pay us dividends or other distributions. The ability of our
subsidiaries to declare and pay dividends to us will be dependent on the cash income of and
cash available to such subsidiary and the operating results, financial condition, other cash
requirements including capital expenditures, the terms of borrowing arrangements and other
contractual restrictions of the relevant subsidiary and may be restricted under applicable law
or regulation.
For example, the relevant subsidiary may need approvals from tax and other regulatory
authorities before payment or repatriation of dividends or other distributions can be made,
which may not be forthcoming in a timely manner or at all. Please also see the section entitled
Risk FactorsRisks Related to the Jurisdictions in Which We OperateAny limitations on
the ability of our subsidiaries to pay dividends to us could have a material adverse effect on
our ability to conduct our business of this Prospectus. If any of our subsidiaries are unable or
are restricted in their ability to declare and pay dividends or other distributions to us, our
ability to pay dividends on our Shares may be adversely affected. In addition, covenants in
loan documents of the subsidiaries may restrict the ability of these subsidiaries to declare
and/or pay dividends, which in turn could have an adverse impact on our ability to declare and
pay dividends to our Shareholders. Please also see the section entitled Risk FactorsRisks
Relating to our Business and OperationsWe have substantial indebtedness and may be
unable to satisfy certain covenants under our senior notes or other debt facilities, which could
materially and adversely affect our business, financial condition and/or results of operations.
and Dividends of this Prospectus for further details.
Shareholders may not be able to participate in future offerings or certain other equity
issues we may make.
In the event that we issue new Shares, we will be under no obligation to offer those Shares to
our existing Shareholders at the time of issue, except where we elect to conduct a rights
issue. However, in electing to conduct a rights issue or certain other equity issues, we may be
subject to regulations as to the procedure to be followed in making such rights offering
available to our existing Shareholders or in disposing of such rights for the benefit of such
Shareholders and making the net proceeds available to them. We may also choose not to
offer such rights to the holders of our Shares having an address in a jurisdiction outside
Singapore. Accordingly, holders of our Shares may be unable to participate in future offerings
of our Shares and may experience dilution of their shareholdings as such.
52

USE OF PROCEEDS
Based on the Offering Price of S$0.80 for each Offering Share, the net proceeds from the
Offering (after deducting underwriting and selling commissions and estimated offering
expenses payable by us, excluding any discretionary incentive fees) will be approximately
S$187.3 million (US$150.6 million) assuming the Over-allotment Option is not exercised and
S$216.4 million (US$174.0 million) assuming the Over-allotment Option is fully exercised.
We intend to use our net proceeds from the Offering primarily for the following purposes:

investment in our China dairy business and the construction of a second five-farm hub in
Inner Mongolia;

investment in our animal protein business in our target markets (including our swine
business in Vietnam, poultry business outside Indonesia and beef business in the PRC);
and

repayment or prepayment of borrowings, including the prepayment charges, of our


Group.

The following table, which is included for the purpose of illustration, sets out the intended
purposes of the net proceeds from the Offering:
Assuming the Over-allotment Option
is not exercised

Assuming the Over-allotment Option


is fully exercised

As a dollar amount
As a dollar amount
for each S$ of the
for each S$ of the
Estimated Estimated
Gross Proceeds
Estimated Estimated
Gross Proceeds
Amounts Amounts
from the Offering
Amounts Amounts
from the Offering
S$
US$
(in millions) (in millions)

Investment in our China dairy business


and the construction of a second fivefarm hub in Inner Mongolia ..............
Investment in our animal protein business
in our target markets ......................
Repayment or prepayment of borrowings,
including the prepayment charges, of
our Group ..................................
Total ..........................................

S$
US$
(in millions) (in millions)

87.1

70.0

0.44

111.9

90.0

0.49

13.2

10.6

0.07

17.4

14.0

0.08

87.1

70.0

0.44

87.1

70.0

0.38

187.3

150.6

0.94

216.4

174.0

0.95

As at the Listing Date, our Group has the following facilities in place, which (including any
interest thereon) will be repaid or prepaid in full after the Listing Date out of the net proceeds:

a credit facility obtained by the Company from Credit Suisse AG, Singapore Branch on
April 9, 2012, for up to US$25 million, which was subsequently increased to
US$40 million. Proceeds from the facility were to finance the Companys working capital,
general investments and corporate requirements. See Material IndebtednessBank
Facilities; and

a bridge loan facility obtained by the Company from Coperatieve Centrale RaiffeisenBoerenleenbank B.A. (trading as Rabobank International), Singapore Branch
(Rabobank Singapore) on April 10, 2014 for US$30 million. This facility was fully
drawn down on June 30, 2014 and we used the proceeds from the facility to finance the
Companys working capital and general corporate requirements. See Material
IndebtednessBank Facilities.

The foregoing represents our best estimate of our allocation of our proceeds from the Offering
based on our current plans and estimates regarding our anticipated expenditures. Actual
expenditures may vary from these estimates, and we may find it necessary or advisable to
re-allocate our net proceeds within the categories described above or to use portions of our
net proceeds for other purposes. In the event that we decide to reallocate our net proceeds
from the Offering for other purposes, we will publicly announce our intention to do so through
a SGXNET announcement to be posted on the Internet at the SGX-ST website,
http://www.sgx.com.
53

Pending the use of our net proceeds in the manner described above, we may also use our net
proceeds for our working capital, place the funds in fixed deposits with banks and financial
institutions or use the funds to invest in short-term money market instruments, as our
Directors may deem appropriate in their absolute discretion.
We intend to make periodic announcements on the use of proceeds as and when material
amounts of Offering proceeds are disbursed, and provide a status report on the use of
proceeds in our annual report.
The announcement will state whether the use of the proceeds is in accordance with the stated
use and the percentage allocated disclosed above.
In the opinion of our Directors, no minimum amount must be raised by the Offering.
Expenses
We estimate that the expenses in connection with the Offering, and the application for listing,
including the underwriting and selling commissions (but excluding discretionary incentive fees)
and all other incidental expenses relating to the Offering will be approximately S$11.1 million
(US$8.9 million) assuming the Over-allotment Option is not exercised and approximately
S$11.8 million (US$9.5 million) assuming the Over-allotment Option is fully exercised. These
expenses are payable by us in proportion to the number of Offering Shares issued or sold by
us, respectively, in the Offering except for regulatory fees, SGX-ST listing and processing fees
which are payable by us. The breakdown of these expenses is set out below:
Assuming the Over-allotment Option
is not exercised

Underwriting and selling


commissions(1) .....................
Professional and accounting
fees(2) ...............................
Other Offering-related
expenses(3) .........................
Total ...................................

Assuming the Over-allotment Option


is fully exercised

Estimated Estimated
Amounts Amounts

As a Percentage of the
As a Percentage of the
Gross Proceeds
Estimated Estimated
Gross Proceeds
from the Offering
Amounts Amounts
from the Offering

S$
US$
(in millions) (in millions)

S$
US$
(in millions) (in millions)

4.3

3.4

2.15%

4.9

4.0

2.15%

5.5

4.4

2.78%

5.5

4.4

2.42%

1.3

1.1

0.67%

1.3

1.1

0.58%

11.1

8.9

5.61%

11.8

9.5

5.16%

Notes:
(1)
Includes GST applicable on underwriting and selling commissions.
(2)
Includes estimated fees for the Co-Lead Manager, the legal advisers fees and fees for the Independent Auditor, the
Industry Consultant, the Share Registrar and Share Transfer Agent and other professionals fees. These are estimated
expenses and the actual amounts may differ.
(3)
Includes the estimated cost of production of this Prospectus, road show and other marketing expenses and certain other
expenses incurred or to be incurred in connection with the Offering. These are estimated expenses and the actual
amounts may differ.

We will pay the Joint Issue Managers, Joint Global Coordinators and Joint Bookrunners and
Underwriters, as compensation for their services in connection with the Offering, underwriting
and selling commissions amounting to 2.0 per cent. of the total gross proceeds from the sale
of Offering Shares. These underwriting and selling commissions of S$0.016 for each Offering
Share are payable by us.
We may, at our sole discretion, pay each of the Joint Issue Managers, Joint Global
Coordinators and Joint Bookrunners and Underwriters or any one of them an incentive fee of
up to 1.0 per cent. of the gross proceeds from the offering of the Offering Shares and the
Additional Shares. The additional incentive fee, if it is to be paid to any of the Joint Issue
Managers, Joint Global Coordinators and Joint Bookrunners and Underwriters, will amount to
up to S$0.008 per Share.
See Plan of DistributionThe Offering for a description of the commissions payable in
connection with the Offering.
54

DIVIDENDS
Statements contained in this section that are not historical facts are forward-looking
statements. Such statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those which may be forecasted and projected. Under no
circumstances should the inclusion of such information herein be regarded as a
representation, warranty or prediction with respect to the accuracy of the underlying
assumptions by us, the Joint Global Coordinators, Joint Issue Managers, Joint Bookrunners
and Underwriters, or any other person. Prospective investors are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the date hereof.
See Notice to InvestorsForward-looking Statements.
Past Dividends
Our Company has not paid dividends in the past.
Dividend Policy
We do not have a fixed dividend policy. All dividends we declare must be approved by an
ordinary resolution of our shareholders at a general meeting, except that our Board of
Directors may declare interim dividends without the approval of our shareholders. We are not
permitted to pay dividends in excess of the amount recommended by our Board of Directors.
Any dividends we pay will be out of our profits as permitted under Singapore law. In addition,
we depend largely upon the receipt of dividends and other distributions from our subsidiaries,
associates and material entities to pay the dividends on the Shares.
When making recommendations on the timing, amount and form of future dividends, if any,
our Companys Board of Directors will consider, among other things:

our results of operations and cash flow;

our expected financial performance and working capital needs;

our future prospects;

our capital expenditures and other investment plans;

other investment and growth plans; and

the general economic and business conditions and other factors deemed relevant by our
Board of Directors and statutory restrictions on the payment of dividends.

Payment of cash dividends and distributions, if any, will be declared in Singapore dollars and
paid in Singapore dollars to CDP on behalf of shareholders who maintain, either directly or
through depository agents, securities accounts with CDP.

55

CAPITALIZATION AND INDEBTEDNESS


The table below sets out our capitalization and indebtedness based on the unaudited financial
statements of our Group as of May 31, 2014 on an actual basis and as adjusted to reflect the
issuance of the Offering Shares, and the application of net proceeds from the Offering in the
manner described in Use of Proceeds.
The information in this table should be read in conjunction with the Use of Proceeds,
Selected Combined Financial Information and Other Information, Managements Discussion
and Analysis of Financial Condition and Results of Operations and our combined historical
financial statements and the notes thereto included in this Prospectus.
As of May 31, 2014
Actual
As adjusted(1)
US$ in thousands

Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

229,975

310,556

527,744
745
-

457,744
745
-

187,451
1,291
343,154

187,451
1,291
343,154

Total loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,060,385

990,385

Current Indebtedness
Secured and guaranteed bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured and non-guaranteed shareholders loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Current Indebtedness
Secured and guaranteed bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured and guaranteed bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured and non-guaranteed bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Controlling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

761,293
237,395
(405,941)
(87,065)
316,186

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

821,868

972,449

Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,882,253

1,962,834

Note:
(1)
Capitalization, as adjusted, assumes net proceeds of US$150.6 million from this offering.

56

916,742
232,528
(405,941)
(87,065)
316,186

DILUTION
New investors subscribing for and/or purchasing the Offering Shares at the Offering Price will
experience an immediate dilution in net asset value per Share immediately after the
completion of the Offering. Net asset value per Share is determined by subtracting our total
liabilities and minority interests from our total assets, and dividing the difference by the
number of Shares deemed to be outstanding on the date as of which the book value is
determined. Our net asset value per Share as of March 31, 2014 was S$0.65 per Share (as
adjusted for the Share Split (as defined herein)).
The Offering Price of S$0.80 per Offering Share exceeds the pro forma net asset value of
S$0.66 per Share as of March 31, 2014 (after adjusting for the Share Split and the issuance
of the Offering Shares in the Offering) by approximately 20.3 per cent. Since the Offering
Price per Share exceeds the net asset value per Share after the Offering, there is an
immediate dilution to investors in the Offering. Such dilution is illustrated in the table below:
Offering Price per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net asset value per Share as of March 31, 2014, as adjusted for the Share Split . . . . . . . . . . . . . . . . . .
Increase in net asset value per share after the Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma net asset value per Share as March 31, 2014, as adjusted for the issuance of the
Issue Shares in the Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilution in pro forma net asset value per Share to new investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage dilution in pro forma net asset value per Share to new investors . . . . . . . . . . . . . . . .

S$0.80
S$0.65
S$0.02
S$0.66
S$0.14
16.9%

The following table summarizes the total number of Shares acquired during the period of
three years before the date of lodgment of this Prospectus or to be acquired by our Directors
or key management, Substantial Shareholders or persons connected to them, the total
consideration paid by them and the effective cash cost per Share to our shareholders and to
our new public shareholders (assuming the Over-allotment Option is not exercised) pursuant
to the Offering.
Number of Shares
Acquired(1)

Total Consideration

710,056,500
81,983,835
211,759,365
60,860,691
81,000,000
248,000,000

522,862,475
27,279,845
146,244,574
49,475,801
101,802,428
198,400,000

(S$)

Rangi Management Limited . . . . . . . . . . . . . . . . . . . . . . .


Tasburgh Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Morze International Limited . . . . . . . . . . . . . . . . . . . . . . . .
Great Alpha Investments Limited . . . . . . . . . . . . . . . . .
Tallowe Services Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New investors in the Offering . . . . . . . . . . . . . . . . . . . . .

Effective Cash Cost


per Share
(S$)

0.74
0.33
0.69
0.81
1.26
0.80

Note:
(1)
After adjusting for the Share Split.

Save as disclosed above, there has been no acquisition of any of our existing Shares by our
Directors or key management, Substantial Shareholders or persons connected to them and/or
their associates, or any transaction entered into by them which grants them the right to
acquire any of our existing Shares, from three years before the date of lodgment of this
Prospectus up to the date of lodgment of this Prospectus by the Authority. For further
information regarding the interest of our Substantial Shareholders, please see Share Capital
and ShareholdersOwnership Structure.

57

EXCHANGE RATES AND EXCHANGE CONTROLS


Exchange Rates
The table below sets forth, for the periods indicated, certain information concerning the
exchange rates between the Singapore dollar and the US dollar and the IDR, as quoted by
Bloomberg L.P. and rounded to four decimal places. The average rates for the annual figures
were determined using the average of the exchange rates at the last day of each month
during the year indicated. No representation is made that the Singapore dollar, US dollar and
IDR amounts referred to herein could have been or could be converted into Singapore dollar,
US dollar and IDR at the rates indicated, at any other rate, or at all.
Closing Exchange Rates
Singapore Dollar per US Dollar
Average
High
Low
Period End

Fiscal year:
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three months ended March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three months ended March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Month:
October 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
May 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 2014. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 1, 2014 to Latest Practicable Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2537
1.2445
1.2536
1.2382
1.2686

1.3133
1.2978
1.2826
1.2433
1.2788

1.2020
1.2163
1.2205
1.2326
1.2583

1.2966
1.2216
1.2624
1.2326
1.2583

1.2433
1.2482
1.2592
1.2724
1.2657
1.2672
1.2550
1.2517
1.2512
1.2442

1.2516
1.2561
1.2689
1.2788
1.2757
1.2780
1.2636
1.2567
1.2572
1.2475

1.2353
1.2427
1.2487
1.2625
1.2588
1.2583
1.2472
1.2462
1.2469
1.2410

1.2411
1.2556
1.2624
1.2767
1.2678
1.2583
1.2552
1.2542
1.2469
1.2437

Source: Bloomberg L.P. Bloomberg L.P. has not provided its consent, for purposes of Section 249 of the Securities and Futures
Act, to the inclusion of the information extracted from its database, and is therefore not liable for such information under Sections
253 and 254 of the Securities and Futures Act. While we and the Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters have taken reasonable actions to ensure that the information from Bloomberg L.P.s database
has been reproduced in its proper form and context, and that the information has been extracted accurately and fairly from such
database, neither we nor the Joint Global Coordinators, the Joint Issue Managers, the Joint Bookrunners nor the Underwriters
nor any other party has conducted an independent review of the information contained in that database or verified the accuracy
of the contents of the relevant information.

58

The closing exchange rate on the Latest Practicable Date for Singapore dollar to US dollar
was US$1=S$1.2437.

Average

Fiscal year:
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Three months ended March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . .
Three months ended March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . .
Month:
October 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
February 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
May 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 1, 2014 to Latest Practicable Date . . . . . . . . . . . . . . . . . . . . . . .

Closing Exchange Rates


IDR per US Dollar
High
Low
Period End

8,767.6
9,158.0
8,464.0
9,410.2
9,799.0
8,888.0
10,585.0 12,261.0
9,618.0
9,724.2
9,753.0
9,692.0
11,835.3 12,240.0 11,293.0

9,069.0
9,793.0
12,171.0
9,734.0
11,361.0

11,163.0
11,614.6
12,076.5
12,162.2
11,921.6
11,422.0
11,440.3
11,533.9
11,895.8
11,747.0

11,274.0
11,965.0
12,171.0
12,213.0
11,610.0
11,361.0
11,562.0
11,676.0
11,875.0
11,736.0

11,530.0
12,018.0
12,261.0
12,238.0
12,240.0
11,598.0
11,630.0
11,676.0
12,099.0
11,918.0

10,853.0
11,335.0
11,770.0
12,050.0
11610.0
11,293.0
11,289.0
11,413.0
11,766.0
11,574.0

Source: Bloomberg L.P. Bloomberg L.P. has not provided its consent, for purposes of Section 249 of the Securities and Futures
Act, to the inclusion of the information extracted from its database, and is therefore not liable for such information under Sections
253 and 254 of the Securities and Futures Act. While we and the Joint Global Coordinators, Joint Issue Managers, Joint
Bookrunners and Underwriters have taken reasonable actions to ensure that the information from Bloomberg L.P.s database
has been reproduced in its proper form and context, and that the information has been extracted accurately and fairly from such
database, neither we nor the Joint Global Coordinators, the Joint Issue Managers nor the Joint Bookrunners nor the Underwriters
nor any other party has conducted an independent review of the information contained in that database or verified the accuracy
of the contents of the relevant information.

The closing exchange rate on the Latest Practicable Date for US dollar to IDR was
US$1=IDR11,736.0.
Exchange Controls
Singapore
Currently, no foreign exchange control restrictions are enforced in Singapore.
Indonesia
There are no foreign exchange controls in Indonesia. Law No. 24 Year 1999 concerning the
Flow of Foreign Exchange and Exchange Rate System (Law No. 24/1999) provides that a
person may freely hold, use and transfer foreign exchange. However, pursuant to Law
No. 24/1999, Bank Indonesia imposes reporting requirements for the movement of assets and
foreign financial liabilities between residents and non-residents including the movement of
assets and foreign financial liabilities among nationals. Bank Indonesia Regulation
No. 14/21/PBI/2012 dated December 21, 2012 concerning Foreign Exchange Activities
Reporting holds corporate bodies and other bodies domiciled in Indonesia responsible for
submitting reports on foreign exchange activities whether for their own interests or those of
other parties. Information to be filed with Bank Indonesia includes: (i) all trading activities
involving goods, services, and other transactions between Indonesian and non-Indonesian
parties whether denominated in Indonesian or other currency; (ii) the balance of their foreign
financial assets and/or any foreign financial obligations by Indonesian residents both on their
own or a customers account whether denominated in Indonesian or other currency; and
(iii) any plan to secure or draw down an offshore loan. Indonesian resident is defined as an
individual, legal or other entity that is domiciled or intends to be domiciled, in Indonesia for at
least one year.
59

There is no restriction for Indonesian residents to open and hold offshore accounts.
China
A discussion on the relevant foreign exchange control laws is set out in Appendix C
RegulationSummary of Relevant Chinese Laws and RegulationsForeign Exchange.
Vietnam
Vietnam has historically imposed exchange control mechanisms designed to limit foreign
currency outflows, generally requiring the use of the Vietnamese Dong in domestic
transactions and attempting to channel foreign currencies into its banking system. The State
Bank of Vietnam primarily administers Vietnams foreign exchange control policy. In 2005, the
Standing Committee of National Assembly of Vietnam introduced Foreign Exchange
Ordinance No. 28/2005/PL-UBTVQH11 which was amended by Ordinance
No. 06/2013/UBTVQH13 on March 18, 2013 (together, Foreign Exchange Ordinance)
intended to stimulate the foreign exchange market by liberalizing current transactions control
and gradually reducing capital transactions control.
Under the Foreign Exchange Ordinance, any person or organization may exchange
Vietnamese Dong into foreign currency at credit institutions licensed to provide foreign
exchange services in Vietnam, provided that such person or organizations intention of using
foreign currency is permitted by Foreign Exchange Ordinance and they can provide the
relevant credit institutions with appropriate supporting documents. Foreign currencies may be
freely exchanged into Vietnamese Dong by individuals at licensed credit institutions.
In order to offer securities denominated in a foreign currency in a foreign jurisdiction, a
company resident in Vietnam is required to open a foreign currency issued securities capital
bank account at a licensed credit institution in Vietnam. Any receipt or payment relating to the
offering must be made through this account in accordance with the foreign exchange
regulations in effect.
For the purpose of investment in Vietnam, foreign direct investors including direct
foreign-owned enterprises and foreign parties in business co-operation contracts are required
to open capital contribution accounts at licensed commercial banks in Vietnam. All financial
transactions relating to the investment of foreign direct investors in Vietnam, including but not
limited to the capital investment into Vietnam, borrowing and repayment of foreign term loans
and after-tax profit remittance out of Vietnam, must be performed via such accounts.
Furthermore, foreign direct investors may repatriate their profits only if (i) they have fully
discharged their financial obligations to Vietnamese government, and (ii) they have submitted
to the competent tax authorities of Vietnam their audited financial statements and tax
finalization that does not contain any accumulated losses after carrying forward losses in
accordance with Vietnams corporate income tax laws. Foreign-invested enterprises and
foreign parties to business cooperation contracts may use their Vietnam dong earnings to buy
foreign currencies at licensed credit institutions and repatriate within 30 days after buying
foreign currencies. The investors must notify the tax authorities of such repatriation at least
seven business days prior to the repatriation.
India
A discussion on the relevant foreign exchange control laws is set out in Appendix C
RegulationSummary of Relevant Indian Laws and RegulationsCertain Foreign
Investment and Foreign Exchange Laws.
Myanmar
The Foreign Exchange Management Law (FEML) is the primarily legislation regulating
foreign exchange controls in Myanmar.
60

Pursuant to Section 7 of the FEML, foreign cash and other payment instruments can only be
transferred between the State and other countries according to the regulations issued by the
Central Bank. According to Section 8 of the FEML, other transfers may only be made
through person who has a foreign exchange licence. It follows therefore that transactions
between private banks and a company can be done through a bank issued with a foreign
exchange licence. This essentially grants the Central Bank of Myanmar (CBM) with control
over foreign currencies in Myanmar and foreign payment instruments such as loans; such
remit being consistent with the CBMs broad responsibility to monitor and regulate the
transmission of money in and out of Myanmar.
Notwithstanding the above, Sections 24 and 25 of the FEML also provide that there should be
no impediments to the repayment of ordinary transactions. Section 2(l) of the FEML defines
ordinary transactions as:
(a)

payments to be made in connection with foreign trade, other ongoing business


including services, ordinary short-term banking and credit facilities;

(b)

payments to be made as interest on loans and as net income from other investments;

(c)

payments in a reasonable amount to amortize loans and depreciate direct investment;


and

(d)

reasonable remittance for family expenses.

Currently, there are no published CBM regulations specifically relating to the transfer of
foreign cash and other payment instruments. However, in practice CBM approval is currently
required for any foreign loan into Myanmarapproval being required for both the drawdown
and each repayment of such loans.
With respect to foreign loans the CBMs general position is that it will not permit foreign
entities to loan monies to Myanmar companies unless such foreign entity and such Myanmar
company are related companies. In addition, in practice obtaining approval from the
Directorate of Investments and Company Administration (DICA) would also be required
even though DICA is unlikely to object if CBM has given its approval.
With respect to the transfer of foreign money by a company holding a MIC Permit, the Foreign
Investment Law (FIL) requires the submission of Form 13 (Application to Transfer Foreign
Currency) to the Myanmar Investment Commission (MIC). However, due to the CBMs
broad responsibility for the transfer of money in and out of Myanmar, the MIC will, in practice,
typically seek CBM approval. In turn, the MIC would unlikely object to the Form 13 Application
if CBM has given its approval.

61

SELECTED COMBINED FINANCIAL INFORMATION AND OTHER INFORMATION


You should read the following selected combined financial information for the periods and as
of the dates indicated in conjunction with the section of this Prospectus entitled
Managements Discussion and Analysis of Financial Condition and Results of Operations
and our combined financial statements, the accompanying notes and the related independent
auditors report included in this Prospectus. The reporting currency for our financial
statements is U.S. dollars and we prepare and present our financial statements in accordance
with FRS, which may differ in certain significant respects from generally accepted accounting
principles in other countries.
The selected combined financial information as of and for the years ended December 31,
2011, 2012 and 2013 have been derived from our audited combined financial statements
included in this Prospectus and should be read together with those financial statements and
the notes thereto. The selected combined financial data as of and for the three months ended
March 31, 2013 and 2014 has been derived from our unaudited interim combined financial
statements as of and for the three months ended March 31, 2013 and 2014 included
elsewhere in this Prospectus. We have prepared the unaudited interim combined financial
statements on the same basis as our audited combined financial statements. Our historical
results for any prior or interim periods are not necessarily indicative of results to be expected
for a full fiscal year or for any future period.

Combined Statement of Comprehensive Income

For the year ended


December 31,
2011
2012
2013

For the three months


ended March 31,
2013
2014

(US$ in millions)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,029.8
2,321.8
2,697.3
Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,663.2) (1,873.8) (2,198.1)
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
366.5
448.0
499.2
Other Items of Income
Increase in Fair Value of Biological Assets. . . . . . . .
7.5
6.6
6.3
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.1
5.9
2.9
Other Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.9
7.3
3.5
Foreign Exchange Adjustments Gains . . . . . . . . . . . .
4.4
Other Items of Expense
Foreign Exchange Adjustments Losses . . . . . . . . . . .
(1.4)
(30.1)
Marketing and Distribution Costs . . . . . . . . . . . . . . . . . . .
(84.6)
(83.1)
(95.0)
Administration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (146.8)
(173.5)
(202.5)
Finance Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(41.9)
(56.8)
(66.8)
Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3.8)
(4.2)
(2.6)
Profit before tax from continuing
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114.4
148.8
114.8
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(34.9)
(38.4)
(33.4)
Profit from continuing operations, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79.5
110.4
81.4
Other comprehensive Income/(Loss):
Remeasurement of the Net Defined Benefits
Plan, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6.2)
(8.7)
7.2
Exchange differences in translating foreign
operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(14.9)
(28.6)
(117.2)
Other Comprehensive Loss for the Year, Net
of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(21.1)
(37.3)
(110.1)
Total Comprehensive Income/(Loss) . . . . . . . . . . .
58.4
73.1
(28.7)
Profit Attributable to Owners of the Parent, Net
of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit Attributable to Non-Controlling Interests,
Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit, Net of Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62

675.8
(541.0)
134.7

690.1
(574.1)
116.0

(10.6)
0.8
0.3
0.6

2.4
1.0
0.8
7.6

(25.0)
(50.4)
(14.7)
(0.6)

(26.1)
(55.2)
(19.3)
(0.01)

35.2
(9.9)

27.2
(5.3)

25.4

22.0

(7.2)

(9.5)

(3.8)

37.6

(11.1)
14.3

28.1
50.1

44.5

53.3

41.8

17.8

13.6

35.0
79.5

57.2
110.4

39.6
81.4

7.6
25.4

8.4
22.0

Combined Statement of Comprehensive Income

For the year ended


December 31,
2011
2012
2013

For the three months


ended March 31,
2013
2014

(US$ in millions)

Total Comprehensive Income/(Loss) Attributable


to Owners of the Parent, Net of Tax. . . . . . . . . . . . .
Total Comprehensive Income/(Loss) Attributable
to Non-Controlling Interests, Net of Tax . . . . . . . .
Total Comprehensive Income/(Loss) . . . . . . . . . . .

28.3

39.4

(35.3)

8.5

33.5

30.1
58.4

33.7
73.1

6.6
(28.7)

5.8
14.3

16.6
50.1

As at December 31,
2011
2012
2013

Combined Statement of Financial Position

As at March 31,
2014

(US$ in millions)

Assets
Non-Current Assets
Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404.0
599.6
652.7
Investment Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.8
3.1
2.3
Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.8
10.5
10.1
Biological Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82.5
159.4
237.9
Deferred Tax Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.1
18.8
15.2
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.0
7.9
9.8
Total Non-Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526.1
799.3
928.0
Current Assets
Asset Held for Sale Under FRS 105 . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332.2
486.9
543.0
Biological Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43.7
47.8
48.5
Trade and Other Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112.9
133.5
134.6
Other Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.1
4.1
2.7
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
48.0
72.3
79.6
Cash and Cash Equivalents(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150.4
157.3
225.0
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 694.3
901.9 1,035.6
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,220.4 1,701.2 1,963.6
Equity and Liabilities
Equity
Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
86.3
86.3
163.4
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125.4
172.4
214.9
Other Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68.2
96.3
134.4
Translation Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16.9)
(25.3) (106.8)
Equity Attributable to Owners of the Parent, Total . . . . . . . 263.0
329.6
405.8
Non-Controlling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233.2
270.2
291.1
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496.2
599.9
696.9
Non-Current Liabilities
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
66.9
85.3
67.4
Deferred Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.6
10.3
11.7
Other Financial Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163.7
304.3
468.7
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.2
0.6
1.1
Trade and Other Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2
1.5
0.6
Total Non-Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241.5
402.0
549.5
Current Liabilities
Income Tax Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.8
13.4
8.5
Trade and Other Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
87.8
131.9
190.2
Other Financial Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379.2
547.0
509.3
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.9
7.0
9.3
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482.8
699.3
717.2
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 724.2 1,101.3 1,266.7
Total Equity and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,220.4 1,701.2 1,963.6

63

717.9
2.4
11.8
259.2
21.6
5.7
1,018.6
2.2
535.9
56.5
157.9
3.0
119.9
214.7
1,089.9
2,108.5

163.4
222.9
144.1
(81.3)
449.0
314.9
763.9
87.5
15.4
516.1
1.1
0.6
620.8
8.3
159.7
549.1
6.7
723.9
1,344.7
2,108.5

Note:
(1)
Cash and cash equivalents includes cash restricted in use and pledged for bank facilities as disclosed in Note 24A in
Appendix A and Note 24A in Appendix B.
For the year ended
December 31,
2011
2012
2013

Combined Cash Flow Data

For the three months


ended March 31,
2013
2014

(US$ in millions)

Net cash flows (used in)/from operating activities . . . . . (23.2)


27.0
89.1
Net cash flows (used in)/from investing activities . . . . . . (148.0) (242.2) (204.7)
Net cash flows from/(used in) financing activities . . . . . 213.9
221.1
184.0

13.5
(34.8)
(34.6)

(47.2)
(47.9)
83.5

Net increase/(decrease) in cash and cash


equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of the year/
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42.7

5.8

68.4

(55.9)

(11.6)

104.5

147.2

153.0

153.0

221.4

Cash and cash equivalents at the end of the year/


period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

147.2

153.0

221.4

97.1

209.8

For the year ended


December 31,
2011
2012
2013

Other Combined Financial Information

For the three months


ended March 31,
2013
2014

(US$ in millions)

EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175.1 241.1 258.6


Profit from continuing operations excluding increases in
fair value of biological assets, net of tax(2) . . . . . . . . . . . . . . . . 72.2 105.8
77.5

73.1

50.5

33.9

21.2

Notes:
(1)
We define EBITDA as profit before tax from continuing operations, less interest income, changes in fair value of biological
assets, foreign exchange adjustments gains, increase/decrease in fair value of marketable securities, plus finance cost,
foreign exchange adjustments losses, depreciation of property, plant and equipment, depreciation of investment properties
and amortization of intangibles.
For the year ended
December 31,
2011
2012
2013

For the three months


ended March 31,
2013
2014

(US$ in millions)

Profit before tax from continuing operations . . . . . . . . . . . . . . .


(+) Finance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(+) Foreign exchange adjustments losses . . . . . . . . . . . . . . . . .
(+) Depreciation of property, plant and equipment . . . . . . . .
(+) Depreciation of investment properties . . . . . . . . . . . . . . . . . .
(+) Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
() Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
() (Increase)/decrease in fair value of biological
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
() Foreign exchange adjustments gains . . . . . . . . . . . . . . . . . .
() (Increase)/decrease in fair value of marketable
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

114.4 148.8 114.8


41.9
56.8
66.8
1.4
30.1
34.8
42.2
53.3
0.2
0.2
0.2
0.6
0.6
1.3
(3.1) (5.9) (2.9)

35.2
14.7
13.2
0.1
0.2
(0.8)

27.2
19.3
14.8
0.0
0.2
(1.0)

(6.3)
-

10.6
(0.6)

(2.4)
(7.6)

(1.8)
3.6
1.3
175.1 241.1 258.6

0.5
73.1

0.0
50.5

(7.5)
(4.4)

(6.6)
-

EBITDA is not a standard measure under FRS. EBITDA should not be considered in isolation or construed as an
alternative to cash flows, net income or any other measure of performance or as an indicator of operating performance,
liquidity, profitability or cash flows generated by operating, investing or financing activities. EBITDA does not account for
taxes, interest expense or other non-operating cash expenses. In evaluating EBITDA, we believe that investors should
consider, among other things, the components of EBITDA such as revenues and operating expenses and the amount by
which EBITDA exceeds capital expenditures and other charges. EBITDA presented herein may not be comparable to
similarly titled measures presented by other companies. You should not compare EBITDA presented by us to EBITDA
presented by other companies because not all companies use the same definition. You should also note that EBITDA as
presented herein is calculated differently from Consolidated EBITDA as defined and used in the Indenture governing our
US dollar-denominated senior notes due 2018 and EBITDA as defined for the purposes of our other indebtedness. See
Material IndebtednessIndebtednessUS-Dollar Denominated Senior Notes Due 2018.

64

(2)

We define profit from continuing operations excluding increase/decrease in fair value of biological assets, net of tax as
profit from continuing operations, net of tax excluding the fair value changes of our biological assets and the taxes thereon,
calculated as follows:
For the year ended
December 31,
2011
2012
2013

For the three months


ended March 31,
2013
2014

(US$ in millions)

Profit from continuing operations, net of tax . . . . . . . . . . . . . . . . . 79.5 110.4 81.4


() (Increase)/decrease in fair value of biological assets . . . (7.5) (6.6) (6.3)
(+) Deferred tax expense in respect of increase in fair
value of biological assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2
2.0
2.4
Profit from continuing operations excluding increases in
fair value of biological assets, net of tax . . . . . . . . . . . . . . . . . . . 72.2 105.8 77.5

25.4
10.6

22.0
(2.4)

(2.1)

1.6

33.9

21.2

FRS 41 is an accounting standard that requires us to value our dairy cows, breeding cattle and swine measured on initial
recognition and at the end of the reporting year. The fair value movements from year-on-year under FRS 41 are non-cash
items and therefore are not used by us when measuring our Groups operational performance because they are not
reflective of the underlying business. We believe that the inclusion of this adjusted profitability measure (excluding FRS 41
fair value changes and the taxes thereon) is useful to investors because it provides a means of evaluating our Groups
operating performance and results from period to period on a comparable basis not otherwise apparent when the impact of
the changes in fair value of biological assets under FRS 41 is included. Profit from continuing operations excluding
increases in fair value of biological assets, net of tax is not a standard measure under FRS and should not be considered
in isolation or construed as an alternative to cash flows, net income or any other measure of performance or as an
indicator of operating performance, liquidity, profitability or cash flows generated by operating, investing or financing
activities. It may not be comparable to similarly titled measures presented by other companies and you should not
compare this measure with that of other companies because not all companies use the same definition.

65

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION


AND RESULTS OF OPERATIONS
We discuss below our historical results of operations and financial condition as of and for the
years ended December 31, 2011, 2012 and 2013 and as of and for the three months ended
March 31, 2013 and 2014, and our assessment of the factors that may affect our prospects
and performance in future periods. You should read the following discussion together with our
audited combined financial statements as of and for the years ended December 31, 2011,
2012 and 2013 and our unaudited combined financial statements as of and for the
three months ended March 31, 2013 and 2014. We have prepared our financial statements in
accordance with FRS, which may differ in certain significant respects from generally accepted
accounting principles in other countries. Our interim results of operations are not necessarily
indicative of our results of operations for the full year.
This discussion and analysis contains forward-looking statements that reflect our current
views with respect to future events and our financial performance. Our actual results may
differ materially from those anticipated in these forward-looking statements as a result of any
number of factors, including those set forth in this section and under the sections headed
Risk Factors and Notice to InvestorsForward-Looking Statements. Any discrepancies in
the tables included herein between the listed amounts and totals thereof are due to rounding.
Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of
the figures which precede them.
Overview
We are a leading agri-food company that produces multiple protein foods. We operate in five
high-growth emerging Asian markets with significant growth potential for protein consumption,
namely China, Indonesia, Vietnam, Myanmar and India. We are a market leader across
multiple classes of protein foods, with an emphasis on milk, poultry and beef, complemented
by growing businesses in swine and aquaculture. We have a vertically integrated business
model that covers the entire value chain for many of our protein products, from feed
production and breeding to commercial farming and processing. We are able to leverage our
premium protein production operations through our high-growth downstream consumer food
business.
We have three operating segments:
DairyWe produce premium raw milk in China and Indonesia. In Indonesia we also produce
premium downstream milk products. We operate a five-farm hub of dairy farms in China,
with four of the farms in the operational stage. We expect construction of our fifth farm to be
completed by the end of 2014, with milk production commencing in early 2015. Our farms in
China are located in Shandong province, and as of March 31, 2014, we had 41,777 heads of
cattle in China, with 16,655 milking cows. We produced over 130,000 tons of milk in China in
2013, and our average milk yield per milking cow for 2013 was 11.5 tons per year. Our
premium raw milk in China is consistently at the top of the market in terms of quality, which is
reflected in its selling price: in 2013 the average selling price of our milk was RMB 4.51 per
kilogram, and in the first three months of 2014, the average price of our milk reached RMB
5.25 per kilogram.
In Indonesia we operate a vertically integrated dairy business. We operate an industrialized
dairy farm to produce premium raw milk that we use for the production of our own
downstream dairy products, and we operate one dairy processing plant for these downstream
products. Our downstream products include premium fresh milk, premium UHT milk and
premium cheese. We market and sell our downstream products under our own brands,
including our Greenfields brand, directly to customers in the retail market in Indonesia and
other countries in Asia, including to major food and beverage companies such as Starbucks.
Our farm in Indonesia is located in Malang, East Java, at an altitude that is conducive to
66

raising high-quality dairy cows, and as of March 31, 2014, we had 5,743 heads of cattle in
Indonesia, with 2,855 milking cows. We produced over 26,000 tons of raw milk in Indonesia in
2013, and our average milk yield per milking cow for 2013 was 9.1 tonnes per year.
Our dairy segment accounted for 4.5% of our total revenue for the year ended
December 31, 2013 and 7.3% of our total revenue for the three months ended March 31,
2014.
Animal ProteinWe produce multiple high-quality animal proteins (poultry, swine, beef and
aquaculture); as well as high-quality animal feed, across our target markets. Our animal
protein operations are vertically integrated and cover the entire value chain of animal protein
production, from animal feed to breeding and commercial farms to slaughtering livestock and
supplying the raw materials for our downstream consumer food segment (see Consumer
Food). Our animal protein operations include the following:

We produce premium-quality animal feed in Indonesia, Vietnam, Myanmar and India,


both for our own poultry, swine and aquaculture operations, as well as for sale to third
parties. We sold over 3.5 million tons of animal feed in 2013 across our markets,
including both internal and external sales;

In our poultry business, we operate over 70 breeding farms and over 30 hatcheries to
produce day-old-chicks (DOCs), primarily in Indonesia, as well as in Vietnam,
Myanmar and India. In 2013 we sold almost 600 million DOCs across our markets. In
2013, we sold approximately 7% of our DOCs produced in Indonesia internally to our
own commercial farms for growing out, with the remainder sold to contract farms or
third parties. We have over 10,000 commercial farms in our network, most of which are
contract farms that are owned and operated by local farmers who grow out the chicks on
our behalf;

In the beef business, we are one of the largest beef cattle feedlot operators in Indonesia
and the largest importer of live beef cattle into Indonesia. We breed, fatten and process
beef cattle and have four feedlots in Indonesia with a total production capacity of
165,000 heads of cattle per year. We also have cattle breeding operations in Australia,
where our stations can hold approximately 45,000 heads of cattle at any one time. We
import the cattle bred at our stations in Australia to Indonesia for fattening and
processing, and we ship approximately 12,000 heads of cattle per year from our
Australian operations to our feedlots in Indonesia;

We have swine breeding and distribution operations in Vietnam, where we sold


approximately 72,700 piglets in 2013. In 2012, we entered into a joint venture with
Hypor, one of the worlds leading suppliers of swine genetics, which enables us to
operate the entire chain of swine breeding farms, including nurseries and parent,
grandparent and great grandparent farms; and

We produce aqua-feed and small amounts of fish and shrimp in Indonesia.

Our animal protein segment accounted for 87.0% of our total revenue for the year ended
December 31, 2013 and 85.9% of our total revenue for the three months ended March 31,
2014.
Consumer FoodWe use the animal protein products that we produce in-house as raw
materials for our downstream consumer food segment, and we leverage the traceability of
these products to position our processed foods as high-quality and reliable consumer food
brands. We make ambient-temperature and chilled/frozen food products from chicken, beef
and seafood for the Indonesian market. Our consumer food segment accounted for 8.4% of
our total revenue for the year ended December 31, 2013 and 6.8% of our total revenue for the
three months ended March 31, 2014.
67

In 2011, 2012 and 2013, our total revenues amounted to US$2,029.8 million, US$2,321.8
million and US$2,697.3 million, respectively, while our profit from continuing operations, net of
tax amounted to US$79.5 million, US$110.4 million and US$81.4 million, respectively. For the
three months ended March 31, 2013 and 2014, our total revenues amounted to US$675.8
million and US$690.1 million, respectively, while our profit from continuing operations, net of
tax amounted to US$25.4 million and US$22.0 million, respectively.
Basis of Presentation
We have included in this Prospectus our audited combined financial statements as of and for
the years ended December 31, 2011, 2012 and 2013 and our unaudited interim combined
financial statements as of and for the three months ended March 31, 2013 and 2014, which
have been prepared in accordance with the provisions of the Singapore Companies Act,
Chapter 50 and FRS. Our audited combined financial statements as of and for the years
ended December 31, 2011, 2012 and 2013 and unaudited combined financial statements as
of and for the three months ended March 31, 2013 and 2014 have been presented in a
manner similar to a pooling-of-interests method to give retrospective application to
transactions involving entities under common control, as a result of a series of transactions to
effect our group restructuring. See Note 1.2 to our audited combined financial statements
included elsewhere in this Prospectus and Corporate Structure and Ownership. Our
unaudited combined financial statements as of and for the three months ended March 31,
2014 include the results of operations and financial position of Japfa Comfeed Myanmar Pte
Ltd, which was formed under a joint venture agreement dated May 9, 2014 with retrospective
application from December 3, 2013, pursuant to which we own an 85.0% shareholding in
Japfa Comfeed Myanmar Pte Ltd. Our audited combined financial statements and unaudited
interim combined financial statements are presented in U.S. dollars, our reporting currency.
Our functional currency is the Singapore dollar, as it reflects the primary economic
environment in which our Group operates, and our financial statements are translated into our
reporting currency at the end of each reporting year at the prevailing Singapore dollar to
U.S. dollar exchange rate. For further information, see Note 2 to our audited combined
financial statements included elsewhere in this Prospectus.
Factors Affecting our Business, Financial Condition and Results of Operations
We outline below a number of factors which have had important effects on our results of
operations and which we expect will continue to impact our financial performance in the
future.
Macroeconomic Factors and General Economic Conditions in Indonesia, China,
Vietnam, India and Myanmar
Our sales volumes of dairy, animal feed, poultry, cattle, swine and consumer foods depend
primarily on consumer demand for our products and for the end products of our customers.
Consumer demand for our products depends in large part on macroeconomic conditions in
our target markets, Indonesia, Vietnam, China, India and Myanmar. For the year ended
December 31, 2013, we generated 81.9%, 10.7%, 3.5% and 2.9% of our revenue from
customers in Indonesia, Vietnam, China and India, respectively. For the three months ended
March 31, 2014, we generated 76.7%, 10.4%, 5.7% and 3.3% of our revenue from customers
in Indonesia, Vietnam, China and India, respectively. Accordingly, our results of operations
may be affected by significant changes in economic and political developments in these
countries, which could affect the demand for and pricing of our products in these markets.
Significantly, as GDP per capita in our target markets grows, we expect the concomitant
increase in purchasing power in these markets to increase the proportion of dairy and protein
consumption. Similarly, if GDP per capita decreases, consumer purchasing power may also
decrease, which we expect would slow down the growth in or decrease consumption of
animal proteins. For consumers in Indonesia and other markets in which we operate, poultry
is a staple protein, and their purchasing power for animal proteins such as poultry and beef
68

directly correlates to the countrys GDP per capita growth and is affected significantly by
inflation and/or depreciation of the local currency. In Indonesia, we expect protein
consumption to consist primarily of poultry and beef, given the halal dietary requirements of a
significant majority of the Indonesian population. In all of our markets, sales volumes of
poultry, cattle and swine are also affected by changes in consumer preferences, including
changes in nutritional guidelines or health advisories. We also expect changes in demand for
our animal feed to move broadly in tandem with changes in macro-economic conditions and
with demand for our animal proteins in our target markets.
Prices and Availability of Raw Materials
For the years ended December 31, 2011, 2012 and 2013 and the three months ended
March 31, 2014, raw material costs constituted approximately 84.0%, 83.7%, 84.5% and
88.3%, respectively, of our total cost of sales, with raw material costs for our animal protein
segment comprising 77.4%, 75.2%, 77.6% and 82.0% of our total cost of sales for these
periods. Corn and soybean meal constitute the substantial majority of the raw materials that
we require for the production of our animal feeds. In 2013, approximately 40% of our corn and
100% of our soybean meal requirements in Indonesia were met by imports. We purchase the
majority of our corn and soybean meal on the spot market, in line with market practice in
Indonesia, Myanmar, India and Vietnam but, depending on market conditions, we may also
enter into forward purchase contracts. For soybean meal, we rely entirely on imports, as
soybean meal is not available in Indonesia. We expect demand for corn and soybean meal
imports in Indonesia to remain high in 2014. The availability and prices of these commodities
are influenced by various factors, including production levels, weather conditions, epidemic
diseases, global demand for such materials, fluctuations in the U.S. dollar and Rupiah
exchange rate (since imported corn and soybean meal are typically priced in U.S. dollars),
and changes in prices of other commodities such as crude oil. Local corn prices have
historically adjusted to global corn prices. For our China dairy segment, the concentrates we
use for our feed, which primarily consist of corn, soybean meal and cotton seed meal, are
readily accessible commodities in China. The forages we use for our feed mainly consist of
corn silage, grass forage and alfalfa, and their availability and price are more dependent on
local market conditions and can fluctuate accordingly. Corn silage can only be harvested once
a year, during August and September. To mitigate against any interruption of our forages
supply, we generally store a years supply of corn silage and at least two months supply of
alfalfa.
Any significant changes in the availability or the prices of our raw materials are likely to affect
our cost of sales. We have in the past been able to pass on increases in raw material costs to
our customers in certain of our business areas. In our animal feed business in Indonesia, for
example, we are generally able to pass on increases in the cost of raw materials (including
corn and soybean meal) into our poultry feed selling prices. Selling prices for feed are based
on a replacement cost plus margin methodology, and as cost increases apply to all feed
millers, the whole industry tends to move in tandem to pass them on. Although there is a time
lag in our ability to implement selling price increases, we typically hold two months of raw
material inventory, which has generally been sufficient time to fully pass on a cost increase. In
our poultry business, prices for DOCs and broilers are determined largely by supply and
demand in the market, which means that we do not have the same ability to pass on
increases in raw material costs, unless market prices move accordingly. In our dairy business
in China, prices for our raw milk depend largely on market forces, albeit influenced and
stabilized by government policies. While our margins have generally increased over the past
three years in our China dairy business because prices have increased, it is unlikely that we
would be able to actively pass on increases in raw material prices to our customers. For our
Indonesian dairy business, raw material price fluctuations tend to have a less direct effect on
the sales prices we offer to our customers, as we use our raw milk in the downstream
processing of our consumer food products, which contain significant value-adds. We expect
69

that these trends will continue across our various business lines and that prices and
availability of raw materials will continue to have a material effect on our results of operations.
Foreign Currency Fluctuations and Translations and Translation of Financial
Statements of Foreign Entities
Our results of operations and financial condition are materially affected by currency
translations of the results of operations and financial condition of our subsidiaries in
Indonesia, India, China, Vietnam and other countries whose functional currency is different
from our functional currency at the group level. Our functional currency is the Singapore
dollar, as the Singapore dollar reflects the primary economic environment in which we
operate, and our combined financial statements are presented in U.S. dollars, our reporting
currency. As such, we are required to translate the results of operations and financial position
for each entity of the Group with a functional currency other than the Singapore dollar or the
U.S. dollar into Singapore dollars, and from Singapore dollars into U.S. dollars for
presentation in our combined financial statements. For each such entity of our Group, income
and expense items on its statement of profit and loss and other comprehensive income are
translated at the average exchange rate between its functional currency and the Singapore
dollar for that reporting period, and assets and liabilities on its balance sheet are translated at
the exchange rate between its functional currency and the Singapore dollar as of the end of
that reporting period. The income and expense items are then translated from Singapore
dollars to U.S. dollars at the average exchange rate between the Singapore dollar and the
U.S. dollar for that reporting period and the assets and liabilities are translated from
Singapore dollars to U.S. dollars at the exchange rate between the Singapore dollar and the
U.S. dollar as of the end of that reporting period. The average exchange rates for the
reporting year for 2011, 2012 and 2013 and for the three months ended March 31, 2014 used
for our combined financial statements were S$1:US$0.797, S$1:US$0.803, S$1:US$0.798
and S$1:US$0.790, respectively, and the exchange rates as of the end of the reporting year
for 2011, 2012 and 2013 and March 31, 2014 used for our combined financial statements
were S$1:US$0.772, S$1:US$0.817, S$1:US$0.789 and S$1:US$0.795, respectively.
Substantial currency fluctuations, particularly the depreciation of the local currencies of our
subsidiaries against the Singapore dollar, will result in translation adjustments that may
materially impact our results of operations and the comparison of such line items from year to
year.
Fluctuations in foreign currencies may also directly impact our business and results of
operations by affecting our profit margins where our costs of goods are predominantly
denominated in one currency and sales are made in another currency. For example, a
significant portion of our cost of raw materials for our animal feed produced and sold in
Indonesia is denominated in U.S. dollars, as we import all of our soybean meal and a
significant portion of our corn for our animal feed business in Indonesia. While we generally
have been able to pass on to customers any increases in the cost of raw materials as a result
of the appreciation of the U.S. dollar against the Rupiah, in the case of a severe depreciation
of the Rupiah against the U.S. dollar, we may not be able to pass on, immediately or at all,
some or all of such an increase to Indonesian consumers, which would have an adverse
impact on our profit margin and our business and results of operations. In addition, a severe
depreciation of the Rupiah could dampen consumer confidence and spending power in
Indonesia and cause a decline in demand for our products. Conversely, if the Rupiah were to
appreciate against the U.S. dollar, we would expect profit margins on our animal feed sales in
Indonesia and our results of operations would improve.
Transactions by the Company in foreign currencies are recorded in Singapore dollars at the
prevailing exchange rates as of the dates of the transactions. At the end of each reporting
year, recorded monetary balances and balances that are measured at fair value and
denominated in functional currencies other than the Singapore dollar are reported at the
prevailing rates as of the end of the reporting year and the fair value dates, respectively. All
70

realized and unrealized exchange adjustment gains and losses are reflected in our statement
of profit or loss. As a result, any such adjustment gains and losses can have a material impact
on our results of operations.
Production Capacity for Dairy, Animal Feed, Poultry and Beef Cattle
We derived a significant portion of our net sales for the years ended December 31, 2011,
2012 and 2013 from our dairy, animal feed, commercial farm and DOC business segments,
and the results of these segments depend to a significant extent on their production
capacities. The volume of raw milk and animal feed and the number of broilers and DOCs that
we can produce annually are dependent on the availability of sufficient production capacity to
meet demand. In recent times, our ability to meet demand in certain of these segments has
been limited by our capacity, and changes to our capacity could have a significant impact on
our net sales. We are currently in the process of expanding our animal feed and DOC
production capacities, which we hope will allow us to better meet our customer demand.
Conversely, any reduction in our production capacities in these key business segments,
whether due to planned maintenance or unforeseen events, may impact our ability to meet
customer demand and could potentially reduce our net sales from the affected business
segment.
Outbreak of Livestock Diseases
Outbreaks of diseases affecting livestock at our poultry, beef cattle, swine, aquaculture and
dairy farms or facilities could have a material effect on our business, financial condition and
results of operations. For instance since 2003, the H5N1 strain of Avian Influenza, or bird
flu, which is potentially lethal to humans, has affected poultry flocks and other birds in several
countries around the world, including in Indonesia, China and Vietnam. Previous outbreaks of
the H5N1 strain of Avian Influenza in Indonesia have resulted in reduced demand for
chickens and drops in the price of DOCs and chicken products. In particular, the initial
outbreak of H5N1 strain of Avian Influenza in Indonesia in late 2003/early 2004 resulted in a
reduction in our gross profit for the first quarter of 2004 for our Indonesian poultry business of
approximately 12.4% from the previous comparative period. An outbreak of disease could
also have a positive effect on our results of operations if consumers perceive us as having
more stringent biosecurity policies and quality control standards than our competitors.
Prices of our Products
The prices of our products are affected by movements in market prices, demand and supply,
the prices of raw materials that we require for production, the quality of our products, and our
customer relationships and strategy, which could have an impact on the demand for our
products. As the selling prices of our feed products typically track the prices of major imported
raw materials, any increase in prices of our raw materials will generally result in an increase in
our selling prices, which could have an impact on the demand for our products. Our dairy,
DOC, broiler, beef, swine and consumer food products are primarily affected by demand and
supply conditions, which can cause our prices to vary due to volatility in market demand and
supply. The prices of our raw milk in China are also driven by the premium quality of our
products. We have established premium dairy businesses in both China and Indonesia and in
2013, the average price of our milk sold in China was approximately 25% higher than the
average market price of milk across ten key production regions in China, according to the
China Ministry of Agriculture. We are also able to sell our dairy products marketed under our
Greenfields brand at premium prices to consumers in Indonesia and other countries in Asia.
High prices can drive our revenue but may also dampen consumer demand. For details on
the average selling prices of our dairy, animal protein and consumer foods products, see the
tables on key operational data in BusinessOur Dairy Segment, BusinessOur Animal
Protein Segment and BusinessOur Consumer Food Segment.

71

Changes in Product Mix


The prices and profit margins of our products vary by business segment. Gross profit margins
have historically been, and we expect will continue to be, generally higher in our dairy
segment and consumer food segment than in our animal protein segment. To the extent that
the contribution of one segment increases or decreases as a proportion of our business, this
will impact our business, results of operations and financial condition. We expect the
contribution of our dairy segment to continue to expand as a proportion of our total business,
and our consumer food segment to increase over the longer term. We expect our animal
protein segment to grow in line with the growth of consumer purchasing power in our target
markets. Within the animal protein segment, a change in our sales mix may affect our results
of operations as prices and profit margins of beef products are higher than those of poultry
products. As any such change will follow changes in consumer demand, we do not expect a
significant change in the sales mix of our animal protein business segment in the near future,
given the current price differential between beef and poultry and the demographics and
purchasing power of customers in our target markets.
Regulatory Environment
Our business activities and results of operations are affected by the regulatory environment in
our target markets. Changes in regulations and government policies with regard to any of the
dairy, poultry, cattle and swine industries could significantly impact our sales and cost of
goods sold. For instance, on April 15, 2014, the Minister of Trade of Indonesia issued an
advisory letter requesting that all poultry husbandry stakeholders (including us) limit the sales
price for their DOCs at Rp.3,200 per DOC and decrease their production of broilers and layer
egg hatching by 15%. The terms of the advisory letter were effective for a period of one
month (commencing April 15, 2014). These requests directly impacted our DOC business and
results of operations for the period from April 15, 2014 to May 15, 2014. Pursuant to meetings
with the Minister of Trade at the time the letter was issued in April 2014, poultry producers
(breeders and farmers) including PT Japfa had, through the associations of which they are
members, requested the Minister of Trade to intervene with respect to the seasonal drop in
broiler prices resulting from the over-production of broiler chicken after the Lebaran
celebrations in Indonesia. The Minister of Trade on July 8, 2014 announced that he had
requested members of such associations to reduce DOC production by 20% from July 8,
2014 until after Lebaran, which fell on July 28, 2014. No formal directive was issued as the
request for a reduction in production had come from the producers. The Indonesian
government has also implemented a scheme to strengthen its domestic beef production
sector and reduce Indonesias reliance on cattle imports, with an aim of boosting cattle
production by 200,000 head per year and reducing cattle imports by 10% by 2014. This has
resulted in a restriction on the number of import permits for live cattle since 2010, which has
directly impacted our cattle breeding activities, as we import approximately 90% of our live
cattle requirements from Australia annually, resulting in part in a reduction in our sales from
approximately 70,100 beef cattle in 2011 to approximately 47,000 beef cattle in 2013.
Changes in Chinas one child policy may also have a significant beneficial effect on our dairy
business in China. We also benefit from favorable tax treatment in China and other
jurisdictions in which we operate. Whether we continue to receive beneficial tax treatment
could significantly impact our results of operations and financial condition in the future.
Critical Accounting Policies
Our combined financial statements have been prepared in accordance with FRS and the
related interpretations to FRS as issued by the Singapore Accounting Standards Council and
the Singapore Companies Act. The preparation of these combined financial statements
requires management to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and
liabilities. Management bases its estimates and judgments on historical experience and other
factors that it believes to be reasonable under the circumstances. We continually evaluate
72

such estimates and judgments. Actual results may differ from these estimates under different
assumptions or actual conditions. In order to provide an understanding of how our
management forms their judgment about future events, including the variables and
assumptions underlying our estimates, and the sensitivity of judgments to different
circumstances, we have identified the critical accounting policies discussed below. For more
details, see Note 2 to our combined financial statements included in this Prospectus.
Fair Value of Biological Assets
Biological assets are measured at fair value less costs to sell the assets. In determining the
fair value of the biological assets, the fair value of dairy cows, breeding cattle and swine is
determined based on either (i) the market-determined price as at the end of the reporting year
adjusted with reference to the species, age, growing condition, costs incurred and expected
yield to reflect differences in characteristics and/or stages of growth of the livestock or (ii) the
present value of expected net cash flows from the livestock discounted at a current marketdetermined rate, when market-determined prices are unavailable. Any change in the
estimates may affect the fair value of the livestock significantly. The professional valuers and
management review the assumptions and estimates annually to identify any significant
change in the fair value of the livestock.
Impairment of and Useful Lives of Biological Assets
Our Group assesses annually whether its biological assets that are not measured at fair value
less costs to sell have any indication of impairment. In instances where there are indicators of
impairment, the recoverable amounts of the biological assets will be determined based on
value-in-use calculations. These calculations require the use of management judgments and
estimates. It is impracticable to disclose the extent of the possible effects. It is reasonably
possible, based on existing knowledge, that outcomes within the next financial year that are
different from assumptions could require a material adjustment to the carrying amount of the
balances affected.
We review the estimated useful lives of breeding chickens at the end of each reporting year.
Where useful lives are less than previously estimated lives, the amortization charge is
increased.
Allowance for Doubtful Trade Accounts
An allowance is made for doubtful trade accounts for estimated losses resulting from the
subsequent inability of the customers to make required payments. If the financial conditions of
the customers were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required in future periods. Management generally
analyses trade receivables and historical bad debts, customer concentrations, and customer
creditworthiness when evaluating the adequacy of the allowance for doubtful trade
receivables. To the extent that it is feasible, impairment and uncollectibility is determined
individually for each item. In cases where that process is not feasible, a collective evaluation
of impairment is performed. At the end of the reporting year, the trade receivables carrying
amount approximates the fair value and the carrying amounts might change materially within
the next reporting year but these changes would not arise from assumptions or other sources
of estimation uncertainty at the end of the reporting year.
Net Realizable Value of Inventories
A review is made periodically on inventory for excess inventory and declines in net realizable
value below cost and an allowance is recorded against the inventory balance for any such
declines. The review requires management to consider the future demand for the products. In
any case the realizable value represents the best estimate of the recoverable amount and is
based on the acceptable evidence available at the end of the reporting year and inherently
73

involves estimates regarding the future expected realizable value. The usual considerations
for determining the amount of allowance or write-down include ageing analysis, technical
assessment and subsequent events. In general, such an evaluation process requires
significant judgment and materially affects the carrying amount of inventories at the end of the
reporting year. Possible changes in these estimates could result in revisions to the stated
value of the inventories.
Useful Lives of Property, Plant and Equipment
The estimates for the useful lives and related depreciation charges for property, plant and
equipment, which includes leasehold land, buildings and site factories, machinery and
equipment, office furniture and fixtures, motor vehicles and assets not in use, are based on
commercial and other factors which could change significantly as a result of innovations in
response to market conditions. The depreciation charge is increased where useful lives are
less than previously estimated lives, or the carrying amounts written off or written down for
technically obsolete or assets that have been abandoned.
Property, Plant and Equipment
Property, plant and equipment are stated at carrying value. An assessment is made at each
end of the reporting year whether there is an indication that the asset may be impaired. If any
such indication exists, an estimate is made of the recoverable amount of the asset. The
recoverable amounts of cash-generating units if applicable is determined based on value-inuse calculations. These calculations require the use of estimates. It is reasonably possible,
based on existing knowledge, that outcomes within the next financial year that are different
from assumptions could require a material adjustment to the carrying amount of the balances
affected.
Income Taxes
Our Group has exposure to income taxes in a number of jurisdictions, including Indonesia,
China, India, Vietnam, Myanmar and Singapore. Significant judgment is involved in
determining our Group-wide provision for income taxes. There are certain transactions and
computations for which the ultimate determination is uncertain during the ordinary course of
business. The administration and enforcement of tax, laws and regulations may be subject to
uncertainty and a certain degree of discretion by the tax authorities in these jurisdictions.
Although our Group believes the amounts recognized for income and deferred taxes are
adequate, these amounts may be insufficient based on the respective countries tax
authorities interpretation and application of these laws and regulations and our Group may be
required to pay more as a result. It is impracticable to determine the extent of the possible
effects of the above, if any, on the combined financial statements of our Group. Our Group
recognizes liabilities for expected tax issues based on estimates of whether additional taxes
will be due. Where the final tax outcome of these matters is different from the amounts that
were initially recognized, such differences will have an impact on the income tax and deferred
tax provisions in the period in which such determination is made.
Deferred Income Taxes
Management judgment is required in determining the provision for income taxes, deferred tax
assets and liabilities and the extent to which deferred tax assets can be recognized.
A deferred tax asset is recognized if it is probable that sufficient taxable income will be
available in the future against which the temporary differences and unused tax losses can be
utilized. Management also considers future taxable income and tax planning strategies in
assessing whether deferred tax assets should be recognized in order to reflect changed
circumstances as well as tax regulations. As a result, due to their inherent nature, it is likely
that deferred tax calculation relates to complex fact patterns for which assessments of
likelihood are judgmental and not susceptible to precise determination.
74

Pension and Employee Benefits


The determination of our Groups obligations and cost for pension and employee benefits
liability is dependent on its selection of certain assumptions used by independent actuaries in
calculating such amounts. Those assumptions include among others, discount rates,
expected rates of return of assets, future annual salary increases, annual employee turnover
rates, disability rates, retirement age and mortality rates. Actual results that differ from the
assumptions are recognized immediately in profit or loss as and when they occur. While our
Group believes that its assumptions are reasonable and appropriate, significant differences in
our Groups actual experience or significant changes in the assumptions may materially affect
its estimated liabilities for pensionable and employee benefits and net employee benefits
expense.
In determining the appropriate discount rate, our management considers the Indonesian
government securities yield (risk free rate) curve and the expected remaining working period
of the relevant employees in Indonesia.
The mortality rate is based on publicly available mortality tables for the specific country and is
modified accordingly with estimates of mortality improvements. Future salary increases are
based on expected future inflation rates for the specific country.
Determination of Functional Currency
Our Group measures foreign currency transactions in the respective functional currencies of the
Company and its subsidiaries. In determining the functional currencies of the entities in our
Group, judgment is required to determine the currency that mainly influences sales prices for
goods and services and of the country whose competitive forces and regulations mainly
determine the sales prices of its goods and services. The functional currencies of the entities in
our Group are determined based on managements assessment of the economic environment
in which the entities operate and the entities process of determining sales prices.
Environmental Regulations
Environmental regulations and social practices in some of the countries in which our Group
operates tend to be less stringent than in developed countries. It is possible that these
regulations could become more stringent in the future and compliance with them may involve
incurring significant costs. This may consequently have an adverse effect on our Groups
operations. Any failure to comply with the laws and regulations could subject our Group to
further liabilities. It is impracticable to disclose the extent of the possible effects of the above
matters on the combined financial statements of our Group.
Changes in Accounting Policies
We have not made any significant changes in our accounting policies during the years ended
December 31, 2011, 2012 and 2013 and the three months ended March 31, 2014.

75

Results of Operations
The following table sets forth certain income statement data from our combined financial
statements, in absolute terms and as a percentage of our revenue for the periods indicated:
For the year ended December 31,
2011
2012
2013
US$
%
US$
%
US$
%

For the three months


ended March 31,
2013
2014
US$
%
US$
%

(US$ in millions, except percentages)


Revenue ............................................. 2,029.8 100.0 2,321.8 100.0 2,697.3 100.0 675.8 100.0 690.1 100.0
Cost of Sales ........................................ (1,663.2) 81.9 (1,873.8) 80.7 (2,198.1) 81.5 (541.0) 80.1 (574.1) 83.2
Gross Profit .........................................
Other Items of Income
Increase in Fair Value of Biological Assets ......
Interest Income ......................................
Other Credits ........................................
Foreign Exchange Adjustments Gains ...........
Other Items of Expense
Foreign Exchange Adjustments Losses ..........
Marketing and Distribution Costs ..................
Administration Expenses ...........................
Finance Costs .......................................
Other Charges .......................................

366.5

18.1

448.0

19.3

499.2

18.5

134.7

19.9

116.0

16.8

7.5
3.1
9.9
4.4

0.4
0.2
0.5
0.2

6.6
5.9
7.3
-

0.3
0.3
0.3
-

6.3
2.9
3.5
-

0.2
0.1
0.1
-

(10.6)
0.8
0.3
0.6

1.6
0.1
0.1
0.1

2.4
1.0
0.8
7.6

0.3
0.1
0.1
1.1

(84.6)
(146.8)
(41.9)
(3.8)

4.2
7.2
2.1
0.2

(1.4)
(83.1)
(173.5)
(56.8)
(4.2)

0.1
3.6
7.5
2.4
0.2

(30.1)
(95.0)
(202.5)
(66.8)
(2.6)

1.1
3.5
7.5
2.5
0.1

(25.0)
(50.4)
(14.7)
(0.6)

3.7
7.5
2.2
0.1

(26.1)
(55.2)
(19.3)
(0.01)

3.8
8.0
2.8
0.0

Profit before tax from continuing


operations ........................................
Income tax expense ................................

114.4
(34.9)

5.6
1.7

148.8
(38.4)

6.4
1.7

114.8
(33.4)

4.3
1.2

35.2
(9.9)

5.2
1.5

27.2
(5.3)

3.9
0.8

Profit from continuing operations, net


of tax ..............................................

79.5

3.9

110.4

4.8

81.4

3.0

25.4

3.8

22.0

3.2

Other comprehensive Income/(Loss):


Remeasurement of the Net Defined Benefits
Plan, Net of Tax ..................................
Exchange differences in translating foreign
operations, net of tax.............................

(6.2)

0.3

(8.7)

0.4

7.2

0.3

(7.2)

1.1

(9.5)

1.4

(14.9)

0.7

(28.6)

1.2

(117.2)

4.3

(3.8)

0.6

37.6

5.5

Other Comprehensive Income/(Loss) for the


Year, Net of Tax .................................

(21.1)

1.0

(37.3)

1.6

(110.1)

4.1

(11.1)

1.6

28.1

4.1

Total Comprehensive Income/(Loss) ..........

58.4

2.9

73.1

3.1

(28.7)

1.1

14.3

2.1

50.1

7.3

44.5

2.2

53.3

2.3

41.8

1.5

17.8

2.6

13.6

2.0

35.0

1.7

57.2

2.5

39.6

1.5

7.6

1.1

8.4

1.2

79.5

3.9

110.4

4.8

81.4

3.0

25.4

3.8

22.0

3.2

28.3

1.4

39.4

1.7

(35.3)

1.3

8.5

1.3

33.5

4.9

30.1

1.5

33.7

1.5

6.6

0.2

5.8

0.9

16.6

2.4

58.4

2.9

73.1

3.1

(28.7)

1.1

14.3

2.1

50.1

7.3

Profit Attributable to Owners of the Parent, Net


of Tax ..............................................
Profit Attributable to Non-Controlling Interests,
Net of Tax .........................................
Profit, Net of Tax ...................................
Total Comprehensive Income/(Loss)
Attributable to Owners of the Parent, Net of
Tax .................................................
Total Comprehensive Income/(Loss)
Attributable to Non-Controlling Interests, Net
of Tax ..............................................
Total Comprehensive Income/(Loss) ..........

Principal Components of Our Combined Statement of Profit and Loss and Other
Comprehensive Income
Revenue
Our revenue consists of our total external sales derived from our various business segments
less the sales discounts that we provide to our customers. We derive our revenue primarily
from our dairy, animal protein and consumer food segments. Our revenue from our animal
protein segment primarily comprise revenue derived from sales of our animal feeds,
commercial farming, DOCs, beef cattle, swine, aquaculture and consumer food products
segments.

76

The following table sets forth information about our revenue by business segment and the
percentage breakdown of our revenue for the periods indicated:
For the year ended December 31,
2011
2012
2013
US$
%
US$
%
US$

For the three months ended


March 31,
2013
2014
US$
%
US$
%

(US$ in millions, except percentages)

Revenue:
Dairy . . . . . . . . . . . . . . . .
38.4
1.9
72.1
3.1
122.5
4.5
28.1
4.2
50.5
7.3
Animal Protein . . . . . 1,762.6
86.8 2,010.3
86.6 2,347.2
87.0 582.2
86.1 592.9
85.9
Consumer Food . . . 228.8
11.3
239.4
10.3
227.6
8.4
65.5
9.7
46.7
6.8
Total . . . . . . . . . . . . . . . . 2,029.8 100.0 2,321.8 100.0 2,697.3 100.0 675.8 100.0 690.1 100.0

Cost of Sales
Cost of sales primarily represents the costs of raw materials, direct labor costs, manufacturing
overheads (which include utilities, depreciation and rental costs) and changes in inventories
of finished goods and work-in-progress associated with our dairy, animal protein and
consumer food business segments, net of inter-segment eliminations. The cost of raw
materials is the most significant component of our cost of sales. Cost of raw materials
accounted for 84.0%, 83.7% and 84.5% of our overall cost of sales for the years ended
December 31, 2011, 2012 and 2013, respectively, and 89.5% and 88.3% of our overall cost of
sales for the three months ended March 31, 2013 and 2014, respectively. The raw materials
purchased by us from independent suppliers include raw materials for our dairy, animal
protein and consumer food segments. Set out below is a breakdown of our cost of sales by
business segment and each item as a percentage of our total cost of sales for the periods
indicated:
For the year ended December 31,
2011
2012
2013
US$
%
US$
%
US$
%

For the three months


ended March 31,
2013
2014
US$
%
US$
%

(US$ in millions, except percentages)

Cost of sales:
Dairy
Raw materials .............................
Direct labor ................................
Manufacturing overheads ................
Changes in inventories of finished
goods and work-in-progress ..........

11.0
2.7
8.5
1.6

0.1

2.8

0.1

7.1

Sub-total ...................................

23.8

1.5

41.8

2.2

70.9

0.7
0.2
0.5

23.6
3.3
12.1

1.3
0.2
0.6

44.7
5.2
13.9

2.0
0.2
0.6

17.0
1.1
4.9

3.1
0.2
0.9

0.4 (6.4) (1.2)


3.2

16.6

3.0

22.4
1.3
4.1

3.9
0.2
0.7

0.4

0.1

28.2

4.9

Animal Protein
Raw materials ............................. 1,287.3 77.4 1,408.5 75.2 1,705.1 77.6 438.2 81.0 470.5 82.0
Direct labor ................................
19.9
1.2
23.5
1.3
33.8
1.5
8.6
1.6
9.1
1.6
Manufacturing overheads ................ 115.1
6.9 142.0
7.6 180.2
8.2 46.8
8.7 50.2
8.7
Changes in inventories of finished
goods and work-in-progress ..........
68.6
4.1
81.0
4.3
47.5
2.2 (16.0) (3.0) (17.3) (3.0)
Sub-total ................................... 1,490.9 89.6 1,655.0 88.4 1,966.6 89.5 477.5 88.3 512.5 89.3
Consumer Food
Raw materials .............................
Direct labor ................................
Manufacturing overheads ................
Changes in inventories of finished
goods and work-in-progress ..........
Sub-total ...................................

98.4
2.5
14.0

5.9
0.2
0.8

135.8
2.3
18.0

7.2
0.1
1.0

108.5
4.4
14.5

4.9
0.2
0.7

29.1
1.2
3.4

5.4
0.2
0.6

13.5
1.5
4.0

2.4
0.3
0.7

33.6

2.0

20.9

1.1

33.2

1.5

13.2

2.4

14.4

2.5

148.5

8.9

177.0

9.4

160.6

7.3

46.9

8.7

33.4

5.8

Total .......................................... 1,663.2 100.0 1,873.8 100.0 2,198.1 100.0 541.0 100.0 574.1 100.0

77

Gross Profit and Gross Profit Margin


Gross profit is our revenue minus our cost of sales. Gross profit margin is calculated as gross
profit divided by our revenue.
Increase in Fair Value of Biological Assets
Increases in fair value of biological assets represent the changes in fair value relating to our
biological assets which comprise dairy cows, breeding cattle and swine. Our biological assets
are carried at fair value measured at the end of the reporting period, and all changes in fair
value relating to the biological assets are recognized directly in profit and loss as required by
FRS.
Interest Income
Our interest income consists of interest income on cash and cash equivalents deposited at
financial institutions.
Other Credits
Other credits comprise principally of gain on disposal of property, plant and equipment
(PPE), rental income from investment properties, increases in fair value of marketable
securities, insurance reimbursement and scrap sales.
Other Charges
Other charges comprise principally of allowance for impairment on trade receivables,
impairment allowance on investment properties, decreases in fair value of marketable
securities, loss on disposal of investment properties, write-offs of PPE, write-offs of intangible
assets, bad debts written off on trade receivables and negative goodwill on acquisition of
subsidiaries.
Foreign Exchange Adjustments Gains/Losses
Foreign exchange adjustments gains/losses comprise all realized and unrealized exchange
adjustment gains or losses arising from the reporting of recorded monetary balances
denominated in functional currencies other than the Singapore dollar as of the end of the
reporting year and balances that are measured at fair value and denominated in functional
currencies other than the Singapore dollar as of their fair value dates.
Marketing and Distribution Costs
Marketing and distribution costs consist of our marketing expenses, advertising and
promotional expenses, employee benefits expenses, freight charges and distribution costs.
Administrative Expenses
Our administrative expenses primarily consist of employee benefits expense and related
payroll costs, defined long-term employee benefits, security, depreciation, travel, repairs and
maintenance, electricity and water, office supplies, professional fees, building rental, and
vehicles maintenance.
Finance Costs
Finance costs primarily consist of interest expenses incurred on our short-term and long-term
loan facilities as well as debt securities. See Indebtedness below.

78

Income Tax Expense


Income tax expense comprise current tax expense and deferred tax expense. The following
table sets forth the breakdown of our total income tax expense for the periods indicated:
For the year ended
December 31,
2011
2012
2013

For the three months


ended March 31,
2013
2014

(US$ in millions)

Current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.3 41.4 32.8


Deferred tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6 (3.1)
0.5
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.9 38.4 33.4

9.6
0.2
9.9

4.8
0.5
5.3

Profit from Continuing Operations, Net of Tax


Profit from continuing operations, net of tax represents our profit after tax for our Group. Profit
from continuing operations, net of tax attributable to our shareholders comprise the portion of
profit from continuing operations, net of tax that is attributable to our shareholders. Profit from
continuing operations, net of tax attributable to non-controlling interests comprise the portion
of profit from continuing operations, net of tax that is attributable to equity interests that are
not owned directly or indirectly by the Company in our subsidiaries.
Remeasurement of the Net Defined Benefits Plan, Net of Tax
Our subsidiary, PT Japfa operates a defined benefit plan for qualifying employees in
Indonesia. The cost of providing post-employment benefits is calculated by an independent
actuary at the end of each reporting period and any actuarial gains and losses from period to
period are recognized to profit and loss as other comprehensive income/(loss) under our
adoption of FRS 19 Employee Benefits.
Exchange Differences on Translating Foreign Operations, Net of Tax
The balance sheet items of each of our subsidiaries whose functional currency is not the
Singapore dollar or the U.S. dollar are translated, first, into Singapore dollars (being the
Companys functional currency) and then from Singapore dollars into U.S. dollars (being our
presentation currency) at the exchange rate between the relevant currencies as of the end of
the financial year or period. The income and expense items of such subsidiaries are
translated, first, into Singapore dollars and then from Singapore dollars into U.S. dollars at the
average exchange rate between the relevant currencies during the financial year or period.
Exchange differences on translating foreign operations, net of tax, comprise cumulative aftertax adjustments made to reconcile (i) the translation of the balance sheet items of such
subsidiaries using exchange rates as of the end of the financial year or period to (ii) the
translated balance sheet items as of the previous financial year or period and changes in
balance sheet items of such subsidiaries due to translation of their profit and expense items
using average exchange rates during the financial year or period. There are no exchange
differences on translating the balance sheet items and the income and expense items of the
AIH Group whose functional currency is the U.S. dollar.
Total Comprehensive Income/(Loss)
Total comprehensive income/(loss) attributable to owners of the Company comprise the
portion of total comprehensive income that is attributable to our shareholders. Total
comprehensive income attributable to non-controlling interests comprise the portion of total
comprehensive income that is attributable to equity interests that are not owned directly or
indirectly by the Company. Non-controlling interest represents the interest of shareholders
other than the Company in the net income and equity of subsidiaries that are not whollyowned by the Company in our subsidiaries, and is presented based on the percentage of
79

ownership of such shareholders in the subsidiaries. Total comprehensive income is attributed


to non-controlling interests even if this results in the non-controlling interests having a deficit
balance.
Review of Historical Operating Results
Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013
Revenue
Our revenue increased 2.1% from US$675.8 million in the three months ended March 31,
2013 to US$690.1 million in the three months ended March 31, 2014 primarily due to an
increase in revenue in our dairy segment and to a lesser extent, an increase in revenue in our
animal protein segment, partially offset by a decrease in revenue in our consumer food
segment.
Revenue from Dairy. Our revenue from dairy increased 79.7% from US$28.1 million in the
three months ended March 31, 2013 to US$50.5 million in the three months ended March 31,
2014. Increase in revenue was primarily due to an increase in sales volume of our dairy
products in China, which increased from 27,850 tons of raw milk sold in the three months
ended March 31, 2013 to 45,797 tons of raw milk sold in the three months ended March 31,
2014 driven primarily by an increase in the number of milking cows (from 10,736 as at
March 31, 2013 to 16,655 as at March 31, 2014) as we completed construction of and
commenced milk production at our third dairy farm in June 2013 and to a lesser extent, to an
increase in the average selling price of our raw milk. The average selling price of our raw milk
from our China operations increased from RMB4.22 per kilogram in the three months ended
March 31, 2013 to RMB5.25 per kilogram in the three months ended March 31, 2014.
Revenue from Animal Protein. Our revenue from animal protein increased 1.8% from
US$582.2 million in the three months ended March 31, 2013 to US$592.9 million in the three
months ended March 31, 2014. This increase was primarily due to increases in sales volume
of our animal feeds, DOCs, broilers and swine as well as increases in average selling prices
of our animal feeds, partially offset by decreases in the average selling prices of our DOCs,
broilers, swine and cattle. Our gross sales volume of animal feeds increased from
approximately 0.88 million tons in the three months ended March 31, 2013 to approximately
0.92 million tons in the three months ended March 31, 2014 primarily due to the addition of
additional production machinery and improved raw materials storage facilities, our gross sales
of DOCs increased from approximately 138.7 million chicks in the three months ended
March 31, 2013 to approximately 146.2 million chicks in the three months ended March 31,
2014 primarily as a result of increased production capacity with the addition of new breeding
farms and hatcheries in Indonesia and our gross sales volume from commercial farming
increased from 116,500 tons of broilers and approximately 8,000 piglets sold in the three
months ended March 31, 2013 to 153,300 tons of broilers and approximately 39,400 piglets
sold in the three months ended March 31, 2014 primarily as a result of increased production
capacity at our commercial farms in Indonesia and Vietnam, respectively. In Indonesia, the
average selling price of our animal feeds increased from Rp.5,697 per kilogram in the three
months ended March 31, 2013 to Rp.6,169 per kilogram in the three months ended March 31,
2014, the average selling price of our broilers decreased from Rp.14,715 per kilogram in the
three months ended March 31, 2013 to Rp.14,507 per kilogram in the three months ended
March 31, 2014 and the average selling price of our DOCs decreased from Rp.4,700 per
chick in the three months ended March 31, 2013 to Rp.4,659 per chick in the three months
ended March 31, 2014. The increase in our revenue for the three months ended March 31,
2014 was also due to a lesser extent to the increase in cattle sales, which increased from
approximately 11,000 heads of cattle in the three months ended March 31, 2013 to
approximately 14,400 heads of cattle in the three months ended March 31, 2014 driven by our
ability to import more live cattle, and to the increase in the average selling price of our cattle,
80

which increased from Rp.32,752 per kilogram in the three months ended March 31, 2013 to
Rp.36,337 per kilogram in the three months ended March 31, 2014.
Revenue from Consumer Food. Our revenue from consumer food decreased 28.7% from
US$65.5 million in the three months ended March 31, 2013 to US$46.7 million in the three
months ended March 31, 2014 primarily due to a decrease in sales volume of our ambient
temperature meat products driven by a decrease in demand as the depreciation of the Rupiah
at the end of 2013 affected purchasing power of our target market which cater more to lower
income customers, which was partially offset by an increase in sales of our chilled/frozen
meat products, which were not as affected by the depreciation of the Rupiah. Gross sales
volume of our ambient temperature meat products decreased from 11,964.7 thousand
kilograms in the three months ended March 31, 2013 to 10,631.2 thousand kilograms in the
three months ended March 31, 2014. Gross sales volume of our chilled/frozen meat products
increased from 1,796.8 thousand kilograms in the three months ended March 31, 2013 to
1,985.1 thousand kilograms in the three months ended March 31, 2014. Over the same
periods, the average selling price of our chilled/frozen meat products remained relatively
constant while the average selling price of our ambient temperature products rose slightly in
Rupiah terms.
Cost of Sales
Our cost of sales increased 6.1% from US$541.0 million in the three months ended March 31,
2013 to US$574.1 million in the three months ended March 31, 2014 primarily due to the
increase in cost of sales in our dairy segment and to a lesser extent, an increase in cost of
sales in our animal protein segment, partially offset by a decrease in cost of sales in our
consumer food segment.
Cost of Sales from Dairy. Our cost of sales from dairy increased 69.9% from US$16.6 million
in the three months ended March 31, 2013 to US$28.2 million in the three months ended
March 31, 2014. The increase in cost of sales was primarily driven by an increase in purchase
of raw materials, primarily feed, in line with the increase in the number of our dairy cows and
a positive change in inventories of finished goods and work-in-progress in the three months
ended March 31, 2013 as compared to a negative change in inventories of finished goods
and work-in-progress in the three months ended March 31, 2014, partially offset by a
decrease in manufacturing overhead and an increase in our average daily milk volume output
per milking cow. Our average daily milk volume output per milking cow increased as our dairy
cows progressed further in their lactation cycle, where they produce higher volumes of milk.
Cost of Sales from Animal Protein. Our cost of sales from animal protein increased 7.3% from
US$477.5 million in the three months ended March 31, 2013 to US$512.5 million in the three
months ended March 31, 2014. The increase in cost of sales was driven by increased
purchases of raw materials in line with increased sales volumes, partially offset by a higher
negative change in inventories of finished goods and work-in-progress as our stock of finished
goods and work-in-progress decreased over the period.
Cost of Sales from Consumer Food. Our cost of sales from consumer food decreased 28.8%
from US$46.9 million in the three months ended March 31, 2013 to US$33.4 million in the
three months ended March 31, 2014 primarily due a decrease in the purchase of our raw
materials in line with decreased sales, partially offset by a higher positive change in
inventories of finished goods and work-in-progress as our stock of finished goods and workin-progress decreased over the period. As our consumer food business is conducted
predominantly through our Indonesian subsidiaries, PT So Good Food and PT So Good Food
Manufacturing, whose functional currency is Rupiah, financial reporting was also affected by
the depreciation of the Rupiah against the U.S. dollar from March 31, 2013 to March 31,
2014.

81

Gross Profit and Gross Profit Margin


As a result of the foregoing, our gross profit decreased 13.9% from US$134.7 million in the
three months ended March 31, 2013 to US$116.0 million in the three months ended
March 31, 2014 primarily due to decreased gross profit in our consumer food and animal
protein segments driven by the depreciation of the Rupiah against the Singapore dollar and
the U.S. dollar over the same periods, partially offset by an increase in gross profit from our
dairy segment. Our overall gross profit margin in the three months ended March 31, 2014
decreased to 16.8% in the three months ended March 31, 2014 from 19.9% in the three
months ended March 31, 2013, primarily due to the decrease in the gross profit margin in our
animal protein business, which decreased from 18.0% in the three months ended March 31,
2013 to 13.6% in the three months ended March 31, 2014, partially offset by the increase in
the gross profit margins of our dairy business and consumer food business, which increased
from 40.9% in the three months ended March 31, 2013 to 44.2% in the three months ended
March 31, 2014 and from 28.4% in the three months ended March 31, 2013 to 28.5% in the
three months ended March 31, 2014, respectively. Due to the inflationary environment caused
by the depreciation of the Rupiah against the U.S. dollar in 2013, including the last quarter of
2013, while the prices of our raw materials increased in Indonesia, we were unable to pass
along certain of these raw material price increases immediately to our consumers as we have
typically been able to do in order to maintain our profit margins.
Increase in Fair Value of Biological Assets
The increase in fair value arising from biological assets was US$2.4 million in the three
months ended March 31, 2014 primarily due to the increase in livestock in our animal protein
and dairy segments while the fair value of our beef and dairy cattle and swine did not change
over the period.
Interest Income
Our interest income increased 25.0% from US$0.8 million in the three months ended
March 31, 2013 to US$1.0 million in the three months ended March 31, 2014 primarily due to
an increase in bank deposits maintained by our subsidiary JCVN.
Other Credits
Other credits increased 166.7% from US$0.3 million in the three months ended March 31,
2013 to US$0.8 million in the three months ended March 31, 2014 primarily due to an
increase in scrap sales and to a lesser extent recovery of certain bad debt trade receivables
in the three months ended March 31, 2014 as compared to the three months ended
March 31, 2013.
Other Charges
Other charges decreased 98.3% from US$0.6 million in the three months ended March 31,
2013 to US$0.01 million in the three months ended March 31, 2014 primarily due to smaller
decreases in fair value of financial assets and write-offs of PPE. As a result of the foregoing,
we had net other credits and (other charges) of US$0.8 million in the three months ended
March 31, 2014 to US$(0.3) million in the three months ended March 31, 2013.
Foreign Exchange Adjustments Gains
Foreign exchange adjustments gains increased 1,166.7% from US$0.6 million in the three
months ended March 31, 2013 to US$7.6 million in the three months ended March 31, 2014
primarily due to the greater appreciation of the Rupiah against the Singapore dollar in the
three months ended March 31, 2014 as compared to in the three months ended March 31,
2013.
82

Marketing and Distribution Costs


Marketing and distribution costs increased 4.4% from US$25.0 million in the three months
ended March 31, 2013 to US$26.1 million in the three months ended March 31, 2014
primarily due to the contribution of marketing and distribution costs from Japfa Comfeed
Myanmar Pte Ltd for the three months ended March 31, 2014.
Administrative Expenses
Administrative expenses increased 9.5% from US$50.4 million in the three months ended
March 31, 2013 to US$55.2 million in the three months ended March 31, 2014 primarily due
to an increase in employee benefits expense and related payroll cost related to increased
headcount.
Finance Costs
Finance costs increased 31.3% from US$14.7 million in the three months ended March 31,
2013 to US$19.3 million in the three months ended March 31, 2014 primarily due to an
increase in borrowings, including the issuance of the U.S. dollar-denominated senior notes
due 2018 and also incurrence of additional debt by our dairy segment.
Profit before Tax from Continuing Operations
As a result of the foregoing, profit before tax from continuing operations decreased 22.7%
from US$35.2 million in the three months ended March 31, 2013 to US$27.2 million in the
three months ended March 31, 2014.
Income Tax Expense
Income tax expense decreased 46.5% from US$9.9 million in the three months ended
March 31, 2013 to US$5.3 million in the three months ended March 31, 2014 in line with the
decrease in our profit before tax from continuing operations.
Profit from Continuing Operations, Net of Tax
As a result of the foregoing, profit from continuing operations, net of tax decreased 13.4%
from US$25.4 million in the three months ended March 31, 2013 to US$22.0 million in the
three months ended March 31, 2014. Profit from continuing operations, net of tax attributable
to owners of the parent decreased 23.6% from US$17.8 million in the three months ended
March 31, 2013 to US$13.6 million in the three months ended March 31, 2014. Profit from
continuing operations, net of tax attributable to owners of non-controlling interests increased
10.5% from US$7.6 million in the three months ended March 31, 2013 to US$8.4 million in the
three months ended March 31, 2014 primarily due to profit after tax of AIH in the three months
ended March 31, 2014 attributable to the non-controlling interests of AIH as compared to loss
after tax of AIH for the three months ended March 31, 2013 attributable to the non-controlling
interests of AIH.
Remeasurement of the Net Defined Benefits Plan, Net of Tax
Our remeasurement of the net defined benefits plan, net of tax was a loss of US$9.5 million in
the three months ended March 31, 2014 due to changes in value of the net defined benefits
plan of PT Japfa during the period.
Exchange Differences in Translating Foreign Operations, Net of Tax
Exchange differences in translating foreign operations, net of tax, was a gain of
US$37.6 million in the three months ended March 31, 2014 as compared to a loss of
US$3.8 million in the three months ended March 31, 2013, primarily due to the translation of
83

the balance sheet items and the income and expense items of PT Japfa whose functional
currency is the Rupiah. The gain from exchange differences in translating foreign operations,
net of tax in the three months ended March 31, 2014 was primarily due to the appreciation of
the Rupiah against the Singapore dollar over the period and the loss from exchange
differences in translating foreign operations, net of tax in the three months ended March 31,
2013 was primarily due to the depreciation of the Rupiah against the Singapore dollar over
the period. The exchange rates between the Rupiah and the Singapore dollar were
Rp.8,990.1077 to S$1 as of March 31, 2014 and Rp.7,833.3065 to S$1 as of March 31, 2013.
The average exchange rates between the Rupiah and the Singapore dollar were
Rp.9,239.9858 to S$1 and Rp.7,835.0936 to S$1 for the three months ended March 31, 2014
and March 31, 2013, respectively.
Total Comprehensive Income/(Loss)
As a result of the foregoing, we had total comprehensive income of US$50.1 million in the
three months ended March 31, 2014 as compared to total comprehensive income of
US$14.3 million in the three months ended March 31, 2013. Total comprehensive income
attributable to owners of the parent was US$33.5 million and total comprehensive income
attributable to owners of non-controlling interests was US$16.6 million in the three months
ended March 31, 2014.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Revenue
Our revenue increased 16.2% from US$2,321.8 million in 2012 to US$2,697.3 million in 2013
primarily due to increases in revenue in our animal protein segment and dairy segment,
partially offset by a decrease in revenue in our consumer food segment.
Revenue from Dairy. Our revenue from dairy increased 69.9% from US$72.1 million in 2012
to US$122.5 million in 2013. Increase in revenue was primarily due to an increase in sales
volume of our dairy products in China, which increased from 62,487 tons of raw milk sold in
2012 to 124,408 tons of raw milk sold in 2013 driven primarily by an increase in milking cows
(from 9,534 as at December 31, 2012 to 14,498 as at December 31, 2013) as we completed
construction of and commenced milk production at our third dairy farm in June 2013 and to a
lesser extent, to an increase in the average price of our raw milk. The average selling price of
our raw milk from our China operations increased from RMB4.22 per kilogram in 2012 to
RMB4.51 per kilogram in 2013.
Revenue from Animal Protein. Our revenue from animal protein increased 16.8% from
US$2,010.3 million in 2012 to US$2,347.2 million in 2013. This increase was primarily due to
increases in sales volume of our animal feeds, DOCs, broilers and swine as well as increases
in average selling prices of our animal feeds, DOCs, broilers, swine and cattle. Our gross
sales volume of animal feeds increased from approximately 3.0 million tons in 2012 to
approximately 3.5 million tons in 2013 primarily due to the full year operation of a new feed
mill completed in mid-2012, the addition of additional production machinery and improved raw
materials storage facilities. Our gross sales of DOCs increased from approximately
540.4 million chicks in 2012 to approximately 593.8 million chicks in 2013 primarily as a result
of increased production capacity with the addition of new breeding farms and hatcheries in
Indonesia and acquisition of our Vietnam operations in September 2012. Our gross sales
volume from commercial farming increased from 405,300 tons of broilers and approximately
5,900 piglets sold in 2012 to 534,800 tons of broilers and approximately 72,700 piglets sold in
2013 primarily as a result of increased production capacity due to the addition of a
commercial farm in Indonesia as well as the acquisition of our swine and poultry operations in
Vietnam in September 2012. In Indonesia, the average selling price of our animal feeds
increased from Rp.5,113 per kilogram in 2012 to Rp.5,784 per kilogram in 2013, the average
84

selling price of our broilers increased from Rp.13,438 per kilogram in 2012 to Rp.14,978 per
kilogram in 2013 and the average selling price of our DOCs increased from Rp.3,818 per
chick in 2012 to Rp.4,517 per chick in 2013. This increase in revenue was partially offset by
an decrease in our revenue from cattle sales, which declined from US$115.4 million in 2012
to US$83.2 million in 2013 due primarily to a decline in our sales volume of cattle which
decreased from approximately 69,000 in 2012 to approximately 47,000 in 2013.
Our animal protein business is conducted predominantly through our subsidiary, PT Japfa,
whose functional currency is Rupiah. As a consequence, revenue from animal protein from
2012 to 2013 as reported in U.S. dollars reflects the impact of the depreciation of the Rupiah
against the U.S. dollar from 2012 to 2013, which depreciated approximately 21.0% from
December 31, 2012 to December 31, 2013. In Rupiah terms, revenue from our animal protein
segment increased 20.1% from 2012 to 2013.
Revenue from Consumer Food. Our revenue from consumer food decreased 4.9% from
US$239.4 million in 2012 to US$227.6 million in 2013 primarily due to the impact of the
depreciation of the Rupiah against the U.S. dollar from 2012 to 2013 and to a lesser extent, a
decrease in our average selling prices. As our consumer food business is conducted
predominantly through our Indonesian subsidiaries, PT So Good Food and PT So Good Food
Manufacturing, whose functional currency is Rupiah, financial reporting from consumer food
was materially impacted by the depreciation of the Rupiah against the U.S. dollar from 2012
to 2013, even as sales volumes increased. Gross sales volume of our chilled/frozen meat
products and ambient temperature meat products increased from 42.1 million kilograms in
2012 to 52.8 million kilograms in 2013. In both Rupiah and U.S. dollar terms, the average
selling price of our chilled/frozen meat products and ambient temperature meat products
declined over the same period.
Cost of Sales
Our cost of sales increased 17.3% from US$1,873.8 million in 2012 to US$2,198.1 million in
2013 primarily due to increases in cost of sales in our animal protein segment and dairy
segment, partially offset by a decrease in cost of sales in our consumer food segment.
Cost of Sales from Dairy. Our cost of sales from dairy increased 69.6% from US$41.8 million
in 2012 to US$70.9 million in 2013. The increase in cost of sales was primarily driven by an
increase in purchases of raw materials, primarily feed, and also increases in direct labor and
manufacturing overheads and the positive change in inventories of finished goods and workin-progress in line with higher sales volume in 2013, partially offset by an increase in our
average daily milk volume output per milking cow.
Cost of Sales from Animal Protein. Our cost of sales from animal protein increased 18.8%
from US$1,655.0 million in 2012 to US$1,966.6 million in 2013. The increase in cost of sales
was primarily driven by an increase in raw materials expenses which increased 21.1% from
US$1,408.5 million to US$1,705.1 million primarily due to increased purchases of raw
materials and also increases in direct labor and manufacturing overheads in line with
increased sales volumes of our animal feeds, DOCs, broilers and swine, partially offset by
lower positive change in inventories of finished goods and work-in-progress.
Cost of Sales from Consumer Food. Our cost of sales from consumer food decreased 9.3%
from US$177.0 million in 2012 to US$160.6 million in 2013 primarily due to impact of the
depreciation of the Rupiah against the U.S. dollar from 2012 to 2013. As our consumer food
business is conducted predominantly through our Indonesian subsidiaries, PT So Good Food
and PT So Good Food Manufacturing, whose functional currency is Rupiah, financial
reporting was affected by the depreciation of the Rupiah against the U.S. dollar from 2012 to
2013. This decrease was partially offset by a higher positive change in inventories of finished
goods and work-in-progress.
85

Gross Profit and Gross Profit Margin


As a result of the foregoing, our gross profit increased 11.4% from US$448.0 million in 2012
to US$499.2 million in 2013 due to increased gross profit across all segments. Our overall
gross profit margin in 2013 decreased to 18.5% from 19.3% in 2012, primarily due to the
decrease in the gross profit margin in our animal protein business, which decreased from
17.7% for 2012 to 16.2% in 2013, partially offset by the increase in the gross profit margin of
our dairy business from 42.0% in 2012 to 42.1% in 2013. Due to the inflationary environment
caused by the severe depreciation of the Rupiah against the U.S. dollar in 2013, while the
prices of our raw materials increased in Indonesia, we were unable to pass along certain of
these raw material price increases immediately to our consumers as we have typically been
able to do in order to maintain our profit margins. Accordingly, we were not able to increase
our selling prices immediately to account for both the Rupiah depreciation and raw material
price increase. However, with our strong market position, we were generally able to pass on
such price increases on previous occasions.
Increase in Fair Value of Biological Assets
The increase in fair value arising from biological assets was US$6.3 million in 2013 primarily
due to the increase in number of livestock in our animal protein and dairy segments as well as
an increase in fair value due to an overall increase in the market price of beef and dairy cattle
and swine. The increase in our beef livestock was due to the purchase of our Australian cattle
ranch in October 2013, from where we started importing cattle to Indonesia in 2013. Further,
we increased the number of swine stock from 24,726 to 29,653 on account of expansion of
our swine farms. The increase in our dairy cows was as a result of an increase in the number
of heads and the value per head. The total number of cows at our farms in China and
Indonesia increased by 54.9% from 29,992 heads as at December 31, 2012 to 46,449 as at
December 31, 2013.
Interest Income
Our interest income decreased 50.8% from US$5.9 million in 2012 to US$2.9 million in 2013
primarily due to a decrease in fixed deposits maintained with banks by our subsidiary PT
Japfa.
Other Credits
Other credits decreased 52.1% from US$7.3 million in 2012 to US$3.5 million in 2013
primarily due to a decrease in gains on disposal of PPE as we disposed fewer assets in 2013
as compared to 2012.
Other Charges
Other charges decreased 38.1% from US$4.2 million in 2012 to US$2.6 million in 2013
primarily due to smaller decreases in fair value of financial assets and write-offs of PPE. We
had a decrease in fair value of financial assets of US$1.3 million in 2013 as compared to
US$3.6 million in 2012 and write-offs on PPE of US$0.1 million in 2013 as compared to
US$0.2 million in 2012. As a result of the foregoing, our net other credits and (other charges)
decreased 71.0% from US$3.1 million in 2012 to US$0.9 million in 2013.
Foreign Exchange Adjustments Losses
Foreign exchange adjustments losses increased 2,050.0% from US$1.4 million in 2012 to
US$30.1 million in 2013 primarily due to unrealized exchange adjustment losses on liability
under our U.S. dollar-denominated senior notes due 2018 amounting to US$43.8 million,
partially offset by some foreign exchange adjustment gains. See Material Indebtedness
IndebtednessUS Dollar-Denominated Senior Notes Due 2018. We converted
approximately US$133 million of the proceeds from the notes into Rupiah in May 2013 shortly
86

after issuance of the notes and were impacted by the depreciation of the Indonesian Rupiah
against the U.S. dollar in 2013. Foreign exchange adjustments losses in 2013 were also
partially due to unrealized exchange adjustment losses on balances denominated in Indian
Rupees due to the depreciation of the Indian Rupee against the Singapore dollar in the same
period.
Marketing and Distribution Costs
Marketing and distribution costs increased 14.3% from US$83.1 million in 2012 to
US$95.0 million in 2013 in line with the increase in our sales in 2013.
Administrative Expenses
Administrative expenses increased 16.7% from US$173.5 million in 2012 to US$202.5 million
in 2013 primarily due to costs incurred in connection with the issuance of our U.S. dollardenominated senior notes due 2018 and in line with the increase in our production capacity
and sales in 2013. This increase in production capacity was due to expansion of our facilities,
primarily in Indonesia, which led to an increased in employee benefits expense and other
expenses which form part of our administrative expenses.
Finance Costs
Finance costs increased 17.6% from US$56.8 million in 2012 to US$66.8 million in 2013
primarily due to an increase in borrowings, including the issuance of the U.S. dollardenominated senior notes due 2018 and also the incurrence of additional debt by our dairy
segment. Our borrowings, excluding a non-interest bearing shareholders loan, increased by
approximately US$198.3 million in 2013. We used the increased borrowings for capital
expenditures, working capital and facility expansion, primarily in our animal protein and dairy
segments.
Profit before Tax from Continuing Operations
As a result of the foregoing, profit before tax from continuing operations decreased 22.8%
from US$148.8 million in 2012 to US$114.8 million in 2013.
Income Tax Expense
Income tax expense decreased 13.0% from US$38.4 million in 2012 to US$33.4 million in
2013 in line with the decrease in our profit before tax from continuing operations.
Profit from Continuing Operations, Net of Tax
As a result of the foregoing, profit from continuing operations, net of tax decreased 26.3%
from US$110.4 million in 2012 to US$81.4 million in 2013. Profit from continuing operations,
net of tax attributable to owners of the parent decreased 21.6% from US$53.3 million in 2012
to US$41.8 million in 2013. Profit from continuing operations, net of tax attributable to owners
of non-controlling interests decreased 30.8% from US$57.2 million in 2012 to US$39.6 million
in 2013.
Remeasurement of the Net Defined Benefits Plan, Net of Tax
Our remeasurement of the net defined benefits plan, net of tax improved from a loss of
US$8.7 million in 2012 to a gain of US$7.2 million in 2013 primarily because the discount rate
in Indonesia underlying the actuarial assumptions used to compute the defined benefit
obligation liabilities for the purpose of the actuarial valuation increased from 5.75% in 2012 to
8.9% in 2013, which reduced the payment obligation of our subsidiary, PT Japfa under its
employee benefit plan. The discount rates used in the actuarial valuation of the defined
benefits obligations are predominantly derived from the medium- to long-term Indonesian
government bonds rates, which represent the risk-free rates. The bond rate used in the
actuarial valuation in 2012 was 5.75% and was determined by reference to the rates at the
87

end of the 2012 reporting period. The bond rate used in the actuarial valuation in 2013 was
8.9% as the bond rates had increased at the end of the 2013 reporting period. As a
consequence of the increase in the bond rates, the defined benefit obligation liability of our
Group reduced at the end of the 2013 reporting period. This re-measurement of the defined
benefit obligation liability gave rise to a gain of US$7.2 million in 2013.
Exchange Differences in Translating Foreign Operations, Net of Tax
Exchange differences in translating foreign operations, net of tax, increased 309.8% from a
loss of US$28.6 million in 2012 to a loss of US$117.2 million in 2013, primarily due to the
translation of the balance sheet items and the income and expense items of PT Japfa whose
functional currency is the Rupiah. The exchange rates between the Rupiah and the Singapore
dollar were Rp.9,635.5687 to S$1 as of December 31, 2013 and Rp.7,878.5650 to S$1 as of
December 31, 2012. The average exchange rates between the Rupiah and the Singapore
dollar were Rp.8,419.3886 to S$1 and Rp.7,540.9644 to S$1 for the years ended
December 31, 2013 and December 31, 2012, respectively. The higher loss from exchange
differences in translating foreign operations, net of tax in 2013 was primarily due to the larger
after-tax adjustments made to reconcile (i) the translation of balance sheet items of PT Japfa
using the exchange rates as of December 31, 2013 to (ii) the translated balance sheet items
of PT Japfa of December 31, 2012 and changes in its balance sheet items due to the
translation of its income and expense items using the average exchange rates during 2013.
Total Comprehensive Income/(Loss)
As a result of the foregoing, we had total comprehensive loss of US$28.7 million in 2013 as
compared to total comprehensive income of US$73.1 million in 2012. Total comprehensive
loss attributable to owners of the parent was US$35.3 million and total comprehensive income
attributable to owners of non-controlling interests was US$6.6 million in 2013.
Year ended December 31, 2012 Compared to the Year ended December 31, 2011
Revenue
Our revenue increased 14.4% from US$2,029.8 million in 2011 to US$2,321.8 million in 2012
primarily due to general increases in demand across all our business segments.
Revenue from Dairy. Our revenue from dairy increased 87.8% from US$38.4 million in 2011
to US$72.1 million in 2012. The increase in revenue was primarily due to an increase in sales
volume of our dairy products in China, which increased from 20,225 tons of raw milk sold in
2011 to 62,487 tons of raw milk sold in 2012 driven primarily by an increase in milking cows
(from 3,777 as at December 31, 2011 to 9,534 as at December 31, 2012) as we completed
construction of and commenced milk production at our second dairy farm during 2012 and to
a lesser extent, to an increase in the average price of our raw milk in China. The average
selling price of our raw milk from our China operations increased from RMB4.06 per kilogram
in 2011 to RMB4.22 per kilogram in 2012.
Revenue from Animal Protein. Our revenue from animal protein increased 14.1% from
US$1,762.6 million in 2011 to US$2,010.3 million in 2012. This increase was primarily due to
increases in sales volume of our animal feeds, DOCs, broilers and swine as well as increases
in average selling prices of our animal feeds, DOCs, broilers, swine and cattle. Our gross
sales volume of animal feeds increased from approximately 2.6 million tons in 2011 to
approximately 3.0 million tons in 2012 due to new feed mill operations in Indonesia, the
addition of production machinery and improvements to our raw materials storage facilities.
Our gross sales volume of DOCs increased from approximately 487.5 million chicks in 2011
to approximately 540.4 million chicks in 2012 primarily as a result of increased production
capacity with the addition of new breeding farms and hatcheries in Indonesia. Our gross sales
volume from commercial farming increased from 293,600 tons of broilers in 2011 to 405,300
88

tons of broilers and 5,900 piglets sold in 2012 primarily as a result of an increase in
production capacity due to additional commercial farming operations in Indonesia in April
2011 and commencement of our swine operations in Vietnam in September 2012. In
Indonesia, the average selling price of our animal feeds increased from Rp.4,840 per kilogram
in 2011 to Rp.5,113 per kilogram in 2012, the average selling price of our broilers increased
from Rp.12,750 per kilogram in 2011 to Rp.13,438 per kilogram in 2012 and the average
selling price of our DOCs increased from Rp.3,232 per chick in 2011 to Rp.3,818 per chick in
2012. The increase in revenue was also due to a lesser extent to the increase in the average
selling price of our cattle, which increased from Rp.23,428 per kilogram in 2011 to Rp.27,568
per kilogram in 2012 due to the rise in demand for beef and the impact of government
regulations in Indonesia restricting the number of import permits for live cattle even as our
sales volume of cattle decreased over the same period from approximately 70,100 in 2011 to
approximately 69,000 in 2012.
Revenue from Consumer Food. Our revenue from consumer food increased 4.6% from
US$228.8 million in 2011 to US$239.4 million in 2012 primarily due to the increase in sales
volume in Indonesia and to a lesser extent, the inclusion of full year results of our Vietnam
consumer food business which we acquired in March 2011. Gross sales volume of our chilled/
frozen meat products and ambient temperature meat products increased from 41.9 million
kilograms in 2011 to 42.1 million kilograms in 2012 while in Rupiah and U.S. dollar terms, the
average selling price of our chilled/frozen meat products and ambient temperature meat
products declined over the same period.
Cost of Sales
Our cost of sales increased 12.7% from US$1,663.2 million in 2011 to US$1,873.8 million in
2012 in line with the increase in sales volumes across all our business segments.
Cost of Sales from Dairy. Our cost of sales from dairy increased 75.6% from US$23.8 million
in 2011 to US$41.8 million in 2012. The increase in cost of sales was primarily driven by an
increase in purchases of raw materials, primarily feed, and also increases in direct labor and
manufacturing overheads and the positive change in inventories of finished goods and workin-progress in line with higher sales volume in 2012, partially offset by an increase in our
average daily milk volume output per milking cow.
Cost of Sales from Animal Protein. Our cost of sales from animal protein increased 11.0%
from US$1,490.9 million in 2011 to US$1,655.0 million in 2012. The increase in cost of sales
was primarily due to a 23.4% increase in manufacturing overheads and 18.1% increase in
direct labor from 2011 to 2012 in connection with the addition of commercial farming
operations and new breeding farms and hatcheries and also increased purchases of raw
materials and higher positive change in inventories of finished goods and work-in-progress in
line with increased sales volumes of our animal feeds, DOCs, broilers and swine.
Cost of Sales from Consumer Food. Our cost of sales from consumer food increased 19.2%
from US$148.5 million in 2011 to US$177.0 million in 2012 primarily due to the increase in
raw material purchases in line with the increase in sales volume of our chilled/frozen meat
products and ambient temperature meat products in Indonesia and the inclusion of full year
results of our Vietnam consumer food business which we acquired in March 2011. It was
partially offset by a lower positive change in inventories of finished goods and work-inprogress.
Gross Profit and Gross Profit Margin
As a result of the foregoing, our gross profit increased 22.2% from US$366.5 million in 2011
to US$448.0 million in 2012. Our gross profit margin increased from 18.1% in 2011 to
19.3% in 2012 primarily due to improvements of our gross profit margins in our dairy and
animal protein segments.
89

Increase in Fair Value of Biological Assets


The increase in fair value arising from biological assets was US$6.6 million in 2012 primarily
due to the increase in livestock in our animal protein and dairy segments as well as an
increase in fair value due to overall increase in the market price of beef and dairy cattle and
swine value.
Interest Income
Our interest income increased 90.3% from US$3.1 million in 2011 to US$5.9 million in 2012
primarily due to increased bank deposits from the cash proceeds from the Rupiah bond
issued in early 2012 by PT Japfa. See Material IndebtednessIndebtednessRupiah
Bond.
Other Credits
Other credits decreased 26.3% from US$9.9 million in 2011 to US$7.3 million in 2012. In
2011, our gain on disposal of PPE was approximately US$7.7 million, primarily from the
disposal of certain slaughterhouses in Indonesia. The increase in our fair value of financial
assets was approximately US$1.8 million primarily due to gains on marketable securities of
certain unrelated Sri Lankan companies. We also had scrap sales of US$22,000, comprising
feed bags sold to third parties and insurance reimbursements of US$160,000, comprising
reimbursements of prior health and inventory insurance claims. In 2012, our gain on disposal
of PPE was lower, amounting to approximately US$3.0 million and there was a decrease in
fair value of financial assets (see Other Charges), partially offset by higher scrap sales
and insurance reimbursements, amounting to US$2.1 million and US$1.1 million respectively.
Other Charges
Other charges increased 10.5% from US$3.8 million in 2011 to US$4.2 million in 2012
primarily due to changes in fair value of financial assets which decreased from a gain of
US$1.8 million in 2011 to a loss of US$3.6 million in 2012 due primarily to unrealized losses
on marketable securities of certain unrelated Sri Lankan companies. As a result of the
foregoing, our net other credits and (other charges) decreased 49.2% from US$6.1 million in
2011 to US$3.1 million in 2012.
Foreign Exchange Adjustments Losses/Gains
Foreign exchange adjustments losses were US$1.4 million in 2012 as compared to foreign
exchange adjustments gains of US$4.4 million in 2011. Foreign exchange adjustments losses
in 2012 were primarily due to the depreciation of the Rupiah against the U.S. dollar in 2012.
Foreign exchange adjustments gains in 2011 were due to foreign exchange gains on U.S.
dollar-denominated loans we made to our subsidiary Jupiter Foods Pte Ltd and our then
subsidiary Japfa Intl as a result of the strengthening of the U.S. dollar against the Singapore
dollar in 2011.
Marketing and Distribution Costs
Our marketing and distribution costs decreased 1.8% from US$84.6 million in 2011 to
US$83.1 million in 2012 primarily due to a decrease in marketing expenses as a result of
Japfa Comfeed India Private Limiteds consolidation of its businesses.
Administrative Expenses
Administrative expenses increased 18.2% from US$146.8 million in 2011 to US$173.5 million
in 2012 primarily due to the addition of our Vietnam animal protein operations in September
2012.

90

Finance Costs
Finance costs increased 35.6% from US$41.9 million in 2011 to US$56.8 million in 2012
primarily due to the Rupiah bond issued by PT Japfa in early 2012. See Material
IndebtednessIndebtednessRupiah Bond.
Profit before Tax from Continuing Operations
As a result of the foregoing, profit before tax from continuing operations increased 30.1% from
US$114.4 million in 2011 to US$148.8 million in 2012.
Income Tax Expense
Income tax expense increased 10.0% from US$34.9 million in 2011 to US$38.4 million in
2012 in line with the increase in our profit before tax from continuing operations.
Profit from Continuing Operations, Net of Tax
As a result of the foregoing, profit from continuing operations, net of tax increased 38.9% from
US$79.5 million in 2011 to US$110.4 million in 2012. Profit from continuing operations, net of
tax attributable to owners of the parent increased 19.8% from US$44.5 million in 2011 to
US$53.3 million in 2012. Profit from continuing operations, net of tax attributable to owners of
non-controlling interests increased 63.4% from US$35.0 million in 2011 to US$57.2 million in
2012.
Remeasurement of the Net Defined Benefits Plan, Net of Tax
Our remeasurement of the net defined benefits plan, net of tax increased 40.3% from a loss
of US$6.2 million in 2011 to a loss of US$8.7 million in 2012 because of the adoption of
FRS 19 at our Group level, which required recognition of changes in value of the net defined
benefits plan of PT Japfa as other comprehensive income/(loss).
Exchange Differences in Translating Foreign Operations, Net of Tax
Exchange differences in translating foreign operations, net of tax, increased 91.9% from a
loss of US$14.9 million in 2011 to a loss of US$28.6 million in 2012, primarily due to the
translation of the balance sheet items and the income and expense items of PT Japfa whose
functional currency is the Rupiah. The exchange rates between the Rupiah and the Singapore
dollar were Rp.7,878.5650 to S$1 as of December 31, 2012 and Rp.7,059.9600 to S$1 as of
December 31, 2011. The average exchange rates between the Rupiah and the Singapore
dollar were Rp.7,540.9644 to S$1 and Rp.7,001.7400 to S$1 for the years ended
December 31, 2012 and December 31, 2011, respectively. The higher loss from exchange
differences in translating foreign operations, net of tax in 2012 was primarily due to the larger
after-tax adjustments made to reconcile (i) the translation of balance sheet items of PT Japfa
using the exchange rates as of December 31, 2012 to (ii) the translated balance sheet items
of PT Japfa as of December 31, 2011 and changes in its balance sheet items due to the
translation of its income and expense items using the average exchange rates during 2012.
Total Comprehensive Income/(Loss)
As a result of the foregoing, total comprehensive income increased 25.2% from
US$58.4 million in 2011 to US$73.1 million in 2012. Total comprehensive income attributable
to owners of the parent was US$39.4 million in 2012 and total comprehensive income
attributable to owners of non-controlling interests was US$33.7 million in 2012.

91

Liquidity and Capital Resources


We have historically met our working capital and other capital requirements primarily from
cash generated by operating activities, short-term and long-term bank borrowings and the
issuance of debt securities. See Indebtedness below.
We expect to receive approximately S$187.3 million from the net proceeds of this Offering
(assuming the Over-allotment Option is not exercised). See the section headed Use of
Proceeds for a description of the proceeds we expect to receive from the Offering and how
we intend to use them.
We believe that we have adequate working capital for our present requirements and that our
net cash generated from operating activities, together with cash and cash equivalents, and
the net proceeds from the Offering, will provide sufficient funds to satisfy our working capital
requirements and anticipated capital expenditures for the next 12 months following the date of
this Prospectus. We may, however, incur additional indebtedness to finance all or a portion of
our planned capital expenditures or for other purposes. In addition, depending on our capital
requirements, market conditions and other factors, we may raise additional funds through
debt or equity offerings or the sale or other disposition of shares or assets.
As at the Latest Practicable Date, the total US$ equivalent of the unutilized banking and credit
facilities available to our Group is approximately US$144,383,937.
Net Cash Flows
The following table sets forth a condensed summary of our combined cash flow data for the
periods indicated:
For the year ended
December 31,
2011
2012
2013

For the three months


ended March 31,
2013
2014

(US$ in millions)

Net cash flows (used in)/from operating activities . . . .


Net cash flows (used in)/from investing activities . . . .
Net cash flows from/(used in) financing activities . . . .

(23.2)
(148.0)
213.9

27.0
(242.2)
221.1

89.1
(204.7)
184.0

13.5
(34.8)
(34.6)

(47.2)
(47.9)
83.5

Net increase/(decrease) in cash and cash


equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of the year/
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42.7

5.8

68.4

(55.9)

(11.6)

104.5

147.2

153.0

153.0

221.4

Cash and cash equivalents at the end of the year/


period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

147.2

153.0

221.4

97.1

209.8

Net Cash Flows From/(Used in) Operating Activities


Net cash used in operating activities was US$47.2 million in the three months ended
March 31, 2014, consisting of operating cash flows before working capital changes of
US$68.6 million, cash outflow due to changes in working capital of US$98.0 million and taxes
paid of US$17.8 million. Cash outflows due to changes in working capital primarily consisted
of: cash outflows of US$22.3 million from increases in purchases of biological assets,
primarily due to purchases of swine, chicken, cattle and dairy cows and growing costs of
breeding swine, breeding chicken, breeding cattle and dairy cows; cash outflows of
US$28.1 million from decreases in trade and other payables, primarily due to payments on
balances outstanding for procurements by Annona during the fourth quarter of 2013 as
Annona made higher than usual purchases of raw materials (primarily soybean meal) in fourth
quarter of 2013 in anticipation of increased prices of raw materials (including soybean meal).
Our purchases of raw materials are generally on average credit terms of about 60 days, which
led to these cash outflows in the three months ended March 31, 2014; and cash outflows of
US$28.4 million from other assets, primarily due mainly to increases in advance payments of
92

(i) US$9.9 million mainly for the purchase of approximately 3,000 heifers for Farm 5 and
(ii) US$14.2 million to obtain letters of credit for the purchase of raw materials by PT Japfa.
Operating cash flows before working capital changes was a result of profit before tax from
continuing operations of US$27.2 million and positive non-cash adjustments of
US$41.3 million primarily for accrued interest expense and depreciation of PPE and the net
effect of exchange rate changes, partially offset by a smaller change in the fair value gain on
biological assets.
Net cash generated from operating activities was US$89.1 million in 2013, consisting of
operating cash flows before working capital changes of US$217.2 million, cash outflow due to
changes in working capital of US$93.3 million and taxes paid of US$34.8 million. Changes in
working capital primarily comprised purchases of biological assets primarily dairy cows for our
dairy segment in relation to commencement of operations of our third dairy farm in China,
which was partially offset by an increase in trade and other payables in line with such
purchases and higher than usual purchases of raw materials (primarily soybean meal) by
Annona in the fourth quarter of 2013 in anticipation of increased prices of raw materials
(including soybean meal). Operating cash flows before working capital changes was a result
of profit before tax from continuing operations of US$114.8 million and positive non-cash
adjustments of US$102.4 million primarily for accrued interest expense and depreciation of
PPE, partially offset by the net effect of exchange rate changes.
Net cash generated from operating activities was US$27.0 million in 2012, consisting of
operating cash flows before working capital changes of US$235.8 million, cash outflow due to
changes in working capital of US$163.5 million and taxes paid of US$45.4 million. Changes in
working capital primarily comprised purchases of raw materials for our animal protein
segment (primarily raw materials for our swine operations in Vietnam, which we acquired in
September 2012) and purchases of biological assets primarily dairy cows for our dairy
segment in relation to commencement of operations of our second dairy farm in China and
increases in trade receivables generally in line with increased sales, which was partially offset
by an increase in trade and other payables in line with increased inventory and biological
asset purchases. Operating cash flows before working capital changes was a result of profit
before tax from continuing operations of US$148.8 million and positive non-cash adjustments
of US$87.0 million primarily for accrued interest expense and depreciation of PPE, partially
offset by the net effect of exchange rate changes.
Net cash used in operating activities was US$23.2 million in 2011, consisting of operating
cash flows before working capital changes of US$179.6 million, cash outflow due to changes
in working capital of US$144.0 million and taxes paid of US$58.8 million. Changes in working
capital primarily comprised purchases of raw materials for our animal protein segment and
purchases of biological assets primarily dairy cows for our dairy segment and a decrease in
trade payables, which was partially offset by a decrease in trade and other receivables. The
decrease in trade and other payables and the decrease in trade and other receivables were
due to eliminations of trade and other payables and trade and other receivables accounts
between AIH and PT So Good Food due to consolidation at the combined Group level.
Operating cash flows before working capital changes was a result of profit before tax from
continuing operations of US$114.4 million and positive non-cash adjustments of
US$65.2 million primarily for accrued interest expense and depreciation of PPE partially offset
by gain on disposal of PPE, and the net effect of exchange rate changes.
Net Cash Flows (Used in)/From Investing Activities
In the three months ended March 31, 2014, our net cash used in investing activities was
US$47.9 million. This consisted primarily of cash payments of US$49.2 million used for the
purchase of buildings, machinery, equipment and land rights for our animal protein segment
in Indonesia, partially offset by proceeds from disposal of PPE.

93

In 2013, our net cash used in investing activities was US$204.7 million. This consisted
primarily of cash payments of US$206.6 million used primarily for the construction and
expansion of our dairy farms in China including the acquisition of PPE in connection with the
expansion of our dairy farms in China (for which we made cash payments of US$32.4 million
(excluding payments towards biological assets)), the expansion of production capacity at our
existing feedmills (for which we made cash payments of US$26.2 million) and also the
expansion of breeding farms (for which we made cash payments of US$39.1 million), partially
offset by cash receipts of US$2.9 million of interest received on bank deposits and US$2.2
million of proceeds from the disposal of PPE.
In 2012, our net cash used in investing activities was US$242.2 million, consisting primarily of
cash payments of US$202.0 million used primarily for the construction and expansion of our
dairy farms in China, including the acquisition of PPE in connection with the expansion of our
dairy farms in China (for which we made cash payments of US$31.8 million (excluding
payments towards biological assets)) and the expansion of production capacity in existing
feedmills (for which we made cash payments of US$36.4 million), the expansion and
construction of existing and new breeding farms and hatcheries and the re-location of an
aqua-feedmill (for which we made cash payments of US$72.9 million) and US$51.0 million
net cash outflow at acquisition date in relation to the acquisition of two subsidiaries, PT
Agrinusa Jaya Santosa and Japfa Vietnam Investments Pte Ltd, partially offset by cash
receipts of US$5.9 million of interest received on bank deposits and US$6.8 million of
proceeds from the disposal of PPE.
In 2011, our net cash used in investing activities was US$148.0 million, consisting primarily of
cash payments of US$139.7 million used primarily for the acquisition of PPE in connection
with the construction of two poultry feedmills and expansion of capacity in existing feedmills
(for which we made cash payments of US$34.1 million), the construction of new breeding
farms and hatching facilities (for which we made cash payments of US$43.0 million) and
US$28.5 million net cash outflow at acquisition datenet of cash balance of a subsidiary, PT
Primatama Karya Persada, acquired, partially offset by cash receipts of US$17.6 million from
the disposal of PPE and US$3.1 million of interest received on bank deposits.
Net Cash Flows From/(Used in) Financing Activities
In the three months ended March 31, 2014, our net cash from financing activities was
US$83.5 million, consisting primarily of US$66.6 million from the proceeds from additional
bank loans in Indonesia, US$20.6 million in proceeds from additional shareholder loans from
shareholders of the Company and US$7.1 million in proceeds from the issuance of shares to
non-controlling shareholders of AIH and non-controlling shareholders of Japfa Comfeed
Myanmar Pte Ltd, partially offset by payment of interest of US$19.3 million on outstanding
bank loans and bonds.
In 2013, our net cash from financing activities was US$184.0 million, consisting primarily of
US$224.6 million from the proceeds from our U.S. dollar-denominated senior notes due 2018,
US$77.1 million in proceeds from the issuance of additional shares to our shareholders and
US$54.1 million in proceeds from the issuance of shares to shareholders of AIH as part of the
restructuring exercise, partially offset by net movements in shareholders loans of
US$71.6 million comprising primarily capitalization of shareholder loans from our
shareholders partially offset by additional shareholder loans, payment of interest of
US$66.8 million on outstanding bank loans and bonds and net decrease in other financial
liabilities of US$27.7 million.
In 2012, our net cash from financing activities was US$221.1 million, consisting primarily of
proceeds from the Rupiah-denominated bonds issued in January and February 2012, net
increase in other financial liabilities of US$66.7 million, US$39.0 million in proceeds from the
issuance of shares to shareholders of AIH and US$51.7 million in net proceeds from the
94

increase in shareholder loans, partially offset by US$54.7 million for repayment of certain
Rupiah-denominated bonds and payment of interest of US$56.8 million on outstanding loans
and bonds.
In 2011, our net cash from financing activities was US$213.9 million, consisting primarily of
US$195.2 million from net increase in other financial liabilities, US$52.4 million in net
proceeds from the increase in shareholder loans and US$44.9 million in proceeds from the
issuance of shares to shareholders of AIH, partially offset by net interest of US$41.9 million
paid on outstanding bank loans and bonds and dividends of US$34.3 million paid by PT Japfa
to non-controlling shareholders.
Capital Expenditures
Historical Capital Expenditures
Our capital expenditures were US$150.4 million, US$201.0 million, US$212.1 million and
US$46.9 million in 2011, 2012, 2013 and the three months ended March 31, 2014,
respectively.
The following table sets forth our major capital expenditures by category of expenditures for
each of the periods indicated below:
For the year ended
December 31,
2011
2012
2013

For the
three months
ended
March 31,
2014

(US$ in millions)

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150.4 201.0 212.1


Investment properties(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0(2)
- 0.0(2)
Total capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150.4 201.0 212.1

46.9
46.9

Notes:
(1)
Comprises property, plant and equipment that have been classified as investment property due to being owned or held
under a finance lease to earn rentals or for capital appreciation or both, rather than for use in the production or supply of
goods or services or for administrative purposes or sale in the ordinary course of business.
(2)
Amount is less than US$50,000.

Planned Capital Expenditures


As at the Latest Practicable Date, we had approved capital expenditures of approximately
US$390.0 million in 2014 as follows:
2014
(US$ in millions)

Segment
Animal protein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dairy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note:
(1)
Includes US$46.9 million incurred in the three months ended March 31, 2014 across all our segments.

95

240.0
120.0
30.0
390.0(1)

The following table sets forth certain details regarding our material plans for planned capital
expenditure in 2014:

Expected
Amount
for 2014
(US$
in millions)

Amount
Expended
as of the
Latest
Practicable
Date
(US$
in millions)

Commencement
Date

Expected
Completion Date

0.2

Second
quarter 2014

Fourth quarter
2014

12.8

4.5

Fourth
quarter 2013

Fourth quarter
2014

Holding Capacity:
8,000 heads
Milking Capacity:
3,800 heads

17.9

1.5

Second
quarter 2014

Second
quarter 2016

Construction of a new
feedmill in Medan,
Indonesia

Fish and Shrimp


Feed:
164,000 tons per
annum

10.2

8.2

Second
quarter 2012

Fourth quarter
2015

Construction of a new
beef cattle feedlot in
China

Production capacity of
10,000 heads per
annum

11.5

8.1

Second
quarter 2013

Fourth quarter
2014(1)

Project

Capacity after Completion

Construction of a new
dairy farm in
Dongying, China

Holding Capacity:
13,000 heads
Milking Capacity:
6,000 heads

34.0

Expansion of an
existing dairy farm in
Gunung Kawi,
Indonesia

Holding Capacity:
9,000 heads
Milking Capacity:
4,200 heads

Construction of a new
dairy farm in Blitar,
Indonesia

Note:
(1)
Initial phase of the feedlot is expected to be completed by the end of 2014.

In addition to the material capital expenditure disclosed in the table above, we have also
budgeted an aggregate of US$303.6 million for planned capital expenditures in 2014 (which
includes environmental, maintenance and construction capital expenditure) in (i) our animal
protein segment (including feed, breeding, aquaculture, beef and swine) spanning Indonesia,
Myanmar, Vietnam and India to the extent of US$218.3 million, (ii) our dairy segment in China
and Indonesia to the extent of US$55.3 million, and (iii) our consumer food segment in
Indonesia, Vietnam and Myanmar to the extent of US$30.0 million.
We anticipate that the funds needed for such capital expenditures will come from part of the
net proceeds from the Offering together with our internal cash and bank loans.
Our actual capital expenditures may differ from the amounts set out above due to various
factors, including our business plan, the progress of our capital projects, our financial
performance, market conditions, our outlook for future business conditions, and relevant
governmental approvals needed. To the extent that we do not generate sufficient cash flows
from our operations to meet our working capital needs and to execute our capital expenditure
plans, or to the extent certain governmental approvals may not be obtained in a timely
manner or at all, we may revise our capital expenditure plans or seek additional debt or equity
financing.

96

Contractual Obligations and Commitments


The following table sets forth our contractual obligations and commitments to make future
payments as of March 31, 2014:

Total

Payment due by period


Less than
More than
1 year
1 5 years
5 years
(US$ in millions)

Short-term bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 474.9


Trade payables
Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.9
Third parties and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
98.2
Other accounts payable to third parties . . . . . . . . . . . . . . . . . . . . . . . . . .
60.3
Long-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163.2
Liability for purchase of property, plant and equipment . . . . . . . .
1.0
Operating Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2
Bonds payable(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351.9
Shareholder loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73.0
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,225.6

474.9

0.9
98.2
60.3
0.4
1.2
73.0
708.9

139.9
0.6
1.0
351.9
493.4

23.3
23.3

Note:
(1)
For details of the bonds, see Material IndebtednessUS-Dollar Denominated Senior Notes Due 2018 and Material
IndebtednessIndebtednessRupiah Bond.

Indebtedness
To fund our working capital and capital expenditure requirements, we have entered into
various loan and facility agreements with various financial institutions and issued debt
securities. As of March 31, 2014, our combined borrowings were approximately US$1,065.2
million. As of March 31, 2014, the interest rates on the outstanding amount of our banking
facilities range from 2.35% to 16.0% per annum and maturity dates of the outstanding amount
are from 2014 to 2018.
The following table sets forth our total outstanding borrowings as of March 31, 2014:
(US$ in millions)

Current Indebtedness
Secured and guaranteed bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured and non-guaranteed shareholders loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Current Indebtedness
Secured and guaranteed bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured and guaranteed bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured and non-guaranteed bonds payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

97

474.9
1.2
73.0
163.2
1.0
351.9
1,065.2

The following table shows, as of March 31, 2014, our outstanding borrowings, by the currency
in which they are denominated:
Borrowings

U.S. Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indonesian Rupiah(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Singapore Dollar(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vietnam Dong(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indian Rupees(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Australian Dollar(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Euro(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Original currency
amount

Translated
amount

(millions)

(US$ millions)

458.0
5,011,261.0
92.0
1,568,070.0
16.0
21.0
1.0

458.0
438.0
73.5
74.4
0.3
19.6
1.4
1,065.2

Notes:
(1)
The Indonesia Rupiah amounts have been translated based on the exchange rate of US$1.00:Rp.11,441.24.
(2)
The Singapore Dollar amounts have been translated based on the exchange rate of US$1.00:SGD1.25.
(3)
The Vietnam Dong amounts have been translated based on the exchange rate of US$1.00:VND21,076.21.
(4)
The Indian Rupee amounts have been translated based on the exchange rate of US$1.00: INR59.89.
(5)
The Australian Dollar amounts have been translated based on the exchange rate of US$1.00:AUD1.07.
(6)
The Euro amounts have been translated based on the exchange rate of EUR1.00:US$1.37.

We may from time to time enter into interest-rate and/or currency hedges as are required by
our lenders in connection with facilities provided by them.
See Material Indebtedness for a summary of the material terms and conditions of the
material borrowings.
Off Balance Sheet Arrangements
We do not have any off balance sheet liabilities that are not reflected in our financial
statements.
Risk Management
We are, during the normal course of business, exposed to various types of market risks,
including interest rate risk, credit risk and liquidity risk, among others. Our risk management
strategy aims to minimize the adverse effects of financial risk on our financial performance.
Foreign Exchange Rate Risk
The substantial majority of our business and sales are conducted in Indonesia, whose official
currency is the Rupiah. We also have substantial operations in China and Vietnam, whose
official currency is the Renminbi and Vietnam Dong, respectively. We import a certain amount
of corn and all of the soybean meal for our Indonesian animal feed business from sources
outside of Indonesia. Our foreign currency denominated liabilities as of March 31, 2014
include borrowings and trade payables denominated in U.S. dollars, Rupiah, Renminbi and
Vietnam Dong. We also pay interest on our U.S. dollar-denominated Notes. As a result, we
have certain exposure to foreign exchange fluctuations and market risk associated with such
exchange rate movements against the Singapore dollar, our functional currency, the U.S.
dollar, our Groups presentation currency, Renminbi, the functional currency of our China
operations and Rupiah, the functional currency of our Indonesian operations.
We manage our foreign exchange risks by performing regular review and by monitoring our
foreign exchange exposures.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. Our exposure to the risk of changes in
98

market interest rates relates primarily to the fluctuation of the prevailing market interest rate
confined to bank deposits, which is immaterial to our profit before tax from continuing
operations and equity.
Credit Risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial
instrument or customer contract, leading to a financial loss. We are exposed to credit risk
from its operating activities (primarily for trade receivables) and from its financing activities,
including deposits with banks and financial institutions, foreign exchange transactions and
other financial instruments.
We face concentration customer credit risk in our China dairy business. As of March 31,
2014, our top three customers in our China dairy business accounted for approximately 84%
of our total dairy sales in China.
Liquidity Risk
Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall
due. We manage liquidity risk by monitoring forecast and actual cash flows continuously and
keeping sufficient cash and cash equivalents.
Commodity Price Risk
We are exposed to commodity price risk resulting from changes in the prices of corn, soybean
meal and alfalfa, some of our principal raw materials. We mitigate our commodity price risk by
typically passing on any increases in the cost of raw materials to customers.
Seasonality
The Indonesian poultry industry is subject to seasonal fluctuations in demand. Typically,
poultry consumption is highest during Ramadan and lowest during the period immediately
following Ramadan and during the beginning of the school year. This seasonality may cause
our net sales to vary across different calendar quarters from year to year. In addition, our
dairy segment typically experiences lower milk production during the summer months. Milk
production is generally lower during the months of July through August for our China dairy
business and April through May for our Indonesian dairy business due to higher temperatures
which affect the production levels of our dairy cows during such periods. We are also subject
to seasonality in respect of our raw materials such as corn, which prices and supply are
subject to the seasonal fluctuations of corn harvests.
Recent Accounting Pronouncements
The Singapore Accounting Standards Council has released revisions to several accounting
standards that may have a material impact on our future financial statements. We are
currently evaluating the potential impact that the adoption of such accounting standards may
have on our financial statements. See Note 39 to our combined financial statements.

99

100

57.5%

Dongying Xianhe
AustAsia Modern
Dairy Farm Co., Ltd.

100%

100%

Shanghai
AustAsia Food
Co., Ltd.

100%

100%

84.0%

Japfa India
Investments
Pte. Ltd.

100%
100%

100%

85.0%
Japfa Hypor
Genetics
Company
Limited(5)

100%

100%

PT Intan
Kenkomayo
Indonesia

51.0%

PT So Good Food
Manufacturing(2)

100%

Annona
Pte. Ltd.

100%

PT So Good Food(3)

100%

Jupiter Foods
Pte. Ltd.

Jupiter Foods
Vietnam Joint
Stock Company(4)

Japfa Comfeed
Binh Thuan
Limited Company

100%

Japfa Comfeed
Vietnam Limited
Company

100%

Japfa Vietnam
Investments
Pte. Ltd.

Japfa Comfeed
Long An Limited
Company

Dongying Shenzhou
AustAsia Modern
Dairy Farm Co. Ltd

100%

Central India
Poultry Breeders
Private Limited

50.0%

Japfa Comfeed
India Private Ltd.

16.0%

Dongying Japfa
Beef Co. Ltd.

100%

Japfa China
Investments
Pte. Ltd.

100%

Tai An AustAsia
Modern Dairy Farm
Co., Ltd.

Japfa Comfeed
Myanmar Pte Ltd

85.0%

Japfa Myanmar JV
Pte Ltd

Dongying AustAsia
Modern Farm
Co., Ltd.

AustAsia Food
(M) Sdn. Bhd.

100%

Various
Subsidiaries

PT Japfa Comfeed
Indonesia Tbk
(IDX-Listed)(1)

Japfa Ltd.

Notes:
(1)
See Appendix DOur Subsidiaries and Associated Companies for further details of all our subsidiaries and associated companies and full details of shareholdings.
(2)
AIH2 Pte. Ltd. is currently wholly-owned by our Company. However, it is expected that capital calls for AIH2 will be on the basis of our Company at 64.45% and BR Fund 2 at 35.55%. Accordingly,
our shareholding in AIH2 will be diluted on the same basis once capital calls are made. See Corporate Structure and OwnershipCertain Commercial Arrangements Relating to our Subsidiaries
AIH Shareholders AgreementAIH2 for more information.
(3)
Under Indonesian law, our Indonesian subsidiaries require at least two shareholders. Accordingly, a nominal number of shares in our Indonesian subsidiaries which are indicated as 100% owned in
the charts above are held by our other subsidiaries. See Appendix DOur Subsidiaries and Associated Companies for full details of such shareholdings.
(4)
A joint stock company in Vietnam requires at least three shareholders. 0.5% of the shares in Jupiter Foods Vietnam Joint Stock Company (Jupiter Vietnam) are held by Mr. Hoang Phan Tan, the
Chairman of the Board of Management of Jupiter Vietnam, and 0.5% are held by Mr. Bambang Widjaja, who is the Head of Capital MarketsCorporate Finance at PT Japfa Comfeed Indonesia
Tbk. Mr. Hoang Phan Tan and Mr. Bambang Widjaja are holding their respective shareholding interests on behalf of / as nominees of Jupiter Foods Pte. Ltd. Jupiter Vietnam is being converted to a
private limited liability company and the shares held by Mr. Hoang Phan Tan and Mr. Bambang Widjaja are in the process of being transferred to Jupiter Foods Pte. Ltd.
(5)
While our wholly-owned subsidiary JCLA holds an 85.0% interest in Japfa Hypor, it is currently only entitled to a 60% share of profits of Japfa Hypor. See Certain Commercial Arrangements
Relating to our SubsidiariesJapfa Hypor Joint Venture AgreementShare of Profits.

PT Austasia
Food(3)

100%

AustAsia Food
Pte. Ltd.

AustAsia Food
HK Limited

PT Greenfields
Indonesia(3)

100%

100%

100%

AIH2
Pte. Ltd.(2)

100%

100%

Austasia Investment
Holdings Pte. Ltd.

61.9%

The following chart shows the structure of our Group(1):

CORPORATE STRUCTURE AND OWNERSHIP

101
PT Agrinusa
Jaya Santosa

100%

PT Austasia
Stockfeed

100%

PT Santosa
Agrindo

100%

PT Japfafood
Nusantara

100%

Japfa Santori
Australia Pty
Ltd

100%

PT Indojaya
Agrinusa

50.0%

100%
PT Indonesia
Pelleting

PT Bhirawa
Mitra
Sentosa

PT Kraksaan
Windu

100%

100%

PT Artha
Lautan Mulya

100%

100%

PT Vaksindo
Satwa
Nusantara

100%

Comfeed
Trading B. V.

100%

Comfeed
Finance B. V.

100%

PT Jakamitra
Indonesia

PT Japfa
Indoland

100%

PT Iroha Sidat
Indonesia

60.0%

PT Bintang
Laut Timur

100%

PT Tretes Indah
Permai

100%

Apachee
Pte Ltd

100%

PT Bumiasri
Lestari

60.0%

PT Suri Tani
Pemuka

100%

Notes:
(1)
Under Indonesian law, our Indonesian subsidiaries require at least two shareholders. Accordingly, a nominal number of shares in our Indonesian subsidiaries which are indicated as 100% owned in
the charts above are held by our other subsidiaries. See Appendix DOur Subsidiaries and Associated Companies for full details of such shareholdings.
(2)
Five out of 690,000 shares in the capital of PT Ciomas Adisatwa are held by Mr. Hendri, the financial controller for our Groups poultry division.

PT Wabin
Jayatama

100%

PT Ciomas
Adisatwa(2)

99.999%

PT Japfa
Comfeed
Indonesia Tbk(1)

57.5%

Japfa Ltd.

The following chart shows the structure of the PT Japfa Group(1):

CORPORATE REORGANIZATION
We have, prior to the Offering, implemented a corporate reorganization in preparation for our
listing on the SGX-ST, resulting in our Company becoming the holding company of our
Group. Certain details regarding the corporate reorganization from January 1, 2011 up to the
Latest Practicable Date are as follows:
AIH
Acquisition of AIH
On April 2, 2014, our Company entered into a sale and purchase agreement with Progressive
Investment Inc. (PII), Foxbar Investments Ltd. (Foxbar) and Viva Sino Investments Limited
(Viva) (collectively, the Progressive Group) for the purchase by our Company of an
aggregate of 134,953,572 fully paid ordinary shares and 6,343,571 partially paid ordinary
shares in, and comprising 61.9% of the issued shares in, the capital of AIH (AIH Shares) for
a consideration of US$554,456,870, comprising US$50,000,000 in cash and 168,256,634
new Shares1 in the capital of our Company issued to the Progressive Group (or to their
order). Following the completion of this transaction, our Company holds 61.87% of the issued
AIH Shares.
The above consideration also includes payment for the assignment of the rights of the
Progressive Group to our Company in respect of (i) the deed of undertaking dated July 19,
2012 entered into between BR Fund 1, Foxbar Investments Ltd, and AIH (Foxbar
Undertaking), under which BR Fund 1 had undertaken to Foxbar to pay 30.0% of its
realization value upon a realization event (AIH IPO or sale of its shares) less its cost of
investment, and (ii) the deed of undertaking dated August 13, 2010 entered between
BR Fund 1, PII and AIH (as amended on August 10, 2011) (PII Undertaking), under which
BR Fund 1 had undertaken to PII to pay 20.0% of its realization value upon a realization event
(AIH IPO or sale of its shares) less its cost of investment. At Foxbar/PIIs election, payment
can take the form of cash or AIH Shares or the form of consideration payable to BR Fund 1.
In addition, Foxbar and PII (respectively) are entitled to (in lieu of, or in combination with, its
other rights of election) purchase up to 30.0% and 20.0% (respectively) of BR Fund 1s AIH
Shares at a price equivalent to its pro-rated cost of investment. The AIH Shares subject to the
Foxbar Undertaking and the PII Undertaking aggregate to 14,014,286 AIH Shares or 6.1% of
the issued AIH Shares, subscribed for by BR Fund 1 at an aggregate of US$15.2 million.
Our Executive Deputy Chairman, Mr. Handojo Santosa, has controlling interests in PII,
Foxbar and Viva. Our Non-Executive Director, Mr. Hendrick Kolonas, has a non-controlling
interest in PII and Foxbar and our Executive Director and Chief Executive Officer, Mr. Tan
Yong Nang, has a non-controlling interest in Foxbar and Viva.
The acquisition was on an arms length basis and the consideration was determined by the
Company using the mid-point of a range of valuations based on listed companies comparable
to AIH and a see-through valuation for the Foxbar Undertaking and PII Undertaking based on
the valuation of AIH and BR Fund 1s cost of investment. The price at which the Shares of the
Company were to be issued was based on a sum-of-the-parts valuation of our Group prior to
the acquisition of AIH. The component valuations included the mid-points of a range of
valuations based on listed comparable companies to our Groups unlisted subsidiaries and
the market capitalization of PT Japfa just prior to the date of the sale and purchase
agreement.
Please also see Certain Commercial Arrangements Relating to our SubsidiariesAIH
Shareholders Agreement.
1

Prior to the Share Split. The 168,256,634 new Shares were issued, to the order of the Progressive Group, to Rangi
Management Limited (103,380,494 Shares), Morze International Limited (27,336,374 Shares), Tallowe Services Inc.
(27,000,000 Shares) and Great Alpha Investments Limited (10,539,766 Shares).

102

Acquisition of the AIH Group Companies


On November 19, 2013, AIH entered into a sale and purchase agreement with PII and
Claridges Investments Limited for the purchase by AIH of an aggregate of: (i) 239,992,000
shares comprising 99.997% of the issued shares in the capital of PT Greenfields Indonesia
(GI), (ii) 12,204,300 shares comprising 100.0% of the issued shares in the capital of
AustAsia Food Pte. Ltd., (iii) 4,000,001 shares comprising 100.0% of the issued shares in the
capital of AustAsia Food HK Limited and (iv) two shares comprising 100.0% of the issued
shares in the capital of AustAsia Food (M) Sdn. Bhd. for an aggregate consideration of
US$113,615,520. US$108,800,000 of the consideration was satisfied by way of the issue to
PII of 68,000,000 new ordinary shares of US$1.60 each in the capital of AIH and the balance
was paid in cash. Mr. Handojo Santosa has controlling interests in PII and Claridges
Investments Limited. Mr. Hendrick Kolonas also has a non-controlling interest in PII.
The acquisition was on an arms length basis and the consideration was negotiated between
the BR Group (as the non-interested party in AIH) and PII and Claridges Investments Limited
and was equal to the sum-of-the-parts valuation undertaken by AIH, which considered market
comparables, book value and replacement cost. The BR Group is managed by Black River
Asset Management LLC (BRAM), which is a subsidiary of Cargill Inc., an unrelated third
party.
Following the completion of the above-mentioned transaction, GI, AustAsia Food Pte. Ltd.,
AustAsia Food HK Limited and AustAsia Food (M) Sdn. Bhd. became wholly-owned
subsidiaries of AIH.
Japfa Vietnam
Acquisition of Japfa Vietnam Investments Pte. Ltd.
On August 1, 2012, our Company entered into a sale and purchase agreement with Moma
Resources Pte. Ltd. (Moma) for the purchase by our Company of 63,976,155 ordinary
shares, comprising all the issued shares, in the capital of Japfa Vietnam Investments Pte Ltd
(JVIPL) for a consideration of US$50,000,000, payable in cash. Mr. Hendrick Kolonas has a
controlling interest in Moma.
The acquisition was on an arms length basis and the consideration paid was equal to the
independent valuation in respect of JCVN, being the main asset of JVIPL at the time (JCVN
Valuation). The independent valuation was based on (i) the income approach using the
discounted cash flow method, and (ii) the market approach using the guideline public
company and guideline transaction methods.
Following the completion of the above-mentioned transaction, JVIPL became a wholly-owned
subsidiary of our Group.
Acquisition of Japfa Comfeed Vietnam JSC
On June 11, 2012, JVIPL entered into a restructuring agreement (as amended) with Moma for
the purchase by JVIPL of 99,646,332 common shares (comprising 99.0% of the common
shares) in the charter capital of Japfa Comfeed Vietnam JSC for a consideration of
VND996,463.3 million or US$50,539,500. The consideration was satisfied by the issue to
Moma of 63,976,154 new shares of S$1.00 each in the capital of JVIPL. Mr. Hendrick
Kolonas has a controlling interest in Moma.
On the same day, each of Annona and our Company purchased 503,264 common shares in
the charter capital of Japfa Comfeed Vietnam JSC from each of Mr. Jusak Siswojo Suwadji
and Mr. Peter Djamiko at an aggregate consideration US$510,500. Mr. Suwadji is an
unrelated third party while Mr. Djamiko is a cousin of Mr. Handojo Santosa and cousin-in-law
of Mr. Hendrick Kolonas.
103

The acquisitions above were on an arms length basis and the consideration paid was equal
to the JCVN Valuation.
Japfa Comfeed Vietnam JSC was converted into a one-member limited liability company
(JCVN) on August 31, 2013. On the same day, JVIPL purchased 503,264 common shares
(comprising 0.5% of the common shares) in the charter capital of JCVN from each of Annona
and our Company for an aggregate consideration of US$510,500.
Following the completion of the above-mentioned transactions, JCVN became a whollyowned subsidiary of our Group.
Japfa India
Acquisition of Japfa Comfeed India Private Limited
On October 31, 2011, our Company entered into a sale and purchase agreement with Moma
for the purchase by our Company of 32,098,479 shares (comprising 35.0% of the then issued
shares) in the capital of Japfa Comfeed India Private Limited (JCIPL) for a consideration of
INR155,998,607.94 (US$2.6 million). Mr. Hendrick Kolonas has a controlling interest in
Moma.
The acquisition was on an arms length basis and the consideration paid was in line with a
valuation conducted by a chartered accountant of each share of JCIPL based on its NAV,
valuing each share at INR4.86.
On March 26, 2012, JIIPL entered into a sale and purchase agreement with Japfa Intl for the
purchase by JIIPL of 102,566,522 shares (comprising 76.16% of the increased issued shares)
in the capital of JCIPL at a consideration of INR473,857,332 (US$7.9 million). At the time of
the transaction, our Company held 100% of Japfa Intl.
The acquisition was on an arms length basis and the consideration paid was equal to the
valuation conducted by a chartered accountant of each share of JCIPL based on its NAV,
valuing each share at INR4.62.
Following the completion of the above-mentioned transactions, JCIPL became a whollyowned subsidiary of our Group.
Acquisition of Central India Poultry Breeders Private Limited
On December 19, 2013, JIIPL entered into a sale and purchase agreement with PT Adijaya
Guna Sawatama for the purchase by JIIPL of 1,831,920 shares (comprising 51.0% of the then
issued shares) in the capital of Central India Poultry Breeders Private Limited (CIPB) at a
consideration of INR33,075,315 (US$0.6 million). PT Adijaya Guna Sawatama is an unrelated
third party.
On December 20, 2013, JCIPL entered into a sale and purchase agreement with
Khadkeshwar Hatcheries Limited for the purchase by JCIPL of 1,760,080 shares (comprising
49.0% of the then issued shares) in the capital of CIPB at a consideration of INR31,778,940.
Khadkeshwar Hatcheries Limited is an unrelated third party.
The above acquisitions were on an arms length basis and the consideration paid was equal
to (a) a valuation conducted by a chartered accountant in accordance with the Indian Income
Tax Rules for the valuation of unquoted equity shares, valuing each share at INR5.40 and
(b) a gain in land valuation of INR12.655 per share.
Following the completion of the above-mentioned transactions, CIPB became a wholly-owned
subsidiary of our Group.
On June 19, 2014, JCIPL and CIPB entered into a joint venture agreement with Aviagen
International Holdings Limited (Aviagen International) in relation to the ownership and
104

operation of Aviagen branded grandparent stock (in particular, Indian River) and production of
parent stock. Under a sale and purchase agreement ancillary to the joint venture agreement,
Aviagen International purchased 2,161,700 shares (comprising 50.0% of the issued shares)
from JIIPL in the capital of CIPB at a consideration which was the US$ equivalent of
INR48,657,000, being US$808,457, converted based on the exchange rate on the date of
transfer of funds.
Jupiter Foods
Acquisition of Jupiter Foods Pte. Ltd.
On March 8, 2011, our Company entered into a sale and purchase agreement with Goldriver
Finance Limited for the purchase by our Company of 1,400,000 ordinary shares (comprising
100.0% of the issued shares) in the capital of Jupiter Foods Pte. Ltd. (Jupiter Foods) at a
consideration of US$984,366.71 / S$1,246,208.00. Mr. Handojo Santosa has a controlling
interest in Goldriver Finance Limited.
The above acquisitions were on an arms length basis and the consideration paid was equal
to the NAV of Jupiter Foods based on its management accounts as at February 28, 2011.
Following the completion of the above-mentioned transactions, Jupiter Foods became a
wholly-owned subsidiary of our Group.
Acquisition of 1.0% of Jupiter Vietnam
On May 1, 2014, Mr. Handojo Santosa assigned all his rights, benefits and interest to Jupiter
Foods in 325,172 common shares (in aggregate comprising 1.0% of the common shares) in
the charter capital of Jupiter Vietnam for a consideration of US$23,504.50.
The above acquisitions were on an arms length basis and the consideration paid was equal
to the book value of Jupiter Vietnam based on its management accounts as at May 1, 2014.
Following the completion of the above-mentioned transaction, Jupiter Vietnam became a
wholly-owned subsidiary of our Group2.
Acquisition of PT Intan Kenkomayo Indonesia
On April 2, 2014, PT So Good Food (SGF) entered into a sale and purchase agreement with
PT Intan Tata Buana Persada for the purchase by SGF of 30,600 shares in PT Intan
Kenkomayo Indonesia (IKM) (comprising 51.0% of the issued shares) in the capital of IKM
at a consideration of IDR30.6 billion (US$2.6 million). Mr. Handojo Santosa has a controlling
interest in PT Intan Tata Buana Persada.
The transaction was entered into at the nominal value of the shares acquired and on an arms
length basis and on normal commercial terms. Although the nominal value of the shares was
higher than its proportional net book value of IDR25.9 billion as at March 31, 2014, in the
opinion of the board of SGF the value of the assets of IKM was higher than its book value
(having regard to the fact that the building and installation of new machinery was completed in
September 2013 and commercial production only commenced in October 2013) and the
nominal value of the shares paid was a fair price.
CERTAIN COMMERCIAL ARRANGEMENTS RELATING TO OUR SUBSIDIARIES
AIH Shareholders Agreement
We own 61.87% of AIH, through which we conduct our Groups dairy operations. The BR
Group owns in aggregate, 38.13% of AIH. We had entered into a third amended and restated
2

Mr. Hoang Phan Tan and Mr. Bambang Widjaja are holding their respective shareholding interests on behalf of / as a
nominee of Jupiter Foods Pte. Ltd.

105

shareholders agreement dated April 2, 20143 with (i) BR Fund 1, (ii) BR Co-Fund 1, and
(iii) AIH (the AIH Shareholders Agreement) to regulate our relationship and the conduct of
the business and affairs of AIH. The AIH Shareholders Agreement is conditional upon the
admission of our Company to the Official List of, and the quotation of our share capital on, the
Mainboard of the SGX-ST prior to December 31, 2014.
AIH IPO and Put Option
Under the AIH Shareholders Agreement, the BR Group and our Company (the AIH
Shareholders) have agreed that they shall each, subject to profitability, viability and
satisfactory reviews and recommendations by competent financial advisers and prevailing
market conditions at the time, use all reasonable endeavors to procure that an application be
made by AIH for the admission of AIH to an internationally recognized securities exchange on
or before August 12, 2017 (AIH IPO Target Date). In the event an initial public offering of
shares in, or assets and businesses of, AIH (AIH IPO) does not take place on or before the
AIH IPO Target Date, the BR Group shall be entitled at any time between August 12, 2017
and September 11, 2017 to require our Company to purchase from the BR Group the shares
in AIH (AIH Shares) owned by the BR Group (Option Shares) as at the date of the notice
(AIH Put Option).
The price at which the AIH Put Option is exercisable (Put Option Purchase Price) shall be
determined by multiplying our Companys Average PER4 by the AIH NPAT5. The BR Group
shall have the option to elect to receive payment of the Put Option Purchase Price by way of
a combination of cash and/or shares in our Company, where an election for shares in our
Company will be subject to an aggregate of 14.9% of our issued and paid-up share capital
being held by the BR Group, BR Fund 2 and their associates, on the AIH IPO Target Date.
AIH 2
The AIH Shareholders plan to build, own and operate a further five dairy farms in the PRC
(see also BusinessOur Dairy Segment for information on our second five-farm hub in
Chifeng). Capital calls for AIH2 (defined below) will be on the basis of our Company at
64.45%, and a new fund to be established and managed by BRAM (BR Fund 2) at 35.55%.
AIH2 Pte. Ltd., a separate development and financing entity (AIH2), has been incorporated
to own newly incorporated PRC subsidiary(ies). AIH2 will build, own and operate Farm 6 to
Farm 10, provided BR Fund 2 funds a minimum of US$20,000,000 at the time of the capital
call, failing which, Farm 6 to Farm 10 shall be built, owned and operated by AIH. In the event
that AIH2 fails to list by August 12, 2018, BR Fund 2 shall have the option to put all its shares
in AIH2 to our Company on substantially the same terms and conditions as the AIH Put
Option under the AIH Shareholders Agreement (AIH2 Put Option). The IPO contemplated
for AIH shall be undertaken via a structure that includes the assets and businesses of AIH
and AIH2. AIH2 was incorporated on July 3, 2014 with an issued and paid-up share capital of
S$1.00. AIH2 is currently 100.0% owned by our Company, but will be capitalized in the ratios
above when a shareholders agreement is signed between us and BR Fund 2 to govern our
relationship as shareholders of AIH2.

The original shareholders agreement was entered into between PII, BR Fund 1 and AIH on August 13, 2010. The original
shareholders agreement was amended and restated (i) on July 19, 2012 with Foxbar as an additional party thereto to
reflect its inclusion as an additional shareholder, and (ii) again on September 20, 2013 with BR Co-Fund 1 and Viva Sino
Investments Limited as additional parties thereto to reflect their inclusion as additional shareholders.
Average PER is defined as: (volume weighted average price of the shares for the six months prior to the exercise of the
AIH Put Option multiplied by the total number of issued shares in our Company as at the date of such exercise) / net profits
after tax, excluding (i) any biological assets valuation gain or loss; and (ii) minority interests, of the Company for the last 4
completed quarters prior to the exercise of the AIH Put Option, determined by reference to the latest available audited and
unaudited financial statements of our Company (rounded to the nearest two decimal places).
AIH NPAT is defined as: net profits after tax, excluding (i) any biological assets valuation gain or loss; and (ii) minority
interests, of AIH for the last 4 completed quarters prior to the exercise of the AIH Put Option, determined by reference to
the latest available audited and unaudited financial statements of AIH.

106

Non-compete
Under the AIH Shareholders Agreement, our Company has undertaken to the BR Group that
during the Prescribed Period6, save for AIH2, it shall not directly or indirectly, carry on or
otherwise be concerned with or interested in the business of owning or operating a dairy farm
in the PRC, except through AIH and its subsidiaries.
In consideration of, inter alia, our Company agreeing to the foregoing, we have the benefit of
the Foxbar Undertaking and the PII Undertaking (see Corporate Structure and Ownership
Corporate ReorganizationAIHAcquisition of AIH for further details).
Japfa Hypor Joint Venture Agreement
Our wholly-owned subsidiary, JCLA, entered into a joint venture agreement dated April 25,
2012 with Hypor (the Hypor JV Agreement) to (i) establish a quality pig breeding unit in
Vietnam, and (ii) produce and sell grandparent pigs in Vietnam through the establishment of
Japfa Hypor. JCLA and Hypor own 85% and 15% of the charter capital of Japfa Hypor,
respectively.
Share of Profits
Under the Hypor JV Agreement, Hypors share of Japfa Hypors profits is determined using a
formula dependent on the actual percentage of the charter capital Hypor owns in Japfa Hypor,
that is, (Hypors share of charter capital / 15) x 40, provided that such enhanced profit share
(i) is subject to a ceiling of 50% and a floor of 10% so long as it owns 3.5% of the charter
capital and (ii) shall be equal to its actual ownership percentage should this become 50% or
more, or less than 3.5%.
Exclusivity
JCLA and Hypor have agreed to work exclusively with each other in Vietnam on, inter alia, the
production and sale of Hypor products through Japfa Hypor. All required feed for the business
of Japfa Hypor will be purchased from JCLA or its affiliates.
Exclusivity is limited to Vietnam and is for a period of seven years from July 31, 2012. If by
July 30, 2017, Japfa Hypor or JCLA has committed to a second nucleus farm of at least
680 great grandparent sows, the period of exclusivity shall be extended by a further seven
years (Exclusivity Period).
Within 12 months after the end of the Exclusivity Period or the termination of any of the
production and distribution agreement or feed supply agreement that Japfa Hypor has
entered into with Hypor and JCLA respectively, JCLA has the right to call from Hypor and
Hypor has the right to put to JCLA, Hypors entire ownership in the charter capital of Japfa
Hypor (including any shareholder loans made by Hypor) at its market value to be determined
by an independent valuer.

Prescribed Period means the period ending on the earliest of:


(i)
August 12, 2017 (or such later date that the AIH Shareholders agree to extend the time period for an IPO);
(ii)
the date on which AIH completes an IPO;
(iii)
the date on which our Company and its permitted transferees cease to own any AIH Shares; or
(iv)
the date on which our Company as a whole, experiences a change in Control and complies with its obligation to
offer its AIH Shares to the other AIH Shareholders.

107

BUSINESS
OVERVIEW
We are a leading agri-food company that produces multiple protein foods with operations in
five high-growth emerging Asian markets. We have, over 40 years, developed core
competencies across the agri-food value chain, including animal feed production, animal
breeding, livestock fattening and consumer food.
We are a market leader across multiple classes of protein foods, with an emphasis on milk,
poultry and beef, complemented by growing businesses in swine and aquaculture. In
Indonesia we are one of the two largest producers of poultry, with over 40 years of
experience, and we currently produce approximately 1.5 million day-old chicks (DOCs) per
day. We have replicated our industrialized, vertically integrated business model for poultry
production in Vietnam, India and Myanmar. In China we successfully replicated our
Indonesian dairy business and are, today, one of a small group of leading producers of
premium milk that is of the highest quality available in the market and that commands
premium prices in China. Given the growing affluence of the populations in our target middleand lower- income consumer groups, we expect protein food consumption in these markets to
rise. We intend to capitalize on this trend by increasing our production capabilities for
premium milk and animal proteins across our markets.
We have an industrialized approach to farming and food production. This allows us to
produce consistently high-quality proteins and to replicate our business model as we expand
our existing protein operations in and across our existing markets. In addition, the vertical
integration of our animal protein business from animal feed production to breeding and
commercial farming to slaughtering and food processing creates more opportunities to
capture value at different points in the value chain. It also provides us with greater food
security and traceability, which is important as we grow our downstream consumer food
brands.
We leverage the high quality of our raw materials to produce premium and mass market
consumer branded food products under leading brands such as So Good and Greenfields.

108

We have three operating segments: dairy, animal protein and consumer food. The following
table shows our business activities within each segment, the geographic locations where we
operate and the percentage of Group revenue and profit after tax contributed by each
segment for the year ended December 31, 2013.

Business Segment

Dairy
Dairy products

Business Activities

Dairy farming
Milk
processing
Branded milk
distribution

Locations

Consumer Food
Chicken
Beef
Seafood
UHT Milk

Animal feed
Breeding
Commercial
farming

Ambienttemperature
Chilled/frozen

Percentage of
Profit
CAGR of
After Tax
Revenue
(2013)
2011-2013

China (raw milk


production)
Indonesia (dairy
production and
distribution)
Southeast Asia and
Hong Kong
(distribution)

5%

32%

79%

87%

67%

15%

Indonesia (poultry,
beef and
aquaculture)
Vietnam (poultry
and swine)
Myanmar (poultry)
India (poultry)
China (beef)

Indonesia
Vietnam

8%

1%

n.m.

Animal Protein
Poultry
Swine
Beef
Aquaculture

Percentage of
Revenue
(2013)

The following map shows the countries in which we currently operate and our principal
business activities in each of these countries.

Dairy
Dairy farming

China
Chi
Animal protein
Beef

Animal protein
Poultry

Animal protein
Poultry
Swine
Consumer Food
Chicken
Beef

India

yanmar
Dairy
Dairy farming
Milk processing
Branded milk
distribution

Animal protein
Poultry

ngapore

Corporate HQ
International
purchasing

In ones a

109

Animal protein
Poultry
Beef
Aquaculture
Consumer Food
Chicken
Beef
Seafood

The table below shows the geographic breakdown of revenues for the year ended
December 31, 2013:
Country

Revenue
(US$ in millions)

Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,210.3
289.0
93.7
104.3
2,697.3

In 2011, 2012 and 2013, our total revenues amounted to US$2,029.8 million, US$2,321.8
million and US$2,697.3 million, while our net profit after tax amounted to US$79.5 million,
US$110.4 million and US$81.4 million. Our EBITDA was US$175.1 million, US$241.1 million
and US$258.6 million in 2011, 2012 and 2013 respectively, representing a CAGR for EBITDA
of 21.6%. For the calculation of EBITDA, see Summary Combined Financial Information and
Other Information.
Dairy
We produce premium raw milk in China and Indonesia that rates at the top of each market in
terms of both quality and price. In China, we focus on producing premium raw milk that we
sell to leading dairies in China at premium prices. There is a substantial shortfall in the supply
of premium milk in China, as highlighted by several food safety scandals in recent years, and
we believe that we are well positioned to benefit from this shortfall and from the expected
growth in dairy consumption in that market. In Indonesia, we use all of our premium raw milk
in our downstream consumer dairy businesses to produce premium dairy products, in
particular premium fresh milk, marketed under our Greenfields brand to consumers in
Indonesia and other countries in Asia.
We operate a five-farm hub of dairy farms in China, with four of the farms in the operational
stage. We expect construction of the fifth farm to be completed by the end of 2014, with milk
production commencing in early 2015. We build our dairy farms pursuant to an industrialized
model of approximately 10,000 to 12,000 heads of cattle per farm. Each dairy farm is
standardized and replicable across locations and jurisdictions. In total, we invested
approximately US$300 million to build our first five-farm hub in Shandong. Our farms are part
of a small number of very large-scale farms in the PRC. According to the Industry Consultant,
as of 2013, large-scale farms (farms housing more than 1,000 heads of cattle) comprise
15.1% of the cattle population in the PRC. We sell our premium raw milk to some of the
leading dairy companies in China for their use in the production of premium fresh milk and
other dairy products. Our farms in China are located in Shandong province, and as of
December 31, 2013 and March 31, 2014, we had approximately 40,700 and 41,800 heads of
dairy cattle in China, with approximately 14,500 and 16,700 milking cows respectively. We
produced over 130,000 tons of milk in China in 2013, and our average milk yield per milking
cow for 2013 was 11.5 tons per annum. Our premium raw milk in China is consistently at the
top of the market in terms of quality, consistently exceeding Chinese and international
standards for nutrition and safety. The quality of our raw milk is also reflected in its selling
price. In 2013, the average selling price of our milk was RMB 4.51 per kilogram, which was
approximately 25% higher than the average price of milk from ten major milk production

110

regions in China, according to the China Ministry of Agriculture1. In the first three months of
2014, the average price of our milk reached RMB 5.25 per kilogram. See BusinessOur
Dairy SegmentIntroduction.
We intend to expand our China dairy business and grow the number of our dairy farms in
China, commencing with the construction of another five-farm hub in Inner Mongolia. We
have entered into a framework agreement with the Chifeng City Government of Inner
Mongolia for the construction of this new five-farm hub, and we intend to begin construction
on the first additional farm before the end of 2014 and to complete the second five-farm hub
in 2018, which would bring our total herd size in China to approximately 120,000 heads of
cattle. On July 12, 2014, we entered into conditional lease agreements with local township
governments in Chifeng City for the construction of farms at two sites in Chifeng.
In Indonesia, we operate a vertically integrated dairy business. We operate an industrialized
dairy farm to produce premium raw milk that we use for the production of our own
downstream dairy products, including fresh milk, UHT milk and premium cheeses. We market
and sell our downstream products under our own brands directly to customers in the retail
market, including to major food and beverage companies such as Starbucks. Our farm in
Indonesia is located in Malang, East Java, at an altitude that is conducive to raising highquality dairy cows, and as of December 31, 2013 and March 31, 2014, we had approximately
5,800 and 5,700 heads of cattle in Indonesia with approximately 3,000 and 2,900 milking
cows, respectively. We produced over 26,000 tons of raw milk in Indonesia in 2013, and our
average milk yield per milking cow for 2013 was 9.1 tons per annum. As in China, our raw
milk in Indonesia is of premium quality, which is reflected in its nutritional and safety
standards, as well as in the premium quality of and premium pricing for our downstream dairy
products and the leading market position of our Greenfields brand. We also export a portion
of our downstream dairy products to our key strategic customers such as Starbucks and Cold
Storage, in other markets in Asia, including Singapore, Hong Kong and the Philippines. The
success of our vertically integrated Indonesian dairy operations is driving our strategy to
increase our upstream production capacity, and we have purchased land for a second dairy
farm, in Blitar, East Java which we expect to be fully operational by the end of 2016.
As of December 31, 2013 and March 31, 2014, we had a total of approximately 46,400 and
47,500 heads of dairy cattle, with approximately 17,500 and 19,500 milking cows, across our
farms in China and Indonesia respectively, compared to approximately 18,300 heads of
cattle, with approximately 6,400 milking cows as of December 31, 2011.
See BusinessOur Dairy SegmentIntroduction.
Animal Protein
We produce multiple high-quality animal proteins (poultry, swine, beef and aquaculture); as
well as high-quality animal feed, across our target markets. Our animal protein operations are
vertically integrated and cover the entire value chain of animal protein production, from animal
feed to breeding and commercial farming to slaughtering and processing livestock and
supplying the raw materials for our downstream consumer food segment (see Business
Consumer Food). We are one of the two largest poultry and poultry feed manufacturers in
Indonesia, with over 40 years of experience in poultry production, and in 2013 we had a
domestic market share of 25% by production capacity of DOCs and 22% by volume of animal
feed (excluding aquafeed) sold. See Appendix FIndependent Market Research on
1

Source: China Ministry of Agriculture. China Ministry of Agriculture has not provided its consent, for purposes of
Section 249 of the Securities and Futures Act, to the inclusion of the information extracted from its website, and is
therefore not liable for such information under Sections 253 and 254 of the Securities and Futures Act. While we and the
Joint Global Coordinators, Joint Issue Managers and Joint Bookrunners and Underwriters have taken reasonable actions
to ensure that the information from China Ministry of Agricultures website has been reproduced in its proper form and
context, and that the information has been extracted accurately and fairly from such website, neither we nor the Joint
Global Coordinators, the Joint Issue Managers nor the Joint Bookrunners and Underwriters nor any other party has
conducted an independent review of the information contained in that website or verified the accuracy of the contents of
the relevant information.

111

Selected Food Markets in Indonesia, China, India, Vietnam and Myanmar. We also have
poultry operations in Vietnam, Myanmar and India and beef operations in China. In addition,
we produce other classes of proteins, namely swine (in Vietnam) and aquaculture (in
Indonesia). We seek to replicate our successful industrialized operational model in Indonesia
for poultry and beef in and across our other markets and our other classes of proteins.
The following chart illustrates the fully integrated value chain for animal protein production.
Our operations include each of the steps in this value chain for certain of our proteins, such
as poultry and swine, and most of the steps for our other proteins. See also BusinessOur
Animal Protein SegmentIntroduction for a more detailed description of these steps.
Breeding Farms

Animal Feed

Commercial Farming:
poultry: grow out
cattle: feedlotting
swine: fattening

Slaughterhouse

Consumer Food

In our poultry business, we operate over 70 breeding farms and over 30 hatcheries to
produce DOCs, primarily in Indonesia, as well as in Vietnam, Myanmar and India. In 2013 we
sold almost 600 million DOCs across our markets. In 2013, we sold approximately 7% of our
DOCs produced in Indonesia internally to our own commercial farms for growing out, with the
remainder sold to contract farms or third parties. We have over 10,000 commercial farms in
our network, most of which are contract farms that are owned and operated by local farmers
who grow out the chicks on our behalf. We source most of our grandparent stock for chicken
from Aviagen, one of the worlds leading poultry genetics companies, and our industrialized
approach results in premium quality DOCs and feed conversion ratios that are among the
highest in the industry in Indonesia.
In our beef business, we are one of the largest beef cattle feedlot operators in Indonesia and
the largest importer of live beef cattle into Indonesia. We breed, fatten and process beef cattle
and have four feedlots in Indonesia with a total production capacity of 165,000 heads of cattle
per year. We also have cattle breeding operations in Australia, where our stations can hold
approximately 45,000 heads of cattle at any one time. We import the cattle bred at our
stations in Australia to Indonesia for fattening and processing, and we ship approximately
12,000 heads of cattle per year from our Australian operations to our feedlots in Indonesia.
Our beef business is operated as a fully integrated business, whereby breeding, feed,
fattening and slaughterhouse operations are carried out within our Group and are therefore
under unified control and operation.
In addition, we have swine breeding and distribution operations in Vietnam, where we sold
approximately 72,700 piglets in 2013. In 2012 we entered into a joint venture with Hypor, one
of the worlds leading suppliers of swine genetics, which enables us to operate the entire
chain of swine breeding farms, including nurseries and parent, grandparent and great
grandparent farms. In addition, we also produce small amounts of fish and shrimp in
Indonesia.
112

We produce premium-quality animal feed in Indonesia, Vietnam and Myanmar, both for our
own poultry, swine and aquaculture operations, as well as for sale to third parties. We sold
over 3.5 million tons of animal feed in 2013 across our markets, including both internal and
external sales. We formulate the feed to maximize its nutritional value depending on its end
use and brand it accordingly, and our feed brands are among the most recognized in
Indonesia.
Consumer Food
We use the high-quality milk and animal protein products that we produce in-house as raw
materials for our downstream consumer food segment. As a result, we are able to trace the
quality of the ingredients in our consumer food products all the way through the production
chain, which provides us with a high degree of confidence in the quality and reliability of our
consumer food products.
We make ambient-temperature and chilled/frozen meat products from chicken, beef and
seafood for the Indonesian market. Our So Good and Sozzis brands are leading brands in
Indonesia for premium processed meats, while our Real Good and So Nice brands focus on
the mass market convenience pack segment for UHT milk and meat, respectively. Due to the
high value-add element of our consumer food products and the changing consumer
preferences in our markets, we believe that our consumer food segment has significant
potential for future growth.
OUR STRENGTHS
We believe that we have the following competitive strengths:
Our industrialized approach to agri-food production and our vertical integration drive
our leadership positions and growth strategies.
Our agri-food production involves (i) large-scale standardization of our operations to create
efficiencies and facilitate replication, (ii) use of superior breeds, and (iii) a sophisticated
approach to animal husbandry, animal health and nutrition, including a strong focus on biosecurity. This approach provides us with a number of key strategic and financial advantages
compared to traditional farming, including the following:

Economies of scale and cost savings that allow us to produce quality products at lower
costs, thereby driving our competitiveness and profitability. Economies of scale also
allow us to provide better animal health and nutrition, while mitigating risks of disease
outbreak through better bio-security;

Resources and technology to support and develop management and operational


expertise as well as build strategic alliances with global leaders in breeding research,
such as Aviagen for poultry and Hypor for swine. Our access to superior-quality breeding
reinforces the quality of our products and the high yields of our production processes;

Consistently high-quality animal protein products that are trusted by our customers who
are willing to pay premium pricing for quality and product traceability; and

Advantages when we expand our business within existing markets or into new markets.
Our experience replicating our industrialized approach provides a cost-effective model
for continued growth. We have executed this strategy in connection with our entry into
the poultry market in Vietnam, India and Myanmar and into the dairy market in China.

113

In addition, the vertical integration of our animal protein business from animal feed production
to breeding to food processing, provides us with a number of significant competitive
advantages, including the following:

We have more opportunities to capture value at different points on the chain and to
continue to diversify our business, enabling us to realize favorable profit margins
compared to less integrated farming operations;

Controlling the entire protein food value chain provides us with greater food security and
traceability. This is becoming increasingly important in Asia and is a key driver for
premium pricing in our protein businesses and consumer food segment as consumers
become more aware of health and safety concerns involving food; and

As we consider new market opportunities across our five target markets for our five
classes of proteins, we have a better understanding of the risks and opportunities
involved at each stage of the value chain and are better able to target our entry point into
the new market opportunity accordingly.

We operate in five large, high-growth emerging Asian markets where protein


consumption is low and expected to increase.
Our leading agri-food businesses are located in China, Indonesia, Vietnam, Myanmar and
India, which have compelling macro-economic fundamentals that drive increasing
consumption of protein foods. There are three billion people living in our target markets, and
we expect these populations to continue to grow and their levels of disposable income to
continue to rise. Income growth in these target markets is expected to be particularly strong in
the middle- and lower- income brackets, which make up the bulk of our target consumer
groups. This increasing consumer wealth is underpinned by a number of macro-economic
factors, including favorable demographics, with young, large and growing populations, and
increasing urbanization. See Appendix FIndependent Market Research on Selected Food
Markets in Indonesia, China, India, Vietnam and Myanmar.
We believe that there is significant potential for growth in protein food consumption in our
target markets. There is a positive correlation between the level of a countrys economic
development (and per capita income) and the consumption of protein foods, such that
national populations tend to consume more proteins as personal income increases. Given the
growing affluence (from a low base) of the populations in our target middle- and lowerincome consumer groups, we expect protein food consumption in these markets to rise.
According to the Industry Consultant, chicken meat consumption in Indonesia will increase by
14.9% per year over the next two years and demand for raw milk in China will increase by
5.7% per year between 2013 and 2018. See Appendix FIndependent Market Research on
Selected Food Markets in Indonesia, China, India, Vietnam and Myanmar. The positive
outlook for growth in protein consumption in our target markets is supported by the fact that
total consumption of protein staples in our target markets remains significantly lower than in
other countries. For example, per capita chicken consumption in Indonesia was 8 kilograms in
2012, compared to 47.7 kilograms in Malaysia. In addition, per capita dairy consumption in
China was 29 kilograms in 2013, compared to 58 kilograms in Japan, 85 kilograms in the EU
and 96 kilograms in the United States.
We also believe these macro-economic factors support the growth of our consumer food
business, as growth in per capita disposable income tends to drive increasing spending on
consumer goods.
We operate our business in multiple protein segments with leading market positions
We are a market leader across multiple classes of proteins, with an emphasis on poultry, milk
and beef, complemented by growing businesses in swine and aquaculture. We focus on
developing operational and technical expertise across each of our protein segments (which
114

form the bulk of animal protein consumption in Asia) to create leading market positions and
then replicate our successes as we expand our five classes of proteins in and across our five
target markets. For example, we are one of the two largest producers of poultry in Indonesia,
with over 40 years of experience, and are successfully replicating our Indonesian poultry
business model in Vietnam, Myanmar and India. We are also replicating the success of our
Indonesian dairy business in China, where we have increased our herd size by more than
three times, from 12,774 heads of cattle in 2011 to 40,691 heads of cattle in 2013.
We currently focus on the following protein segments where we believe there are significant
opportunities to strengthen our market positions:
Poultry

We have over 40 years of experience in poultry production and have developed a fully
integrated and industrialized business model across the entire value chain of poultry
production, from the manufacture of poultry feed, to breeding and commercial farming, to
the processing of chicken meat and the marketing of branded processed foods. This
business model provides us with a number of strategic and financial benefits that have
contributed to our market positions. In 2013, we had market shares in Indonesia of
25.1% by production capacity of DOCs and 21.9% by volume of poultry feed (excluding
aqua feed), which was the second-largest market share in Indonesia, with the nextlargest poultry feed producer holding a market share of 5.5%. We drew on our extensive
experience in the Indonesian poultry industry as we expanded in Vietnam, where we had
a 22% market share in 2013 by number of broilers produced. Similarly, we have also
been able to develop leading market positions for poultry in Myanmar and are developing
our poultry operations in India.

In Asian emerging markets, in particular Indonesia, chicken is an affordable source of


protein for the large and growing middle- and lower-income consumer classes. The
affordability and quality of chicken in Indonesia is driven by a number of factors,
including sophisticated genetics, sophisticated breeding and farming practices, low
transportation costs and limited cold storage facilities for other protein sources. In
addition, as protein sources in Indonesia must be halal for the predominantly Muslim
population, there is little competition from swine, the next most affordable animal protein.

Dairy

We are one of a small group of leading, industrialized producers of premium raw milk in
Indonesia and China that is of the highest quality in terms of nutritional and safety
standards. In Indonesia, we use all of our premium raw milk in our downstream
consumer dairy businesses to produce fresh milk and premium cheeses marketed under
our Greenfields brand. According to the Industry Consultant, in 2013, our Greenfields
brand was the market leader for premium fresh milk in Indonesia, with an estimated
market share of 38.4% by value. In China, we currently focus exclusively on producing
premium raw milk that we sell at premium prices to leading dairies in China. In 2013, the
average price of our milk was RMB 4.51 per kilogram, approximately 25% higher than
the average market price of milk across ten key production regions in China.

In China, there is a structural supply shortage of raw milk that the Industry Consultant
expects to continue through 2018. The demand for raw milk increased at a compounded
average growth rate of 4.8% from 2008 to 2013 and, according to the Industry
Consultant, the current demand growth is outpacing the growth in production. Over the
same period, Chinas raw milk supply increased from 35.6 million tons in 2008 to
37.4 million tons in 2012 but declined by 5.7% (compared to 2012) to 35.3 million tons in
2013, as a result of extended dry conditions, contagious diseases amongst cows and the
exit of some small-scale dairy farms.
115

Swine

Swine remains the largest protein segment in a number of Asian emerging economies,
including China and Vietnam, which presents significant opportunities for industrialized
farmers in these markets. In Vietnam, we are replicating our industrialized approach to
farming in order to create a market-leading position for swine.

Beef

We believe there are attractive opportunities in Asian markets for beef products, as beef
consumption increases with rising levels of wealth. In particular, the Indonesian market
could be a strong growth area for our Group, as there is ample supply of quality feed in
that market. In China, we also intend to draw upon synergies with the expansion of our
dairy business in order to grow our beef operations in that market.

We have established a leading premium dairy business in China and Indonesia, which
is poised for substantial growth.
We have established premium dairy businesses in both China and Indonesia that, we believe,
place us at the top of the dairy market in both of these high-growth countries and position us
for sustainable and profitable growth. In China, we sell our premium raw milk to processors in
the rapidly developing premium dairy market. In Indonesia, we have the largest dairy farm
operation by volume of premium fresh milk produced, and we use our raw milk to produce
premium fresh milk and other premium downstream dairy products that we sell directly to
consumers. We believe that our success in producing high-quality milk, generating high yields
from our milking cows and receiving premium prices for our milk and milk products is due to a
number of factors, including the following:

Scale and design of farms: we have expertise in building and operating large-scale
industrialized dairy farms, with a standardized ten- to twelve-thousand-head farm design
that maximizes operational efficiency and quality. These farms are supported by
government policies to encourage large-scale farming in both China and Indonesia. In
China, incentives include (a) tax exemptions and rebates on value-added tax and
corporate income tax, (b) providing infrastructure support, including water and power,
and (c) granting long-term land leases at rates below market rate. In Indonesia,
incentives include value-added tax exemptions and import duty exemptions on the
import of certain capital goods. The quality of raw milk supplied from our farms is
significantly higher than the overall quality of raw milk supplied in each of these
countries, as the significant majority of raw milk is sourced from small-holder farms;

Farm management: we have a depth of experienced farm managers. We follow


advanced and industrialized farm management practices to maximize our yields and
produce milk of the highest quality. These practices range from feed management and
animal nutrition to the insemination and breeding process to milking techniques,
biosecurity measures and the management of effluent. We also have experience in
sourcing local forage for cattle feed. See BusinessOur Dairy SegmentOur Farms.

High-yielding livestock: we select the most suitable semen from our suppliers to optimize
the genetic mix of our cows and breed the highest-yielding cows. In addition, we use
sex-controlled semen in order to increase the birth rate of female cows on our farms.

Location of farms: in China, our first five-farm hub is located in Shandong province,
which has cool and dry weather and an abundance of fertile land and is proximate to
Beijing and Shanghai. We intend to commence building our second five-farm hub in
2014 in Inner Mongolia, which will have similar operational advantages. In Indonesia, our
farm is located 1,200 meters above sea level, with cool and dry weather and good
access to water. In addition, we have purchased land for a second dairy farm in Blitar,
East Java, Indonesia and we target completion of construction of this farm in the first half
of 2016.
116

We believe that our consistent application of these practices is the driving factor that
underpins the success of our dairy business. This success is reflected in the following:

Milk quality: our milk is of the highest quality in both the Chinese and the Indonesian
market. The protein and fat levels of our milk exceed both Chinese and international
industry standards by substantial margins, while our microbe counts and somatic cell
counts are only about one-tenth of the maximum counts allowed by those standards.
See BusinessOur Dairy Segment. Especially in the Chinese market, with its recent
history of food quality scandals involving milk, this high quality gives us a significant
advantage over many other milk producers in the market.

Premium pricing: the premium quality of our milk results in premium prices for our milk,
as customers look to use our milk for the production of their high-end dairy products. In
the first three months of 2014, our raw milk sold for an average price of RMB 5.25 per
kilogram, compared to an average price for milk for ten key production regions in China
of RMB 4.24 per kilogram, according to the China Ministry of Agriculture.2

Milk yields: our average milk yield per cow in 2013 was 9.1 tons per annum in Indonesia
and 11.5 tons per annum in China, compared to industry averages of 3 tons per annum
and 5.5 tons per annum in these countries.

Strong customer relationships: we have established strong customer relationships with


the leading dairy companies in China, driven in large part by the quality and traceability
of our milk. Our sales volume in China increased from 62,487 tons in 2012 to
124,408 tons in 2013.

We have created leading downstream consumer food brands, which we expect to be a


key driver for future growth.
We have leveraged the high quality of the raw materials we produce to establish leading and
reputable downstream consumer food brands, and we expect this business segment to be a
driver for future growth. As a result of our vertical integration, we are able to trace the quality
of the ingredients in our consumer food products all the way through the production chain,
and since we control virtually all parts of this chain, we have a high degree of confidence in
the quality and reliability of these ingredients and of our end products.
While most meat in Indonesia is still bought and sold through traditional wet markets,
increasing income levels and changing lifestyles are leading more consumers to processed
meat consumption. To capitalize on this market opportunity, we use our high-quality protein
products to make processed meat products marketed under leading brands such as So Good,
So Nice and Best Chicken. In Indonesia, our consumer food segment has the second-largest
market share in frozen consumer food and the third-largest market share in
ambient-temperature food. Further, we also source milk from third parties in Indonesia to
produce UHT milk for the mass market segment in Indonesia in ready-to-drink small
convenience packs under the Real Good brand. We expect strong growth from this market
segment. We expect that our significant experience in the management, marketing and
distribution of our downstream brands and products will be instrumental in supporting our
expansion into the downstream dairy business in China.

Source: China Ministry of Agriculture. China Ministry of Agriculture has not provided its consent, for purposes of
Section 249 of the Securities and Futures Act, to the inclusion of the information extracted from its website, and is
therefore not liable for such information under Sections 253 and 254 of the Securities and Futures Act. While we and the
Joint Global Coordinators, Joint Issue Managers and Joint Bookrunners and Underwriters have taken reasonable actions
to ensure that the information from China Ministry of Agricultures website has been reproduced in its proper form and
context, and that the information has been extracted accurately and fairly from such website, neither we nor the Joint
Global Coordinators, the Joint Issue Managers nor the Joint Bookrunners and Underwriters nor any other party has
conducted an independent review of the information contained in that website or verified the accuracy of the contents of
the relevant information.

117

Because we control virtually the entire production chain for most of these products, we have a
high level of traceability and quality control for our consumer foods, which provides us with a
strong reputation for quality and reliability, in particular with international food service
customers and leading modern retailers.
We benefit from a strong management team focused on growth and driving group
synergies across our business segments.
Our senior management team consists of experienced industry executives with a long history
in our Group and a clear long-term vision of our Groups business. This team is supported by
operational leaders who are integral to our success and future growth strategies, and have
extensive experience in the day-to-day operations of farms, feedmills, food processing plants,
and all other aspects of our business. This combination of long-term vision and strong
operational expertise is the key reason for our Groups success in growing from one feedmill
more than 40 years ago to our market-leading poultry business, and more recently, our
sizeable dairy business.
We believe that the structure of our organization and the manner in which the business
segments operate with each other drive synergies across our Group. For example, in each of
our business segments:

Our senior management team fosters an industrialized farming culture and approach to
operations. The strength and consistency of this culture facilitates collaboration across
business segments;

The operational segment leaders are highly experienced with significant industry and
technical knowledge. They have developed best practices for their businesses, and
these competencies can be shared across our Group; and

We benefit from the expertise and experience developed in other business segments by
sharing key resources when we expand into new markets or implement new growth and
operational initiatives.

OUR STRATEGY
We intend to drive the growth of our Group through the following strategic initiatives:
Expand our dairy business in China through the continued replication of our
successful business model
We intend to expand our China dairy business and grow the number of our dairy farms in
China, commencing with the construction of another five-farm hub in Inner Mongolia. We
have entered into a framework agreement with the Chifeng City Government of Inner
Mongolia for the construction of this new five-farm hub, and we intend to begin construction
on the first farm before the end of 2014 and to complete the second five-farm hub in 2018.
See Use of Proceeds. We expect the second hub to increase our total herd size in China to
approximately 120,000 heads of cattle by the end of 2018. For the construction and operation
of the second hub, we plan to replicate our current farm designs and operating systems in
order to achieve similar productivity to our current farms. We believe that this expansion will
allow us to capitalize on the current supply deficit for premium milk in China and to enlarge
our footprint as a leading premium milk producer in Asia.
Continue to grow and enhance the profitability of our core poultry business in
Indonesia
Our poultry operations in Indonesia are a core part of our business, providing us with the
strong foundation of a profitable, growing and cash flow-generative business segment. We
believe there are significant opportunities for growing this business as Indonesias per capita
118

income continues to rise and as we increase our feed capacity, our DOC production and the
reach of our downstream consumer brands. We plan to continue to build breeding farms and
aim to expand our production of DOCs from almost 600 million in 2013 by approximately 30%
in the next two years. In 2013, we invested approximately IDR492.4 million (US$47.2 million)
into growing our production capacity for DOCs in Indonesia, which consisted primarily of
construction of new breeding farms and hatcheries. We expect that this additional capacity,
along with additional capital expenditures into our DOC production capacity in 2014, will
underpin our growth plans for DOC production in Indonesia over the next two years. As we
grow our DOC production, we also intend to increase our feed capacity and production to
support our growth in DOCs.
To cater for more DOCs and to account for a shift in consumer preferences toward highquality processed foods, we plan to increase the capacity of our existing slaughterhouses and
to build additional slaughterhouses. Depending on the extent of these developments, we may
double our processing capacity in the next several years, and we expect that our sales from
processed or dressed poultry will increase as a proportion of our total sales.
Expand our animal protein business in our target markets
As we expect consumption of animal proteins to increase in Asia, we intend to expand our
animal protein business in certain of our five target markets. For example, we intend to
replicate our industrialized approach to farming in order to establish a market-leading position
for swine in Vietnam and to expand our poultry operations in Myanmar. Similarly, in China, we
intend to draw upon synergies with the expansion of our dairy business in order to grow our
beef operations. Across our five classes of proteins and our five target markets, we may
consider opportunities for acquiring existing businesses on a case-by-case basis. We
currently have no specific plans to expand into new animal proteins or new geographies
beyond that in which we currently operate.
Build on our high-growth consumer food brands
We believe that our consumer food business has significant potential for future growth, due to
the high value-add nature of the business, our competitive advantage resulting from our
vertical integration and the shifting preferences of consumers. We intend to capitalize on this
growth potential over the medium to long term by continuing to invest in our consumer food
business, both for ambient temperature meat products and chilled or frozen meat products.
We will seek to expand the reputation and market reach of our consumer food brands,
including Real Good for mass market UHT milk and So Good and So Nice for processed
meats. To that end, we intend to increase our manufacturing and processing capacity in
Indonesia and Vietnam and to expand our distribution capabilities in Indonesia, Vietnam and
Myanmar.
OUR HISTORY
The table below sets forth key milestones in our history:
Dairy
Year

Event

1997 . . . . . . . We commenced operations at our dairy farm in Malang, East Java, Indonesia
2000 . . . . . . . We launched our Greenfields brand of milk
2004 . . . . . . . Our promoters entered into a joint venture with Mengniu Dairy to set up a 10,000-head
dairy farm in Inner Mongolia (subsequently sold to Mengniu Dairy)
2009 . . . . . . . Our first dairy farm in Shandong, China commenced operations
2013 . . . . . . . We established a distribution company for retail sales of dairy produce in China
2014 . . . . . . . We entered into a framework agreement with the Chifeng City Government for the
construction of a second five-farm hub in Chifeng, Inner Mongolia and signed leases for
the first two farms
119

Animal Protein
Year

Event

1975 . . . . . . .
1982 . . . . . . .
1986 . . . . . . .
1989 . . . . . . .
1995 . . . . . . .
2008 . . . . . . .
2008 . . . . . . .
2012 . . . . . . .
2013 . . . . . . .

We commenced operations in our first poultry feed mill in Surabaya, Indonesia


We commenced poultry breeding operations in Indonesia
We commenced aquaculture operations in Jakarta
PT Japfa was listed on the Jakarta Stock Exchange
We commenced feedmill operations in India
We diversified into beef operations through the acquisition of PT Santosa Agrindo
We acquired PT Vaksindo Satwa Nusantara, an animal vaccine company
We diversified into swine breeding in Vietnam
We commenced operations at our beef feedlot in China and acquired our cattle-breeding
station in Australia
2014 . . . . . . . We commenced poultry operations in Myanmar

Consumer Food
Year

Event

2000 . . . . . . . We launched consumer food brands So Good and So Nice in Indonesia


2011 . . . . . . . We commenced our consumer food business in Vietnam

OUR DAIRY SEGMENT


Introduction
Our dairy segment consists of our dairy farming businesses in China and Indonesia. We carry
out our dairy operations through the AIH Group, which comprises AIH and its subsidiaries.
We own 61.9% of the share capital of AIH, and the remaining 38.1% of AIHs share capital is
owned by the BR Group. The BR Group consists of BR Fund 1 and BR Co-Fund 1 and is
managed by Black River Asset Management LLC, which is a subsidiary of Cargill, Inc.
The following table shows our business activities within our dairy segment, the geographic
locations where we operate and the percentage of Group revenue and profit after tax
contributed by our dairy segment for the year ended December 31, 2013.

Business Segment

Business Activities

Locations

Percentage
of Revenue
(2013)

Percentage
of Profit
CAGR of
After Tax
Revenue
(2013)
(2011-2013)

Dairy

Dairy products

Dairy farming
Milk processing
Branded milk
distribution

China (raw milk


production)
Indonesia (dairy
production and
distribution)
Southeast Asia
and Hong Kong
(distribution)

5%

32%

79%

In China, we produce premium raw milk that is at the top of the market in terms of both quality
and price, and we sell that milk to some of Chinas leading dairy companies for the production
of premium fresh milk and other high-end processed dairy products. We recently passed the
audit process of Starbucks China to supply them with milk processed and packaged from raw
milk produced at Farm 2 in China and branded under our L Tian Yuan (
) brand.
In Indonesia, we do not sell the raw milk we produce but instead operate a vertically
integrated dairy business that includes the production of premium raw milk for use in our own
downstream production and distribution of premium processed dairy products, such as fresh
milk, cheese and whipping cream. We market these downstream dairy products under our
leading Greenfields brand in Indonesia, and we also export a portion of these products to
other markets in Asia, including Singapore, Hong Kong, Malaysia and the Philippines.
120

Our dairy farms are able to achieve significantly higher-yielding and higher-quality milk than
smaller-scale farms and most other larger scale farms in China. This has enabled us to
produce raw milk of a quality that consistently surpasses international nutritional and safety
standards and to sell our raw milk at premium prices. In 2013, for example, the average
selling price of our raw milk was RMB 4.51 per kilogram in China, which was approximately
25% higher than the average selling price of RMB 3.6 per kilogram for raw milk from ten
major production regions in China. See Appendix FIndependent Market Research on
Selected Food Markets in Indonesia, China, India, Vietnam and Myanmar.
We operate a five-farm hub of dairy farms in Shandong province, China, with four of the
dairy farms currently in the operational stage and the fifth farm under construction. We expect
construction of the fifth farm to be completed by the end of 2014 and the farm to commence
producing milk in early 2015. Our approach in constructing our dairy farms is to create a
standardized model that is highly industrialized, efficient and easily replicable, both in terms of
construction and in terms of operation. To this end, we developed the first five-farm hub in
Shandong, where we constructed five farms of substantially identical design and similar size,
each holding between 10,000 and 12,000 heads of cattle. This approach creates operational
efficiencies, enables us to construct additional farms more efficiently and without having to
design the new farm from scratch, and allows us to move personnel from one farm to another
more effectively. We intend to follow this standardized farm model as we expand to our
second five-farm hub in China. In April 2014 we entered into a framework agreement with the
Chifeng City Government, a prefecture-level city in eastern Inner Mongolia approximately
500km north of Beijing, that provides a basic framework for our acquisition of land and our
construction of a second five-farm hub in China. Pursuant to the agreement, we expect to
begin construction on the first of these five large, modern farms before the end of 2014 and to
complete the second five-farm hub in 2018. On July 12, 2014, we entered into conditional
lease agreements in respect of two sites in Chifeng for the construction of new farms with the
Alukerqin County Government. We expect this five-farm hub to have an aggregate holding
capacity of 60,000 cattle. We have chosen Chifeng as the location of our second five-farm
hub as it has abundant cropping land available to be leased to us, corn and alfalfa plantations
in the vicinity, suitable temperature and climatic condition for cattle farming and abundant
water sources. We expect completion of this second hub to increase the total size of our herd
in China to approximately 120,000 heads of cattle. Save in respect of the second five-farm
hub in Inner Mongolia, we currently have no other plans to expand our dairy farms in China.
However, if commercially viable, we may consider constructing a milk processing facility.
In Indonesia we operate one milk-producing dairy farm and one dairy processing plant for our
downstream dairy products, both located in Malang, East Java, Indonesia. In addition, we
have purchased land for a second dairy farm in Blitar, East Java, and we aim to begin
producing milk at this farm in the first half of 2016.
The following table sets forth certain key operating data for our dairy segment:

As of or for the years ended


December 31,
2011
2012
2013

Country

China
Number of farms(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
3
4
Total cattle population(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,774 24,345
40,691
Number of milking cows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,777
9,534
14,498
Average milk yield per milking cow for the year/period
(tons)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.9
10.5
11.5
Raw milk produced (tons) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,840 64,349 130,227
Raw milk sold (tons) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,225 62,487 124,408
Average selling price (RMB/kg) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.06
4.22
4.51
Total Revenue (US$ millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.2
43.2
93.5
121

As of or for
the three
months
ended
March 31,
2014

4
41,777
16,655
12.4
45,797
45,797
5.25
39.3

As of or for
the three
months
ended
March 31,
2014

As of or for the years ended


December 31,
2011
2012
2013

Country

Indonesia
Number of farms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1
1
Total cattle population(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,532
5,647
5,758
Number of milking cows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,604
2,687
2,959
Average milk yield per milking cow for the year/period
(tons)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.0
9.4
9.1
Raw milk produced (tons) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,341 24,727 26,984
Raw milk sold (tons)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,315 24,111 26,676
Total Revenue (US$ millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52.7
58.2
54.6

1
5,743
2,855
9.4
6,669
6,669
11.9

Notes:
(1)
Includes farms for which construction was completed as of the date indicated but which may not have commenced milk
production.
(2)
Consists of the total number of cows on our farms at period-end, including milking cows, young stock, heifers that are
pregnant (and therefore not yet milking) and other non-milking cows. As of December 31, 2013, total cattle population in
China included our fourth farm in China, which was holding cattle but not yet producing milk as of that date.
(3)
Average milk yield per milking cow is calculated as the sum of the daily milk yield per milking cow for each day of the year.
Daily milk yield per cow is calculated as the total milk production for the day divided by the number of milking cows on that
day.
(4)
Represents internal sales of raw milk to our processing plant in Indonesia for the manufacture of our dairy products.

Our raw milk in both China and Indonesia surpasses both local and international nutritional
and safety standards, including the EU raw milk standard, which is among the most stringent
industrial standards for raw milk and other dairy products in the world. Our raw milk in China
is therefore in high demand among leading domestic dairy product manufacturers that use it
for their premium dairy products. In addition, our raw milk in Indonesia is used for our own
premium dairy products marketed under our leading consumer food brands. The following
table sets forth our key milk quality and safety indicators for our operational dairy farms, as
compared to the relevant EU standard.

Safety Standard
Microbe count . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nutritional Standard
Protein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Farm at Malang,
East Java,
Indonesia

Farms in China
(Farm 1, Farm 2
and Farm 3)

EU Standard(1)

10.0K/ml
200.0K/ml

11.0 K/ml
152.7K/ml

<100K/ml
<400K/ml

3.3%
3.8%

3.3%
4.1%

>3.1%
>3.5%

Note:
(1)
Indicators for freshly milked raw milk and before treatment. As set forth in the Raw Milk Quality Standards in Council
Directive 92/46/EEC of June 16, 1992 adopted in the EU.

122

Our Farms
The following diagram is a simplified illustration of our dairy farm business model:
Establish free-stall farm

Import heifers or
transfer heifers from
mature farms

Feeding

Waste
management

Insemination

Repeat

Milking

Calving

Female
calves

Male
calves

Culled / sold

We strategically locate our farms in Shandong province because this area has cool and dry
weather, clean air and water, and an abundance of flat fertile land, which makes it suitable for
raising high-quality dairy cows and producing premium raw milk. In addition, Shandong
province lies in between Beijing and Shanghai and as such, our farms are in close proximity
to the processing facilities of our customers and to our suppliers of key raw materials (such as
corn silage, corn flake and cotton seeds) required for our dairy farming operations.
In Indonesia, we have one integrated operational dairy farm and one dairy product processing
plant, both located in Malang, East Java. Our farm is located 1,200 meters above sea level in
a region with dry weather and cool temperatures, to make it suitable for raising high-quality
dairy cows and producing premium raw milk. The farm also has good access to water and is
located away from populous areas. In addition, we have purchased land for a second dairy
farm with an area of 60 hectares and a capacity of 8,000 cows, located in close proximity to
the first farm. We have commenced preparatory work for the construction of the second farm
and expect to begin producing milk at this farm in the first half of 2016.

123

The following table below sets forth certain details about our dairy farms in China and
Indonesia.
Legal
Entities
China:
Farm 1: DYAA

Location

DongYing
Guang Rao
AustAsia
Town, Dong
Modern Dairy Ying City
Farm Co. Ltd.

Construction Development
Size
Cattle
Holding
Status
Stage
(hectares) Population Capacity

Milking
Capacity

Acquired from Milking since


a local dairy the second
operator in
half of 2009.
the second
half of 2009.

49.6

11,956

10,000

5,800

Farm 2: TAAA

Taian
Fei Cheng
Construction First milk
County, Tai An completed in generation in
AustAsia
Modern Dairy City
2011
the second
Farm Co. Ltd.
half of 2011.

88.4

12,933

13,000

6,000

Farm 3: DXAA

DongYing
He Kou District, Construction First milk
Xianhe
Dongying City completed in generation in
AustAsia
2012
the first half of
2013.
Modern Dairy
Farm Co. Ltd.

110.2

9,855

13,000

6,000

Farm 4: DSAA

DongYing
He Kou District, Construction We target first
Dongying City completed in milk by the
Shenzhou
2013
second half of
AustAsia
Modern Dairy
2014.
Farm Co. Ltd.

100.8

5,947

17,000

6,000

Farm 5: DSAA

DongYing
He Kou District, Preliminary
Shenzhou
Dongying City work has
AustAsia
commenced.
Modern Dairy
Farm Co. Ltd.

153.6

NA

13,000

6,000

We target first
milk by the
first half of
2015.

Indonesia:
Malang Farm 1

PT
Greenfields

Desa
BabadanKec.
Mgajum
Gunung Kawi,
Malang, Jawa
Timur

Acquired from Milking since


a local dairy the second
operator in
half of 1998.
the second
half of 1998.

50.0

5,758

6,000

2,800

Blitar Farm 2

PT
Greenfields

Blitar, East
Java

We target
completion of
construction
during the
course of
2016.

60.0

NA

8,000

3,800

We target first
milk in the
first half of
2016.

Breeding
For our dairy farms in China and Indonesia, we import female dairy Holstein heifers older than
10 months from Australia or New Zealand for the early stages of our operations. The selection
process for such imports is carried out via the Dairy Herd Improvement Association
computerized system and then through individual physical inspection and approval. Once the
heifer is selected and declared fit, it is then prepared in Australia or New Zealand before
being shipped to our dairy farms. Heifers are then artificially inseminated with semen from
high-quality bulls to begin the breeding cycle. After the birth of the calf, the heifer begins to
produce raw milk, which we collect for sale or for use in our downstream processing. We
currently sell all male calves (approximately RMB1,100 or IDR2 million per head) to third
parties, but, in the case of China, will increasingly transfer them to our own beef feedlot
operations in China. In our dairy farms, we raise the female calves until they reach a suitable
age for insemination and the breeding cycle is repeated. After an initial breeding phase, we
can use our own heifers for growing our herd further, as well as for starting a new herd when
we open a new farm. To populate our new dairy farms we intend to use both heifers and
milking cows from our existing dairy farms and to import new heifers and milking cows as
required.
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We breed our own high-quality Holstein dairy cows to support our own farms in China and
Indonesia. We use artificial insemination technologies to breed our dairy cows and we use
high-quality bull semen purchased from the United States. We usually request our suppliers
to provide us with a list of the most productive Holstein bulls of that year. Taking into
consideration factors such as the milk yield of the bulls offspring, age, type of dairy cow and
the nutritional content of the raw milk produced by the bulls offspring, we select the most
suitable semen that we believe will optimize the genetic mix of our dairy cows. We use sexcontrolled semen for mature heifers in order to achieve female calf birth rates of
approximately 80%, which is significantly higher than normal female birth rates and which
enables us to more aggressively grow the herd. Our suppliers of Hostein bull semen provide
after-sales services and training to our staff in relation to disease control and breeding
techniques.
It typically takes a new born female calf approximately 14 months to become a heifer of the
appropriate breeding weight. At this stage, the heifer will be inseminated. After calving, the
lactation period begins and the cow is typically milked for approximately 305 to 340 days. A
cow has the highest milk production six to eight weeks after calving, after which its milk
production will decrease. A sufficient dry period is required to maximize the cows milk
production post-calving, and typically the cow is given a dry period of approximately
50 to 60 days prior to the next insemination.
Feeding
Our feed includes concentrates and forages. Concentrates, which primarily consist of corn,
soybean meal and cotton seed meal, are easily accessible commodities in China and
Indonesia. Forages consist mainly of corn silage, grass forage and alfalfa. We select
suppliers based on the feeds quality and price. Corn silage can only be harvested once a
year in China, during the period from August to September. As a result, we store a years
supply of corn silage in China to avoid any interruption of feed supply. We store at least two
months supply of alfalfa.
The feed nutrients required by each dairy cow can vary depending on a number of factors,
such as age, stage of lactation and milk production level. Our feed ration is in line with the
formula and practice used in California but tailored for our conditions in China and Indonesia.
We adopt total mixed ration, which involves the weighing and blending of all feedstuffs into a
complete ration to provide adequate nourishment to meet the dietary requirement of dairy
cows and to ensure well-balanced feed intake. The milk quality and yield of a dairy cow are
largely determined by the nutritional composition of its feed. We supplement our feed
composition with vitamins and minerals to further improve the average dairy cows daily
nutritional intake and digestion of our dairy cows. We do not use hormonal growth substances
to feed our dairy cows.
We take measures to ensure the good health of our female calves. We feed them colostrum
as soon as they are born, following which we switch to regular milk and feed them
approximately six litres of regular milk per day for eight weeks. In addition to milk, we feed the
female calves with grains and water. Once they begin to consume approximately one-and-ahalf kilograms of grain per day for three consecutive days, they are ready for weaning and are
kept on the same calf grain for one more week before we feed them with a calf grower.
Herd Management Technologies
We rely to a large extent on the US Herd Information System (Dairy Star) for the management
of our dairy farms. Our cattle in China and Indonesia are specifically identified by way of radio
frequency cow tags which are linked to the US Herd Information System (Dairy Star). This
software allows us to monitor each cow in terms of its basic information, genetic connection,
medical history and milk yield and also allows us to track every step of the production
125

process, including the breeding cycle. We perform a full stock-take on our dairy cows on a
quarterly basis.
The software generates various types of reminders to prevent mistakes due to employee
negligence or misconduct, including, among other things, the dry period reminders for
pregnant milking cows, the insemination reminders for mature heifers, the weaning reminders
for female calves and the barn-switching reminders. The US Herd Information System (Dairy
Star) improves the operating efficiency of our dairy farms and accuracy of our herd
management. Additionally, the software allows us to track the family tree of all bulls whose
semen we have used for insemination. We utilize this software to avoid utilizing semen from a
bull to inseminate any offspring of the same bull.
Furthermore, this software is capable of generating various types of reports regarding
different aspects of our operation, including but not limited to reports on different groups of
cows, reports on the daily milk yield per cow and reports on total milk yield. This software
consolidates all the information of our farms on a single network in each of China and
Indonesia to allow central monitoring and data analysis, which greatly enhances the
uniformity and standardization of our farm management.
Additionally, we utilize an automated activity monitoring system for heat detection to
determine the best time to inseminate our cows, thereby improving the rate of successful
inseminations and leading to a higher rate of pregnancies, shortened calving periods and
increased milk yields.
Cattle Welfare and Disease Control
It is our philosophy to give priority to cattle welfare. Cows produce more milk, have fewer
health problems and live longer if they live in a comfortable environment. We equip our dairy
farms with free-stall ventilated barns, which allow the cows to walk freely between the
bedding and the feeding area. As bedding material, we use high quality sand, which is
believed to be the most comfortable material for cows and is known for its ability to control the
spread of mastitis in cattle housing. To prevent cows from slipping and incurring feet injury,
we utilize non-slip grooves in cow barns and non-slip matting in milking halls and passways
from cow barns to the milking halls. Furthermore, we house our female calves in naturally
ventilated barns in China, which are heated during the winter months to keep them warm.
We have implemented a strict and effective disease control policy to maintain the overall
health of our herd. We perform routine checks on our dairy cows twice daily for our dairy
farms in China and Indonesia. In China from mid-November to mid-May every year, extra
monitoring is undertaken as diseases tend to be more prevalent during the colder months.
The incidence and prevalence of lameness and mastitis, the two most common diseases
affecting dairy farms, is relatively low in our farms. This is attributable to our good hygiene
practices, our well-managed free stalls, the clean environment of our facilities and our
attention to the health and welfare of our cattle.
Infectious diseases, such as FMD, brucellosis and bovine TB, are the major threats to the
dairy farming industry. We have adopted several disease control measures at our dairy farms,
including regular administration, typically on a quarterly basis, of the FMD vaccination and
regular testing for brucellosis and bovine TB. We vaccinate all of our female calves that are
over three months of age and the whole herd four times a year as part of our FMD prevention
measures. Because there is no vaccine to prevent bovine TB, we conduct regular testing of
the herd to keep the herd clean. We also require our employees to conduct regular testing to
make sure they do not carry the disease to the farm. To prevent brucellosis, a disease that
can spread quickly and lead to miscarriages, we regularly examine the herds at all of our
farms. Where there is risk of infection, we carry out farm-wide disinfection and immunization
to prevent the spread of the disease.
126

We have established disease control committees at all of our dairy farms, comprising our farm
managers, veterinary personnel and heads of each department. Upon detecting a disease
outbreak, we immediately quarantine the diseased dairy cows in a secured barn and carry out
farm-wide inspections and disinfection procedures to prevent the spread of the disease. We
also suspend the transfer of cows between different barns. In addition, we are required to file
reports with the local veterinary bureaus regarding any outbreak of classified diseases, such
as FMD.
We have not experienced any major outbreaks of diseases in our dairy farms in China and
Indonesia.
Quarantine and Treatment of Diseased and Dead Cows
We quarantine our diseased dairy cows in separate barns and our veterinary personnel
inspect them regularly. We seek prompt and appropriate treatment for our dairy cows. Where
medical treatment is not cost-effective or not feasible, the diseased dairy cows are culled, and
the affected areas are disinfected. Dairy cows that have been cured of any disease are milked
in a separate milking hall until their milk passes all of our tests and examinations. Generally,
dead cows and aborted foetuses are treated with quicklime which corrodes and disinfects the
carcasses before they are buried in specific and designated areas. The local government in
China is building a carcasses treatment facility expected to be operational by the third quarter
of this year. We plan to make full use of this government-initiated facility for treatment of dead
cows.
Strict Farm and Production Facility Protocol
Employees are required to change and disinfect themselves before entering the production
facilities and vehicles must be disinfected before entering the farm. If employees are returning
from a period of leave from work, they are required to be disinfected under UV rays for half an
hour before they are allowed back in the production facility. In addition, unauthorized vehicles,
persons, animals and equipment are prohibited from entering the farm. We disinfect our staff
living quarters, milking halls and our veterinary hospital regularly. For example, we disinfect
the veterinary hospital every day. Employees are required to wear gloves when handling dairy
cows or milk.
Waste Management and Environmental Issues
Dairy cows produce huge amounts of waste in the form of excrement and urine. We have
designed a comprehensive recycling system in each farm in China and Indonesia. Waste
water, following filtration, is recycled for cleaning and flushing barns. Manure is dried and
utilized by surrounding farmers as fertilizers for cropping which is used for our feed
production. Our farm design utilizes efficient and effective ways of effluent management using
specialized separation units. We have also undertaken the construction of bio-gas and waste
water treatment facilities as well as a large-scale waste water lagoon, rain water separation
system and the roofing of heifer barns to complete our environmental protection facilities.
Our Production Processes
We use automated milking systems at each of our dairy farms. The milk production process
comprises the following steps:

Pre-milking sterilizationbefore milking, the udders and teats of milking cows are
sprayed with sanitizing fluids. We also clean and sterilize the teat cups before milking.

Cleaningthe udders and teats of milking cows are wiped dry with dry towels within
30 seconds after sterilization.

Testingto ensure the quality and safety of raw milk, we discard the first three squeezes
of raw milk from the milking cows. Our dairy workers also check the health condition of
127

the milking cows udders at this stage. Upon observation of any signs of mastitis, the
milking cow will be immediately quarantined and checked by our veterinary personnel.

Milkingto commence the milking process, the dairy workers will attach the teat cups,
which are connected directly to a central milk tank, to our milking cows udders promptly
after finishing the above procedures to minimize the risk of infection.

Coolingthe raw milk produced from milking cows is immediately cooled to around 4 C.

Central collectionwe pipe all milk directly to our central milk tank and store the milk at
around 4 C.

Deliverywe directly pipe the raw milk from our central milk tank to the trucks of our
customers, who collect the raw milk at our farms.

All the pasteurization, sterilization and packing machines at our dairy farm in Indonesia are
controlled by a programmable logic controller to ensure a smooth flow of operations. For
packing, our Indonesian dairy farm uses TetraPak processing machines as well as TetraPak
and Evergreen filling machines. Our Indonesian dairy farm received ISO 22000 certification
for systematic procedure from Good Manufacturing Practice and Hazard Analysis and Critical
Control Point (HACCP) in November 2007.
Our Dairy Products
We use our premium raw milk produced in Indonesia to produce the following processed and
packaged premium dairy products:
Greenfields Extended Shelf Life Pasteurized Milk
Our Greenfields extended shelf life milk is ultra pasteurized to eliminate bacteria. To preserve
the freshness, the product is kept refrigerated at between 2 C and 4 C. Our full cream milk
does not contain any preservatives, additives, milk powder, hormones or antibiotics but
contains naturally occurring protein, vitamins and essential minerals such as calcium. The
milk is packed in Tetra or Evergreen packs in sizes of 1,000 ml, 946 ml, 500 ml, 236 ml and
200 ml in aseptic cartons and its shelf life is up to 40 days. We have also introduced a 2-litre
version in the form of plastic bottles with a shelf life of up to 28 days. Greenfields extended
shelf life pasteurized milk is available in five variants: full cream, low fat, skimmed, chocolate
and mochaccino. All Greenfields extended shelf life pasteurized milk is produced from our
own integrated dairy farm and milk processing facility, thereby guaranteeing the integrity of
the supply chain and ensuring full traceability of our Greenfields milk products.
Greenfields Ultra High Temperature Milk
Our ultra high temperature (UHT) milk is processed using UHT sterilization technology to
eliminate bacteria while preserving its freshness. The milk is packed in 1,000 ml TetraPak
aseptic cartons and the product shelf life is up to 9 months. Our Greenfields full cream UHT
milk does not contain any preservatives, additives, milk powder, hormones or antibiotics but
contains naturally occurring protein, vitamins and essential minerals such as calcium.
Greenfields UHT milk is available in four variants: full cream, low fat, skimmed and chocomalt.
The milk used for our UHT milk is generally sourced from external sources.
Greenfields UHT Whipping Cream
Greenfields whipping cream is made from premium fresh milk and produced using modern
methods and equipment so as to preserve its freshness and quality. Greenfields whipping
cream is available in 1,000 ml TetraPak cartons and has a product shelf life of up to six
months.

128

Greenfields Mozzarella Cheese


Our Greenfields mozzarella cheese is sold in the following sizes: 1 kilogram block, 200-gram
block, 1 kilogram shredded and bocconcini balls in 33 grams and 125 grams. Our mozzarella
cheese is made from our own Greenfields milk and is used as an essential ingredient of
dishes such as pizza, lasagna and salads.
Greenfields Ricotta Cheese
Greenfields ricotta cheese is made from the whey of Greenfields cheese and is popularly
used in dishes such as cheese cake or lasagna. Greenfields ricotta cheese products are
packed in convenient sizes of 250 grams. Greenfields ricotta cheese is distributed in
conveniently-sized packs of 250 grams.
Quality Control and Environmental Safety
Good quality control is critical for dairy products. We place great emphasis on quality control
and have implemented strict monitoring and quality control systems to manage our operations
and to ensure the safety and high quality of our raw milk. Our control over the quality of our
dairy cows and our efforts to keep a clean living environment for our cows enable us to
produce high-quality raw milk with low microbe count and low SCC.
We perform routine checks on our dairy cows thrice per day to lower the incidence and
prevalence of mastitis. We also use sand, which is known for its ability to control the spread of
mastitis, as bedding material to bed our cow stalls, and clean the barns and other facilities
regularly. In addition, we adopt strict disinfection procedures during milking and carry out the
extraction of raw milk in an automated and sanitary environment to minimize the chance of
contamination with microbes. After the milk is milked from dairy cows, we cool the raw milk
immediately and transport it through pipes directly to our central milk tank, which is
temperature controlled, all of which helps to minimize the risk of external contamination and to
eliminate human contact with our raw milk.
At different stages of this production process, we perform a number of quality inspections and
testing procedures, including sensory testing, physicochemical index evaluation, total
bacterial count testing, veterinary drug residue testing, somatic cell testing and pathogenetic
bacteria testing to ensure that our raw milk complies with applicable Chinese and Indonesian
health and safety regulations for food products.
In China, our customers, who are mainly dairy products manufacturers, are required by law to
carry out melamine contamination tests before their dairy products are sold on the market.
Our customers also carry out melamine contamination tests when our raw milk is delivered to
them. We do not add any additive or chemical substances in our raw milk for any purpose.
Each of our dairy farms is equipped with a laboratory to closely monitor our production
process. Reports on the safety and quality of our raw milk are generated in our laboratory
centres and submitted to the enterprise management department and the quality control
managers. We have not received any material safety or quality-related complaints regarding
our raw milk nor have we been subject to any material product dispute or recall or return of
our product which could have a material adverse effect on our financial condition or results of
operations.
Supply of Raw Materials
The primary raw material for our dairy business is feed for our dairy cows. Our feed consists
of concentrates, such as corn, soybean meal and cotton seed meal, and forages such as corn
silage, grass forage and alfalfa. While the concentrates are commodities that can be readily
purchased in the market, forages are much more difficult to procure as they must be planted
and harvested according to certain specifications in order to preserve their nutritional values.
129

Our procurement department is responsible for acquiring feed, selecting suitable suppliers,
and coordinating with our quality control personnel to ensure that the delivered feed meets
our specifications and requirements. We source feed products from carefully selected feed
suppliers in and outside China and Indonesia to ensure reliable and high-quality feed
supplies. We select suppliers mainly through mutual negotiation, which enables us to procure
high-quality feed at reasonable costs. We compare the quality and prices of feed from several
suppliers, where possible, and consider each suppliers ability and track record to satisfy our
volume and delivery requirements. We provide specifications to our suppliers for feed,
including certain percentages of protein for calf feed, freshness requirement for alfalfa and a
certain percentage of water content for cotton seed meal. We procure almost all the feed from
multiple suppliers at the same time to minimize our dependence on any single supplier.
We have not entered into any long-term contracts with any of our suppliers. We maintain
good relationships with our feed suppliers. Because of our scale and the quantity of the feed
we typically purchase, we are able to obtain favorable prices for many of our concentrate
components. For our forage supplies, we generally enter into short-term purchase
agreements shorter than five months to purchase high-quality imported alfalfa. For corn
silage, we generally enter into short-term purchase agreements of between eight and
12 months with local suppliers, under which the local suppliers grow the corn silage according
to our specifications. We harvest the corn silage using large-scale harvesters to ensure the
quality of the corn silage. We maintain the right to refuse the delivery of concentrates and
forages if the feed fails to meet our standards.
OUR ANIMAL PROTEIN SEGMENT
Introduction
In our animal protein segment, we produce high-quality animal proteins (poultry, swine, beef
and aquaculture) as well as high-quality animal feed, across our target markets. The following
table shows our business activities within our animal protein segment, the geographic
locations where we operate and the percentage of Group revenue and profits after tax
contributed by our animal protein segment for the year ended December 31, 2013:

Business Segment

Business Activities

Animal Protein
Poultry
Swine
Beef
Aquaculture

Animal feed
Breeding
Commercial
farming

Locations

Indonesia

(poultry,
beef and aquaculture)
Vietnam (poultry and
swine)
Myanmar (poultry)
India (poultry)
China (beef)

Percentage of
Revenue
(2013)

Percentage of
Profits
After Tax
(2013)

CAGR of
Revenue
(2011-2013)

87%

67%

15%

Our animal protein operations are vertically integrated and cover the full value chain of animal
protein production, from animal feed to breeding and commercial farming to slaughtering and
processing livestock and supplying the raw materials for our downstream consumer food
segment (see Our Consumer Food Segment). We operate in Indonesia (where we have
vertically integrated poultry and beef operations as well as aquaculture operations), Vietnam
(where we have vertically integrated swine and poultry operations), India (where we have
vertically integrated poultry operations), Myanmar (where we have vertically integrated poultry
operations) and China (where we have beef operations). We acquired our operations in
Vietnam effective September 1, 2012. In Myanmar, we entered into a joint venture agreement
with Best Livestock Limited for the formation of our subsidiary Japfa Comfeed Myanmar Pte.
Ltd. effective from December 3, 2013, which commenced operations from January 1, 2014.
Japfa Comfeed Myanmar Pte. Ltd is 85.0% held by our wholly-owned subsidiary, Japfa
Myanmar JV Pte. Ltd., and 15.0% held by Best Livestock Limited.
130

As part of our animal feed operations, we produce specially formulated feed for poultry, swine
and aquaculture which we either sell directly to third parties or use internally for our breeding
operations. At our breeding farms, we breed high-performance DOCs, swine and beef cattle
based on an industrialized approach to ensure the consistency, quality and conversion ratio of
our breeds. In 2013, we sold approximately 7% of our DOCs produced in Indonesia internally
to our own commercial farms for growing out, with the remainder sold to contract farms or
third parties. The majority of broilers produced by our commercial farms are sold live to
poultry traders who distribute the broiler to the wet markets. Our commercial farming
operations involve grow-out feedlotting of our commercial broiler chicken, swine and cattle
which are then typically sold to third parties. A small percentage of our commercial broiler
chicken is also sent to our slaughterhouses and primary processing plants and then sold as
chilled or frozen whole chicken, chicken parts or chicken meat to restaurants and fast food
chains or for use as raw material by our consumer food segment.
Our animal protein segment contributed US$1,762.6 million, US$2,010.3 million, US$2,347.2
million and US$592.9 million, representing approximately 87%, 87%, 87% and 86% of our
Groups total revenue for the years ended December 31, 2011, 2012 and 2013 and the three
month period ended March 31, 2014, respectively.
The vertical integration of our animal protein production chain can be seen in the following
four principal steps:
Feedmill

Commercial
Farming

Primary
Processing

Breeding

Our operations include each of the steps in this value chain for poultry and swine and most of
the steps for our other proteins.
The table below sets forth certain key operational data for our animal protein segment:
As of or for the years ended December 31,
2011
2012
2013

Operations

Poultry and Feed


Indonesia
Poultry feed sold (thousand tons)(1) . . . . . . . . . . . . . . .
Aquafeed sold (thousand tons) . . . . . . . . . . . . . . . . . . . .
Average aquafeed selling price
(IDR/kilogram) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of DOCs sold (millions) . . . . . . . . . . . . . . . . . . .
Broiler sold (thousand tons) . . . . . . . . . . . . . . . . . . . . . . .
Total revenue (US$ millions)(2) . . . . . . . . . . . . . . . . . . . .
Vietnam(3)
Poultry feed sold (thousand tons)(1) . . . . . . . . . . . . . . .
Swine feed sold (thousand tons)(1) . . . . . . . . . . . . . . . .
Number of DOCs sold (millions) . . . . . . . . . . . . . . . . . . .
Broiler sold (thousand tons) . . . . . . . . . . . . . . . . . . . . . . .
Total revenue (US$ millions)(2) . . . . . . . . . . . . . . . . . . . .
Myanmar(5)
Feed sold (thousand tons)(1) . . . . . . . . . . . . . . . . . . . . . . .
Number of DOCs sold (millions) . . . . . . . . . . . . . . . . . . .
Broiler sold (thousand tons) . . . . . . . . . . . . . . . . . . . . . . .
Total revenue (US$ millions)(2) . . . . . . . . . . . . . . . . . . . .
131

For the three


months ended
March 31,
2014

2,185.6
187.9

2,426.8
194.8

2,642.1
204.8

673.4
43.1

5,959
468.9
278.1
1,649.2

6,279
512.9
371.7
1,818.1

7,349
544.5
467.8
1,960.0

8,303
130.2
136.1
469.2

99.1(4)
71.0(4)
12.2(4)
19.7(4)
67.6(4)

295.5
239.8
39.0
50.3
254.2

65.6
62.7
9.0
11.9
57.0

27.1
4.2
0.7
20.0

As of or for the years ended December 31,


2011
2012
2013

Operations

India
Feed sold (thousand tons)(1) . . . . . . . . . . . . . . . . . . . . . . .
Number of DOCs sold (millions) . . . . . . . . . . . . . . . . . . .
Broiler sold (thousand tons) . . . . . . . . . . . . . . . . . . . . . . .
Total revenue (US$ millions)(2) . . . . . . . . . . . . . . . . . . . .
Swine Farming
Vietnam(3)
Number of great grandparent stock
(thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of grandparent stock (thousands) . . . . . . .
Number of parent stock (thousands) . . . . . . . . . . . . . .
Number of piglets sold (thousands) . . . . . . . . . . . . . . .
Average selling price for fattening piglet
(US$/kilogram) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue (US$ millions)(2) . . . . . . . . . . . . . . . . . . . .
Beef
Indonesia
Sales
Cattle (heads in thousands) . . . . . . . . . . . . . . . . . . . . .
Beef (tons) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average selling price
Cattle (IDR/kilogram) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beef (IDR/kilogram) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue (US$ millions) . . . . . . . . . . . . . . . . . . . . . .
China(6)
Sales (heads) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average selling price of cattle (US$/kilogram) . . .

For the three


months ended
March 31,
2014

160.1
18.6
15.5
71.1

170.2
15.3
13.9
76.0

171.6
10.3
16.7
79.7

49.2
2.8
4.6
23.0

0.7
5.1
18.9(4)
5.9

0.8
5.7
23.1
72.7

0.8
5.6
26.0
39.4

1.87(4)
3.6(4)

1.95
33.1

2.16
14.3

70.1
1,943

68.9
1,912

47.0
1,240

14.4
189

23,428
44,223
99.1

27,568
55,164
115.4

34,097
72,551
83.2

36,337
78,081
23.6

246
4.38

Notes:
(1)
Includes feed sold externally and internally (for our own breeding and commercial farming businesses).
(2)
Comprises revenue from both internal and external sales.
(3)
We acquired our operations in Vietnam effective from September 1, 2012.
(4)
For the three months ended December 31, 2012.
(5)
In Myanmar, we entered into a joint venture agreement with Best Livestock Limited for the formation of our subsidiary
Japfa Comfeed Myanmar Pte. Ltd. effective from December 3, 2013, which commenced operations from January 1, 2014.
(6)
We constructed a part of our beef feedlot in October 2013 and began housing and feeding Holstein bull calves in
December 2013. Construction of the initial phase of the feedlot is expected to be completed by the end of 2014. See
Our Beef Cattle Operations.

Our Poultry Operations


We have poultry operations in Indonesia, Vietnam, India and Myanmar. We are one of the two
largest producers of poultry in Indonesia. We have over 40 years of experience in poultry
production and have developed a fully integrated and industrialized business model across
the entire value chain of poultry production from the manufacture of poultry feed, to breeding
and commercial farming, to the processing of chicken meat and the marketing of branded
processed foods. This business model provides us with a number of strategic and financial
benefits that have contributed to our market positions across this value chain. In 2013, we
had market shares in Indonesia of 25% by production capacity of DOCs and 22% by volume
of animal feed (excluding aqua feed) (16.4% higher than the next producer).3 See Appendix
FIndependent Market Research on Selected Food Markets in Indonesia, China, India,
Vietnam and Myanmar.

This market share data has been compiled by Frost & Sullivan (S) Pte Ltd, the Industry Consultant. As DOC production
output numbers were not publicly available for the major industry players, the Industry Consultant used production capacity
numbers (which were publicly available for the major industry players) as a proxy to calculate market shares for DOCs.

132

Poultry Feed
As of March 31, 2014, we operated 16 poultry feedmills in nine locations throughout
Indonesia; five poultry feedmills in Vietnam (which also produce swine feed); and five poultry
feedmills in India. We have constructed a feedmill in Myanmar which is now partially
operational and which we expect to be fully operational by August 2014. For the years ended
December 31, 2011, 2012 and 2013 and the three months ended March 31, 2014, the
utilization rates (calculated as actual production output divided by production capacity) of our
poultry feedmills in Indonesia were 76%, 77%, 70% and 71% respectively.
Feed Manufacturing Process
The following chart sets forth the typical manufacturing process for our feed operations:
RAW MATERIALS

MIXING

PRODUCTION

PACKING

WAREHOUSE

Corn,
soya bean meal
and others

Ground raw
material &
vitamins and other
components

Mashing

Bagging

Finished product
storage

Grinding

Dosing

Pelleting

Ground
raw material

Mixing

Pellet

Crumble

Raw materials such as corn and soybean meal are ground before they are weighed and
dosed under an automated system. After dosing, the raw materials are mixed until they
become homogenous in our mixers before being sent to the pellet machines where they are
processed into pellets or crumble feed. Approximately 7% of the feed is bagged in mashed
form after mixing. The finished products are finally packed into plastic woven bags and stored
in warehouses dedicated to storing finished products.
Production of Customized Poultry Feed
Our poultry feed in pellet, crumble or mashed form can be fed directly to poultry. We market
our poultry feed under the Comfeed and Benefeed brands in Indonesia; Comfeed, Profeed
and Bonafeed brands in Vietnam and Comfeed and Benefeed brands in India. We offer a
range of poultry feed targeted at each stage of a birds maturity cycle with size of a pellet or
crumble and with nutritional content adjusted to maximize the development of the bird at each
stage of maturity. We also produce breeder feed and operate three dedicated breeder
feedmills. We are the only company in Indonesia with specialized breeder feedmills. These
feedmills ensure no mixing of different types of feeds, thus enhancing bio-security by
minimizing cross-contamination from broiler feeds.
We believe that our success in feed production is primarily attributable to our feed formulation
expertise. Our qualified nutritionists utilize a range of raw materials to create feed formulas
that are tailored to the particular breeds and climatic conditions in Indonesia, Myanmar, India
and Vietnam. We offer poultry feed that is customized to the needs of different poultry types,
namely feed that caters to the age of the broilers, feed for the breeder DOCs, feed for the
layer DOCs and feed for the layer. We also offer poultry feed which is specifically customized
for the Indian River DOCs, that we source from Aviagen.
133

We believe that our ability to customize our feed offers an important benefit to our customers
as specifically formulated poultry feed has been proven to enhance growth rates, while also
being cost efficient. Our poultry feed products are continually reformulated to take into
account research developments, particularly relating to nutrition and health of the poultry and
with the goal of reducing the consumption of each bird required to grow it to maturity and the
amount of time such maturity process typically requires.
In Indonesia, we have been successful in reducing the feed conversion ratio (i.e. total
amount of feed required per bird kilogram) on average from 1.737 kilograms per bird kilogram
to 1.636 kilograms per bird kilogram in the period from December 31, 2007 to December 31,
2013 and the average maturing period from 35.1 days to 32.7 days in the same period.
Procurement of Raw Materials
Raw materials account for approximately 90.0% of our poultry feed production costs. We
procure raw materials for our feed production segment from international suppliers via
Annona Pte. Ltd. (Annona), our wholly-owned subsidiary. Annona trades in agricultural
products and is the procurement arm for all feedmills across our Group. Annona purchases
raw materials such as corn and soybean meal, feed vitamins, animal protein meal and wheat
products from the US, South America, China, India, Europe, Australia and Canada. Aside
from economies of scale, the benefits of having centralized raw material procurement through
Annona include uniformity and tax incentives (as a result of Annona being part of the Global
Trader Programme). We believe that we are competitively placed to secure a stable supply of
raw materials at competitive prices from both domestic and international suppliers, many of
whom have established relationships with us. Annona also works with the production units
within our Group to ensure that the raw materials reach the feedmills in Indonesia, Vietnam,
India and Myanmar in a timely manner.
Typically 50.0% of our poultry feed mix is made up of corn, which provides a carbohydrate
component, with other principal ingredients including soybean meal, which provides a protein
component. Other components may also include rice bran, wheat bran, meat-bone meal, fish
meal, tapioca and vitamins. Depending on market prices, we may also utilize corn substitutes
including wheat, broken rice, sorghum and tapioca. For the year December 31, 2013 and the
three months ended March 31, 2014, approximately 45% and 41% of the corn we purchased
was sourced primarily from Annona. Our corn dryers are strategically located near corn belts
to ensure better access to fresh local corn supplies and to leverage on seasonal supply
fluctuations. We are able to buy and store corn at our storage facilities when market prices
are low. Corn that has been dried can typically be stored for approximately six months. Our
inventory levels may vary depending on whether it is a harvest season or festive season. We
generally maintain two to three months inventory of our raw materials. These capabilities to
source corn domestically enable us to lower our costs. In 2013, we set up Comfeed Trading
B.V., a company incorporated in the Netherlands to trade and procure commodities and
vitamins.
Our corn and soybean meal are imported primarily from Argentina, Brazil, and India. Although
the precise formula of our poultry feed varies and is determined, at least in part, by the
availability and prevailing market prices of raw materials and corn in particular, we seek to
produce poultry feed of consistent quality.
Quality Control
We conduct checks on all incoming raw materials so that only raw materials that meet the
quality standards determined by our quality control department are unloaded into our
warehouses. We operate an advanced feed technology system which includes a stringent
quality assurance program, in addition to which we conduct regular bench-marking activities,
including laboratory tests. 15 of our 16 feedmills in Indonesia have ISO 9001:2000
certification with the remaining one feedmill expected to receive such certification in 2015.
134

Our feedmills in Vietnam have also obtained ISO 9001:2008 certification, while the Supa
feedmill in India has obtained ISO 9001:2008 certification.
Customers
In Indonesia we sell approximately 60% of our poultry feed production directly to domestic
farmers and independent distributors located throughout Indonesia, using an in-house sales
team, with the remaining 40% utilized in our DOC breeding and commercial farming business.
Our top five poultry feed external customers accounted for 10.9%, 12.5%, 11.7% and 13.2%
of our net sales in poultry feed for the years ended December 31, 2011, 2012 and 2013 and
the three months ended March 31, 2014, respectively with no single customer exceeding 5%
of total net sales of our Indonesian poultry operations.
In addition, our feed production operations include certain supporting businesses. Our factory
in Wonoayu, East Java, for example, sold approximately 6.7 million kilograms of feed bags in
2012 and 6.2 million kilograms of feed bags in 2013, which we used to pack our poultry and
aqua-feed products. On a smaller scale, we also have operations in trading excess corn and
selling copra pellets and edible oils.
Breeding
We operate 57 DOC breeding farms and 24 hatcheries in Indonesia; 12 DOC breeding farms
and four hatcheries in Vietnam; one DOC breeding farm and one hatchery in Myanmar; and
two DOC breeding farms and three hatcheries in India. These facilities are enclosed and
climate controlled and are typically located in isolated areas which offer improved levels of
biosecurity.
The table below sets forth production and utilization data for our farms and hatcheries in the
countries in which we have breeding operations:

Country

Indonesia
Production capacity (million DOCs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilization rate (percentage) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vietnam
Production capacity (million DOCs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilization rate (percentage) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
India
Production capacity (million DOCs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilization rate (percentage) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Myanmar
Production capacity (million DOCs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilization rate (percentage) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the years ended


December 31,
2011
2012
2013

For the three


months ended
March 31,
2014

489 546 630


93% 91% 82%

190.8
71%

55.6
82%

14.2
67%

24.3 19.6 13.6


79% 80% 76%

3.4
85%

1.6
100%

In Indonesia, most of our broiler grandparent stock DOCs are sourced from Aviagen, which
supplies our Indian River broiler DOCs that are sent to our grandparent stock breeding farms.
Long-term cooperation with Aviagen has resulted in the refinement of this breed to suit
Indonesias tropical climate, leading to improved production performance. This is also linked
to the development of optimal-performance feed formulations which are produced in our
feedmills. Our contracts with Aviagen and its subsidiaries provide us with the rights to sell and
distribute Indian River DOC in Indonesia and other jurisdictions approved by Aviagen and
provide for the purchase of grandparent stock DOC at preset contract prices, which we
believe acts as a significant barrier to entry for potential new competitors and provides us with
a key advantage over our competitors. In June 2014, we entered into a joint venture with
Aviagen International in relation to the production of Indian River parent stock for our breeding
operations in India. We expect this joint venture to provide our operations in India with greater
135

control and reliability on the quality of India River parent stock DOCs. We also import
grandparent stock for our layer hens from Lohmann Tierzucht.
The Indonesian grandparent stock remain at our grandparent stock breeding farms for a
period of approximately 24 weeks (known as the growing period), after which the
grandparent stock reach reproductive maturity (from weeks 25 to 67). During this period,
fertilization occurs and hatching eggs are produced, which are then sent to our grandparent
stock central hatchery. Fertilized hatching eggs are placed in a holding room for a maximum
period of seven days, after which they are placed in an industrial incubator for 21 days (18
days in a setter and three days in a hatcher) to produce our parent stock. The parent stock
undergoes the same process at our parent stock breeding farms to produce final stock DOC.
The following chart sets forth the steps in our breeding process:
GRAND-PARENT

PARENT
PARENT
STOCK
BREEDING

GRAND-PARENT
STOCK
BREEDING

GRAND-PARENT
HATCHERY

Grand-parent DOC

Parent Stock
Hatching Egg

Parent Stock DOC

Feed and other

Growing Period
(0 24 weeks)

Holding Room
(Maximum 7 days)

PARENT
HATCHERY

COMMERCIAL
FARM

Final Stock
Hatching Egg

Final Stock DOC

Feed and other

Growing Period
(0 24 weeks)

Holding Room
(Maximum 7 days)

Feed and other

Growing Period
(32 days)
Productive Period
(25 66 weeks)

Incubator
(21 days)

Productive Period
(25 66 weeks)

Incubator
(21 days)

Parent Stock
Hatching Egg

Parent Stock DOC

Final Stock
Hatching Egg

Final Stock DOC

Live Chicken to
Wet Market

To increase operational efficiency within our breeding business, we have implemented a


bio-security system that focuses on sanitation and disinfection (including full immersion
sanitation), ensuring optimal flock health. As a result, we believe our farms enjoy higher
productivity of grandparent and parent stock, lower mortality rates, reduced losses from
mishandling and greater consistency in DOC size and weight. We have also introduced a
performance benchmarking program that is targeted at improving our breeding operations by
comparing the quality of our DOCs to DOCs produced by local farms and DOCs produced by
farms in other countries. In 2008, we acquired PT Vaksindo Satwa Nusantara, one of only
three Indonesian companies with research capabilities on the H5N1 (avian flu) virus. This
acquisition has enabled our breeding operations to develop vaccines internally which are also
used by our operations in other jurisdictions. We believe that we are the only integrated
poultry company in Indonesia able to produce autogenous vaccines to protect our animals.
In Indonesia, we sold a total of approximately 468.9 million, 512.9 million, 544.5 million and
130.2 million DOCs in the years ended December 31, 2011, 2012 and 2013 and the three
months ended March 31, 2014, respectively. In 2013, we sold approximately 7% of our DOCs
produced in Indonesia internally to our own commercial farms for growing out, 51% to
contract farms and 42% to third parties.

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Commercial Farming
We carry out commercial broiler farming operations through (i) farms that we either own or
operate on lease (Company Farms) or (ii) farms that are owned or rented by external
commercial farmers, with whom we have contract farming arrangements (Contract Farms).
In Indonesia, approximately 88% of our commercial farming operations in 2013 were through
contract farmers, who grow-out broiler DOCs to sizes that can be sold in the market, in
accordance with standard operating procedures established by us. The remaining 12% of our
commercial farming operations were through our Company Farms. As of March 31, 2014, we
owned 100 Company Farms and had in excess of 9,200 Contract Farms in locations
throughout Indonesia; 510 Contract Farms in India; and 271 farms in Vietnam (of which 33
were Company Farms and 238 were Contract Farms).
We operate Company Farms ourselves and the licenses and permits relating to the
operations and assets of the farms are held by us. On the other hand, Contract Farms are
operated by external commercial farmers with whom we have contract farming arrangements.
Licenses and permits relating to the operations and assets of the farm are held by the
contract farmer. Under our contract farming arrangements, we provide feed, DOCs,
medicines and vaccinations and technical support to the contract farmers. At harvest time, we
control sales of mature chickens produced at the Contract Farms. The mature chickens
produced at Contract Farms are mainly sold as live chickens, with a proportion used in our
poultry processing business segment. To ensure efficiency and performance, we require
contract farmers to implement our farm management techniques, including requirements as to
feed and vaccinations. Our contract farmers are primarily independent local commercial
farmers. The rationales for this farming model are that it gives us increased flexibility in
adjusting to fluctuations in regional demand, provides access to markets which are not
covered by our own commercial farms and minimizes our capital expenditure requirements
relating to our commercial farming operations. In addition, through profit-sharing
arrangements, our contract farmers are incentivized to improve productivity in the farming of
chickens. At the end of each growing period, the contract farmers receive their share of profits
calculated by reference to certain agreed-upon key performance indicators. Our contract
farming arrangements are typically for each grow-out cycle, so effectively after each harvest,
the contract farmer is free to switch to another producer of DOCs and feed.
The broilers produced by our Company Farms are mainly used in our poultry processing
business segment and for sale as live birds. Commercial farming in our Company Farms
provides us with the ability to control the quality and size of the broiler produced for our
poultry processing plants.
Primary Processing
We have slaughtering and primary processing operations in Indonesia. In Indonesia
approximately 80% of poultry is sold as live birds or as fresh meat at traditional wet markets,
some of which also act as slaughter yards. As of December 31, 2013, we operated six
slaughtering and primary processing plants in Bogor, Bali, Makassar, Salatiga, Purwakarta
and Sidoarjo, with a combined annual production capacity of 75.2 million kilograms as of
December 31, 2013. Our finished products include chilled or frozen whole chicken, chicken
parts and chicken meat. For the years ended December 31, 2011, 2012 and 2013 and the
three months ended March 31, 2014, the utilization rates of our poultry processing facilities
were approximately 91%, 88%, 34% and 37%, respectively. The utilization rate of our poultry
processing facilities decreased in the years ended December 31, 2012 and 2013 due to the
commencement of operations at our processing plants in Purwakarta and Sidoarjo, Indonesia.
Through our modern processing plants, we are able to meet stringent customer demand for
traceability, consistency, freshness and hygiene. Our products have been certified as having
met the highest quality standards within the industry, and we have HACCP and halal
certifications.
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We have also implemented comprehensive occupational health protection and hygiene


measures at our processing plants, including protective clothing and comprehensive
cleansing and disinfection procedures for all processing staff as well as temperaturecontrolled environments.
Our Swine Operations
Swine Feed
We have operations in swine feed production in Vietnam, which we acquired effective from
September 1, 2012. We have three feedmills in North Vietnam and two feedmills in South
Vietnam (all five of which also produce poultry feed). All three of our feedmills in North
Vietnam have ISO 22000:2005 certification and two of them also have ISO 9001:2008
certification. For the year ended December 31, 2013, our total production capacity was
approximately 245,000 tons of swine feed per year.
As with our poultry feed, our feedmills produce swine feed that is usually in pellet or crumble
form and can be fed directly to swine. We broadly follow the same manufacturing processes
for swine feed production as for poultry feed. The raw materials used in the production of
swine feed are also largely the same, with the exception that a higher proportion of cassava is
used in the swine feed mix, compared to poultry feed mix.
We have over five formulations of swine feed marketed under the following brands: Comfeed,
Profeed, Bonafeed, Corefeed and BigBang. We produce specially formulated feed for the
following categories of swine: 5 days old to up to 20 kilograms in weight (piglets);
20 kilograms to 40 kilograms in weight; 40 kilograms to 60 kilograms in weight; 60 kilograms
to 100 kilograms in weight; lactating; gestating; and boar. We also have two brands for piglets
as creep feed and starter feed: MilacA and MilacB.
At our facilities, we have specific equipment for piglet feed production, which can fine-grind
the feed to make the size of the pellet small enough to feed piglets. We believe that our ability
to customize our feed offers a benefit to our customers as we are able to produce feed which
is specially suited to the maturity cycle or type of swine.
We follow stringent quality control measures for our raw materials and test our raw materials
for quality compliance on delivery. In particular, for piglet and breeder feed, we follow higher
quality standards for raw materials, as the raw materials for piglet and breeder feed have to
be of a higher quality than other swine feed.
We continually undertake research and development for swine feed and feeding programs at
our farms to improve our feed formulations. We also seek to interact with our customers to
inform them of new developments in our research and development and demonstrate the
benefits of our feed formulations.
We primarily sell our swine feed through distributors who collect the feed at our feedmill. Our
feed is further sold by these distributors to sub-distributors or directly to farmers. In South
Vietnam, we also sell our feed directly to some large farmers.
Swine Breeding
We have operations in swine breeding and distribution in Vietnam. In April 2012, we entered
into a joint venture with Hypor, one of the worlds leading suppliers of swine genetics. As a
result of the joint venture, we are able to produce a high-performance breed of pigs with high
productivity of grandparent and parent stock.
We operate one great grandparent farm (as part of our joint venture with Hypor), four
grandparent farms, 24 parent farms, six nursery farms and 12 fattening farms and several
contract growing farms for fattening. Grandparent stock produced at our great grandparent
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farm is sent to our grandparent farms. Subsequently, parent stock produced at our
grandparent farms is sent either to our nursery farms, where piglets of 20 kilograms weight
are produced, or to our fattening farms, where they are fattened to 100 kilograms. Our piglets
are typically sold to distributors who further sell onwards to farmers. A small proportion of our
piglets are also sold directly to large farmers. The 100 kilograms swine produced at our
fattening farms are sold directly to slaughterhouses.
We are able to offer a combination of high quality piglets along with our specially formulated
swine feed to farmers.
Our Beef Cattle Operations
We have beef operations in Indonesia and China. Our beef operations in Indonesia are
integrated from breeding, fattening and processing. We have one of the largest beef cattle
feedlot operations in Indonesia and are the largest importer of live beef cattle into Indonesia
by import permits. As of March 31, 2014, we had four beef cattle feedlots, one beef breedlot
and one slaughterhouse located in Indonesia. For the years ended December 31, 2011, 2012
and 2013, the production capacity of our beef cattle feedlots was 165,000 head of cattle per
year. The utilization rate of our beef cattle feedlots for the years ended December 31, 2011,
2012 and 2013 and the three months ended March 31, 2014 was 61%, 54%, 35% and 38%,
respectively. We sell the majority of our beef cattle to our customers who then slaughter and
deliver beef to our wet markets. Our beef cattle business segment focuses on fattening our
beef cattle from approximately 300 kilograms to approximately 500 kilograms.
In October 2013, we expanded our cattle breeding operations into Australia by completing the
acquisition of a cattle breeding station (Riveren Station and Inverway Station), in Northern
Territory, Australia, from which we import cattle into Indonesia. Both stations are located in
the Victorian River Downs area in Northern Territory of Australia and have a combined area of
555,000 hectares with a carrying capacity of 45,000 heads of cattle, which are predominantly
of the Brahman cross breed. The Australian cattle stations have a production capacity of
approximately 12,000 heads of cattle per year, which are sent to our feedlets in Indonesia for
fattening.
In addition to our operations in Indonesia, we are developing a 30,000 head feedlot in the
Hekou district in the Shandong province of China. The total area of the feedlot is 200 hectares
with an additional 500 hectares for cultivation. We completed construction of a part of the
feedlot in October 2013 and began housing and feeding Holstein bull calves in December
2013. Construction of the initial phase of the feedlot is under progress and is expected to be
completed by the end of 2014. The bull calves born at our dairy farms in China will be raised
in our feedlot and will provide a source of cattle for our beef business, thereby providing
integration across our dairy and animal protein beef segments.

139

The following chart sets forth the production process of our beef cattle:
Breeding

Fattening

Breeder cattle

Feeder
cattle
(local)

Joining natural/artificial
insemination (3 months)

Wet market
Feeder
Cattle
(imported
to
Indonesia)
from
Australia)

Slaughter

Traders

Butchers
Pregnancy (9 months)

Fattening (3-4 months)


Own abattoir/
modern market

Calving

Cattle for slaughter

Slaughter

Growing (12 months)

Boning

Feeder Cattle

Packaging

Ageing

Warehouse

Our breeder cattle undergo natural or artificial insemination at our breeding farms after which
they are pregnant for approximately nine months. The calves then grow for a period of
approximately 12 months before they are sent to our feedlots as feeder cattle. After a period
of approximately three months during which the feeder cattle undergo the fattening process at
the feedlots, the cattle will be sent to the wet markets for sale to distributors, or to our abattoir
for processing into beef products for consumption. Breeding is a relatively small component of
our beef cattle operations and the majority of our beef cattle operations relates to the fattening
stage.
Our Aquaculture Operations
Aquaculture Feed
Our aquaculture operations are managed by our subsidiary, PT Suri Tani Pemuka, which is a
leading producer of aqua-feed in Indonesia with minor interests in fish and shrimp ponds.
For the year ended December 31, 2013 and the three months ended March 31, 2014,
approximately 88% and 81% of our net sales from our aquaculture business were derived
from our aqua-feed business respectively. Our aqua-feed has many of the same basic
components as our poultry feed, although there are differences in the production process. We
believe we offer customers a complete solution to the growth requirements of aqua-life. All of
our floating feed is specific-pathogenic free which makes it less susceptible to bacterial
contamination. We offer two premium aqua-feed brands, Comfeed and Benefeed. Most of the
aquafeed that we currently produce is sold directly to local farmers and independent
distributors located throughout Indonesia. We will increase our aqua-feed production by
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relocating operations of our feedmills at Cirebon to Purwakarta by the end of 2014 and by
commencing operations at one additional feedmill by the end of 2015, and increase our
geographical market coverage to meet the growing demand for our feed products. As of
March 31, 2014, we had five aqua-feed mills located in Gresik, Banyuwangi, Cirebon,
Lampung, and Medan. For the years ended December 31, 2011, 2012 and 2013 and the
three months ended March 31, 2014, the production capacity of our aqua-feed mills was
approximately 280,000 tons, 280,000 tons, 318,000 tons and 79,500 tons, and the utilization
rate of our aqua-feed mills was 69%, 73%, 67% and 58%, respectively. For the year ended
December 31, 2013 and the three months ended March 31, 2014, approximately 91% and
88% of our total production was fish feed and the other 9% and 12% was shrimp feed,
respectively.
Supporting Facilities for Aqua-Feed
To support our sales in the aqua-feed business, we operate fish and shrimp hatchery ponds
to breed commercial grade fingerlings or seedlings for aqua-feed customers who have
insufficient means or know-how to acquire suitable starter-species for commercial farming
under specific localized environmental conditions. We believe such value-added auxiliary
facilities are important to our success in aqua-feed distribution. In addition, we operate an eel
farming operation, breeding Anguilla Bicolor and Anguilla Marmorata eels to maturity before
processing them for sale as ready-to-consume products. We operate our eel operation in
accordance with typical Japanese methods in order to produce a Kabayaki style finished
product. As of March 31, 2014, we operated three ponds located at Banyuwangi and Karang
Tekok in order to produce approximately 160 tons of live eels per year for domestic and
export markets.
Bio-security Measures
We believe that we have one of the most stringent bio-security systems in the animal protein
industry.
We believe that in animal protein production, prevention is the most viable and economically
feasible approach to the control of infectious disease agents. Accordingly, our bio-security
procedures are implemented with the objective of preventing the introduction and reducing
the number and spread of infectious disease agents in the animal protein production chain.
Our bio-security measures are premised on the three components below:

isolation (i.e. the process of keeping our livestock confined and protected in specialized
areas);

sanitation and disinfection; and


traffic control (i.e. the control of traffic in and out of our premises).

In addition, we undertake modern farming practices, vaccination and medication, ongoing


monitoring, auditing and education of our staff, suppliers and customers.
In furtherance of our policy of isolation, our DOC breeding farms, in particular, are located in
separate, isolated locations, in order to minimize the risk of the spread of infection. In
Indonesia, we have built 57 breeding farms and 24 hatcheries at different locations that are
isolated from one another so that any livestock disease affecting one location does not impact
the livestock at other locations. Further, we have stringent sanitation and disinfection
procedures at our farms. We also follow strict traffic control procedures to prevent infections
at our farms. For instance, we are the only Indonesian company to have specialized breeder
feedmills so that only vehicles that transport breeder feed are allowed to enter our breeder
feedmill, thereby minimizing the risk of contamination.
We did not suffer any significant livestock losses during the outbreak of Avian Influenza in late
2003, early 2004 and late 2005 and we believe that this was, at least in part, due to our
141

bio-security measures and stringent quality control policies. In addition, we are not aware of
any cases of infections having occurred at any of the facilities operated by our contract
farmers. None of our processing or production facilities have been quarantined.
In 2008, we acquired PT Vaksindo Satwa Nusantara, one of only three Indonesian companies
with research capabilities on the H5N1 (avian flu) virus. This acquisition has enabled our
breeding operations to develop vaccines internally which are also used by our operations in
other jurisdictions. We believe that we are the only integrated poultry company in Indonesia
able to produce autogenous vaccines able to protect our animals.
Although we have not experienced any material adverse financial impact as a result of the
outbreaks of Avian Influenza, it nevertheless poses a significant risk for us in the future and
there can be no assurance that we will not be severely affected by an outbreak in the future.
Disease prevention through vaccination is one of the aspects of bio-security measures which
we observe religiously. Our veterinary diagnostic laboratories and PT Vaksindo Satwa
Nusantara are set up to carry out diagnostics and vaccine development. PT Vaksindo Satwa
Nusantara engages with scientists at Erasmus MC, University of Rotterdam, NL; Institute of
Zoology, University of Cambridge, UK; University of Maryland, USA; and Agricultural
Research Service (ARS), Athens, GA, USA to conduct research and development on
vaccination and the prevention of poultry diseases. We aim to leverage on such technical
capacity to formulate cost-effective solutions to control the outbreak of diseases.
Our bio-security measures and stringent quality control policies provide us with a degree of
protection against infection. However, there can be no assurance that the policies and
procedures that we have implemented to date, and which we keep under regular review, will
provide us with adequate protection in the future. See Risk FactorsRisks Relating to our
Business and OperationsOutbreaks of livestock diseases could have a material adverse
effect on our business, financial condition and results of operations.
We conduct ongoing staff training in bio-security measures, which is important to ensure safe
and hygienic operation of our business.
For our beef operations, every cattle that enters the production system is tagged via an
individual identification system which allows us to track the movement of each cattle
throughout the production process. Beef cuts are randomly tested for bacteria count and
residue to ensure levels are better than safety levels. All beef facilities comply with local
environmental regulations and discharged water is monitored regularly to ensure compliance.
Indonesia is among several countries that are free from foot and mouth disease and mad-cow
disease. To ensure Indonesia maintains its disease-free status, importation of livestock,
especially cattle, and beef are restricted to countries that have the same animal health
statuses. Our beef operations import feeder cattle only from Australia.
We have not had, in the last three years up to the Latest Practicable Date, any material
quality or safety issues in our animal protein segment which have had a material impact on
our business or results of operations.

142

OUR CONSUMER FOOD SEGMENT


Introduction
We leverage the quality raw materials produced by our animal protein segment to produce
premium and mass market products under our consumer food segment. The following table
shows our business activities within our consumer food segment, the geographic locations
where we operate and the percentage of Group revenue and profits after tax contributed by
our consumer food segment for the year ended December 31, 2013.
Consumer Food (Protein-Based)
Business Segments

Chicken
Beef
Seafood
UHT Milk

Business Activities

Ambient Temperature
Chilled/Frozen

Locations

Indonesia
Vietnam

Percentage of
Revenue (2013)

Percentage of
Profits After
Tax (2013)

8%

1%

We focus on chicken, beef and seafood ambient temperature meat products and chilled/
frozen meat products for the high-growth markets of Indonesia and Vietnam. In Indonesia, we
manufacture value-added chilled/frozen meat products such as breaded chicken meat,
chicken on bone, chicken and beef meatballs and seafood-based products, as well as
ambient temperature meat products such as chicken and beef sausages. We also
manufacture and market small-pack UHT liquid milk under the Real Good brand in Indonesia.
Our distribution network in Indonesia covers five regional sales branches and 32 sales
depots. Our main customers are hypermarket chains, supermarket chains, minimarket chains,
wholesalers, semi-wholesalers and retail shops. We also serve some institutional customers
(hotels, restaurants and caterers). In Vietnam we produce and market packaged ambient
temperature shelf-stable sausages.
Our So Good (for chicken nuggets, beef/chicken/fish/shrimp balls) and So Good Sozzis (shelf
stable sausages) and So Nice (shelf stable sausages) brands are leading brands in Indonesia
in the branded processed meat category according to the Industry Consultant. So Good brand
won the Top Brand award from 2008 to 2013 and So Nice won the Top Brand award from
2010 to 2013 awarded by Marketing magazine and Frontier research in Indonesia.
In Vietnam we manufacture and market branded shelf-stable sausages under the So Yumm
brand. Our meat processing and packaging facility is located at Binh Duong village just
outside Ho Chi Minh city. We have also established a sales office in Ho Chi Minh city to serve
as our marketing and distribution centre for Vietnam. As our consumer food operations in
Vietnam are still relatively new, we plan to focus on expanding on such operations.
We have commenced trial sales of our consumer food in Myanmar by exporting two test
shipments from our Vietnam consumer food operations. In addition, we plan to expand into
distribution of consumer foods in Myanmar which may be through arrangements with local
distributors.

143

The table below sets forth the key operational data for our branded value-added meat
products (which comprise ambient temperature and chilled/frozen meat products) in our
consumer foods segment:
For the years ended December 31,
2011
2012
2013

Consumer Food (Branded Value-Added Meat Products)

For the three


months ended
March 31,
2014

Ambient Temperature Meat


Total Sales (thousand kilograms) . . . . . . . . . . . . . . . . . . . . . . . . 36,871.1 36,892.5 44,268.1
Average Selling Price (US$/kilogram) . . . . . . . . . . . . . . . . . . .
4.42
3.72
3.30
Total Revenue (US$ millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
163.1
137.1
145.9
Chilled/Frozen Meat
Total Sales (thousand kilograms) . . . . . . . . . . . . . . . . . . . . . . . . 5,017.3
5,187.0
8,550.0
Average Selling Price (US$/kilogram) . . . . . . . . . . . . . . . . . . .
6.26
5.74
4.99
Total Revenue (US$ millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31.4
29.8
42.7

10,631.2
2.87
30.5
1,985.1
4.48
8.9

For the year ended December 31, 2013 and the three-month period ended March 31, 2014,
ambient temperature meat products contributed 60.4% and 62.4% and chilled/frozen meat
products contributed 17.7% and 18.2% respectively out of our total revenue from our
consumer food segment (before the elimination of intercompany sales for consolidation at the
Group level) of US$241.6 million and US$48.9 million.
In addition to our value added meat products (which comprise ambient temperature and
chilled/frozen meat products), our consumer food segment also produces and sells UHT milk;
distributes beef in Indonesia produced by our animal protein segment; and sells other snacks,
syrup and mayonnaise.
Our Products
The table below sets forth details of our products:
Brand

Industry category

So Good and So Good Sozzis . . . . Branded Chilled/Frozen and


Ambient Temperature
So Nice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Branded Chilled/Frozen and
Ambient Temperature
So Fresh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chilled

Products

Chicken nuggets, beef/chicken/


fish/shrimp balls, shelf stable
sausages
Chicken nuggets, beef/chicken/
fish/shrimp balls, shelf stable
sausage
Dressed and cut-up chicken,
fresh beef/meat balls

Our Manufacturing Facilities


In Indonesia, we have four meat processing plants (with a capacity of 6,462 tons per month),
six poultry slaughterhouses (with a capacity of 47.6 million birds per year) and an UHT milk
processing plant (with a capacity of 3,500 tons per month). We have fully integrated in-house
product development and production from slaughtering to product packaging for all poultry
and meat items. All of our Indonesian processing plants are Halal compliant and one of our
plants (located in Cikupa) has been certified ISO 22000. 85% of the chicken ingredients used
by PT So Good Food are sourced from our subsidiary farms, thereby ensuring traceability,
quality and consistency of key ingredients.
In Vietnam we have a meat processing plant producing ambient temperature sausage
products, with a capacity of 6,652 tons per year.
Our Manufacturing Processes
The manufacturing process for our ambient temperature products as well as our chilled and
frozen products starts from the slaughter houses where we slaughter and produce dressed
chickens. The dressed chickens are processed and parted into boneless chicken meat, bonein chicken parts or minced chicken meat through dual mechanical port machines, forming the
144

ingredients for the next production process to make value-added chilled/frozen and ambient
temperature meat products.
We have five production processes for our productsthe frozen and chilled sausage line,
ambient temperature sausage line, nugget line, whole muscle line and meatball line.
For frozen and chilled sausages, the raw materials are first tempered before being separated
into batches. The tempered raw materials are chopped before undergoing a process called
vacuum stuffing. The sausages are smoked before being sent for primary packing. After being
frozen, the sausages are sent for secondary packing.
For ambient temperature sausages, the raw materials are first tempered before being
separated into batches. Following grinding and blending, the materials are emulsified before
they are processed for filling and cooking. The product is finally washed and dried before
being packaged as the final product.
For nuggets, the raw materials are first tempered before being separated into batches. The
materials undergo a process called forming to shape the nuggets before being coated. The
nuggets are subsequently cooked and frozen before they are packaged as the final product.
For whole muscles, the raw materials are first tempered before being separated into batches.
The materials are fed into a tumbling machine to be massaged into the requisite form before
they are coated and cooked. The whole muscle is frozen before they are packaged as the
final product.
For meatballs, the raw materials are first tempered before being separated into batches. The
tempered raw materials are chopped before undergoing a process called forming to shape
the meatballs. The meatballs are subsequently cooked and frozen before they are packaged
as the final product.
The manufacturing process for our UHT liquid milk products comprises three stages: receipt
of raw milk, cream separation and pasteurizing and UHT flavored milk production. Under the
first stage, raw milk is degassed and chilled in preparation of the next stage. The milk is then
separated into cream and skimmed milk. Cream is pasteurized and chilled before being sent
to cream storage. Skimmed milk is pasteurized, chilled and stored for the next stage involving
UHT liquid milk production. The pasteurized skimmed milk is transferred to a mixing tank
where ingredients and flavorings are mixed. The milk is then homogenized before it
undergoes ultra high temperature processing. The sterilized milk is transferred to an aseptic
tank before it is filled into TetraPaks and packed in corrugated cartons for incubation.
Quality Standards
We utilize a system called food safety management system, also known as FSMS. FSMS
ensures product consistency and safety through formulated product standard, food safety,
hazard analysis and critical control point policies. This system is applied to all of our factories
in Indonesia and Vietnam.
In Indonesia FSMS is certified ISO 22000:2005 by Bureau Veritas Quality International. All of
our consumer food products comply with Indonesia National Standard, Indonesia Food and
Drug Safety Body and Indonesian Halal Certification Body.
We have not had, in the last three years up to the Latest Practicable Date, any material
quality or safety issues in our consumer food segment which have had a material impact on
our business or results of operations.
MAJOR CUSTOMERS
None of our customers accounted for 5% or more of our total revenue for any of the past
three financial years and the first quarter of 2014.
145

As at the Latest Practicable Date, our business and profitability are not materially dependent
on any industrial, commercial or financial contract (including a contract with a customer).
As at the Latest Practicable Date, save for their interests in quoted or listed securities which
do not exceed 5% of the total amount of issued securities in that class, none of our Directors,
Substantial Shareholders or their Associates has any interest, direct or indirect, in any of our
major customers.
Due to the nature of our business, we do not maintain an order book.
MAJOR SUPPLIERS
We identify a major supplier as one who accounted for 5% or more of our Groups total
purchases in any of the past three financial years and the first quarter of 2014.
The following table sets forth our supplier which accounted for 5% or more of our total
purchases for any of the past three financial years and the first quarter of 2014:
Major Supplier(1)

Types of Purchases /
Services

Marubeni Grain & Oilseeds Trading Asia


Pte Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Soybean meal and corn
PT Multi Agro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Soybean meal and corn
Bunge Agribusiness Singapore Pte Ltd . . . . . . . . . . Soybean meal and corn

As a percentage of our Groups


total purchases
As at
As at December 31,
March 31,
2011 2012 2013
2014

5.4
6.7
30.8

9.9
4.0
2.1

10.9
5.2
4.9

10.2
1.8
1.2

Note:
(1)
Our Group had shifted towards bulk-purchasing supplies of corn and soybean meal from larger suppliers such as Marubeni
in the year ended December 31, 2012.

Save as disclosed above, as at the Latest Practicable Date, our business and profitability are
not materially dependent on any industrial, commercial or financial contract (including a
contract with a supplier).
As at the Latest Practicable Date, save for their interests in quoted or listed securities which
do not exceed 5% of the total amount of issued securities in that class, none of our Directors,
Substantial Shareholders or their Associates has any interest, direct or indirect, in any of our
major suppliers set out above.
SALES, MARKETING AND DISTRIBUTION
Dairy
In China, our dairy farms have entered into premium raw milk off-take contracts with the major
Chinese processing firms such as Yili, Mengniu, Bright Dairy and Nestle. Accounts
receivables are billed and collected twice a month from each customer. We intend to continue
having a diversified customer base by keeping the tenure of each off-take agreement to one
year or less.
To augment our established position in raw milk production and farming in China, we have
expanded into the downstream production of premium, branded dairy consumer products,
where we believe the demand for premium, branded dairy products remains strong. We
established our sales and distribution presence in Shanghai in December 2013 when we
incorporated Shanghai AustAsia Food Company Ltd. We are currently developing our first
consumer products for the Chinese market and we expect commercial operation to start by
middle 2014. We aim to target existing customers, such as major international coffee chains.
The go-to-market strategy will be similar to the way AIH entered the Hong Kong market by
initially targeting existing business-to-business customers such as major international coffee
146

chains. Discussions with these chains in China have been ongoing and we expect shipments
to commence at the end of 2014. We also expect to undertake further product developments
and channel and market expansions in China.
In Indonesia, the majority of our dairy products are exported to Singapore, Hong Kong,
Malaysia, Philippines and Brunei. Some of our dairy products produced in Indonesia are sold
to major retail chains and supermarkets in Southeast Asia and Hong Kong and coffee chains
such as Starbucks, Coffee Bean and Pacific Coffee in Southeast Asia and Hong Kong.
We distribute our finished products under our Greenfields brand through a network of our own
sales and distribution companies in Indonesia, Singapore, Hong Kong and Malaysia and
through distributors in markets such as the Philippines and Brunei. Our sales and marketing
strategy in respect of Greenfields is three-prongedgeography, products and channels. First,
in terms of geography, our key market is and remains Indonesia as it is Greenfields home
market and the country with the largest population in Southeast Asia and the largest potential
for growth in dairy consumption. We hold a commanding position in fresh milk in Indonesia. In
addition, we have targeted developed markets such as Hong Kong and Singapore where we
have established meaningful positions and thereby demonstrated our capability to compete
internationally. Recently we launched our fresh products into both Malaysia and the
Philippines, both of which are sizeable markets which lack good supply of local dairy
products. The customers in such markets are in the modern trade comprising supermarkets
and coffee chains. Second, in terms of products, we position ourselves as a premier supplier
of fresh dairy offerings which hold a premium over our competitors in terms of pricing and
position. We advertise our Greenfields milk as honest milk with a high assurance of its
quality given that all the raw milk is sourced from our own dairy farm where we control the
entire value chain. Third, in terms of channels, we sell our Greenfields milk in three main
channels comprising (i) modern retail (hypermarkets, supermarket and convenience stores),
(ii) coffee chains as well as (iii) hotels, restaurants and cafes.
The key function of our own distribution companies is to liaise directly with our key retail and
coffee chain customers and to conduct marketing and promotion activities appropriate for
each country. In addition, we develop marketing and public relations strategies with regional
consultants and oversee all new product developments.
Animal Protein Segment
We market our poultry feed under the Comfeed and Benefeed brands in Indonesia, Myanmar
and India; and Comfeed, Profeed and Bonafeed brands in Vietnam. The development of
these brands into reputable and recognized brands, with the requisite degree of brand
equity, has taken many years to achieve, through consistent product quality and high service
standards. We believe our brands are well known throughout the industry and to our
customers and offer an excellent value proposition to customers who are looking for quality,
consistency and reliability.
In Indonesia, we mainly undertake direct marketing by approaching poultry shops, dealers
and agents as well as end users. Our external sales of poultry feed in Indonesia accounted
for approximately 60% and 57% of our total poultry feed sales volume for the year ended
December 31, 2013 and the three months ended March 31, 2014 respectively. In India, our
poultry feed is sold through dealers and distributors and to farmers. Approximately 79% of the
total sales of poultry feed in India are made to external customers, while the remaining 21% is
consumed by our parent stock farms and commercial farms. Any excess DOCs not consumed
by our farms or commercial farms are sold directly to the traders and farmers. Broiler
chickens are sold in the market to traders in India.
We market our beef under Tokusen Wagyu Beef and Santori Beef (non-wagyu). We believe
that both our beef brands are known within the trade for their superior quality amongst
modern retailers such as supermarkets and restaurants.
147

We currently have an operational presence in 15 key regional hubs across the Indonesian
archipelago, thereby reducing logistics costs and decreasing time to market, allowing us
better access to local raw material sources, and placing us closer to our customers. Our
feedmills in India are located in the eastern, western and southern parts of India for ease of
transportation of feed to the customers located in the respective regions, thereby reducing
transportation costs. Similarly, our parent stock farms are located in the western part of India
while our commercial farms are located in Maharashtra, Andhra Pradesh and Karnataka,
India, for the same reason. This proximity to customers also allows us to develop close
working relationships.
For the Indonesian market, most of our logistics activities are coordinated in-house,
particularly for areas where we have an established presence. For poultry feed, we sell
directly to our key customers and also through agents or poultry shops with whom we have
long-term, established relationships. We maintain control over these agents through strict
credit limits, terms of payment and uniform product pricing, as well as by requiring agents to
pledge assets, including land. We usually distribute the DOCs directly to our final customers,
who typically place an order on cash on delivery terms. Live broilers produced on our
commercial and contract farms are sold directly to regional wholesalers on cash before
delivery basis while chilled or frozen chicken is sold to wholesalers on prevailing credit terms.
We manage our distribution and logistics activities in-house at various regional hubs as part
of our overall supply chain management efforts. We generally outsource physical delivery
services for feed and other products, whereas we maintain and manage a fleet of chick-vans
for DOC delivery. We decide whether to outsource these activities or manage them in-house
largely according to the sensitivity of the products and the ability of existing vendors to deliver
to the standards required by us and our customers.
Consumer Food
In Indonesia and Vietnam, we have our own marketing department as well as a sales and
distribution department. The marketing department carries out marketing plans and activities
for our existing and new brands and products. This includes planning product launches,
determining pricing strategy, promotion strategy and sales and distribution strategy. The
implementation of these plans and strategies are handled and monitored by the marketing
team. Distribution of our products falls under the purview of our sales and distribution
department.
In Indonesia, we have invested in the development of our distribution operations. We have a
distribution network of five regional sales branches and 32 regional sales depots. Our direct
distribution coverage serves over 50,000 regular customers in modern channels, including
hypermarkets, supermarkets and minimarkets, as well as in traditional channel, including
agents (sub-distributors), wholesalers, semi wholesalers, and large-scale retail shops and
institutional clients.
The distribution strategy of our consumer food segment is to increase penetration into cities
and provincial townships with the highest population density and cold-storage retail
infrastructure.

148

The map below sets forth the details of our distribution network.
Kalimantan
Branch:
Depot:
Agent:

Sumatera
Branch:
Depot:
Agent:

Sulawesi
Branch:
Depot:
Agent:

0
1
30

0
1
10

Maluku & Papua


Branch:
0
Depot:
0
Agent:
4

0
4
22

Java
Branch:
Depot:
Agent:
C/S:

Bali & Nusa Tenggara


Branch:
0
Depot:
1
Agent:
4

5
28
8
3

Total
Branch:
Depot:
Agent:
C/S:

5
32
58
3

We have developed an internally controlled distribution system which allows PT So Good


Food to form direct relationships with the most suitable trade channels by brand, by locality,
by price points and optimum stock turn. The distribution structure is made up of five regional
branch offices and 32 sales depots to service specific geographical markets. It employs about
1,400 people comprising about 300 salespersons, 650 delivery and warehouse staff,
50 merchandisers, and 400 finance and sales administration staff. The entire network is
linked to manufacturing, marketing and corporate functions by enterprise resource planning
(ERP) software, which consolidates sales data by trade channels and locations to facilitate
overall production planning and inventory control.
TECHNICAL AND AFTER-SALES SERVICES
We seek to provide after-sales servicing, technical support and comprehensive solutions
directly to our customers. We provide on-site guidance to our customers to assist them to use
our feed products effectively and advise our customers on any technical issues that they may
encounter in the poultry breeding process. We offer products tailored to key customers
individual specifications and work with them to maximize their overall operational success,
which in turn can lead to greater demand for our products.
CUSTOMER CREDIT
In Indonesia, we extend credit to a limited number of customers in connection with sales of
our poultry feed and aqua-feed. Our credit terms for poultry third-party sales typically provide
for payment within 21 days or less. We take a number of factors into consideration when
agreeing to credit terms with our customers, including sales volumes, customer relationship
and historical track record for timely payment.
In Indonesia, live cattle are sold to our affiliated abattoirs on a 7-day credit basis, while beef
products are sold in the modern trade on a 30-day credit term. In China all cattle will be sold
on a cash basis.
LOGISTICS
We sell milk in China to the processing factories directly rather than adopting the traditional
distribution channels. Therefore risk of contamination is largely reduced and the
transportation cost will be borne by the off-takers. The milk trucks collecting raw milk from our
farms in China are vehicles specially designed for transporting milk directly from our farms to
the processing factories. This provides the processing factories traceability of the milk
source. Besides, by not routing our milk to other farms, we maintain the shortest delivery time
and eliminate the bio-security risks of contamination from other locations. Each milk truck has
a loading capacity of 60MT and we aim to utilize the full load of each milk truck for every trip
for efficiency.
149

We maintain our own fleet of more than 46 vehicles for our DOC business so as to maintain
our high bio-security standards and to ensure the timely delivery of DOCs. All DOCs must be
shipped to commercial farms, which are located within Indonesia, within 24 hours of their
birth.
Delivery of live cattle in Indonesia and China are sub-contracted to third-party trucking
companies. In Indonesia, we maintain a fleet of refrigerated trucks to distribute our beef
products to our customers.
We maintain our own fleet of more than 230 vehicles for our consumer food segment to
support our distribution network. Of these vehicles, approximately 60 vehicles are used for
delivery of chilled and frozen products while approximately 170 vehicles are used for ambient
temperature products.
INVENTORY CONTROL
Dairy
We use an integrated ERP system to monitor and control our inventory comprising raw
materials such as cocoa powder and packaging materials. We utilize a first in, first out
(FIFO) policy in respect of the raw milk produced to maintain freshness. Raw milk produced
is piped directly to our integrated processing plant where milk is produced. We generally seek
to maintain approximately three months inventory of raw materials (except milk) and
approximately six months inventory of packaging materials which we mainly import from
China.
Animal Protein Segment
Inventory levels in Indonesia are centrally monitored by our purchasing department in Jakarta.
We utilize a FIFO policy in respect of our inventory to maintain freshness. We maintain
inventory insurance for losses from certain damage and seek to minimize shortage, shrinkage
and demurrage by implementing tight performance standards for employee management of
inventory.
We generally maintain two to three months inventory of raw materials. Our raw materials
inventory is dependent upon the timing of harvests, festive seasons, actual and expected
weather conditions, and prevailing world market prices. We subject our incoming raw material
deliveries to on-the-spot quality control tests utilizing sophisticated lab equipment. This allows
us to immediately reject deliveries that fail to meet our specifications. Corn and certain other
raw materials must be kept dry and we therefore monitor moisture content in our silos and
operate corn dryers at strategic locations. As of March 31, 2014, we operated nine
stand-alone corn dryers in Indonesia located near major corn belts (two corn dryers in the
Central Java, two in South Sulawesi and five in the Lampung corn belts). Most of our
Indonesian feedmills also have corn dryers.
As of March 31, 2014, we operated two silos in Long An, Vietnam, four corn silos at Binh
Thuan, Vietnam, eight corn silos at Huong Chan, Vietnam, four corn silos at Thai binh,
Vietnam, and two corn silos at Hoa Binh, Vietnam.
Timely delivery and management of inventory is also essential in our DOC breeding business,
as we deliver more than 10.5 million DOCs per week in Indonesia and deliveries to customers
must be made within 24 hours.
Inventory monitoring in Myanmar is undertaken by our procurement department in Myanmar.
We utilize a FIFO policy in respect of our inventory to maintain freshness. In Myanmar, we
generally maintain approximately 1.5 to two months inventory of raw materials, including
major and seasonal raw materials such as maize, broken rice and soybean meal. Our raw
materials inventory is mainly dependent upon the timing of harvests, actual and expected
weather conditions, price trends, prevailing world prices and availability of warehouse
capacity. Myanmar has only two corn harvest seasons, straddling the April-May and the
October-January periods. Harvests are also affected during prolonged periods of rain. We
150

conduct strict quality and quantity checks on the raw materials we purchase from our
suppliers. The raw materials are stored at our warehouses and fumigation is conducted on a
monthly basis to preserve the quality of the raw materials.
Consumer Food
We use an integrated ERP system to monitor and control our inventory from raw materials,
packaging materials until finished goods items in all factories and distribution stock points.
The daily stock availability can be accessed through ERP online by the purchasing,
production, logistics and sales departments at the head office, factories and sales branches.
The ERP system also helps to ensure efficiency in stock levels and logistics costs, while at
the same time meeting the customer needs in the market.
Our raw material and packaging material requirements are centrally controlled by our
purchasing department and these are tied to the rolling monthly and weekly stock forecasts
and purchase orders from all sales branches. We utilize a FIFO policy using an ERP system
to ensure availability and to avoid expired products in our own warehouses and in the trades.
COMPETITION
We
believe our primary competitor is
Charoen Pokphand Group. See
Appendix FIndependent Market Research on Selected Food Markets in Indonesia, China,
India, Vietnam and Myanmar for a discussion of the competitive landscape of each of our
business segments.
The table below sets forth the key competitors for our various business segments:
Segment

Competitor

Dairy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

China
China Modern Dairy
Huishan Dairy
Yuan Sheng Tai Dairy
Beijing Sanyuan
Sheng Mu High-Tech (

Indonesia
Sukanda Jaya (Diamond)
Animal Protein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commercial Broiler
Charoen Pokphand (in Indonesia,
Vietnam and Myanmar)
Sierad Produce (in Indonesia)
CJ Feed (in Indonesia)
Proconco (in Vietnam)
Cargill (in Vietnam)
Suguna Foods Ltd (in India)
Venkys India Ltd (in India)
Feed
Charoen Pokphand (in Indonesia,
Vietnam and Myanmar)
Sierad Produce (in Indonesia)
CJ Feed (in Indonesia)
Suguna Foods Ltd (in India)
Godrej Agrovet (in India)
Beef
Great Giant Livestock Corp.
Agrisatwa Jaya Kencana
Widodo Makmur

151

Segment

Competitor

Consumer Food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Branded processed meat category in


Indonesia:
PT. Prima Food Internasional (Fiesta,
Champ, Oke)
PT. Bellfood Indonesia (Bellfood, 222)
PT. Eloda Mitra (Bernardi, Vitalia)
PT. Sanmiguel Purefoods (Farmhouse,
Vida)
Liquid UHT milk market:
PT. Danone Dairy Indonesia (Milkuat)
PT Friesland Campina Kievit (Susu
Bendera, Yess)
PT. Ultra Jaya Milk Industry Tbk. (Ultra,
Susu Sehat)
PT. Indo Lakto (Indomilk)
Branded processed
Vietnam:
Vissam

meat

category

in

INSURANCE
We have in place the following insurance policies:

property all-risks insurance for our fixed assets and inventory in relation to any damage
caused by accidents, fire civil disorder, and/or natural disasters;

all-risks insurance in respect of physical loss or damage to grandparent, parent and final
DOC stocks, excluding losses arising from Avian Influenza;

social security insurance for our employees (Employee Social Security or Jamsostek),
as required by Indonesian law, including pension insurance, unemployment insurance,
work injury insurance and medical insurance;

insurance in relation to any damage caused by earthquakes, volcanic eruptions or


tsunamis; and

motor vehicle insurance in relation to any damages to our motor vehicles.

We believe that the above insurance policies that we currently hold are adequate for our
business and operations, and we will review our insurance coverage annually. See Risk
FactorsRisks Relating to Our Business and OperationsOur insurance coverage may be
inadequate.
PROPERTIES AND FIXED ASSETS
We own various properties on which our offices, farms and processing facilities are located.
Please refer to Appendix J for details of the material leased or owned properties.
LICENSES
We hold a number of licenses and permits which are essential for the conduct of our
business. Please refer to Appendix K for details of the material licenses and permits.

152

COMPLIANCE
Titles and Licences Monitoring and Compliance
Each business unit will nominate a person to continue our Groups efforts to rectify the title
and license irregularities disclosed in this Prospectus. This person will also be responsible for
monitoring, checking and liaising with respect to any renewal or additional licenses, or new
titles or leases that may from time to time apply to that business unit. This person will report to
the Head of Legal and Compliance who will supervise and co-ordinate monitoring and
compliance across our Group. The Head of Legal and Compliance will report periodically to
the Board on the status of material titles and licenses.
PRC Environmental Licences
Please refer to Risk FactorsRisks Relating to our Business and OperationsFailure to
comply with environmental regulations, could harm our operating results, financial condition
and reputation. for details on certain environmental non-compliances in relation to our PRC
operations.
DYAA, TAAA, DXAA and DSAA have provided and Dongying Japfa will be providing the
relevant PRC authorities with their environmental protection plans and timelines for
implementation. In respect of Dairy Farms 1, 2 and 3, the relevant PRC authorities have
provided written responses indicating their agreement to each of DYAA, TAAA and DXAAs
construction plans regarding the environmental protection facilities. As at the date of this
Prospectus, based on the foregoing correspondence and discussions between the PRC
subsidiaries and the environmental authorities, and the existing enforcement history in
respect of non-compliance by these dairy farms being limited to non-material financial
penalties, the Legal Adviser to the Company as to PRC Law, Global Law Office, is of the view
that the likelihood of Dairy Farms 1, 2, 3 and 4 being required to suspend and/or cease
operations is low.
Anti-Corruption Policy
The Company does not have a specific or formalized anti-corruption policy. However, the
financial controllers of the various business segments monitor to ensure that proper
documentation is required before reimbursements or payments are permitted. In addition, the
management and employees of our Group are required to comply with the laws and
regulations in all the jurisdictions in which they operate (which include any anti-corruption
laws and regulations).
INTELLECTUAL PROPERTY RIGHTS
We have trademarks in respect of the Japfa name and our key brands including Greenfields,
Comfeed and Benefeed. Our distribution and use rights of these trademarks are for all areas
in Indonesia. Please refer to Appendix L for details of our material intellectual property rights.
EMPLOYEES
As at March 31, 2014, we directly employed 26,795 people, with 1,495 employed in our dairy
segment, 21,085 in our animal protein segment, 3,891 in our consumer foods segment and
324 in our head office and other supporting functions. As at March 31, 2014, we had
approximately 190 management staff, 3,198 sales and marketing staff, 18,062 production
staff and 5,314 employees working in our head office and other supporting functions. As at
March 31, 2014, we had 14,944 temporary workers.
153

The following table sets forth our total employees by business and staff type as well as
geography for the periods indicated:
As at December 31,
2011
2012
2013

Business Segment
Animal Protein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,643 17,344 19,451
Consumer Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,111
2,486
3,558
Dairy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
955
1,078
1,495
Head Office and others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257
316
324
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,966 21,224 24,741
Staff Type
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,907 13,331 16,198
Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,610
5,064
5,314
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,28
2,659
3,045
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
160
170
184
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,966 21,224 24,741
Geography
Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,203 17,985 20,382
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
309
435
768
Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,900
2,233
2,984
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
482
504
537
Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62
56
58
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
11
12
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,966 21,224 24,741

We employ a range of qualified technical staff, experts and professionals who have
industry-recognized qualifications, as well as significant previous experience in the industry.
On commencing employment with us, the staff is required to undertake induction and basic
skills training. Our technical staff is required to attend an in-house Total Productive
Maintenance training program, which includes specific training in relation to machinery and
our management staff receive communication and leadership skills training. We also send our
employees to seminars and training sessions held by external institutions.
We consider strong leadership skills to be a key factor in the success of our business and
reinforce this message through the Japfa Manager-Leader Training Program. In 2013, 295 of
our middle to top-level managers attended the program, which was conducted by our own
Training Communication Department.
We believe we have a good relationship with our employees. We have established a system
of employee cooperatives which work closely together with our management team to ensure
that the welfare of our employees is protected. We also conduct regular bipartite forums
between employees and management to encourage open communication. We have not
experienced any serious labor unrest.
Save that certain of our employees are members of labor unions in China and Vietnam, our
employees are not covered by any collective bargaining agreements and are not unionized. In
China, certain of our employees are members of the labor union committee of Dongying
AustAsia Modern Dairy Farm Co., Ltd. and the labor union committee of Dongying Xianhe
AustAsia Modern Dairy Farm Co., Ltd.. There are no collective bargaining agreements for our
subsidiaries in China.
In Vietnam, certain of our employees are members of the Trade Union of Japfa Comfeed
Vietnam, Trade Union of Japfa Comfeed Binh Thuan and Trade Union of Japfa Comfeed
Long An. There are collective bargaining agreements for JCBT and JCLA. The collective
bargaining agreement for JCVN is in the process of being finalized with the relevant
authorities.
154

CORPORATE SOCIAL RESPONSIBILITY


In accordance with our vision Growing towards mutual prosperity, we conduct our business
activities to benefit a broad range of stakeholders. As such, our activities adhere to the
principles of corporate social responsibility, including social responsibility towards: (1) the
work environment; (2) the products which we manufacture; (3) the community in the vicinity of
our operations; and (4) the environment.
We strive to meet our social responsibility towards society and the environment, and have
continued to develop sustainable social programs in developing communities in the vicinity of
our operations, providing greater access to better education and encouraging sports activities.
To this end, we have implemented an educational program called the JAPFA4Kids which
aims to help students learn and also improve their health. The students receive medical
examinations free of charge and obtain a nutritional JAPFA4Kids package which consists of
milk, sausages, eggs and two books in addition to school stationery.
Through the first aid training activities, participating schools receive a complete set of first
aid equipment along with weight and height measuring tools. This program can actively help
teachers and health workers to provide health services at the school. Specific activities
include hygiene week, nutrition week, weight and height week, and eye care week.
As part of its corporate social responsibility initiatives, our subsidiary PT Japfa has contributed
each year from 2011 to 2013 to the Santosa Lestari Foundation (the Foundation) and will
continue to do so. The Foundation was set up by the Santosa family and its objectives include
helping the less fortunate people by providing scholarships to students, providing medical and
health aid, operating nursing homes for senior citizens as well as earthquake and
environmental disaster aid and relief. Four out of seven members of the Board of Trustees of
the Foundation are Mr. Handojo Santosa, Mr. Hendrick Kolonas, Ms. Mieke Santosa (sister of
Mr. Handojo Santosa and spouse of Mr. Hendrick Kolonas) and Mr. Boyke Gozali (brother of
Mr. Hendrick Kolonas). The Santosa family members are not beneficiaries of the Foundation.
We also support and develop interest in chess among our employees. This support is given
because of our belief that chess stimulates brain activities. We set up the JAPFA Chess Club
to encourage the participation in chess activities by our employees. We also sponsor a
number of chess tournaments held in Indonesia. In 2013, we organized the JAPFA Chess
Festival for the eighth time in cooperation with the Indonesian Chess Association. This
tournament was the biggest chess festival in Indonesia with the largest number of participants
and the highest number of categories. In addition, the tournament facilitated participation from
the wider community in chess activities.
RESEARCH AND DEVELOPMENT
Our poultry division owns a test farm in Mojokerto, East Java where poultry feed formula, new
enzymes and probiotics are tested. This test farm conducts research on how the physical
form of the poultry feed, whether in the mash, pellet or crumble form, has any effect on
nutrients absorption and digestibility. It also collects its own research data on different DOC
strains and other different strains including broiler and layer. The test farm also researches
farm management techniques on how best to handle DOC and poultry in general.
We own a vaccine company, PT Vaksindo Satwa Nusantara, which is part of our poultry
division and which conducts its research and development on the vaccine avian influenza
(AI) master seeds which aims to anticipate the quick mutation of the AI virus. We collaborate
with Erasmus MC on AI virus classification, genetic or antigenic AI virus characterization and
the mapping and isolation of the virus using antigenic cartography. Our vaccine company also
develops vaccines for Newcastle Disease Genotype VII by using isolates taken from the
farms. This led to a joint project with Professor Siba M. Samal of University of Maryland in the
155

United States to produce seed Newcastle Disease Genotype VII reverse genetic as the
master seed live vaccine.
We also collaborate with the Queensland University, Australia to conduct research on
stereotyping to isolate the Coryza bacteria. Under this project, we aim to develop vaccines for
E coli and clostridium for poultry flocks usage.
Our aquaculture division engages in aqua-feed research and development. The goal is to
generate comprehensive knowledge about nutritional requirements of aqua-feed for different
fish. Unlike the experience with farm products on land, research data done by other countries
such as Japan are not readily applicable to the Indonesian water environment due to
differences such as water temperatures. As such, research and development has to be done
separately and independently by our aqua-feed division which is based in Indonesia.
We have four centers devoted to aqua-feed research. Our center in Cirebon deals with
various testing of mudfish and tilapia feed. Our Banyuwangi center in Indonesia deals with
research on eel and prawn feed, and our Gresik center in Indonesia deals with feed research
for fresh water fish such as milkfish, carp and Nile tilapia, while our Ciranjang center in
Indonesia deals with research for catfish, black and white pomfret and striped catfish. These
centers collect data findings to determine best formula for raw material mix for different fish,
including eel and shrimp, the digestibility of the aqua-feed produced and the percentage of
feed not ingested by the fish.
We spent US$542,784, US$485,843 and US$541,855 on research and development in 2011,
2012 and 2013 respectively, which amounted to 0.027%, 0.021% and 0.020% respectively of
our revenue for these years.

156

157

Country Head,
Vietnam

Head of Poultry

Country Deputy Head, India

Head of Commercial Poultry II


/Aquaculture

Head of Beef
Country Head, Myanmar

CEO

BOARD OF DIRECTORS

Head of Dairy

Head of Consumer
Food

Head of Human Resource

Head of Legal and Compliance

Chief Financial Officer

Group Headquarters

The management reporting structure reflecting the reporting lines and functional responsibilities of our Directors and Executive Officers are set out
in the chart below.

Management Reporting Structure

MANAGEMENT AND CORPORATE GOVERNANCE

DIRECTORS
Our Board of Directors is entrusted with the responsibility for our overall management and
direction.
The following table sets forth information regarding our Directors.
Name

Age

Address

Mr. Goh Geok Khim . . . . . . . . . . . . . . . . . . 82 391B Orchard Road #18-08


Ngee Ann City Tower B,
Singapore 238874
Mr. Handojo Santosa @ Kang
Kiem Han . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874
Mr. Hendrick Kolonas . . . . . . . . . . . . . . . . 58 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874
Mr. Tan Yong Nang . . . . . . . . . . . . . . . . . . 53 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874
Mr. Kevin John Monteiro . . . . . . . . . . . . . 58 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874
Mr. Ng Quek Peng . . . . . . . . . . . . . . . . . . . 60 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874
Ms. Lien Siaou-Sze . . . . . . . . . . . . . . . . . . 64 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874
Mr. Liu Chee Ming . . . . . . . . . . . . . . . . . . . . 63 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874

Designation

Non-Executive
Independent Chairman

Executive Deputy
Chairman
Non-Executive Director

Executive Director and


Chief Executive Officer
Executive Director and
Chief Financial Officer
Independent Director

Independent Director

Independent Director

Experience of our Board of Directors


Information on the key business and working experience of our Directors is set out below:
Mr. Goh Geok Khim is our Non-Executive Independent Chairman and was appointed to our
Board on June 30, 2014.
Mr. Goh started his career in his familys business, which was active in trading, rubber,
property and manufacturing steel products. He left in 1968 to join the stockbroking industry,
and in 1979, he established the G. K. Goh stockbroking group.
Mr. Goh is currently Chairman of the Board of Directors of G. K. Goh Holdings Limited,
Boardroom Limited, Temasek Foundation CLG Limited and Federal Iron Works Sdn Bhd.
Mr. Goh had previously served as a Non-Executive Director of Lam Soon (M) Bhd, a member
of the National Heritage Board and Chairman of the National Museum of Singapore. Mr. Goh
was also a member of the SGX-ST Disciplinary Committee from 1998 to 2006.
Mr. Goh graduated with a Bachelor of Science degree in Civil Engineering from the University
of Colorado.
Mr. Handojo Santosa @ Kang Kiem Han is our Executive Deputy Chairman. He is in charge
of the overall management of business and operations of our Group, including making any
major corporate decisions. Mr. Santosa oversees the formulation of our Groups corporate
planning, strategic direction, business and corporate policies.
158

Mr. Santosa joined our Group in 1986 as a manager in the edible oil division at Nilam in
Surabaya where he was in charge of the edible oil divisions day to day operations. From
1989 to 1997, he served as Vice-President Director of our subsidiary PT Japfa Comfeed
Indonesia Tbk. In 1997, he was appointed as President Director of PT Japfa Comfeed
Indonesia Tbk, a role in which he has oversight of the PT Japfa Groups operations. His
responsibilities include overseeing the entire operations of the PT Japfa Group including the
Aquaculture Division, Trading Division and the Beef Cattle Division.
Mr. Hendrick Kolonas is a Non-Executive Director of our Company.
Mr. Kolonas joined our Group in 2012 as Vice-President Commissioner of our subsidiary, PT
Japfa Comfeed Indonesia Tbk. Prior to joining our Group, Mr. Kolonas was the branch
manager at the Head Office (Operational) of Bank Dagang Nasional Indonesia. During his
time there from 1983 to 1988, he was involved in organizing and managing various
departments of the branch. Mr. Kolonas has also served on the board of Bank Tiara Asia,
where he was President Director from 1989 to 1997 and Vice-President Commissioner from
1997 to 1998. Mr. Kolonas founded PT Celebes Artha Ventura in 1996 and spearheaded
investments into various financial services businesses. He has been the President
Commissioner of PT Celebes Artha Ventura since 2010.
Mr. Kolonas graduated from Middlesex University, United Kingdom in 1982 with a Bachelor of
Arts (Hons) degree in Accounting and Finance. He also has a Masters degree in Business
Administration from Schiller International University, United Kingdom and a Masters of Arts
degree in Banking Administration from University of Hull, United Kingdom, which he attained
in 1983 and 1989, respectively.
Mr. Tan Yong Nang is an Executive Director and the Chief Executive Officer of our
Company. He is in charge of leading the development and execution of our Companys longterm strategy and is also responsible for all day-to-day management decisions.
Mr. Tan joined our Group in 2007 as an assistant to the Chief Executive Officer and Chief
Operating Officer of Corporate Services before taking on the position of Chief Operating
Officer of our Group in 2011. Mr. Tan was involved in the growth of our Groups operations in
the region such as the expansion of our Groups swine and dairy business segments. He also
had oversight of the management functions across our Groups businesses and introduced
authority matrices across the various business segments of our Groups operations to
establish clearer roles and responsibilities for the management of our Group. Mr. Tan is also
involved in the management of our Groups financial liabilities and has assisted our Group in
diversifying our Groups financial relationships to include regional and international banking
organizations.
Mr. Tan started his career as a statistician at the Department of Statistics, Singapore in 1985
and went on to become a research economist with Singapores Ministry of Trade and Industry
in 1986. He joined the Prudential group in 1988 as an investment analyst and was based in
Hong Kong and the U.S.. Mr. Tan was employed by the PAMA Group Inc.s group of
companies (PAMA Group) from 1991 to 2003, becoming a partner of PAMA BVI in 2001.
Mr. Tan was involved in setting up several equity funds of the PAMA Group and handling the
funds investment portfolio in South East Asia. He was also an Investment Committee
member of PAMA BVI from 1997 to 2003. Mr. Tan joined Delifrance Asia Ltd in 2003 as its
Chief Executive Officer where he was in charge of setting strategic corporate visions and
directions for, and had oversight of the operations of, Delifrance Asia Ltd. He joined Li & Fung
Group in 2005 as its Project Director and Chief Operating Officer and was involved in charting
its overall investment direction and strategy.
Mr. Tan graduated with a Bachelor of Arts (Economics) degree from the University of
Cambridge, United Kingdom in 1983. He was also registered as a Chartered Financial
Analyst with The Institute of Chartered Financial Analysts, United States of America in 1992
and is currently a member of Mensa International.
159

Mr. Kevin John Monteiro is an Executive Director and the Chief Financial Officer of our
Group. His key roles are to develop a balanced capital structure and to source adequate
funding for our Group and to ensure the integrity of financial data for proper record keeping
and accurate reporting. Mr. Monteiro also has oversight over all the financial operations of our
Group and he currently leads a team of 13 professionals, including our Group Financial
Controller and nine country/divisional Financial Controllers.
Mr. Monteiro is currently also the Head of Corporate Finance of our subsidiary, PT Japfa
Comfeed Indonesia Tbk and has over 14 years of experience of working in the agri-food
industry, having joined PT Japfa Comfeed Indonesia Tbk in 1999. His responsibilities in this
position include reviewing and analysing the financial statements of the PT Japfa Group,
overseeing the capital structure of the PT Japfa Group and managing equity-related matters
such as investor relations, annual reports and IDX-compliance. He also oversees merger and
acquisition activities and fund-raising activities of the PT Japfa Group which included a SGXlisted US$225 million Senior Notes issuance in 2013 and three mergers by PT Japfa of which
two involved public-listed targets.
Prior to joining PT Japfa, Mr. Monteiro was a financial advisor to another IDX-listed company,
PT Trafindo Perkasa Tbk (Trafindo) between 1995 and 1999. In his role at Trafindo,
Mr. Monteiro was instrumental in putting in place and institutionalizing the internal controls
and financial reporting systems expected of a company listed on the IDX. Mr. Monteiro also
handled the investor relations and corporate finance functions of Trafindo. Between 1985 and
1995, Mr. Monteiro practiced as a chartered accountant, first as a sole practitioner, and later
as a partner of Callaway & Hecht in Melbourne. Whilst in practice, Mr. Monteiro was a
registered tax agent and registered company auditor in Australia. As a chartered accountant,
he audited the financial statements of numerous private companies, hospitals and
universities.
Mr. Monteiro obtained a Bachelor of Economics degree from Monash University, Australia in
1979 and has been an associate member of the Institute of Chartered Accountants in
Australia since 1982.
Despite being appointed as our Chief Financial Officer less than six months prior to the
submission of our listing application, Mr. Monteiro considers himself to be adequately familiar
with the finance and accounting policies and the internal control systems of our Group, having
been with PT Japfa since 1999 and also having overseen the capital structure and financing
aspects of our Groups dairy and consumer foods businesses prior to his appointment as
Chief Financial Officer. In considering the suitability of Mr. Kevin Monteiro as our Chief
Financial Officer, our Audit Committee has considered his qualifications and past working
experience as described above and his years of service with our Group and has noted his
abilities, familiarity and diligence in relation to financial matters and information of our Group.
Our Audit Committee confirms that, based on the foregoing, and after making all reasonable
enquiries, and to the best of its knowledge and belief, nothing has come their attention to
cause them to believe that Mr. Monteiro does not have the competence, character and
integrity expected of a chief financial officer of a company listed on the SGX-ST.
Mr. Ng Quek Peng is one of our Independent Directors and was appointed to our Board on
July 29, 2014.
Mr. Ng has had more than 30 years of experience in the corporate finance and securities
industry in Singapore and Malaysia, advising clients on corporate restructuring, mergers and
acquisitions and fund raising. He has held positions in foreign and local financial institutions
during his career, including Citicorp Investment Bank (Singapore) Ltd, OCBC Securities Pte
Ltd, ABN Amro Bank and CIMB Bank Berhad, Singapore Branch. Mr. Ng was also with
Temasek Holdings Private Ltd as a Managing Director of its Portfolio Management division
160

and as Chief Representative China. He was also a Director of GMR Infrastructure (Singapore)
Pte. Limited (part of the India-based GMR Group) and was involved in the development of
their infrastructure projects in South East Asia.
Mr. Ng is currently a director of Otto Marine Limited, a company listed on the SGX-ST.
Mr. Ng graduated with a degree in Civil Engineering from the University of London in 1976
and has been a member of the Institute of Chartered Accountants in England and Wales
since 1980.
Ms. Lien Siaou-Sze is one of our Independent Directors and was appointed to our Board on
July 29, 2014. She is currently a Senior Executive Coach at Mobley Group Pacific, a
management consulting firm.
Ms. Lien joined Hewlett-Packard Singapore (Private) Limited (HP) in 1978. During her time
at HP, she headed its Technology Solutions Group Asia Pacific and Japan and retired from
HP in 2007 as a Senior Vice President. Ms. Lien joined Mobley Group Pacific in 2006.
Ms. Lien has served on the board of Luvata Ltd., a conglomerate headquartered in Finland,
since 2006 and the board of Elekta AB, a company listed on the Nordic Stock Exchange,
since 2011. She is also a member of the Compensation Committee for Elekta AB. Ms. Lien
has also served as a member of the Board of the Confucius Institute at Nanyang
Technological University since 2008 and a member on the Board of Trustees at Nanyang
Technological University and the Board of Governors at Republic Polytechnic Singapore
since 2006.
Ms. Lien graduated with a Bachelor of Science degree in Physics from the former Nanyang
University in 1971 and attained a Masters degree in Computer Science from London
University, Imperial College Science and Technology in 1973. In 2011, she was awarded the
Bintang Bakti Masyarakat (Public Service Star) for valuable public service by the Singapore
Government and was also appointed a Justice of the Peace by the President of Singapore in
2013.
Mr. Liu Chee Ming is an Independent Director of our Company and was appointed to our
Board on July 29, 2014. He is currently the Managing Director of Platinum Holdings Company
Limited, which he established in 1996, and oversees its day to day business operations.
Prior to forming Platinum Holdings Company Limited, he worked at Jardine Fleming Holdings
Limited for over 20 years where he assumed positions the positions of Head of Brokerage
and subsequently Head of Investment Banking. He was also a member of its Executive
Committee.
He has been an independent non-executive director of Kader Holdings Company Limited (a
company listed on the Hong Kong Stock Exchange) since 1998 and an independent
non-executive director of StarHub Ltd. (a company listed on the SGX-ST) since 2004. He has
been an independent non-executive director of Haitong Securities Company Ltd. (a company
listed on the Hong Kong and Shanghai stock exchanges) since 2011. In 2013, Mr. Liu was
appointed as an independent director of OUE Hospitality REIT Management Pte. Ltd. and
OUE Hospitality Trust Management Pte. Ltd., which are the REIT Manager and TrusteeManager of OUE Hospitality Trust (listed on the SGX-ST), respectively. He is also a member
of the Audit and Risk Committee of OUE Hospitality REIT Management Pte. Ltd.
Mr. Liu has been a member of the Takeovers Appeal Committee of the Securities and Futures
Commission in Hong Kong since 1995, and was appointed as a Deputy Chairman of the
Takeovers and Mergers Panel since 2008.
Mr. Liu graduated with a Bachelors degree in Business Administration from the former
University of Singapore in 1976.
161

Expertise of the Board of Directors


As evidenced by their respective business and working experience set out above, our
Directors possess the appropriate expertise to act as directors of our Company. In
accordance with the requirements under the SGX-STs listing rules, we made arrangements
for our Directors to be briefed on the roles and responsibilities of a director of a public listed
company in Singapore.
Present and past principal directorships and commissionerships of our Directors
The present and past principal directorships and commissionerships, in the case of
Indonesian incorporated companies, held by our Directors in the last five years preceding the
date of this Prospectus (excluding those held in our Company) are set out in Appendix G
List of Present and Past Principal Directorships.
Significant Changes in Percentage of Ownership
Save as disclosed in Share Capital and ShareholdersOwnership Structure, there have not
been any significant changes in the percentage of ownership of our Directors in our Company
in the last three years up to the Latest Practicable Date.
Term of Office
Save in respect of the appointments of Mr. Handojo Santosa, Mr. Tan Yong Nang and
Mr. Kevin Monteiro, with whom we have entered into service agreements as described below,
our Directors do not currently have fixed terms of office. Our Articles of Association provide
that at each annual general meeting, at least one-third of our Directors for the time being (or,
if their number is not a multiple of three, the number nearest to but not less than one-third)
retire from office by rotation and will be eligible for re-election at that annual general meeting
(the Directors so to retire being those longest in office). Following the practice adopted by PT
Japfa, our Company has adopted the policy that all Directors (unless already required to retire
pursuant to our Articles of Association) retire at the annual general meeting next following
their last re-election or appointment. The retiring directors will be eligible for re-election at that
annual general meeting.
Pursuant to Section 153 of the Singapore Companies Act, no person of or over the age of
70 years shall be appointed to act as a director of a public company or a subsidiary of a public
company. Notwithstanding this, as permitted under Section 153(6) of the Singapore
Companies Act, Mr. Goh Geok Khim may, by ordinary resolution passed at an annual general
meeting of our Company be appointed or re-appointed as a director of our Company to hold
office or be authorized to continue in office as a director of our Company, until the next annual
general meeting of our Company.
EXECUTIVE OFFICERS
Our Executive Officers, together with our Executive Directors, are responsible for our day-today management and operations as well as the implementation and execution of our
operational policies. The following table sets forth information regarding our Executive
Officers.
Name

Age

Address

Animal Protein
Mr. Bambang Budi Hendarto . . . . 68 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874
Dairy
Mr. Edgar Dowse Collins . . . . . . . . . 47 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874
162

Position

Head of Poultry

Head of Dairy

Name

Age

Address

Consumer Food
Mr. Peter Chin Chi Kee . . . . . . . . . . . 59 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874
Group Headquarters
Ms. Christina Chua Sook Ping . . . 48 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874
Mr. Jasper Tan Kai Loon . . . . . . . . . 39 391B Orchard Road #18-08
Ngee Ann City Tower B,
Singapore 238874

Position

Head of Consumer Food

Head of Legal and


Compliance
Head of Human Resource

Experience of our Executive Officers


Information on the key business and working experience, educational and professional
qualifications, if any, and areas of responsibilities of our Executive Officers are set out below:
Animal Protein
Mr. Bambang Budi Hendarto is the Head of Poultry of our Group. He oversees the entire
poultry operations of our Group, including the feed, breeding and commercial aspects, and is
responsible for establishing corporate objectives, strategies and plans for our Groups poultry
operations.
Mr. Hendarto joined our Group in 1978 as a Nutrition Manager in the Production Planning
Control Department where he was involved in supervising and coordinating the activities for
the production of formula feed. He became a Vice Director (Deputy Director) of PT Comfeed
Indonesia in 1981 and led the Feed Division of our Groups operations in Indonesia. Over the
years with our Group, he was promoted several times and was appointed the Vice-President
Director of PT Japfa in 1997. He holds this position till today and his roles and responsibilities
as Vice-President Director of PT Japfa include leading the breeding and commercial poultry
operations of our Group and to oversee and ensure that our Groups corporate objectives and
strategies relating to such operations are met.
Mr. Hendarto graduated from Brawijaya University in 1972 with an Engineering degree in
Animal Husbandry.
Dairy
Mr. Edgar Dowse Collins is the Head of Dairy of our Group. He is responsible for the day-today operations of our Groups Dairy Division and is in charge of formulating, developing and
implementing both strategic and long-term business plans for our Groups Dairy operations.
Having been involved in beef and cattle operations throughout his career, Mr. Collins has
accumulated many years of industry experience. Mr. Collins has been with AustAsia Food
Pte. Ltd. since 1999 and is currently its Managing Director. Before joining AustAsia Food Pte.
Ltd., Mr. Collins was Head of Operations of PT Santosa Agrindo, currently a subsidiary of our
Group, where he was involved in the development of a cattle and beef business in Indonesia.
Mr. Collins was also a General Manager for approximately two years at BxE Commodities Pty
Ltd (BxE), a company engaged in the business of import and trading of cattle feed
commodities in Australias and New Zealands dairy industries. During his time at BxE, he
was involved in the establishment of a system for the importation, trading and distribution of
feed products such as copra meal and palm kernel extract to commercial farmers and feed
mills.

163

Consumer Food
Mr. Peter Chin Chi Kee is the Head of Consumer Food of our Group. He has oversight of the
performance of our Groups consumer branded foods business in Indonesia and its expansion
beyond Indonesia to other developing Asian countries such as Vietnam, Myanmar and India.
He was previously responsible for expanding our Groups poultry businesses beyond
Indonesia to other markets such as China, India, Myanmar and Vietnam and was Head of
International Poultry and Head of International Dairy up till 2008.
Mr. Chin has over 30 years of experience in the food industry. Prior to joining our Group, he
worked for several national and multi-national corporations including Eta Foods (part of
Nabisco New Zealand), Fonterra Co-operative Group Limited and Goodman Fielder Wattie
Ltd where he was engaged in different roles including sales, marketing, quality assurance and
general management.
Mr. Chin graduated with a Bachelor of Technology (Food Technology) degree from Massey
University, New Zealand in 1979 and attained his Masters degree in Agricultural Business
and Administration in Marketing from Massey University in 1982.
Group Headquarters
Ms. Christina Chua Sook Ping is the Head of Legal and Compliance of our Group and
oversees all legal, compliance and secretarial functions of our Groups operations. She joined
our Group in 2010.
Ms. Chua has more than 20 years of experience in legal practice. She joined Drew & Napier
LLC in 1990 and later joined Rajah & Tann LLP in 2007. During her time in practice,
Ms. Chua was a partner in the corporate and tax departments of both firms and was
recommended in the 2003/2004, 2004/2005 and 2006/2007 editions of The Asia Pacific Legal
500 for Mergers & Acquisitions with a technology specialization, for her role in advising in the
Bharti Changi Consortium in respect of the modernization and restructuring of the Mumbai
and Delhi airports and as a leading individual, respectively. She was also named in both
Whos WhoLegal (Singapore) for Mergers & Acquisitions and the International Tax Review
2004 as a leading tax practitioner in Singapore. She was highly recommended for tax
(particularly infrastructure and cross border) transactions in PLC Which Lawyer? Yearbook
Singapore 2008/2009 edition and was also named as a highly recommended tax lawyer in
PLC Tax on Transactions Handbook 2009/2010 edition.
Ms. Chua graduated with a Bachelor of Laws (Honors) degree from the National University of
Singapore in 1989 and was admitted as an advocate and solicitor of the Supreme Court of the
Republic of Singapore in the same year. She has been a member of both the Law Society of
Singapore and the Singapore Academy of Law since 1990.
Mr. Jasper Tan Kai Loon is the Head of Human Resource of our Group and is in charge of
all human resource matters in our Group and responsible for human resource management,
policy governance and administration.
Prior to joining our Group, Mr. Tan was employed by the Singapore Ministry of Defense from
1998 to 2012. He was engaged in various positions including Head of the Singapore Armed
Forces Careers Centre and Head of Mindef Scholarship Centre. He was appointed as the
Head of the Human Resource Department of the Ministry of Defense in 2009 and was
responsible for all human resource matters for all non-uniformed personnel of the Ministry of
Defense and Singapore Armed Forces. He joined our Group in 2012.
Mr. Tan graduated with a Bachelor of Arts and Social Sciences degree from the National
University of Singapore in 1997.

164

Present and past principal directorships and commissionerships of our Executive


Officers
The present and past principal directorships and commissionerships, in the case of
Indonesian incorporated companies, held by our Executive Officers in the last five years
preceding the date of this Prospectus (excluding those held in our Company) are set out in
Appendix GList of Present and Past Principal Directorships .
LEGAL REPRESENTATIVE
Legal Representative of our PRC Dairy Subsidiaries
In aggregate, DYAA, TAAA, DXAA, DSAA and SHAA are principal subsidiaries of our Group
engaged in the dairy business in the PRC.
Our Head of Dairy, Mr. Edgar Dowse Collins, is the legal representative of DYAA, TAAA,
DXAA, DSAA and SHAA. Mr. Collins is also a director of AIH, which is the holding company
of DYAA, TAAA, DXAA, DSAA and SHAA.
In accordance with PRC law, Mr. Edgar Dowse Collins has the following powers in relation to
all of our PRC dairy subsidiaries:
(i)

to act as representative of that PRC subsidiary; and

(ii)

to execute contracts on behalf of that PRC subsidiary.

Our Board has noted that there are risks in relation to the appointment of Mr. Edgar Dowse
Collins as the legal representative of DYAA, TAAA, DXAA, DSAA and SHAA, including
concentration of authority. After noting that the articles of association of DYAA, TAAA, DXAA,
DSAA and SHAA allow its sole shareholder to, inter alia, remove the legal representative of
the respective company, the Board is of the view that there are adequate processes and
procedures in place to mitigate the risks in relation to the appointment of Mr. Edgar Dowse
Collins as the legal representative of DYAA, TAAA, DXAA, DSAA and SHAA. Our Company
and AIH will monitor and periodically review the processes and procedures in relation to the
appointment and removal and the avoidance of concentration of authority of the legal
representatives of DYAA, TAAA, DXAA, DSAA and SHAA, to ensure their effectiveness and
robustness.
FAMILY RELATIONSHIPS
Our Executive Deputy Chairman Mr. Handojo Santosas spouse is Farida Gustimego Santosa
and their children are Renaldo Santosa, Gabriella Santosa, Mikael Santosa and Raffaela
Santosa. The wife and children of Mr. Handojo Santosa are each deemed to have an interest
in the Shares held by our Substantial Shareholders, Rangi Management Limited and
Tasburgh Limited (see Share Capital and ShareholdersOwnership Structure).
Our Non-Executive Director, Mr. Hendrick Kolonas spouse is Mieke Santosa, who is
Mr. Handojo Santosas sister. Their children are Aldrian Irvan Kolonas, Marcellina Claudia
Kolonas and Rachel Anastasia Kolonas. The wife and children Mr. Hendrick Kolonas are
each deemed to have an interest in the Shares held by our Substantial Shareholder, Morze
International Limited (see Share Capital and ShareholdersOwnership Structure).
Save as disclosed above and in the section Share Capital and ShareholdersOwnership
Structure, none of our Directors are related to each other or to our Executive Officers or
Substantial Shareholders.

165

CORPORATE GOVERNANCE
Our Directors recognize the importance of corporate governance and the maintenance of high
standards of accountability to our shareholders. Our Board has established three committees:
(i) the Audit Committee; (ii) the Nominating Committee; and (iii) the Remuneration Committee.
Audit Committee
Our Audit Committee comprises three members, namely Mr. Ng Quek Peng, Mr. Hendrick
Kolonas and Mr. Liu Chee Ming. The Chairman of our Audit Committee is Mr. Ng Quek Peng.
The Audit Committee is responsible for:
(a)

assisting our Board of Directors in discharging its statutory responsibilities on financing


and accounting matters;

(b)

reviewing significant financial reporting issues and judgments to ensure the integrity of
the financial statements and any formal announcements relating to financial
performance;

(c)

reviewing the scope and results of the audit and its cost effectiveness, and the
independence and objectivity of the external auditors;

(d)

reviewing the external auditors audit plan and audit report, and the external auditors
evaluation of the system of internal accounting controls, including financial,
operational, compliance and information technology controls as well as reviewing our
Groups implementation of any recommendations to address any control weaknesses
highlighted by the external auditor;

(e)

reviewing the key financial risk areas, including our Groups hedging policy in respect
of its exposure to fluctuations in foreign exchange and raw material costs;

(f)

reviewing the risk management structure and any oversight of the risk management
process and activities to mitigate and manage risk at acceptable levels determined by
our Board of Directors;

(g)

reviewing the statements to be included in the annual report concerning the adequacy
and effectiveness of our risk management and internal controls systems, including
financial, operational, compliance controls, and information technology controls;

(h)

reviewing any interested person transactions and monitoring the procedures


established to regulate interested person transactions, including ensuring compliance
with our Companys internal control system and the relevant provisions of the Listing
Manual, as well as all conflicts of interests to ensure that proper measures to mitigate
such conflicts of interests have been put in place (see the Interested Person
Transactions and Conflicts of InterestsReview Procedures for Future Interested
Person Transactions);

(i)

reviewing the scope and results of the internal audit procedures, and at least annually,
the adequacy and effectiveness of our internal audit function;

(j)

approving the hiring, removal, evaluation and compensation of the head of the internal
audit function, or the accounting / auditing firm or corporation to which the internal
audit function is outsourced;

(k)

appraising and reporting to our Board of Directors on the audits undertaken by the
external auditors and internal auditors, the adequacy of disclosure of information;

(l)

making recommendations to our Board of Directors on the proposals to Shareholders


on the appointment, reappointment and removal of the external auditor, and approving
the remuneration and terms of engagement of the external auditor;
166

(m)

undertaking such other reviews and projects as may be requested by our Board of
Directors, and report to our Board its findings from time to time on matters arising and
requiring the attention of our Audit Committee; and

(n)

undertaking generally such other functions and duties as may be required by law or
the Listing Manual, and by amendments made thereto from time to time.

Apart from the duties listed above, the Audit Committee will ensure that arrangements are in
place for employees to raise concerns, in confidence, about possible wrongdoing in financial
reporting or other matters. The Audit Committee will commission and review the findings of
internal investigations into such matters or matters where there is any suspected fraud or
irregularity, or failure of internal controls, or infringement of any law, rule or regulation which
has or is likely to have a material impact on our Groups operating results and financial
position. The Audit Committee will also ensure that the appropriate follow-up actions are
taken.
Our Group has an in-house internal audit department for reviewing and implementing
appropriate internal controls, including in respect of financial, operational and compliance
risks. Following our listing on the SGX-ST, the in-house internal audit department will report to
our Audit Committee who will approve the internal audit policies and plans. Our Audit
Committee will review the effectiveness of the internal audit function and, where deemed
necessary, expand the internal audit function to ensure its effectiveness within our Group.
Our Board, after making all reasonable enquiries, with the concurrence of our Audit
Committee, is of the opinion that our internal controls are adequate to address the financial,
operational and compliance risks.
Nominating Committee
Our Nominating Committee comprises Ms. Lien Siaou-Sze, Mr. Handojo Santosa and Mr. Liu
Chee Ming. The Chairwoman of our Nominating Committee is Ms. Lien Siaou-Sze.
The Nominating Committee is responsible for:
(a)

making recommendations to our Board of Directors on relevant matters relating to


(i) the review of board succession plans for directors, in particular, our Chairman and
the Chief Executive Officer, (ii) the reviewing of training and professional development
programs for our Board and (iii) the appointment and re-appointment of our Directors
(including alternate Directors, if applicable);

(b)

reviewing and determining annually, and as and when circumstances require, if a


Director is independent, in accordance with the Code of Corporate Governance 2012
(the Code) and any other salient factors;

(c)

reviewing the composition of our Board of Directors annually to ensure that our Board
of Directors and our Board committees comprise Directors who as a group provide an
appropriate balance and diversity of skills, expertise, gender and knowledge of our
Company and provide core competencies such as accounting or finance, business or
management experience, industry knowledge, strategic planning experience and
customer-based experience and knowledge; and

(d)

where a Director has multiple board representations, deciding whether the Director is
able to and has been adequately carrying out his duties as Director, taking into
consideration the Directors number of listed company board representation and other
principal commitments.

In addition, our Nominating Committee will make recommendations to our Board of Directors
on the development of a process for evaluation and performance of the Board, its board
167

committees and directors. In this regard, our Nominating Committee will decide how our
Board of Directors performance is to be evaluated and propose objective performance criteria
which address how our Board of Directors has enhanced long-term shareholder value. The
Nominating Committee will also implement a process for assessing the effectiveness of our
Board of Directors as a whole and our Board committees and for assessing the contribution of
our Chairman and each individual Director to the effectiveness of our Board of Directors. Our
Chairman will act on the results of the performance evaluation of our Board of Directors, and
in consultation with our Nominating Committee, propose, where appropriate, new members to
be appointed to our Board of Directors or seek the resignation of Directors.
Each member of the Nominating Committee is required to abstain from voting, approving or
making a recommendation on any resolutions of the Nominating Committee in which he has a
conflict of interest in the subject matter under consideration.
Nominating Committees view of our Independent Directors
The Nominating Committee, having taken into consideration the following:
(a)

the number of listed company directorships by each of our Independent Directors;

(b)

the principal commitments of our Independent Directors;

(c)

the confirmations by our Independent Directors stating that they are each able to
devote sufficient time and attention to the matters of our Company;

(d)

the confirmations by our Independent Directors that each of them is not accustomed or
under an obligation, whether formal or informal, to act in accordance with the
directions, instructions or wishes of any Controlling Shareholder, has no relationship
with our Company, its related corporations or with any directors of these corporations,
its 10.0 per cent. Shareholders or its officers that could interfere or be reasonably
perceived to interfere, with the exercise of his or her independent business judgment
with a view to the best interests of our Company;

(e)

our Independent Directors working experience and expertise in different areas of


specialization; and

(f)

the composition of the Board,

is of the view that (i) each of our Independent Directors is individually and collectively able to
devote sufficient time to the discharge of their duties and are suitable and possess relevant
experience as Independent Directors of our Company and (ii) our Independent Directors, as a
whole, represent a strong and independent element on the Board which is able to exercise
objective judgment on corporate affairs independently from the controlling shareholders.
Mr. Goh Geok Khim is the Non-Executive Chairman of Boardroom Limited and is, by virtue of
Section 4 of the SFA, deemed to be interested in 81.28% in the issued and paid-up ordinary
share capital of Boardroom Limited. Boardroom Limited is the sole shareholder of Boardroom
Corporate & Advisory Services Pte. Ltd. (Boardroom), which has been appointed as our
Share Registrar and Share Transfer Agent on normal commercial terms and on an arms
length basis. Mr. Goh Geok Khim will abstain from and will not be involved in any decision of
our Board in relation to any transactions or dealings with Boardroom. The Board has reviewed
the independence of Mr. Goh Geok Khim and, having considered the nature of the
relationship and transaction and the factors considered in the appointment of Boardroom, is
satisfied that the relationship described above will not interfere with Mr. Gohs exercise of his
independent judgment and ability to act with regard to the interests of Shareholders.

168

Remuneration Committee
Our Remuneration Committee comprises Ms. Lien Siaou-Sze, Mr. Hendrick Kolonas and
Mr. Ng Quek Peng. The Chairwoman of our Remuneration Committee is Ms. Lien Siaou-Sze.
Our Remuneration Committee is responsible for:
(a)

reviewing and recommending to our Board of Directors, in consultation with the


Chairman of our Board of Directors, for endorsement, a comprehensive remuneration
policy framework and guidelines for remuneration of our Directors, the Chief Executive
Officer and other persons having authority and responsibility for planning, directing and
controlling the activities of our Company (Key Management Personnel);

(b)

reviewing and recommending to our Board of Directors, for endorsement, the specific
remuneration packages for each of our Directors and Key Management Personnel;

(c)

reviewing and approving the design of all share option plans, performance share plans
and/or other equity based plans;

(d)

in the case of service contracts, reviewing our Companys obligations arising in the
event of termination of the executive Directors or Key Management Personnels
contracts of service, to ensure that such contracts of service contain fair and
reasonable termination clauses which are not overly generous, with a view to being fair
and avoiding the reward of poor performance; and

(e)

approving performance targets for assessing the performance of each of the Key
Management Personnel and recommend such targets as well as employee specific
remuneration packages for each of such Key Management Personnel, for
endorsement by our Board of Directors.

Our Remuneration Committee also periodically considers and reviews remuneration


packages in order to maintain their attractiveness, to retain and motivate our Directors to
provide good stewardship of our Company and key executives to successfully manage our
Company, and to align the level and structure of remuneration with the long-term interests
and risk policies of our Company.
If a member of our Remuneration Committee has an interest in a matter being reviewed or
considered by our Remuneration Committee, he will abstain from voting on the matter.
ARRANGEMENTS OR UNDERSTANDING
None of our Directors or Executive Officers has any arrangement or understanding with any
of our Substantial Shareholders, customers or suppliers or other person pursuant to which
such Director or Executive Officer was appointed as a Director or as an Executive Officer.
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
The compensation, in remuneration bands of S$250,000, paid to our Directors and the
Executive Officers for services rendered to us in all capacities on an aggregate basis in the
financial years ended December 31, 2012 and 2013 and the estimated amount of
compensation to be paid for the current financial year ending December 31, 2014, is as
follows:

Directors
Mr. Goh Geok Khim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Handojo Santosa(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Hendrick Kolonas(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Tan Yong Nang(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
169

FY2012(1)

FY2013(2)

FY2014
Estimated(3)(4)

H
D
G

H
C
G

A
G
E
F

FY2012(1)

FY2013(2)

FY2014
Estimated(3)(4)

B
-

B
-

C
A
A
A

F
D
D
D
B

F
F
D
D
B

B
C
C
C
B

Mr. Kevin Monteiro(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Mr. Ng Quek Peng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ms. Lien Siaou-Sze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Liu Chee Ming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Officers
Mr. Bambang Budi Hendarto(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Edgar Dowse Collins(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Peter Chin Chi Kee(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ms. Christina Chua Sook Ping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Jasper Tan Kai Loon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes:
(1)
Based on the year end exchange rates for FY2012, which are S$1:IDR8,016.14, S$1:AUD0.7884, S$1:INR45.0232,
USD1:S$1.2216.
(2)
Based on the year end exchange rates for FY2013, which are S$1:IDR9,621.54, S$1:AUD0.8874, S$1:INR48.9118,
USD1:S$1.2624.
(3)
Based on the exchange rates as at March 31, 2014, which are S$1:IDR9,011.70, S$1:AUD0.8574, S$1:INR47.4990,
USD1:S$1.2583.
(4)
The estimated amount of remuneration excluded any bonus or profit-sharing plan or any other profit-linked agreement or
arrangement payable for the financial year ended December 31, 2014 as such bonuses are variable in nature.
(5)
Mr. Handojo Santosa receives his remuneration in a combination of IDR, USD and SGD.
(6)
Mr. Hendrick Kolonas receives his remuneration in a combination of IDR and SGD.
(7)
Mr. Tan Yong Nang receives his remuneration in a combination of USD and SGD.
(8)
Mr. Kevin Monteiro receives his remuneration in a combination of IDR and USD.
(9)
Mr. Bambang Budi Hendarto receives his remuneration in IDR.
(10) Mr. Edgar Dowse Collins receives his remuneration in a combination of AUD and USD.
(11) Mr. Peter Chin Chi Kee receives his remuneration in USD.
Remuneration bands:
A refers to remuneration below the equivalent of S$250,000.
B refers to remuneration between the equivalent of S$250,001 and S$500,000.
C refers to remuneration between the equivalent of S$500,001 and S$750,000.
D refers to remuneration between the equivalent of S$750,001 and S$1,000,000.
E refers to remuneration between the equivalent of S$1,000,001 and S$1,250,000.
F refers to remuneration between the equivalent of S$1,500,001 and S$1,750,000.
G refers to remuneration between the equivalent of S$2,250,001 and S$2,500,000.
H refers to remuneration between the equivalent of S$3,000,001 and S$3,250,000.

Compensation includes benefits in kind and any deferred compensation accrued for the
relevant financial year and payable at a later date. The estimated amount of compensation
payable in the current financial year excludes any bonus or profit-sharing plan or any other
profit-linked agreement or arrangement.
The total compensations of Mr. Handojo Santosa and Mr. Tan Yong Nang have been derived
after considering market data, to keep our compensation packages competitive and current.
Our compensation packages for Mr. Handojo Santosa and Mr. Tan Yong Nang comprise a
fixed base salary and a variable bonus component. The bonus component is measured
annually against a set of qualitative (such as strategy and leadership) and quantitative (such
as our Groups revenue and net income margin) performance indicators to determine the
amount of bonus to be paid out. This is in line with our emphasis that our Companys overall
performance (which contributes to the determination of the bonus component) is a significant
indicator of their performance. Mr. Handojo Santosas bonus component is about 20% of his
total compensation and that of Mr. Tan Yong Nangs is about 40%, reflecting the different
roles they play in our Group, Mr. Handojo Santosas role being more strategic and
consultative and Mr. Tan Yong Nangs role being more operational.
Except as set out above, as of the date of this Prospectus, our Company does not have in
place any formal bonus or profit-sharing plan or any other profit linked agreement or
arrangement with any of its employees, and bonuses are expected to be paid on a
discretionary basis.
170

PENSION AND RETIREMENT BENEFITS


Other than amounts set aside or accrued for compliance with the applicable laws of the
jurisdictions in which we operate and as disclosed in the Managements Discussion and
Analysis of Financial Condition and Results of OperationPrincipal Components of our
Combined Statement of Profit and Loss and Other Comprehensive IncomeAdministrative
Expenses, no amounts have been set aside or accrued by our Company or our subsidiaries
to provide for pension, retirement or similar benefits for our employees.
SERVICE AGREEMENTS
Our Company has entered into separate service agreements (each, a Service Agreement)
with each of our Executive Directors namely, Mr. Handojo Santosa, Mr. Tan Yong Nang and
Mr. Kevin John Monteiro. The Service Agreements will take effect from the Listing Date and
shall continue thereafter for a period of three (3) years (the Initial Term) and thereafter
continue from year to year. The Service Agreements shall be effective for the Initial Term and
may not be terminated by either party by giving notice of termination during the Initial Term.
After the expiry of the Initial Term, each Service Agreement may be terminated by either party
with six (6) months notice. Notwithstanding the foregoing, we may also forthwith terminate
their Service Agreements if they, amongst other things, are guilty of any dishonesty, gross
misconduct, or material breach of the Service Agreement, or if the Executive Director acts in a
manner that is likely to bring himself and/or any member of our Group into disrepute.
Save in respect of costs covered by their monthly transport allowance of S$1,500, the
Executive Directors will be reimbursed for all travelling, accommodation, entertainment and
other out-of-pocket expenses reasonably incurred by them in the discharge of their duties on
behalf of our Group.
Directors fees do not form part of the terms of the Service Agreements as these require the
approval of Shareholders in our Companys annual general meeting.
Save as disclosed above, there are no existing or proposed service agreements between our
Company, our subsidiaries and any of our Directors. None of our Directors has entered, or
proposes to enter, into any service agreement with our Company or any subsidiary or
subsidiary entity of our Company which provides for benefits upon termination of employment.
RESERVED SHARES
Out of the International Offer and subject to compliance with applicable laws and regulations,
up to 22,500,000 Offering Shares will be reserved for subscription by our directors,
employees and business associates and others who have contributed to the success and
development of our Group.
The Reserved Shares will be offered on the same terms as the other Offering Shares in the
International Offer. If any of the Reserved Shares are not taken up, they will be made
available to satisfy over-subscription (if any) for the Offering Shares in the International Offer
and/or the Singapore Public Offer.
Upon application by and successful allocation of these Reserved Shares to our Directors,
their respective shareholdings immediately following the completion of the Offering will be the
actual number of Offering Shares (including Reserved Shares) applied for by them and
allocated to them.
The number of Shares set aside for our Directors represent 15.2 per cent. of the aggregate
number of Reserved Shares.

171

The following table sets out the Reserved Shares allocated to our Directors:

Name of Director

Number of
Reserved
Shares(1)

Percentage of our
issued Shares
immediately after
the Offering(2)

Mr. Goh Geok Khim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


Mr. Handojo Santosa @ Kang Kiem Han . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Hendrick Kolonas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Tan Yong Nang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Kevin John Monteiro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Ng Quek Peng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ms. Lien Siaou-Sze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Liu Chee Ming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

500,000
1,500,000
500,000
625,000
300,000

0.03%
0.09%
0.03%
0.04%
0.02%

Notes:
(1)
Our Directors may also apply for additional Offering Shares under the Offering (including unsubscribed Reserved Shares).
(2)
Assuming that all our Directors take up their allocation of their respective Reserved Shares and assuming the Overallotment Option is not exercised.

172

MATERIAL INDEBTEDNESS
INDEBTEDNESS
To fund our working capital and capital expenditure requirements, we have entered into
various loan and facility agreements with various financial institutions and issued debt
securities.
The Company believes that the financial covenants / restrictions in the various loan and
facility agreements have been negotiated to ensure that our Group can carry on with its
business in the ordinary course. To ensure our Groups compliance with the bank covenants,
these are monitored by all the financial controllers of the various business segments of our
Group on a regular basis. If there is a risk of a breach of any of the covenants under such
facilities, the Chief Financial Offer and/or the corporate finance team looking after banking
relations will engage with the respective lender to obtain a waiver or relaxation of the
covenant. To the best of the Companys knowledge, there has not been any material breach
of the material banking facilities currently entered into by entities within our Group. Set forth
below is a summary of the material terms and conditions of certain of these material loans
and other material indebtedness.
US Dollar-Denominated Senior Notes Due 2018
On May 2, 2013, Comfeed Finance B.V (the Notes Issuer), a wholly-owned subsidiary of
PT Japfa, issued senior notes denominated in U.S. dollars with a nominal value of US$225
million due 2018 (the Notes). The Notes bear interest at 6.0% per annum and are
unconditionally and irrevocably guaranteed by PT Japfa and certain of its subsidiaries. The
Notes mature on May 2, 2018.
The Notes are redeemable in certain circumstances, prior to May 2, 2016, at the Notes
Issuers option, at a redemption price equal to 100% of the principal amount of the Notes
redeemed plus a premium and plus accrued and unpaid interest. In addition, in the event of a
change of control1 of the Notes Issuer, the Notes Issuer is required to make an offer to
repurchase all Notes then outstanding at a purchase price equal to 101% of their principal
amount plus accrued and unpaid interest. The Notes are also redeemable, at the option of the
Notes Issuer in the event of certain changes affecting taxes of The Netherlands or the
Republic of Indonesia (or certain other jurisdictions).
Pursuant to the terms of the Notes, PT Japfa and its subsidiaries (including the Notes Issuer)
are subject to certain financial and other covenants. Among other things, these covenants
limit PT Japfas (and, where applicable, its subsidiaries) ability to:

pay dividends, unless such dividend payments do not exceed 50% of PT Japfas
consolidated net income and meet certain other conditions;

repurchase shares of capital stock of PT Japfa or its subsidiaries and make certain other
restricted payments;

incur additional indebtedness;

issue preferred stock;

sell the capital stock of PT Japfas subsidiaries or, in the case of PT Japfas subsidiaries,
issue additional capital stock;

sell, transfer or otherwise dispose of assets;

merge or enter into an amalgamation of business with another entity;

Including the situation where any person or group who is or becomes a beneficial owner of the total voting power of the
shares of PT Japfa greater than the voting power held beneficially by Handojo Santosa and his affiliates (as contemplated
under the Notes)

173

enter into transactions with related parties (which could constitute interested person
transactions for the purposes of Chapter 9 of the Listing Manual) unless such relatedparty transactions (as they are defined in the covenant) be entered into on terms that are
fair and reasonable and that are no less favorable to PT Japfa (and, where applicable, its
subsidiaries) than those that would have been obtained in a comparable arms-length
transaction with an unrelated party;

incur liens;

enter into sale and leaseback transactions; and

engage in other businesses.

As of March 31, 2014, US$225 million was outstanding on the bonds.


Rupiah Bond
In January and February, 2012, PT Japfa issued two tranches of bonds totaling
Rp.1,500.0 billion (US$155.1 million) of Rupiah denominated bonds. The bonds mature on
January 12, 2017 and February 1, 2017, respectively, and bear interest at a rate of 9.90% per
annum. Interest is payable quarterly and principal is payable on maturity. Pursuant to the
bonds, we are subject to certain financial and restrictive covenants, including the
maintenance of certain current ratios, debt-to-equity ratios and EBITDA-to-interest ratios. As
of March 31, 2014, approximately Rp.1.5 billion (US$130.9 million) was outstanding on the
bonds.
Bank Facilities
Singapore
Credit Suisse AG, Singapore Branch (Credit Suisse)
On April 9, 2012, the Company obtained a credit facility from Credit Suisse for up to
US$25 million, which was subsequently increased to US$40 million. The facility bears interest
at a rate of 5.50% above the cost of funds per annum, and has a maturity date of April 15,
2015. The facility was most recently amended on September 24, 2013. Prior to that, the
facility was increased to US$40 million on April 11, 2013, and amended on September 2,
2013, April 30, 2013 and April 11, 2013. The purpose of the credit facility is to finance the
Companys working capital, general investments and corporate requirements. The loan is
collateralized by, inter alia, a pledge over a portion of PT Japfas shares. The terms of the
facility require the Company to use its best endeavors to ensure that no change in control of
PT Japfa occurs at any time. A change of control in the facility is defined where any person
or group of persons gains controls or directly or indirectly becomes the beneficial owner of
more than 50.1% of PT Japfas issued share capital.
Coperatieve Centrale Raiffeisen-Boerenleenbank B.A. (trading as Rabobank International),
Singapore Branch (Rabobank Singapore)
On April 10, 2014, the Company obtained a bridge loan facility from Rabobank Singapore for
up to the maximum aggregate principal amount of US$30 million, the purpose of which is to
finance our Groups working capital and general corporate requirements. Each loan utilization
under this facility shall be in the minimum amount of US$5 million (or if less, the remaining
unutilized amounts under this facility) provided that the aggregate of all loans under this
facility must not at any time exceed US$30 million. This facility was fully drawn down by the
Company on June 30, 2014. The interest rate is 3.0% per annum over the prevailing
Rabobank Singapores cost of funds for interest periods of one month. The facility matures
within nine months from the effective date or one month after the initial public offer of the
Company, whichever date is earlier, and the Company will utilize the proceeds from the initial
public offering to repay the bridge loan facility. See Use of Proceeds.
174

Under this facility, the Company has to ensure that:

its consolidated net worth to total assets in respect of any relevant period shall not to be
less than 20%,

its consolidated total debt to consolidated EBITDA in respect of any relevant period shall
not be more than the ratio of 4:1

it will continue to own more than 50% of the voting shares (whether directly or indirectly)
and maintain management control in each of PT Japfa, AIH, Jupiter Foods Pte Ltd, Japfa
Vietnam Investments Pte Ltd and any other subsidiary whose EBITDA on a consolidated
basis represents 10% or more of the consolidated EBITDA of our Group or has a paid up
share capital of at least US$35 million (or its equivalent in other currencies), and

the beneficial owners of the shareholders of the Company (which will not include
Tasburgh Limited once the Company is able to provide evidence reasonably satisfactory
to Rabobank Singapore that Tasburgh Limited is no longer a shareholder of the
Company) will continue to own more than 50% of the voting shares (whether directly or
indirectly) in the Company and maintain management control over the Company at all
times.

There are restrictions on the Companys ability to create or permit the creation of any
negative pledges over its and its related corporations assets, and restrictions on the
Companys and its related corporations (a) right to dispose its assets and (b) plans for
amalgamation, demerger, merger, consolidation or corporation reconstruction save for certain
exceptions.
On September 12, 2013, the Company obtained a term loan facility from Rabobank
Singapore for US$30 million, the purpose of which was to finance the expansion of our
Groups swine farming operations in Vietnam through the grant of shareholder loans to JCVN,
JCLA and JCBT, who are all guarantors under the facility. The term of the loan is 36 months
and will be repaid in stages, in accordance with the repayment schedule. The term loan
facility is secured by, inter alia, (a) a corporate guarantee executed by the guarantors; (b) a
mortgage of the equity interests owned by the obligors under the facility in each of the
guarantors; (c) the assignment of shareholders loan agreements between the Company and
the guarantors; and (d) a mortgage over the swine livestock owned by certain of the
guarantors in Vietnam. The Company has to ensure that it will maintain at all times (a) its
100% shareholding interests (whether directly or indirectly) in each of the guarantors, (b) at
least 85% shareholding interests (whether directly or indirectly) in Japfa Hypor Genetics
Company Limited, and (c) more than 50% shareholding interests (whether directly or
indirectly) in PT Japfa.
On December 9, 2011, Annona Pte Ltd (Annona) obtained a loan facility from Rabobank
Singapore for US$15 million, later increased to US$35 million, which is to be used for short
term working capital financing of up to 120 days to finance the purchase of feed products. The
facility limit was most recently increased on June 25, 2013 when it was increased to
US$35 million and matures on September 30, 2014. The facility limit was previously
increased on February 13, 2012 and November 6, 2012. The facility is collateralized by, inter
alia, (a) a deed of charge executed by the borrower, (b) a guarantee and indemnity executed
by the Company and (c) an insurance policy naming Rabobank Singapore, as loss payee.
Indonesia
PT Bank Central Asia Tbk (BCA)
On October 8, 2010, PT Japfa obtained a working capital loan facility from BCA for
Rp.250 billion for a term of 12 months. In October 2011, the loan amount was increased to
Rp.541 billion and the purpose was to settle PT Japfas debt to other banks through
syndicated loans coordinated by BNP Paribas Singapore. This loan is collateralized by, inter
175

alia, PT Japfas trade accounts receivable and certain of its land, building and machinery and
its subsidiary, PT Suri Tani Pemukas receivables, machineries and equipments. This facility
matures on October 20, 2015. Under this facility, PT Japfa is obliged to ensure that the
Santosa Family maintains, directly and indirectly, more than 50% of the shareholding in
PT Japfa.
On November 11, 2011, PT Vaksindo Satwa Nusantara, a subsidiary of PT Japfa, obtained
two credit facilities under deed from BCA, (a) one investment credit facility for up to
Rp.10 billion to fund PT Vaksindo Satwa Nusantaras project and (b) a local credit facility for
up to Rp.10 billion for working capital. On January 18, 2013, BCA granted a second
investment credit facility for up to Rp.15 billion to PT Vaksindo Satwa Nusantara. The facilities
are collaterized by, inter alia, land, facility, machineries and equipments of PT Vaksindo
Satwa Nusantara in Bogor. The first investment credit facility and the local credit facility
mature 72 months following the date of the first drawdown while the second investment credit
facility matures 78 months from July 1, 2013. Under this facility, PT Japfa is obliged to ensure
that the Santosa Family maintains, directly and indirectly, more than 50% of the shareholding
in PT Japfa.
PT Bank Mandiri (Persero) Tbk (Bank Mandiri)
In July 2004, PT Bintang Terang Gemilang (BTG), a subsidiary which merged into PT Japfa
in 2011, obtained a working capital loan facility from Bank Mandiri, for Rp.70 billion, which
was later increased to Rp.111 billion. The facility has a term of 12 months. This facility is
collateralized with, inter alia, trade accounts receivables, inventories and land and buildings.
In April 2011, this facility was transferred to PT Japfa following the merger.
In June 2010, PT Multiphala Agrinusa (MAG), a subsidiary which merged into PT Japfa in
2011, obtained a working capital loan (KMK) consisting of fixed loan and revolving loan
facilities from Bank Mandiri, for Rp.100 billion and Rp.50 billion, respectively, with a term of
12 months. These facilities were transferred to PT Japfa on the effective date of merger of
MAG into the Company.
On April 19, 2011, PT Japfa obtained several loan facilities from Bank Mandiri consisting of
KMK Fixed Loan (FL) with maximum loanable amount of Rp 150 billion, KMK Revolving (RL)
with maximum loanable amount of Rp 50 billion, Non Cash Loan (NCL) sublimit of Trust
Receipt (TR) with maximum loanable amount of US$2 million, and Treasury Line (TL) with
maximum loanable amount of US$5 million. PT Japfa started using the FL and RL facilities on
April 20, 2011 as working capital. These facilities were novation from MAG and BTG,
subsidiaries, which have been merged with PT Japfa on January 1, 2011.
On November 27, 2012, the KMK Fixed Loan increased to Rp 250 billion and KMK Revolving
increased to Rp 150 billion. On April 23, 2013, KMK Fixed Loan changed to KMK Mandiri Plus
Non Revolving. These loan facilities have been extended several times, the latest is until
April 23, 2015. These facilities are collateralized with, inter alia, short-term investmenttime
deposits, trade accounts receivables, inventories, breeding livestocks and certain property,
plant and equipment owned by PT Japfa.
On October 25, 2011, PT Multibreeder Adirama Indonesia Tbk (MBAI), a subsidiary which
merged into PT Japfa in 2012, obtained a KMK revolving loan facility with a maximum amount
of Rp.130 billion and a KMK revolving fixed loan facility for Rp.70 billion from Bank Mandiri,
which were used for working capital purposes. Since July 1, 2012, the effective date of
merger of MBAI into PT Japfa, these facilities have been transferred to PT Japfa. On
October 22, 2012, the limits were increased to Rp.100 billion for each facility. On
November 27, 2012, the KMK revolving fixed loan was increased to Rp.250 billion and the
KMK revolving loan was increased to Rp.150 billion. On July 24, 2014, a KMK revolving fixed
loan (tranche B) of Rp.300 billion was granted. On April 23, 2013, the KMK revolving fixed
loan was amended to a KMK Mandiri plus/non-revolving loan. Both the KMK Mandiri plus/
176

non-revolving loan and KMK revolving loan bear interest at 10.0% per annum and mature on
April 23, 2015. The KMK revolving fixed loan (tranche B) matures on June 23, 2017.
PT Bank CIMB Niaga Tbk (CIMB Niaga)
On July 21, 2010, MBAI, a subsidiary which merged into PT Japfa in 2012, obtained credit
facilities from CIMB Niaga for Rp.300 billion, which consist of a special loan transaction
(PTK), overdraft loan (PRK) and fixed loan (PT). The PTK loan bears interest at a
floating rate per annum and matures on August 24, 2014. The PRK facility limit has been
increased to Rp.100 billion and the PT facility limit has been increased to Rp.200 billion. The
PRK and PT facilities bear interest at rates of 12.0% and 10.75% respectively per annum and
mature on October 21, 2014. Since July 1, 2012, effective date of merger of MBAI into PT
Japfa, these facilities have been transferred to PT Japfa.
PT Bank Rakyat Indonesia (Persero) Tbk (BRI)
In June 2007, PT Santosa Agrindo (SA) obtained a working capital loan facility from BRI for
Rp.108 billion, which was subsequently increased to Rp.198 billion and later decreased to
Rp.98 billion. This facility is collateralized by, inter alia, trade accounts receivables,
inventories, machinery and equipment and land and buildings. The term of this loan has been
from time to time extended, most recently to September 21, 2014.
In June 2007, SA obtained a working capital loan facility from BRI for Rp.30 billion, which was
increased to Rp.144 billion and had an original term of 12 months. This facility is collateralized
by trade accounts receivable, inventories, machinery and equipment and land. The term of
this loan has been extended several times, most recently to September 21, 2014.
On October 16, 2012, AAS obtained a working capital loan facility from BRI for Rp.50 billion,
an import working capital loan facility for Rp.100 billion, a forex line facility up to US$5 million
and a bank guarantee of Rp.15 billion. They are collateralized by, inter alia, trade accounts
receivable, inventories, machinery and equipment and land. The loans bear interest at
10.50% per annum for the working capital loan facility and import working capital loan facility,
renewable at any time, and mature on October 16, 2014except for forex line facility which
matures six months after such transaction is conducted. There is a restriction on the change
of shareholding composition of AAS without the prior consent of BRI.
In May 2008, PT Japfa obtained a working capital loan facility from BRI for Rp.110 billion
which has been extended from time to time, most recently to August 7, 2014. In August 2010,
the limit was increased to Rp.270 billion. The loan is collateralized by, inter alia, accounts
receivables, land, building, inventory, machinery, site facilities and equipment owned by the
company and land, building, machinery, equipment, stable and plant owned by PT Wabin
Jayatama.
PT Bank Rabobank International Indonesia
On April 16, 2010, PT Japfa obtained a spot and forward foreign exchange facility, to
accommodate PT Japfas foreign exchange transaction or hedging requirement for up to
US$25 million. The facilities are available until August 29, 2014.
On May 31, 2011, PT So Good Food (SGF) obtained a loan facility from PT Bank Rabobank
International Indonesia which consists of an uncommitted revolving facility for up to
US$15 million for working capital purposes. This facility bears an interest rate of cost of fund
plus 2.25% per annum and is collateralized with trade accounts receivable, inventories,
machinery and land owned by the SGF and a pledge of shares over all shares in SGF owned
by Jupiter Foods Pte. Ltd., and the Company. The facility will mature on September 28, 2014.
On May 31, 2011, SGF obtained a loan facility from PT Bank Rabobank International
Indonesia which consists of 5-year committed amortizing term loan facility for up to
177

US$35 million for general corporate funding and capital expenditure. This facility will mature
on March 9, 2016 and bears an interest rate of the PT Bank Rabobank International
Indonesias cost of funds plus 2.25% per annum. This loan is collateralized by, inter alia,
SGFs trade accounts receivable, inventories, machinery and land and a pledge of shares
over all shares in SGF owned by Jupiter Foods Pte. Ltd. and the Company.
On December 3, 2013, SGF obtained a loan facility from PT Bank Rabobank International
Indonesia which consists of a 5-year committed amortizing term loan facility for up to
Rp 500,000,000,000, for general corporate funding, capital expenditures and working capital
requirement. This facility will mature on December 9, 2018 and bears an interest rate of the
PT Bank Rabobank International Indonesias cost of funds plus 2% per annum. This loan is
collateralized by, inter alia, fiducia, machinery and equipment owned by SGF, a pledge of
shares over all shares in SGF owned and corporate guarantees from the Company, Jupiter
Foods Pte. Ltd., and PT So Good Food Manufacturing.
In respect of the above facilities SGF had obtained from PT Bank Rabobank International
Indonesia, SGF had undertaken to maintain that Handojo Santosa, his siblings and each of
his and their immediate family and their respective family and family trusts shall retain directly
or indirectly more than 50.0% shareholding and controlling interest in the Company.
PT Bank DBS Indonesia (Bank DBS)
On August 12, 2010, PT Japfa and PT Suri Tani Pemuka (STP), a subsidiary of the
Company obtained Letter of Credit, Trust Receipt, and Account Payable Financing facilities
from Bank DBS for raw materials purchases up to the amount of US$20 million, with a term of
120 days. On May 5, 2011, the limit was increased to US$40 million. On November 11, 2011,
the limit was changed to Rp.360 billion. This facility bears interest at DBSs cost of funds plus
2% and has been extended until August 12, 2014.
PT Bank Pan Indonesia Tbk (Bank Panin)
On May 3, 2011, PT Japfa and STP obtained a joint borrower facility from Bank Panin which
consisted of a letter of credit sublimit and a revolving loan for up to Rp.150 billion. The facility
will mature on August 20, 2014. These facilities are collateralized with trade accounts
receivable and inventories owned by STP.
PT Bank ICBC Indonesia (Bank ICBC)
On February 25, 2013, PT Japfa and STP obtained a working capital facility from Bank ICBC
for up to Rp.130 billion, which will be used for the working capital purposes. The working
capital facility consists of (a) a fixed loan on demand facility for up to Rp.40 billion, (b) a fixed
loan on demand facility for up to Rp.40 billion and (c) fixed loan on demand for up to
Rp.50 billion. The working capital facility will mature on February 25, 2015. The facilities bear
floating interest rate of 10.75% per annum and are collateralized with trade accounts
receivable, inventory, land, building, machinery and equipment, owned by PT Japfa and STP.
China
PT Bank Mandiri (Persero) Tbk Shanghai Branch (Bank Mandiri), Rabobank Nederland
Beijing Branch and DBS Bank (China) Limited, Tianjin Branch
On December 20, 2013, Dongying AustAsia Modern Dairy Farm Co., Ltd., Taian AustAsia
Modern Dairy Farm Co., Ltd., Dongying Xianhe AustAsia Modern Dairy Farm Co., Ltd. and
Dongying Shenzhou AustAsia Modern Dairy Farm Co., Ltd., subsidiaries of the Company,
entered into a facility agreement with Bank Mandiri, Rabobank Nederland Beijing Branch and

178

DBS Bank (China) Limited, Tianjin Branch for the following facilities, each for a term of
60 months:
Lender

Facility A
(US$)
Commitment

Facility A
(RMB)
Commitment

Facility B
(US$)
Commitment

Facility B
(RMB)
Commitment

Bank Mandiri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000,000


Nil 17,000,000
Nil
DBS Bank (China) Limited, Tianjin Branch . . . . . .
Nil 185,000,000
Nil 105,000,000
Rabobank Nederland, Beijing Branch. . . . . . . . . . . . 30,000,000
Nil 17,000,000
Nil

These facilities are used for refinancing existing indebtedness, repayment of shareholder
loans where such repaid shareholder funds are applied towards funding the capital
expenditure of the farms designated by the borrowers and in respect of Dongying Shenzhou
AustAsia Modern Dairy Farm Co., Ltd., financing its capital expenditure. The facilities mature
on December 20, 2018.
In relation to the above credit facilities, no dividends or payments to shareholders may be
made unless certain financial ratios are met, including the ratio of their combined Financial
Indebtedness to their combined EBITDA is equal to or lower than 1x and the covenants
concerning incurrence of indebtedness are satisfied. It will be an event of default, among
others, if (a) the Santosa Groups ultimate shareholding in the borrowers is not less than 40%,
(b) AIH holds less than 67% of the issued share capital or equity interest of each of the
borrowers or (c) the Santosa Group (which comprises Handojo Santosa, his siblings, and
each of their family members and family trusts and its affiliates) ceases to have management
control over the borrowers and AIH or be able to give directions with respect to the operating
and financial policies of the borrowers and AIH with which the directors or other equivalent
officers of the borrowers and AIH are obliged to comply.
Australia
National Australia Bank
On September 25, 2013, Japfa Santori Australia Pty Ltd (Japfa Santori Australia) obtained
(a) a management account overdraft for AUD1.5 million and (b) a flexible rate loan for
AUD20 million from National Australia Bank Limited. The flexible rate loan for AUD20 million
was used for the acquisition of the Riveren and Inverway cattle stations located in the
Northern Territory of Australia.
The interest rate in each case is a weighted average of four different rates as they apply from
time to time (a fixed amount, a flexible maturity fixed amount, a cap amount and a range
amount) and a default rate of 15.77% as of September 2013. The flexible rate loan expires on
October 31, 2023. Both facilities are secured by (a) a floating security interest over the assets
of Japfa Santori Australia, (b) a first mortgage over Riveren Station and Inverway Station,
(c) a stock mortgage and (d) a limited guarantee and indemnity for AUD5 million from
PT Japfa.
Other Facilities
Singapore
DBS Bank
On September 12, 2012, Annona Pte Ltd obtained a bills receivable purchase facility from
DBS Bank for up to US$20 million to be used to finance the purchase of raw materials and
feed products. On January 2, 2014, the bills receivable purchase facility was increased to
US$40 million. Interest on the facility is at the London Inter-Bank Offer Rate (LIBOR), plus
2% per annum and is subject to DBS Banks right of review. The facility is collateralized by
(a) a deed of charge over assets and receivables financed by DBS Bank; (b) a deed of
assignment of the borrowers shipping instructions and sales contracts and the proceeds
thereof; and (c) a corporate guarantee executed by the Company.
179

PT Bank Mandiri (Persero) TbkSingapore Branch


On June 22, 2011, Annona obtained a loan facility from PT Bank Mandiri for US$20 million,
subsequently increased to US$60 million on July 5, 2013 and US$80 million on June 26,
2014, which is to be used for issuing irrevocable sight import letters of credit and trust receipt
financing for up to 90 days. The rate of interest ranges from 1 16% per month to 1.5% per
annum over the US$ cost of funds and/or LIBOR, depending on the type of financing and
matures in July 2015, subject to periodic review. The facility is secured by, inter alia, (a) a
corporate guarantee executed by the Company for US$80 million; (b) the accounts
receivables of Annona; and (c) a charge of deposit for a cash margin of 7.5% of the value of
the relevant import letter of credit/non-letter of credit/purchase documents and/or trust
receipts transacted or financed by PT Bank Mandiri.
Indonesia
PT Bank Permata Tbk (Bank Permata)
On August 13, 2010, IAG obtained an overdraft facility from Bank Permata for Rp.5 billion, a
revolving loan facility for Rp.40 billion and a letter of credit facility for US$1 million. These
facilities are used for working capital purposes and mature on August 13, 2013. In November
2011, the overdraft facility was increased to Rp.10 billion and the revolving loan was
increased to Rp.50 billion. The term of the facilities were extended to August 13, 2014, with
the inclusion of two term loans for Rp.45 billion and Rp.40 billion, respectively. These facilities
are collateralized by, inter alia, trade accounts receivables, inventories, machinery and
equipment and land.
In relation to all of the above credit facilities, IAG will have to ensure that the percentage of
PT Japfas and Salim Groups shareholding in IAG to be at least 50% each, directly or
indirectly.
PT Bank Central Asia Tbk (Jakarta branch)
On November 20, 2010, PT Japfa obtained a loan investment credit facility from PT Bank
Central Asia Tbk (Jakarta branch) for up to Rp.750 billion which was used to fully pay the
restructured debt to BNP Paribas, Singapore. The value of the restructured debt was
Rp.709 billion, and the balance of Rp.41 billion was used to increase the working capital
facility. This loan will mature on November 20, 2015 and bears interest rate of JIBOR +
1% per annum. This loan is collateralized with trade accounts receivable, machinery, land and
building.
UNDERTAKINGS
Each of Mr. Handojo Santosa and Ms. Rachel Anastasia Kolonas has undertaken to notify the
Company as soon as he or she becomes aware, of any share pledging arrangements relating
to the Shares held by the Scuderia Trust and the Capital Two Trust (directly and/or indirectly)
respectively and of any event which may result in a breach of the provisions under the
banking facilities where the shareholdings of the Controlling Shareholders are referenced.

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JAPFA LTD. SHARE-BASED INCENTIVES


AIH had implemented a share option scheme known as the AustAsia Subsidiaries
Employee Share Option Scheme (the AIH Share Option Scheme) which came into
effect on January 1, 2010 and, in conjunction with our listing on the Official List of the
SGX-ST, we have also implemented a performance share plan known as the Japfa
Performance Share Plan (the PSP). The rules of the AIH Share Option Scheme and our
PSP are set out in Appendix H and Appendix I of this Prospectus, respectively. These rules
comply with the requirements set out in the Listing Manual.
Prior to the preparation of our listing on the Official List of the SGX-ST, share-based
incentives were only available to employees of certain subsidiaries of AIH. In connection with
our listing on the Official List of the SGX-ST and so as to extend share-based incentives to
employees of our Group, we implemented the PSP. It is intended that employees of the AIH
ESOS Group participate in the AIH Share Option Scheme only, save as determined by the
Remuneration Committee on a case-by-case basis.
JAPFA PERFORMANCE SHARE PLAN
On July 23, 2014, our Shareholders approved a share scheme known as the Japfa
Performance Share Plan, the rules of which are set out in Appendix I of this Prospectus. The
PSP complies with the relevant rules as set out in Chapter 8 of the Listing Manual.
Capitalized terms as used throughout this section, unless otherwise defined, shall bear the
meanings as defined in Appendix IRules of the Japfa Performance Share Plan of this
Prospectus.
Objectives of the PSP
The objectives of the PSP are as follows:
(a)

foster an ownership culture within our Group which aligns the interests of our
employees with the interests of shareholders;

(b)

motivate participants of the PSP to achieve our key financial and operational goals;
and

(c)

make total employee remuneration sufficiently competitive to recruit and retain staff
having skills that are commensurate with our ambition to become a world-class
company.

Summary of PSP
A summary of the rules of the PSP is set out as follows:
(1)

Participants
Executive Directors and employees of our Group who have attained the age of twentyone (21) years and hold such rank as may be designated by our Remuneration
Committee from time to time shall be eligible to participate in the PSP.
Controlling Shareholders of our Company or Associates of such Controlling
Shareholders who meet the criteria above are also eligible to participate in the PSP if
their participation and awards are approved by independent Shareholders in separate
resolutions for each such person and for each such award.
The selection of a participant and the number of Shares which are the subject of each
award to be granted to a participant in accordance with the PSP shall be determined at
the absolute discretion of our Remuneration Committee, which shall take into account
criteria such as his rank, job performance and potential for future development, his
181

contribution to the success and development of our Group and, if applicable, the extent
of effort to achieve the performance target(s) within the performance period.
(2)

Administration
The PSP shall be administered by the Remuneration Committee with such powers and
duties conferred to it by the Board. A member of the Remuneration Committee who is
also a participant of the PSP must not be involved in its deliberation in respect of the
award granted or to be granted to him.

(3)

Size of PSP
The aggregate number of Shares which may be issued or transferred pursuant to
awards granted under the PSP, when aggregated with the aggregate number of
Shares over which options or awards are granted under any other share option
schemes or share plans of our Company, shall not exceed 15% of the total number of
issued Shares (excluding Shares held by our Company as treasury shares) from time
to time.

(4)

Maximum entitlements
Subject to the following, the aggregate number of Shares which may be issued or
transferred pursuant to awards granted under the PSP shall be determined by the
Remuneration Committee:

(5)

(a)

The aggregate number of Shares which may be issued or transferred pursuant


to Awards under the Plan to Participants who are Controlling Shareholders and
their Associates shall not exceed 25% of the Shares available under the Plan;

(b)

The number of Shares which may be issued or transferred pursuant to Awards


under the Plan to each Participant who is a Controlling Shareholder or his
Associate shall not exceed 10% of the Shares available under the Plan

Awards
Awards represent the right of a participant to receive fully paid Shares free of charge,
provided that certain prescribed performance targets (if any) are met and upon expiry
of the prescribed performance period.
Shares which are allotted and issued or transferred to a participant pursuant to the
release of an award shall not be transferred, charged, assigned, pledged or otherwise
disposed of, in whole or in part, during a specified period (as prescribed by our
Remuneration Committee in the award letter), except to the extent approved by our
Remuneration Committee.

(6)

Details of Awards
Our Remuneration Committee shall decide, in relation to each award to be granted to
a participant:
(a)

the date on which the award is to be granted;

(b)

the number of Shares which are the subject of the award;

(c)

the performance target(s) and the performance period during which such
performance target(s) are to be satisfied, if any;

(d)

the extent to which Shares, which are the subject of that award, shall be
released on each prescribed performance target(s) being satisfied (whether
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fully or partially) or exceeded or not being satisfied, as the case may be, at the
end of the performance period; and
(e)
(7)

any other condition which our Remuneration Committee may determine in


relation to that award.

Timing of Awards
While our Remuneration Committee has the discretion to grant awards at any time in
the year, it is currently anticipated that awards would in general be made once a year.
An award letter confirming the award and specifying, inter alia, the number of Shares
which are the subject of the award, the prescribed performance target(s), the
performance period during which the prescribed performance target(s) are to be
attained or fulfilled and the schedule setting out the extent to which Shares will be
released on satisfaction of the prescribed performance target(s), will be sent to each
participant as soon as reasonably practicable after the making of an award.

(8)

Vesting of Awards
Subject to applicable law, our Company will deliver Shares to participants upon vesting
of their awards by way of either (i) an issue of new Shares; or (ii) a transfer of Shares
then held by our Company in treasury.
In determining whether to issue new Shares to participants upon vesting of their
awards, our Company will take into account factors such as (but not limited to) the
number of Shares to be delivered, the prevailing market price of the Shares and the
cost to our Company of issuing new Shares or delivering existing Shares.
The financial effects of the above methods are discussed below.

(9)

Termination of Awards
Special provisions in the rules of the PSP dealing with the lapse or earlier vesting of
awards apply in circumstances which include the termination of the participants
employment, the bankruptcy of the participant and the winding-up of the Company.

(10)

Rights of Shares arising


New Shares allotted and issued and existing Shares procured by our Company for
transfer on the release of an award shall be eligible for all entitlements, including
dividends or other distributions declared or recommended in respect of the then
existing Shares, the record date for which is on or after the relevant date of issue or,
as the case may be, delivery, and shall in all other respects rank pari passu with other
existing Shares then in issue.

(11)

Duration of the PSP


The PSP shall continue in force at the discretion of our Remuneration Committee,
subject to a maximum period of 10 years commencing on the date on which the PSP is
adopted by our Company in a general meeting, provided always that the PSP may
continue beyond the above-stipulated period with the approval of Shareholders in a
general meeting and of any relevant authorities which may then be required.
Notwithstanding the expiry or termination of the PSP, any awards made to participants
prior to such expiry or termination will continue to remain valid.

(12)

Abstention from voting


Shareholders who are eligible to participate in the PSP are to abstain from voting on
any shareholders resolution relating to the PSP and should not accept nominations as
183

proxy or otherwise for voting unless specific instructions have been given in the proxy
form on how the vote is to be cast.
Disclosures in Annual Reports
Details of, among other things, the number of Shares comprised in awards and the number of
Shares comprised in award which have vested will be disclosed in our annual reports.
Financial Effects of the PSP
The PSP is considered a share-based payment that falls under FRS 102 where participants
will receive Shares and the awards would be accounted for as equity-settled share-based
transactions, as described in the following paragraphs.
The fair value of employee services received in exchange for the grant of the awards would
be recognized as a charge to the income statement over the period between the grant date
and the vesting date of an award. The fair value per share of the awards granted will be
determined using an option pricing model. The significant inputs into the option pricing model
will include, inter alia, the share price as at the date of grant of the award, the risk-free interest
rate, the vesting period, volatility of the share and dividend yield. The total amount of the
charge over the vesting period is determined by reference to the fair value of each award
granted at the grant date and the number of Shares vested at the vesting date, with a
corresponding credit to the reserve account. Before the end of the vesting period, at each
accounting year end, the estimate of the number of awards that are expected to vest by the
vesting date is revised, and the impact of the revised estimate is recognized in the income
statement with a corresponding adjustment to the reserve account. After the vesting date, no
adjustment to the charge to the income statement is made.
The amount charged to the income statement also depends on whether or not the
performance target attached to an award is measured by reference to the market price of the
Shares. This is known as a market condition. If the performance target is a market condition,
the probability of the performance target being met is taken into account in estimating the fair
value of the award granted at the grant date, and no adjustments to the amounts charged to
the income statement are made whether or not the market condition is met. However, if the
performance target is not a market condition, the fair value per share of the awards granted at
the grant date is used to compute the amount to be charged to the income statement at each
accounting date, based on an assessment by our Chief Financial Officer at that date of
whether the non-market conditions would be met to enable the awards to vest. Thus, where
the vesting conditions do not include a market condition, there would be no cumulative charge
to the income statement if the awards do not ultimately vest.
The following sets out the financial effects of the PSP.
(a)

Share capital
The PSP will result in an increase in our Companys issued share capital when new
Shares are issued to participants. The number of new Shares issued will depend on,
inter alia, the size of the awards granted under the PSP. In any case, the PSP
provides that the number of Shares to be issued or transferred under the PSP, when
aggregated with the aggregate number of Shares over which options are granted
under any other share option schemes of our Company, will be subject to the
maximum limit of 15% of our Companys total number of issued Shares (excluding
Shares held by our Company as treasury shares) from time to time. If instead of
issuing new Shares to participants, existing Shares are purchased for delivery to
participants, the PSP will have no impact on our Companys issued share capital.

184

(b)

NTA
As described in paragraph (c) below on EPS, the PSP is likely to result in a charge to
our Companys income statement over the period from the grant date to the vesting
date of the awards. The amount of the charge will be computed in accordance with
FRS 102. When new Shares are issued under the PSP, there would be no effect on
the NTA due to the offsetting effect of expenses recognized and the increase in share
capital. However, if instead of issuing new Shares to participants, existing Shares are
purchased for delivery to participants, the NTA would be impacted by the cost of the
Shares purchased. It should be noted that the delivery of Shares to participants under
the PSP will generally be contingent upon the eligible participants meeting prescribed
performance targets and conditions.

(c)

EPS
The PSP is likely to result in a charge to earnings over the period from the grant date
to the vesting date, computed in accordance with FRS 102.
It should again be noted that the delivery of Shares to participants of the PSP will
generally be contingent upon the participants meeting the prescribed performance
targets and conditions.

(d)

Dilutive Impact
The issuance of new Shares under the PSP will have a dilutive impact on our
consolidated EPS.

AUSTASIA SUBSIDIARIES EMPLOYEE SHARE OPTION SCHEME


Our Subsidiary, AIH, has implemented a share option scheme known as the AustAsia
Subsidiaries Employee Share Option Scheme, which came into effect on January 1, 2010 and
the rules of which are set out in Appendix H of this Prospectus. The AIH Share Option
Scheme complies with the relevant rules as set out in Chapter 8 of the Listing Manual.
The AIH Share Option Scheme will provide eligible participants with an opportunity to
participate in the equity of AustAsia Investment Holdings Pte. Ltd. (AIH) and to motivate
them towards better performance through increased dedication and loyalty. The AIH Share
Option Scheme, which forms an integral and important component of our employee
compensation plan, is designed primarily to reward and retain the employees of subsidiaries
of AIH from time to time (AIH ESOS Group).
As at the Latest Practicable Date, options to subscribe for 1,690,000 ordinary shares in the
capital of AIH have been granted under the AIH Share Option Scheme to 40 participants.
Capitalized terms as used throughout this section, unless otherwise defined, shall bear the
meanings as defined in Appendix HRules of the AustAsia Subsidiaries Employee Share
Option Scheme of this Prospectus.
Objectives of the AIH Share Option Scheme
The objectives of the AIH Share Option Scheme are as follows:
(a)

to provide an opportunity for participants who have met performance targets to be


remunerated by an equity stake in AIH in addition to salary and cash bonuses;

(b)

to make employee remuneration more effective to reward and motivate participants


towards clearly outlined targets that promote the longer term growth strategy of AIH
such as AIHs initial public offering and listing on a recognized stock exchange; and
185

(c)

to incentivize participants who are able to contribute to drive the growth and
profitability of AIH.

Summary of the AIH Share Option Scheme


A summary of the rules of the AIH Share Option Scheme is set forth as follows:
(1)

Participants
Under the rules of the AIH Share Option Scheme, full-time employees of the AIH
ESOS Group are eligible to participate in the AIH Share Option Scheme (Eligible
Participants) at the absolute discretion of the committee which was set up to
administer the AIH Share Option Scheme (the Committee).
The Committee shall be entitled, in their sole and absolute discretion, to select persons
other than those listed above as Eligible Participants, taking into account criteria such
as rank, job performance, creativity, innovativeness, entrepreneurship, years of service
and potential for future development, his contribution to the development and
profitability of the AIH ESOS Group, and the extent of effort and resourcefulness
required to achieve a positive result for one or more members of the AIH ESOS Group
within the performance period.
Persons who are Controlling Shareholders or Associates of a Controlling Shareholder
are not eligible to participate in the AIH Share Option Scheme.

(2)

Administration
The AIH Share Option Scheme shall be administered by the Committee with such
powers and duties conferred on it by the Board.
The Committee will comprise of 2 to 5 members duly authorized and nominated by the
directors of AIH, from time to time, to administer the AIH Share Option Scheme. A
member of the Committee who is also a participant of the AIH Share Option Scheme
must not be involved in its deliberation in respect of AIH Options granted or to be
granted to him.

(3)

Size of the AIH Share Option Scheme


The aggregate number of ordinary shares in the capital of AIH (AIH Shares) over
which the Committee may grant AIH Options on any date, when added to the number
of AIH Shares issued and issuable in respect of all AIH Options granted under the AIH
Share Option Scheme, and all AIH Shares issued under any other share incentive
scheme implemented by AIH for the time being in force, shall not exceed 2.0% of the
issued AIH Shares on the day immediately preceding the relevant date of grant.

(4)

Maximum entitlements
The aggregate number of AIH Shares to which a participant under the AIH Share
Option Scheme is entitled shall be determined at the absolute discretion of the
Committee.

(5)

Exercise period and exercise price


The AIH Options that are granted under the AIH Share Option Scheme shall vest over
a period of four years of continuous full-time employment from the date of the grant (or
such earlier date as the Committee may determine in its sole and absolute discretion)
in four equal installments, and may only be exercised upon the full satisfaction of the
dual conditions that:
(a)

the Option is fully vested (Vesting Condition); and


186

(b)

AIH has carried out an initial public offering and listing of the AIHs shares on
any internationally recognized stock exchange on or before August 12, 2017 or
such other dates as the Directors may, with the consent of shareholders of the
AIH, approve in writing (IPO Condition).

The exercise price of each AIH Option shall be determined by the Committee for each
financial year, in the Committees sole and absolute discretion, and shall initially be
US$1.25 per AIH Share.
(6)

Grant of options
Under the rules of the AIH Share Option Scheme, there are no fixed periods for the
grant of AIH Options. As such, offers for the grant of AIH Options may be made at any
time from time to time at the discretion of the Committee. However, the Committee will
generally grant AIH Options once a year in February. In addition, no AIH Option shall
be granted during the period of 30 days immediately preceding the date of
announcement of AIHs (in the event it is listed) or our Companys interim or final
results (as the case may be).
In addition, in the event that an announcement on any matter of an exceptional nature
involving unpublished price sensitive information is imminent, offers may only be made
after the second day on which the SGX-ST and, where applicable, such internationally
recognized stock exchange on which the AIH is listed, is open for trading in securities,
from the date on which the aforesaid announcement is made.

(7)

Acceptance of Options
The grant of AIH Options shall be accepted within 30 days from the date of offer.
Offers of AIH Options made to grantees, if not accepted before the closing date, will
lapse. For the avoidance of doubt, each AIH Option which has been accepted shall
vest from the date of grant of the AIH Option.

(8)

Termination of Options
Special provisions in the rules of the AIH Share Option Scheme deal with the lapse or
earlier exercise of AIH Options in circumstances which include the termination of the
participants employment from the AIH Group, the bankruptcy of the participant and the
winding-up of AIH.

(9)

Rights of AIH Shares arising


AIH Shares arising from the exercise of AIH Options are subject to the provisions of
the Memorandum and Articles of AIH. The AIH Shares so allotted will upon issue rank
pari passu in all respects with the then-existing issued AIH Shares, save for any
dividend, rights, allotments or distributions, the record date (Record Date) for which
is prior to the relevant date of issue of the new shares issued pursuant to exercise of
the AIH Option. Record Date means the date as at the close of business (or such
other time as may be prescribed by AIH) on which shareholders of AIH must be
registered in order to participate in any dividends, rights, allotments or other
distributions (as the case may be).

(10)

Duration of the AIH Share Option Scheme


The AIH Share Option Scheme shall continue in operation for a maximum duration of
10 years and may be continued for any further period thereafter with the approval of
AIHs Shareholders by ordinary resolution in general meeting and of any relevant
authorities which may then be required.

187

(11)

Abstention from voting


Shareholder of AIH and Shareholders who are eligible to participate in the AIH Share
Option Scheme are to abstain from voting on any shareholders resolution of AIH or
the Company relating to the AIH Share Option Scheme and should not accept
nominations as proxy or otherwise for voting unless specific instructions have been
given in the proxy form on how the vote is to be cast.

Disclosure in Annual Reports


Details of, among other things, the number of AIH Options granted, the number of AIH
Options exercised and the exercise price will be disclosed in our annual reports.
Financial Effects of the AIH Share Option Scheme
Any AIH Option granted under the AIH Share Option Scheme will have a fair value. Where
such AIH Options are granted at a consideration which is less than their fair value, there will
be a cost to AIH and also our Company, the amount of which will depend on whether the AIH
Options are granted at the valuation price of such options or at a discount.
The cost to AIH / our Company of granting AIH Options pursuant to the AIH Share Option
Scheme would be as follows:
(a)

The exercise of an AIH Option at a discounted exercise price would translate into a
reduction of the proceeds from the exercise of such an AIH Option, as compared to the
proceeds that AIH would have received from such exercise had the exercise been
made at the prevailing valuation price of the AIH Shares. Such reduction of the
exercise proceeds would represent a monetary loss to AIH / our Company;

(b)

As the monetary cost of granting AIH Options with a discounted exercise price is borne
by AIH, our earnings would effectively be reduced by an amount corresponding to the
reduced interest earnings that AIH would have received from the difference in
proceeds from the exercise price with no discount compared to the discounted
exercise price. Such reduction would, accordingly, result in the dilution of our earnings
per Share.

(c)

The issue of new AIH Shares upon the exercise of AIH Options granted pursuant to
the AIH Share Option Scheme will have the effect of increasing AIH / our Companys
consolidated NTA by the aggregate exercise price of the new AIH Shares issued. On a
per AIH Share basis, the effect would be accretive if the exercise price is above the
NTA per AIH Share but dilutive otherwise.

(d)

The grant of AIH Options under the AIH Share Option Scheme will have an impact on
our Companys reported profit because under the Singapore Financial Reporting
Standards (SFRS), share-based payment requires the recognition of an expense in
respect of Options granted under the AIH Share Option Scheme. The expense will be
based on the fair value of the Options at the date of grant (as determined by the
option-pricing model) and will be recognized over the vesting period. The requirement
to recognize an expense in respect of options granted to employees is set out in
FRS102.

It should be noted that the financial effects discussed in (a), (b) and (c) above would materialize
only upon the exercise of the relevant AIH Options. The cost of granting AIH Options discussed
in (d) would be recognized in the financial statements even if the AIH Options are not exercised
in (d). Measured against these costs would be the desirable effect of the AIH Share Option
Scheme in attracting, recruiting, retaining and motivating directors and employees which could,
in the long term, yield greater returns for AIH and our Shareholders.
188

As each AIH Options are granted at zero consideration, there will be a cost to AIH (in that AIH
will receive from the participant upon the grant of the AIH Option to him, a consideration that
is less than the fair value of the AIH Option).
The cost to AIH / our Company in granting an AIH Option would vary depending on the
number of AIH Options granted pursuant to the AIH Share Option Scheme, whether these
AIH Options are granted at valuation prices or at a discount and the validity period of the AIH
Options. Generally a greater discount and a longer validity period for an AIH Option will result
in a higher potential cost to AIH / our Company. If such costs were to be recognized in
accordance with FRS102, it would have to be charged to AIH / our Companys profit and loss
account over the vesting period.
The issuance of new AIH Shares under the AIH Share Option Scheme will have a dilutive
impact on the consolidated EPS of AIH and our Company.

189

SHARE CAPITAL AND SHAREHOLDERS


Share Capital of our Company
Our Company (Registration No. 200819599W) was incorporated in Singapore on October 8,
2008 under the Singapore Companies Act as a private company limited by shares under the
name Malvolia Pte. Ltd.. On January 18, 2013, our Company changed its name to Japfa
Holdings Pte. Ltd. and subsequently to Japfa Pte. Ltd. on February 4, 2014. We converted
into a public company limited by shares and changed our name to Japfa Ltd. on July 18,
2014.
As of the date of incorporation, our issued and paid-up share capital was S$1.00 comprising
one ordinary share. As of the Latest Practicable Date, our issued and paid-up ordinary share
capital was S$958,935,123 comprising 493,156,797 Shares. As at the date of this
Prospectus, our issued and paid-up ordinary share capital was S$958,935,123 comprising
1,479,470,391 Shares (after adjusting for the Share Split). Upon the allotment of the New
Shares which are part of the subject of the Offering (and assuming the Over-Allotment Option
is not exercised), the resultant issued and paid-up capital of our Company will be increased to
S$1,157,335,123 comprising 1,727,470,391 Shares.
Our Shareholders approved, among other things, by way of written resolutions on July 9,
2014, the following:
(a)

the conversion of our Company to a public limited company and the change of our
name to Japfa Ltd.; and

(b)

the adoption of a new set of Articles of Association.

At an Extraordinary General Meeting held on July 23, 2014, our Shareholders approved,
among other things, the following:
(a)

the authorization to our Directors to issue Shares and offer the same to such persons,
in connection with the Offering (including the Additional Shares) upon such terms and
conditions and to such persons as the Directors may think fit for the benefit of our
Company;

(b)

the authorization to our Directors to:


(i)

(A) issue Shares whether by way of rights, bonus or otherwise; and/or


(B) make or grant offers, agreements or options (collectively, Instruments)
that might or would require Shares to be issued, including but not limited to
the creation and issue of (as well as adjustments to) warrants, debentures
or other instruments convertible into Shares,
at any time and upon such terms and conditions and for such purposes and to
such person(s) as the Directors may in their absolute discretion deem fit; and

(ii)

(notwithstanding such authority may have ceased to be in force) issue Shares


in pursuance of any Instrument made or granted by our Directors while such
authority was in force,

provided that:
(1)

the aggregate number of Shares issued pursuant to such authority (including


Shares issued in pursuance to any Instruments made or granted pursuant to
this resolution), does not exceed 50 per cent. of the total number of issued
Shares excluding treasury Shares (as calculated in accordance with subparagraph (2) below), of which the aggregate number of shares to be issued
other than on a pro rata basis to Shareholders (including Shares to be issued in
pursuant of Instruments made or granted pursuant to such authority) does not
190

exceed 20 per cent. of the total number of issued Shares excluding treasury
Shares (as calculated in accordance with sub-paragraph (2) below);
(2)

(subject to such manner of calculation as may be prescribed by the SGX-ST)


for the purpose of determining the aggregate number of Shares that may be
issued under sub-paragraph (1) above, the percentage of issued shares shall
be based on the post Offering issued share capital of our Company immediately
following the close of the Offering (excluding treasury shares), after adjusting
for:
(aa)

new Shares arising from the conversion or exercise of any convertible


securities or share options or vesting of share awards which are
outstanding or subsisting at the time such authority is given; and

(bb)

any subsequent bonus issue, consolidation or subdivision of Shares;

(3)

in exercising the authority conferred by such authority, our Company shall


comply with the provisions of the Listing Manual for the time being in force
(unless such compliance has been waived by the SGX-ST) and the Articles of
Association; and

(4)

(unless revoked or varied by our Company in general meeting) such authority


shall continue in force until the conclusion of the next annual general meeting of
our Company or the date by which the next annual general meeting of our
Company is required by law to be held, whichever is the earlier.

At an Extraordinary General Meeting held on July 31, 2014, our Shareholders approved,
among other things, the sub-division of each ordinary share in the capital of our Company into
three Shares (the Share Spilt).

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192

Substantial Shareholders
Rangi Management
Limited(2)(4)(6) . . . . . . . . . . . . . . . . .
Fusion Investment Holdings
Limited(4)(6) . . . . . . . . . . . . . . . . . . .
Tasburgh Limited(2)(5)(6) . . . . . . .
Tallowe Services Inc(2) . . . . . . . .
Morze International
Limited(7) . . . . . . . . . . . . . . . . . . . . .
Coutts & Co Trustees
(Jersey) Limited(5)(6)(7)(8) . . . .

Directors(1)
Mr. Goh Geok Khim . . . . . . . . . . .
Mr. Handojo Santosa @
Kang Kiem Han(2)(6) . . . . . . . . .
Mr. Hendrick Kolonas . . . . . . . . .
Mr. Tan Yong Nang(3) . . . . . . . . .
Mr. Kevin Monteiro . . . . . . . . . . . .
Ms. Lien Siaou-Sze . . . . . . . . . . .
Mr. Liu Chee Ming . . . . . . . . . . . .
Mr. Ng Quek Peng . . . . . . . . . . . .

Name

8.56
5.47

928,368,240 62.75

- 1,337,609,700 90.41

282,527,085 19.10

126,714,375
81,000,000

928,368,240 62.75

- 1,136,082,615 76.79
60,860,691 4.11
-

Shares Owned as of the Latest Practicable Date


(adjusted for the Share Split)
Direct Interest
Deemed Interest
No. of Shares
%
No. of Shares
%

7.34
4.69

928,368,240 53.74
-

- 1,337,609,700 77.43

282,527,085 16.35

126,714,375
81,000,000

- 1,136,082,615 65.77
60,860,691 3.52
-

928,368,240 53.74

7.18
4.59

928,368,240 52.61
-

- 1,337,609,700 75.80

282,527,085 16.01

126,714,375
81,000,000

- 1,136,082,615 64.38
60,860,691 3.45
-

928,368,240 52.61

Shares Owned Immediately After Completion of the Offering


(Assuming the Over-allotment Option is not
(Assuming the Over-allotment Option
exercised)
is fully exercised)
Direct Interest
Deemed Interest
Direct Interest
Deemed Interest
No. of Shares
%
No. of Shares
%
No. of Shares
%
No. of Shares
%

Save as disclosed below, there are no other relationships among our Substantial Shareholders.

Percentage ownership is based on 1,479,470,391 Shares outstanding as of the Latest Practicable Date (as adjusted for the Share Split),
1,727,470,391 Shares (assuming the Over-allotment Option is not exercised) and 1,764,670,391 Shares (assuming the Over-allotment Option is
fully exercised) outstanding immediately after completion of the Offering.

The table below sets out the shareholdings of each Substantial Shareholder, each Director (including our Chief Executive Officer) who has an
interest in our Shares as at the Latest Practicable Date and immediately after completion of the Offering. The Shares held by our Directors
(including the Chief Executive Officer) and Substantial Shareholders will carry the same voting rights as the Offering Shares.

Ownership Structure

193

4.11
100

60,860,691

1,479,470,391

282,527,085 19.10

- 1,055,082,615 71.31
- 282,527,085 19.10

3.52

282,527,085 16.35

- 1,055,082,615 61.08
- 282,527,085 16.35

248,000,000 14.36
1,727,470,391 100

60,860,691

3.45

282,527,085 16.01

- 1,055,082,615 59.79
- 282,527,085 16.01

285,200,000 16.16
1,764,670,391 100

60,860,691

Shares Owned Immediately After Completion of the Offering


(Assuming the Over-allotment Option is not
(Assuming the Over-allotment Option
exercised)
is fully exercised)
Direct Interest
Deemed Interest
Direct Interest
Deemed Interest
No. of Shares
%
No. of Shares
%
No. of Shares
%
No. of Shares
%

Notes:
(1)
Not including any Reserved Shares allocated to the Directors.
(2)
Mr. Handojo Santosa is the settlor of the Scuderia Trust. Under the terms of the Scuderia Trust, he is entitled, as an investment power holder, to direct the trustee of the Scuderia Trust to procure to
the best of its ability that the directors of Fusion Investment Holdings Limited and Tasburgh Limited act in accordance with his instructions in relation to the investments of the Scuderia Trust. See
Note (6) below. As the sole shareholder of Rangi Management Limited, Fusion Investment Holdings Limited is entitled to determine the composition of the board of directors of Rangi Management
Limited. Accordingly, Mr. Handojo Santosa can control the exercise of the rights of the shares held by Fusion Investment Holdings Limited in Rangi Management Limited and through the board of
directors appointed by Fusion Investment Holdings Limited, control the exercise of the rights of the Shares held by Rangi Management Limited under the Scuderia Trust. By virtue of Section 4 of the
SFA, Mr. Handojo Santosa is deemed to have an interest in the Shares held by Rangi Management Limited and Tasburgh Limited. The shares of Tallowe Services Inc are held by Magnus
Nominees Limited and Fidelis Nominees Limited as bare trustees for Mr. Handojo Santosa. By virtue of Section 4 of the SFA, Mr. Handojo Santosa is also deemed to have an interest in the Shares
held by Tallowe Services Inc. Mr. Handojo Santosa is also the brother-in-law of Mr. Hendrick Kolonas.
(3)
Mr. Tan Yong Nang holds the entire issued and paid-up capital of Great Alpha Investments Limited. By virtue of Section 4 of the SFA, Mr. Tan is deemed to have an interest in the Shares held by
Great Alpha Investments Limited.
(4)
Fusion Investment Holdings Limited holds the entire issued and paid-up capital of Rangi Management Limited. By virtue of Section 4 of the SFA, Fusion Investment Holdings Limited is deemed to
have an interest in the Shares held by Rangi Management Limited.
(5)
The shares in each of Fusion Investment Holdings Limited, Tasburgh Limited and Morze International Limited are collectively held by Magnus Nominees Limited and Fidelis Nominees Limited as
bare trustees on trust for their sole shareholder, Coutts & Co Trustees (Jersey) Limited, as trustee of the Scuderia Trust and the Capital Two Trust. By virtue of Section 4 of the SFA, Coutts & Co
Trustees (Jersey) Limited is deemed to have an interest in the Shares held by Rangi Management Limited, Tasburgh Limited and Morze International Limited. Coutts & Co Trustees (Jersey) Limited
is a professional trustee and part of The Royal Bank of Scotland Group.
(6)
Coutts & Co Trustees (Jersey) Limited is the trustee of the Scuderia Trust which is a reserved power discretionary trust. The Shares held by Rangi Management Limited and Tasburgh Limited are
assets of the Scuderia Trust. The settlor of Scuderia Trust is Mr. Handojo Santosa. The beneficiaries of the Scuderia Trust are Mr. Handojo Santosas spouse (Farida Gustimego Santosa), children

Others
Great Alpha Investments
Limited(3) . . . . . . . . . . . . . . . . . . . . .
Public (including
employees) . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Scuderia Trust(6) . . . . . . . . . . . . . . .
Capital Two Trust(7) . . . . . . . . . . .
Rachel Anastasia
Kolonas(7)(9) . . . . . . . . . . . . . . . . . .

Name

Shares Owned as of the Latest Practicable Date


(adjusted for the Share Split)
Direct Interest
Deemed Interest
No. of Shares
%
No. of Shares
%

194

(9)

(8)

(7)

(Renaldo Santosa, Gabriella Santosa, Mikael Santosa and Raffaela Santosa) and remoter issue. Pursuant to Section 4 of the SFA, the beneficiaries of the Scuderia Trust are deemed to have an
interest in the Shares held by Rangi Management Limited and Tasburgh Limited.
Coutts & Co Trustees (Jersey) Limited is the trustee of the Capital Two Trust which is a reserved power discretionary trust. The Shares held by Morze International Limited are assets of the Capital
Two Trust. The settlor of Capital Two Trust is Ms. Rachel Anastasia Kolonas, the daughter of Mr. Hendrick Kolonas. The beneficiaries of the Capital Two Trust are Mr. Hendrick Kolonas spouse
(Mieke Santosa), children (Aldrian Irvan Kolonas, Marcellina Claudia Kolonas and Rachel Anastasia Kolonas) and issue and remoter issue of Aldrian Irvan Kolonas, Marcellina Claudia Kolonas and
Rachel Anastasia Kolonas. Pursuant to Section 4 of the SFA, the beneficiaries of the Capital Two Trust are deemed to have an interest in the Shares held by Morze International Limited.
The Royal Bank of Scotland Group plc is the ultimate holding company of Coutts & Co Trustees (Jersey) Limited, through its wholly-owned subsidiaries, The Royal Bank of Scotland plc, National
Westminster Bank plc, RBSG International (Holdings) Limited, National Westminster International Holdings BV and The Royal Bank of Scotland International (Holdings) Limited. By virtue of
Section 4 of the SFA, each of The Royal Bank of Scotland Group plc and its aforementioned subsidiaries is deemed to be indirectly interested in the Shares that Coutts & Co Trustees (Jersey)
Limited is interested in.
Ms. Rachel Anastasia Kolonas is the settlor of the Capital Two Trust. Under the terms of the Capital Two Trust, she is entitled, as an investment power holder, to direct the trustee of the Capital Two
Trust to procure to the best of its ability that the directors of Morze International Limited act in accordance with her instructions in relation to the investments of the Capital Two Trust. Accordingly she
can control the exercise of the rights of the Shares held under the Capital Two Trust. By virtue of Section 4 of the SFA, Ms. Rachel Anastasia Kolonas is deemed to have an interest in the Shares
held by Morze International Limited.

Control of our Company


Save as disclosed in this Prospectus, to the best of the knowledge of our Directors, our
Company is not directly or indirectly owned or controlled whether severally or jointly, by any
other person or government and there is no known arrangement, the operation of which may,
at a subsequent date, result in a change in the control of our Company.
Substantial Shareholding Disclosure
Under the Securities and Futures Act, a person has a substantial shareholding in a company
if he has an interest or interests in one or more voting shares (excluding treasury shares) in
that company and the total votes attached to that share, or those shares, is not less than five
per cent. of the total votes (excluding treasury shares) attached to all the voting shares in that
company, and a substantial shareholder is a person who holds a substantial shareholding.
The Securities and Futures Act requires a person who is or (if he has ceased to be one) had
been a substantial shareholder in the Company to give notice in writing to the Company of
particulars of the voting Shares in the Company in which he has or had an interest or interests
and the nature and extent of that interest or those interests, in such form and shall contain
such information as the Authority may prescribe, within two business days after such person:
(a)

becomes aware that he is or (if he has ceased to be one) had been a substantial
shareholder in the Company; or

(b)

becomes aware of a change in the percentage level2 of the interest or interests of the
substantial shareholder in the Company in voting Shares in the Company.

Where a person (the beneficial owner) authorizes another person (the legal owner) to
hold, acquire or dispose of, on his behalf, voting Shares or an interest or interests in voting
Shares in the Company, the beneficial owner shall take reasonable steps to ensure that the
legal owner notifies him as soon as practicable and, in any case, no later than two business
days after any acquisition or disposal of any of those voting Shares or interest or interests in
voting Shares effected by the legal owner on his behalf which will or may give rise to any duty
on the part of the beneficial owner to give notice under the Securities and Futures Act.
In addition, where a person holds voting Shares in the Company, being voting Shares in
which another person has an interest, he shall give to the second-mentioned person a notice
of any acquisition or disposal of any of those Shares effected by him, in the form as the
Authority may prescribe, as soon as practicable and, in any case, no later than two business
days after acquiring or disposing of the Shares.

Percentage level, in relation to a Substantial Shareholder in the Company, means the percentage figure ascertained by
expressing the total votes attached to all the voting shares in which the Substantial Shareholder has an interest or interests
immediately before or (as the case may be) immediately after the relevant time as a percentage of the total votes attached
to all the voting shares (excluding treasury shares) in the Company, and, if it is not a whole number, rounding that figure
down to the next whole number.

195

INTERESTED PERSON TRANSACTIONS AND CONFLICTS OF INTERESTS


For purposes of this section, the following definitions will apply:
1.

our Group means:


(a)

our Company;

(b)

a subsidiary of our Company that is not listed on the SGX-ST or any approved
exchange; or

(c)

an associated company of our Company that is not listed on the SGX-ST or any
approved exchange and which our Group and our interested person(s) have
control.

2.

approved exchange means a stock exchange that has rules which safeguard the
interests of shareholders against interested person transactions according to similar
principles in Chapter 9 of the Listing Manual.

3.

interested person means:


(a)

a director, chief executive officer, or controlling shareholder of our Company; or

(b)

an associate of any such director, chief executive officer, or controlling


shareholder.

Certain terms such as associate, control, controlling shareholder, and interested person
used in this section have the meanings as provided in the Listing Manual and in the Securities
and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore
(SFR), unless the context specifically requires the application of the definitions in one or the
other as the case may be.
In general, transactions between our Group and any of our interested persons would
constitute interested person transactions for the purposes of Chapter 9 of the Listing Manual.
Details of the present and ongoing transactions as well as past transactions between our
Group and our interested persons which are material in the context of the Offering are set out
below. We have entered into certain other transactions with our interested persons which are
material in the context of the Offering, as further disclosed in this section and the sections
entitled Material Indebtedness and Corporate Structure and OwnershipCorporate
Reorganization of this Prospectus. Save as disclosed in these sections, there are no
interested person transactions that are material in the context of the Offering for the last three
financial years ended December 31, 2011, 2012 and 2013 and for the Relevant Period.
Investors, upon subscription and/or purchase of the Offering Shares, are deemed to have
specifically approved these transactions entered into with our interested persons (including
the Property Leases and the Security Services Agreement (each as defined herein) set out in
Present and Ongoing Interested Person Transactions) and as such these transactions are
not subject to Rules 905 and 906 of the Listing Manual to the extent that there are no
subsequent changes to the terms of the agreements in relation to each of these transactions.
In line with the rules set out in Chapter 9 of the Listing Manual, a transaction which value is
less than S$100,000 is not considered material in the context of the Offering and is not taken
into account for the purposes of aggregation in this section.

196

PAST INTERESTED PERSON TRANSACTIONS


Details of the past transactions between our Group and interested persons which are material
in the context of the Offering, for the past three financial years ended December 31, 2011,
2012 and 2013 and for the Relevant Period are as follows:
Purchase of Live Birds
Our Group purchased live birds from PT Ricos Farmindo (Ricos), formerly an associate of
Mr. Handojo Santosa. The aggregate value of the purchase contracts with Ricos for FY2011,
FY2012, FY2013 and for the Relevant Period, are as follows:
FY2011

FY2012

FY2013

Relevant
Period1

(IDR million)

(IDR million)

(IDR million)

(IDR million)

Aggregate value of purchases of live birds


from Ricos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,116
22,913
10,354
(S$2.0million) (S$2.4million) (S$1.1 million)

As the purchase of live birds were at the prevailing market rates and on substantially the
same terms for live birds of a comparable breed and quality purchased from other unrelated
third parties, such transactions were conducted on an arms length basis and on normal
commercial terms. As at the Latest Practicable Date, Ricos is no longer an interested person
as PT Intan Tata Buana Persada, an associate of Mr. Handojo Santosa, sold its interests in
Ricos to Leadfield Pte. Ltd., an unrelated third party, on April 23, 2014.
Sale of Animal Feed, DOCs and Animal Supplements
Our Group sold animal feed, DOCs and animal supplements to Ricos. The aggregate value of
the sales to Ricos for FY2012, FY2013 and for the Relevant Period, are as follows:
FY2011

FY2012

FY2013

Relevant Period1

(IDR million)

(IDR million)

(IDR million)

(IDR million))

Aggregate value of sales to Ricos . . . . . . . . . . .

17,854
25,874
13,531
(S$1.9 million) (S$2.7million) (S$1.4 million)

As the sales of animal feed, DOCs and animal supplements to Ricos were at the prevailing
market rates and on substantially the same terms for similar products sold to unrelated third
parties, the transactions were conducted on an arms length basis and on normal commercial
terms. As at the Latest Practicable Date, Ricos is no longer an interested person.
Sale of Land
Our Group sold a piece of land at Banjarkemantren Village, Buduran Subdistrict, Sidoarjo
District, East Java in FY2011 to PT Wisma Mukti (PT WM) for a consideration of
IDR6.5 billion (S$0.7 million). PT WM is an associate of Mr. Handojo Santosa.
The above transaction was undertaken on an arms length basis and on normal commercial
terms and the purchase price paid by PT WM to our Group was negotiated by PT Japfa
Comfeed Indonesia Tbk having taken into account the location of the land, transacted prices
in the surrounding area, historical costs of the land as well as improvements made to the
land.
Purchase of Land and Assets
On April 2, 2014, PT Santosa Agrindo purchased 17,550 sq m of land (and building thereon)
in Gunung Kawi, East Java from PT Sentra Satwatama Indonesia (PT SSI), for a
consideration of IDR3.148 billion (S$0.3 million). PT SSI is an associate of Mr. Handojo
Santosa and our Non-Executive Director, Mr. Hendrick Kolonas.
1

In respect of transactions up to April 23, 2014 when Ricos ceased to be an interested person.

197

The transaction was undertaken on an arms length basis and on normal commercial terms
and the consideration paid was decided by the board of PT Santosa Agrindo after taking into
account the location of the land, transacted prices in the surrounding area, historical costs of
the land as well as improvements made to the land, facilities already built on the land and
licences already obtained for the business.
Rental of Office Space
Our Company rented 3,606 sq ft of office space at Orchard Towers for use as our corporate
office from Vivaldi Property Pte. Ltd. (Vivaldi) up to FY2012. Vivaldi is an associate of
Mr. Handojo Santosa. The aggregate of the rental payments made to Vivaldi for FY2011 and
FY2012 are as follows:
FY2011

FY2012

FY2013

Relevant Period

(S$)

(S$)

(S$)

(S$)

Aggregate rental payments made to Vivaldi . . . . . . . . . . . . . . . . . . 246,650 123,325

As the rental payments were higher than the prevailing rental rates for comparable premises,
the rental of these premises was not on an arms length basis. We do not intend to enter into
leases with a higher rental than the prevailing market rate with any of our interested persons
in the future.
Subscription for Medium Term Notes (MTNs)
Our subsidiary, PT Bhirawa Mitra Santosa (PT BMS) subscribed for MTNs issued by
PT Celebes Artha Ventura (PT CAV). PT CAV is an associate of Mr. Hendrick Kolonas. The
aggregate value of such subscriptions for MTNs for FY2012, FY2013 and for the Relevant
Period, are as follows:
FY2011

FY2012

FY2013

Relevant Period

(IDR million)

(IDR million)

(IDR million)

(IDR million)

Aggregate subscription for MTNs . . . . . . . . . .

2,000
1,000
2,750
(S$0.2 million) (S$0.1 million) (S$0.3 million)

The interest rate on the MTNs ranged from 9.75% to 10.75% (after deducting withholding
tax). As the MTNs were subscribed for by PT BMS on the same terms as those available to
unrelated third parties of PT CAV, the subscriptions were undertaken on an arms length
basis and on normal commercial terms. PT BMS disposed of the MTNs on May 16, 2014.
Provision of Management Services
Our subsidiary, AIH, had entered into a management services agreement with AustAsia Dairy
Farm Management Pte. Ltd. (ADFM) on August 13, 2010, under which ADFM provided AIH
with, inter alia, management and advisory services. ADFM is an associate of Mr. Handojo
Santosa. The aggregate fees paid to ADFM for FY2011, FY2012 and FY2013 are as follows:
FY2011

FY2012

FY2013

Relevant Period

(US$ million)

(US$ million)

(US$ million)

(US$ million)

0.75

0.75

1.02

Aggregate fees paid to ADFM . . . . . . . . . . . . . . . . . . . . . . . .

As the consideration negotiated under the agreement took into account the apportionment of
staff costs and time spent in respect of staff allocated to provide the services to AIH, the
transaction was undertaken on an arms length basis and on normal commercial terms. This
transaction was terminated prior to the acquisition of AIH by our Company.

198

Loans from Interested Persons


Loans to our Company
The following interested persons had provided shareholders loans to our Company in line
with our pre-Offering capital structure. As at the Latest Practicable Date, all shareholders
loans provided by the interested persons listed below have either been repaid in full or
capitalized into equity of our Company. As the shareholders loans were unsecured, interestfree and repayable on demand, these were not on an arms length basis. The outstanding
balances due as at December 31, 2011, 2012 and 2013 and as at the Latest Practicable
Date, and the largest amount outstanding during the past three financial years and up to the
Latest Practicable Date are as follows:

Loans from Rangi Management


Limited to our Company(1) . . . . . . . . .
Loans from Morze International
Limited to our Company(2) . . . . . . . . .
Loans from Tasburgh Limited to our
Company(3) . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan from Great Alpha Investments
Limited to our Company(4) . . . . . . . . .

FY2011

FY2012

FY2013

As at the Latest
Practicable Date

Largest Amount
Outstanding
(based on monthend balances)

(S$ million)

(S$ million)

(S$ million)

(S$ million)

(S$ million)

59.78

96.19

41.18

96.19

19.39

31.20

13.35

31.20

12.26

19.72

8.44

19.72

1.95

4.55

Notes:
(1)
Rangi Management Limited had extended interest-free loans to our Company (a) which had outstanding balances due as
at December 31, 2011, 2012 and 2013, in the aggregate amount of S$17.23 million for FY2010, S$43.75 million for
FY2011, S$36.42 million for FY2012, S$4.77 million for FY2013 and, (b) in the aggregate amount of S$32.11 million for
the Relevant Period. Rangi Management Limited is a controlling shareholder of our Company.
(2)
Morze International Limited had extended interest-free loans to our Company (a) which had outstanding balances due as
at December 31, 2011, 2012 and 2013, in the aggregate amount of S$5.21 million for FY2010, S$14.17 million for FY2011,
S$11.80 million for FY2012, S$1.54 million for FY2013 and, (b) in the aggregate amount of S$10.43 million for the
Relevant Period. Morze International Limited is a controlling shareholder of our Company.
(3)
Tasburgh Limited had extended interest-free loans to our Company (a) which had outstanding balances due as at
December 31, 2011, 2012 and 2013, in the aggregate amount of S$3.29 million for FY2010, S$8.96 million for FY2011,
S$7.46 million for FY2012, S$0.98 million for FY2013 and, (b) in the aggregate amount of S$6.58 million for the Relevant
Period. Tasburgh Limited is an associate of our Executive Deputy Chairman, Mr. Handojo Santosa.
(4)
Great Alpha Investments Limited had extended interest-free loans to our Company (a) which had outstanding balances
due as at December 31, 2013, in the aggregate amount of S$8.22 million for FY2013 and, (b) in the aggregate amount of
S$1.52 million for the Relevant Period. Great Alpha Investments Limited is an associate of our Non-Executive Director and
CEO, Mr. Tan Yong Nang.

Loans / advances to AIH


Other Interested Persons have also from time to time provided shareholders loans and/or
capital advances to AIH. Such shareholders loans and/or capital advances are capitalized
when subscription monies from all shareholders of AIH (from time to time) are received such
that all issuances of new equity in AIH are in line with the agreed shareholding proportion
under the AIH Shareholders Agreement (as amended from time to time). As these
shareholders loans and/or capital advances were unsecured, interest-free and repayable on
demand, these were not on an arms length basis. There were no outstanding balances due
as at December 31, 2011, 2012 and 2013 and as at the Latest Practicable Date, and the
largest amount outstanding during the past three financial years and up to the Latest
Practicable Date was the principal sum advanced in respect of each loan.

199

FY2011

FY2012

FY2013

As at the Latest
Practicable Date

Largest Amount
Outstanding
(based on monthend balances)

(US$ million)

(US$ million)

(US$ million)

(US$ million)

(US$ million)

4.0

10.0

25.0

Loans from Progressive


Investments Inc to AIH(1) . . . . . .
Loans from Foxbar Investments
Ltd to AIH(2) . . . . . . . . . . . . . . . . . . . . .
Loans from Viva Sino
Investments Limited to
AIH(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes:
(1)
Progressive Investments Inc. had on June 12, 2010 provided a US$4.0 million interest-free shareholders loan to AIH. The
entire amount was capitalized on January 20, 2011. A further loan of US$4.0 million was provided on June 27, 2011 and
was capitalized September 2, 2011. Progressive Investments Inc. is an associate of Mr. Handojo Santosa.
(2)
Foxbar Investments Ltd had on April 30, 2012 and June 12, 2012 provided in aggregate US$10.0 million interest-free
capital advance to AIH. The entire amount was capitalized on July 19, 2012. Foxbar Investments Ltd is an associate of
Mr. Handojo Santosa.
(3)
Viva Sino Investments Limited had on April 23, 2013 and July 23, 2013 provided in aggregate US$25.0 million interest-free
capital advance to AIH. The entire amount was capitalized on September 20, 2013. Viva Sino Investments Limited is an
associate of Mr. Handojo Santosa.

PRESENT AND ONGOING INTERESTED PERSON TRANSACTIONS


Details of the present and ongoing transactions between our Group and interested persons
which are material in the context of the Offering, for the past three financial years ended
December 31, 2011, 2012 and 2013 and for the Relevant Period are as follows:
Goods and Services Provided By Interested Persons
Building and Construction Services
Our Group appoints PT Ometraco Arya Samanta (PT OAS) to undertake building and
construction work for our Groups access roads, farms and farming facilities, warehouses,
silos, processing plants and corporate offices in Indonesia. PT OAS is an associate of
Mr. Handojo Santosa. The aggregate value of the contracts awarded to PT OAS for FY2011,
FY2012, FY2013 and for the Relevant Period, are as follows:

Aggregate value of contracts


awarded to PT OAS . . . . . . . . . . .

FY2011

FY2012

FY2013

Relevant Period

(IDR million)

(IDR million)

(IDR million)

(IDR million)

94,906
263,586
145,800
182,947
(S$10.0 million) (S$27.9 million) (S$15.4 million) (S$19.4 million)

As tenders were called for the majority of services for our larger projects and PT OAS had
submitted competitive proposals for our larger projects, these project contracts with PT OAS
were on an arms length basis and on normal commercial terms. Tenders were not called for
several smaller projects where PT OAS was appointed, including projects where works on
farming infrastructure were required on an urgent basis and projects in relatively remote areas
or related to another project completed by PT OAS. Such small transactions comprised 48
projects during FY2011 at an aggregate value of IDR12.77 billion (S$1.4 million), 155 projects
during FY2012 at an aggregate value of IDR32.41 billion (S$3.4 million), 125 projects during
FY2013 at an aggregate value of IDR23.46 billion (S$2.5 million) and 71 projects during the
Relevant Period at an aggregate value of IDR20.52 billion (S$2.2 million). Such smaller
transactions, accounting for 13.5%, 12.3%, 16.1% and 11.2% of the total value of the projects
undertaken for FY2011, FY2012, FY2013 and for the Relevant Period, respectively, may not
have been undertaken on an arms length basis.

200

Rental of Premises
Our Group rents (i) office and warehouse premises (aggregate of 3,820 sq m) at Jln. Daan
Mogot KM 12 No 9, Jakarta (Daan Mogot Property) from PT OAS, (ii) office premises
(6,588 sq m) at Wisma Millenia, Jakarta (Millenia Office) from PT Omega Propertindo
(PT OP) and (iii) a 2,874 sq ft apartment in Four Seasons Park in Singapore (FSP
Apartment) from Top Matrix Investments Limited (TMIL) for the use of senior executives
travelling to Singapore on work commitments. PT OAS and TMIL are associates of
Mr. Handojo Santosa while PT OP is an associate of both Mr. Handojo Santosa and
Mr. Hendrick Kolonas. The aggregate of the rental payments made to PT OAS and PT OP
respectively for FY2011, FY2012, FY2013 and for the Relevant Period, are as follows:

Aggregate rental payments made to


PT OAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aggregate rental payments made to
PT OP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Aggregate rental payments made to


TMIL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FY2011

FY2012

FY2013

Relevant Period

(IDR million)

(IDR million)

(IDR million)

(IDR million)

3,789
4,853
3,830
3,698
(S$0.4 million) (S$0.5 million) (S$0.4 million) (S$0.4 million)
11,915
12,088
11,565
6,856
(S$1.3 million) (S$1.3 million) (S$1.2 million) (S$0.7 million)
FY2011

FY2012

FY2013

Relevant Period

(US$)

(US$)

(US$)

(US$)

30,000

As the rental payments in respect of the Daan Mogot Property and the Millenia Office were
lower than the prevailing rental rates for comparable premises, the rental of these premises
were not on an arms length basis but are not prejudicial to the interests of our Group and/or
minority Shareholders.
Our Group has also entered into medium-term leases for a period of five years commencing
April 1, 2014 with (i) PT OAS for the rental of the Daan Mogot Property and (ii) PT OP for the
Millenia Office. Rental for the office and the warehouse at the Daan Mogot Property is at the
rate of IDR95,000 / sq m and IDR 45,000 / sq m per month (including service charges)
respectively for FY2014 and rental for the Millenia Office is at the rate of IDR130,000 / sq m
(including service charges) per month for FY2014.
Under the terms of the leases, rental will be reviewed and may increase or decrease after
each year of the lease term provided that the new rental rate shall not exceed the rental rates
of office premise rental with comparable buildings / premises in the surrounding area of the
Daan Mogot Office and the Warehouse and Millenia Office. These lease agreements were
entered into on an arms length basis and on normal commercial terms as the rental rates
were based on the prevailing rental rates for comparable premises surrounding the (i) Daan
Mogot Office, such as SSK Building for office rental and Duta Kinzo and Era Prima
warehouses for the warehouse rental, and (ii) Millenia Office, such as Korindo Building, Green
Building, Mugi Griya Building and Graha Pratama Building.
In respect of the FSP Apartment, our Group entered into a three year lease (with an option for
an additional year extension) commencing January 1, 2014 with TMIL in at an agreed rent of
US$10,000 per month (such lease, together with the lease for the medium term leases for the
Daan Mogot Property and Millenia Office, the Property Leases). The lease agreement was
entered into on an arms length basis and on normal commercial terms as the rental rate took
into consideration (i) the prevailing rental rates for comparable premises in the Orchard
Road / Tanglin area with close proximity to our corporate office and (ii) the average room rate
allowances of the senior executives entitled to stay at the Four Seasons Park apartment.

201

Security Services
Our Group obtains security services for a majority of the operations of the PT Japfa Group
from PT Jaya Sakti Mandiri Unggul (PT JSMU). Services provided include the provision of
security personnel as well as co-ordination with the local and regional police departments. PT
JSMU is an associate of Mr. Handojo Santosa. The aggregate value of security contracts with
PT JSMU for FY2011, FY2012, FY2013 and for the Relevant Period, are as follows:

Aggregate value of security contracts


with PT JSMU . . . . . . . . . . . . . . . . . . . . . . . .

FY2011

FY2012

FY2013

Relevant Period

(IDR million)

(IDR million)

(IDR million)

(IDR million)

49,483
62,727
84,727
52,758
(S$5.2 million) (S$6.6 million) (S$9.0 million) (S$5.6 million)

Our Group accounts for about 30% of PT JSMUs total contracts from all of its customers. The
contract values agreed with PT JSMU were negotiated on an arms length basis and on
normal commercial terms, and on similar terms to quotations given by PT JSMU to unrelated
third party customers and took into account, inter alia, regional minimum wages, meal,
transportation and medical allowances and other related employee expenses had our Group
employed its own security guards. Our Group pays PT JSMU a certain margin over such
employee expenses for the provision of its services.
The PT Japfa Group has also entered into a medium term security services contract with
PT JSMU for a period of five years commencing April 1, 2014 for the provision of security
services and co-ordination with local and regional police departments by PT JSMU (the
Security Services Agreement). The contract values agreed with PT JSMU were negotiated
on an arms length basis, on normal commercial terms and are not prejudicial to the interests
of the Company and its minority Shareholders. The contract values are on similar terms to
unrelated third party quotes and took into account, inter alia, regional minimum wages, meal,
transportation and medical allowances and other related employee expenses had our Group
employed its own security guards. The fee payable to PT JSMU (on a monthly basis) will be
the cost of all employee-related expenses incurred by PT JSMU in the provision of its
services to the PT Japfa Group plus a 15% margin. The PT Japfa Group will determine if the
costs recorded by PT JSMU (as the basis for charges) are reasonable on an annual basis
after audited financial statements of PT JSMU are available.
Boat rental and expenses
Our Group rents a fishing boat (Lady Carla) on an annual basis from Fortunata Pty Ltd
(Fortunata) primarily for corporate functions and business entertainment. Fortunata is an
associate of Mr. Handojo Santosa. The aggregate value of rental and operational expenses
paid to Fortunata for FY2011, FY2012, FY2013 and for the Relevant Period, are as follows:

Aggregate value of rental


paid to Fortunata . . . . . . . . .

FY2011

FY2012

FY2013

Relevant Period

(IDR million)

(IDR million)

(IDR million)

(IDR million)

5,197
(S$0.6