from freshness to goodness - morningstar, inc

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From Freshness to

Goodness

Annual Report 2010

Contents

From Freshness to Goodness

01 Corporate Profi le

02 Corporate Information

03 Corporate Structure

04 Chairman’s Statement

07 Operational Review by Chairman of the Executive Committee

08 Board Of Directors

10 Financial Highlights

11 Key Management

12 Financial Contents

Fresh Division - Fruit Trading and Distribution

The SunMoon Fresh Division is an international player in the fresh fruit industry, with an extensive sales and market network spanning fi ve continents.

The Division has implemented improved global procurement strategies. SunMoon now manages a carefully controlled Certifi ed Supplier Program. Fruits from certifi ed plantations comply with the ‘SunMoon Quality Assurance’ standard, a critical assurance of freshness, quality, safety and traceability demanded by our discerning customers; a reputation also backed up by internationally recognised accreditations.

SunMoon continues to emphasise aggressive sales channel development by deepening its existing broad customer base. Our customers comprise importers, wholesalers, supermarket chains as well as the individual consumer all over the world. The Division also manages a network of franchise SunMoon retail outlets that provide valuable, direct connection to the end consumer.

SunMoon also embarks on new product development using innovative food science technology and modern packaging design to deliver fruit and fruit derivative products to generate new demand and create new markets for our premium fruit sources.

Produce Division – Dehydrated Produce Processing and Distribution

SunMoon Produce Division is the largest integrated processor and exporter of dehydrated garlic and onion in China. We serve global food companies in USA, Canada, Australia, Europe, South America, Asia, and the rest of the world. Our valued customers and users include renowned global companies like Unilever, Newly Weds, Givaudan/ Quest, Kerry, Ajinomoto, Symrise, MARS and Lee Kum Kee.

Our state-of-the-art facility and US-imported dehydrating lines in China produce 12,000 MT of dehydrated garlic and onion annually for export globally. Our products are 100% natural, containing no additives or preservatives. With the emphasis on strong fl avour and aroma, they are regarded as direct substitutes to US dehydrated products by the industry.

Core to our success is ensuring our operations and quality system are fully accredited and certifi ed to international standards: HACCP; Good Manufacturing Practice (GMP); American Institute of Baking (AIB), ISO 22,000, Halal and Kosher Certifi cation. Our integrated Dehydrating and Milling operation, together with our Quality Assurance and Quality Control programs, gives our valued customers confi dence in the consistency and quality of our products, which are vital in the food industry. Our products thus command a premium and we remain focused on targeting the top food companies in the world to increase our share of the dehydrated garlic and onion market.

SunMoon Food Company Limited is a fully integrated fresh fruit and dehydrated produce

company well positioned to meet the increasing consumer demand for healthy, safe and

premium grade agricultural produce in the globalised economy. The core businesses of

SunMoon are Fruit Trading, Distribution and Retail & Franchise, and Dehydrated Produce

Processing and Distribution. SunMoon is embarking on its next stage of growth with a

renewed strategic focus on value creation capitalising on its strong brand equity to fuel

growth in existing and new markets.

Corporate Profile

Contents

Sunmoon Food Company Limited Annual Report 2010


01 Corporate Profi le

02 Corporate Information

03 Corporate Structure

04 Chairman’s Statement

07 Operational Review by Chairman of the Executive Committee

08 Board Of Directors

10 Financial Highlights

11 Key Management

12 Financial Contents

1

Corporate Information

Company SecretaryChia Lay Beng

Registered Office1 Scotts Road#21-07/08/09 Shaw CentreSingapore 228208Tel: 6779 5688

Company Registration No.198304656K

Share RegistrarB.A.C.S. Private Limited63 Cantonment RoadSingapore 089758

AuditorMazars LLP133 Cecil Street #15-02Keck Seng TowerSingapore 069535Chang Fook Kay (Partner)Date of appointment: 23 April 2007

Principal BankerDBS Bank Ltd

Board of DirectorsDr. Tan Eng Liang (Chairman)Gary Loh Hock Chuan (Deputy Chairman)Chee Wai PongChan Soo SenMichael John MartinRicky Goh Hoon Kan

Executive CommitteeGary Loh Hock Chuan (Chairman)Dr. Tan Eng LiangChee Wai PongChan Soo Sen

Audit CommitteeMichael John Martin (Chairman)Dr. Tan Eng LiangChan Soo SenChee Wai Pong

Remuneration CommitteeChee Wai Pong (Chairman)Dr. Tan Eng LiangChan Soo SenGary Loh Hock Chuan

Nominating CommitteeChan Soo Sen (Chairman)Chee Wai PongDr. Tan Eng LiangRicky Goh Hoon Kan





Corporate StructureCorporate Structure

Taian FHTK Foodstuffs Co Ltd

UGC 2003, Inc

United Agro Produce Pte Ltd

SunMoon Distribution & Trading Pte Ltd

United Fruit Company Limited

SunMoon Retail & Franchise Pte Ltd

Agrifood Investments Pte Ltd

Fook Huat Tong Kee Pte Ltd

Weifang Xinan FHTK Fruits Co Ltd

United Fruits Pak (Pvt) Ltd

Fook Yong Pte Ltd

(100%)

(100%)

(100%)

(100%)

(100%)

(100%)

(100%)

(100%)

(100%)

(100%)

(25%)

(100%)

(100%)

(100%)

(100%)

(50%)

SunMoon Food (Shanghai) Co Ltd

Xinjiang SunMoon Co Ltd

Taian Fook Huat Tong KeeFoodstuffs Co Ltd

Shanghai Fook Huat Tong Kee Cold Storage Co Ltd

Fook Huat Tong Kee(Xiamen) Foodstuffs Co Ltd.



3

Chairman’s Statement

Dear Shareholders,

On behalf of the board, I am pleased to present my fourth annual report as Chairman, for the Financial Year ended 31 December 2010 (“FY10”).

StrategyBuilding a Lean Company Focusing on Quality and Brand, Establishing Sourcing Partnership

FY10 marked the second profitable year of the Group since its transformation into a leaner, more effective Group. SunMoon Group continues to focus on quality, building our brand equity, growing our customer networks globally and expanding our product offering to deliver future growth. At the same time we have established and strengthened long-term partnership with key suppliers with the expertise to manage the back-end operations optimally.

ResultsContinuing Core Operations ImprovementsThe Group continued to build on the successful stabilisation of its operations in FY09 and continued efficiency improvements to deliver significant improvements to its operational results in FY10.

Revenue grew 34% to $36.0M in FY10 compared to $26.9M in FY09. Gross Profit at $8.2M in FY10 represents a 45.6% increased over $5.6M in FY09. Overall Gross Profit Margins improved from 21.0% in FY09 to 22.8% in FY10.

The Group’s Net Profit for FY10 was $0.94M compared to net profit of $6.44M for FY09. Excluding Other Income and Other Operating Expenses, FY10 profits increased by $4.07M compared to FY09. The FY09 profit included one-off gain on disposal of subsidiaries of $12.44M, write-back of impairment of inventories of $1.46M, and further impairment of $3.50M for assets subject to bank

“In the course of 2010, we made further inroads into supplying a global customer which is one of the largest food companies in the world. We secure contract to supply its operations in 15 countries.”

Sunmoon Food Company Limited Annual Report 2010Sunmoon Food Company Limited Annual Report 2010


4

guarantee. This improvement in operational performance was attributed to increased sales volume, new customers, improved markets, and lower operational expenses.

Fresh Division FY10 revenue was $17.7M, an increase of 21% over revenue of $14.6M in FY09, while gross profit margin continued to improve over FY09. The Division continues to invest in the SunMoon brand and quality system, completing a key project to develop a new Branding Identity and Marketing Strategy. We also re-penetrated markets in the Philippines and Malaysia, while embarking on new business initiatives like Fresh Juice Vending and Fruit Bowls which have good potential in the long term.

Produce Division revenue grew 50% from $12.2M FY09 to $18.3M in FY10. In the course of 2010, we made further inroads into supplying a global customer which is one of the largest food companies in the world. We secure contract to supply its operations in 15 countries, and it also started using our dehydrated onion for the first time. Other milestones achieved include our first export of dehydrated garlic into the Japanese market, and the first shipment of our new product Toasted Onion.

New Strategic InvestorFollowing MOUs signed in September 2010, the Group entered into 2 Convertible Loan Agreements and a Sourcing and Distribution Agreement with Chic Asia Pacific (“Chic”) (a member of Chic Group) in December 2010. Under the agreements and subject to certain conditions being fulfilled including our Shareholders’ approval, Chic will invest up to $84M in our Group, with the first $24M to be used for repaying the existing Convertible Loan.

With its vast sourcing network and quality control systems in China, Chic will also strengthen our back-end operations especially for China-sourced fruit products. At the same time, the SunMoon brand, well recognised

as a leading brand for premium fresh fruits, offers excellent opportunities for Chic to leverage on to launch its products into our key markets.

In conjunction with the investment from Chic, the Group is also planning for a Rights Issue for existing Shareholders to offer them an opportunity to participate in our future growth.

Forward OutlookSound Operations, New Challenges, New Growth Opportunities

While challenges remain, including increasing production costs in China and the appreciating Chinese Renminbi, I believe the Group has rebuilt its foundation on which it will continue to grow its operations. As the global economy and consumer demand recover, the Group will maintain focus on building strong brand equity and expanding our customer network, while exploiting the new opportunities that come with the SunMoon-Chic partnership to grow to a new level of excellence.

AcknowledgementsI would like to thank the investors, shareholders and customers of the Group for giving the strong support for the professional management team to transform SunMoon into our vision of a leading food company in Asia, with worldwide sourcing capabilities and a global customer base.

On behalf of the Board I would like also to thank fellow directors, management and staff for their hard work and contributions, and their commitment to the future success of the SunMoon Group.

Dr. Tan Eng LiangChairman of the Board



5

Our Products



Our Products

6

FY10 marked our fi rst revenue growth since 2008 as we gather strength and momentum from our successful business restructuring.

Our sale volume increased sharply, and gross profi t margins continued to improve as we steadily regained our market share and partially helped by the improved economy and consumer demands in Asia. We achieved a second year of profi tability since 2002 as we continued to enjoy the benefi ts of the severe cost cutting measures adopted in the previous year. Operating expenses decreased despite the increased sales volume as we maintained tight control on operations and costs.

In the Fresh Division, tonnage shipped increased 19% in FY10 over FY09. General price increases helped to increase the Fresh Division revenue by 21%. We continued to focus on Brand Building and Marketing of the SunMoon brand – a brand review was completed during FY10, and an updated marketing plan has been established and is being implemented. Newer, more contemporary packaging will be introduced together with new product launches in the coming year.

Produce (Dehy) Division sales volume increased 56% over FY10 even though one of our key markets for dehydrated products, the United States, continued to pose signifi cant challenges in FY10 due to lower consumer demands, high Chinese garlic prices, and the depreciating US Dollar. We were able to penetrate new markets including Japan, Thailand, Malaysia, Taiwan and Pakistan, as well as increased sales to some existing ones including China domestic market and Indonesia. In FY10, we also started producing and marketing Toasted Onion which has large demand in Indonesia. More signifi cantly, we continued to deepen our relationship with key global customers, supplying common product to their plants in multiple countries.

As our traditional businesses regained their strengths, we embarked on pilot trials for new businesses. One of the projects is Fresh Juices. We deployed vending machines that dispense fresh-squeezed orange juices with encouraging results. We plan to expand the range of products to include cut fruit cups and other juices, while planning to launch new fruit products into our traditional markets under the SunMoon brand.

While our business operations expands, our organisation structure remains very lean, in fact the top management team helming the Group could even be likened to a 4-member jazz band. The management team thus looks forward to the active participation from our Strategic Investor Chic Group, and believes that Chic Group will be able bring various resources to complement the team to propel SunMoon Group to the next higher level of performance. One of the key SunMoon-Chic collaboration will be the sourcing and supply of products in China under the Sourcing and Distribution Agreement signed. With Chic taking care of the back-end operations, SunMoon will be able to focus more resources into front-end brand building and marketing.

As the Asian economy regains its growth and the recovery of the consumer demands takes root, the SunMoon Group has also resumed its growth path. We see many new opportunities for the Group, including entering new markets, introducing new products range, and securing increased dehydrated products contract volumes through long-term tie-ups with key customers. We certainly look forward to the years ahead.

Gary Loh Hock ChuanChairman of the Committee

Our Products

Operational Review By ChairmanOf The Executive Committee

“We see many new opportunities for the Group, including entering new markets, introducing new products range, and securing increased dehydrated products...”



7

Board of Directors

Dr. Tan Eng LiangChairman

Dr. Tan was appointed to the Board as an Independent Director and Chairman of the Board on 13 November 2006. Dr. Tan held several directorships in private and public companies in Singapore, Hong Kong and Malaysia. He was a Member of Parliament, Singapore from 1972 to 1980. He was also a Chairman of Singapore Quality & Reliability Association, Urban Redevelopment Authority and Singapore Sports Council. He held the position of Senior Minister of State for National Development from 1975 to 1978 and Senior Minister of State for Finance from 1978 to 1979.

Mr. Gary Loh Hock ChuanDeputy Chairman

Mr. Loh was appointed to the Board as a Non-Independent Director on 15 April 2007, Deputy Chairman of the Board on 22 May 2007 and Executive Director and Chairman of the Executive Committee on 1 July 2007. Mr. Loh is the Executive Chairman of First Alverstone Capital Ltd and Friven & Co. Ltd. He was the Director of Sales in UOB Kay Hian Pte Ltd. Mr. Loh graduated from the National University of Singapore (NUS) with a Bachelor of Arts (Political Science & Economics) and NUS Business School with a Master in Applied Finance.

Mr. Chee Wai PongIndependent Director

Mr. Chee was appointed to the Board as an Independent Director on 28 February 2005 and Chairman of the Remuneration Committee on 11 November 2005. He joined the Legal Service and was appointed as a Deputy Public Prosecutor/State Counsel from 1971 to 1973. He was appointed as a Magistrate and then District Judge and the State Coroner between 1973 and 1976. Mr. Chee joined M/s Osborne Jones & Co as a partner from August 1976 to December 1978. He was a partner of M/s Ng Ong & Chee from January 1979 to December 2006. From 1 January 2007 he started his own practice under the name of Chee Wai Pong & Co. Mr. Chee is the honorary legal advisor to the Medical Alumni, Ling Kwang Home for the Senior Citizens. He is also a member of the Management Committee of the Students Care Service and a member of the Yishun Centre Advisory Committee of the Students Care Service. He is a Director of the Prison Fellowship Singapore Ltd. Mr. Chee graduated from the University of Singapore with a Bachelor of Law Degree (L.L. B Hons) in 1971.



8

Mr. Chan Soo SenIndependent Director

Mr Chan was appointed to the Board as an Independent Director on 13 November 2006 and Chairman of the Nominating Committee on 14 November 2006. Mr Chan retired from ministerial appointments in May 2006. He continues to serve as Member of Parliament for Joo Chiat Constituency. He joined Keppel Corporation Ltd as Director, Chairman’s Offi ce on 19 July 2006. On 1 June 2009, he joined SingBridge International Singapore Pte Ltd as Executive Vice President.

Mr Chan was previously a Minister of State and had served in several ministries including Prime Minister’s Offi ce, Ministry of Health, Ministry of Education, Ministry of Community Development, Youth and Sports, and Ministry of Trade and Industry. Before entering the political scene, Mr Chan started up the China-Singapore Suzhou Industrial Park as the founding Chief Executive Offi cer in 1994, laying the foundation and framework for infrastructure and utilities development. Mr Chan holds a Master in Management Science from the University of Stanford, United States of America and is a director of a few listed companies in Singapore.

Mr. Micheal John MartinIndependent Director

Mr. Martin was appointed as an Independent Director and Chairman of the Audit Committee of the Company with effect from 15 April 2007. Mr. Martin was a partner in Cooper Lancaster Brewers, London and a member fi rm partner in Arthur Andersen, Singapore. He has his own business advisory fi rm, Michael Martin Business Advisory. He is a Fellow member of the Institute of Chartered Accountants in England and Wales.

Mr. Ricky Goh Hoon KanIndependent Director

Mr. Goh was appointed to the Board as an Independent Director on 15 April 2007. Mr. Goh is currently the Chief Executive Offi cer of Care Hospitality Pte Ltd and was the Chief Executive Offi cer of Delifrance Asia Ltd from January 2005 to November 2009. He holds a Bachelor of Science Degree in Business Administration and is a Certifi ed Hotel Administrator. Mr. Goh has over 30 years of experience in the Food and Hospitality industry. Mr. Goh served as the elected President of The Singapore Hotel Association from 1987 till 1993.



9

Financial Highlights



FY2010 FY2009 FY2008(18 Mths)

FY2007 FY2006

Turnover ($ Millions) 36.02 26.87 65.53 47.44 67.51

Profit/(loss) before Income Tax ($ Millions) 0.96 6.44 (49.80) (49.02) (20.43)

Shareholders’ funds ($ Millions) (19.27) (19.30) (19.76) 13.20 61.35

Net Tangible Assets per Share (Cents) (0.24) (0.24) (0.25) 0.21 1.00

Net Earning/(Loss) per Share (Cents) 0.01 0.08 (0.71) (0.79) (1.47)

EBITDA ($ Millions) 4.57 10.47 (35.46) (30.29) (3.07)

Turnover ($ Millions)

09 0810 07 06

26.87

65.53

36.02

47.44

67.51

09 0810 07 06

70

60

50

40

30

20

10

0

Profit/(loss) before Income Tax ($ Millions)

-49.80 -49.02

-20.43

6.440.96

10

0

-10

-20

-30

-40

-50

-60

Shareholders’ funds ($ Millions) Net Tangible Assets per Share (Cents)

09

-19.30

08

-19.76

10 07

13.20

61.35

06

1.00.21

-0.25-0.24-0.24

09 08

-19.27

10 07 06

60

40

20

0

-20

-40

3

2

1

0

-1

-2

-03

Net Earning/(Loss) per Share (Cents) EBITDA ($ Millions)

0909 0808

-0.71

0.080.01

-0.79

-1.47

1010 0707 0606-35.46

-30.29

-3.07

10.47

4.57

1

0

-1

-2

30

20

10

0

-10

-20

-30

-40

10

Key ManagementMr. Neo Wei MingChief Executive Offi cer

Mr. Neo was appointed as the Chief Executive Offi cer (“CEO”) on 1 August 2009. He joined the Group on 1 October 2007 as Chief Operating Offi cer and had been the Acting CEO from 31 March 2009. He provides the leadership for the business restructuring and strategic growth, and is responsible for the overall business performance of the Group. He brings with him vast experiences in sales, marketing, procurement, supply chain management and strategic planning from both the public and private sectors. He holds a Bachelor of Arts (Honours) in Engineering Science from Oxford University and a MBA from Insead.

Ms. Chen MeiGroup Financial Controller

Ms. Chen was appointed as the Group Financial Controller on 1 September 2009. She joined the group on 1 September 2007 as the Regional Financial Controller and had been the Financial Controller for Produce Division since June 2008. Ms. Chen is experienced in fi nancial management with previous employment in MNCs. She is a CPA and holds a MBA (Accountancy) from NTU, Singapore.

Mr. Chua Kim Boon IvanManaging Director Fresh Division

Mr. Chua joined the Group on 17 March 2008 as Manager – Retail & Franchise and is presently the Managing Director of Fresh Division. He manages the Fresh Division including new product development. His previous employment was with a SGX-listed company as General Manager of a subsidiary, overseeing the retail chain of outlets and managing various international brands and distributorships.

Mr. Chng Say KiatSenior Manager Produce Division

Mr. Chng is the Senior Manager with Dehydrated Produce Division. He joined the Group in 2004 as the President of UGC 2003, Inc., a subsidiary responsible for the sales, marketing and distribution of dehydrated products in North America. He oversees a team of sales and marketing staff in the sales and marketing of dehydrated products to North America. Prior to joining the Group, he was the Executive Director of SGX-listed New Wave Technologies Ltd and its subsidiary, Eplus Technologies Pte Ltd. He holds a Bachelor of Engineering majoring in Computer Engineering and a MBA (Finance & International Business).


From left: Chua Kim Boon Ivan, Chen Mei, Neo Wei Ming, Chng Say Kiat

11

Financial Contents

13 Report On Corporate Governance

23 Directors’ Report

26 Statement By Directors

27 Independent Auditors’ Report

29 Consolidated Statement Of Comprehensive Income

30 Statements Of Financial Position

31 Consolidated Statement Of Changes In Equity

32 Consolidated Statement Of Cash Flows

34 Notes To Financial Statements

87 Shareholders Statistics

88 Notice Of Annual General Meeting

Proxy Form


Sunmoon Food Company Limited Annual Report 2010 13

The Board of Directors (“Board”) of SunMoon Food Company Limited (the “Company”) recognises that sound corporate governance practices are important to the proper functioning of the Company and its subsidiaries (the “Group”) and enhances the interest of all shareholders.

This report sets out the corporate governance practices that have been adopted by the Company with specific reference to the principles of the Code of Corporate Governance (the “Code”). The Company has adhered to the principles and guidelines of the Code.

BOARD MATTERS

BOARD’S CONDUCT OF ITS AFFAIRS

PRINCIPLE 1: EVERY COMPANY SHOULD BE HEADED BY AN EFFECTIVE BOARD TO LEAD AND CONTROL THE COMPANY. THE BOARD IS COLLECTIVELY RESPONSIBLE FOR THE SUCCESS OF THE COMPANY. THE BOARD WORKS WITH MANAGEMENT TO ACHIEVE THIS AND THE MANAGEMENT REMAINS ACCOUNTABLE TO THE BOARD.

The Board comprises one executive director and five non-executive directors. All the five non-executive directors are independent directors. Together the Board has the relevant core competencies and diversity of experience which enable them to effectively contribute to the Group.

The Board, in additional to its statutory responsibilities, has the responsibility to protect and enhance long-term shareholders’ value. It sets the overall strategy for the Group and supervises the management of the Company (“Management”). To fulfill this role, the Board is responsible for the overall corporate governance of the Group which includes:

1. Setting and guiding the corporate strategy, directions and financial objectives of the Group, and monitoring the performance of Management towards achieving adequate shareholders’ value;

2. Overseeing the processes related to risk management and internal control, financial reporting and compliance, including the release of financial results and announcements of material transactions;

3. Approving all Board appointments and appointments of key personnel;

4. Approving annual budgets, major funding proposals, investment and divestment proposals;

5. Advising Management on major policy initiatives and significant issues; and

6. Overseeing the proper conduct of the Company’s business and assuming responsibility for corporate governance.

To assist the Board in the execution of its responsibilities, the Board delegates specific authority to four Board Committees which comprise the Audit Committee, the Nominating Committee, the Remuneration Committee and the Executive Committee. These Committees function within clearly defined terms of reference and operating procedures which are reviewed on a regular basis. The effectiveness of each committee is also constantly monitored.

The Executive Committee oversees the management of the business and affairs of the Group. It reviews the Group’s policies, principles, strategies, values, objectives and performance targets. These include investment and divestment policies.

The Board will meet on a quarterly basis and ad-hoc Board meetings will be convened when they are deemed necessary. In place of physical meetings, the Board and Board committees also circulate written resolutions for approval by the relevant members of the Board and Board committees. The Company’s Articles of Association allow a board meeting to be conducted by way of a tele-conference and video conference, audio visual, or other similar communications equipment. The Board conducts an annual review of its processes to ensure that it is able to carry out its functions in the most effective manner.

Report on Corporate Governance





The approval of the Board is required for any matters which is likely to have a material impact on the Group’s operating units and/or financial positions as well as matters other than in the ordinary course of business.

The directors, when first appointed, were given an orientation on the Group’s business strategies and operations.

Directors also had the opportunity to visit the Group’s operating facilities and meet with the Management to gain a better understanding of the Group’s business operations and governance practices. In the event of appointment of a director, the Company will provide a formal letter to the director, setting out the director’s duties and obligations. All directors to be appointed will also receive an orientation on the business strategies and operations of the Group and those who have no prior experience as directors of a listed company will undergo briefing on the roles and responsibilities as directors of a listed company.

DIRECTORS’ MEETINGS HELD IN 2010

Details of directors’ attendance at the Board and Board committee meetings held for the financial year ended 31 December 2010 are summarised in the table below.

DIRECTORS’ ATTENDANCE AT BOARD AND BOARD COMMITTEE MEETINGS

Board AuditCommittee

Remuneration Committee

NominatingCommittee

Number of Meetings held

Directors during financial year

Dr. Tan Eng Liang 4 4 1 1

Mr. Gary Loh Hock Chuan 4 - 1 -

Mr. Chee Wai Pong 4 4 1 1

Mr. Chan Soo Sen 2 2 1 1

Mr. Michael John Martin 2 2 - -

Mr. Ricky Goh Hoon Kan 4 - - 1

BOARD COMPOSITION AND BALANCE

PRINCIPLE 2: THERE SHOULD BE A STRONG AND INDEPENDENT ELEMENT ON THE BOARD, WHICH IS ABLE TO EXERCISE OBJECTIVE JUDGEMENT ON CORPORATE AFFAIRS INDEPENDENTLY, IN PARTICULAR, FROM MANAGEMENT. NO INDIVIDUAL OR SMALL GROUP OF INDIVIDUALS SHOULD BE ALLOWED TO DOMINATE THE BOARD’S DECISION MAKING.



Sunmoon Food Company Limited Annual Report 2010Sunmoon Food Company Limited Annual Report 2010 15

Presently the Board comprises one executive director and five independent non-executive directors. The present composition of the Board complies with the Code’s guidelines that independent directors make up more than one-third of the Board. The participation of the directors in the Board committees is as follows:

Name of Director Board AuditCommittee

RemunerationCommittee

NominatingCommittee

Dr. Tan Eng Liang C M M M

Mr. Gary Loh Hock Chuan M - M -

Mr. Chee Wai Pong M M C M

Mr. Chan Soo Sen M M M C

Mr. Michael John Martin M C - -

Mr. Ricky Goh Hoon Kan M - - M

C = ChairmanM = Member

The Board adopts the Code’s definition of what constitutes an independent director in its review. The Board is of the view that the independent non-executive directors of the Company are independent, and further, that no individual or small group of individuals dominate the Board’s decision making process. The independence of each director is also reviewed annually by the Nominating Committee.

The size and composition of the Board will be reviewed annually by the Nominating Committee. The review will seek to ensure that the size of the Board is appropriate so as to facilitate effective decision making. The review will also ensure that there is an appropriate mix of expertise and experience, which the Group may tap for assistance in furthering its business objectives and shaping its business strategies. Together, the directors as a group provide core competencies such as accounting and finance, business experience, industry knowledge, strategic planning experience and customer-based experience.

Non-executive Directors contribute to the Board process by monitoring and reviewing Management’s performance against goals and objectives. Their views and opinions provide alternative perspectives to the Group’s business. When challenging Management proposals or, decisions, they bring independent judgement to bear on business activities and transactions involving conflicts of interest and other complexities.

Key information regarding the directors is set out on pages 8 and 9 of the Annual Report.

ROLES OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER

PRINCIPLE 3: THERE SHOULD BE A CLEAR DIVISION OF RESPONSIBILITIES AT THE TOP OF THE COMPANY – THE WORKING OF THE BOARD AND THE EXECUTIVE RESPONSIBILITY OF THE COMPANY’S BUSINESS – WHICH WILL ENSURE A BALANCE OF POWER AND AUTHORITY, SUCH THAT NO ONE INDIVIDUAL REPRESENTS A CONSIDERABLE CONCENTRATION OF POWER.

Different individuals assume the roles of the Chairman of the Board and the Chief Executive Officer (“CEO”). The separation of the roles of the Chairman and CEO ensures a balance of power and authority such that no one individual represents a considerable concentration of power. The posts of Chairman and CEO are held by Dr. Tan Eng Liang and Mr. Neo Wei Ming respectively. The CEO is not a member of the Board.






As the Chairman, Dr. Tan bears responsibility for the effective working of the Board. He is responsible for amongst others, ensuring that the directors receive accurate, timely and clear information. In addition to making sure that effective communication is achieved with the shareholders, he acts as facilitator to non-executive directors for them to effectively contribute to the Group. He also encourages constructive relations between the management of the Company and the Board as well as between the executive director and non-executive directors.

As the CEO, Mr. Neo Wei Ming is responsible for the day-to-day running of the Group and the execution of the strategic plans set out by the Board and ensures that the Directors are kept updated and informed of the Group’s business.

The above is not an exhaustive description of the current or future role of the Chairman and CEO. The role of the Chairman and CEO may change in line with developments affecting the Group.

BOARD MEMBERSHIP

PRINCIPLE 4: THERE SHOULD BE A FORMAL AND TRANSPARENT PROCESS FOR THE APPOINTMENT OF NEW DIRECTORS TO THE BOARD.

NOMINATING COMMITTEE (“NC”)

The NC, regulated by a set of written terms of reference, comprises four members, all of whom are independent non-executive directors. The Chairman is Mr. Chan Soo Sen, an independent non-executive director, who is not, or who is not directly associated with, a substantial shareholder. The other three members are Dr. Tan Eng Liang, Mr. Chee Wai Pong and Mr. Ricky Goh Hoon Kan, the independent non-executive directors.

The NC is responsible for the following:

(a) to make recommendations to the Board on all Board appointments, including re-nominations, having regard to the directors’ contribution and performance including, if applicable, as an independent director;

(b) to determine annually, on a discretionary basis, whether or not a director is independent, bearing in mind the circumstances set forth in the Code and any other salient factors;

(c) in respect of a director who has multiple board representations on various companies, to decide whether or not such director is able to and has been adequately carrying out his duties as director, having regard to the competing time commitments that are faced when serving on multiple boards;

(d) to determine the process for selection and appointment of new directors to the Board, including disclosure on the search and nomination process; and

(e) to decide how the Board’s performance may be evaluated and propose objective performance criteria, as approved by the Board, that allows comparison with its industry peers, and address how the Board has enhanced long term shareholders’ value.

All the directors submit themselves for re-nomination and re-election at regular intervals of at least once every three years. Article 91 of the Articles of Association of the Company requires one-third of the Board (other than the Managing Director) to retire by rotation at every Annual General Meeting (“AGM”).

The NC recommended to the Board the re-nomination of Dr. Tan Eng Liang, Mr. Gary Loh Hock Chuan and Mr. Chee Wai Pong for re- election as directors of the Company at the forthcoming AGM.




BOARD PERFORMANCE

PRINCIPLE 5: THERE SHOULD BE A FORMAL ASSESSMENT OF THE EFFECTIVENESS OF THE BOARD AS A WHOLE AND THE CONTRIBUTION BY EACH DIRECTOR TO THE EFFECTIVENESS OF THE BOARD.

The Company acknowledges the importance of a formal assessment of Board performance and has adopted a formal system of evaluating Board performance as a whole. An evaluation of Board performance will be conducted annually to identify areas of improvement and as a form of good Board management practice.

The NC had assessed the effectiveness of the Board as a whole on each of the following:

- Board composition;- Information to the board;- Board procedure;- Board accountability;- CEO/Management; and- Standard of conduct.

ACCESS TO INFORMATION

PRINCIPLE 6: IN ORDER TO FULFILL THEIR RESPONSIBILITIES, BOARD MEMBERS SHOULD BE PROVIDED WITH COMPLETE, ADEQUATE AND TIMELY INFORMATION PRIOR TO BOARD MEETINGS AND ON AN ON-GOING BASIS.

Management is required to provide complete, adequate and timely information to the Board on Board affairs and issues that require the Board’s decision. Information provided included background of explanatory information and copies of disclosure documents.

The CEO keeps Board members abreast of key developments affecting the Group as well as material transactions in order that the Board is fully aware of the affairs of the Group. All directors have separate and independent access to the Management and the Company Secretary at all times.

The Company Secretary attends all Board meetings and assists the Board in ensuring that Board procedures and all other rules and regulations applicable to the Company are complied with. The Company Secretary also follows the direction of the Chairman to ensure that good information flows within the Board and its committees and between senior management and non-executive directors, as well as to facilitate orientation and assist with professional development when required to do so. The appointment and removal of the Company Secretary is subject to approval by the Board.

The Company has in place the procedure to enable the directors, whether as a group or individually, to obtain independent professional advice as and when necessary in furtherance of their duties at the Company’s expense.

The appointment of such independent professional advisor is subject to approval by the Board.

REMUNERATION MATTERS

PROCEDURES FOR DEVELOPING REMUNERATION POLICIES

PRINCIPLE 7: THERE SHOULD BE A FORMAL AND TRANSPARENT PROCEDURE FOR FIXING THE REMUNERATION PACKAGES OF INDIVIDUAL DIRECTORS. NO DIRECTOR SHOULD BE INVOLVED IN DECIDING HIS OWN REMUNERATION.






Remuneration Committee (“RC”)

The RC ensures the appropriateness, transparency and accountability to shareholders on issues of remuneration of the directors and Management.The RC, regulated by a set of written terms of reference, comprises four members, three of whom are independent non-executive directors. The Chairman of the RC is Mr. Chee Wai Pong, an independent non-executive director. The members are Dr. Tan Eng Liang and Mr. Chan Soo Sen, the independent non-executive directors and Mr. Gary Loh Hock Chuan, an executive director.

The RC is responsible for the following:

(a) to recommend to the Board a framework of remuneration for the Board and key executives;

(b) to recommend specific remuneration packages and terms of employment for each executive director and the CEO (or executive of equivalent rank) if the CEO is not a director;

(c) to recommend the remuneration of the non-executive directors, taking into account factors such as their effort and time spent, and their responsibilities;

(d) in the case of service contracts, to consider what compensation commitments the Directors’ contracts of service, if any, would entail in the event of early termination with a view to be fair and avoid rewarding poor performance;

(e) to review the remuneration of senior management; and

(f) to recommend to the Board long term incentive schemes which may be set up from time to time.

The recommendation of the RC for the remuneration of directors would be submitted for endorsement by the Board and should cover all aspects of remuneration, including but not limited to director’s fees, salaries, allowances, bonuses, options, and benefits in kind. No director or member of the RC is involved in deciding his own remuneration.

If required, the RC will seek expert advice inside and/or outside the Company on remuneration of all Directors.

LEVEL AND MIX OF REMUNERATION

PRINCIPLE 8: THE LEVEL OF REMUNERATION SHOULD BE APPROPRIATE TO ATTRACT, RETAIN AND MOTIVATE THE DIRECTORS NEEDED TO RUN THE COMPANY SUCCESSFULLY BUT COMPANIES SHOULD AVOID PAYING MORE THAN IS NECESSARY FOR THIS PURPOSE. A SIGNIFICANT PROPORTION OF EXECUTIVE DIRECTORS’ REMUNERATION SHOULD BE STRUCTURED SO AS TO LINK REWARDS TO CORPORATE AND INDIVIDUAL PERFORMANCE.

The remuneration packages are set such that the directors are adequately but not excessively remunerated as compared to other comparable companies in the industry in view of present market conditions. The remuneration policy adopted takes into account the individual’s and the Company’s performance.

The remuneration of the Chairman of EXCO, Mr. Gary Loh Hock Chuan, as set out in the renewable yearly service agreement which commenced on 1 July 2007, consists of a fixed monthly salary. The service agreement may be terminated during such term either as provided in the service agreement or by either party giving to the other not less than 3 months written notice. There are no onerous compensation commitments on the part of the Company in the event of an early termination of the service of Chairman of EXCO.

The current remuneration of the non-executive directors is appropriate to the level of contribution, taking into account factors




such as effort and time spent, and responsibilities of the directors. Except for directors’ fees, which have to be approved by Shareholders at every annual general meeting (“AGM”), the non-executive directors do not receive any other forms of remuneration from the Company.

The Company is currently in the process of formulating an employee’s share option scheme for shareholders’ approval.

DISCLOSURE ON REMUNERATION

PRINCIPLE 9: EACH COMPANY SHOULD PROVIDE CLEAR DISCLOSURE OF ITS REMUNERATION POLICY, LEVEL AND MIX OF REMUNERATION, AND THE PROCEDURE FOR SETTING REMUNERATION IN THE COMPANY’S ANNUAL REPORT. IT SHOULD PROVIDE DISCLOSURE IN RELATION TO ITS REMUNERATION POLICIES TO ENABLE INVESTORS TO UNDERSTAND THE LINK BETWEEN REMUNERATION PAID TO DIRECTORS AND KEY EXECUTIVES, AND PERFORMANCE.

Directors

The fees and remuneration paid to each of the directors of the Company for the financial year ended 31 December 2010 are below S$250,000 per annum for five independent directors and below S$500,000 for one executive director. A breakdown of the level and mix of the remuneration of the directors is as follows:

Fees % Salary % Bonus and Benefits in Kind

%

Total %

S$250,000 to Below S$500,000

Mr. Gary Loh Hock Chuan 3.5% 96.5% - 100%

Below S$250,000

Dr. Tan Eng Liang 100% - - 100%

Mr. Chee Wai Pong 100% - - 100%

Mr. Chan Soo Sen 100% - - 100%

Mr. Michael John Martin 100% - - 100%

Mr. Ricky Goh Hoon Kan 100% - - 100%

Mr. Howard Jeffrey Unger 100% - - 100%

Key Executives

The top key executives of the Group are Mr. Neo Wei Ming, Ms. Chen Mei, Mr. Chng Say Kiat, and Mr. Ivan Chua Kim Boon. The remuneration for Mr. Neo Wei Ming (CEO) for the financial year ended 31 December 2010 was above S$250,000 and below S$500,000 per annum. And the remuneration of each of the rest key executives for the financial year ended 31 December 2010 were all below S$250,000 per annum.

There are no employees of the Group who are immediate family members of a director.






ACCOUNTABILITY AND AUDIT ACCOUNTABILITY

PRINCIPLE 10: THE BOARD SHOULD PRESENT A BALANCED AND UNDERSTANDABLE ASSESSMENT OF THE COMPANY’S PERFORMANCE, POSITION AND PROSPECTS.

In presenting the annual financial statements and quarterly announcements to shareholders, it is the aim of the Board to provide the shareholders with a detailed analysis, explanation and assessment of the Group’s financial position and prospects. The Management currently provides the Board with management accounts of the Group’s performance, position and prospects on a quarterly basis.

AUDIT COMMITTEE (“AC”)

PRINCIPLE 11: THE BOARD SHOULD ESTABLISH AN AUDIT COMMITTEE (“AC”) WITH WRITTEN TERMS OF REFERENCE WHICH CLEARLY SET OUT ITS AUTHORITY AND DUTIES.

The AC, regulated by a set of written terms of reference, comprises four independent non-executive directors namely,Dr. Tan Eng Liang, Mr. Michael John Martin, Mr. Chan Soo Sen and Mr. Chee Wai Pong. The Chairman of the AC is Mr. Michael John Martin.

The Board is of the view that the members of the AC are appropriately qualified, having the necessary accounting or related management expertise or experience as the Board interprets such qualification, to discharge their responsibilities.

The AC meets periodically to discuss and review the following where applicable:

(a) review with the external auditors the audit plan, their evaluation of the system of internal controls, their audit report, their letter to Management and Management’s response;

(b) review the quarterly, half yearly, and annual financial statements and balance sheet and profit and loss accounts before submission to the Board for approval, focusing in particular, on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, the going concern statement, compliance with accounting standards as well as compliance with any stock exchange and statutory/regulatory requirements;

(c) review the internal controls and procedures and ensure co-ordination between the external auditors and Management, reviewing the assistance given by Management to the auditors, and discussing problems and concerns, if any, arising from the interim and final audits, and any matters which the auditors may wish to discuss (in the absence of Management where necessary);

(d) review and discuss with the external auditors any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on the Group’s operating results or financial position, and Management’s response;

(e) consider the appointment or re-appointment of the external auditors and matters relating to resignation or dismissal of the auditors;

(f) review transactions falling within the scope of Chapter 9 of the Listing Manual;

(g) review potential conflicts of interests, if any;

(h) undertake such other reviews and projects as may be requested by the Board and to report to the Board its findings from time to time on matters arising and requiring the attention of the AC; and




(i) generally undertake such other functions and duties as may be required by statute or the Listing Manual, and by such amendments made thereto from time to time.

The AC has the explicit powers to conduct or authorize investigations into any of the abovementioned matters. The AC has full access to and co-operation by Management and also full discretion to invite any director or executive officer to attend its meetings as well as reasonable resources to enable it to discharge its function properly.

The AC meets with the Group’s external auditors and Management to review accounting, auditing and financial reporting matters so as to ensure that an effective system of control is maintained in the Group. The AC meets with the external auditors, without the presence of Management, at least once a year.

The AC has conducted an annual review of the volume of non-audit services, if any, to satisfy itself that the nature and extentof such services will not prejudice the independence and objectivity of the external auditors as well as the cost effectivenessof the audit before confirming their re- nomination. The AC had recommended the re-appointment of Mazars LLP as external auditors at the forthcoming AGM.

INTERNAL CONTROLS

PRINCIPLE 12: THE BOARD SHOULD ENSURE THAT THE MANAGEMENT MAINTAINS A SOUND SYSTEM OF INTERNAL CONTROLS TO SAFEGUARD THE SHAREHOLDERS’ INVESTMENT AND THE COMPANY’S ASSETS.

The Board acknowledges that it is responsible for the overall internal control framework and maintains a sound system of internal controls to safeguard the shareholders’ investment and the Company’s assets. The AC reviews the adequacy of the Company’s internal financial controls, operational and compliance controls, and risk management policies and systems established by the Management.

The AC conducts a review to ensure the adequacy of the internal audit function at least annually. The system of internal controls currently implemented by the Group provides reasonable assurance against financial misstatements or loss.

The Board recognizes that no internal control system will preclude all errors and irregularities, as a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss.

The Board believes that, in the absence of any evidence to the contrary, the system of internal control maintained by the Group’s management throughout the financial year ended 31 December 2010 up to the date of this report is adequate to meet the needs of the Group in its current business environment.

INTERNAL AUDIT

PRINCIPLE 13: THE COMPANY SHOULD ESTABLISH AN INTERNAL AUDIT FUNCTION THAT IS INDEPENDENT OF THE ACTIVITIES IT AUDITS.

The Board is responsible for maintaining a sound system of internal controls to safeguard shareholders’ interests.

Company had appointed an internationally reputable accounting firm to perform internal audit. The AC meets with the internal auditors regularly to review the Company’s operations and to plan for appropriate internal audit program. Reports are prepared by the internal auditors for review by the AC and approval by the Board.






COMMUNICATION WITH SHAREHOLDERS

PRINCIPLE 14: COMPANIES SHOULD ENGAGE IN REGULAR, EFFECTIVE AND FAIR COMMUNICATION WITH SHAREHOLDERS.

PRINCIPLE 15: COMPANIES SHOULD ENCOURAGE GREATER SHAREHOLDER PARTICIPATION AT AGMS, AND ALLOW SHAREHOLDERS THE OPPORTUNITY TO COMMUNICATE THEIR VIEWS ON VARIOUS MATTERS AFFECTING THE COMPANY.

In line with continuous disclosure obligations of the Company and pursuant to the SGX-ST’s Listing Manual, the Board’s policy is that shareholders are informed of all major developments that impact the Group.

Information is communicated to shareholders on a timely basis. Communication is made through annual reports that are prepared and issued to all shareholders as well as quarterly announcements, notice of annual general meetings and extraordinary general meetings, other announcements and press releases are issued via SGXNET.

In addition, shareholders are encouraged to attend the AGM to ensure a high level of accountability and to stay informed of the Group’s strategy and goals. Shareholders may vote in person or in absentia by way of proxies deposited, in person or by mail, at the registered address of the Company. Currently the Board has not implemented any voting methods to allow shareholders to vote by way of electronic mail or facsimile. Pursuant to Article 71 of the Articles of Association of the Company, a shareholder shall not be entitled to appoint more than two proxies to attend and vote at the same general meeting.

The AGM is the principal forum for dialogue with shareholders. The Board welcomes questions from shareholders who havean opportunity to raise issues either informally or formally before or at the AGM. The notice of the AGM is despatched to shareholders, together with explanatory notes or a circular on items of special business, at least 14 days before the meeting for ordinary resolutions and 21 days before the meeting for special resolutions. There are separate resolutions on each substantially separate issue. The Chairmen of the AC, NC and RC will normally be available at the shareholders’ meetings to answer those questions relating to the work of these committees. The external auditors of the Company will also normally be present to address shareholders’ queries about the conduct of audit and the preparation and content of the auditors’ report.

Dealing in Securities

The Company has adopted internal codes pursuant to the SGX-ST Listing Manual’s guidelines applicable to all its officers in relation to dealings in the Company’s securities. Its officers are not allowed to deal in the Company’s shares during the period commencing two weeks before the announcement of the Company’s financial statements for each of the first three quarters of the financial year, and during the period commencing one month before the announcement of the financial statements for the financial year, and ending on the date of announcement of the relevant results.

Interested Person Transactions

The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the Company’s interested-person transactions.




Directors’ Report

We are pleased to submit this annual report to the members of Sunmoon Food Company Limited (the “Company”), together with the audited financial statements of the Company and consolidated financial statements of the Company and its subsidiaries (the “Group”) for the financial year ended 31 December 2010.

DIRECTORS

The directors of the Company in office at the date of this report are as follows:

Dr. Tan Eng Liang (Chairman)Gary Loh Hock Chuan (Deputy Chairman)Chee Wai PongChan Soo SenMichael John MartinRicky Goh Hoon Kan

DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50 (the “Act”), except as disclosed, none of the directors (including those held by their spouses and infant children) who held office at the end of the financial year had interest in shares, debentures, warrants and share options in the Company and in related corporations (other than wholly-owned subsidiaries), either at the beginning or at the end of the financial year:

Shareholdings registered in the name of director

Shareholdings in which director isdeemed to have interests

Name of director and company in which interests is held 01.01.2010 31.12.2010 21.01.2011 01.01.2010 31.12.2010 21.01.2011

The Company Ordinary shares with no par value

Gary Loh Hock Chuan - - - 497,204,258 497,204,258 497,204,258

Except as disclosed in this report and the accompanying financial statements, since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

Neither at the end of, nor at any time during the financial year, was the company a party to any arrangement whose objects are, or one of whose object is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.





Directors’ Report

SHARE OPTIONS

As at 31 December 2010, the Company had outstanding convertible loan owing to the investors of $24.4 million and $7.3 million premium payable on the convertible loans; both of which may be convertible into shares of the Company at $0.01 each at the discretion of the investors. On 30 September 2010, the Company and the convertible loan holders entered into a Memorandum of Understanding (MOU) setting out the principal terms on which the convertible loan is proposed to be settled/repaid.

On 3 December 2010, the Company entered into (i) a $24 million convertible loan agreement with CHIC FOODS ASIA PACIFIC CO., LTD. (“Chic”), and (ii) a $60 million convertible loan facility agreement with Chic. Currently, the Company and Chic are seeking approvals from various authorities.

Other than the above, there were no unissued shares of the Company or its subsidiaries under options as at the end of the financial year.

AUDIT COMMITTEE

The members of the Audit Committee during the year and at the date of this report are:

Michael John Martin (Chairman)Dr. Tan Eng LiangChan Soo SenChee Wai Pong

The Audit Committee performs the functions specified in Section 201B of the Singapore Companies Act, the SGX Listing Manual and the Code of Corporate Governance.

The Audit Committee has held 4 meetings since the last report of the directors. In performing its functions, the Audit Committee met with the Company’s external and internal auditors to discuss the scope of their work, the results of their examination and evaluation of the Company’s internal accounting control system.

The Audit Committee also reviewed the following:

(i) assistance provided by the Company’s officers to the external and internal auditors;

(ii) interested person transactions (as defined in Chapter 9 of the SGX Listing Manual);

(iii) quarterly financial information and annual financial statements of the Group and the Company prior to their submission to the directors of the Company for adoption.

The Audit Committee has full access to management and is given the resources required for it to discharge its functions. It has full authority and the discretion to invite any director and executive officer to attend its meetings. The Audit Committee also recommends the appointment of the external auditors and reviews the level of audit and non-audit fees.

The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommended to the Board of Directors that the auditors, Mazars LLP, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.



Directors’ Report

INDEPENDENT AUDITORS

Mazars LLP, Public Accountants and Certified Public Accountants, have expressed their willingness to acceptre-appointment.

On behalf of the Board of Directors

Dr. Tan Eng Liang Michael John MartinDirector Director

Singapore23 March 2011





Statement by Directors

In our opinion,

(a) the accompanying financial statements are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010 and of the results of the business, changes in equity and cash flows of the Group and for the financial year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore Financial Reporting Standards; and

(b) at the date of this statement, with the financial support from the loan investors of the $60 million convertible loan facility, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

The Board of Directors has, on the date of this statement, authorised these financial statements for issue.

On behalf of the Board of Directors

Dr. Tan Eng Liang Michael John MartinDirector Director




Report on the Financial Statements

We have audited the accompanying financial statements of Sunmoon Food Company Limited (the “Company”) and its subsidiaries (the “Group”), which comprise the statements of financial position of the Group and the Company as at 31 December 2010, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the financial year ended 31 December 2010, and a summary of significant accounting policies and other explanatory notes, as set out on pages 29 to 86.

Management’s responsibility for the financial statements

Management is responsible for the preparation of financial statements in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the Group’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements of the Group and the statement of financial position of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010 and of the results, changes in equity and cash flows of the Group for the financial year ended on that date.

Emphasis of Matter

Going concern

We draw your attention to Note 2 of the accompanying financial statements. The financial statements of the Group and the Company have been prepared on a going concern basis notwithstanding the deficiency in shareholders’ equity of $19.3 million and $16.9 million of the Group and the Company respectively as at 31 December 2010, and net current liabilities of $26.9 million and $36.7 million of the Group and Company respectively as of 31 December 2010.

Independent Auditors’ Report to the members of SunMoon Food Company Limited and its subsidiaries





Independent Auditors’ Report to the members of SunMoon Food Company Limited and its subsidiaries

In analysing the going concern position of the Group and the Company, the directors of the Company have considered the following factors:

The generation of significant positive cash flows from the Group’s on-going activities; and

The Company is exploring various strategies to improve its financial position and cash flows, is in discussion with a potential investor (see below) and seeking new banking facilities. The successful implementation of these restructuring plans is crucial for the going concern of the Group and the Company.

° Subject to approvals by the Singapore Exchange (“SGX”) and shareholders of the Company, and the completion of the terms and conditions of the convertible loan facility, it is proposed that the new investor will repay the current convertible loan holders with the option to convert the loan to shares before maturity of the convertible loan and provide a $60 million convertible loan facility (refer to Note 26).

Management has prepared a cash flow forecast for the year ending 31 December 2011 to support the going concern of the Group and the Company. The cash flow forecast showed that the Group will have adequate working capital out of its operations but before the repayment of the convertible loans to investors. One of the key assumptions made by management in the preparation of the cash flow forecast for the next one year is that the proposed new investor will repay the current convertible loan holders and convert the loan to shares before maturity of the convertible loan.

The validity of the going concern assumption on which these financial statements are prepared depends on the favourable outcome of the matters described above. These factors indicate the existence of material uncertainty which may cast significant doubt on the Group’s and the Company’s ability to continue as going concerns. If the Group and the Company are unable to continue in operational existence for the foreseeable future, the Group and the Company may be unable to discharge their liabilities in the normal course of business and adjustments may be required to reflect the situation that assets may need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts at which they are currently recorded in the statements of financial position. In addition, the Group and the Company may have to reclassify certain non-current assets as current assets. No such adjustments have been made to these financial statements as at 31 December 2010. Our opinion is not qualified in respect of this matter.

Report on Regulatory and Other Legal Requirements

The accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors, have been properly kept in accordance with the provisions of the Act.

MAZARS LLP PUBLIC ACCOUNTANTS ANDCERTIFIED PUBLIC ACCOUNTANTS




Group

Note 2010 2009

$’000 $’000

Revenue 4 36,024 26,870

Cost of sales (27,809) (21,229)

Gross profit 8,215 5,641

Other income 5 2,161 15,873

Selling and distribution expenses (1,290) (1,204)

Administrative expenses (5,228) (7,065)

Other operating expenses 6 (453) (4,600)

Finance costs 7 (2,450) (2,203)

Profit before tax 8 955 6,442

Income tax expense 9 (16) (4)

Profit for the year attributable to owners of the parent 939 6,438

Other comprehensive loss

Changes in fair value of property, plant and equipment - (539)

Currency translation difference arising from consolidation (910) (535)

Reclassification of foreign currency translation reserve on disposal of subsidiaries - (4,908)

Other comprehensive loss for the year, net of tax (910) (5,982)

Total comprehensive income for the year attributable to owners of the parent 29 456

Earnings per share (cents)

- Basic 10 0.012 0.082

- Diluted 10 0.012 0.076

Consolidated Statement of Comprehensive IncomeFor the Year Ended 31 December 2010

The accompanying notes form an integral part of these financial statements.





Group Company

Note 2010 2009 2010 2009

ASSETS $’000 $’000 $’000 $’000

Non-current assets

Subsidiaries 11 - - 19,671 16,389

Associates 12 - - - -

Other investments 13 17 17 17 17

Property, plant and equipment 14 7,590 9,172 100 125

7,607 9,189 19,788 16,531

Current assets

Cash and cash equivalents 15 5,384 1,639 105 63

Trade receivables 16 2,697 1,597 - -

Other receivables and prepayments 17 348 1,078 150 151

Inventories 18 5,385 7,075 - -

13,814 11,389 255 214

Total assets 21,421 20,578 20,043 16,745

EQUITY AND LIABILITIES

Equity attributable to equity holders of the Company

Share capital 19 100,508 100,508 100,508 100,508

Capital reserve 20 944 944 - -

Capital reduction reserve 21 18,384 18,384 18,384 18,384

Foreign currency translation reserve 22 1,131 2,041 - -

Asset revaluation reserve 23 2,596 2,596 - -

General reserve 24 2,201 2,201 - -

Accumulated losses (145,035) (145,974) (135,772) (136,473)

Total equity (19,271) (19,300) (16,880) (17,581)

Current liabilities

Bank loan (secured) 25 979 1,029 - -

Loan from investors 26 24,424 24,424 24,424 24,424

Trade payables 27 1,235 2,946 - -

Other payables 28 13,949 11,410 12,499 9,902

Current tax payable 105 69 - -

Total liabilities 40,692 39,878 36,923 34,326

Total equity and liabilities 21,421 20,578 20,043 16,745

Statements of Financial PositionAs at 31 December 2010




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Consolidated Statement of Changes in EquityFor the year ended 31 December 2010

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Group

Note 2010 2009

$’000 $’000

Operating activities

Profit before tax 955 6,442

Adjustments for:

Interest expense 7 2,450 2,203

Interest income 5 (8) (2)

Dividend income 5 (3) (3)

Impairment of property, plant and equipment - 118

Impairment of associated companies - 107

Impairment (written back)/made on assets subject to bank guarantees 5 (1,143) 3,500

Depreciation of property, plant and equipment 14 1,164 1,828

Deposit forfeited/amount waived by supplier - (62)

Overprovision of VAT accrued - (483)

Loss on disposal of property, plant and equipment 6 4 190

Long outstanding payables written off 5 (155) -

Gain on disposal of other investments - (144)

Gain on disposal of subsidiaries (a) - (12,442)

Allowance made for doubtful other receivables 6 73 -

Allowance made/(written back) for doubtful trade receivables 5 82 (48)

Allowance written back for inventories obsolescence 5 (746) (1,457)

Provision for cost of registering property, plant and equipment - 637

Unrealised currency translation gain (337) (1,526)

Operating profit/(loss) before changes in working capital 2,336 (1,142)

Change in working capital:

Trade and other receivables (370) (807)

Inventories 3,579 1,680

Trade and other payables (1,622) (2,211)

Cash flows generated from/(used in) operations 3,923 (2,480)

Income taxes refunded/(paid) 18 (4)

Net cash flows generated from/(used in) operating activities 3,941 (2,484)

Investing activities

Interest received 8 2

Dividend received 3 3

Purchase of property, plant and equipment 14 (101) (575)

Proceeds from disposal of property, plant and equipment - 279

Proceeds from disposal of other investments - 144

Proceeds from disposal of subsidiaries (a) - (5)

Net cash flows used in investing activities (90) (152)

Consolidated Statement of Cash FlowsFor the year ended 31 December 2010



Group

2010 2009

$’000 $’000

Financing activities

Proceeds from bank loan 1,029 1,029

Repayment of bank loan (1,029) -

Net cash flows generated from financing activities - 1,029

Net increase/(decrease) in cash and cash equivalents 3,851 (1,607)

Cash and cash equivalents at beginning of year 1,639 3,310

Effect of exchange rate changes on cash and cash equivalents (106) (64)

Cash and cash equivalents at end of year 5,384 1,639

Note (a): Gain on disposal of subsidiaries

In 2009, the Group disposed of two subsidiaries of the Sub-group (refer to Note 32).

Group

2009

$’000 $’000

Disposal price ($1 each) -

Net assets disposed of:

Property, plant and equipment 20,601

Biological assets - plantations 9,713

Cash and cash equivalents 5

Trade and other receivables 1,944

Trade payables (2,300)

Other payables (11,897)

Current tax payable (610)

Bank loans (secured) (24,990)

Reclassification of currency translation reserve on disposal of foreign operations (4,908) (12,442)

Gain on disposal of subsidiaries (12,442)

Cash and cash equivalents disposed of (5)

Consolidated Statement of Cash FlowsFor the Year Ended 31 December 2010







Notes to the Financial StatementsFor the year ended 31 December 2010

These notes form an integral part of and should be read in conjunction with the accompanying financial statements. The financial statements have been authorised for issue by the board of directors on 23 March 2011.

1. DOMICILE AND ACTIVITIES

Sunmoon Food Company Limited (the “Company”) is incorporated in the Republic of Singapore with its principal place of business at 21 Bukit Batok Crescent #10-75 WCEGA Tower, Singapore 658065 and registered office at 1 Scotts Road, #21-07/08/09 Shaw Centre, Singapore 228202. The Company is domiciled in Singapore and is listed on the Singapore Exchange Securities Trading Limited.

The principal activity of the Company is that of investment holding. The principal activities of the significant subsidiaries are disclosed in Note 11 to the financial statements.

The consolidated financial statements relate to the Company and its subsidiaries (referred to as the “Group”) and the Group’s interest in associates.

2. GOING CONCERN

The financial statements of the Group and Company have been prepared on a going concern basis notwithstanding the deficiency in shareholders’ equity of $19.3 million and $16.9 million of the Group and the Company, and the net current liabilities of $26.9 million and $36.7 million of the Group and the Company respectively as of 31 December 2010.

In analysing the going concern position of the Group and the Company, the directors of the Company have considered the following factors:

• The generation of significant positive cash flows from the Group’s on-going activities; and

• The Company is exploring various strategies to improve its financial position and cash flows, is in discussion with a potential investor (see below) and seeking new banking facilities. The successful implementation of these restructuring plans is crucial for the going concern of the Group and the Company.

° Subject to approvals by the Singapore Exchange (“SGX”) and shareholders of the Company, and the completion of the terms and conditions of the convertible loan facility, it is proposed that the new investor will repay the current convertible loan holders with the option to convert the loan to shares before maturity of the convertible loan and provide a $60 million convertible loan facility (refer to Note 26).

Management has prepared a cash flow forecast for the year ending 31 December 2011 to support the going concern of the Group and the Company. The cash flow forecast showed that the Group will have adequate working capital out of its operations but before the repayment of the convertible loans to investors. One of the key assumptions made by management in the preparation of the cash flow forecast for the next one year is that the proposed new investor will repay the current convertible loan holders and convert the loan to shares before maturity of the convertible loan.

The validity of the going concern assumption on which these financial statements are prepared depends on the favourable outcome of the matters described above. These factors indicate the existence of a material uncertainty which may cast significant doubt on the Group’s and the Company’s ability to continue as going concerns. If the Group and the Company are unable to continue in operational existence for the foreseeable future, the Group and the Company may be unable to discharge their liabilities in the normal course of business and adjustments may be required to reflect the situation that assets may need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts at which they are currently recorded in the statements of financial position. In addition, the Group and the Company may have to reclassify certain non-current assets as current assets. No adjustment have been made to these financial statements as at 31 December 2010.





3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Basis of preparation

The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (FRS).

The financial statements have been prepared on the historical cost basis except as disclosed in the significant accounting policies set out below. The financial statements are presented in thousands of Singapore dollar (or $’000) except as indicated otherwise.

3.2 Interpretations and amendments to published standards effective in 2010

The accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the Group and the Company have adopted all the new and revised standards and interpretations of FRS (“INT FRS”) that are effective for annual periods beginning on or after 1 January 2010. The adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group and the Company except as disclosed below:

FRS 103 Business Combinations (revised) and FRS 27 Consolidated and Separate Financial Statements (revised)

The revised FRS 103 Business Combinations and FRS 27 Consolidated and Separate Financial Statements are applicable for annual periods beginning on or after 1 July 2009. As of 1 January 2010, the Group adopted both revised standards at the same time in accordance with their transitional provisions.

FRS 103 Business Combinations (revised)

The revised FRS 103 introduces a number of changes to the accounting for business combinations that will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. Changes in significant accounting policies resulting from the adoption of the revised FRS 103 include:

• Transaction costs would no longer be capitalised as part of the cost of acquisition but will be expensed immediately;

• Consideration contingent on future events are recognised at fair value on the acquisition date and any changes in the amount of consideration to be paid will no longer be adjusted against goodwill but recognised in profit or loss;

• The Group elects for each acquisition of a business, to measure non-controlling interest at fair value, or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets, and this impacts the amount of goodwill recognised; and

• When a business is acquired in stages, the previously held equity interests in the acquire is remeasured to fair value at the acquisition date with any corresponding gain or loss recognised in profit or loss, and this impacts the amount of goodwill recognised.

According to its transitional provisions, the revised FRS 103 has been applied prospectively. Assets and liabilities that arose from business combinations whose acquisition dates are before 1 January 2010 are not adjusted. The Group has not been significantly impacted from this revised standard.






3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

3.2 Interpretations and amendments to published standards effective in 2010 (cont'd)

FRS 27 Consolidated and Separate Financial Statements (revised)

Changes in significant accounting policies resulting from the adoption of the revised FRS 27 include:

• A change in the ownership interest of a subsidiary that does not result in a loss of control is accounted for as an equity transaction. Therefore, such a change will have no impact on goodwill, nor will it give rise to a gain or loss recognised in profit or loss;

• Losses incurred by a subsidiary are allocated to the non-controlling interest even if the losses exceed the non-controlling interest in the subsidiary’s equity; and

• When control over a subsidiary is lost, any interest retained is measured at fair value with the corresponding gain or loss recognised in profit or loss.

According to its transitional provisions, the revised FRS 27 has been applied prospectively, and does not impact the Group’s consolidated financial statements in respect of transactions with non-controlling interests, attribution of losses to non-controlling interests and disposal of subsidiaries before 1 January 2010. The changes will affect future transactions with non-controlling interests.

The Group has not adopted the following standards and interpretations that have been issued but not yet effective.

DescriptionEffective for annual periods commencing on

FRS 32: Financial Instruments: Presentation, on Classification of Rights Issue 1 February 2010

INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments 1 July 2010

Amendments to FRS 24 Related Party Disclosures 1 January 2011

Amendments to INT FRS 114 Prepayments of a Minimum Funding Requirement 1 January 2011

INT FRS 115 Agreements for the Construction of Real Estate 1 January 2011

The Conceptual Framework for Financial Reporting 2010 (Chapters 1 and 3) 1 March 2011

Amendments to FRS 107 Disclosures – Transfers of Financial Assets 1 July 2011

Amendments to FRS 12 Deferred Tax: Recovery of Underlying Assets 1 January 2012

Except for the revised FRS 24, the initial application of those standards and interpretations are not expected to have any material impact on the Group’s financial statements. The Group has not considered the impact of accounting standards issued after the reporting date. The nature of the impending changes in accounting policy on adoption of the revised FRS 24 is described below.







3.2 Interpretations and amendments to published standards effective in 2010 (cont'd)

Revised FRS 24 Related Party Disclosures

The revised FRS 24 clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised FRS 24 expands the definition of a related party and would treat two entities as related to each other whenever a person (or a close member of that person’s family) or a third party has control or joint control over the entity, or has significant influence over the entity. The revised standard also introduces a partial exemption of disclosure requirements for government-related entities. The Group is currently determining the impact of the changes to the definition of a related party has on the disclosure of related party transactions. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group when implemented in 2011.

3.3 Consolidation

Business combinations from 1 January 2010

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the end of the reporting period. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Business combinations are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with FRS 39 either in profit or loss or as change to other comprehensive income. If the contingent consideration is classified as equity, it is not to be remeasured until it is finally settled within equity.

In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.

The Group elects for each individual business combination, whether non-controlling interest in the acquiree, if any, is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquire identifiable net assets.







3.3 Consolidation (cont'd)

Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquire, if any, and the fair value of the Group’s previously held equity interest in the acquire, if any, over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill. The accounting policy for goodwill is set out in Note 3.7. In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the acquisition date.

Business combinations before 1 January 2010

In comparison to the above mentioned requirements, the following differences applied:

Business combinations are accounted for by applying the purchase method. Transaction costs directly attributable to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the proportionate share of the acquiree’s identifiable net assets.

Business combinations achieved in stages were accounted for as separate steps. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity.

When the Group acquired a business, embedded derivatives separated from the host contract by the acquire are not reassessed on acquisition unless the business combination results in a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.

Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent measurements to the contingent consideration affected goodwill.

3.4 Transactions with non-controlling interests

Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to owners of the Company.

Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received.

3.5 Foreign currency

The Groups’ consolidated financial statements are presented in Singapore dollar, which is also the parent company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.







3.5 Foreign currency (cont'd)

Transactions and balances

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Non-monetary items are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

Group companies

The assets and liabilities of foreign operations are translated into Singapore dollar at the rate of exchange ruling at the end of the reporting period and their profit or loss are translated at the exchange rates prevailing at the date of the transactions. The exchange differences arising on the translation are recognised in other comprehensive income within equity. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.

In the case of a partial disposal without loss of control of a subsidiary that includes a foreign operation, the proportionate share of the cumulative amount of the exchange differences are re-attributed to non-controlling interest and are not recognised in profit or loss. For partial disposals of associates or jointly controlled entities that are foreign operations, the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

The Group has elected to recycle the accumulated exchange differences in the separate component of other comprehensive income that arises from the direct method of consolidation, which is the method the Group uses to complete its consolidation.

3.6 Property, plant and equipment

All items of property, plant and equipment are initially stated at cost. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying property, plant and equipment. The accounting policy for borrowing costs is set out in Note 3.17. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.







3.6 Property, plant and equipment (cont'd)

Subsequent to recognition, certain plant and equipment, furniture, fixtures and fittings, office equipment and motor vehicles are measured at cost less accumulated depreciation and any accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. Leasehold properties and certain plant and equipment are measured at fair value less accumulated depreciation and impairment losses recognised after the date of the revaluation. Valuations are performed with sufficient regularity to ensure that the carrying amount does not differ materially from the fair value of the leasehold properties and certain plant and equipment at the end of the reporting period.

Any revaluation surplus is recognised in other comprehensive income and accumulated in equity under the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss. A revaluation deficit is recognised in profit or loss, except to the extent that it offsets an existing surplus on the same asset carried in the asset revaluation reserve.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. The revaluation surplus included in the asset revaluation reserve in respect of an asset is transferred directly to accumulated losses on retirement or disposal of the asset.

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:

Leasehold properties - Over lease period of 10 to 50 yearsPlant and machinery - 6 to 10 yearsFurniture, fixtures and fittings - 5 to 10 yearsOffice equipment - 3 to 10 yearsMotor vehicles - 2 to 5 years

Assets under construction included in property, plant and equipment are not depreciated as these assets are not yet available for use.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in profit or loss in the year the asset is derecognised.







3.7 Intangible assets

Goodwill

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units.

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the cash-generating unit retained.

Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 3.5.

Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2005 are deemed to be assets and liabilities of the Company and are recorded in Singapore dollar at the rates prevailing at the date of acquisition.

3.8 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when an annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.







3.8 Impairment of non-financial assets (cont'd)

Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset, except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase.

3.9 Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses.

3.10 Associates

An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.

The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in associates is carried in the statement of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to associates is included in the carrying amount of the investment and is neither amortised nor tested individually for impairment. Any excess of the Group’s share of the net fair value of the associate’s identifiable asset, liabilities and contingent liabilities over the cost of the investment is deducted from the carrying amount of the investment and is recognised as income as part of the Group’s share of results of the associate in the period in which the investment is acquired.

The profit or loss reflects the share of the results of operations of the associates. Where there has been a change recognised in other comprehensive income by the associates, the Group recognises its share of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associates.

The Group’s share of the profit or loss of its associates is shown on the face of profit or loss after tax and non-controlling interests in the subsidiaries of associates.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.







3.10 Associates (cont'd)

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associates. The Group determines at the end of each reporting period whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profit or loss.

The financial statements of the associates are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

Upon loss of significant influence over the associate, the Group measures any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the aggregate of the retained investment and proceeds from disposal is recognised in profit or loss.

3.11 Financial assets

Initial recognition and measurement

Financial assets are recognised on the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial assets at initial recognition.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by FRS 39. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

The Group has not designated any financial assets upon initial recognition at fair value through profit or loss.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial assets are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss include exchange differences, interest and dividend income.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.







3.11 Financial assets (cont'd)

Loans and receivables

Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.

Available-for-sale financial assets

Available-for-sale financial assets include equity and debt securities. Equity investments classified as available-for sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions.

After initial recognition, available-for-sale financial assets are subsequently measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

Derecognition

A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

All regular way purchases and sales of financial assets are recognised or derecognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned.







3.12 Impairment of financial assets

The Group assesses at each end of the reporting period whether there is any objective evidence that a financial asset is impaired.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The impairment loss is recognised in profit or loss.

When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset.

To determine whether there is objective evidence that an impairment loss on financial assets has incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the receivables and default or significant delay in payments.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

Financial assets carried at cost

If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

Available-for-sale financial assets

In the case of equity investments classified as available-for-sale, objective evidence of impairment include (i) significant financial difficulty of the issuer or obligor, (ii) information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in equity instrument may not be recovered; and (iii) a significant or prolonged decline in the fair value of the investment below its costs. ‘Significant’ is to be evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost.







3.12 Impairment of financial assets (cont'd)

If an available-for-sale financial asset is impaired, an amount comprising the difference between its acquisition cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from other comprehensive income and recognised in profit or loss. Reversals of impairment losses in respect of equity instruments are not recognised in profit or loss; increase in their fair value after impairment are recognised directly in other comprehensive income.

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in profit or loss. Future interest income continues to be accrued based on the reduced carrying amount of the asset and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increases can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed in profit or loss.

3.13 Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cash management.

3.14 Inventories

Inventories are carried at the lower of cost (weighted average method) and net realisable value.

Agricultural produce comprises harvested fruits such as apples, pears, grapes, cherry, nectarines and peaches.

Other inventories include agricultural products that have undergone processing after harvest, such as dehydrated garlic and onions, and packaging materials. The cost of these inventories comprises all cost of purchases, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs.

The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised in profit or loss in the period in which the reversal occurs.

3.15 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.







3.15 Provisions (cont'd)

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

3.16 Financial liabilities

Initial recognition and measurement

Financial liabilities are recognised on the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and in the case of other financial liabilities, plus directly attributable transaction costs.

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss includes financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial liabilities are recognised in profit or loss.

The Group has not designated any financial liabilities upon initial recognition at fair value through profit or loss.

Other financial liabilities

After initial recognition, other financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.







3.17 Borrowing costs

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

3.18 Employee benefits

Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.

3.19 Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the transitional requirements of INT FRS 104.

As lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

As lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 3.20. Contingent rents are recognised as revenue in the period in which they are earned.







3.20 Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable, excluding discounts, rebates, and sales taxes or duty. The Group assesses its revenue arrangements to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognised:

Sale of goods

Revenue from sale of goods is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

Interest income

Interest income is recognised using the effective interest method.

Dividend income

Dividend income is recognised when the Group’s right to receive payment is established.

Rental income

Rental income receivable under operating leases is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.

3.21 Taxes

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the end of the reporting period, in the countries where the Group operates and generates taxable income.

Current income taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is provided using the liability method on temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.







3.21 Taxes (cont'd)

Deferred tax liabilities are recognised for all temporary differences, except:

• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

• Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• In respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the end of each reporting period.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.







3.21 Taxes (cont'd)

Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

• Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

• Receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

3.22 Segment reporting

For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 30, including the factors used to identify the reportable segments and the measurement basis of segment information.

3.23 Share capital and share issuance expenses

Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.

3.24 Related parties

A party is considered to be related to the Group if:

a) The party, directly or indirectly through one or more intermediaries,

(i) controls, is controlled by, or is under common control with, the Group;

(ii) has an interest in the Group that gives it significant influence over the Group; or

(iii) has joint control over the Group;

b) The party is an associate;

c) The party is a jointly-controlled entity;

d) The party is a member of the key management personnel of the Group or its parent;

e) The party is a close member of the family of any individual referred to in (a) or (d); or

f) The party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or







3.24 Related parties (cont'd)

g) The party is a post-employment benefit plan for the benefit of the employees of the Group, or of any entity that is a related party of the Group.

Key management personnel

Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the Group.

3.25 Intra-group financial guarantees

Intra-group financial guarantees are financial instruments issued by the Group that requires the issuer to make specified payments to reimburse the holder for the loss it incurs because a specified debtor fails to meet payment when due in accordance with the original or modified terms of a debt instrument.

Financial guarantees are recognised initially at fair value and classified as financial liabilities. Subsequent to initial measurement, the financial guarantee is stated at higher of the initial fair value less cumulative amortisation and the amount that would be recognised if they were accounted for as contingent liabilities. When financial guarantees are terminated before their original expiry date, the carrying amount of the financial guarantees is transferred to profit or loss.

Intra group transactions are eliminated on consolidation.

3.26 Significant accounting judgements and estimates

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

Judgements made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which has the most significant effect on the amounts recognised in the financial statements:

Fair value of financial instruments

Where the fair values of financial instruments recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgement is required to establish fair values. The judgements include considerations of liquidity and model inputs regarding the future financial performance of the investee, its risk profile, and economic assumptions regarding the industry and geographical jurisdiction in which the investee operates.







3.26 Significant accounting judgements and estimates (cont'd)

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next year are discussed below:

Useful lives of property, plant and equipment

Property, plant and equipment are depreciated on a straight line basis over their estimated useful lives. Management estimates the useful lives of these property, plant and equipment to be within 2 to 50 years, net of residual value. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. The carrying amount of the Group’s property, plant and equipment at the end of each reporting date is disclosed in Note 14 to the financial statements.

Income taxes

The Group is subject to income taxes in numerous jurisdictions. In determining the income tax liabilities, management is required to estimate the amount of capital allowances and the deductibility of certain expenses at each tax jurisdiction. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Refer to Note 9 to the financial statements.

Net realisable value of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses. These estimates are based on the current market condition and the historical experience of selling products of similar nature. It could change significantly as a result of competitor actions in response to severe industry cycles. Management reassesses the estimations at the end of each reporting date annually. The carrying amount of the Group’s inventories at the end of each reporting date is disclosed in Note 18 to the financial statements.

Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill and other indefinite life intangibles are tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

Impairment of loans and receivables

The Group assesses at the end of each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the end of each reporting date are disclosed in Notes 16 and 17 to the financial statements.






4. REVENUE

Group

2010 2009

$’000 $’000

Sale of agriculture products and fruits 36,024 26,870

5. OTHER INCOME

Group

Note 2010 2009

$’000 $’000

Gain on disposal of subsidiaries - 12,442

Gain on disposal of other investments - 144

Rental income 24 250

Interest income 8 2

Dividend income 3 3

Long outstanding payables written off 155 -

Allowance written back for inventories obsolescence 18 746 1,457

Overprovision of VAT accrued - 483

Exchange gain - 426

Impairment written back on assets subject to bank guarantees 18,33 1,143 -

Others 82 666

2,161 15,873






6. OTHER OPERATING EXPENSES

Group

Note 2010 2009

$’000 $’000

Impairment made on property, plant and equipment - 118

Exchange loss 287 -

Impairment made on assets subject to bank guarantees - 3,500

Impairment made on investment in associates 12 - 107

Provision for cost of registering property, plant and equipment - 637

Loss on disposal of property, plant and equipment 4 129

Allowance made for doubtful other receivables 73 -

Allowance made/(written back) for doubtful trade receivables 16 82 (48)

Others 7 157

453 4,600

7. FINANCE COSTS

Group

Note 2010 2009

$’000 $’000

Interest on convertible loans 26 2,388 2,165

Interest on bank loans 62 38

2,450 2,203






8. PROFIT BEFORE TAX

The following items have been included in arriving at profit before tax:

Group

Note 2010 2009

$’000 $’000

Depreciation of property, plant and equipment 14 1,164 1,828

Loss on disposal of property, plant and equipment 4 190

Impairment loss on property, plant and equipment 14 - 118

Directors’ fees 180 182

Directors’ remuneration 251 258

Rental and advisory fees paid to a firm in which a director of the Company is a director of those firms 67 347

Staff costs 2,596 3,102

Contributions to defined contribution plans included in staff costs 84 89

Operating lease expense 140 422

The key management personnel compensation is as follows:

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Short-term employee benefits 1,258 1,492 785 1,204

Post-retirement benefits 52 34 22 19

1,310 1,526 807 1,223






9. INCOME TAX EXPENSE

Group

2010 2009

$’000 $’000

Current tax expense

Current year 87 4

Over provision in respect of prior years (71) -

16 4

Reconciliation of effective tax rate:

Group

2010 2009

$’000 $’000

Profit before tax 955 6,442

Tax calculated using Singapore tax rate of 17% (2009: 17%) 162 1,095

Expenses not deductible for tax purposes 1,258 3,079

Income not subject to tax (1,328) (2,318)

Partial tax exemption (43) (233)

Effect of different tax rates of overseas operations (135) (1,839)

Utilisation of deferred tax benefits previously not recognised (42) -

Over provision in respect of prior years (71) -

Others 215 220

16 4

Deferred tax assets have not been recognised in respect of the following item:

Unutilised tax losses 136,098 136,341

Pursuant to the Chinese income tax regulations, the subsidiaries in China are entitled to exemptions from China income tax for the first two years commencing from their first profit making year followed by 50% reduction in their income tax for the next three years. A profit-making year is defined as the first year for which an enterprise would need to pay income tax after absorption of any loss carried forward.

Pursuant to the China Enterprise Income Tax Law (中华人民共和国企业所得税法) which was promulgated on 16 March 2007 and went into effect on 1 January 2008, the income tax law of China on foreign-invested enterprise and foreign enterprises was abolished and the income tax for both domestic and foreign-invested enterprise will be unified at 25% effect from 1 January 2008. However, there will be a transition period for enterprises that currently receive preferential tax treatments granted by the tax authorities. Enterprises that are subject to an enterprises income tax rate lower than 25% may continue to enjoy the lower rate and gradually transfer to the new tax rate within five years after the effective date of the new enterprise income tax law. Enterprises that are currently entitled to exemptions or reductions from the standard income tax rate for a fixed term may continue to enjoy such treatment until the fixed term expires.






9. INCOME TAX EXPENSE (CONT'D)

The realisation of the future income tax benefits from tax losses carry forwards is available for an unlimited future period subject to the conditions imposed by law in the respective countries of incorporation where the subsidiaries operate. In accordance with the relevant China tax laws and regulations, China subsidiaries’ tax losses cannot be carried forward for more than five years.

No deferred tax asset has been recognised in the financial statements in respect of tax losses carry forward due to the unpredictability of future profit streams.

10. EARNINGS PER SHARE

The calculation of the basic and fully diluted earnings per share is based on the following:

Group

2010 2009

$’000 $’000

Profit attributable to equity holders of the Company 939 6,438

Profit used to determine diluted earnings per share 939 8,235

(‘000) (‘000)

Weighted average number of ordinary shares in issue during the financial year - Basic 7,878,441 7,878,441

Weighted average number of ordinary shares in issue during the financial year - Diluted 7,878,441 10,812,641

Cents Cents

Earnings per share

- Basic 0.012 0.082

- Diluted 0.012 0.076

The convertible loans from investors including unpaid interest amounting to $31.7 million as at 31 December 2010, which could be convertible into shares of the Company, were not included in the computation of diluted earnings per share because they are antidilutive.

In 2009, the earnings of $8.235 million was used to determine the diluted earnings per share were arrived at assuming the convertible loans from investors are fully converted with interest savings of $2.2 million net of tax. The weighted average number of shares 10,812,641,000 for 2009 applicable to diluted earnings per share was arrived at assuming the convertible loans from investors of $24.424 million plus unpaid interest of $4.918 million was fully converted at $0.01 per share.






11. SUBSIDIARIES

Company

2010 2009

$’000 $’000

Unquoted equity shares, at cost 256,896 256,501

Less: Impairment loss (255,313) (255,313)

1,583 1,188

Amounts due from subsidiaries (non-trade) 147,882 147,591

Less: Allowance for doubtful receivables (129,794) (132,390)

18,088 15,201

19,671 16,389

The non-trade amounts due from subsidiaries are unsecured and interest-free. The settlement of the amounts due from subsidiaries is neither planned nor likely to occur in the foreseeable future. As the amounts are, in substance, part of the Company’s net investments in the subsidiaries, they are stated at cost less accumulated impairment losses.

The movements in impairment loss and allowance for doubtful receivables in respect of unquoted shares in subsidiaries and amount due from subsidiaries during the year are as follows:

Company

2010 2009

$’000 $’000

Impairment loss on investment in subsidiaries

At beginning of year 255,313 246,213

Impairment loss made - 9,100

At end of year 255,313 255,313

Allowance for doubtful receivables


Allowance written back (2,046) (11,275)

Exchange differences (550) -

At end of year 129,794 132,390






11. SUBSIDIARIES (CONT'D)

The impairment loss made on investment in subsidiaries in 2009 was due to recurring losses incurred by certain subsidiaries. The net impairment loss written back on amounts due from subsidiaries was due to recovery of debts from subsidiaries during the year and in 2009, was mainly due to the disposal of two former subsidiaries (refer toNote 32).

The subsidiaries of the Group are:

Name of subsidiary and country of incorporation Principal activities

Group’s effective equity interest

Cost of investment in the Company

2010 2009 2010 2009

% % $’000 $’000

Held by the Company

Fook Huat Tong Kee Pte Ltd (Singapore) v

Investment holding and importer, exporter, wholesaler, retailer and commission agent of all kinds of fruits and foodstuffs

100 100 229,620 229,620

United Fruit Company Limited (Hong Kong) i

Importer, exporter, wholesaler, retailer and commission agent of fruits and foodstuffs

100 100 2,328 2,328

Weifang Xinan FHTK Fruits Co., Ltd (China) vi

Dormant 100 100 3,724 3,724

UGC 2003, Inc. (USA) ii Distributor of garlic and other food products

100 100 610 610

Agrifood Investments Pte Ltd (Singapore) iii

Providing coldroom, warehousing and other facilities

100 100 10,000 10,000

Fook Yong Pte Ltd (Singapore) iii

Providing coldroom, warehousing and other facilities

100 100 8,732 8,732

Sunmoon Retail & Franchise Pte Ltd (Singapore) iii

To own, operate and manage as principal, franchisor and/or agent of all kinds of fruits

100 100 200 200

Sunmoon Distribution & Trading Pte Ltd (Singapore) iii

Importer, exporter, wholesaler, retailer and commission agent for all kinds of fruits

100 100 100 100






11. SUBSIDIARIES (CONT'D)

Name of subsidiary and country of incorporation Principal activities



2010 2009 2010 2009

% % $’000 $’000

United Agro Produce Pte Ltd (Singapore) iii

General wholesaler trade (including general importers and exporters)

100 100 - -

Taian FHTK Foodstuffs Co., Ltd (China) iv

To process, market and sell garlicand onions.

100 100 1,582 1,187

Held by the subsidiaries Fook Huat Tong Kee Pte Ltd

Fook Huat Tong Kee (Xiamen) Foodstuffs Co., Ltd (China) vi

Dormant 100 100 - -

Shanghai Fook Huat Tong Kee Storage Co., Ltd (China) v

Dormant 100 100 - -

Fook Yong Pte Ltd

Taian Fook Huat Tong Kee Foodstuffs Co., Ltd (China) iv, v

Dormant 100 100 - -

Sunmoon Distribution & Trading Pte Ltd

Sunmoon Food (Shanghai) Co., Ltd (China) vi

Headquarter for China operations, sales and other marketing and distribution

100 100 - -

256,896 256,501

i Audited by Mazars CPA Limited, Hong Kong.ii Audited by Mazars LLP, Singapore for consolidation purposes although audit is not required in the country of

incorporation. iii All the subsidiaries incorporated in Singapore are audited by Mazars LLP, Singapore.iv Audited by Mazars LLP, Singapore for consolidation purposes.v These subsidiaries are subject to bank collaterals and guarantees.vi These are non-significant subsidiaries.






12. ASSOCIATES

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Unquoted equity shares, at cost 523 523 416 416

Less: Impairment loss (523) (523) (416) (416)

- - - -

Name of associate and country of incorporation Principal activities



2010 2009 2010 2009

% % $’000 $’000

Held by the Company

United Fruits Pak (Pvt) Ltd (Pakistan) Dormant 50 50 416 416

Held by the subsidiary Sunmoon Distribution & Trading Pte Ltd

Xin Jiang Sunmoon Co. Ltd (China) Dormant 25 25 - -

The movements in impairment loss in respect of unquoted equity shares in associates during the year are as follows:

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

At beginning of year 523 416 416 416

Impairment loss made - 107 - -

At end of year 523 523 416 416

In 2009, additional impairment loss $107,000 was made due to the adverse financial conditions of the associates.






12. ASSOCIATES (CONT'D)

The summarised financial information of associates is as follows:

Group

2010 2009

$’000 $’000

Assets 272 349

Liabilities - -

Revenue - -

Net loss (54) (45)

13. OTHER INVESTMENTS

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Unquoted equity shares, at cost 17 17 17 17

The investments are classified as available-for-sale financial asset and measured at cost.






14.

PR

OP

ER

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PLA

NT

AN

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QU

IPM

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T

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eho

ldp

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and

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upA

t va

luat

ion

At

cost

At

valu

atio

nA

t co

stA

t co

stA

t co

stA

t co

stA

t co

st

2010

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0

Co

st o

r va

luat

ion

At 1

Jan

uary

201

05,

045

6,87

63,

805

5,69

036

726

437

443

022

,851

Add

ition

s-

--

-92

9-

-10

1

Dis

posa

ls-

--

-(8

)-

(56)

-(6

4)

Exc

hang

e di

ffere

nces

(317

)(1

06)

(191

)(1

95)

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8)-

(836

)

At 3

1 D

ecem

ber

2010

4,72

86,

770

3,61

45,

495

446

279

290

430

22,0

52

-

Acc

umul

ated

dep

reci

atio

n

and

imp

airm

ent

loss

es

At 1

Jan

uary

201

0-

6,87

6-

5,69

014

925

128

542

813

,679

Dep

reci

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n ch

arge

d fo

r th

e ye

ar35

9-

744

-24

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164

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-(2

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-(1

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33)

At 3

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ber

2010

359

6,77

074

45,

495

167

254

245

428

14,4

62

Net

bo

ok

valu

e

At 3

1 D

ecem

ber

2010

4,36

9-

2,87

0-

279

2545

27,

590






14.

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At

valu

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2009

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$’00

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$’00

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000

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000

$’00

0

Co

st o

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luat

ion

At 1

Jan

uary

200

95,

807

52,4

434,

994

96,2

8783

11,

592

1,68

953

316

4,17

6

Add

ition

s-

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-59

5615

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575

Dis

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(307

)(2

19)

(66)

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-(4

4,96

2)-

(93,

197)

(294

)(1

,212

)(1

,085

)(1

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(140

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)

Rev

alua

tion

defic

it(1

87)

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52)

--

--

-(5

39)

Rev

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adju

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ent

(379

)-

(778

)-

--

--

(1,1

57)

Exc

hang

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(196

)(1

,033

)(5

9)2,

848

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(65)

(236

)-

1,25

2

At 3

1 D

ecem

ber

2009

5,04

56,

876

3,80

55,

690

367

264

374

430

22,8

51

Acc

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ated

dep

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n

and

imp

airm

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loss

es

At 1

Jan

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200

9-

36,6

47-

93,5

5848

487

91,

189

428

133,

185

Dep

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n ch

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ar37

919

577

836

545

3432

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828

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--

--

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Dis

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-(3

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(88,

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-21

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91

At 3

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2009

-6,

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690

149

251

285

428

13,6

79

Net

bo

ok

valu

e

At 3

1 D

ecem

ber

2009

5,04

5-

3,80

5-

218

1389

29,

172






14. PROPERTY, PLANT AND EQUIPMENT (CONT'D)

Leaseholdproperties

Plant and machinery

Furniture, fixtures

and fittingsOffice

equipmentMotor

vehicles Total

At valuation At cost At valuation At cost At cost At cost

Company $’000 $’000 $’000 $’000 $’000 $’000 $’000

Cost or valuation

At 1 January 2009 5,807 141 4,994 163 8 284 11,397

Additions - - - 59 - - 59

Disposals (5,807) - (4,994) (80) (8) (284) (11,173)

At 31 December 2009 and 2010 - 141 - 142 - - 283

Accumulated depreciation and impairment losses

At 1 January 2009 - 21 - 4 8 - 33

Depreciation charged for the year - 2 - 32 - - 34

Impairment loss made - 118 - - - - 118

Disposals - - - (19) (8) - (27)

At 31 December 2009 - 141 - 17 - - 158

Depreciation charged for the year - - - 25 - - 25

At 31 December 2010 - - - 42 - - 183

Net book value

At 31 December 2009 - - - 125 - - 125

At 31 December 2010 - - - 100 - - 100

The leasehold properties in China as at 31 December 2010 comprise a leasehold land and building located in Taian, Shandong Province, China of 161,933 square metres for lease periods ranging from 10 to 50 years from 1998, 1999 and 2009.

Impairment loss

In 2009, the Group and the Company recognised an impairment loss of $118,000 for a leasehold property as the property was subject to court seizure (refer to Note 32).






14. PROPERTY, PLANT AND EQUIPMENT (CONT'D)

Revaluation of property, plant and equipment

In 2009, the leasehold properties together with certain plant and equipment were carried at their fair values of RMB43.4 million ($8.9 million) of which a revaluation loss $539,000 was recognised in assets revaluation reserve. The fair values as at 31 December 2009 were carried at after a valuation was performed by a professional valuer in China. Had assets being carried at cost, the carrying amount of these assets would be $9.5 million as at 31 December 2009.

No valuation was carried out for those assets in 2010 as the management is of the opinion that the current carrying values represent the fair values. Had assets being carried at cost, the carrying amount of these assets would be $8.0 million as at 31 December 2010.

Assets pledged as security

At 31 December 2010, certain leasehold properties of the Group with carrying amount of $3 million (RMB15 million) (2009: $3 million) are pledged as security to secure bank loans (refer to Note 25).

Cost of registering land use right and building ownership

The Group has certain leasehold properties with a carrying amount of $1 million as at 31 December 2010 (2009: $1.1 million) and a land with a carrying amount of $0.2 million as at 31 December 2010 (2009: $0.2 million) for which the building ownership and land use right to the land have not yet been transferred from the Sub-group. The Group estimates that the cost necessary to register the building ownership and land use right with the Group is $587,000 (RMB3 million).

15. CASH AND CASH EQUIVALENTS

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Cash on hand 9 9 - -

Cash at banks 5,375 1,630 105 63

5,384 1,639 105 63

The effective interest rate on cash at banks is 1% (2009: 1%) per annum.






15. CASH AND CASH EQUIVALENTS (CONT'D)

Cash and cash equivalents denominated in foreign currencies at the reporting date are as follows:

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Chinese Renminbi 2,770 440 - -

United States dollar 1,526 968 2 2

Hong Kong dollar 4 81 - -

Euro 1 5 - -

4,301 1,494 2 2

16. TRADE RECEIVABLES

Group

2010 2009

$’000 $’000

Trade receivables 6,338 5,403

Less:

Allowance for doubtful receivables (3,641) (3,806)

2,697 1,597

Trade receivables are non-interest bearing and are generally on 15 to 60 days’ terms.

Trade receivables denominated in foreign currencies at the reporting date are as follows:

Group

2010 2009

$’000 $’000

Chinese Renminbi 321 157

United States dollar 4,707 3,807

Hong Kong dollar 1,245 1,231

Euro 55 187

6,328 5,382






16. TRADE RECEIVABLES (CONT'D)

The movements in the allowance for doubtful trade receivables during the year are as follows:

Group

2010 2009

$’000 $’000


Allowance made/(written back) 82 (48)

Exchange differences (247) (161)

At end of year 3,641 3,806

The impairment made during the year is mainly due to unrecoverable amount from the debtor. The impairment loss written back in 2009 was mainly due to payment received from the debtor.

17. OTHER RECEIVABLES AND PREPAYMENTS

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Other receivables 100,748 108,140 2,089 2,092

Less:

Allowance for doubtful receivables (100,486) (107,283) (1,960) (1,960)

262 857 129 132

Amount due from associates 14 14 14 14

Less:

Allowance for doubtful receivables (14) (14) (14) (14)

- - - -

Advances to suppliers 12 105 - -

Deposits and prepayments 74 116 21 19

348 1,078 150 151






17. OTHER RECEIVABLES AND PREPAYMENTS (CONT'D)

The movements in the allowance for doubtful other receivables during the year are as follows:

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

At beginning of year 107,283 - 1,960 97

Allowance made/(written back) 73 - - -

Foreign exchange (6,870) - - -

Reclassified from amount due from subsidiaries - 107,283 - 1,863

At end of year 100,486 107,283 1,960 1,960

18. INVENTORIES

Group

2010 2009

$’000 $’000

Fruits and agricultural products 5,136 6,930

Packing materials 249 145

5,385 7,075

The write back of allowance of inventories of $0.746 million (2009: $1.457 million) during the year was mainly due to sales of inventories whereby the allowance made in respect of such inventories in the previous financial year was no longer required. During 2010, an impairment written back on assets subject to bank guarantee amounting to $1.143 million was made mainly due to the sale of inventories during the year.

In 2010, the changes in inventories recognised in cost of sales amounted to $22,074,000 (2009: $17,083,000) for the Group.

19. SHARE CAPITAL

No. of shares 2010 No. of shares 2009

Group and Company (‘000) $’000 (‘000) $’000

Fully paid ordinary shares, with no par value

At beginning and end of year 7,878,441 100,508 7,878,441 100,508

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.






20. CAPITAL RESERVE

The capital reserve arose on consolidation of foreign operations since 1997. The capital reserve is a non-distributable reserve.

21. CAPITAL REDUCTION RESERVE

A capital reduction reserve application was made and completed on 13 June 2005 to reduce the par value of each ordinary share in the capital of the Company from $0.05 to $0.005. The effect of the capital reduction exercise was that an aggregate amount of $55.39 million of the issued and paid-up share capital of the Company was cancelled, of which $37.01 million represented issued and paid-up share capital which had been lost or was unrepresented by available assets as at 31 December 2004 and was applied towards the writing off of the accumulated losses of the Company, and the balance amount of $18.38 million was credited to a capital reduction reserve.

22. FOREIGN CURRENCY TRANSLATION RESERVE

The foreign currency translation reserves comprise:

(a) foreign exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from the functional currency of the Company; and

(b) the exchange differences on monetary items which form part of the Group’s net investment in the foreign operations, provided certain conditions are met.

23. ASSET REVALUATION RESERVE

The asset revaluation reserve arises on the revaluation surpluses of leasehold properties and certain plant and machinery.

24. GENERAL RESERVE

The general reserve relates to those transferred from accumulated losses since 1997.

25. BANK LOAN (SECURED)

During the year, a subsidiary has repaid the previous year’s bank loan and obtained a short-term working capital loan from a bank in China amounting to $1 million (RMB5 million) at an interest rate of 6.372% per annum. The loan is secured by mortgages of the leasehold properties, coldroom, plant and machinery of the subsidiary with a carrying amount of $3 million (RMB15 million).






26. LOAN FROM INVESTORS

The Company has entered into a convertible facility loan agreement with an investor, amounting to a total of $60 million. The Company’s shareholders approved the $60 million convertible loans facility following an Extraordinary General Meeting of the Company held on 16 October 2007. As at 31 December 2010, the amount of the convertible loan outstanding was $24.424 million (2009: $24.424 million).

On 7 April 2009, the Company and the investors have entered into a non-binding term sheet setting out the principal terms on which the convertible loan is proposed to be restructured and revised.

The loans from investor bear a premium at an effective rate of 8% per annum and are secured by a charge on the shares of the Company.

The amount of convertible loan utilised, converted and outstanding is as follows:

Date of conversionNumber

of sharesValue

(including interest)Unit per

sharePrincipal amount

(excluding interest)

$ $

18 February 2008 180,289,184 1,802,892 $0.01 1,700,000

22 February 2008 665,216,574 6,652,166 $0.01 6,300,000

27 February 2008 53,184,805 531,848 $0.01 500,000

29 May 2008 160,720,745 1,607,207 $0.01 1,500,000

18 June 2008 101,672,986 1,016,730 $0.01 1,000,000

31 October 2008 111,987,684 1,119,877 $0.01 1,000,000

4 November 2008 224,156,596 2,241,566 $0.01 2,000,000

16 December 2008 53,062,585 530,626 $0.01 500,000

Total converted during 2008 1,550,291,159 15,502,912 $0.01 14,500,000

Amount not yet converted 24,423,547

Amount not yet drawn down 21,076,453

Total facility 60,000,000

There was no conversion during the year.






26. LOAN FROM INVESTORS (CONT’D)

The principal terms and conditions of the $60 million loan facility from investor are as follows:

Date and amount of loan 21 March 2007 for the $60 million convertible loan amount.

Maturity date The convertible loan is repayable on the date falling 2 years from the date of the convertible loan agreement.

Purpose of loan The $60 million loan may only be used:• for the repayment in full of the initial loan obtained in the year ended 30 June 2007;• for working capital purposes; and/or• to make certain critical payments as the majority lenders may approve in writing

Premium Premium equal to 8% per annum on the principal amount calculated from the date of the drawdown until the maturity date.

Repayment All outstanding amounts under the convertible loan shall be repaid in cash on the maturity date but the lenders may on the maturity date and at its discretion, convert the outstanding convertible loan and the premium payable at $0.01 each (subject to adjustments as stated in the $60 million convertible loan agreement) into shares in the capital of the Company. The convertible loan is subject to the approval of the shareholders at an extraordinary general meeting to be held on 16 October 2007.

Security Charge over the shares of Fook Huat Tong Kee Pte Ltd, a wholly-owned subsidiary of the Company;

Convertible bonds that are convertible into shares of the Company are accounted for as a compound instrument, consisting of a liability component and an equity component on the statement of financial position. The liability component is recognised initially at its fair value, determined using a market interest rate for equivalent non-convertible bonds. The difference between the total proceeds and the liability component is allocated to the conversion option (equity component) which is presented in equity, net of deferred tax effect. Management is of the view that the interest rate of 8% per annum payable on the convertible bond reflects the market interest rate for equivalent non-convertible bonds and as a result, the nominal amount of the loan liability reflects its fair value at inception of the loan. Accordingly, no equity component is recognised in these financial statements. The interest component is recognised as an expense in profit or loss over the period of the borrowing.

On 30 September 2010, the Company and the convertible loan holders entered into a MOU setting out the principal terms on which the convertible loan is proposed to be settled/repaid.

On 3 December 2010, the Company has entered into a $24 million Convertible Loan agreement and a $60 million Convertible Loan Facility agreement with a new investor, subject to approvals by the Singapore Exchange and shareholders of the Company and the completion of the terms and conditions of the convertible loan facility, it is proposed that the new investor will repay the current convertible loan from the current convertible investors and convert the loan to shares before maturity of the convertible loans and provide a $60 million convertible loan facility.






27. TRADE PAYABLES

Trade payables are non-interest bearing and are normally settled between 7 to 60 days terms.

Trade payables denominated in foreign currencies at the reporting date are as follows:

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Chinese Renminbi 746 2,244 - -

United States dollar 487 702 - -

1,233 2,946 - -

28. OTHER PAYABLES

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Other payables 984 1,172 766 902

Accrued operating expenses 4,830 4,544 4,427 4,082

Accrued convertible loan interest 7,306 4,918 7,306 4,918

Deposits and advances 242 139 - -

Provision for registering property, plant and equipment 587 637 - -

13,949 11,410 12,499 9,902

29. LEASE COMMITMENTS

At 31 December 2010, the commitments in respect of non-cancellable operating leases for rental of premises and land are as follows:

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Rental payable:

Within 1 year 64 122 - 55

Between 2 to 5 years - 60 - 28

64 182 - 83








29. LEASE COMMITMENTS (CONT'D)

The Group and the Company lease a number of offices and office equipment under operating leases. The leases typically run for an initial period of 2 to 5 years, with an option to renew the lease after that date.

30. SIGNIFICANT RELATED PARTY TRANSACTIONS

For the purposes of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or significant influence. Related parties may be individuals or other entities.

Expect as disclosed elsewhere in these financial statements, during the year/period under review, the Group had the following significant transactions within related parties on terms agreed between the parties as follows:

Significant related party transactions

Company

2010 2009

$’000 $’000

Expenses paid to firms in which a director of the Company is a director of those firms:

- Rental - 258

- Advisory services 67 89

67 347

Key management personnel compensation

The key management personnel compensation is as follows:

Group Company

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Short-term employee benefits 1,258 1,492 785 1,204

Post-retirement benefits 52 34 22 19

1,310 1,526 807 1,223






31. SEGMENT INFORMATION

The Group has two reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s Chief Executive Officer (“CEO”) reviews internal management reports on at least a monthly basis. The following summary describes the operations in each of the Group’s reportable segments.

• The agricultural products division distributes fresh garlic and manufactures dehydrated garlic and onion products. The production facilities are located in China while the products are mainly distributed to the markets in United States of America, Europe, China and ASEAN countries.

• The fruits division procures and distributes fruits globally.

Other operations include retails and franchise business. None of the other operations meets any of the quantitative thresholds for determining reportable segments in the current and last financial year end.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before tax, as included in the internal management reports that are reviewed by the Group’s CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

(a) Analysis by Business Segment

Segment revenue and expense: Segment revenue and expense are the operating revenue and expenses reported in the Group’s profit or loss that are directly attributable to a segment and the relevant portion of such revenue and expense that can be allocated on a reasonable basis to a segment.

Segment assets and liabilities: Segment assets include all operating assets used by a segment and consist principally operating receivables, inventories, property, plant and equipment and net of allowances and impairment that can be specifically attributable to a specific segment. Capital expenditure includes the total cost incurred to acquire property, plant and equipment directly attributable to the segment. Segment liabilities include all operating liabilities and consist principally of trade and other payables. The Group’s income tax expense and income tax payable are not allocated to any specific segment.

Investment in associates: Income from associates is not allocated as it is nor specifically attributable to any of the major business segments, accordingly the investments in associates are includes as unallocated assets of the Group.

The reportable segment profit and loss has been determined using the same accounting policy of the Group.

The Group has categorised the business of the Group into the following segments, agricultural products (comprising the sales of garlic and onion), fruits and others.

One customer exceeded 10% or more of the total revenue of the Group in agricultural products for the year ended 31 December 2010 (2009: Nil).






31.

SE

GM

EN

T IN

FOR

MA

TIO

N (C

ON

T'D

)

(a)

An

alys

is b

y B

usi

nes

s S

egm

ent

(con

t'd

)

Ag

ricu

ltur

al

pro

duc

tsFr

uits

Oth

ers

Elim

inat

ion

Co

nso

lidat

ed

2010

2009

2010

2009

2010

2009

2010

2009

No

te20

1020

09

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

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000

Rev

enue

Ext

erna

l sal

es18

,294

12,1

7817

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14,5

9110

101

--

36,0

2426

,870

Inte

r-co

mpa

ny s

ales

7,01

22,

766

--

--

(7,0

12)

(2,7

66)

--

Inte

rest

inco

me

82

--

--

--

82

Inte

rest

exp

ense

(63)

(38)

--

(2,3

87)

(2,1

65)

--

(2,4

50)

(2,2

03)

Dep

reci

atio

n ex

pens

e(1

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)(1

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)

Exc

hang

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ain

(262

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0(8

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--

(287

)42

6

Allo

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ritte

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orie

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sole

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ce74

61,

457

--

--

--

746

1,45

7

Rep

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rofit

/(los

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efor

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x4,

394

(1,4

60)

942

(87)

(12)

(257

)-

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324

(1,8

04)

Rep

ort

able

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men

t as

sets

Seg

men

t ass

ets

26,0

5123

,920

2,29

41,

697

1,22

91,

282

(8,5

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(6,6

76)

(2)

21,0

4820

,223

Una

lloca

ted

corp

orat

e as

sets

(3)

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31. SEGMENT INFORMATION (CONT'D)

Note (1) Reconciliation of profit for the year

Group

2010 2009

$’000 $’000

Reportable segment profit/(loss) before tax 5,324 (1,804)

Gain on disposal of subsidiaries - 12,442

Unallocated corporate loss (4,369) (4,196)

Income tax expense (16) (4)

Profit for the year 939 6,438

Note (2) Elimination of segment assets

Group

2010 2009

$’000 $’000

Elimination of inter-company (5,791) (4,063)

Inventories (635) (513)

Others (2,100) (2,100)

(8,526) (6,676)

Note (3) Unallocated corporate assets

Group

2010 2009

$’000 $’000

Unallocated corporate assets 20,044 16,744

Elimination of

- investment in subsidiaries (1,583) (1,188)

- inter-company (18,088) (15,201)

373 355






31. SEGMENT INFORMATION (CONT'D)

Note (4) Elimination of segment liabilities

Group

2010 2009

$’000 $’000

Elimination of inter-company (176,097) (174,749)

Note (5) Unallocated corporate liabilities

Group

2010 2009

$’000 $’000

Investor loan and interest 31,730 29,343

Professional fee related to restructuring 2,876 2,911

Other unallocated corporate liabilities 2,317 2,070

36,923 34,324

(b) Analysis by Geographical Segments

The Group’s reportable segments operate in four main geographical areas, namely, ASEAN, China, United States of America, Europe and others. One external customer exceeded 10% of the total revenue of the Group in agricultural products for the year ended 31 December 2010 (2009: Nil).

Revenue Non-current assets

2010 2009 2010 2009

$’000 $’000 $’000 $’000

Singapore 2,029 1,421 173 71

Indonesia 14,646 11,529 - -

Thailand 2,092 1,266 - -

China 1,746 1,197 7,434 9,118

United States of America 6,872 4,111 - -

Belgium 2,679 2,996 - -

Australia 3,243 2,705 - -

Others 2,717 1,645 - -

36,024 26,870 7,607 9,189






32. FINANCIAL RISK MANAGEMENT

Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Group’s risk management process to ensure that an appropriate balance between risk and control is achieved.

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.

The Group prepares cash flows projections on a regular basis for its core operations to ensure as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. In addition, the Group has the access to external borrowings (refer to Notes 25 and 26).

The maturity profile of the Group’s financial assets and liabilities as at the year end, based on the carrying amounts, was as follows:

On demand6 months

or less6 to 12months

Carryingamount

$’000 $’000 $’000 $’000

2010

Cash and cash equivalents 5,384 - - 5,384

Trade receivables - 2,697 - 2,697

Other receivables and prepayments - - 348 348

5,384 2,697 348 8,429

Bank loan (secured) - 979 - 979

Loan from investors 24,424 - - 24,424

Trade payables - 1,235 - 1,235

Other payables 13,949 - - 13,949

38,373 2,214 - 40,587

2009

Cash and cash equivalents 1,639 - - 1,639

Trade receivables - 1,597 - 1,597

Other receivables and prepayments - - 1,078 1,078

1,639 1,597 1,078 4,314

Bank loan (secured) - 1,029 - 1,029

Loan from investors 24,424 - - 24,424

Trade payables - 2,946 - 2,946

Other payables - - 11,410 11,410

24,424 3,975 11,410 39,809






32. FINANCIAL RISK MANAGEMENT (CONT'D)

Balances due within 12 months are assumed to approximate their carrying amounts as the impact of discounting is not significant.

Credit risk

The Group has a credit policy in place which established credit limits for customers and monitors their balances on an on-going basis. Credit evaluations are performed on all customers requiring credit over a certain amount.

The Group’s trade receivables (net of allowances) comprise 6 (2009: 9) debtors that individually represented more than 5% of trade receivables. The Group primary exposure to credit risk arises through its trade receivables are limited due to the Group’s many varied customers. These customers are mainly located in the United States of America, Europe, Indonesia and China.

The credit risk for trade receivables based on the information provided to key management is as follows:

Group

2010 2009

$’000 $’000

By geographical areas

Singapore 129 18

Malaysia 20 -

China 221 29

Indonesia 227 342

United States of America and Europe 1,191 879

Thailand 147 -

Others 762 329

2,697 1,597

By types of customers

External parties 2,697 1,597







Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Group

2010 2009

$’000 $’000

Trade receivables 2,697 1,597

Cash and cash equivalents 5,384 1,639

8,081 3,236

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets. No allowance for collective impairment was made based on past experience.

Cash are placed with banks and financial institutions which are regulated.

Financial assets that are past due and/or impaired

There is no other class of financial assets that is past due and/or impaired except for trade receivables.

The age analysis of trade receivables and the impairment is as follows:

Gross Impairment Gross Impairment

2010 2010 2009 2009

$’000 $’000 $’000 $’000

Not past due - - - -

Past due 0 to 30 days 2,163 - 1,475 -

Past due 31 to 60 days 653 119 218 96

Past due 61 to 90 days 218 218 83 83

More than 90 days 3,304 3,304 3,627 3,627

Total 6,338 3,641 5,403 3,806

Based on past experience, except for certain trade receivables balances that were impaired, the Group believes that no impairment allowance is necessary in respect of the remaining trade receivables due to the good track records of its customers.







Foreign currency risk

The Group incurs foreign currency risk on revenue and costs that are denominated in currencies other than Singapore dollars. The currencies giving risk to this risk are primarily the United States dollar, Chinese Renminbi, Hong Kong dollar and Euro.

The Group does not hedge its foreign currency exposure, the Group ensures that the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates, where necessary, to address short term imbalances.

The Group is also exposed to foreign currency exchange rate movements on its net investments in subsidiaries in China. No hedge has been taken up for this exposure.






32.

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Sensitivity analysis

At 31 December 2010, if the foreign currencies weakened 2% against the Singapore dollar with all other variables held constant, net profit and equity for the year would have been $65,000 lower (2009: $35,000 higher) and $18,000 lower (2009: $11,000 lower) respectively, on the basis that all other variables remain constant.

Fair values

The carrying amounts of the financial assets and liabilities approximate their fair values as at reporting dates due to the short period to maturity.

It is not practicable within in the constraint of cost of reliably determine the fair value of amounts due from subsidiaries. These instruments are shown at cost subject to impairment in value.

The Group does not hold financial assets nor derivative asset or liabilities carried at fair value or at valuation. Accordingly, the disclosure requirement of the fair value hierarchy (levels 1, 2 and 3) under FRS 107 Financial Instruments Disclosures does not apply.

Interest rate risk

The Group is not significantly exposed to interest rate risk through the impact of interest rate changes on interest-bearing financial liabilities and financial assets as the loans from investors and bank loan are fixed rate instruments.

Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including borrowings and trade and other payables and excluding current tax payable) less cash and cash equivalents. Total capital is calculated as total equity plus net debt.

The gearing ratios at the reporting date were as follows:

Group

2010 2009

$’000 $’000

Total borrowings 40,587 39,809

Less: Cash and cash equivalents (5,384) (1,639)

Net debt 35,203 38,170

Total equity (19,271) (19,300)

Total capital 15,932 18,870

Gearing ratio 2.21 2.02





33. CONTINGENT LIABILITIES

During the financial period ended 31 December 2008, one of the former subsidiaries (Dongguan Fook Huat Tong Kee Refrigeration & Foodstuffs Co., Ltd or the “Borrowing Subsidiary”) of the Group had defaulted on the repayment of the loans (“Loan”) from Dongguan Agricultural Bank of China (the “Bank”). The Loans are secured on the mortgages of land and buildings belonging to the Borrowing Subsidiary and another former subsidiary (Longkou Fook Huat Tong Kee Refrigeration Co., Ltd or the “Collateral Subsidiary”). The Borrowing Subsidiary and the Collateral Subsidiary have since been disposed in 2009.

There are three other subsidiaries which have furnished corporate guarantees to support the Loans (the Borrowing Subsidiary, Collateral Subsidiary and three other subsidiaries are collectively known as the “Sub-group” of the Group). These corporate guarantees may be called upon by the Bank. The three remaining subsidiaries are still subject to corporate guarantees in respect of the Loan from the Bank and may be subject to claims. The Company is unable to ascertain the likelihood, outcome and quantum of these potential claims. However, for these three subsidiaries, whether arising from the corporate guarantees or otherwise, the Company is of the view that any action that may be undertaken by the bank or any other creditors is unlikely to significantly affect the operation of the rest of the Group as these three subsidiaries have ceased operations, do not possess significant assets and are presently dormant, and the exposure to the Group in respect of any contingent claim arising from the above-mentioned corporate guarantees is limited to the net assets of these three dormant subsidiaries.

In August 2009, the Dongguan Municipal Intermediate People’s Court issued a writ of seizure and sale against four apartments owned by Fook Huat Tong Kee Pte Ltd (one of the subsidiaries in the Sub-group). These four apartments had already been fully impaired in 2008, and accordingly has no financial impact to the results of the Group and the Company for the year ended 31 December 2010. Similarly, certain property amounting to $118,000 which was subject to court seizure was impaired in 2009. The impairment arose as the application to transfer the said property from the Sub-group to the Group was not accepted by the China authority due to lack of proper proof of ownership. As at 31 December 2010, each of the three remaining subsidiaries has negative net assets and has been consolidated with the financial statements of the Group for the year ended 31 December 2010. In addition, the remaining assets of the three subsidiaries of the Sub-group that are still subject to bank collateral and guarantee amounting to $3.5 million have been fully impaired since 31 December 2009 and no further impairment has been made during the year in respect of these claims. During the year ended 31 December 2010, a reversal of impairment amounting to $1.143 million was made mainly due to the sale of inventories during the year.




Shareholders StatisticsFor the year ended 31 December 2010

STATISTICS OF SHAREHOLDINGS AS AT 16 MARCH 2011

ISSUED AND FULLY PAID-UP CAPITAL : $100,508,000NO.OF SHARES ISSUE : 7,878,441,114 ORDINARY SHARESCLASS OF SHARES : ORDINARY SHARES FULLY PAID WITH EQUAL

VOTING RIGHTS EACH

SIZE OFSHAREHOLDINGS

NO. OF SHAREHOLDERS % NO.OF SHARES %

1 - 999 123 0.88 24,514 0.001,000 - 10,000 5,469 39.35 19,815,932 0.2510,001 - 1,000,000 7,593 54.63 1,686,997,541 21.411,000,001 & ABOVE 715 5.14 6,171,603,127 78.34Total 13,900 100.00 7,878,441,114 100.00

TOP TWENTY SHAREHOLDERS NO. OF SHARES %

UOB KAY HIAN PTE LTD 783,256,758 9.94OCBC SECURITIES PRIVATE LTD 410,999,731 5.22PHILLIP SECURITIES PTE LTD 272,415,542 3.46MORGAN STANLEY ASIA (SINGAPORE) PTE LTD 247,617,700 3.14KIM ENG SECURITIES PTE. LTD 230,540,110 2.93LIM & TAN SECURITIES PTE LTD 216,324,504 2.75DBS NOMINEES PTE LTD 202,249,300 2.57CHENG CHIH LI @ THIE TJIE LIEP 179,970,000 2.28PRIMA PORTFOLIO PTE LTD 159,115,046 2.02HSBC (SINGAPORE) NOMINEES PTE LTD 155,341,000 1.97TAN NG KUANG 147,334,120 1.87UNITED OVERSEAS BANK NOMINEES PTE LTD 145,345,750 1.84CIMB SECURITIES (SINGAPORE) PTE LTD 102,415,000 1.30CHENG KOH CHUEN 100,000,000 1.27TAN ROSALIND 79,000,000 1.00DBS VICKERS SECURITIES (S) PTE LTD 70,153,400 0.89OCBC NOMINEES SINGAPORE PTE LTD 62,900,500 0.80CITIBANK NOMINEES SINGAPORE PTE LTD 62,255,000 0.79S P LIM & COMPANY PRIVATE LIMITED 59,935,477 0.76CHIA CHEE MING, TIMOTHY 53,184,805 0.68

3,740,353,743 47.48

On the basis of the information available to the Company, approximately 88.1% of the equity securities of the Company are held in the hands of the public. This is in compliance with Rule 723 of the Listing Manual of the SGX-ST, which requires at least 10% of a listed issuer’s equity securities to be held by the public.

SUBSTANTIAL SHAREHOLDERS

NO.OF SHARES

Name of Substantial Shareholders Direct Interest Deemed Interest

Tan Ng Kuang 437,249,624 -First Alverstone Capital Ltd 497,204,258 -Selena Cheng Koh Min - 497,204,258Gary Loh Hock Chuan - 497,204,258





NOTICE IS HEREBY GIVEN that the Annual General Meeting of SUNMOON FOOD COMPANY LIMITED will be held at 21 Bukit Batok Crescent #10-75, WCEGA Tower, Singapore 658065 on 28 April 2011 at 10.00 a.m. for the following purposes:

1. To receive and adopt the Directors' Report and the Audited Accounts of the Company and the Group for the year ended 31 December 2010.

2. To approve the payment of Directors' Fees in respect of the year ended 31 December 2010.

3. To re-elect Mr Gary Loh Hock Chuan retiring by rotation pursuant to Article 91 of the Company’s Articles of Association.

4. To re-elect Mr Chee Wai Pong retiring by rotation pursuant to Article 91 of the Company’s Articles of Association.

5. To consider and, if thought fit, to pass the following as an ordinary resolution:-

“That pursuant to Section 153(6) of the Companies Act, Cap. 50, Dr Tan Eng Liang be and is hereby re-appointed Director of the Company, to hold office until the next Annual General Meeting.”

6. To re-appoint Messrs Mazars LLP, Public Accountants and Certified Public Accountants, Singapore as Auditors of the Company and to authorise the Directors to fix their remuneration.

7. As Special Business

To consider and if thought fit, to pass the following resolution as an Ordinary Resolution, with or without any modifications:

Authority to allot and issue shares

That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, authority be given to the Directors of the Company to issue shares (“Shares”) whether by way of rights, bonus or otherwise, and/or 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 to such persons as the Directors may, in their absolute discretion, deem fit provided that:

a) the aggregate number of Shares (including Shares to be issued in pursuance of instruments made or granted pursuant to this Resolution) does not exceed fifty per centum (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, of which the aggregate number of Shares and convertible securities to be issued other than on a pro rata basis to all shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares (excluding treasury shares) in the Company;

Notice of Annual General Meeting




b) for the purpose of determining the aggregate number of Shares that may be issued under sub-paragraph (a) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares of the Company (excluding treasury shares) as at the date of the passing of this Resolution, after adjusting for:

i) new shares arising from the conversion or exercise of convertible securities;

ii) new shares arising from exercising share options or vesting of Share awards outstanding or subsisting at the time this Resolution is passed; and

iii) any subsequent bonus issue, consolidation or subdivision of shares;

c) And that such authority shall, unless revoked or varied by the Company in general meeting, continue in force (i) until the conclusion of the Company’s next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier or (ii) in the case of shares to be issued in accordance with the terms of convertible securities issued, made or granted pursuant to this Resolution, until the issuance of such shares in accordance with the terms of such convertible securities. [See Explanatory Note (ii)]

8. To transact any other business that may be transacted at an Annual General Meeting.

By Order of the Board

Chia Lay BengSecretary

SingaporeDate: 6 April 2011





Explanatory Notes

(i) Mr Chee Wai Pong and Dr Tan Eng Liang, if re-appointed, will remain as Audit Committee members, and are considered independent for the purposes of Rule 704 (8) of the Listing Manual of the Singapore Exchange Securities Trading Limited.

(ii) (a) The Ordinary Resolution 7 proposed in item 7 above, if passed, will empower the Directors from the date of the above Meeting until the date of the next Annual General Meeting, to allot and issue Shares and convertible securities in the Company up to an amount not exceeding fifty per centum (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which up to twenty per centum (20%) may be issued other than on a pro rata basis.

(ii) (b) For the purpose of this resolution, the total number of issued shares (excluding treasury shares) is based on the Company’s total number of issued shares (excluding treasury shares) at the time this proposed Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of convertible securities, the exercise of share options or the vesting of share awards outstanding or subsisting at the time when this proposed Ordinary Resolution is passed and any subsequent bonus issue, consolidation or subdivision of shares.

Notes:

1. A member of the Company entitled to attend and vote at the above meeting is entitled to appoint not more than two proxies to attend and vote in his stead. A proxy need not be a member of the Company and where there is more than one proxy, the proportion (expressed as a percentage of the whole) of his shareholding to be represented by each proxy must be stated.

2. If the appointor is a corporation, the instrument appointing a proxy must be executed under seal or the hand of its duly authorized officer or attorney.

3. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 1 Scotts Road #21-07/08/09 Shaw Centre, Singapore 228208 not less than forty-eight (48) hours before the time appointed for holding the Meeting.



SUNMOON FOOD COMPANY LIMITED

PROXY FORM(Incorporated in Singapore)Company Registration No. 198304656K

I/We

of

being a member/members of the abovementioned Company, hereby appoint

Name Address NRIC/Passport No Proportion ofShareholdings (%)

and/or (delete as appropriate)

as my/our proxy/proxies, to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on 28 April 2011 and at any adjournment thereof in the following manner:

Resolutions For Against

1Ordinary BusinessAdoption of Report and Accounts

2 Approval of amount proposed as directors' fees

3 Re-election of Mr. Gary Loh Hock Chuan retiring under Article 91

4 Re-election of Mr. Chee Wai Pong retiring under Article 91

5Re-election of Dr. Tan Eng Liang retiring pursuant to Section 153(6) of the Companies Act, Cap. 50.

6 Re-appointment of Auditors

7Special BusinessApproval to issue Shares pursuant to Section 161 of the Companies Act, Cap. 50

8 Any Other Business

If you wish to exercise all your votes For or Against, please tick with [√]. Alternatively, please indicate the number of votes For and Against each resolution.

If this form of proxy contains no indication as to how the proxy should vote in relation to each resolution, the proxy shall, as in the case of Any Other Business raised at the meeting, vote as the proxy deems fit.

As witness my/our hand(s) this day of 2011

No. of Ordinary Shares held

Signature(s) or Common Seal of Shareholder(s)

Important please read notes overleaf

Registered Office: 1 Scotts Road #21-07/08/09Shaw CentreSingapore 228208

Notes

1 Please insert the total number of Ordinary Shares held by you. If you have Ordinary Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50), you should insert that number of Ordinary Shares. If you have Ordinary Shares registered in your name in the Register of Members, you should insert that number of Ordinary Shares. If you have Ordinary Shares entered against your name in the Depository Register and Ordinary Shares registered in your name in the Register of Members, you should insert the aggregate number of Ordinary Shares entered against your name in the Depository Register and registered in your name in the Register of Members.

2 A Member entitled to attend and vote at a Meeting of the Company is entitled to appoint one or two proxies to attend and vote instead of him.

3 Where a Member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy.

4 The Instrument appointing a proxy must be deposited at the registered office of the Company at 1 Scotts Road #21-07/08/09 Shaw Centre, Singapore 228208 not less than 48 hours before the time appointed for the Annual General Meeting.

5 The instrument appointing the proxy or proxies must be under the hand of the appointer or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised.

6 A corporation which is a Member may, in accordance with Section 179 of the Companies Act, Chapter 50, authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Annual General Meeting.

7 The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointer are not ascertainable from the instructions of the appointer specified in the Instrument appointing a proxy or proxies. In addition, in the case of members whose Ordinary Shares are entered against their names in the Depository Register, the Company may reject any Instrument appointing a proxy or proxies lodged if such Members are not shown to have Ordinary Shares entered against their names in the Depository Register 48 hours before the time appointed for holding the Annual General Meeting as certified by The Central Depository (Pte) Limited to the Company.

SU

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SINGAPORE HEADQUARTERSSunMoon Food Company Limited21 Bukit Batok Crescent#10-75 WCEGA TowerSingapore 658065Tel: (65) 6779 5688Fax: (65) 6565 9489

CHINA - SHANGHAI OFFICESunMoon Food (Shanghai) Co., Ltd.369 Xian Xia Road, Chang Ning District2201- Modern PlazaShanghai 200336Tel: (86) 21 3252 8628Fax: (86) 21 3252 8629

SUNMOON FOOD COMPANY LIMITEDCompany Registration No. 198304656KTel: (65) 6779 5688 Fax: (65) 6565 9489Website: www.sunmoonfood.comE-mail: [email protected]

HONG KONG SALES OFFICEUnited Fruit Company LimitedSuite No. 6B, 10/FHollywood Centre233 Hollywood RoadSheung Wan, Hong KongTel: (852) 2541 7200Fax: (852) 2541 4304

USA SALES OFFICEUGC 2003, Inc.400 North Center Drive, Suite 211Norfolk, VA 23502Tel.: (1) 757 319 4343eFax: (1) 877 720 5713Fax: (1) 757 226 8619

PROCESSING PLANTTaian FHTK Foodstuffs Co., Ltd.Fanzhen Development ZoneDaiyue District, Taian CityShandong, China 271033Tel: (86) 538 868 2888Fax: 86) 538 868 1183

Annual Report 2010

from freshness to goodness - morningstar, inc

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