Annual Report 2012 EN by ar.tuf.si ar.tuf.si

COMPANY PROFILE THAI UNION FROZEN PRODUCTS PCL.

Registration No. 0107537000891 (previously Bor.Mor.Jor. 336)

Type Of Business

Processor and exporter of frozen and canned seafood

Head Office

72/1 Moo 7, Sethakit 1 Road, Tambon Tarsrai, Amphoe Mueang Samutsakhon, Samutsakhon 74000 Tel: 66 (0) 3481-6500 (Automatic 7 Lines) Fax: 66 (0) 3481-6886

Bangkok Office

979/12 M Floor, S.M. Tower, Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400 Tel: 66 (0) 2298-0024, 2298-0537 - 41 Fax: 66 (0) 2298-0548, 2298-0550

Website

www.thaiuniongroup.com

Listed on the Stock Exchange of Thailand since November 22, 1994 As of December 31, 2012 Registered capital of Bt1,202,000,000 (At Bt1 par value) Paid-up capital of Bt1,147,593,829 (1,147,593,829 shares)

TUF’S GLOBAL SOURCING, PRODUCTION AND MARKETS

FRANCE

NORTH PACIFIC OCEAN

NORTH ATLANTIC OCEAN PORTUGAL GEORGIA, USA

SOUTH PACIFIC OCEAN

SOUTH ATLANTIC OCEAN

TUF PRODUCTION BASES

TUF MARKETS

TUF SOURCES OF FISH

EUROPE

NORTH PACIFIC OCEAN

CHINA THAILAND VIETNAM

GHANA INDONESIA SEYCHELLES INDIAN OCEAN

SOUTH PACIFIC OCEAN

CONTENTS 3 6 8 10 12 13 23 24 26 27 28 30 31 35 43 44 46 50 51 52 54 55 64 68 73 85 86 89 91 92 102 104 111 112 116 117 118 120 129

Company Profile Contents Message from Chairman Message from President Organization Chart Board of Directors Audit Committee and Sub-Committees Management Team 5-Year Comparative Financial Statistics 2012 Sales Breakdown and Distribution Corporate History and Development Our Brands Nature of Business Investments in Subsidiaries and Associated Companies Sales Structure of TUF and Subsidiaries Nature of Main Business Related Business Groups TUF Strengths Financial Highlights Awards, Certificates and Rankings Food Safety and Quality Standards Sustainable Development Industry Outlook and Competition Risk Factors and Other Related Factors for Investment Considerations Report on the Practice of Good Corporate Governance Appointment of Directors Authority of Board of Directors and Audit Committee Shareholding Structure and Management Remuneration for Directors and Management Connected Transactions of Listed Company Report of Audit Committees Management Discussion and Analysis (MD&A) Comparative Financial Ratios Financial Analysis References Statement of the Board of Directorâ&#x20AC;&#x2122;s Responsibilities for the Financial Statements Independent Auditorâ&#x20AC;&#x2122;s Report Consolidated and the Company Only Financial Statements Note to Consolidated Financial Statements

THAI UNION FROZEN PRODUCTS PCL.

MESSAGE FROM CHAIRMAN Today’s business world is one of dramatic change, resulting in greater challenges for business operations. As a manufacturer, the Company needs to quickly adapt its business strategy to reflect sudden changes in business conditions and stay competitive. The global economic downturn has significantly affected the Company’s operations and there are several challenges facing the Company this year including raw material costs and upward pressure on wages. The Company has closely monitored internal operations and applied intensive cost management in order to improve operational efficiency. It has also stepped up technological development and machinery maintenance in various production processes in an effort to increase efficiency. Regarding the Company’s operating performance in 2012, revenue in USD terms was equivalent to USD 3,441 million, an increase of 6%. The Company’s revenue in Baht terms was equivalent to THB 106,698 million, an increase of 8% compared with that of the previous year. Meanwhile net profit

for 2012 was THB 4,694 million, a decline of 8%. The net profit decrease was due to a fire at our factory in Samutsakhon which caused the Company to lose sales opportunities for 2 months as well as last year’s significant fluctuations in the raw material prices of tuna and shrimp. In addition, the Company’s earnings were adversely affected by the Baht’s appreciation in the second-half of 2012. In fact, last year should have been a good year for TUF but the impact of these various factors which occurred in close succession meant that the Company’s operating performance was not outstanding. Nonetheless, the Company is still satisfied with the overall operating performance because its revenue in Baht terms rose to above THB 100,000 million. Moreover, the success of debt restructuring resulted in a strengthening of our financial position. Currently, the Company’s Debt to Equity ratio is 0.83 times. We believe shareholders can remain confident that the Company can successfully manage fluctuations in prices and costs caused by both internal and external factors.

ANNUAL REPORT 2012

Mr. Kraisorn Chansiri Chairman

The Company has operated its seafood business for more than 3 decades and has expanded its global network to 4 continents i.e. Asia, America, Europe and Africa. With 10 production bases all over the world, the Company continues to enhance its competitive advantages in production capacity, raw material procurement, seafood sales and marketing channels. The Company is also a global leader in canned seafood and frozen seafood and owns the world’s leading brand. Continuing integration among production facilities and various marketing bases, coupled with well-known brands and many years of experience in seafood business operations, has enabled the Company to effectively compete in this industry and be ready to fulfill the requirements of its worldwide customer base. The Company’s success is based on its strict discipline in finance and risk management and key focus on our 6 core businesses. We have a long track record of expertise in these core businesses which helps generate good yields to the Company. As the Company has been in the seafood business for many years, our customers accept and trust us. In addition the Company continues to make innovations in seafood processing.

Although the Company now has a global footprint, our biggest base remains in Thailand as does our corporate headquarters. Management and I are proud that we as a Thai company can effectively compete at the global level. Currently the business of our Company is highly stable with income growth of a thousand billion baht which has uplifted our organizational level. As Chairman, I would like to extend my thanks and admiration to Management and all the Company’s employees who worked so hard during the year. I would also like to thank shareholders, investors, and financial institutions for their strong support and trust in the Company’s operations. The Company continues to develop and improve its capacity and human resources in order to more effectively compete in the business world. However, we remain committed to achieving sustainable growth.

THAI UNION FROZEN PRODUCTS PCL.

MESSAGE FROM PRESIDENT Last year proved a challenging one for TUF. The global economy remained in a slowdown due to the sovereign debt crisis in the EU and the economic recession in the US. The fire at TUF’s shrimp factory in Samutsakhon temporarily disrupted production. Meanwhile the price of tuna jumped by 22 per cent compared to that of 2011. The price of shrimp also saw significant fluctuations due to EMS (Early Mortality Syndrome), an epidemic which resulted in lower shrimp harvests. Other challenges last year were fluctuations in currency exchange rates and more intensive competition in the US market. Despite these adverse factors, our overall business continued to show growth, resulting in a satisfactory performance for the year.

TUF has clear goals for growth and we see that there are many opportunities to expand our business. Hence, we employ a strategy of continuous investment in our 6 core business groups: tuna, shrimp and other shrimp products, sardines/mackerel, salmon, pet food and value-added products. Over the next 3 years, our main strategy is to improve businesses in which we have recently invested so that these operate at maximum efficiency and utilization. For example,

Rapid changes in the business environment present new challenges to management and make it more difficult to ensure continuous growth. Therefore, the Company strives to present a clear management strategy, with improvements in human resources and the launch of innovative products. We also aim to upgrade our production processes in order to enhance our organization as well as compete more effectively in a global market.

•

We plan to increase our investment in Pakfood Public Company Limited (PPC) to 54.46 per cent, making it one of our subsidiaries. Combining TUF with Pakfood, our market share for shrimp exports should increase to around 20%, thereby strengthening our competitive position in this market. We have entered the US market for pet food which offers a very high market value, strong growth potential and a wide gross profit margin. Hence, we have set up a US subsidiary called U.S. Pet Nutrition, LLC to take advantage of this growth opportunity. MW Brands plans to expand its business to many more countries in Europe. So far it has expanded in only 5 out of a total of 27 countries.

ANNUAL REPORT 2012

Mr. Thiraphong Chansiri President

Meanwhile, TUF plans to expand our business in the Asean Economic Community (AEC) by focusing on 3 brands: Sealect, Fisho and Bellotta. We have already expanded operations into Vietnam, Myanmar and Cambodia, and will enter the Indonesian market in 2013. In terms of our investment policy over the next few years, we will focus on expanding production capacity, which is one of our key growth strategies. For example, we are currently constructing a new and modern shrimp factory to replace the one damaged by fire in February 2012. We also plan to build a new ready-to-eat meals and bakery products factory and expand capacity at our new salmon products factory. All these expansion plans are aimed at supporting our future growth.

TUF’s achievements and continuous growth in operating performance reflect management’s commitment to improving efficiency and the team’s organizational strength and determination. This has resulted in greater financial security for the company as well as more integrated and larger business operations. Coupled with expansion of our global manufacturing base and our well-regarded brand names in 3 continents, we believe our company is on the right track for continuous and sustainable growth in the future. As President, I would like to thank shareholders, analysts, investors, business partners and financial institutions for their support, with a special mention to our management team and employees.

THAI UNION FROZEN PRODUCTS PCL.

ORGANIZATION CHART BOARD OF DIRECTORS

Audit Committee

Nomination and Remuneration Committee

Company Secretary

Risk Management Committee

PRESIDENT/CEO

Quality Management Office of President Strategic Business Development

Fish Product Lines

Shrimp Product Lines

BU Support

Corporate Support

Internal Audit

Marketing

Engineering

Finance & Accounting

Sustainability Development

Production/QC

Supply Chain Management

Human Resource

Communication

Procurement

Research & Development

Safety

Investor Relations & Corporate Investment

Total Workforce as of December 31, 2012 • Salaried Employee • Daily Employee

12,549 Staffs 1,502 Staffs 11,047 Staffs

ANNUAL REPORT 2012

BOARD OF DIRECTORS

Mr. Kraisorn Chansiri Chairman Age 78

Education • Honorary Doctorate Degree of Philosophy in Business Administration, Mae Fah Luang University • Honorary Science Degree of Doctor of Philosophy in Food Science and Technology, the Thai Chamber of Commerce University • The Role of Chairman Program organized by the Thai Institute of Directors Association (RCP 15/2007) • Certificate, Capital Market Academy Leader Program 12 (March – July 2011) Other Positions • Chairman, Thai Union Manufacturing Co., Ltd. • Chairman, Thai Sea Food Co., Ltd. • Chairman, Merchant Partners Securities PCL. • Executive Director, Songkla Canning PCL. • Executive Director, Thai Union Graphic Co., Ltd. • Director, Tri-Union Seafoods, LLC. • Director, Tri-Union Frozen Products Inc.

• • •

Director, Thai Union Seafood Co., Ltd. Director, Thai Union Feedmill Co., Ltd. Director, New Frontier Foods Co., Ltd.

Social Positions • Chief of Permanent Advisory Board, Thai-Chinese Merchant Club • President of the Tio Chew Association of Thailand • Vice President, Thai-Chinese Friendship Association • Honorary Live Vice President, Asian Volleyball Confederation No. of Shares Held: 117,783,680 shares* *

Shareholders of TUF that included spouse and children as of 3 January 2013

THAI UNION FROZEN PRODUCTS PCL.

Mr. Cheng Niruttinanon

Mr. Chuan Tangchansiri

Executive Director Age 71

Executive Director Age 68

Education • The second Middle School of Shantou, People’s Republic of China

Education • Bachelor’s Degree, South China Normal University, People’s Republic of China • Directors Accreditation Program organized by the Thai Institute of Directors Association (DAP 86/2010)

Other Positions • Chairman, Asian-Pacific Can Co., Ltd. • Chairman, Lucky Union Foods Co., Ltd. • Executive Director and Managing Director, Thai Union Manufacturing Co., Ltd. • Director, Thai Union Feedmill Co., Ltd. • Director, Tri-Union Seafoods, LLC. • Director, Tri-Union Products, Inc. • Director, PT Juifa International Foods Co., Ltd. • Director, Yueh Chyang Canned Food Co., Ltd. • Director, U.S. Pet Nutrition LLC. • Director MW Brands SAS • Director, New Frontier Foods Co., Ltd.

Other Positions • Executive Director, Thai Union Manufacturing Co., Ltd. • Director, Songkla Canning PCL. • Director, Asian-Pacific Can Co., Ltd. • Director, Thai Union Seafood Co., Ltd. • Director, Thai Union Feedmill Co., Ltd. • Director, Thai Union Graphic Co., Ltd. • Director, Thai Union Investment Holding (Investment in MW Brands SAS) • Director, New Frontier Foods Co., Ltd.

No. of Shares Held: 70,595,934 shares* No. of Shares Held: 9,967,000 shares* *

Shareholders of TUF that included spouse and children as of 3 January 2013

ANNUAL REPORT 2012

Mr. Thiraphong Chansiri President Age 48

Education • Bachelor’s Degree (Marketing), Assumption University • Master of Business Administration (Management), University of San Francisco, USA • Directors Certification Program organized by the Thai Institute of Directors Association (DCP 10/2001) Other Positions • Chairman, Thai Union Seafood Co., Ltd. • President, MW Brands SAS • President, Thai Union International, Inc. • President, Thai Union Graphic Co., Ltd. • President, T-Holding Co., Ltd. • President, Thai Union France Holding 2 SAS • Executive Director, Thai Union Manufacturing Co., Ltd. • Executive Director, Songkla Canning PCL. • Director, Asian-Pacific Can Co., Ltd. • Director, Thai Union Feedmill Co., Ltd. • Director, Thai Union Hatchery Co., Ltd. • Director, Biz Dimension Co., Ltd. • Director, Tri-Union Seafoods, LLC.

• • • • • • • • •

Director, Tri-Union Products, Inc. Director, Lucky Union Foods Co., Ltd. Director, PT Juifa International Foods Co., Ltd. Director, Yueh Chyang Canned Food Co., Ltd. Director, TN Fine Chemicals Co., Ltd. Director, Merchant Partners Securities PCL. Director, U.S. Pet Nutrition LLC. Director, Thai Union Investment Holding (Investment in MW Brands SAS) Director, New Frontier Foods Co., Ltd.

Social Positions • Advisory Committee, Market for Alternative Investment (MAI) • Advisory Committee, SET Research Institute • Advisory Committee, Thailand Future Foundation • Councilor, Thailand Management Association (TMA) • Board of Trustees of Siam Technology College No. of Shares Held: 114,711,943 shares* *

Shareholders of TUF that included spouse and children as of 3 January 2013

THAI UNION FROZEN PRODUCTS PCL.

Mr. Rittirong Boonmechote

Mr. Yasuo Goto

Managing Director (Shrimp Product Lines) Age 51

Director Age 64

Education • Bachelor’s Degree, Bangkok University • Directors Certification Program organized by the Thai Institute of Director Association (DCP 84/2010) • TLCA Executive Development Program (EDP 2/2009) by Thai Listed Companies Association

Education • Bachelor’s Degree, Keio University, Japan

Other Positions • President, Thai Union Feedmill Co., Ltd. • President, Thai Quality Shrimp Co., Ltd. • President, Thai Union Hatchery Co., Ltd. • President, Thai Union Seafood Co., Ltd. • Director, Tri-Union Frozen Products, Inc. • Director, TCM Fishery Co., Ltd. • Director, TMK Farm Co., Ltd. • Director, TMAC Co., Ltd. Social Positions • Vice President, Thai Frozen Foods Association • Vice President, Bangkok University Alumni Association No. of Shares Held: 15,860,745 shares* *

Shareholders of TUF that included spouse and children as of 3 January 2013

Experience • President & Chief Executive Office, Hagoromo Foods Corporation • Chairman, Hagoromo Foods Corporation • Director and Managing Director, Hagoromo Foods Corporation No. of Shares Held: -

ANNUAL REPORT 2012

Mr. Takehiko Kakiuchi

Mr. Chan Tin King

Director Age 58

Executive Director and Chief Financial Officer Age 45

Education • Bachelor’s Degree, Kyoto University, Japan

Education • Bachelor’s Degree, California State University, USA • Directors Certification Program organized by the Thai Institute of Directors Association (DCP 47/2004)

Experience • Senior Vice President (Food Department) of Mitsubishi Corporation No. of Shares Held: -

Other Positions • Executive Director and Managing Director, Biz Dimension Co., Ltd. • Executive Director, Thai Union Manufacturing Co., Ltd. • Executive Director, Songkla Canning PCL. • Director, T-Holding Co., Ltd. • Director, Tri-Union Seafoods, LLC. • Director, Tri-Union Frozen Products Inc. • Director, Thai Union Hatchery Co., Ltd. • Director, PT Juifa International Foods Co., Ltd. • Director, Yueh Chyang Canned Food Co., Ltd. • Director, Thai Union Investment Holding (Investment in MW Brands SAS) • Director, MW Brands SAS • Director, New Frontier Foods Co., Ltd. No. of Shares Held: 7,463,331 shares* *

Shareholders of TUF that included spouse and children as of 3 January 2013

THAI UNION FROZEN PRODUCTS PCL.

Mr. Chan Shue Chung

Mr. Ravinder Singh Grewal Sarbjit S

Executive Director Age 38

Director Age 44

Education • Bachelor’s Degree, Oregon State University, USA • Master of Business Administration, Bangkok University • Directors Certification Program organized by the Thai Institute of Directors Association (DCP 10/2002) • TLCA Executive Development Program (EDP 1/2009) by Thai Listed Companies Association

Education • Bachelor’s Degree (Commerce), University of New South Wales, Australia • Certified Public Accountants, Australian Society

Other Positions • Director, Thai Union Feedmill Co., Ltd. • Director, Thai Union Hatchery Co., Ltd.

Other Positions • Director, Wellard Holdings (Australia) • Director, Shangri-La Hotel (Malaysia) • Alt Director, Straits Resource Ltd. • Alt Director, Otto Marine Ltd. • Director, MW Brands SAS • Director, Scomi Oilfeld Limited (Bermuda) No. of Shares Held: *

No. of Shares Held: 3,273,818 shares* *

Shareholders of TUF that included spouse and children as of 3 January 2013

ANNUAL REPORT 2012

Mr. Sakdi Kiewkarnkha Independent Director Age 78

Education • Bachelor’s Degree (Accounting, Commerce and Law), Thammasat University • Directors Certification Program organized by the Thai Institute of Directors Association (DCP 13/2001) • The Role of Chairman Program organized by the Thai Institute of Directors Association (RCP 4/2001) • DCP Refresher Course organized by the Thai Institute of Directors Association (RE DCP 2/2006) • Handling Conflicts of Interest: What the Board should do? organized by the Thai Institute of Directors Association (4/2008) • The Role of Compensation Committee organized by the Thai Institute of Directors Association (RCC 9/2009) • How to Develop a Risk Management organized by the Thai Institute of Directors Association (HRP 2/2012) • Executive Program, Stanford University & University of Singapore • Senior Executive Program, Sasin Graduate Institute of Business Administration of Chulalongkorn University • Audit World – Conference 25-26 June 2012 Resort World Convention Centre, Singapore

•

Audit World – Post Conference 27 June 2012 Resort World Convention Centre, Singapore

Experience • Banking Ombudsman, Bank of Thailand • Executive Vice President, The Siam Commercial Bank PCL. • Executive Director, Bangkok Metropolitan Bank PCL. • Executive Director, Bangkok Metropolitan Life Insurance Co., Ltd. • Chairman of Audit Committee, The Book Club Finance PCL. • Independent Director & Audit Committee Member, Dusit Thani PCL. • Advisor to Executive Board, Bangkok Metropolitan Bank PCL. • Certified Public Accountant No. 0156 from 1962 • Attorney of Law No.2913401 from 1986 Social Positions • Vice President, The Princess Mother’s Medical Volunteer Foundation No. of Shares Held: *

Shareholders of TUF that included spouse and children as of 3 January 2013

THAI UNION FROZEN PRODUCTS PCL.

Pol.Maj.Gen. Pracha Anucrokdilok

Mr. Kiti Pilunthanadiloke

Independent Director Age 76

Independent Director Age 74

Education • Bachelor’s Degree (Law), Ramkhamhaeng University • Police Cadet Academy of Republic of China • Directors Accreditation Program organized by the Thai Institute of Directors Association (DAP 33/2005)

Education • Bachelor’s Degree (Law), Thammasat University • Barrister at Law • Directors Accreditation Program organized by the Thai Institute of Directors Association (DAP 36/2005)

Experience • Commander, Quartermaster Division • Deputy Commissioner, Immigration Bureau • Deputy Inspector General, Royal Thai Police

Experience • Lawyer, Kiti Legal Counselors • Special Public Prosecutor, Office of the Attorney General No. of Shares Held: -

No. of Shares Held: 7,572 shares* * *

Shareholders of TUF that included spouse and children as of 3 January 2013

ANNUAL REPORT 2012

Dr. Thamnoon Ananthothai Independent Director Age 56

Education • Bachelor’s Degree (Accountancy & Management), Eckerd College USA • Master’s Degree (M.B.A Management), The University of Sarasota Florida USA • Ph.D. International Management, Walden University USA • A.C.A Certificate, American Accreditation Council for Accountancy USA • Audit Committee Program organized by the Thai Institute of Directors Association (ACP 10/2005) • Directors Accreditation Program organized by the Thai Institute of Directors Association (DAP 48/2005) • Directors Certification Program organized by the Thai Institute of Directors Association (DCP 70/2006) • The Role of Chairman Program organized by the Thai Institute of Directors Association (RCP 14/2006) • Understanding the Fundamental of Financial Statement organized by the Thai Institute of Directors Association (UFS 7/2007)

Other Positions • Chairman, Vintage Engineering PCL. • Vice Chairman and Chairman of Audit Committee, Better World Green PCL. • Vice Chairman and Chairman of Audit Committee, IFS Capital (Thailand) PCL. • Executive Director, Merchant Partners Securities PCL. • Director and Chairman of Audit Committee, Eastern Printing PCL. • Director, Independent Director, Audit Committee, Chairman of the Nominating-Committee and Remuneration Committee Member, Property Prefect PCL. • Director and Audit Committee, Bangkok University No. of Shares Held: *

Shareholders of TUF that included spouse and children as of 3 January 2013

THAI UNION FROZEN PRODUCTS PCL.

Mr. Kirati Assakul Independent Director Age 55

Education • Bachelor’s Degree (Chemical Engineering Ontario), Queen’s University USA • Master’s Degree (Chemical Engineering), University of Southern California USA • Directors Certification Program organized by the Thai Institute of Directors Association (DCP 27/2003) • The Role of Compensation Committee organized by the Thai Institute of Directors Association (RCC 5/2007) Other Positions • Chairman, Ocean Life Insurance Co., Ltd. • Chairman of the Boards, Ocean Glass PCL. No. of Shares Held: 13,312 shares* *

Shareholders of TUF that included spouse and children as of 3 January 2013

AUDIT COMMITTEE AND SUB-COMMITTEES Audit Committee Mr. Kiti Pilunthanadiloke

Mr. Sakdi Kiewkarnkha

Pol.Maj.Gen. Pracha Anucrokdilok

Audit Committee

Chairman of Audit Committee

Audit Committee

Sub-Committees; Nomination and Remuneration Committee 1. Dr. Thamnoon Ananthothai 2. Mr. Sakdi Kiewkarnkha 3. Mr. Chan Tin King

Chairman of the Nomination and Remuneration Committee Member of the Nomination and Remuneration Committee Member of the Nomination and Remuneration Committee

Risk Management Committee 1. 2. 3. 4. 5.

Dr. Thamnoon Ananthothai Mr. Sakdi Kiewkarnkha Pol.Maj.Gen. Pracha Anucrokdilok Mr. Thiraphong Chansiri Mr. Chan Tin King

Chairman of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee

THAI UNION FROZEN PRODUCTS PCL.

1 5

ANNUAL REPORT 2012

MANAGEMENT TEAM 1. Mr. Suthidej Amornkasemwong Assistant Managing Director – Fish Product Lines Experience • General Manager (Fish Product Lines), Thai Union Frozen Products PCL. • Marketing Manager (Fish Product Lines), Thai Union Frozen Products PCL.

2. Mr. Preerasak Boonmechote General Manager – Shrimp Product Lines Experience • Assistant General Manager (Shrimp Product Lines), Thai Union Frozen Products PCL.

3. Ms. Sureenard Sukhawanchai General Manager Audit Unit Experience • Manager of Internal Audit Department, Krungthai Panich Insurance Co., Ltd. • Assistant Manager of Finance Department, Krungthai Panich Insurance Co., Ltd.

4. Mr. Yongyut Setthawiwat Deputy General Manager Finance Experience • Corporate Treasurer, KCE Electronics PCL • Treasury Manager, Hutchison CAT Wireless Multimedia Ltd.

5. Mr. Niti Trakpiboon Corporate Accounting Manager Experience • Assistant Vice President Information Management Department, Kiatnakin Securities Co., Ltd.

THAI UNION FROZEN PRODUCTS PCL.

5-YEAR COMPARATIVE FINANCIAL STATISTICS Total Revenues (Million Bt)

107,679 99,589

Net Profit

Total Assets

(Million Bt)

94,759 83,277

5,117

72,810 69,697 69,519

74,777 4,694 39,865 35,870

3,344 2,874

2,200

2008 2009 2010 2011 2012

Book Value per Share 34.77

Total Liabilities to Equity

Return on Average Equity

(Times)

(%)

(Bt)

22.79

21.79 25.57

16.03

23.36

16.26

18.49

2008 2009 2010 2011 2012

2.22 2.07 1.46

15.41

15.22

1.35 0.95

2008 2009 2010 2011 2012

ANNUAL REPORT 2012

2012 SALES BREAKDOWN AND DISTRIBUTION

2012 SALES BREAKDOWN Tuna Business

49%

Shrimp Business and Related Products

23%

Sardine and Mackerel Business

Petfood Business

Salmon Business

4% 11%

Value Added Business and Other Products

2012 SALES DISTRIBUTION USA

36%

Europe

30%

Japan

Domestic Sales

10%

Africa

Australia

Asia (Non-Japan)

Middle East Canada

2% 1%

South America

THAI UNION FROZEN PRODUCTS PCL.

CORPORATE HISTORY AND DEVELOPMENT

TUF’s long history of frozen seafood processing and export started in 1988 with Bt25-million initial capital. Later in 1992, we embarked on a joint venture with Mitsubishi Corporation and Hagoromo Foods Corporation, both of which are our Japanese business alliances that have taken dual roles as our authorized product distributors as well as our valued customers. Their efforts have played critical roles in the development of our products, enabling us to reach high industry standards and compete in the international marketplace. In 1994, we became a publicly traded company on the Stock Exchange of Thailand and we have continually increased our investment capital ever since. Today, our registered capital amounts to Bt1,202,000,000 at Bt1 par value, with paid-up capital of Bt1,147,593,829 or 1,147,593,829 shares. Through the years since the establishment, we have operated our business under prudent management policy to achieve the most efficient operations possible. This has been further strengthened by our expertise developed through decades of hands-on industry experience and visionary executive members. These factors in combination have yielded our business success, sustained growth and solid financial status to date.

Vision We strive to be the “Chef of the World” creating and providing high quality and innovative cuisine that fully satisfies our customers, consumers and stakeholders’ ever evolving demands.

Mission • Trusted as a provider of high-quality, safe, delicious and convenient food products and simultaneously as a fair and responsible partner for all of our stakeholders with a commitment to building long-term mutually successful relationships. • Renowned as an employer of choice; investing in people and creating opportunities for careers to grow and talent to flourish; providing our people with a better quality of life. • Globally respected as an ambassador and advocate for business associated with the seafood industry both in Thailand and among the world business communities. • Admired as an environmentally aware corporate citizen with long-term commitment to protect the environment and our Earth’s resources.

ANNUAL REPORT 2012

The increased investment in Pakfood Public Co., Ltd. is to allow for more flexibility in management. Pakfood’s readiness in manufacturing is valuable to support future business growth, thus enabling TUF to expand its seafood and frozen food businesses faster and definitely strengthen its business in the future.

Development in 2012 1. The Company reduced the amount of registered capital from Bt1,000,000,000 to Bt999,186,550 through cancellation of 813,450 registered common shares. This move was intended for a subsequent increase in the amount of registered capital to facilitate other prospects. 2. The Company increased the amount of registered capital from Bt999,186,550 to Bt1,202,000,000 at Bt1 par value, through issuance of 202,813,450 registered common shares. The new shares were offered to the current shareholders, limited individuals according to their shareholding proportion, and the shareholders of the convertible debentures at Bt50 per share, at 5 current shares: 1 newly issued share. This move aims at accelerating the company’s debt reduction plan resulting from the MWB acquisition, as well as facilitating for the continual growth in the future. 3. Changing of shareholding ratio in Avanti Feeds Ltd., TUF’s joint venture company, which is a listed company in India’s capital market, from 14.99% to 25.12%, by trading TUF’s 3,844,800 shares in Avanti Thai Aqua Feeds Ltd. with 1,083,042 shares in Avanti Feeds Ltd., made Avanti Feeds Ltd. the sole shareholder of

Avanti Thai Aqua Feed Ltd. This change further enhances effective management and increases shrimp feeds production capacity due to the steady and continuing growth in shrimp business in India, especially the shrimp feeds business.

4. The successful joint venture of Thai Union Feedmill Co., Ltd., a TUF’s subsidiary, and Mitsubishi Corporation, to form TMAC Co., Ltd. for shrimp farming business in Thailand at the proportion of 51% and 49% respectively, has strengthened the company’s capability in sourcing quality shrimp raw materials from safe and reliable sources, and imposing effective traceability. The joint venture adds to TUF’s business development portfolio in shrimp feeds and shrimp hatchery businesses. 5. The company increased investment in Pakfood Public Company Limited by acquiring 2,989,999 shares, equal to 9.97% of total issued shares, resulting in TUF’s owning 14,989,999 shares of Pakfood, accounting for 49.97% of total issued shares. Recently in February 2013, the Company purchased additional shares of 9.04%, as a result, the Company’s current share holding in Pakfood Public Co., Ltd. represents 54.46% or 17,971,756 shares.

THAI UNION FROZEN PRODUCTS PCL.

OUR BRANDS The company currently owns a number of global brands of frozen seafood and premium brand of pet food, covering 3 continents:

AMERICA Chicken of the Sea #3 brand in the U.S.A. In addition to its branding strength in this continent, Tri-Union Frozen Products, Inc., our subsidiary, is also the largest importer of frozen shrimps in the U.S.A.

EUROPE

ASIA John West #1 brand in the U.K., the Netherlands, and Ireland

Century #1 brand in China

Petit Navire #1 brand in France

Sealect #1 brand of Tuna in Thailand and ASEAN

Hyacinthe Parmentier #3 brand in France

Fisho Quality brand of fish snack in Thailand

Mareblu #3 brand in Italy

Bellotta Premium brand of pet food in Thailand

ANNUAL REPORT 2012

NATURE OF BUSINESS THAI UNION FROZEN PRODUCTS PUBLIC COMPANY LIMITED GROUP 1 Production and Export of Frozen and Canned Food Products

THAI UNION MANUFACTURING CO., LTD. (TUM)

90.08%

NEW FRONTIER FOODS CO., LTD. (NFF)

100%**

SONGKLA CANNING PCL. (SC)

90.44%

THAI UNION SEAFOOD CO., LTD. (TUS)

PAKFOOD PUBLIC COMPANY LIMITED (PPC)

51%

54.46%

THAI UNION FROZEN PRODUCTS PCL.

GROUP 2 Production and Distribution of Packaging Products

ASIAN-PACIFIC CAN CO., LTD. (APC)

THAI UNION GRAPHIC CO., LTD. (TUG)

90.5%*

74%

GROUP 3 Production and Distribution of Animal Feeds and Agriculture Products

THAI UNION FEEDMILL CO., LTD. (TFM)

51%

THAI QUALITY SHRIMP CO., LTD. (TQS)

95%***

THAI UNION HATCHERY CO., LTD. (TUH)

100%***

TCM FISHERY CO., LTD. (TCM)

80%***

TMK FARM CO., LTD. (TMK)

75%***

THAI MAC CO., LTD. (TMAC)

51%***

ANNUAL REPORT 2012

GROUP 4 Food Business in Domestic Market

T-HOLDING CO., LTD. (THD)

90.00%

GROUP 5 Overseas Investments

THAI UNION INTERNATIONAL, INC. (TUI)

100%

TRI-UNION SEAFOODS, LLC. (TRI-U) (Chicken of the Sea International)

100%

TRI-UNION FROZEN PRODUCTS, INC. (TUFP)

82.00%

U.S. PET NUTRITION, LLC (USPN)

99.00%

CANADIAN PET NUTRITION, ULC (CAPN)

PT JUIFA INTERNATIONAL FOODS CO., LTD. (JIF)

100%

88.78%

THAI UNION FROZEN PRODUCTS PCL.

YUEH CHYANG CANNED FOOD CO., LTD. (YCC)

51%*

THAI UNION INVESTMENT HOLDING (TUIH)

100%

MW BRANDS SAS (MW BRANDS)

100%

ASSOCIATED COMPANIES

LUCKY UNION FOODS CO., LTD. (LUF)

25%

BIZ DIMENSION CO., LTD. (BZD)

20%

AVANTI FEEDS LIMITED (AFL)

25.12%

TN FINE CHEMICAL CO., LTD. (TNFC)

48.97%**

MORESBY INTERNATIONAL HOLDINGS, INC. (MIH)

33.33%**

* Investment by Songkla Canning PCL. ** Investment by Thai Union Manufacturing Co., Ltd. *** Investment by Thai Union Feedmill Co., Ltd.

ANNUAL REPORT 2012

INVESTMENTS IN

SUBSIDIARIES AND ASSOCIATED COMPANIES

THAI UNION FROZEN PRODUCTS PCL.

THAI UNION MANUFACTURING CO., LTD. (TUM)

SONGKLA CANNING PCL. (SC)

Office: 979/13-16 M Floor, S.M. Tower, Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400 Tel: 66 (0) 2298-0025, 298-0421 - 32 Fax: 66 (0) 2298-0027 - 28

Office: 979/9-10 12th Floor, S.M. Tower, Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400 Tel: 66 (0) 2298-0029 Fax: 66 (0) 2298-0442 - 3

Factory: 30/2 Moo 8, Sethakit 1 Road, Tambon Tarsrai, Amphoe Mueang Samutsakhon, Samutsakhon 74000 Tel: 66 (0) 3441-2210, 3481-6441 - 4 Fax: 66 (0) 3442-5459

Factory: 333 Kanjanavanij Road, Tambon Pavong, Amphoe Mueang Songkhla, Songkhla 90100 Tel: 66 (0) 7433-4005 - 8 Fax: 66 (0) 7433-4009

Type of Business: Processor and exporter of canned tuna and petfood

Type of Business: Processor and exporter of canned seafood

Registered Capital: Bt300,000,000 at Bt10 Par Value

Registered Capital: Bt360,000,000 at Bt10 Par Value

Date of Investment: March 1994 (Additional investment in June 1999)

Date of Investment: October 1995 (Additional investment in March 1999)

Type/% Holding/No. of Shares: Common share 90.08% or 27,025,360 shares

Type/% Holding/No. of Shares: Common share 90.44% or 32,556,819 shares

THAI UNION SEAFOOD CO., LTD. (TUS)

ASIAN-PACIFIC CAN CO., LTD. (APC)

Office: 979/8 12th Floor, S.M. Tower, Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400 Tel: 66 (0) 2298-0024 Fax: 66 (0) 2298-0550

Office: 38/70 Moo 8, Sethakit 1 Road, Tambon Tarsrai, Amphoe Mueang Samutsakhon, Samutsakhon 74000 Tel: 66 (0) 3442-3401 - 6 Fax: 66 (0) 3442-1493

Factory: 77 Moo 5, Songkhla-Ranot Road, Tambon Watkanun, Amphoe Singhanakhon, Songkhla 90330 Tel: 66 (0) 7448-3482 - 7 Fax: 66 (0) 7448-3480 - 1

Type of Business: Manufacturer and distributor of steel and aluminum food packaging products

Type of Business: Processor and exporter of frozen shrimp Registered Capital: Bt300,000,000 at Bt10 Par Value Date of Investment: December 1996 (Additional investment in March 2005 and October 2008) Type/% Holding/No. of Shares: Common share 51.00% or 15,300,000 shares

Registered Capital: Bt80,000,000 at Bt400,000 Par Value Date of Investment: December 1993 Type/% Holding/No. of Shares: Common share 90.50% or 181 shares (Invested by Songkla Canning PCL.)

ANNUAL REPORT 2012

THAI UNION GRAPHIC CO., LTD. (TUG)

THAI UNION FEEDMILL CO., LTD. (TFM)

Office: 255 Smaedam Road, Smaedam, Bangkhunthian, Bangkok 10150 Tel: 66 (0) 2415-5808 - 9, 2895-5865 - 6 Fax: 66 (0) 2415-4371

Office/Factory: 89/1 Moo 2, Rama II Road, Tambon Kalong, Amphoe Mueang Samutsakhon, Samutsakhon 74000 Tel: 66 (0) 3441-7222, 3441-7219 Fax: 66 (0) 3441-7255

Type of Business: One-stop-service offset printing house specialized in standard high-quality printouts

Factory: 103/1 Moo 2, Songkhla-Ranot Road, Tambon Pak-Trae, Amphoe Ranot, Songkhla 90140 Tel: 66 (0) 7439-6933-7 Fax: 66 (0) 7439-6938

Registered Capital: Bt40,000,000 at Bt10 Par Value Date of Investment: July 1995 (Additional investment in May 2001) Type/% Holding/No. of Shares: Common share 74.00% or 2,960,000 shares Website: http://www.thaiuniongraphic.com

Type of Business: Processor and exporter of animal feeds Registered Capital: Bt500,000,000 at Bt10 Par Value Date of Investment: June 2000 (Additional investment in May 2001, October 2006 and August 2010) Type/% Holding/No. of Shares: Common share 51.00% or 25,500,000 shares Website: http://www.thaiunionfeedmill.com

THAI QUALITY SHRIMP CO., LTD. (TQS)

THAI UNION HATCHERY CO., LTD. (TUH)

Office: 89/1 Moo 2, Rama II Road, Tambon Kalong, Amphoe Mueang Samutsakhon, Samutsakhon 74000 Tel: 66 (0) 3441-7222, 3441-7219 Fax: 66 (0) 3441-7255

Office: 89/1 Moo 12, Rama II Road, Tambon Kalong, Amphoe Mueang Samutsakhon, Samutsakhon 74000 Tel: 66 (0) 3441-7222, 3441-7219 Fax: 66 (0) 3441-7255

Type of Business: Producer and distributor of nauplii and postlarvae shrimps. Research and development of new shrimp breeds.

Factory: 42 Moo 14, Tambon Kokkloy, Amphoe Takua Thung, Phangnga 82140 Tel: 66 (0) 7658-4000 – 27 Fax: 66 (0) 7658-4028 – 9

Registered Capital: Bt4,000,000 at Bt10 Par Value Date of Investment: July 2004 (The capital decrease in December 2007)

Type of Business: Quality white-shrimp breed development to produce and distribute high-quality nauplii and postlarvae to farmers

Type/% Holding/No. of Shares: Common share 95.00% or 379,994 shares (Invested by Thai Union Feedmill Co., Ltd.)

Registered Capital: Bt420,000,000 at Bt10 Par Value Date of Investment: April 2006 (Additional investment in November 2007, April 2011 and January 2013) Type/% Holding/No. of Shares: Common share 100.00% or 41,999,950 shares (Invested by Thai Union Feedmill Co., Ltd.)

THAI UNION FROZEN PRODUCTS PCL.

T-HOLDING CO., LTD. (THD) Office: 11 Kanjanapisek Road, Bangbon, Bangbon, Bangkok 10150 Tel: 66 (0) 2898-8200 Fax: 66 (0) 2895-3001 Type of Business: Distributor of “Fisho”,“Sealect” and “Bellotta” product lines Registered Capital: Bt70,000,000 at Bt10 Par Value Date of Investment: November 1996 Type/% Holding/No. of Shares: Common share 90.00% or 6,300,000 shares Website: http://www.fisho.com, http://www.sealectbrand.com

TRI-UNION SEAFOODS, LLC. (TRI-U) Office: Sorrento South Corporate Center 9330 Scranton Road, Suite 500, San Diego, California 92121, USA Tel: (858) 558-9662 Fax: (858) 597-4566

THAI UNION INTERNATIONAL, INC. (TUI) Office: Sorrento South Corporate Center 9330 Scranton Road, Suite 500, San Diego, California 92121, USA Tel: (858) 558-9662 Fax: (858) 597-4566 Type of Business: A holding company for investment in USA Registered Capital: USD10,000,000 at USD1 Par Value Date of Investment: April 1996 Type/% Holding/No. of Shares: Common share 100.00% or 10,000,000 shares

TRI-UNION FROZEN PRODUCTS, INC. (TUFP) West Office: 222 N. Sepulveda Blvd, Suite 1550, El Segundo CA 90245 USA Tel: (866) 572-0996 Fax: (310) 469-7037

Type of Business: Processor and distributor of canned seafood under “Chicken of the Sea” brand

East Office: 5 Dakota Drive, Suite 303, Lake Success, NY 11042 USA Tel: (516) 740-4100 Fax: (516) 621-0199

Equity: USD62,614,649

Type of Business: Importer and distributor of frozen seafood products

Date of Investment: July 1997 (Additional investment in January 2001)

Registered Capital: Common share 5,800 shares at USD0.001 Par Value Preferred Share 4,200 shares at USD0.001 Par Value

Type/% Holding/No. of Shares: 100.00% (Invested by Thai Union International, Inc.) (No share issued) Website: http://www.chickenofthesea.com

Type/%Holding/No. of Shares: Common share 68.97% or 4,000 shares Preferred share100.00 or 4,200 shares (Invested by Thai Union International, Inc.) ** Empress International Ltd. and Tri-Union Frozen Foods, LLC were merged

ANNUAL REPORT 2012

U.S. PET NUTRITION LLC. (USPN)

CANADIAN PET NUTRITION, ULC (CAPN)

Office: 9330 Scranton Road, Suite 500, San Diego CA 92121 USA Tel: (858) 558-9662 Fax: (858) 597-4566

Office: 100, 1150 Kalamalka Lake Road, Vernon, BC V1T6V2 Canada Tel: (250) 762-5434

Type of Business: Processor and distributor of wet and dry pet food

Type of Business: Processor and distributor of pet food

Registered Capital: USD1

Registered Capital: 100 shares at USD0.01 Par Value

Date of Investment: October 2010

Date of Investment: July 2011

Type/%Holding/No. of Shares: Common share 99.00% (Invested by Thai Union International, Inc.) Common share 1.00% (Invested by Tri-Union Seafoods, LLC)

Type/%Holding/No. of Shares: Common share 100.00% (Invested by U.S. Pet Nutrition LLC.)

THAI UNION INVESTMENT HOLDING (TUIH) Office: 8th Floor, Medine Mews, La Chaussee Street, Port Louis, Mauritius Type of Business: A holding company for investment in Europe Registered Capital: 222,000,000 shares at EUR1 Par Value Date of Investment: June 2010 Type/%Holding/No. of Shares: Common share 100.00% or 222,000,000 shares

MW BRANDS SAS (MW BRANDS) Office: 104, Avenue du PrĂŠsident Kennedy 75016 Paris, France Tel: (33) 1-53-77-53-53 Fax: (33) 1-53-77-17-13 Type of Business: Processor and exporter of canned seafood in Europe Registered Capital: 31,367,000 shares at EUR1 Par Value Date of Investment: October 2010 Type/%Holding/No. of Shares: Common share 100.00% or 31,367,000 shares (Invested by Thai Union Investment Holding)

THAI UNION FROZEN PRODUCTS PCL.

PT JUIFA INTERNATIONAL FOODS CO., LTD. (JIF)

YUEH CHYANG CANNED FOOD CO., LTD. (YCC)

Office: JL. Lingkar Timur No.53 Tegalkamulyan Cilacap 53211 Jawa Tengah, Indonesia Tel: (62-282) 521-002 - 5 Fax: (62-282) 521-007

Office: Nhut Chinh Village, Ben Luc District, Long An Province, Peopleâ&#x20AC;&#x2122;s Republic of Vietnam Tel: (84) 072-387-2377 Fax: (84) 072-387-2388

Type of Business: Processor and exporter of canned tuna products

Type of Business: Processor and exporter of canned seafood

Registered Capital: USD2,700,000 at USD100 Par Value

Registered Capital: USD1,919,936

Date of Investment: May 2006

Date of Investment: December 2007

Type/% Holding/No. of Shares: Common share 88.78% or 23,970 shares

Type/%Holding/No. of Shares: 51.00% (Invested by Songkla Canning PCL.)

LUCKY UNION FOODS CO., LTD. (LUF)

BIZ DIMENSION CO., LTD. (BZD)

Office/Factory: 1/74-75 Samutsakhon Industrial Estate, Tambon Tarsrai, Amphoe Mueang Samutsakhon, Samutsakhon 74000 Tel: 66 (0) 3449-0330, 3449-0009 Fax: 66 (0) 3449-0008

Office: 979/79-80 26th Floor, S.M. Tower, Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400 Tel: 66 (0) 2298-0345 Fax: 66 (0) 2298-0331 - 3

Type of Business: Processor and exporter of imitation crab stick

Type of Business: E-Procurement Service Provider

Registered Capital: Bt150,000,000 at Bt100 Par Value

Registered Capital: Bt25,000,000 at Bt5 Par Value

Date of Investment: June 1990 (Additional investment in March 2004)

Date of Investment: September 2003

Type/% Holding/No. of Shares: Common share 25.00% or 375,000 shares

Type/% Holding/No. of Shares: Common share 20.00% or 1,000,000 shares

ANNUAL REPORT 2012

AVANTI FEEDS LIMITED (AFL)

TN FINE CHEMICAL CO., LTD. (TNFC)

Office: G2, Concorde Apartments, 6-3-658, Somaji Guda, Hyderabad-500 082, Andhra Pradesh, India Tel: 91-40-2331-0260, 2331-0261 Fax: 91-40-2331-1604

Office: 30/2 Moo 8, Sethakit 1 Road, Tambon Tarsrai, Amphoe Mueang Samutsakhon, Samutsakhon 74000 Tel: 66 (0) 3442-3686 Fax: 66 (0) 3442-3688

Type of Business: Processor and exporter of shrimp feed and frozen shrimp

Type of Business: Processor and exporter of seafood by-products, i.e. high grade oil extracts from tuna fish, glucosamine derived from shrimp shell.

Registered Capital: INR90,830,420 at INR10 Par Value Date of Investment: October 2008 Type/% Holding/No. of Shares: Common shares 25.12% or 2,282,042 shares

Registered Capital: Bt90,000,000 at Bt10,000 Par Value Date of Investment: March 2009 Type/% Holding/No. of Shares: Common share 48.97% or 4,407 shares (Invested by Thai Union Manufacturing Co., Ltd.)

MORESBY INTERNATIONAL HOLDINGS, INC. (MIH) Office: Unit 4, 2nd Floor ADF Haus, Musgrave St., Port Moresby, Papua New Guinea Type of Business: A holding company set up for investment in Majestic Seafood Corporation Ltd. in Papua New Guinea which operates tuna processing / tuna fishing in the country’s waters and nearby maritime areas Registered Capital: USD9,400,000

PAKFOOD PUBLIC COMPANY LIMITED (PPC) Office: 103 Soi Ruam Mit, Non Si Road, Chong Non Si, Yannawa Bangkok 10120 Tel: 66 (0) 2295-1991-9, 2295-2000-1 Fax: 66 (0) 2861-1205 Factory: 30 Ekkachai Road, Tambon Nadee, Amphoe Mueang, Samutsakhon 74000 Tel: 66 (0) 3483-3803 – 6 Fax: 66 (0) 3486-1110

Date of Investment: October 2009

Type of Business: Processor and exporter of seafood and ready- to- eat products

Type/% Holding/No. of Shares: Common share 33.33% (Invested by Thai Union Manufacturing Co., Ltd.)

Registered Capital: Bt300,000,000 at Bt10 Par Value Date of Investment: April 2012 (Additional investment in December 2012 and February 2013) Type/%Holding/No. of Shares: Common shares 54.46 or 17,971,756 shares

THAI UNION FROZEN PRODUCTS PCL.

TCM FISHERY CO., LTD. (TCM)

TMK FARM CO., LTD. (TMK)

Office: 89/1 Moo 12, Rama II Road, Tambon Kalong, Amphoe Mueang Samutsakhon, Samutsakhon 74000 Tel: 66 (0) 3441-7222, 3441-7219 Fax: 66 (0) 3441-7255

Farm: 147 Moo 11, Tambon Kumpang, Amphoe La-ngu, Satun 91110

Farm: 173/1 Moo 4, Tambon Bangsak, Amphoe Kantang, Trang 92110

Type of Business: Shrimp Farm

Registered Capital: Bt70,000,000 at Bt10 Par Value

Registered Capital: Bt150,000,000 at Bt10 Par Value

Date of Investment: April 2012

Date of Investment: June 2012

Type/% Holding/No. of Shares: Common share 80.00% or 5,600,000 shares (Invested by Thai Union Feedmill Co., Ltd.)

Type/% Holding/No. of Shares: Common share 75.00% or 11,250,000 shares (Invested by Thai Union Feedmill Co., Ltd.)

TMAC CO., LTD. (TMAC) Office: 89/1 Moo 12, Rama II Road, Tambon Kalong, Amphoe Mueang Samutsakhon, Samutsakhon 74000 Tel: 66 (0) 3441-7222, 3441-7219 Fax: 66 (0) 3441-7255 Type of Business: Shrimp Farm Registered Capital: Bt560,000,000 at Bt10 Par Value Date of Investment: December 2012 Type/% Holding/No. of Shares: Common share 50.99% or 28,559,997 shares (Invested by Thai Union Feedmill Co., Ltd.)

NEW FRONTIER FOODS CO., LTD. (NFF) Office: 30/24 Moo 8, Rama II Road, Tambon Tarsrai, Amphoe Mueang Samutsakhon, Samutsakhon 74000 Type of Business: Processor and exporter of canned tuna and petfood Registered Capital: Bt10,000,000 at Bt10 Par Value Date of Investment: January 2013 Type/% Holding/No. of Shares: Common share 100.00% or 999,989 shares (Invested by Thai Union Manufacturing Co., Ltd.)

ANNUAL REPORT 2012

SALES STRUCTURE OF TUF AND SUBSIDIARIES Unit: Million Baht Product / Business Group

% Holding by TUF

Company

2012 Sale

2011 %

Sale

2010 %

Sale

Group 1 Production and Export of Frozen and Canned Food Products

Thai Union Frozen Products PCL TUF

15,011.09 14.1

13,276.77 13.5

11,961.94

16.7

Thai union Manufacturing Co., Ltd. TUM

90.08

17,237.95 16.2

15,175.86 15.4

12,642.51

17.7

Songkla Canning PCL.

90.44

7,212.52

6.8

6,557.31

6.6

5,374.85

7.5

Thai Union Seafood Co., Ltd.

TUS

51.00

1,394.42

1.3

1,531.51

1.6

1,487.42

2.1

Group 2 Production and Distribution of Packaging Products

Asian – Pacific Co., Ltd.

APC

90.50*

1,068.88

1.0

799.06

0.8

496.92

0.7

Thai Union Graphic Co., Ltd.

TUG

74.00

157.88

0.2

187.00

0.2

241.32

0.3

Group 3 Production and Distribution of Animal Feeds and Agricultural Products

Thai Union Feedmill Co., Ltd.

TFM

51.00

4,951.52

4.6

4,978.25

5.0

4,758.23

6.7

Thai Quality Shrimp Co., Ltd.

TQS

95.00*

22.08

0.0

23.41

0.0

27.81

0.1

Thai Union Hatchery Co., Ltd.

TUH

99.99*

149.20

0.1

88.48

0.1

78.03

0.0

Group 4 Food Business in Domestic Market

T-Holding Co., Ltd.

THD

90.00

1,419.40

1.3

1,813.86

1.8

1,514.02

2.1

N/A

Group 5 Overseas Investments

Thai Union International, Inc.

TUI

100.00

• Tri-Union Seafoods, LLC.

Tri-U

100.00*

14,124.28

13.2

13,080.19

13.3

12,860.20

18.0

• Tri-Union Frozen Products, Inc.

TUFP

82.00*

18,576.08

17.4

18,594.08

18.8

11,713.50

16.4

4,396.97

6.2

(Empress International Ltd. and Tri-Union Frozen Foods, LLC were merged)

• U.S. Pet Nutrition LLC.

USPN

Thai Union Investment Holding

TUIH

• MW Brands SAS

MWB 100.00*

99.00* 100.00

508.74

0.5

N/A

24,116.98

22.6

21,867.85

22.2

2,820.32

3.9

PT Juifa International Foods Co., Ltd. JIF

76.50

459.51

0.4

437.26

0.4

503.86

0.7

Yueh Chyang Canned Food Co., Ltd. YCC

51.00*

287.09

0.3

259.49

0.3

647.50

0.9

106,697.62 100.0

98,670.38 100.0

71,507.40 100.0

Remark: The above data refers to sales structure after exclusion of connected transactions. The total sales of tuna vessel business group are derived from sales made to member companies in Thai Union Group and therefore regarded wholly as connected transactions. * APC and YCC holding owned by SC / TQS and TUH holding owned by TFM / Tri-U, TUFP and USPN holding owned by TUI / MWB holding owned by TUIH

THAI UNION FROZEN PRODUCTS PCL.

NATURE OF MAIN BUSINESS Tuna Frozen cooked tuna and canned tuna, manufactured under customer’s brands and TUF’s own brands, contributes 49% of the total corporate revenues.

Shrimp and Related Products Frozen shrimps and by products, such as shrimp food and hatchery contributes 23% of the total corporate revenues.

Sardine and Mackerel Canned sardine and mackerel, manufactured under customer’s brands and TUF’s own brands, contributes 6% of the total corporate revenues.

ANNUAL REPORT 2012

Salmon Frozen salmon, processed salmon, and canned salmon, manufactured under both customer’s brands and TUF’s own brands, contributes 4% of the total corporate revenues.

Pet Food Pet food, manufactured under both customer’s brands and TUF’s own brands, contributes 7% of the total corporate revenues.

Other Value-Added products Ready-to-eat frozen food, frozen seafood, frozen cephalopod, and bakery, manufactured under both customer’s brands and TUF’s own brands, contributes 11% of the total corporate revenues.

THAI UNION FROZEN PRODUCTS PCL.

RELATED BUSINESS GROUPS

ANNUAL REPORT 2012

Asian Pacific Can Co., Ltd. (APC)

“Sealect” Family

Asian Pacific Can Co., Ltd. is a manufacturer and distributor of steel and aluminum food packaging products (conventional lid and 2-piece easy-open lid).

In 2012, the overall canned fish market in Thailand increased by only 1% due to economic uncertainty and a lower demand after the Thai flood crisis in 2011. However, Sealect remained ranked the second in the overall canned fish market with a growth rate of 13% and retained its first ranking within the canned tuna category with a market share in excess of 45%.

The company’s sales in 2012 stayed flat from a year ago. It also invested 13 million baht in purchasing a 307-mm can making machine to expand production capacity and fulfill consumers’ growing demand. The company currently can produce up to 16 million pieces of 307-mm empty cans. In 2013, APC will further expand its production capacity to support increasing orders. APC is determined to maintain and further develop it its quality product standards and punctual delivery to meet customers’ demand with high satisfaction.

Thai Union Graphic Co., Ltd. (TUG) Thai Union Graphic Co., Ltd. offers high-quality offset printing services, such as label printing, box printing, book printing, rolled sticker printing, etc. The printing industry is undergoing change as a result of the growing popularity of digital media. The demand for print media for advertising purposes has declined. Therefore TUG has changed its marketing focus in 2012 to industrial printing, such as for industrial packaging, in order to compensate for a lower demand for print media. In 2013, TUG will remain its focus on industrial printing. It will also apply for certification of quality standards, namely GMP and HACCP (The company has already been ISO-9001 certified), in order to produce prints that can be in direct contact with food. This plan should be accomplished in the third quarter of 2013.

T-Holding Co., Ltd. (THD) T-HOLDING CO., LTD. is a marketing communications strategy consultant and a distributor of branded products under the trademarks of “Sealect”, “Fisho” and “Bellotta” for the domestic market in Thailand.

In 2012, there were continual marketing efforts on Sealect brand in the canned fish market. Sealect canned tuna products were rebranded and launched with a new logo and new packaging in order to highlight its leadership on innovation in the canned tuna market. The new images projected an universal recognition and higher product premium. In addition, the company performed its 360-Degree marketing communications plan under the campaign “Gin Pla Dai Boi, Aroi Dai Tookwan” (Enjoy your daily meal with tuna) through road show activities, online media, including a new set of advertising commercials. The latter was to convey a message that that Sealect Tuna is a suitable ingredient for preparing different dishes, both Thai and international. Also, fish products are fit for health-conscious consumers and can be consumed on a daily basis, particularly that tuna fish has a high nutritional value and can be used in many new recipes for everyday cooking with high palatability. For sardine and mackerel products, THD signed a Memorandum of Understanding (MoU) for a business partnership to support the Doi Kham Royal Project in 2012. It sourced high quality tomatoes from Doi Kham as an ingredient in its tomato sauce for sardine and mackerel products while provided a job and income opportunity for farmers working in the royal project. In 2013, the company will emphasize strengthening the brand image of Sealect brand in order to highlight its leadership in the canned fish market with high quality and variety products to meet customers of all genders and ages with satisfaction. THD will also expand its distribution channels in Bangkok and up-country while continuously developing new products

THAI UNION FROZEN PRODUCTS PCL.

“Fisho” Family Fisho is also one of the company’s leading product brands. In 2012, its brand image was greatly enhanced for its high quality and popularity among Thais. The company developed products that meet the different perspectives of its target groups. Fisho’s brand image was developed based on the following key elements: 1. Product Quality 1.1 Formula development: the company developed a new formula and had a leading research institute to review and test it. The company then concluded that its products were acceptable in all major aspects by consumers, such as flavor, product texture and color. Hence, the company was confident that its products quality should meet customers’ demand. 1.2 Packaging development: Fisho’s packaging was re-designed in order to to project a more modern image by using innovative opaque metalite to replace the plastic sheet. By this way, fish quality can be better preserved and warrants a high quality product to customers. 1.3 Product format development: Fisho products were developed in many different formats and flavors for customers’ choices. Currently, fish stripe products carry 6 flavors, fish chip 5 flavors, grinded fish 2 flavors, and fish crispy 3 flavors. The fish crispy is unique in the seafood snack market and has no competitor. Therefore, this is an attractive segment for the company.

also launched an online media via a Facebook fan page (www.facebook.com/fishopage) for a direct and up-to-date communication to consumers and a growing popularity of digital media. 3. Distribution Channels The company made its product display on shelves in a more attractive way in each distribution channel, such as modern trade and superstores in upcountry areas. Also, the company made a brand block more appealing to buy. Moreover, the company a offered promotions to business partners to push sales as well as conducting product tasting for customers. Our business partners l responded positively and stocked more Fisho products in their stores. Meanwhile, our consumers also showed have more interests in Fisho products. “Bellotta” Wet-Based Dog and Cat Food Family Pet food in Thailand is a sizeable market with high growth potential. In 2012, the local pet food market grew 20% growth due to the fast growing pet population. Pet owners have also spent more on pet food on average because they tend to treat and take care of their pets more like their own children or family members. This trend continued to grow based on a high growth rate in pet services and related business, such as grooming, boarding, training, recreational activities (e.g. swimming pool for pets), veterinary clinics and hospitals, medical treatments, equipment, clothing and accessories, snack & treat, and kitten-puppy farms and pet contests.

2. Fully Integrated Communication Fisho presented its new campaign under the concept “Fisho Happy Snack”. The concept showed that Fisho is a fish stripe snack with an outstanding and different quality from other snacks. Fisho is a snack you can eat all the time and can make a customer feel good. The company applied the 360-degree advertising to build product recognition and acquaintance with target customers. The company

In 2012, Bellotta continuously focused on sales promotion to create product trial in order to make an impression on consumers and to build brand loyalty. Its sales revenue last year increased by 32% from the previous year, particularly from Alu Tray for cats, which is a premium grade product. This has confirmed that pet owners are less price-sensitive and willing to pay for premium products due to their care for their pets.

ANNUAL REPORT 2012

Thai Union Seafood Co., Ltd. (TUS) Thai Union Seafood Co., Ltd. is involved in frozen shrimp processing for export business. In 2012, the company recorded sales revenue of USD 123.4 million, down 8% from the previous year. This was due to higher raw shrimp prices between August and the year end. The Thai shrimp industry suffered a shrimp disease outbreak called EMS (Early Mortality Syndrome) which resulted in lower production. Moreover, other major shrimp producing countries, namely China, Vietnam and Malaysia, were also affected by this disease, leading to increasing raw material prices. During the year, the company expanded its customer base in Korea and other Asian markets (non-Japan), resulting in a growth rate of 69% from the previous year in these markets. In 2013, TUS will put focus on market expansion in value-added products, such as Alive Shrimp which has high value and few competitors as well as building customer trust in its high quality products through certification and compliance with international standards.

Thai Union Feedmill Co., Ltd. (TFM) Thai Union Feedmill Co., Ltd. is a manufacturer and distributor of aquatic feed for shrimp and fish, serving both domestic and overseas markets. In 2012, Thailand exported 348,390 metric tons of shrimp products worth THB 95,473 million. This showed a decline of 10.3% in volume and 12.7% in value respectively from lasrt year due to lower shrimp production. Thai shrimp production in 2012 is estimated to drop 10% to 540,000 metric tons from 600,000 metric tons a year ago due mainly to: 1. Shrimp disease outbreak called EMS (Early Mortality Syndrome) 2. Shortage supply of high quality baby shrimps

In terms of TFM’s performance, the company’s sales were short of its original annual target. In 2013, the domestic shrimp feed and fish feed markets are expected to continually grow, especially for feed for Sea Bass which expects sales to more than double and generates the highest margin among other fish feeds. This will be also the firm’s focus market this year. In 2013, the company will emphasize market expansion and developing a new customer base. Meanwhile, the company will also secure its existing customer base via representatives and direct sales to farms.

Thai Union Hatchery Co., Ltd. (TUH) Thai Union Hatchery Co., Ltd. is a manufacturer of high-quality white shrimps (Penaeus vannamei) nauplii under strong quality commitment to ensure continual provision of unparalleled products and services to customers. At present, the company is certified by international standards, such as The Accreditation Committee of Aquaculture Certification Council, Inc. (ACC), Code of Conduct Shrimp Hatchery (COC) and ISO 9001-2008. TUH’s sales in 2012 showed growth rates of 90% and 60% of nauplii products and shrimp babies respectively, thanks to a production capacity expansion of baby shrimps. The baby white shrimp farm at Amphoe Sathingphra, Songkhla province and the one in Amphoe Khogkloy, Phangaga province can produce 2,400 million baby shrimp per year. The company also changed its delivery method of baby shrimps from delivery in bags to delivery in tanks. The new method has a better quality of baby shrimps and meets customers’ satisfaction. Meanwhile, TUH started the breeding program and produced its own high quality broodstocks, nauplii and baby shrimps. The company also produced Polychaete to feed its brookstocks. By this way, the company can reduce buying Polychaete from an external party by as much as 10% of the company’s total usage.

THAI UNION FROZEN PRODUCTS PCL.

TUF STRENGTHS 1. TUF and other Thailand-based subsidiaries are all major seafood processors with combined production capacity of tuna, frozen shrimp, frozen seafood, and canned pet food of 580,000, 76,000, 131,000 and 55,000 tons per year respectively. Such a large annual output enables lower cost of production through economy of scale. 2. TUF is the brand owner of a number of world’s top canned and frozen seafood products, ranging from “John West”, the number-one brand in the United Kingdom, Ireland and the Netherlands; Petit Navire and Hyacinthe Parmentier, the dominant brands in France; “Mareblu”, the third-largest brand in Italy; “Chicken of the Sea”, the third-largest brand in the U.S.; “Century”, the number-one brand in China; and “Sealect”, the leading brand in Thailand. TUF’s production base that spans across 4 continents, i.e. America, Europe, Africa and Asia, further broadens and diversifies its marketing and production arena in reaching every region globally, with greater overall strengths. 3. TUF is the world’s largest tuna canner. One of every five tuna cans on the shelves worldwide is manufactured by TUF. TUF is also the leader in global frozen seafood industry. 4. TUF is one of a few seafood manufacturers that manage the entire value chain processes.

5. TUF’s cold storage for raw materials and finished products with overall capacity of 99,000 tons enables the company to effectively fulfill customer needs in terms of product choice and order volume. 6. Thai Union Group products are marketed in many countries around the world, thus outspreading global customer base, and, at the same time lowering economic impacts in any certain country on TUF. 7. Thai Union Group has strong international competitiveness. High quality standard products at competitive price, experienced and capable marketing teams, as well as our enduring, exceptional customer relationship, play roles in securing us such a strong competitiveness in global market. 8. Management members carry with them long experience in, and insight into, frozen seafood business and they are well respected in the industry. Our operational personnel are fully professional capable for their role. These combined strengths are among the drives that propel our continuing growth.

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FINANCIAL HIGHLIGHTS Unit: Million Baht

Financial Highlights

2012

2011

2010

Sales Total Revenues Gross Profit Total Assets Total Liabilities Shareholdersâ&#x20AC;&#x2122; Equity

106,698 107,679 16,362 94,759 54,415 40,344

98,670 99,589 16,417 83,277 56,161 27,117

71,507 72,810 9,531 74,777 51,541 23,236

Per Share (Baht)

2012

2011

2010

Basic Earnings per Share Diluted Earnings per Share Dividend Par Value Book Value per Average Share

4.39 4.29 2.10 1.00 34.77

5.35 5.21 1.56 1.00 25.57

3.20 3.15 1.60 1.00 23.36

THAI UNION FROZEN PRODUCTS PCL.

AWARDS, CERTIFICATES AND RANKINGS Our efficiency-focused policies and effective strategic management, coupled with a strong determination to strengthen our capabilities in all aspects; management, food innovation, quality standards and more, that would prepare us for the dynamic business challenges, has secured us a host of prestigious awards granted by different state and private certification bodies and organizations, trade partners and the financial community in 2012 as follows:

1. Thiraphong Chansiri, the President of Thai Union Frozen Products, was the first Asian executive awarded IntraFish Media’s 2012 Person of the Year for his leadership in building TUF a successful international seafood company. TUF’s strong growth together with their emphasis on enforcing sustainable seafood industry development, as well as the acquisition of leading European seafood business, contribute to the remarkable success. 2.

Voted for 4 consecutive years the Most Favorite CEO for their outstanding business management and industrial expertise, and, the Most Favorite Investor Relations (IR) in the Food and Agribusiness sector, by the Securities Analysts Association (SAA) of Thailand’s annual awards.

3. Voted Thailand’s Best Mid-Cap Company in 2012 by Finance Asia Magazine’s annual Best Managed Companies Poll, the first Thai company to be awarded for 3 consecutive years (2010-2012). 4. Awarded “The Southeast Asia Challengers 2010” by The Boston Consulting Group as one of the most successful Southeast Asian companies, with outstanding management contributing to the continuing growth and profit, and, successful international investment leading to global brand business.

ANNUAL REPORT 2012

5. Awarded “Beginner Award 2012” for company compliant with the Stand for Corporate Social Responsibility, by the Department of Industrial Works, Ministry of Industry. The award is granted to the entrepreneurs that meet the Standard in environmental awareness, community involvement and development, and, their readiness for level 2 green industry or green operations. 6. Awarded the Quality Award 2012 for food processing entrepreneur, by the Food and Drugs Administration, Ministry of Public Health, for continually maintaining product quality standards, applying quality system to develop or control the production processes for consistent quality products, as well as attaining good social responsibility. 7. Accredited with “Thai Select” Certification by Department of International Trade Promotion, Ministry of Commerce, for Sardine in Spicy Dressing, and, Stir-fried Tuna Curry (Panaeng Tuna) as Thai recipes with preserved genuine Thai ingredients, spices and tastes. The certificate also takes in consideration the internationally accepted preserved food packaging for unchanged premium quality food to insure customer and consumer confidence in international markets. 8. Upgraded to AA- from previously A+, corporate credit and bond ratings with a stable outlook by TRIS Rating Co., Ltd. reflects the company’s capabilities in business operations and competitiveness as the seafood industry leader, with prominent global brands, and strong financial profile.

THAI UNION FROZEN PRODUCTS PCL.

FOOD SAFETY AND QUALITY STANDARDS The Company will be manufacturer of quality processed seafood for export with focus on producing products that are safe, hygienic, with up to standard quality, met with customer acceptance and satisfaction up to having continuous improvement. Top quality products are always our first priority, which our domestic and international customers can be assured of. Our products are of international standards and quality, are traceable, and are responsive to the needs of our customers globally. All TUF products pass our rigorous quality inspection system in every stage of production; biological, chemical and physical. TUF’s own inspection laboratory is certified with ISO/IEC 17025 by the Bureau of Laboratory Quality Standards, Department of Medical Sciences, Ministry of Public Health. The lab was also awarded the best 2010

agricultural product inspection laboratory from the National Bureau of Agricultural Commodity and Food Standards (ACFS), Ministry of Agricultural and Cooperatives. With our continuous determination and attention on sanitation/ hygiene and food safety, we have been certified with various quality accreditations from both national and international organizations. The noteworthy include ISO 9001:2008 for quality management system; ISO 14001 for environmental management system; Best Aquaculture Practices – certification standard for shrimp production throughout the value chain processes; HACCP, GMP, BRC, IFS, Kosher, HALAL, etc. These notations affirm the company’s concise and rigorous quality control and inspection system as we endeavor only the best quality food for our customers.

ANNUAL REPORT 2012

SUSTAINABLE DEVELOPMENT

THAI UNION FROZEN PRODUCTS PCL.

We realize that, in order to be genuinely sustainable, every business activity across the entire value chain must be managed with an in depth understanding of their environmental and social impacts both positive and negative. In 2012, we have thus focused on dialoging among management, employees, and stakeholders (e.g. suppliers and customers) in making understanding of our sustainability concept.

The results from aforementioned dialogues were deployed in shaping our sustainability direction, goals, strategies, and action plans in a more meaningful way to effectively address the sustainability journey for us and our stakeholders. Therefore, sustainable development for us is an integrated management of the business pursuit and the development of economic, social, and environment as opposed to a program or an activity in separation of our business conduct. This is conceptualized by our sustainability philosophy “We can, We care, We connect”.

WE CARE

These three basic elements of our philosophy indeed evolve from decades of our visionary leadership, values and culture which have formed the success formula of our business growth and good corporate citizenship.

Respect for Environment

WE CAN “We can” states our committed business proposition as a provider of safe foods and necessary nutrition to the world’s fast growing population, sourcing from well managed natural environment. In coupling with visionary leadership and distinctive expertise, we are thus prime to take the leadership in the world seafood industry with operational excellence, product offerings and a global network.

Being aware of the dynamisms in economic, social, and environment that continuously drive contextual change from the past till present and onto the future, we always conduct the business with great caution and being responsible to our stakeholders. We are committed to pursuit 4 principal sustainability objectives: Respect for Environment, Excellence for Consumers, Be a Great Place to Work, and Care for Society respectively.

Sustainable Fisheries Being dependent on the natural resources, particularly the products from the oceans such as tuna, we realize that our business activities can create an impact to the environment as much as the impact of environmental changes placing on our sustainability. We thus strive to protect the marine environment through best practice and sustainable fisheries management. We cooperate with every Regional Fisheries Management Organizations (RFMOs) in governing and managing marine ecosystems by provisions of our tuna procurement data for regulating the conservation measures and improving scientific research capabilities.

ANNUAL REPORT 2012

In addition, as a co-founder of the International Sustainable Seafood Foundation (ISSF) together with our subsidiaries, MW Brands and Chicken of the Sea International, we are dedicated to lending consistent supports both directly and indirectly to ISSF for its missions in delivering sound scientific advices and best practices to tuna industry. ISSF has placed their strategic focus in 6 areas namely; • • • • • •

Control and reduce fishing capacity Mitigate Bycatch Eliminate illegal, unregulated and unreported (IUU) fishing Expand data support to Regional Fishery Management Organizations Advance performance in monitoring, control and surveillance Improve overall tuna stock health

We are proud to be part of the conservation efforts and committed to be proactive in; •

Sourcing only from companies or fishing vessels that conform to the respective RFMOs,

• •

Regulating the documentation that enables traceability of our fish supplies for fishing vessel, fishing ground, and fishing gear as to ensure that we refrain from transactions in tuna caught by vessels known or listed for illegal, unregulated and unreported (IUU) or practices endangered to mammal such as dolphin, and Refraining from companies or fishing vessels associated with shark finning.

Moving Towards Zero Waste With dedication to preserve and enhance the quality of ecological services essential for current and future socio-economic development, we feel obliged to take an initiative beyond just strictly compliance with related environmental laws and regulations. As such, we adopt an internationally recognized management system, specifically ISO 14001. In moving towards zero waste operation, we emphasize on the principle of pollution prevention from reducing the consumption of materials, energy, water, and packaging to waste utilization such as making use of fish wastes from our processing plants as feed meals and other value added products.

THAI UNION FROZEN PRODUCTS PCL.

We recognize the important role of our employees in fulfilling our environmental commitment. All employees are engaged through necessary technical training to be aware and understand how the environment can be impacted by our business operations across the entire value chain. They are also encouraged to take their own initiative in planning and campaigning for minimizing wastes and improving energy efficiency.

processing, transporting, and catering respectively. As a result, we are capable of identifying the pattern and key sources of greenhouse gas releases and, hence, defining future strategies for improving our shrimp production chain in regards to greenhouse gas emission.

Excellence for Consumers Quality Management and Food Safety

Combating Climate Change We are committed to take our responsibility in combating climate change. At present, our production imports energy both electricity and fuels. Variety of engineering projects initiated and continued in the past has resulted in significant energy saving per unit product. Those include, for instance, the utilization of waste heat from refrigeration system. In 2012, we have spent 240 million Baht of capital investment to recover energy in the form of biogas from wastewater, hence lessening our dependency on imported energy, reducing wastes and greenhouse gas emissions from our production. In collaboration with our major trade partner, the carbon footprint was conducted for the entire value chain of our shrimp industry, from hatchery to farming,

Product quality and food safety is central to how we operate our business and we strive to be a trusted provider of safe and hygienic foods, products of good taste, nutritious and value. We make sure that every step of our operation is subjected to rigorous quality control, from raw material sourcing to product delivery. In doing so, we adhere to international quality management practices such as ISO 9001:2008, Good Manufacturing Practice (GMP), Hazard Analysis Critical Control Point (HACCP) and Best Aquaculture Practice (BAP). Furthermore, we apply certain standards to accommodate the specific requirements of selected group of customers and consumers. They include, for instance, HALAL, British Retail Consortium (BRC), International Food Standard

ANNUAL REPORT 2012

(IFS), etc. All our laboratories are also ISO 17025 certified, and we take an effort to assure that every third party providing laboratory and quality testing services strictly follow our standard code of practice for quality and food safety. As part of total quality management, we ensure all employees in the production line proper knowledge and awareness of good practices in regard to health, hygiene and food safety. We even take care of their personal health and hygiene. Every single one of them is subject to relevant medical examination prior to the commencement of work and annually thereafter. Not only promoting health and safety of our employees, we also encourage all employees to take a good care of the wellbeing of their family. Our commitment can be realized through the welfare and benefit provided in additional to basic wage and allowance, for example, sport facilities on-site, proper living quarters, health promotion campaigns including sport and recreation. Product Traceability Manufacturing and supplying products with integrity is of the greatest importance to us. We respect the rights of consumers and customers for product information in the areas of product quality, consumersâ&#x20AC;&#x2122;

health and food safety, including environmental and social aspects associated with sourcing, processing and delivery. We thus make sure that the information flow is appropriately managed so that the traceability can be made for any finished product backwards to the source of every key ingredient of interest. We also work proactively to strengthen and continually improve our management system per se in pursuing the standard practice in regard to product traceability generally accepted.

Be a Great Place to work Equity and Human Rights With highly respect of human rights and the dignity of individual, we endorse the governing principles addressed in the Universal Declaration of Human Rights, United Nations Global Compact, and International Labour Organisation (ILO). As such we are fully committed to equity (no discrimination against national origin, religion, gender, marital status, language, or workforce ranks), not associating with forced labor, child labor, and human trafficking, and not supporting bribery and corruption.

THAI UNION FROZEN PRODUCTS PCL.

We are dedicated to maintain our good labor management practices by being strictly abided by the local laws at the minimum. We also work further to take appropriate action in addressing areas for improvement in reference to the internationally recognized standards such as those issued by Ethical Trade Initiative (ETI) and Business Social Compliance Initiative (BSCI). In doing so, we are opened for the dialogue and collaboration between the company and our business partners, and the company versus both local and international non-governmental organization (NGO) to bring about mutual understanding and to seek proper solutions to all potential problems. Occupational Health and Safety As for the occupational safety and healthy working environment for our employees, we place the highest priority on prevention of incident and protection of our people from risks and harms. On top of being strictly in compliance with related laws and regulations, we adopt an internationally recognized management standard as mean to improve the standardization of our practice. Since 2011, we have obtained the authorization from the Occupational Safety and Health Bureau, Department of Labour Protection and Welfare to perform in-house certified safety trainings for safety officers in all levels and safety committee member. Various trainings have

been conducted so far such as basic fire fighting, safety supervisor for confined space work, and others related to awareness raising and education of safe practices for our employees and contractors. At present, we are working towards OHSAS 18001 certification. With safety accountability and leadership of our management, we have never encountered any fatal incident in our companyâ&#x20AC;&#x2122;s history. We realize though that the management of occupational health and safety must be sustained with continuous improvement. Lessons learnt from the past incidents such as the fire incident at our shrimp production line in Samutsakhon are valuable in preventing a recurrence through improving our standard safety practices concerning infrastructure and production line. People Development We believe in the utmost importance of human capital as the key foundation for sustainable development. We have worked continuously on people development as well as organizational development. The focus is made on effective business and efficient work processes, constructive job assessment, competitive benefit and salary structure, appropriate performance evaluation and KPI deployment. Key programs that have been launched and implemented continuously

ANNUAL REPORT 2012

include but not limit to Individual Development Plan (IDP), Human Resource Information System (HRIS) and Star Program aiming at developing and providing fast-track career paths for current employees. The most recent program “TUF Management Associate Program” has been introduced to provide opportunities for young talents from within and outside the organization to experience working in our overseas operations. Employee Engagement We are aware of how significant the quality of life of our employees has on corporate sustainability. We thus thrive to create and maintain a happy work place through various programs and activities that focus on joyful working environment and spirit of teamwork. Many of these programs (such as New Year’s Party, Songkran Festival, Company-sponsored Annual Trip Package, and Annual Mini-Half Marathon) involve the majority of workforce while some programs, such as Hometown Community Development, open up the opportunity for employees to initiate and implement the ideas of their own.

Care for Society Care for Our Neighbors Apart from taking a great care of our employees, we also focus on working to promote a better environment and society in collaboration with local government agencies, private organizations, and neighborhood communities. Our main production facilities locate in Samutsakhon, one of the provinces in Thailand highly populated with migrant workers. For some of these migrant workers, taking a good care of their children while they work can be a great burden. We have worked to resolve this issue in partnership with the Labour Rights Promotion Network Foundation (LPN) and pilot schools in Samutsakhon under “TUF Care Center” program. This program aims at providing opportunity for migrants’ preschool children to gain access to proper education and obtain appropriate nutrition for their dietary. At the early stage of the program, we make the commitment to provide funding for establishing basic infrastructures (e.g. a building for classroom), expenses for teachers and staffs, and expenses for food and supplementary milk regularly provided equally among Thai and migrants’ children.

THAI UNION FROZEN PRODUCTS PCL.

We also aim at propelling a proactive development of the program under its 5 year implementing period (the beginning of 2013 till the end of 2017) and have the desire to leverage the success of this program to bring about more collaboration and partnership locally in addressing other social needs and tackling inadequacy in an efficient and sustainable manner. Care for the Ones in Need We consider that healthy society provides opportunities to a diverse range of its citizens in access of fundamental social services rather than being a society whose citizens exhibit healthy and wealthy living. Therefore, throughout decades of our business history, we continually lend our direct supports to disaster victims and underprivileged groups and indirect supports via various charitable organizations, public and private organizations. To name a few, our social servicing programs include •

“Hometown Community Development” program aiming at promoting employees’ sense of engagement with their hometown and care to initiate their own idea for community development,

•

“Sealect See Love” volunteering camp recently launched to promote employees’ participation in community and social works, “Birthday with Rejoice in the Merit” as another monthly event bringing a group of employees whose birthdays are in the same month to giving services, “Blood Donation” organized for six consecutive years with over 3,000 units of accumulated blood donated to Thai Red Cross Society.

Care for the Future Generation “Ethically engaged and empowered youth today can make tomorrow a better and brighter world” reflects our belief in the importance of youth on sustainability. This belief also constitutes our policy on promoting the engagement of all concerned on youth development. We continuously collaborate with our partners in establishing and conducting programs that promote creativity and systematic thinking among youth group such as volunteering for rural area development camps organized by academic institutions, activities on National Children’s Day by public and private organizations.

ANNUAL REPORT 2012

WE CONNECT

Sustainability Governance

With strong belief that genuine sustainability is resulted from collective initiatives and offerings by every stakeholder, we take a participatory approach in propelling our sustainability strategy which is in alignment with our adherence to good corporate citizenship and our long-standing company’s values, the constituents that govern the way our business is conducted and the way we work. As the way to validate our sustainability direction and goals against economic, social, and environmental setting and stakeholders’ expectations, we seek first to understand the context of sustainability within which we operate and the values to which each of our stakeholders adhere. We take every effort to make sure that every opinion and concern of our stakeholders is seriously taken into consideration in planning and taking proactive actions towards the solutions that emphasize on precaution and prevention of potential risks and future problems. Besides, we strive for being recognized as an active member of the society who contributes to the development of long-term sustainability for all through incubating the good deeds from within our organization, then amplifying their impacts locally, regionally, and globally respectively.

To ensure that our sustainability governance and policy deployment are effective and transparent, the Sustainable Development Committee chaired by CEO and constituting with appointed members from senior executives takes the leading role in policy planning, providing framework for implementation, and monitoring the progress and performance of sustainability initiatives. In addition, 6 working teams have been appointed to take action efficiently and proactively in response to our apparent sustainability issues in the areas of • • • • • •

Corporate Social Responsibility (CSR) and Environment Ethical Labor Practices People Development for Sustainability Climate Change Impacts on Shrimp Farming Sustainable Fisheries Energy and Greenhouse Gas Emission

THAI UNION FROZEN PRODUCTS PCL.

INDUSTRY OUTLOOK AND COMPETITION The overall Thailand’s food industry in 2012 demonstrated export value of 971,689 million Baht expanding by 0.8% year-on-year. Shrimp and canned and valued-added tuna products ranked the third and fourth took a share of 9.9% and 8.4% respectively, based on overall Thailand’s food export. As for the situation of seafood export in previous year, the global economy decelerated in the first half rooted in European financial crisis. The US economy also was not yet fully recovered while national competitors put unabated efforts in their export products which leaded to severe pricing competitions and then impacted on numerous industries of Thailand’s manufacturing and export sectors, including seafood industry.

Challenging factors to the business are increased each year. For this year, insufficiency and rising price of raw materials were critical. For instance, a price of tuna increased by 22% from previous year and a shortage of shrimp caused by EMS (Early Mortality Syndrome) epidemic, resulted in inadequate products. Because of such epidemic, China, Vietnam, and Malaysia also generated less shrimp products causing continuous rise in shrimp prices. Other worth-mentioning factors were minimum wage increase, fluctuated exchange rate, and rules,

regulations, and requirements in relation to sustainable resources and environment. In consequence of these, Thai entrepreneurs need to urgently adapt themselves, closely keep an eye on situations, and develop their work procedures to be efficient, fast, and ready for competition with high capacity. Thailand’s seafood export in 2012 was categorized with details as follows:

ANNUAL REPORT 2012

FROZEN SEAFOOD PRODUCTS Frozen Tuna Loin The volume of Thai frozen tuna loin export during 2012 was Bt1,793 million, dropped by 70.7%. The whole year export volume reached 10,826 metric tons representing a 73.5% drop year-on-year. The US was the largest market for Thai frozen tuna loin exports with 2,541 metric tons in volume and Bt427 million in value and took 23.8% share of the total export value. The second largest export market for Thai frozen tuna loin was Algeria with export value of Bt310 million, followed by Spain with export value of Bt251 million, accounting for 17.3% and 13.9% of the total export value, respectively. Frozen and Value-added Shrimp Thai frozen and value-added shrimp total export volume during 2012 was 326,485 metric tons, declining 13.9% year-on-year. In 2011, the volume was 379,346 metric tons. The total export value of the year was equivalent to Bt90,473 million, down by 15.2% year-on-year in comparison to the previous year value of Bt106,716 million.

The US was ranked first as the most important market for Thai frozen and value-added shrimp products with 122,207 metric tons and the export value reached Bt33,520 million or 37.1% of the total export value. Ran second was Japan, the value was Bt24,497 million, followed by Canada whose its value was Bt6,052 million and the United Kingdom whose its value was Bt5,902 million, with 27.1%, 6.7% and 6.5% share of the total export value, respectively. Frozen and Value-added Cephalopod Thai frozen and value-added cephalopod totals export volume during 2012 was 69,388 metric tons, rising 7.1%, compared with their 2011 counterparts. Meanwhile, export value obtained a 4.5% growth, from Bt12,859 million in 2011, reaching Bt14,391 million in 2012. The largest export market was Japan whose export value was Bt6,447 million. By ranking, Italy and the US are also important exporters with value of Bt3,280 million and Bt1,140 million respectively. These top three exporters shared 44.8%, 22.8%, and 7.9% from the overall export value respectively.

THAI UNION FROZEN PRODUCTS PCL.

CANNED SEAFOOD PRODUCTS Canned Tuna Thai canned tuna export during 2012 was equivalent to 548,667 metric tons, going up by 5.9%. Its export value amounted to Bt80,805 million representing a 31.4% increase, with a year-on-year growth of 31.4%. The US took the lead in export market with export volume of 81,616 metric tons, or a value of Bt13,301 million. The second biggest export market was Australia with export volume of 34,148 metric tons or Bt5,765 million in value. The third market destination in rank was Japan with export volume of 26,790 metric tons or a value of Bt5,038 million. Canned Sardine and Mackerel The year-on-year growth of overall Thai export of sardine and mackerel in 2012 was registered both in terms of volume and value. The whole-year export totaled 138,422 metric tons with a jump of 35.3%, compared with 102,335 metric tons in previous year. Meanwhile, the annual export valued Bt10,551 million with a 52.9% year-on-year growth, from Bt6,900 million. The most significant export market of canned sardine and mackerel was South Africa with an export value of Bt3,180 million or 30%. The second ranked market belonged to the

US with a value of Bt868 million or 8.2%. The third in rank was Brazil with a value of Bt797 million or 7.6% of the total export value. Canned Crab Meat Thai canned crab meat export during 2012 reached export value of Bt1,689 million, with a 14.5% growth, and its total export volume for the entire year was 3,837 metric tons, with a growth of 21.6% year on year. The US, identified as the number-one export market, generated an export value of Bt1,348 million or 79.8%, followed by smaller export markets in size where were Singapore, Canada, and the UK with 3.3%, 3%, and 2.8% respectively according to the total export value. Canned Pet Food Canned pet food this year generated total export of 346,275 metric tons going up from previous year by 13.5%, with its export value of Bt25,576 million, rising 19.2% year on year. Japan remained as the top market exporter with 134,380 metric tons or 38.8% of the total export volume, sharing market export value of Bt9,679 million or 37.8% of the entire export value. The US, by ranking, was the second with a value of Bt4,377 million or 17.1%. Italy was in the third with a value of Bt2,167 million or 8.5% of the total export value.

ANNUAL REPORT 2012

INDUSTRY TRENDS

Besides, the issues of non-tariff trade barriers (NTBs), European Union (EU)’s Generalized Preference of System (GSP), and US shrimp antidumping duty (AD) have required a close Besides, the issues of non-tariff trade barriers attention and preparation of entrepreneurs to (NTBs), European Union (EU)’s Generalized encounter the situations. Preference of System (GSP), and US shrimp antidumping duty (AD) have required a close Thai Union Frozen Products PCL. (TUF) has attention and preparation of entrepreneurs to formulated plans to be circumspectly and carefully encounter the situations. implemented in every step to mitigate risks which possibly impact the Company. Our Company has Thai Union Frozen Products PCL. (TUF) has consistently followed up information and situations formulated plans to be circumspectly and carefully together with continuously developing all job implemented in every step to mitigate risks which functions which covers the areas of production possibly impact the Company. Our Company has process, marketing strategy, product creation, consistently followed up information and situations inventory management, raw materials procurement, together with continuously developing all job and technology development of machinery so as functions which covers the areas of production to reduce the labor shortage and get ourselves process, marketing strategy, product creation, inventory management, raw materials procurement, sustainably. and technology development of machinery so as to reduce the labor shortage and get ourselves prepared for global competition efficiently and sustainably.

Although Thailand’s export situation in 2012 represented unremarkable growth because of INDUSTRY TRENDS numerous factors, such factors were anticipated to be eased up during 2013 which would result in a Although Thailand’s export situation in 2012 good direction of continual growth of Thai seafood represented unremarkable growth because of industry. The factors from offshore market driven by numerous factors, such factors were anticipated to be eased up during 2013 which would result in a impacts as these products are essential to living good direction of continual growth of Thai seafood and Thai entrepreneurs have adapted themselves industry. The factors from offshore market driven by to handle their situations. The growth of Thai seafood sluggish global economy did not provide significant industry would be backed by participation in the impacts as these products are essential to living coming ASEAN Economic Community (AEC) as and Thai entrepreneurs have adapted themselves a great push for trading expansion and product to handle their situations. The growth of Thai seafood repricing conducted by entrepreneurs in response industry would be backed by participation in the to the soaring costs which the entrepreneurs had coming ASEAN Economic Community (AEC) as earlier carried the costs by themselves. a great push for trading expansion and product repricing conducted by entrepreneurs in response Nonetheless, many factors, such as raw materials, to the soaring costs which the entrepreneurs had have called for a close monitoring from the earlier carried the costs by themselves. entrepreneurs. In addition to competitiveness, procurement of raw materials, such as tuna, have Nonetheless, many factors, such as raw materials, more challenging because raw materials have to have called for a close monitoring from the correspond with current demand in the production. entrepreneurs. In addition to competitiveness, Additionally, sustainability is regarded as an issue procurement of raw materials, such as tuna, have Sources: which will play an important role. The regulations and more challenging because raw materials have to • Customs Department requirements concerning the issue of conservation correspond with current demand in the production. • Ministry of Commerce and preservation of natural resources in the Additionally, sustainability is regarded as an issue • National Food Institute future are likely to be stricter which would impact Sources: which will play an important role. The regulations and • Customs Department requirements concerning the issue of conservation entrepreneurs. A factor of industry, particularly a • Ministry of Commerce and preservation of natural resources in the shortage of labors is a noteworthy one. • National Food Institute future are likely to be stricter which would impact the amount of fishery and competitiveness of entrepreneurs. A factor of industry, particularly a shortage of labors is a noteworthy one. UNION GROUP AMONG THAI EXPORTERS MARKET SHARE OF THAI TUNA

35%

SARDINE/MACKEREL

35%

PET FOOD

30%

FROZEN SHRIMP

10%

FROZEN CEPHALOPOD

THAI UNION FROZEN PRODUCTS PCL.

RISK FACTORS AND OTHER RELATED

FACTORS FOR INVESTMENT CONSIDERATIONS BUSINESS RISKS

The Company’s Policies and Actions Taken

Trade Barriers

Under this continually unfavorable circumstance, close monitoring of situations and keeping abreast of new conditional updates and developments are all a must among Thai seafood operators to ensure their timely adoption of appropriate measures in order to stay compliant with any upcoming non-tariff barriers. With our company policy and commitment to be the world best seafood manufacturer and exporter, our customers and trade partners have confidence and trust in the company and widely accepted our products. In addition, the company also pays attention to safety standard management, sanitary and environmental standard and business continuity management for business sustainability. Our policy framework of business consists of:

Thailand seafood industry has grown significantly to become one of the world’s leading players, both in terms of production potential and competitiveness as well as acceptance by countries throughout the world in its recognized food safety and world-class quality. These factors in combination have placed Thailand on a strategic position to gain strong reputation and unwavering trust in global marketplace as one of the world’s top seafood processing and exporting countries. Thailand seafood export’s revenue of the year 2012 was worth THB 264,766 million, a 1.89% increase from the previous year, helping to develop a strong economy for the country. However, this remarkable growth is not without obstacles. Thailand has been continuously facing trade barriers erected by its trade partners. Such barriers include both tariff and non-tariff measures, the latter of which have particularly become more prevalent and stringent each year. Sustainability in fishery resources has currently become a challenging issue due to stricter rules and regulations of fishing methods and the amount of fishing as well as limited maximizing the number of fish caught toward recovered and sustainable fisheries. Realization of sustainability requires a serious attention and collaboration from all entrepreneurs. All mentioned issues reflect a challenging in doing business in the world today; therefore entrepreneurs must closely monitor and adapt quickly to a current in order to stay competitive in the world.

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Resources protection for future sustainability by being one of founders of the International Sustainable Seafood Foundation (ISSF) for the long-term conservation and sustainable use of marine resources in order to create a balanced exploitation of marine ecosystems. • Environmental management by focusing on resources efficiency for example, energy, raw material and water usage. • Safety management, sanitary and workplace environmental standard under Thai labor law and related regulations in order to create equality on all employees. • Social and community sustainable development by applying from Corporate Social Responsibility principle.

ANNUAL REPORT 2012

Marketing and investment policies are also developed and implemented with the aim to broaden our markets to cover all parts of the world and to diversify our product portfolio, with strong emphasis on value added products, in order to better serve our customersâ&#x20AC;&#x2122; needs. Through a series of strategic investments, we now have or are constructing manufacturing facilities in 10 countries, including Thailand, Indonesia, Vietnam, India, Papua New Guinea, the United States, France, Portugal, Ghana and Seychelles with Thailand as the main production base. Such diverse production locations enable us to successfully take advantage of, or manage risks of, the country of origin requirement that is normally stipulated in preferential trade measures or trade barriers.

PRODUCTION RISKS Procurement and Raw Material Risk The cost of raw materials accounts for about 70 to 80 percent of our overall product cost. Raw material procurement is therefore a major driver of the Companyâ&#x20AC;&#x2122;s costs and profits. Prices of in accordance with world market situations. Therefore, it is our policy to set our prices based on the prevailing market trend which could occasionally result in cost differential between raw material inventory and products sold owing to their variances in purchase costs and selling prices. In addition, the fluctuation in world market energy prices has been identified as another influential risk factors that have constant impacts on several cost items, such as prices of fish raw materials packaging materials, seasoning and other ingredients, which have also varied accordingly. The Companyâ&#x20AC;&#x2122;s Policy and Actions Taken Tuna To minimize the cost difference between the time of raw material purchase and when the finished products are sold, and to allow the shortest period of variance possible, our sales of finished products and purchase of tuna are made between 30-45 days in advance, while maintaining inventory turnover at an appropriate level.

Shrimp We source our shrimp directly from shrimp farmers in various farming regions throughout the country to ensure sufficient flow of supply. This process also enables us to match costs and selling prices to maintain initial profit margin at the time of higher shrimp price. Cephalopod With continually growing demand for cephalopod raw materials, we pursue both local and overseas procurement, which in turn protects us from the risk of the raw material shortage. We have responded effectively to price increases by maximizing production efficiency and developing a diversified portfolio of value-added products, a strategy that has allowed us to maintain a reasonable profit margin in this segment. Energy Price Energy is one of our key inputs, and we have in recent years adapted our production process to minimize potential losses and lower our production costs in other areas. We will continue to seek ways to improve our management system and raise our production efficiency to become even more resilient in times of fluctuating energy prices. Human Resources The seafood industry requires a number of laborers who must be trained to have a skill of seafood production, so it is different from other kinds of industry. In addition, the workplace environment of

THAI UNION FROZEN PRODUCTS PCL.

the industry is probably not pleasing as compared with that of other industry types, such as textures or electronics. In the light of smell and temperature, seafood production causes fishy smell and requires no air-conditioners at a workplace, so a labor shortage is always problematic. Recently, the minimum wage in Thailand was increased to 300 baht per day in April 2012 (especially in Samutsakhon Province); therefore the entrepreneurs’ labor cost has also increased unquestioningly. The Company’s Policies and Actions Taken TUF has invested in automation since 2011 preparing for a future labor shortage. This investment is also a solution on the minimum wage increase by a substitution of machinery to some part of daily workers that not directly related to a production. With the combination of automation and converting support workers into direct production workers should lead to cost savings and cost level stabilization allowing us to stay competitive with higher production capacity utilization and efficiency regardless of any potential impact from the minimum daily wage hike pursued by the government. NATURAL DISASTER RISKS Dramatic changes in environmental and climatic conditions worldwide have been evident through the past several years and unprecedentedly resulted in unusually frequent occurrence of severe natural disasters in each region across the globe, causing enormous loss of life and property as well as significant impacts on trading and economy. Flooding has been identified as the most frequent natural disasters in Thailand. Fortunately, in 2012 Thailand has no flood crisis in Bangkok and its peripheral areas like the worst of all in the country’s flood records in the year 2011, helping business to operate normally. The Company’s Policies and Actions Taken Although there was no flood crisis in 2012, the company has had in place a set of well-planned preventive measures to be deployed in emergencies and difficult situations as consequences of natural

disaster. It is intended that all these available established measures will help cushion the severity of the impacts of future natural disaster threats. The measures are developed into corporate emergency preparedness plan, which encompasses various aspects of emergency during natural disaster period, including training session, emergency response rehearsal and evacuation drill. The purpose of the emergency preparedness plan is to equip all employees with necessary survival skills and allow them to learn how to react properly and effectively with minimum panic whenever natural disaster strikes. FIRE INCIDENT RISKS In February 2012, our shrimp production plant in Samutsakhon Province faced a fire outbreak. Fortunately, damages were limited only at the shrimp plant area. Due to our effective safety management system, we were able to evacuate our 2,100 workers safely. In regards to manufacturing and product delivery processes, the company properly informed our customers who understood and helped us. We relocated our manufacturing base to one of our subsidiary in Songkla Province, Thai Union Seafood Company Limited and were able to process some of our shrimp products within seven days. We have also leased some production area from K.L. Cold Storage Company Limited in Samutsakhon Province. Within two months, our shrimp production was returned. The incident caused a very small damage to the company because we have a fire insurance covering assets, products and business interruption. Therefore, we were compensated from all damages. The Company’s Policies and Actions Taken TUF places a great emphasis on safety management system. We have a strict fire prevention and control by supervision and using the Work Permit/Hot Work Permit system. This system is to control operations which can create overheating and friction sparks in working areas including the contractor’s working areas. We have assigned our specialist teams, such as security guards and fire watch men. We have set up an emergency team under

ANNUAL REPORT 2012

the Emergency Team Potential Development Program. This consists of more than 100 people from every department’s representatives who have already passed the Fire Extinguisher Advanced Level Training Course including Fire Rescue from institutions accredited by the government. And we have regularly trained on monthly basis. We have also provided availability on emergency control equipments, such as Fire Suit NOMAX, SCBA and fire extinguishing system with more than two-hour fire-resistance. We have set a training/simulation with local institutes to build the fire-extinguishing network and appointed the safety committee for the company to test whether all safety systems have been complied with the safety standard. With continuity on our safety system, the company can quickly control the fire incident including our workers’ safety. Meanwhile, the company is determined to increase the company’s safety standard to meet the global standard through the following measures: 1. Increase stringent rules and regulations including controlling an external party working in the company 2. Continue to set up a Firefighters’ Potential Development Program which all employees must pass the training: • Fire Extinguishing Basic Training • Fire Technique • Fire Advanced • Fire Command • Fire Training • First Aid and CPR Currently, our emergency rescue team is ready to control and suppress an incident if it happens. 3. Provide training on an emergency preventive plan and fire extinguishing annually with the government institution. 4. Provide the Fire Water System consisting of a 2,500 GPM of fire pump, the fire water in the drainage system covered all areas in the plants and the fire water reserve for more than 2,000 CM3.

5. Provide an automatic fire alarm system covered all areas and connected with the Fire Control Panel. ADMINISTRATIVE AND MANAGEMENT RISKS Operational System Our strategy of investment expansion has currently resulted in 28 subsidiaries and associated companies with each being active in different business areas. Such diverse collection of business operations, while beneficial for the mitigation of risks arising from business fluctuations in any given industry, poses a risk associated with ensuring that all entities operate under harmonized policies aim at generating satisfactory returns on investments. The Company’s Policies and Actions Taken TUF places great emphasis on business administration and operational management. We have developed comprehensive corporate policies providing strategic directions to our subsidiaries and associated companies. Our management teams possess extensive experiences and expertise directly relevant to the business that they manage. While our corporate executives provide strategic guidance and policies, management teams based at the subsidiaries and associated companies are given full authority to run the operations. Our investments in subsidiaries usually feature agreements of minority ownership by relevant management teams for the purpose of ensuring appropriate incentives for running the business. As the parent company, TUF monitors and controls operations in the area of annual business plans, business expansion, and further investments to maintain harmony among all subsidiaries. As part of its monitoring and auditing responsibility, our Internal Audit Department ensures that the highest efficiency and transparency in the group’s overall operations are preserved and that full compliance with the Board’s policy is achieved.

THAI UNION FROZEN PRODUCTS PCL.

FINANCIAL RISKS

Interest Rate Risks

Volatility of Foreign Exchange rates

Globalization has connected economies in all parts of the world together, allowing rapid movement of investment funds across borders. This implies a world where interest rates can change very quickly, requiring business operators to carefully implement a sound financial policy to address risks associated with shifting interest rates.

In recent years, foreign exchange rates have been relatively volatile and consequently impacted our business, given the fact that over 90% of revenues from Thailand-based operations of Thai Union Group is generated from shipping products to overseas markets, such as the US, the EU, and Japan. Because of this, a majority of our revenues are recognized in foreign currencies, mostly in U.S. dollar. Therefore, our revenue are subject to the risk of foreign exchange volatility. The Companyâ&#x20AC;&#x2122;s Policies and Actions Taken We have maintained a close watch on movements of currency exchange rates as well as considered all appropriate measures in managing our exposure to exchange rate risks. Our revenue and expense streams have provided an effective natural hedge, as we import most of our raw materials and export most of our products, using US dollar as the transactional currency. Other measures taken include the utilization of forward contracts and currency options to minimize our exposure to currency fluctuations, to allow efficient use of our financial resources and to continue closely monitor trends in financial markets and capital movements.

The Companyâ&#x20AC;&#x2122;s Policies and Actions Taken As in the case of currency exchange rate situations, we have continuously monitored interest rate movement. Thai Union Group as a whole has been carefully maintaining an optimal debt structure given interest rate situations and trends, with appropriate proportion of fixed and floating-rate loans. The debt structure can be also adjusted to match changing circumstances via various financial instruments, including Interest Rate Swap, Cross Currency Swap. OTHER RELATED FACTORS FOR INVESTMENT CONSIDERATION Lawsuits TUF and the subsidiary companies are not involved in any lawsuits, so their assets with a higher 5% of shareholders will be impacted.

ANNUAL REPORT 2012

REPORT ON THE PRACTICE OF

GOOD CORPORATE GOVERNANCE The Board of Directors of Thai Union Frozen Products PCL. perceives the importance of good corporate governance within the Company in order to promote sustainable operational growth and to gain public acceptance of the Company both locally and internationally. Being guided by this perception, the Board is determined to adhere to good corporate governance principles and therefore embraces such principles directed by the Stock Exchange of Thailand, in conjunction with honesty, transparency, responsibility, business ethics, confidence, trust and high level of working standards in accordance with the Code of Best Practices of listed company. This principle adoption is intended to enhance the Company’s competitiveness, which in turn will further boost the confidence in the Company’s operations among shareholders, investors and all stakeholders, thereby creating effective, prosperous and sustainable growth in the Company’s business, as well as adding value to shareholders while also taking into account all stakeholders. Following the perception of the importance of good corporate governance above mentioned, the Board therefore promotes and supports the practice of good corporate governance principles directed by the Stock Exchange of Thailand through devising its own policy centered on 5 pillars as set forth below:

1. 2. 3. 4. 5.

Right of Shareholders Equitable Treatment of Shareholders Roles of Stakeholders Information Disclosure and Transparency Board of Directors’ Responsibilities

prudent and careful administration for the best interests of the Company and shareholders. Operations are transparent and can be verified. Information disclosure is made in the complete, accurate, punctual, and equitable manner to all parties concerned. The Company has appropriate controlling system and risk management adequate for facilitating well-informed decision making. The Company adheres to business ethics as a main pillar to prevent damages to all stakeholders. The Board oversees the Company’s disclosure of all material information to ensure its accuracy, fairness and timeliness in order to secure investor confidence. The Company’s information disclosures to shareholders are made on the basis of equity regardless of share volume owned, individuals or juristic person and being local or overseas. In each shareholders’ meeting, the Company places emphasis on, and respects, the right of shareholders by strictly carrying out the meeting pursuant to the Public Limited Companies Act. And also, the Company recognizes that the shareholders have the rights to decide, to obtain easily accessible, adequate, complete and timely information including the encouragement for the use and non-violation of the rights of shareholders as follows: Shareholders’ Meeting •

1. RIGHT OF SHAREHOLDERS The Company follows good corporate governance principles and sets clear business policy perceiving equitable treatment of shareholders and stakeholders. This can be evident from the fact that the Board and the management cooperate their efforts to efficiently deliver work performance,

Set the schedules of the Annual General Meeting of Shareholders (AGM) within 4 months of the annual closing date of its accounting books. That is within 30 April of each year. For the urgent matters of shareholders’ interest or requiring shareholders’ approval, the Board will call the Extraordinary General Meeting of Shareholders (EGM). For year 2012, the Company’s following arrangements for the hosting of the Annual General Meeting of Shareholders (AGM) on March 26, 2012 and the Extraordinary General Meeting of Shareholders (EGM) No.1/2012 on April 10, 2012.

THAI UNION FROZEN PRODUCTS PCL.

Meeting Preparation Procedure and Delivery of Meeting Invitation •

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The Board began to allow shareholders to propose name list of potential director candidates and meeting agenda for 2012 Annual General Meeting of Shareholders. Company secretary was assigned to publicize such information electronically through the Stock Exchange of Thailand communication systems and forwarded to corporate website 44 days prior to the date of meeting invitation delivery in order to allocate appropriate time for their proposals. The Company publicized meeting invitation along with sufficiently-detailed relevant documentation, objectives and reasons as well as opinions of the Board given in each agenda and the proxy forms as stipulated by the Ministry of Commerce on www.thaiuniongroup.com since February 28, 2012 and such information dissemination was available for 27 days prior to the date of AGM and March 21, 2012 for 20 days prior to the date of EGM. The Company authorized Thailand Securities Depository Co., Ltd., in its capacity as registrar, to deliver to shareholders meeting invitation along with sufficiently-detailed relevant documentation, opinions of the Board given in each agenda, proxy form for convenience of shareholder who is unable to attend the meeting and wishes to authorize an appropriate person or any independent director to act as proxy and vote on his/her behalf, and including annual report CD-ROM 10 days prior to the date of AGM and 8 days prior to the date of EGM No.1/2012 The Company publicized meeting invitation in Post Today newspapers (in Thai) and Bangkok Post (in English) for 3 consecutive days and 7 days prior to the date of meeting to reassure shareholder attendance on the scheduled meeting date and time.

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On-site Meeting Procedure

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The Company facilitated all shareholders including institution investors in a fair manner by arranging the officers to welcome and provide the sufficient information on document checking and registration. The Company was open for AGM registration between 11:00 a.m. - 13:00 p.m. of March 26, 2012 at the well-known Thai Army Club, Viphavadi-Rangsit Road, Bangkok to provide convenient access to shareholders. In the past year, there were totally 586 shareholders in attendance with aggregate share volume of 652,001,574 units, equivalent to 68.18%

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of the total issued and paid-up shares and EGM on April 10, 2012 at InterContinental Hotel, Ploenchit Road, Bangkok, there were totally 571 shareholders in attendance with aggregate share volume of 705,090,370 units, equivalent to 73.73% of the total issued and paid-up shares. Chairman of the Board chaired 2012 Annual General Meeting of Shareholders, in which there were 10 board members, including the Chairman, in attendance out of the whole board of 15 members. The board members in attendance comprised Chairman, President, Managing Director, CFO, Independent Director and Audit Committee members, who are independent directors. As some Board members are representatives of overseas shareholders, not all Board members were able to attend the meeting. However, without their presence, all such members could express their opinions about the issues through the agendas being directly delivered to them prior to the meeting. Moreover, there were Finance controller, Corporate account manager, Legal advisor and Independent auditors from Ernst & Young Co., Ltd. to attend the AGM and Chairman of the board chaired 1/2012 Extraordinary General Meeting of Shareholders, in which there were 11 board members, including the Chairman, in attendance out of the whole board of 15 members. The board members in attendance comprised President, Managing Director, CFO, Independent Director and Audit Committee members, who are Independent directors including Finance controller, Corporate account manager, Finance advisor, Legal advisor and Independent auditors from Ernst & Young Co., Ltd. Chairman of the meeting assigned the MC to clearly explain vote-casting and vote-counting procedures for each agenda to eligible shareholders as well as the procedure of one vote per one share according to the Company’s Articles of Association No.35. The Company’s auditors from Ernst & Young and 2-volunteer from shareholders were the witness for the vote counting. The meeting was conducted in the manner that allowed and encouraged all shareholders to raise questions, express opinions and give suggestions about the issues through the entire meeting session. There were 8 shareholders who made queries and presented opinions for AGM and 9 shareholders who did for EGM No.1/2012. In order to preserve voting transparency, the Company made available ballots to facilitate exercise of voting right by shareholders in

ANNUAL REPORT 2012

case of their disapproval or abstention of any agenda being considered. Shareholders were allowed to freely cast their votes for each director candidate on an individual basis, not on the whole board of candidates. Vote counts were clearly announced onsite to make known to all attending shareholders immediately following the end of voting procedure in each agenda. The meeting session was also videotaped on the Company’s website for further dissemination afterwards. Interested shareholders may request copy of the videotape from Stock Information Department, Office of President.

Post-meeting Procedure •

The Company publicized the resolutions of all agenda considered in 2012 Annual General Meeting of Shareholders on www.thaiuniongroup.com immediately on the date of meeting, except for questions raised by shareholders and answers given during the meeting session. Complete resolutions of the meeting were subsequently submitted through the Stock Exchange of Thailand communication systems and forwarded to corporate website on March 30, 2012, or 4 days following the date of AGM and April 23, 2012, or 13 days following the date of EGM No.1/2012

Hosting of shareholders’ meeting with great emphasis on equitable voting right has earned the Company excellent performance in the 2012 annual evaluation of Annual General Meeting of Shareholders conducted by Thai Investors Association. 2. EQUITABLE TREATMENT OF SHAREHOLDERS The Company perceives the importance of right of shareholders, is well aware of its responsibility to ensure equitable treatment of shareholders and therefore have put the following initiatives into action. •

The Board assigned company secretary to prepare data and communicate to shareholders with regards to the Company’s invitation for shareholders to propose name list of potential director candidates and meeting agenda for consideration in 2012 Annual General Meeting of Shareholders. Such information was publicized electronically through the Stock Exchange of Thailand communication systems and forwarded to investor relations section on corporate website

•

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44 days prior to the date of meeting invitation delivery in order to allocate appropriate time for their proposals. Although the Company has provided shareholders with such these proposal opportunities since 2007, no proposals, however, were submitted for either director candidates or meeting agenda during the past year. In addition, we do not have the additional agendas that did not notice except the Extraordinary General Meeting of Shareholders No.1/2012. Due to there are shareholders holding 377,914,509 shares or equivalent to 39.52% or not less than one-third of the total issued and paid-up capital of the Company would like to propose to the Meeting to add the issue other than those outlined in the meeting invitation notice. This proposal is in accordance with section 105; clause 2 of the Public Limited Companies Act B.E. 2535 (and its subsequent amendments). The additional of 4 commercial objectives of the Company from 47 to 51 objectives were proposed for the Company’s benefits. The Board facilitated shareholders who cannot attend the meeting by assigning any independent directors and proposed the name list of at least 2 independent directors who were to act as proxies to vote in each meeting agenda on behalf of shareholders. In 2012 Annual General Meeting of Shareholders, there were 17 shareholders who authorized Mr. Sakdi Kiewkarnkha, Chairman of Audit Committee, to act as proxy and vote on his/her behalf, there were 1 shareholders who authorized Mr. Kiti Piluntanadilok, a member of Audit Committee, All of them have been serving as independent directors and the Extraordinary General Meeting of Shareholders No. 1/2012, there were 23 shareholders who authorized Mr. Sakdi Kiewkarnkha, Chairman of Audit Committee, 3 shareholder who authorized Mr. Kiti Piluntanadilok, a member of Audit Committee, 2 shareholder who authorized Dr. Thamnoon Ananthothai and 1 shareholder who authorized Mr. Kirati Assakul for the same purpose. All of them have been serving as independent directors. The Board provided voting cards for the shareholders for each agenda separately so that they can vote as appropriate. The voting cards are then collected and calculated together with the votes cast before in the proxy form. The votes are then announced in the meeting room and filed the cards for inspection. The Board assigned company secretary to document and file the meeting resolutions in a correct and complete manner and to

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THAI UNION FROZEN PRODUCTS PCL.

publicize the resolutions of all agenda considered in 2012 Annual General Meeting of Shareholders in investor relations section on www.thaiuniongroup.com immediately on the date of meeting, except for questions raised by shareholders and answers given during the meeting session. Complete resolutions of the meeting were subsequently submitted through the Stock Exchange of Thailand communication systems and forwarded to corporate website within 14 days following the date of meeting. The Company imposes preventive measures to guard against the use of internal information for personal gains among the Board and management members by communicating their mandatory duties to report any changes made to the securities ownership of their own, those of their spouses and children below lawful age to the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET) pursuant to Section 59 of the Securities and Exchange Act B.E. 2535 on immediate basis and not later than 3 business days following the date of purchase, sell, transfer or receipt of such securities. The Board or management members or sections with access to, or acknowledgement of, internal information are not allowed to leak the information to outsiders or other unauthorized persons. In addition, no securities trading by those management is allowed within the period of one month prior to the disclosure of financial statements or any other material information to the public in order to prevent illegal use of internal information undisclosed to the public, which can affect the trading of the Company’s share on the Stock Exchange of Thailand. However, this prohibition is exempted in the case of continued fluctuation of securities trading prices driven naturally by overall stock market mechanism, which encourages those management to trade their securities only in response to the stock market situations and in good faith. Furthermore, the Board and management members are made aware of legal punishment and penalty pursuant to the Securities and Exchange Act B.E. 2535 and relevant regulations. The Board assigns company secretary to oversee and follow up items with potential conflict of interests and connected transactions. Company secretary is responsible for preparing quarterly summary report of those items and transactions and regularly publicizes such report at year-end in the Company’s annual report and Form 56-1. Furthermore, the Board and management members, in any Board meeting, are required

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to comply with good corporate governance policy by not participating in casting votes or giving opinions on any issues sensitive to conflict of interests or vested interests. The Board assigns company secretary to maintain the filing of report of vested interests as disclosed to the Company by the Board and management members pursuant to the Notification No. Tor.Jor.2/2552 of Capital Market Committee Governing Required Vested Interests Disclosure by Listed Company Directors, Management Members and Connected Persons. With regards to this issue, the Section 89/14 of the Securities and Exchange Act B.E. 2535, as subsequently amended under the authority of the Securities and Exchange Act (No. 4) B.E. 2551, stipulates that the Board and management members must report to the Company their vested interests in the Company’s and its subsidiaries’ operations and management, or those of their connected persons. This requirement is aimed to furnish necessary information to the Company and to enable the Company to comply with its own connected transaction handling procedures, which are established to prevent such items with potential conflict of interests from leading to possible siphoning of corporate funds and interests from the Company and its subsidiaries.

3. ROLES OF STAKEHOLDERS The Company perceives the importance of right of all stakeholders and equitable treatment, as the Company foresees the importance of their support and the mutual cooperation between the Company and the various groups of stakeholders in that it can secure long-term business wealth, employment and financial stability. Therefore, the Company adheres to equitable treatment of all stakeholders as well as ensures that effective administration of internal controls and compliance controls are established and maintained, as summarized below; Shareholder: The Company is determined to represent all shareholders efficiently through generating maximum long-term returns on investment with regular and sustainable strong operational performance and continued growth while simultaneously paying attention to accurate, complete and punctual disclosure of material information to all shareholders in response to their unwavering trust and support given to the Company and provide the investment returns that satisfy the shareholders the most.

ANNUAL REPORT 2012

Employee: The Company treats employees equitably and fairly with no discrimination against national origin, religion, gender, marital status, language, or workforce ranks, not associating with forced labor, child labor, and human trafficking, and not supporting bribery and corruption. The Company sets the appropriate compensation comparable to compensation paid in the same industry. Provision of fringe benefits to employees not only complies with but also exceeds relevant standard mandatory requirements. Among those benefits available to employees are provident fund, annual health check-up and adoption of Kaizen principle, safe and sanitary workplace environment, employee recreational activities, and in-house physical workout facility to promote mutual recreation among employees. In addition, the annual mini-marathon run started since 2009 to encourage the employees to be committed to that goal. Although some employees will not do before, but they will try to practice successfully. Besides, much emphasis is also placed on long-term personnel development, ample learning and self-development opportunity for career advancement and improved life quality. In order to put these implementations in actions, the Company introduces organization-wide professional human resources management systems to maximize personnel potentiality and capability throughout the entire business group. Employees of all levels are encouraged to acquire new knowledge and skills through company-subsidized scholarship program along with seminar/training attendance at leading educational institutions. The Company provides employee manual, which equips employees with necessary information on corporate policy and entitled fringe benefits. In addition, the Company has adopted a progress-oriented HR policy, driven by passionate belief in the utmost importance of human capital in business and the vital contribution it makes to the Company’s achievement of common goals. Therefore, the Company is committed to promoting greater professional capability among employees in parallel with continued improvements in their quality of life. Concerning learning and development paths made available to employees, appropriate practical learning programs are developed and applied to employees from their first day of employment within the Company until their retirement. In this regard, the Company has provided continued support to facilitate their greater learning experiences through time allocation, financial contribution and career progression as detailed below:

Human Capital Development: The Company’s human capital development is intended to encourage employees to perform respective functions at their optimum efficiency. In order to achieve this goal, the Company develops, and capitalizes on, tailored individual development plan on a continued basis. The individual development plan is implemented in conjunction with systematic follow-up and performance evaluation conducted to personnel training and development programs. Employees of all levels throughout the business gain benefits from organization-wide adoption of knowledge-based approach. In addition, the availability of Human Resource Information System (HRIS) within the Company not only enhances efficiency and accuracy of HR data management but also lowers operating costs. Under this human capital management policy, all people across the business are engaged side by side in continual process of knowledge acquisition and management. Apart from these continued HR development efforts regardless of position levels of employees, the Company has been making regular investment in the area of organizational development since 2004 with the intention of further strengthening organizational performance. In this regard, the Company has hired qualified advisors and experts in different disciplines to work in advisory capacity on the organizational and human capital development initiatives. Those professional advisory bodies include Accenture, CSR, INWIS and APM Group, among others. The Company’s human capital development policy is created in harmony with corporate visions and business strategies. Great emphasis is placed on development efforts in line with current personnel management system (PMS), which centers on competency development. Such competency is composed of 3 major elements; Core Competency, Management Competency and Functional Competency. Moreover, as the Company foresees the importance of specific functional, management and soft skills development among each position level as one of job enhancement factors, other personnel development efforts have also been made. These efforts encompass a wide range of personnel development aspects; for example, prerequisite knowledge for industrial establishment personnel, development of specific functional skills, development of management and soft skills, Leadership Program, Coaching Program, cross-functional rotation system, inter-departmental personnel realignment system, trial function performance in superior position, Star Program and the most recent program “TUF Management Associate Program” has been introduced to provide

THAI UNION FROZEN PRODUCTS PCL.

opportunities for young talents from within and outside the organization to experience working in our overseas operations. Moreover, the Company stresses the importance of communicating information concerning its business to all employees, such as CEO meets employees every 6 months for announcement the annual targets, the results including as the spirit and morale in the operating in the event of circumstances, such as when the shrimp factory fire in the early of year 2012. Customer: The Company builds customer satisfaction and is responsible for customers through offering developing high-quality products in compliance with food safety, occupational health and environment standards, adhering to commitments given to customers, delivering goods and service on-time and at fair prices, making customers accurately well-informed of available goods and service, and also placing much attention to customer confide entiality. The Company also sets aside special unit or appoints persons in charge of handling customer complaints and responding to those complaints without delay. In February 2012, our shrimp production plant in Samutsakhon Province faced a fire outbreak. Due to our effective safety management system, the Company were able to evacuate our workers safely. In regards to manufacturing and product delivery processes, the Company properly informed our customers who understood and helped us and relocated our manufacturing base to one of our subsidiary and also leased some production area from other plant. Within two months, our shrimp production was returned to normal. Business Partner: The Company treats suppliers equitably and fairly in line with commercial conditions, is willingly open for their opinions and suggestions to forge stronger business relations and places much attention to their commercial confidentiality. Creditor: The Company honestly and strictly adheres to loan agreement commitments given to respective creditors and financial institutions so as to ensure the availability of proper and fair returns on their loan investments. Furthermore, the Company takes best efforts to minimize its exposure to potential conflict of interests with creditors and not omitting information or facts that may damage creditors. If the Company cannot respect the conditions of the contracts, it must notify its creditors in advance to jointly solve the problems.

Competitor: The Company competes with competitor under fair commercial competition, with business ethics and in compliance with applicable legislation. The Company does not seek information that is its competitors’ trade secret by dishonest means, thereby having no trading disputes with any competitor. Corporate Social Responsibility: The Company perceives the corporate responsibility for the environment in the society and community and for natural resources conservation. In turning its nature-care spirit into actions, extensive corporate support is given to communities around the plant in terms of both safety and environment at its best. Among our corporate social responsibilities having been materialized include, for example, “Sealect See Love” volunteering camp recently launched to promote employees’ participation in community and social works, Hometown Community Development Program, which has been running on continued basis with clear objectives of promoting community strength and fostering pride in hometowns among employees, and “Blood Donation” organized for six consecutive years with over 3,000 units of accumulated blood donated to Thai Red Cross Society Other company-sponsored CSR initiatives in actions through the entire 2012 are further described under Sustainable Development heading on page 55 - 63 of this annual report. Respect of Copyrights and Intellectual Property Rights The Company respects copyrights and intellectual property rights of others by forbidding the employees to use illegal programs or software and strictly comply with the Copyright Act B.E.1994 Whistle-Blowing and Complaints The Company provided the channel for whistle-blowing or complaint-making that stakeholders are or may be affected by the damage caused by the Company’s operation, or the employees are involved in unlawful, dishonest acts or corruption by directly submitting the case or via post to; Chairman of the Audit Committee, or General Manager, Audit Unit Thai Union Frozen Products Public Company Limited 23rd floor, S.M.Tower, Samsennai, Phyathai, Bangkok 10400 Telephone 02 298-0024 ext 695-6 Facsimile 02 298-0024 ext 697

ANNUAL REPORT 2012

4. INFORMATION DISCLOSURE AND TRANSPARENCY The Board devises policy on correct, complete and punctual disclosure of material financial and non-financial information through dissemination channels of the Stock Exchange of Thailand and investor relations section on corporate website in both English and Thai languages so as to provide equitable and credible access opportunity for shareholders, institution investors and any persons interested in obtaining such information. The Board stands behind the Company and its subsidiaries’ consolidated financial statements and financial information presented in the Company’s annual report. The said financial statements are prepared in accordance with generally accepted accounting standards by applying appropriate accounting policy on a regular and carefully considered basis. Material information is sufficiently disclosed in the notes to the financial statements. The Board has provided report indicating its responsibilities to prepare financial statements. Such report is exhibited alongside the auditor’s report in the Company’s annual report to ensure true and fair presentation of the financial statements regularly following the generally accepted accounting standards and accounting policy. The Board opinions that there is effective administration of internal controls in the Company and that the reasonable fairness is assured for the financial statements for period ending December 31, 2012, for which the Company’s auditors have conducted the audits on a generally accepted auditing standards.

Unit : Million baht

Remuneration for Directors and Management •

Directors are remunerated in the form of monthly retainer and meeting allowance comparable in average to the general practice in the industry, suitable for the scope and amount of assigned responsibilities, and shareholders approved. Aside from the preceding meeting allowance, directors are not additionally remunerated from the Company’s subsidiaries. Executive directors are remunerated in the form of monthly retainer, meeting allowance, salary, provident fund matching contribution and annual bonus based mainly on operational performance of the Company and work performance of each director. The management team is remunerated in the form of salary, provident fund matching contribution and annual bonus based mainly on operational performance of the Company and work performance of each management member. Aside from the preceding monetary remuneration, the Company does not pay any other remuneration to directors.

•

The Company considers the total amount of annual remuneration paid to the Board and management members is not high when compared to the average amount paid by other listed companies in the Stock Exchange of Thailand due to the Company’s attention to the best interests of shareholders. The remuneration paid to the Board and management members in the year 2012 in comparison with its counterparts in the year 2011 is set forth below:

2012 Board of Directors

2011

Management Team

Board of Directors

Management Team

Number (Person) Retainer/Meeting Allowance Salary/Annual Bonus Provident Fund Matching Contribution

15 5.84 -

10 66.31 4.19

15 5.55 -

12 72.83 3.58

Total

5.84

70.50

5.55

76.41

THAI UNION FROZEN PRODUCTS PCL.

The Board perceives the importance of correct, complete and transparent information disclosure to all shareholders, investors and all parties concerned on equitable treatment basis. Information on operations and financial status is communicated clearly and timely under relevant laws to provide target groups with correct understanding of the Company, thereby creating acceptance and investment sentiment among investors. The communication also allows the Company to gain insight into public view on the Company’s operations, which will be a part of considerations for future goal and strategy setting. Moreover, the Investor Relations Unit is officially set up, the Company clearly assigns the management and other personnel to assist in communicating with the pubic as follows: 1. Mr. Thiraphong Chansiri 2. Mr. Wai Yat Paco Lee 3. Ms. Suthipa Vacharotayangul

President Head of Investor Relations & Corporate Investment Investor Relations Manager

The past continued communications of operational performance, financial and non-financial information to stock analysts, investors and shareholders during 2012 were as follows: • • • • • •

Approximately 92 company visits by investors and stock analysts 3 analysts meetings following the announcement of operating results 2 plant visits by stock analysts 2 plant visits by minor shareholders 19 overseas investor conferences 4 times of Opportunity Day by SET

In addition, the Company provides the public with written information dissemination through corporate website http://www.thaiuniongroup.com and printed media as follows: • • • •

Investor note, a press release giving information on operational results issued to investors and stock analysts on a quarterly basis TUF E-Newsletter, a bimonthly corporate newsletter delivered to shareholders and investors to regularly report new information and updates on the Company’s operations Annual report for shareholders, investors and other interested general public Report or notification of any corporate changes in need of public disclosure pursuant to the Notifications of the Securities and Stock Exchange Commission and the Stock Exchange of Thailand

Due to continued strong adherence to transparent information disclosure, Securities Analysts Association grants to the Company its annual

SAA’s Picked Award for being the most-admired listed company’s top executive. The Company wins totally 2 awards in Agro & Food category; The Most-admired CEO Award, The Most-admired IR Award, The grant of the awards is based on favorable votes cast by stock analysts and fund managers who identify the Company’s regular provision of complete and accurate in-depth information, including facilitating convenient availability and accessibility for interviews as their deciding factors to vote for the Company. 5. BOARD OF DIRECTORS’ RESPONSIBILITIES The Board has set up policy, strategies, goals and budgeting in order to improve operational efficiency and to preserve the best interests of the Company. The Board follows up and ensures that the management’s work performance is in line with the work plans. The Board also clearly defines roles, duties and responsibilities of the Board members, the management, staff and other parties concerned. The Board assigns the Audit Committee to oversee the Internal Audit Department, to evaluate the department’s work performance, to ensure an adequacy of internal controls and to promote appropriate risk management in order to preserve the best interests of the Company. In order to be equipped with further knowledge, capability and potentials as visionary directorship, the directors of the Company have attended the training courses organized by the Thai Institute of Directors Association (IOD) and others as follows;

ANNUAL REPORT 2012

Names

DCP

DAP

1. Mr. Kraisorn Chansiri

RCP

RCC

ACP

UFS

HRP and HCI

TLCA

15/2007

Leader Program 12/2011

2. Mr. Cheng Niruttinanon 3. Mr. Chuan Tangchansiri 4. Mr. Thiraphong Chansiri

86/2010 10/2001

5. Mr. Rittirong Boonmechote

84/2010

2/2009

6. Mr. Yasuo Goto 7. Mr. Takehiko Kakiuchi 8. Mr. Ravinder Singh Grewal Sarbjit S 9. Mr. Chan Tin King

47/2004

10. Mr. Chan Shue Chung

10/2002

11. Mr. Sakdi Kiewkarnkha

13/2001

1/2009 4/2001

9/2009

2/2012

2/2006

4/2008

12. Pol.Maj.Gen. Pracha Anucrokdilok

33/2005

13. Mr. Kiti Pilunthanadiloke

36/2005

14. Dr. Thamnoon Ananthothai

70/2006 48/2005 14/2006

15. Mr. Kirati Assakul

27/2003

10/2005

7/2007

5/2007

DCP : Director Certification Program DAP : Director Accreditation Program RCP : The Role of Chairman Program RCC : The Role of Compensation Committee ACP : Audit Committee Program

UFS : Understanding the Fundamental of Financial Statement HRP : How to Develop a Risk Management Plan HCI : Handling Conflicts of Interest TLCA : TLCA Executive Development Program Leader Program : Capital Market Academy

Although some members of the Board and the management team are shareholders, the management policy is based mainly on the best interests of the Company, particularly decision on issues sensitive to conflict of interests or vested interests. Those members are not eligible for voting for issues that may cause conflict of interests in order to preserve independence in decision making. Furthermore, the information regarding such consideration is immediately disclosed to the public for transparency. The necessary information is also regularly disclosed in the Company’s annual report and Form 56-1.

their awareness, understanding and compliance. The Company believes that such practice would improve the standards of good corporate governance and promote investor confidence in the Company’s management as well as preserve justice and credibility in the capital market.

The Company has created the code of ethics or statement of business conduct for all directors, management team and employees. The code serves as guidelines for their honest and equitable work operations and is made known to all directors, management team and employees to ensure

Board Composition The Company’s Board of Directors comprises 15 members, namely; 7 executive directors, 2 directors from business partners (in support of business strategies), 1 director from Bondholders and 5 independent directors (3 of which also serve as Audit Committee members). Such proportion of the Board members allows effective considerations for the best interests of the Company. For the year 2012, there were totally 5 independent directors to be at one-third of the total number of Board members or the proportion accounts for 33.33%.

THAI UNION FROZEN PRODUCTS PCL.

Definition and Qualifications of Independent Director An independent director is a qualified and independent person of the same qualification criteria described in the Notification Governing Qualifications and Responsibilities of Audit Committee established by the Stock Exchange of Thailand. In addition, a person qualified to serve as independent director must be able to perform duties to preserve the best interests of all shareholders in equitable manner without conflict of interests and be available in Board meetings to give independent and unbiased opinions and judgments. An independent director must meet the following criteria: (1) Holds no more than 0.05% of total voting stocks of TUF including stocks held by connected persons of the independent director, as well as nominees. (2) Is not or has not ever been a major shareholder. (3) Is not or has not ever been board member of its parent company or an executive director, employee, staff, advisor who receives salary of a controlling person of TUF, its parent company, its subsidiaries or its associated companies. (4) Is not any professional advisor. (5) Has not or has not had a business relationship with the Company, its parent company, its subsidiaries, its associated companies or a juristic person who may have conflict of interests, in the manner that may interfere with his independent judgment.

(6) Does not represent the Company’s or its major shareholder’s board members or a shareholder who is related to the Company’s major shareholders. The afore-mentioned definition of independent director is based on the Company’s Corporate Governance Policy established by the Board. Moreover, the Company’s criteria are stricter than “the criteria” required by the Stock Exchange of Thailand and the Securities Exchange Commission in term of stock holding ratio. Although the title Chairman of the Board and Managing Director are not combined into one position, both represent the same group of major shareholders. However, consideration of important matters requires approval from directors from all groups of shareholders. Independent directors play important roles in giving opinions, balancing and verifying the power of management. Board Meeting The Board meeting is held regularly on a quarterly basis following clearly defined and scheduled agendas mutually agreed and decided by Chairman and President. Follow-up agenda is regularly included in the meeting. Company secretary sends meeting agendas and meeting invitation to the Board members not less than 10 days in advance to allocate appropriate time for data analysis. The agendas and meeting invitation may be sent to the Board members less than 10 days in advance in the case of urgency or preservation of the Company’s interests. Each meeting session lasts about 2 hours. There were totally 6 ordinary meeting sessions during the year 2012, with each director’s attendance summarized below: Unit: Time Board Meeting (Times)

Directors 1. Mr. Kraisorn Chansiri 2. Mr. Cheng Niruttinanon 3. Mr. Chuan Tangchansiri 4. Mr. Thiraphong Chansiri 5. Mr. Rittirong Boonmechote 6. Mr. Yasuo Goto 7. Mr. Takehiko Kakiuchi

Times of Attendance/ Total Sessions Held

Prior Notice via Electronics Media

5/6 3/6 6/6 6/6 6/6 1/6 1/6

1/6 3/6 5/6 5/6

ANNUAL REPORT 2012

Unit: Time Board Meeting (Times)

Directors 8. Mr. Ravinder Singh Grewal Sarbjit S 9. Mr. Chan Tin King 10. Mr. Chan Shue Chung 11. Mr. Sakdi Kiewkarnkha* 12. Pol.Maj.Gen. Pracha Anucrokdilok* 13. Mr. Kiti Pilunthanadiloke* 14. Dr. Thamnoon Ananthothai* 15. Mr. Kirati Assakul*

Times of Attendance/ Total Sessions Held

Prior Notice via Electronics Media

6/6 6/6 6/6 6/6 6/6 5/6 4/6 6/6

1/6 2/6 -

* Independent Director Remarks: 1. Mr. Yasuo Goto and Mr. Takehiko Kakiuchi are directors, who reside outside the Kingdom of Thailand. 2. The company secretary is assigned to oversee and facilitate the Board meeting including documenting the meeting resolutions and filing in a complete, correct and verifiable manner.

Subcommittee The Board has appointed committees to assist in governing the Company. (1) Audit Committee The Audit Committee has 3 years of tenure and is composed of 3 independent directors professionally competent in financial and accounting, organizational management and law disciplines. All independent directors neither hold any managerial positions, nor perform employee or consulting roles for the Company. TUF Audit Committee composition is as set forth below:

1. Mr. Sakdi Kiewkarnkha 2. Pol.Maj.Gen. Pracha Anucrokdilok 3. Mr. Kiti Pilunthanadiloke

Chairman of Audit Committee Audit Committee Audit Committee

The Audit Committee met regularly in 21 meeting sessions during the year 2012 to implement assigned tasks and report performance results directly to the Board. The details of those implemented tasks are described under â&#x20AC;&#x153;Report of Audit Committeeâ&#x20AC;? heading on page 102 of this annual report. (2)

Nomination and Remuneration Committee The Nomination and Remuneration Committee includes a Chairman and two other members. Majority members must be independent directors possessing qualifications required by the Securities and Exchange Commission and the Stock Exchange of Thailand, and must have the appropriate level and scope of experience and expertise. TUF Nomination and Remuneration Committee composition is as set forth below:

1. Dr. Thamnoon Ananthothai 2. Mr. Sakdi Kiewkarnkha 3. Mr. Chan Tin King

Chairman of Nomination and Remuneration Committee Member of Nomination and Remuneration Committee Member of Nomination and Remuneration Committee

(3) Risk Management Committee The Risk management Committee includes a Chairman and four other members. Majority members must be independent directors possessing qualifications required by the Securities and Exchange Commission and the Stock Exchange of Thailand, and must have the appropriate level and scope of experience and expertise. TUF Risk Management Committee composition is as set forth below:

1. 2. 3. 4. 5.

Dr. Thamnoon Ananthothai Mr. Sakdi Kiewkarnkha Pol.Maj.Gen Pracha Anucrokdilok Mr. Thiraphong Chansiri Mr. Chan Tin King

Chairman of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee

Controlling System, Internal Audit and Risk Management Controlling System and Internal Audit: The Company has its own Internal Audit Unit to regularly oversee internal controls system, to inspect significant items and to ensure the effectiveness of controlling system for greater credibility of financial statements. A committee has also been set up to be in charge of reviewing the efficiency of the internal controls, in which operations, compliance controls, risk management and extraordinary items are incorporated. The past internal audit reports indicated that the Company’s operations have been in line with the planned systems, possessed efficient internal controls, risk assessment, risk management and prevention measures, compliance control and shown no significant non-compliance in its operations. Risk Management: The Risk Management Committee assigns the management team to regularly identify internal and external risk factors as well as to conduct assessment of their impacts on the Company’s business. Risk management team is diversely composed of management members and top executives who are directly responsible for the work areas where risk factors are identified. The risk management team analyzes target risk factors in order to determine root causes and create countermeasures. The countermeasures are turned into practical guidance to either prevent or minimize potential impacts of those risks. In addition, the risk management team also follows up and ensures that taken corrective and preventive actions are in line with its directed countermeasures and reports the performance of countermeasure implementation to Audit Committee for subsequent address in Board meeting. Conflict of Interests and Use of Internal Information The Board determines handling procedures and monitoring measures against potential conflict of interests and connected transactions. Much efforts and prudential considerations are independently taken in order to identify the appropriateness of

target items under the scope of the Company’s Corporate Governance Policy and for the best interests of the Company. Those items with nature of potential conflict of interests and connected transactions are treated in the same manner as transactions made to outsiders. Quarterly summary report of those items and transactions is prepared and regularly publicized at year-end in the Company’s annual report and Form 56-1. Furthermore, the Company requires that the Board and management members report to the Company their vested interests in the Company’s and its subsidiaries’ operations and management, or those of their connected persons. This requirement is aimed to furnish necessary information to the Company and to enable the Company to comply with its own connected transaction handling procedures, which are established to prevent such items with potential conflict of interests from possible siphoning of corporate funds and interests from the Company and its subsidiaries. The Company imposes preventive measures to guard against the use of internal information for personal gains among the Board and management members by communicating their mandatory duties to report any changes made to the securities ownership of their own, those of their spouses and children below lawful age to the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET) pursuant to Section 59 of the Securities and Exchange Act B.E. 2535 on immediate basis and not later than 3 business days following the date of purchase, sell, transfer or receipt of such securities. The Board or management members or sections with access to, or acknowledgement of, internal information are not allowed to leak the information to the outsiders or other unauthorized persons. In addition, no securities trading by those management is allowed within the period of one month prior to the disclosure of financial statements or any other material information to the public in order to prevent illegal use of internal information undisclosed to the public, which can affect the trading of the Company’s share on the Stock Exchange of Thailand.

ANNUAL REPORT 2012

APPOINTMENT OF DIRECTORS Board of Directors shall appoint a director, whose qualifications are deemed appropriate and qualified pursuant to the Public Companies Limited Act. Such appointment can be made only in the event that directorship either expires by normal office term or prematurely falls vacant in consequence of whatever causes during the office term. A substitute director appointed to fill interim vacancy shall be in the office only for the remaining tenure. One third of directors shall retire and new directors shall be elected in an annual general meeting of shareholders according to criteria and procedures set forth below: 1. Each shareholder has a right to vote in proportion to share volume owned; the principle of “one share, one vote” is applied. 2. Each shareholder is required to cast the entire vote owned in 1 for one or more candidates but can not split the vote into portions. 3. Candidates shall be entitled to directorship based on votes received. Candidate with maximum votes is first entitled to directorship and followed by the other less voted, respectively. As a rule, the number of newly appointed directors must not exceed the number of new directors intended in that election.

Shareholders, if necessary, may pass resolutions to remove any director prior to statutory expiration of office term provided (a) three fourth of majority votes of all shareholders present at a meeting is reached; and (b) the aggregate share volume owned by shareholders in (a) must be greater than half of the aggregate share volume owned by all shareholders present at the meeting. Such case shall be effective only when the qualifications of all board members and the management comply fully with Section 68 of the Public Companies Limited Act of 1992 and the SEC’s Regulation Governing the Rules, Conditions and Procedures for the Securities Offer and Permission dated May 18, 1992. Board of Directors shall appoint any person deemed professionally recognized and qualified to act as independent director provided that the appointee is (a) not an employee or staff member receiving regular salary from the company or its subsidiaries; (b) independent of major dominant shareholders; (c) a shareholder of not more than 0.05% of the respective paid-up capital of the company; and (d) able to equally protect the interests of minority shareholders. Board of Directors shall consider and vote to appoint qualified candidate and seek further approval during meeting of shareholders.

THAI UNION FROZEN PRODUCTS PCL.

AUTHORITY OF BOARD OF DIRECTORS AND AUDIT COMMITTEE Authority of Board of Directors

Authority of Executive Directors

Board of Directors is authorized to manage the company in conformity with objectives, regulations and shareholder resolutions with honesty, in good faith, and for the best interest of the company. Additionally, Board of Directors is responsible for setting corporate policy and direction as well as ensure that the management implement the policy effectively and efficiently.

(1) Implement the company’s policy, which obliges to laws, conditions, regulations, and rules of the Company, except for those issues subjected to the consent of shareholders. (2) Set, propose and devise business policy and strategy to Board of Directors. (3) Set business plan, business management authority, annual budget estimation, and budget allocation propose all these to Board of Directors for review and approval, as well as follow business plan and strategy in accordance with the corporate policy and business guidelines to committed to Board of Directors. (4) Handle general business administration, set up organization and management structures to cover all aspects of personnel recruitment, training, employment, and employment termination. (5) Approve credit facility requests made to financial institution, including giving collateral or making any payment for normal business transactions, e.g. payment made for branch expansion investment or any regular business operations. The approval of the said credit facility must involve not over Bt200 million or equivalent in value, or the value as approved by Board of Directors. However, the credit facility value allowed for approval may be subject to change as deemed appropriate depending on the consideration of Board of Directors. (6) Appoint or dismiss any employee holding position lower than managing director. (7) Perform other duties as assigned by Board of Directors.

Legal binding of the company requires a countersign of two directors in minimum and the seal of the company affixed. Alternatively, Board of Directors may authorize certain directors to deal with such legal binding. Board members are required to disclose any material interest in transactions or contracts which the company enters into and increase/decrease in share/debenture ownership in the company or its subsidiaries during any fiscal year. Board of Directors is authorized to implement and direct the company’s activities except for the following issues, which require prior shareholder approval. (1) Any issue that requires shareholder approval, pursuant to the law; (2) Altering the company’s par value or registered capital; (3) Increase in the company’s Board members. (4) Any deed that yields Board of Directors’ gain or loss or any deed that is obliged, by SET regulations, to have shareholder’s approval.

ANNUAL REPORT 2012

In addition, the above-mentioned approval authorities must not be in nature of any business transactions that allow executive directors, or their authorized persons, to grant further approval for transactions having their conflicts of interest, vest interest, or any other forms of conflicts of interest (according to the company’s articles of association and pursuant to the Notifications of the Office of the Stock Exchange Commission and the Stock Exchange of Thailand) with the company or its subsidiaries except that the said approval is given for business transactions in accordance with corporate policy and criteria approved by Board of Directors, provided that executive directors with vested interest in such issue are not eligible for voting right. Board of Directors is authorized to make change to the authority of executive directors as deemed necessary or appropriate. The following policies are under the consideration of managing director or Board of Directors:

(1) Financial Policy

• • • •

Annual budget; Investment in other companies; Loan application; Property lease agreement;

approved by Board of Directors approved by Board of Directors approved by Executive Directors approved by President

(2) Business and Marketing Policy

•

Business and Marketing Policy;

approved by Managing Director

(3) Management Policy

• • •

Organizational restructuring; Management realignment; Changes in work regulations or fringe benefits;

approved by Executive Directors approved by Managing Director approved by Managing Director

(4) Employee Policy • •

Salary/bonus increment; Recruitment, performance evaluation, punishment or resignation of the management;

approved by Executive Directors approved by Managing Director

(5) Budgeted Purchase of Fixed Assets

•

Budgeted Purchase of Fixed Assets;

approved by Managing Director

(6) Unbudgeted Purchase of Fixed Assets

•

Unbudgeted Purchase of Fixed Assets;

approved by Board of Directors

THAI UNION FROZEN PRODUCTS PCL.

In the case where Board of Directors authorizes another person to perform duties on behalf of Board of Directors regarding ordinary business conduct, such authorization is made following the resolution passed in Board of Directors’ meeting with clearly defined scope, authority and responsibility. Such authorization does not give authority to the said authorized person to approve issues that the said authorized person, or other persons may have vested interest or conflicts of interest in other forms with the company or its subsidiaries.

Authority of Audit Committee The company requires that Audit Committee consist in minimum of 3 independent members with assigned duties in accordance with those stipulated in the Office of the Stock Exchange Commission’s and the Stock Exchange of Thailand’s regulations. Audit Committee is sufficiently equipped with solid knowledge and competent experience to review the fairness of the Company’s financial statements, including performing other duties in their capacity as Audit Committee, as summarized below: (1) Perform the followings: (a) ensure that Board’s directions are fully followed; (b) maintain transparency; (c) provide Internal Audit Department with task guidelines; (d) review and approve annual internal audit plan submitted by Internal Audit Department; (e) manage potential conflicts of interest; (f) ensure full compliance with applicable requirements, laws and regulations; and (g) give opinions and assess an adequacy of internal controls and report to Board of Directors.

(2) (3)

Review significant information in financial reports and provide guidelines for preparing such reports and relevant analysis prior to submission to Board of Directors. Devise policy on commercial best practice with emphases on prohibitions and responsibilities applied to staff. (4) Coordinate with external parties, e.g. independent auditor, the Office of the Stock Exchange Commission, the Stock Exchange of Thailand, for opinions on the company’s internal controls and review of relevant regulations.

ANNUAL REPORT 2012

SHAREHOLDING STRUCTURE AND MANAGEMENT Shareholder

1. CHANSIRI FAMILY 2. MITSUBISHI CORPORATION 3. NIRUTTINANON FAMILY 4. THAI NVDR CO., LTD. 5. SOCIAL SECURITY OFFICE 6. STATE STREET BANK EUROPE LIMITED 7. THE BANK OF NEW YORK MELLON-CGT TAXABLE 8. BOONMECHOTE FAMILY 9. STATE STREET BANK AND TRUST COMPANY 10. HAGOROMO FOODS CORPORATION

278,375,124 86,936,280 85,907,317 46,879,913 34,043,062 32,283,985 31,531,200 29,893,745 19,897,157 19,278,000

% 24.62 7.58 7.49 4.09 2.97 2.81 2.75 2.60 1.73 1.68

Remark: On the closing date of register book (January 3, 2013) and based on total number of shares of 1,147,593,829 at the par value of Bt1 with regard to Thai NVDR Co., Ltd., as shareholders will not be eligible for exercising their right to vote in shareholder meeting 4.09% of total votes will be excluded.

Shareholding Structure as of January 3, 2013 Types

% Holding January 3, 2013

Juristic Persons Thai Foreign Total Private Individuals Thai Foreign Total Grand Total

2011

18.70 33.55 52.25

33.84 33.63 67.47

43.19 4.56 47.75

32.21 0.32 32.53

100.00

THAI UNION FROZEN PRODUCTS PCL.

Change in Shareholdings of The Board of Director as of January 3, 2013 and 2011 Board of Directors

As of January 3, 2013*

As of December 31, 2011 *

1. Mr. Kraisorn Chansiri 2. Mr. Cheng Niruttinanon 3. Mr. Chuan Tangchansiri 4. Mr. Thiraphong Chansiri 5. Mr. Rittirong Boonmechote 6. Mr. Yasuo Goto 7. Mr. Takehiko Kakiuchi 8. Mr. Chan Tin King 9. Mr. Chan Shue Chung 10. Mr. Ravinder Singh Grewal Sarbjit S 11. Mr. Sakdi Kiewkarnkha 12. Pol.Maj.Gen. Pracha Anucrokdilok 13. Mr. Kiti Pilunthanadiloke 14. Dr. Thamnoon Ananthothai 15. Mr. Kirati Assakul

117,783,680 70,595,934 9,967,000 114,711,943 15,860,745 7,463,331 3,273,818 7,572 13,312

122,282,016 60,716,605 9,400,000 82,422,782 13,100,000 18,553,327 2,878,182 6,310 21,000

Total

339,677,335

309,380,222

Remark: Shareholders of TUF that included spouse and children

ANNUAL REPORT 2012

REMUNERATION FOR DIRECTORS AND MANAGEMENT Remuneration 2012 (Baht) Board of Directors

Retainer

Meeting allowance

360,000 180,000 180,000 180,000 180,000 180,000 180,000 180,000 180,000 180,000 240,000 240,000 240,000 240,000 240,000

100,000 45,000 90,000 90,000 90,000 15,000 15,000 90,000 90,000 90,000 90,000 90,000 75,000 60,000 90,000

Remuneration 2012 (Baht) 10 members of the management team Other Forms of Remuneration: None

Audit Committee Fees

Sub Committee Fees

30,000

60,000

540,000 240,000 240,000

140,000 90,000 200,000

Salary & Bonus and Provident Fund 70.50 Million Baht

THAI UNION FROZEN PRODUCTS PCL.

CONNECTED TRANSACTIONS OF LISTED COMPANY Connected Company 1. Thai Union Feedmill Co., Ltd.

First & Last Name

Position Held in TUF

Mr. Rittirong Boonmechote

Director

5,974,975

11.9%

Mr. Prasert Boonmechote

Relative of

2,500,000

5.0%

1,750,000

3.5%

1,750,000

3.5%

(Mr. Rittirong’s father) Mr. Wattana Boonmechote (Mr. Rittirong’s brother) Ms. Rungtiwa Boonmechote

2. Thai Union Seafood Co., Ltd.

No. of Shares Owned in Connected Company

Director Relative of Director Relative of

(Mr. Rittirong’s sister)

Director

Mr. Rittirong Boonmechote

Director

3,974,850

13.2%

Mr. Prasert Boonmechote

Relative of

3,000,000

10.0%

900,000

3.0%

900,000

3.0%

(Mr. Rittirong’s father) Mr. Wattana Boonmechote (Mr. Rittirong’s brother) Ms. Rungtiwa Boonmechote (Mr. Rittirong’s sister)

Director Relative of Director Relative of Director

ANNUAL REPORT 2012

CONNECTED TRANSACTIONS OF LISTED COMPANY The company has transactions with individuals / parties who might have conflict of interests based on the shareholding structure of the company, or as a result of the materiality and significance of such transactions. Nevertheless, those transactions do not cause any conflict of interests with the minority shareholders of the company. With regards to business transactions with the parties that might have conflict of interests, the company has provided the details of such transactions in the Note (Item 9) for reference. Further details related to those transactions, excluding those already provided in the Notes to the Financial Statements, are as follows:

Policy of Price Market Price

Connected Transactions for year 2012 Commercial Transactions: •

Purchase of raw materials from TUF at the total amount of Bt19,578,550.

•

Purchase of raw materials from TUS at the total amount of Bt14,220,938.

•

Purchase of finished goods from THD at the total amount of Bt305,451.

Supporting Commercial Transactions:

Market Price

•

Payment for marketing service and lab service charge to TUF

at the total amount of Bt780,000.

Commercial Transactions: •

Purchase of raw materials from TUF at the total amount of Bt234,346,659.

•

Purchase of raw materials from TCM at the total amount of Bt28,884,613.

•

Purchase of packages from TUG at the total amount of Bt651,300.

•

Sale of finished goods to COSF at the total amount of Bt2,361,252,882.

•

Sale of raw materials and finished goods to TUF at the total amount of Bt560,916,171.

•

Sale of finished goods to PPC at the total amount of Bt17,194,321.

•

Sale of raw materials to TFM at the total amount of Bt14,220,938.

•

Sale of raw materials to SC at the total amount of Bt131,600.

•

Sale of raw materials to TUH at the total amount of Bt85,800.

Supporting Commercial Transactions: •

Payment for marketing service charge to TUF at the total amount of Bt11,082,197.

•

Payment for marketing service charge to TUM at the total amount of Bt6,348,000.

•

Payment for claim and transportation charge to TUF at the total amount of Bt5,603,169.

•

Payment for transportation charge to COSF at the total amount of Bt5,107,723.

•

Receive the penalty charge due to delay payment from COSF at the total amount

of Bt18,366.

THAI UNION FROZEN PRODUCTS PCL.

Connected Company

First & Last Name

Position Held in TUF

No. of Shares Owned in Connected Company

3. Lucky Union Foods Co., Ltd.

Mr.Cheng Niruttinanon

Director

102,000

11.3%

4. Chansiri Real Estate Co., Ltd.

Mr. Thiraphong Chansiri

Director

19,680,000

32.8%

Relative of

15,260,000

25.4%

15,260,000

25.4%

Director

7,800,000

13.0%

Relative of

2,000,000

3.4%

Mr. Dejphon Chansiri (Mr. Kraisorn’s son) Mr. Disaphol Chansiri (Mr. Kraisorn’s son) Mr. Kraisorn Chansiri Ms. Bussakorn Chansiri

Director Relative of Director

(Mr. Kraisorn’s wife)

Director

Mr. Chuan Tangchansiri

Director

Mr. Kraisorn Chansiri

Director

2,200

22.0%

Mr. Cheng Niruttinanon

Director

2,000

20.0%

Mr. Chuan Tangchansiri

Director

1,000

10.0%

6. Jana Industry Co., Ltd.

Mr. Cheng Niruttinanon

Director

50,000

25.0%

7. TC Union Agrotech Co., Ltd.

Mr. Cheng Niruttinanon

Director

496,000

49.6%

5. Thai Union Securities Co., Ltd.

ANNUAL REPORT 2012

Policy of Price Market Price

Connected Transactions for year 2012 Commercial Transactions: •

Purchase of raw materials from TUF at the total amount of Bt1,244,214.

•

Purchase of printing package from TUG at the total amount of Bt311,986.

•

Purchase of finished goods from THD at the total amount of Bt32,771.

•

Sale of raw materials to TUM at the total amount of Bt8,867,111.

•

Sale of finished goods to SC at the total amount of Bt1,491,200.

•

Sale of finished goods to TUF at the total amount of Bt184,350.

Supporting Commercial Transactions: -None-

Compare to neighbor areas

Short-term Rent of Immovable Property Transactions: TUF, TUM and SC paid the rent and service charge for its Bangkok office in at the total amount of Bt21,459,313. With their needs to run Bangkok office to facilitate business transactions, the three companies entered into rental contract with the Chansiri Real Estate Co., Ltd., a real estate developer. The contracted rental charge is Bt270/square metre/ month and the service charge is between Bt180/square metre/month depending on level of the rented area. The rental and service charge is consistent with general market price in the industry and apply only for rented area, excluding other utility charge. The rental period is 3 years. The contract will expire in December 2013.

Commercial Transactions: -None-

Market Price

Commercial Transactions: •

Purchase of raw materials from SC at the total amount of Bt108,970,090.

•

Sale of raw materials to TFM at the total amount of Bt42,690,912.

Commercial Transactions: •

Purchase of raw materials from TUM at the total amount of Bt290,838,645.

•

Purchase of raw materials from TUF at the total amount of Bt244,089,678.

•

Purchase of finished goods from THD at the total amount of Bt14,400.

•

Purchase of sticker printing from TUG at the total amount of Bt10,319.

•

Sale of raw materials to TFM at the total amount of Bt303,050,711.

•

Sale of raw materials to TUM at the total amount of Bt433,630.

Asset or Service Transactions: •

Payment for Sola oil and moving fish cooking tank charge to TUF at the total amount of Bt369,404.

THAI UNION FROZEN PRODUCTS PCL.

Connected Company

First & Last Name

8. Lucky Surimi Products Co., Ltd.

Mr. Cheng Niruttinanon

9. Ekawat Products Co., Ltd.

Mr. Prasert Boonmechote (Mr. Rittirong’s father) Mr. Wattana Boonmechote (Mr. Rittirong’s brother) Ms. Rungtiwa Boonmechote (Mr. Rittirong’s sister)

10. Pae Rungtiwa (Natural Person)

Ms. Rungtiwa Boonmechote (Mr. Rittirong’s sister)

11. Pae Parichart (Natural Person)

12. Geminai & Associate Co., Ltd.

13. Waithai Co., Ltd.

Ms. Parichart Boonmechote

Position Held in TUF Director

Relative of

No. of Shares Owned in Connected Company 1

0.0%

100,000

20.0%

137,500

27.5%

50,000

10.0%

Owner

100.0%

Owner

100.0%

459,870

92.0%

Director Relative of Director Relative of Director Relative of Director

Relative of

(Mr. Rittirong’s sister)

Director

Mr. Dejphon Chansiri

Relative of

(Mr. Kraisorn’s son)

Director

Mr. Cheng Niruttinanon

Director

100,000

31.3%

Mr. Kraisorn Chansii

Director

59,200

18.5%

Mr. Chuan Tangchansiri

Director

20,000

6.3%

Mr. Thiraphong Chansiri

Director

20,000

6.3%

ANNUAL REPORT 2012

Policy of Price Compare to neighbor areas

Connected Transactions for year 2012 Short-term of Immovable Property Transaction: TUF paid the rent, service charge and utility charge at the total amount of Bt6,111,210 for office and plant area including machinery, equipment and contracted service of Lucky Surimi Products Co., Ltd., as a solution for the Company’s inadequate processing area for extension of its value added production line (pie and ready-to-eat food). The rental agreement is effective for 3 years, at Bt549,070 per month (the said amount is only for the rent and service charge, excluding expenses on utilities.) and utilities service charge at the total amount of Bt22,415,611. The contract will expire in December 2014.

Market Price

Commercial Transactions: •

Sale of raw materials to TUF at the total amount of Bt2,441,231,412.

•

Sale of raw materials to TUS at the total amount of Bt521,486,900.

Commercial Transactions: •

Purchase of finished goods from TUF at the total amount of Bt60,875.

•

Sale of raw materials to TUF at the total amount of Bt24,060,374.

Commercial Transactions: •

Purchase of finished goods from TUF at the total amount of Bt981.

•

Sale of raw materials to TUF at the total amount of Bt336,775,232.

Commercial Transactions: •

Purchase of finished goods from THD at the total amount of Bt456,547.

•

Purchase of brochure printing from TUG at the total amount of Bt51,978.

Asset or Service Transactions:

Market Price

•

Receive for cold storage construction (add from 2011) from TUF at the total amount

of Bt313,233.

Supporting Commercial Transactions: •

Receive for Haulage charge from TUM at the total amount of Bt36,741,002.

•

Receive for Haulage charge from TUF at the total amount of Bt6,661,455.

•

Receive for Haulage charge from APC at the total amount of Bt4,837,500.

•

Receive for Haulage charge from SC at the total amount of Bt97,608.

Under the 2011 AGM resolution passed on April 25, 2011 of the expenses for transaction

per year not exceeding Bt100 million.

THAI UNION FROZEN PRODUCTS PCL.

Position Held in TUF

No. of Shares Owned in Connected Company

Connected Company

First & Last Name

14. Ahead Way International

Mr. Cheng Niruttinanon

Director

6,998

70.0%

15. Thaipatana

Mr. Cheng Niruttinanon

Director

20,000

40.0%

Mr. Chuan Tangchansiri

Director

5,000

10.0%

Mr. Cheng Niruttinanon

Director

Mr. Kraisorn Chansiri

Director

2,850,000

9.5%

Mr. Chan Tin King

Director

749,997

2.5%

Mr. Thiraphong Chansiri

Director

49,995

0.2%

Co., Ltd.

Stainless Steel Co., Ltd.

16. Yueh Chyang

120,181USD*

6.2%

Canned Food Co., Ltd.

17. Biz Dimension Co., Ltd.

ANNUAL REPORT 2012

Policy of Price Market Price

Market Price

Connected Transactions for year 2012 Commercial Transactions: •

Purchase of finished goods from JIF at the total amount of Bt454,285,128.

•

Purchase of finished goods from THD at the total amount of Bt40,299.

•

Sale of finished goods to COSI at the total amount of Bt124,586,349.

Asset or Service Transactions: •

Sale of equipments to TUM at the total amount of Bt77,271,012.

•

Receive for repair charge from TUM at the total amount of Bt25,523,818.

•

Sale of equipments to TUF at the total amount of Bt22,594,498.

•

Sale of equipments to SC at the total amount of Bt3,586,952.

•

Receive for repair charge from TUF at the total amount of Bt2,038,380.

•

Receive for service charge from APC at the total amount of Bt1,762,400.

•

Receive for repair charge from SC at the total amount of Bt102,300.

•

Payment for the penalty charge due to delay delivery to SC

at the total amount of Bt2,776.

Under the 2011 AGM resolution passed on April 25, 2011 of the expenses for transaction

per year not exceeding Bt150 million.

Commercial Transactions: •

Purchase of raw materials from TUM at the total amount of Bt40,600,369.

•

Purchase of raw materials from TUF at the total amount of Bt21,337,929.

•

Purchase of finished goods from COSF at the total amount of Bt1,868,216.

•

Purchase of finished goods from COSI at the total amount of Bt194,669.

•

Sale of finished goods to COSI at the total amount of Bt813,658,566.

•

Sale of finished goods to TUM at the total amount of Bt495,019,976.

•

Sale of finished goods to COSF at the total amount of Bt308,943,241.

Supporting commercial transactions consist of:

Market Price

•

Receive the consultant charge for Vietnamese market from TUF at the total amount

of Bt709,004.

Supporting commercial transactions consist of: •

Receive for professional service charge for “Fisho.com” web content update and

web-based activities from THD at the total amount of Bt879,076.

•

Receive for professional service charge for e-Procurement and e-Auction consulting service from TUF at the total amount of Bt490,000.

•

Receive for professional service charge for e-Procurement and e-Auction consulting service from TUM at the total amount of Bt220,000.

100

THAI UNION FROZEN PRODUCTS PCL.

Connected Company 18. Pakfood PCL.

First & Last Name

Position Held in TUF

No. of Shares Owned in Connected Company

Mr. Thiraphong Chansiri

Director

Mr. Rittirong Boonmechote

Director

Dr. Thamnoon Ananthothai

Independent

Director

19. TN Fine Chemicals Co., Ltd.

Mr.Thiraphong Chansiri

Director

0.0%

20. Thai Union Properties Co., Ltd.

Mr. Kraisorn Chansiri

Director

16,300

54.3%

Relative of

7,700

25.7%

Director

2,400

8.0%

Relative of

1,800

6.0%

1,800

6.0%

-0-

400,000

80.0%

Ms. Bussakorn Chansiri (Mr. Kraisorn’s wife) Mr. Thiraphong Chansiri Mr. Dejphon Chansiri (Mr. Kraisorn’s son) Mr. Disaphol Chansiri

21. Geminai Water Craft Co., Ltd.

Director

Director Relative of

(Mr. Kraisorn’s son)

Director

Mr. Chuan Tangchansiri

Director

Mr. Dejphon Chansiri (Mr. Kraisorn’s son)

Relative of Director

Remarks: • • •

Commercial transaction refers to purchase or sale of raw materials in the normal course of business and under general trading conditions under the Board of Directors’ Meeting No. 5/2008 resolution passed on August 20, 2008. For item 4, 8, 13 and 17-20 Mr. Kraisorn Chansiri, Mr. Cheng Niruttinanon, Mr. Chuan Tangchansiri, Mr. Thiraphong Chansiri and Mr. Chan Tin King are TUF directors with share ownership in the connected company less than 10% of its registered capital but also hold director titles in the said connected company. For items 16, Yueh Chyang Canned Food Co., Ltd. located in Vietnam with investment value that no number of shares.

ANNUAL REPORT 2012

Policy of Price Market Price

101

Connected Transactions for year 2012 Commercial Transactions: •

Purchase of finished goods from TUS at the total amount of Bt17,194,321.

•

Purchase of finished goods from TUF at the total amount of Bt6,201,623.

•

Purchase of finished goods from APC at the total amount of Bt3,379,950.

•

Sale of finished goods to TUF at the total amount of Bt177,954,890.

Supporting commercial transactions consist of: •

Market Price

Payment for claim to TUF at the total amount of Bt6,810.

Commercial Transactions: •

Purchase of finished goods from TUF at the total amount of Bt7,747,210.

•

Purchase of finished goods from TUM at the total amount of Bt518,730.

Supporting commercial transactions consist of:

Compare to neighbor areas

Market Price

•

Payment for utilities service charge to TUM at the total amount of Bt19,804,592.

•

Payment for lab service charge to TUF at the total amount of Bt77,750.

Commercial Transactions: •

Purchase of finished goods from THD at the total amount of Bt8,804.

Commercial Transactions: •

Purchase of brochure printing from TUG at the total amount of Bt11,620.

In addition, the Company and subsidiaries have entered into property insurance policy, with Asia-Pacific Risk Consultants (Thailand) Co., Ltd. and Asia-Pacific insurance Brokers Co., Ltd. as insurer. The transaction is connected, as Mr. Chuan Tangchansiri, TUF Director, also has director

title in the insurer., TUF and subsidiaries paid approximately Bt83.13 million Asia-Pacific Risk Consultants (Thailand) Co., Ltd. and Asia-Pacific insurance Brokers Co., Ltd.. The insurer is entitled to commission only partially from total amount of the paid premium.

102

THAI UNION FROZEN PRODUCTS PCL.

REPORT OF AUDIT COMMITTEES To Our Directors and Shareholders, TUF Audit Committee is composed of 3 independent directors who are professionally competent in finance, accounting, organizational management, law, internal controls and risk management. All Audit Committee members meet qualification criteria stipulated by the Office of the Stock Exchange Commissionâ&#x20AC;&#x2122;s and the Stock Exchange of Thailandâ&#x20AC;&#x2122;s regulations. They neither hold any managerial position, nor perform employee or consulting roles for the Company. The list of TUF Audit Committee Members who attended meetings in 2012 was shown as below:

Mr. Sakdi Kiewkarnkha

acting in capacity as Audit Committee Chairman;

attended 21 meetings

acting in capacity as Audit Committee Member;

attended 21 meetings

Independent Director

acting in capacity as Audit Committee Member;

attended 19 meetings

Ms. Sureenard Sukhawanchai General Manager - Audit Unit

acting in capacity as Secretary of the Audit Committee

Independent Director

Pol.Maj.Gen. Pracha Anucrokdilok Independent Director

Mr. Kiti Pilunthanadiloke

During 2012, the Audit Committee conducted 21 sessions, discussing and sharing ideas with company management, the internal auditor and an independent auditor; 1 session, without the presence of company management, discussing and seeking advice from the independent auditor with regards to the performance and coordination of the responsible parties. The following is a summary of the tasks performed by the Audit Committee in 2012:

ANNUAL REPORT 2012

1. The Audit Committee examined the annual and quarterly financial statements for the year 2012, the crucial accounting policies, accounting adjustments that significantly impacting financial statements, the adequacy of information disclosure and the preparation of financial statements according to the updated accounting standards. 2. The Audit Committee considered and gave advice on the related transactions or the transactions with potential conflicts of interest. 3. The Audit Committee examined the effectiveness of the internal control system to ensure that the operations of the company is efficient and effective, based on the internal auditor and independent auditor’s reports. 4. The Audit Committee supervised the internal audit function to ensure that it would be effective to protect the best interests of the company and its shareholders. 5. The Audit Committee visited 8 companies within the group in Thailand and attended meetings with management of each company. They examined the risk management system, the internal control system, the environment management system, problems related to financial statements; and problems related to the internal and independent auditors. They also visited factories to observe the production processes, inventory management and the overall environment. 6. The Audit Committee Chairman visited 2 subsidiary companies in the USA. He attended meetings with the directors of these companies in the same manner as he performed with group subsidiaries within Thailand.

(Mr. Sakdi Kiewkarnkha) Audit Committee Chairman

103

7. The Audit Committee considered and appraised the performance of the independent auditors and found that they had performed their professional roles with independence, knowledge, ability and experience and had full unconditional access to all data required. The independent auditors made inquiries to the Company’s executives and directors to provide observations and suggestions in the aspect of the accounting systems, the internal control measures and risk management to the Company and its subsidiaries as they deemed necessary and appropriate. Seeing that their professional performance, according to the performance appraisal conducted, was satisfactory and proved beneficial to shareholders’ and the Company’s interests, the Audit Committee therefore proposed that Mr. Sophon Permsirivallop, Ms. Rungnapa Lertsuwankul, Mr. Chayapol Suppasedtanon, Ms. Pimjai Manitkajohnkit from Ernst & Young Office Limited should be re-appointed to act in the same capacity for the year 2013. The Audit Committee conducted performance appraisal of independent auditors and found that they had performed their professional roles with independence and had full unconditional access to all data required. The Audit Committee concluded that the Company’s directors and executives were committed to achieving their goals with quality, emphasizing the importance of their duties performed under a good management system with adequate and appropriate internal controls, reporting financial information and preparing financial reports in accordance with generally accepted accounting standards, and fully observing relevant legislative and regulatory requirements.

(Pol.Maj.Gen. Pracha Anucrokdilok) Audit Committee Member

(Mr. Kiti Pilunthanadiloke) Audit Committee Member

104

THAI UNION FROZEN PRODUCTS PCL.

MANAGEMENT DISCUSSION AND ANALYSIS (MD&A) OVERVIEW 2012 was clearly a testing year for TUF when tough challenges disrupted our business in succession. However, we still managed to attain another record level of sales in spite of lower earnings than that of a year ago. Consolidated sales increased by 8% from 2011 to THB 106,698 million while net income dropped by 8% to THB 4,694 million due to escalating costs. Higher sales value was driven primarily by upward price adjustments, coupled with moderate increase in volume. In sum, it was considered a satisfactory performance, given the host of challenges. Indeed, the firm’s performance was resilient during the first 9 months of the year with sales, EBITDA and net profit all up by 11%, 8% and 14% YoY respectively from a year ago. Moreover, the successful capital increase (THB 9,563 million) thru a rights offering in May simply restored our financial position to the pre-MW Brands level that consequently increased our capacity for future expansion or acquisition opportunities as well as reducing our interest burden going forward. Nevertheless, a sharp decline of tuna raw material prices led by an unexpected increase in supply and fast rising shrimp raw material prices caused by the quick and extensive emergence of Early Mortality Syndrome (EMS) that killed shrimp prematurely have sent the last quarter of the year into a rollercoaster spin. Both extreme situations, though in totally different directions, made matching cost with prices such a formidable task that profitability during the fourth quarter fell dramatically as a consequence.

The following are some key events that shaped our performance of the year: (1) A fire at our Samutsakhon shrimp plant On February 11, 2012, one of our shrimp processing plants (located in Samutsakhon province, Thailand) was damaged by a fire. All staff and daily workers were safe and unhurt. The damage was limited to the building, inventories and some machinery which were fully insured. The insurance policy also covered potential financial impacts from business interruptions. The operations successfully resumed within 2 months in a rented facility, though with limited space that capped our capacity and productivity in the short term. The normal daily processing capacity of the original plant was 120 tons of raw materials. (2) 40% increase in the minimum wage by the Thai government With the Thai government’s aim to drive the local economy by promoting domestic consumption through welfare policies, raising the minimum daily wage by 40% to THB 300 in one shot was by far the move with most far-reaching consequences to the local industries, particularly among SMEs. With less of than 10% of our cost of goods sold accounting for labor wages, we have been able to cope with the new challenge thru price adjustments and streamlining our workforce using automation. Our first 6 months’ performance since the implementation of this policy showed sustainable margins despite higher labor costs.

ANNUAL REPORT 2012

105

(3) Continual tuna raw material prices and sharp volatility in Q4

(6) Operating loss of US Pet Nutrition (USPN)’s first year of commercial run

In 2012, the unprecedented continuous upward trend of tuna raw material prices (WPO/Bangkok landing) set a historic high in September at USD 2,350 per metric ton, followed by an abrupt fall in the final quarter to USD 1,900 per metric ton. This development sent processors, including TUF, into a rollercoaster spin that made maintaining profitability a major challenge. In other words, a gradual change in raw material prices appeared to be more manageable than a volatile one seen in the last quarter.

2012 was USPN’s first year of commercial run which capacity utilization was still low and adjustments to the operations were still ongoing. The firm reported an operating loss as expected for a startup. We are nevertheless positive about the prospect of the US pet food business, particularly in the premium segment. We do look forward to this plant breaking even soon when administrative issues are organized and settled. (7) Short shrimp supply and spiking prices after the EMS outbreak

(4) Thai baht appreciation upon capital inflows Since early August, Thai baht revived its upward trend against US dollar. Thai baht suddenly appreciated from the ranges of THB 31.5 / USD to THB 30.5 / USD within weeks due to the continuous capital inflows into Thai capital markets. The negative impact of Thai baht strength has been largely offset by our currency hedging, at least in the short term. Except if Thai baht continues to rise against other regional currencies on a more permanent basis, a stable Thai baht at the current rate should be manageable. (5) Intensifying market competition between US canned tuna brands In 2012, the price competition between the top brands of canned tuna in the US intensified. The consequence was significantly lower profitability at major players, including our US subsidiary Chicken of the Sea International (COSI). The situation only started to turn rational when leading players began adjusting prices upward to cope with historic high raw material costs from the third quarter onward. If the trend continues, COSI’s profitability should recover in 2013.

In 2012, the new epidemic of Early Mortality Syndrome (EMS) struck a few major shrimp production countries in succession, namely China, Malaysia, Vietnam and Thailand. The epidemic indeed only became obvious in the third quarter of the year when a large percentage of farms on the Eastern Seaboard and the Central Region of Thailand were badly affected by the disease that made shrimp seeds die prematurely. It was estimated that up to 20% of Thailand’s shrimp output in 2012 was reduced from a year ago as a result of this outbreak. The situation remained unclear as the true cause of this disease was not exactly known. The acute short supply, particularly in the fourth quarter of 2012 and the first quarter of 2013, however shot up the raw material prices significantly, causing most shrimp processors unprofitable, given either their orders being committed at lower prices before the outbreak or market resistance for price adjustments. In 2013, the industry will need to closely monitor the situation to determine whether the harvest of the first crop of the year (due in June / July) will be poor or a return to normalcy.

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THAI UNION FROZEN PRODUCTS PCL.

TUNA BUSINESS Total tuna sales were THB 52,147 million, up 7.5% from THB 48,491 million a year ago while volume (tonnage) increased by 4.1%. The factor behind the increase was driven by volume and price adjustments to cope with the continual surge of raw material prices through most of the year. Our contract manufacturing (OEM) sales outpaced branded business (10.7% vs. 4.5%). Sales growth generally came from the US, Africa and the Middle East markets. Profitability was generally in line during the first three quarters, but dampened by the raw material price volatility in the last quarter. The tuna raw material price through the year was generally high, reaching new highs and setting a new record at US$ 2,350 per metric ton in September (again), though fell abruptly in the last fourth quarter and hit a bottom in USD 1,900. On average, the skipjack price (WPO/Bangkok landing) during the year has increased by 20% to USD 2,127 per metric ton from USD 1,766 a year ago. The year started with prices at around USD 2,030 and rose continually and eventually set a historic high in September. However, the price suffered a deep drop into the fourth quarter, due to increased supply made possible by better catching. Nevertheless, the fish price has already rebound recently and edging back to the previous high level. The higher raw material price was attributable to periodic poor catches (as a result of unpredictable and sometime extreme weather patterns) and increased fishing regulations supporting precautionary conservative causes. SHRIMP AND RELATED BUSINESS (FROZEN SHRIMP AND FEED) Total sales of shrimp and related business were THB 24,072 million, almost staying flat from a year ago while volume (tonnage) dropped by 1.5%. Selling prices were generally adjusted upward to cope with the higher shrimp raw material prices in the second half of the year. Frozen shrimp export sales were limited by the current constrained

production capacity after the February fire incident and the adverse impact from the EMS outbreak in the fourth quarter. The dominant market remained the US, followed by Japan and the EU. The alliance and subsequent share acquisition of Pakfood, a leading shrimp processor and exporter in Thailand, during the year should help strengthen our procurement, processing and distribution in our main markets, particularly the US. In 2012, the domestic shrimp raw material price has been very volatile, only dropping briefly upon the harvest of the first crop, followed by a sharp jump due to growing shortage caused by the EMS outbreak that greatly reduced output on the Eastern Seaboard and the Central region of Thailand. In general, the average price (60 pieces/kg) was THB 136/kg, down 4% from a year ago. But this figure was far from a realistic picture that showed a sharp volatility through the year. The price indeed hit some low levels in the first half of the year, but moved sharply higher when the supply got really short by the year end. The most recent level was above THB 160 per kg. FINANCING AND INVESTMENT During 2012, we have carried out a few important financing and investment activities as follows: (1) Successful equity capital increase through a rights offering (5 existing shares for a newly issued share @THB 50 each) to existing shareholders in May, 2012 That allowed us to raise as much as THB 9,563 million (the largest ever fund raising activity for TUF that was also considered a sizable amount among most Thai listed firms), thanks to the strong shareholders’ support. This whole amount was then used to repay all of our euro-denominated debts worth in excess of € 340 million incurred as a result of the acquisition of MW Brands in 2010. This exercise helped send the group’s net debt / equity ratio to 0.8 time (well below our long term policy of 1 time or below), restoring our financial position to the

ANNUAL REPORT 2012

healthy level before the acquisition of MW Brands. In addition to lower financial risks, it also made us possible and ready again to consider any new investment opportunity. With an improved financial position and our extended market reach thanks to a successful integration with MW Brands, the leading local credit rating agency TRIS has decided to upgrade our corporate and issue credit rating from A+/stable to AA-/stable in January, 2013. (2) Successful strategic investment in a 54.46% stake of SET-listed Pakfood (PPC). Pakfood is one of the leading Thai frozen seafood processors and exporters with a strong focus on frozen shrimp, pasteurized crab meat and ready-to-eat meals (chilled and frozen). Its main markets are the US, the EU and Japan. It also owns a local brand “T Time” focusing on value-added food products, such as dim sum, in Thailand. In 2012, the firm generated sales of THB 6,507 million, though with a loss of THB 77 million due to a challenging shrimp market. As of December 31, 2012, its total assets were worth THB 3,573 million. The share acquisition was made in 3 steps. First, it was through a tender offer by TUF (@ THB 51 per PPC share) in April when we can acquire up to 40% of its total 30 million outstanding shares. Then, in December, we managed to acquire another 9.97% stake from its existing shareholders @ THB 54 per share. Most recently, we acquired more shares (c. 3 million) thru PPC’s rights offering (10 existing shares for 1 new share @ THB 50 per share). The total investment was worth THB 920 million. These transactions were funded by TUF’s internally generated cash flows. We recognize the strategic value of cooperation between the two leading seafood companies which both share similar business in shrimp and value-added frozen seafood products. This alliance

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would allow more efficient raw material sourcing, improved management of manufacturing capacities and more joint marketing efforts to expand our local and overseas markets, such as the US and the EU which have been offering plenty of growth opportunities. With PPC’s capability of value-added frozen seafood products, this partnership should lead to more business opportunities as TUF can offer more variety of products to serve consumers’ needs. It is estimated that the typical annual shrimp procurement by both firms will collectively amount to almost 20% of total Thai shrimp output per year, creating a crucial advantage for the alliance. In addition, as the local labor supply continues to tighten, this linkup should also lead to more optimal capacity utilization at both firms’ processing plants without unnecessary expansion. (3) Increased investment in Avanti Feeds Limited to 25.12% from 14.99%. The increase in the shareholding in Avanti Feeds was mainly a result of transferring our existing 49% stake in Avanti Thai Aqua Feed (a joint venture with Avanti Feeds in producing shrimp feed for sale in Gujarat, India) to our Indian partner in exchange for new shares issued by them after an Indian court’s approval for such share acquisition with no requirement for a tender offer to existing shareholders. In other words, this was not a cash transaction. Avanti Feeds (listed on the Bombay Stock Exchange) has been a value-accretive acquisition for us since our initial investment in late 2008. For the past two years, the firm has delivered a turnaround performance as it managed to capitalize on the fast growing white shrimp farming business in India. Currently, the firm is among the two largest shrimp feed producers and distributors in the country. At the moment, it is also expanding its shrimp processing operations to take advantage of the growing demand for shrimp from overseas markets.

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(4) A shrimp farming joint venture with Mitsubishi Corporation thru Thai Union Feedmill. TUF’s 51% owned subsidiary Thai Union Feedmill (TFM) has entered into a joint venture with Mitsubishi Corporation (MC), where TFM will hold 51% while MC the rest. This joint venture would provide an enhanced supply chain for both TUF and MC, allowing them to procure good quality shrimp raw materials from Thailand and offer their respective customers of reliable product traceability. In addition, this investment should help achieve both parties’ mutual objectives of secured sourcing and sustainability. This strategic initiative will also make use of TUF’s feeds and baby shrimps, which in turn helps develop its feed quality and hatchery business, achieving an end-to-end integrated shrimp business. The initial investment amounted to THB 560 million and would eventually increase to THB 900 million in the future. This amount will include purchase of existing mid-scale shrimp farms and setting up new ones along the Thai coast. Initially, the new firm will acquire two existing shrimp farms in Satoon and Trang provinces, currently owned by TFM. The new venture targets a total annual production capacity of up to 10,000 metric tons by 2018. In order to achieve full product traceability and quality assurance, the new firm will also operate a shrimp hatchery business by acquiring TFM’s subsidiary Thai Union Hatchery (TUH). Through this new venture, TUF will be able to offer an integrated shrimp supply chain network which starts from hatchery, farming, shrimp feed production, processing thru distribution. The ultimate goal is to secure safe and reliable raw materials in order to meet its worldwide customers’ growing need for products that provide traceability. It would also help to strengthen and expand the group’s global shrimp business in the future.

FUTURE PROSPECT AND ACTION PLAN We expect consolidated sales to increase by around 15% in 2013 to achieve our USD 4 billion target. Key growth drivers will come from continual sales growth of the following products: (1) tuna (on the back of rising tuna prices and continuous growth of OEM business); (2) sardine & mackerel (strong demand from emerging markets such as Africa and AEC); (3) pet food (improvement of USPN’s operations); (4) recovery of shrimp processing and feed business in Thailand with an expectation of the easing EMS epidemic in 2H13 In addition to expected higher sales, our main objective is also to maintain profit margins in light of tremendous cost pressure from higher raw material prices, strengthening Thai baht and a higher minimum wage in Thailand. Financial costs should however decrease thanks to the successful capital increase last year that reduced a significant portion of our overseas debts. The US should still be our largest market, but emerging markets, namely the ASEAN Economic Community (AEC), the Middle East, Africa, and South America, are expected to post continually higher growth rates from their small bases. We’ll spend approximately THB 6 billion per year on capital investment, which is higher than our typical annual budget of THB 3 billion, in this and next 2 years in order to strengthen our processing capacities and capabilities of the group.

ANNUAL REPORT 2012

Our main tasks in 2013 are therefore to: (1) Increase our production capacities: a) building a new modern shrimp processing plant near Samutsakhon province to replace the existing one (rented facility) that cannot cope with our customers’ growing demands; b) renovating the shrimp plant that was damaged by the fire and turning it into a processing facility for our salmon and cephalopod business in Thailand; c) adding more cold storage facilities for raw materials and finished products as a result of continual capacity expansion in Thailand and our overseas production plants; (2) Implement further automation in Thai operations in order to cope with the challenges of chronic labor shortage and a higher minimum wage; (3) Adjust selling prices and costs of our products in order to maintain profitability and stay competitive despite the rising pressure of surging raw material prices; (4) Implement the shrimp farming and hatchery joint venture with Mitsubishi Corporation thru Thai Union Feedmill; (5) Ensure US Pet Nutrition to stay on track to ramp up its utilization rate with an objective to achieve profitability soon and capture the potential of the emerging premium segment of the US pet market; (6) Implement further sustainability initiatives to meet the growing requirements and expectations from global customers and interest groups; (7) Increase the proportion of value-added products through more new product developments; (8) Manage financial risks (FX and interest rate) and scrutinize cash flows and debt covenants actively

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Our dividend policy is to pay at least 50% of our net profit twice a year. We have followed this policy all along, only until 2011 when we had to limit the annual dividend to a fixed amount of THB1.2 billion due to the covenants of the debts incurred for the acquisition of MW Brands. However, after we successfully repaid a substantial portion of those debts as a result of the successful capital increase in May, we have already returned to the original dividend policy since the second dividend payment in September last year. Thanks to our prudent management and ability to adapt to changing business environments, we have managed to report consecutively profitable quarters and dividend payments since our listing in the Stock Exchange of Thailand in 1994. RISKS In addition to proper execution of our focused strategy and our staff’s determination to success, we believe the likelihood of meeting our goal this year will also be subject to the following critical factors: Foreign exchange rate. As 90% of the group’s revenues are in foreign currencies, any extreme fluctuations of foreign exchange rates will have impact on our profitability. It is mainly because a portion of our Thai plants’ expenses are in Thai baht. In 2012, around 76% of our group (consolidated) operating expenses were in foreign currencies. As a dollar earner, we normally benefit from a strong dollar situation. But, thanks to our non-speculative and timely currency hedging policy, we have been successful in riding out most of the foreign exchange rate fluctuations, with consistent foreign exchange gains in the past few years as a proof.

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Raw material price. Raw material price is the main factor for earnings volatility as it accounts for almost a majority of our typical product costs. The raw material price volatility from time to time could exert some pressure on margins as price adjustments might not be as timely as we wish, but we can generally achieve that over a longer period of time. Our long term track record shows that non-speculative purchase, careful inventory management of raw materials and timely adjustment of the selling price has helped us ride out most of the potential impact from such volatility. Our selling prices are normally set on (raw material) cost-plus (processing fees) basis. The exception happened in 2012, particularly during the fourth quarter, the local shortage of farm-raised shrimp as a result of EMS epidemic and the sudden improved catching of sea-captured skipjack tuna had caused a significant impact on our bottom line due to sharp price volatility (though moving in opposite directions). Dramatically lower or higher prices created market confusion and customer resistance to new purchases regardless of the price level. What made the matter worse was the fact that both extreme situations took place at the same time. We expect our operating performance to return to normalcy once raw material prices restore their typical patterns. Most of these factors are beyond our control, but close monitoring and punctual adjustments will allow us to minimize risk exposure or take advantage of any opportunities that might arise. Food safety (and traceability) and sustainability continue to be very critical competitive factors for food exporting business going forward. They can serve as an advantage as well as a disadvantage (in form of trade barriers) to any food company. Given our on-going certification programs and frequent factory audits by global customers from

most food safety-stringent markets, we are confident that our high standards and track record will work to our advantage. Besides, our management also takes note of consumers and investors’ growing awareness of the impact of each business on the environment in terms of preservation and sustainability. That intention led to our involvement in co-founding the International Seafood Sustainability Foundation in early 2009, which performs scientific research and promote preservation of tuna resources. Furthermore, our four-star certification on our shrimp hatchery, shrimp feed mill, partner farms and processing facilities by Aquaculture Certification Council (ACC) is another proof of this intention. We work closely with all stakeholders to ensure TUF as socially responsible. We also uphold corporate governance, transparency and professional management, in light of corporate social responsibility (CSR), as our guiding principles. We treat shareholders, whether major or minority, in the fairest and most responsible manner by committing to full and timely information disclosure and returning cash in form of dividend to them as much as possible. Investors’ confidence in our commitments has been consistently proved in numerous awards which we received over the years. Furthermore, consistent coverage by analysts from world and local leading investment banks and securities brokers and frequent visits by influential investment managers are just some of the proofs of our long term commitment to good corporate governance. Moreover, as countries around the world are becoming more integrated and dependent on each other, awareness and care for the sustainability of each company’s business practices in respect to the environment and the society become consumers’ interests. Our management has been taking proactive measures to ensure that our business practices are sustainable through various certification programs, social activities and with the Sustainability Department set up specifically for the business under the group.

ANNUAL REPORT 2012

COMPARATIVE FINANCIAL RATIOS Comparative Financial Ratios (2012-2011) Consolidated Figures

2012

2011 (Restated)

Liquidity Ratios • •

Current Ratio (Times) Quick Ratio (Times)

1.36 0.37

1.59 0.48

1.35 0.87 3.40

2.07 1.47 3.76

1.20 3.40 9.35 11.66

1.25 3.46 9.72 13.29

15.34 4.36 15.22 8.90

16.64 5.14 22.79 10.80

4.39 2.10 34.77

5.35 1.56 25.57

Leverage Ratios • • •

Total Liabilities to Equity (Times) Debt to Equity (Times)* Time Interest Earned (Times)

Efficiency Activity Ratios • • • •

Assets Turnover (Times) Inventory Turnover (Times) Accounts Receivable Turnover (Times) Accounts Payable Turnover (Times)

Profitability Ratios • • • •

Gross Profit Margin (%) Net Profit Margin (%) Return on Average Equity (%) Return on Assets (%)**

Per Share Data • • •

Earnings per Share (Baht) Dividend per Share (Baht) Book Value per Share (Baht)

* Debts = Interest-bearing debts only ** Pre-tax ROA = EBIT / Average total assets

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FINANCIAL ANALYSIS AN OVERVIEW 2012 full year sales of THB 106,698 million were a new record with 8% growth YoY. Nevertheless, this was also a year full of challenges, namely the shrimp plant fire incident in February, the rising tuna raw materials prices with high volatility in 3Q & 4Q12, intense price competition in the US canned tuna market, the loss from USPNâ&#x20AC;&#x2122;s first year of operations, and the Early Mortality Syndrome (EMS) outbreak on the local shrimp supply and raw material prices. The business remained resilient for the first 9 months of the year and the performance was indeed considered satisfactory, particularly strong in 3Q12 when total sales and net profit set new quarterly highs. The negative impacts from the huge volatility of shrimp and tuna raw material prices just reversed the trend in the last quarter. SALES 2012 consolidated sales hit a record level of THB 106,697 million with 8% growth YoY from THB 98,670 million due to higher sales of tuna (+8% YoY), sardine & mackerel (+30% YoY), value-added & other products (+24% YoY) and pet food (+11% YoY). However, sales of shrimp and related business slightly declined by 0.4% YoY while sales of salmon decreased by 2% YoY. In US Dollar term, 2012 consolidated sales increased by 6.5% YoY from USD 3,232 million to USD 3,441 million. The average exchange rate for the year was at THB31.00/USD in comparison with THB30.53/USD in 2011.

Tuna and shrimp were the major sources of revenues accounting for 49% and 23% of total sales, respectively. Pet food sales accounted for 7% of total sales, followed by sardine and mackerel at 6%, salmon at 4% and value-added & other products at 11%. In terms of revenues breakdown by geography, the US remained the largest market (36% of total sales), followed by Europe (30%), Thailand (10%), Japan (9%) and Africa (5%). The African market showed the strongest growth (+84% YoY), followed by the Middle East (+24% YoY). The developed markets such as the US and Europe showed moderate growth of 8% and 2% YoY while Japan showed negative growth of 2% YoY. Sales to South America were lower than a year ago by 20%. In terms of the main operating units, Chicken of the Sea International accounted for 14% of the total group sales while Chicken of the Sea Frozen Products for 17%. In other words, the US operating units added up to 31% of the total. MW Brands now became the single largest unit within the group, accounting for 24% when Thai and other operating units made up for the biggest portion (45%). GROSS MARGIN Gross margin for 9M12 was successfully sustained at 16.5%, but not until 4Q12 when quarterly gross margin fell to 11.6%. As a result, 2012 gross margin was 15.3%, a plunge from 16.6% in 2011 due

ANNUAL REPORT 2012

mainly to the operating loss from USPNâ&#x20AC;&#x2122;s first year of operations, high volatility of tuna raw material prices in 4Q12 that pressured tuna OEM gross margin, intense price competition in the US canned tuna market, and a significant drop of shrimp feed margin (due to rising raw material prices and lower demand from shrimp farms as a result of EMS outbreak in 2H12). SELLING AND ADMINISTRATIVE EXPENSES (SG&A) 2012 SG&A increased by 7% YoY from THB 8,882 million to THB 9,493 million mainly as a result of higher sales promotion, personnel and other administrative expenses. However, %SG&A to sales was 8.9%, still below the expected range of 9% and lower than that of 2011. OTHER INCOMES (INCLUDING SHARE OF INCOME FROM INVESTMENT IN ASSOCIATES) Other incomes declined by 21% YoY from THB 698 million in 2011 to THB 555 million in 2012 due to a lower share of income from investment in associates (e.g. Pakfood), lower tax coupon received and lower claims from raw material damages. FX GAIN/LOSS 2012 FX gain increased by 63% YoY from THB 305 million in 2011 to THB 497 million due to timely USD forward hedging upon THB appreciation. Any gain is meant to compensate for any lost profit in case of Thai baht appreciation.

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FINANCE COST (INCLUDING INTEREST EXPENSES, BANK CHARGES & OTHERS) Finance cost increased by 2.5% YoY from THB 2,272 million in 2011 to THB 2,329 million in 2012 due mainly to the one-time non-cash prepayment expense of MW Brands loan in 2Q12 (THB 407 million net-of-tax). The 2012 effective interest rate therefore temporarily rose to 6.2%. Going forward, the interest expense would decline after the loan repayment. CORPORATE INCOME TAX 2012 corporate income tax decreased by 38% YoY from THB 192 million to THB 120 million mainly as a result of tax credits from operating losses of US subsidiaries in 2012. The effective tax rate in 2012 therefore dropped to 2.1% from 3.1% in 2011. NET PROFIT 2012 net profit were reported at THB 4,694 million, an 8% decline YoY from THB 5,117 million in 2011. The main reasons came from a lower gross margin, higher finance cost (due to 2Q12 prepayment of MWB loan) and lower tax expenses (from 4Q12 tax credit). Net profit margin therefore declined to 4.4% lower from 5.2% in 2011. Excluding the one-off extraordinary finance fee booked in 2Q12, the normalized net profit should have only declined by 0.3%YoY to THB 5,101 million with the normalized net profit margin of 4.8%.

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ASSETS

•

Total assets in 2012 amounted to THB 94,759 million representing an increase of THB11,482 million from THB 83,277 million in 2011.

•

• •

Trade receivables were THB 11,918 million, up 7% from THB 11,161 million in 2011 primarily due to higher selling prices to cope with high raw material prices. Accounts receivable turnover decreased to 9.35 times from 9.72 times in 2011 thanks to higher growth of average accounts receivables in relation to growth of sales (+12% YoY compared to 8% YoY). However, accounts receivable turnover days were stable at 38 days compared to 37 days in 2011. Inventories increased by 27% to THB 33,291 million from THB 26,180 million a year ago due to higher raw material costs. Inventory turnover declined to 3.04 times from 3.46 times in 2011 due to higher growth of average inventory compared to growth of COGS (+25% YoY vs +10% YoY). 2012 inventory turnover days increased to 119 days from 104 days in 2011 mainly as a result of higher value of inventory balance from the higher raw material prices. Asset turnover fell to 1.20 times in 2012 from 1.25 times in 2011 due to higher growth of average total assets compared to growth of sales (+13% YoY vs +8% YoY). Current ratio declined to 1.36 times in 2012 from 1.59 times in 2011. Quick ratio also dropped to 0.37 time from 0.48 time. The declining of these ratios resulted from the higher growth of total current liabilities (+41% YoY) compared to that of total current assets (+21% YoY). Total current liabilities were higher YoY due mainly to higher bank overdrafts and short-term loans from financial institutions and higher trade and other payables.

Property plant and equipment totaled THB 17,923 million, up 14% compared to THB 15,655 million in 2011 due to capacity expansion and improvement of existing plants (TUF, TUM, SCC and TFM) as well as new equipment and machinery of MWB, USPN and COSI to increase efficiency of subsidiaries plants.

LIABILITIES Total liabilities in 2012 amounted to THB 54,415 million representing a decrease of THB 1,746 million from THB 56,161 million in 2011. •

•

• •

Bank overdrafts and short-term loans increased by 55% to THB 22,511 million from THB 14,477 million due mainly to higher working capital need from higher inventory level. Trade payables were THB 10,545 million, up 33% from THB 7,919 million due to higher raw material costs. Accounts payable turnover dropped to 11.66 times from 13.29 times a year ago due to higher growth of average accounts payable compared to growth of COGS (+25% YoY vs +10% YoY). Trade payables days consequently rose to 31 days from 27 days. Long term loans significantly dropped by 82% to THB 2,824 million from THB 15,599 million mainly as a result of MW Brands loan prepayment in 2Q12. Interest bearing debts were THB 35,008 million, a 12% decrease from THB 39,766 million a year ago. Approximately 36% of the total interesting bearing debts were long term (including 3% of current portion). In addition, around 75% of these debts were THB currency while 17% were in US dollar and 8% in Euro.

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SHAREHOLDERS’ EQUITY

CASH FLOWS

Total shareholders’ equity in 2012 amounted to THB 37,215 million representing an increase of THB 12,757 million from THB 24,458 million in 2011 mainly due to capital increase in 2Q12 and earnings incurred during the year.

Net cash flows from operating activities in 2012 were THB 4,451 million, a decrease of THB 1,009 million from THB 5,460 million in 2011 mainly due to lower profit before tax. The annual depreciation and amortization expenses amounted to THB 1,902 million.

•

In May 2012, the firm increased the capital totaled THB 9,563 million by a rights offering at the ratio of 5 existing common shares to 1 newly issued share at the subscription price of THB 50 per share. The registered capital rose from THB 1,000 million in 2011 to THB 1,202 million in 2012 for the support of this capital increase and the previous issuance of a convertible debenture in 2010. Issued and paid-up common shares increased by 191,264,422 shares from 2011 to 1,147,593,829 shares in 2012. Total liabilities-to-equity ratio in 2012 declined to 1.35 times from 2.07 times in 2011 due mainly to a boost of shareholders’ equity by 49% YoY (from capital increase in 2Q12) while total liabilities slightly fell by 3% YoY. 2012 debt to equity ratio also dropped sharply to 0.87 time from 1.47 times in 2011 thanks to successful capital increase and the subsequent repayment of MW Brands loan. 2012 return on average equity decreased to 15.2% from 22.8% in 2011 mainly as a result of greater shareholders’ equity base but at a slower pace of earnings growth. Excluding the one-off extraordinary item in 2Q12, the normalized return on average equity would be 16.5%.

Net cash flows from investing activities amounted to THB 4,283 million representing an increase of THB 1,105 million from THB 3,178 million a year ago due mainly to new investment in associates (Pakfood). Cash outflows from financing activities in 2012 were THB 168 million. The net outflows were mainly a result of MW Brands loan prepayment despite the capital increase, higher bank overdrafts and short-term loans and dividend payment of THB1,884 million during the year. Net increase in cash and cash equivalents at the end of 2012 amounted to THB 497 million.

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REFERENCES Common Share Register

Thailand Securities Depository Co., Ltd 7th Floor, The Stock Exchange of Thailand Building, 62 Rachadapisek Road, Klongtoey Bangkok 10110 Tel: 66 (0) 2229-2440

Convertible Debentures Registrar

Stock Information Department Thai Union Frozen Products PCL. (TUF) 25th Floor, S.M. Tower, Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400 Thailand Tel: 66 (0) 2298-0024 Fax: 66 (0) 2298-0553

Independent Auditors

Mr. Sophon Permsirivallop or Ms. Rungnapa Lertsuwankul or Mr. Chayapol Suppasedtanon or Ms. Pimjai Manitkajohnkit Ernst & Young Office Limited 193/136-137, 33rd Floor, Lake Rajada Office Complex, New Rachadapisek Road, Klongtoey, Bangkok 10110 Tel: 66 (0) 2264-0777, 2661-9190 Fax: 66 (0) 2264-0709

Independent Auditor Remuneration

1. Audit Fee The Company and subsidiaries paid audit fee to: • Auditing firm where independent auditors are attached to, individual or entity related to independent auditors and auditing firm during 2012 fiscal year at Bt 7,645,400 2. Non-Audit Fee The Company and subsidiaries paid remuneration incurred by the following service: • Audit fee paid to Auditing firm where independent auditors are attached to, individual or entity related to independent auditors and auditing firm during 2012 fiscal year amounts totally to Bt-. • Audit fee for special items, pursuant to the Notification Por 4/2001 of the Board of Investment, paid to Auditing firm where independent auditors are attached to, individual or entity related to independent auditors and auditing firm during 2012 fiscal year amounts totally to Bt 400,000

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STATEMENT OF THE BOARD OF DIRECTORâ&#x20AC;&#x2122;S RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS

As the Company is a listed company on the Stock Exchange of Thailand, the Board of Directors here by expresses its responsibility for ensuring that the Companyâ&#x20AC;&#x2122;s financial reports contained herein genuinely reflect its actual financial status and operating results, based on accounting principles which require accurate, complete, and adequate recording of accounting items in every aspect. We affirm that all due care and attention have been taken in the reporting of the financial statements

and that they strictly comply with the generally accepted accounting standards. We also wish to assure that adequate disclosure of all pertinent material data has been made in notes to financial statement in accordance with the updated Accounting Standards as applied to the past financial year. Independent auditors have unconditionally expressed their opinions on our financial statements in the Report of Independent Auditors.

Mr. Kraisorn Chansiri

Mr. Thiraphong Chansiri

Chairman

President

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Independent Auditor's Report To the Shareholders of Thai Union Frozen Products Public Company Limited I have audited the accompanying consolidated financial statements of Thai Union Frozen Products Public Company Limited and its subsidiaries, which comprise the consolidated statement of financial position as at 31 December 2012, and the related consolidated statements of income, comprehensive income, changes in shareholdersâ&#x20AC;&#x2122; equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, and have also audited the separate financial statement of Thai Union Frozen Products Public Company Limited for the same period. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Thai Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Thai Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about 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 judgment, 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 control relevant to the entity'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 entity's internal control. 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.

ANNUAL REPORT 2012

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Thai Union Frozen Products Public Company Limited and its subsidiaries and of Thai Union Frozen Products Public Company Limited as at 31 December 2012, and their financial performance and cash flows for the year then ended, in accordance with Thai Financial Reporting Standards. Emphasis of matter I draw attention to Note 4 to the financial statements, regarding the changes made by the Company and its subsidiaries to their accounting policies in 2012, whereby from presenting land at cost to presented it on a revaluation basis, and on accounting for raw material inventories from a first-in, first-out basis to an average cost basis. The Company and its subsidiaries have restated the financial statements presented herein for comparative purposes as if they had always presented raw materials on an average cost basis. My opinion is not qualified in respect of this matter.

Sophon Permsirivallop Certified Public Accountant (Thailand) No. 3182 Ernst & Young Office Limited Bangkok: 1 March 2013

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Thai Union Frozen Products Public Company Limited and its subsidiaries Statement of financial position As at 31 December 2012 (Unit: Baht) Consolidated financial statements

Note

Separate financial statements

As at

31 December 2012

31 December 2011

1 January 2011

31 December 2012

31 December 2011

1 January 2011

(restated)

Assets Current assets Cash and cash equivalents

1,400,044,853

902,520,399

1,037,296,710

62,334,789

55,908,174

14,912,270

Trade and other receivables

8,9

11,918,157,723

11,160,791,416

9,261,819,663

4,196,393,140

4,088,187,150

3,066,632,071

Short-term loans to subsidiaries

625,824,650

1,417,041,200

80,000,000

11,652,013

5,465,000

440,335,000

2,691,738,000

6,954,524

4,070,571

1,430,750

1,608,338

33,290,478,541

26,179,795,469

21,345,831,518

4,871,029,878

3,644,784,286

2,450,618,428

Prepaid income tax

127,239,879

106,600,895

286,323,491

60,357,391

28,162,734

Current portion of forward exchange contracts receivables

240,052,680

142,731,953

748,337,711

130,727,848

140,443,542

558,700,840

Value added tax refundable

461,043,103

664,015,221

538,929,720

68,340,536

42,214,924

60,726,120

Others

881,003,687

817,680,911

739,834,454

73,173,048

34,631,753

51,494,323

1,709,339,349

1,731,028,980

2,313,425,376

332,598,823

245,452,953

699,084,017

48,336,627,003

39,978,206,835

33,959,804,017

10,886,471,168

8,554,667,563

9,548,809,436

Short-term loans to other companies Current portion of long-term loans to subsidiaries Current portion of long-term loans to other companies Inventories Other current assets

Total other current assets Total current assets Non-current assets Restricted bank deposits

13,649,287

12,024,282

11,031,720

Investments in associates

1,806,273,171

923,968,413

837,717,064

929,033,585

66,231,008

Investments in subsidiaries

14,063,001,850

4,566,571,387

4,396,708,852

Other long-term investments

32,317,276

70,305,372

72,669,275

34,579,160

Long-term loans to subsidiaries - net of current portion

21,129,712,775

17,007,904,981

15,429,105,300

24,121,373

24,557,502

28,630,292

1,260,000

17,923,268,913

15,654,960,315

14,190,173,390

3,849,580,950

3,204,693,088

3,004,741,748

Long-term loans to other companies - net of current portion Property, plant and equipment Goodwill Intangible assets

11,536,447,404

11,674,495,827

11,396,141,526

13,278,430,015

13,349,544,156

13,027,293,393

2,929,189

1,675,667

1,508,855

97,167,200

76,264,500

387,308,300

97,167,200

76,264,500

387,308,300

204,308,926

175,671,012

21,094,331

Other non-current assets Forward exchange contracts receivables - net of current portion Leasehold rights Advance payment for purchase of property, plant and equipment

37,734,173

8,251,306

35,227,356

1,163,761,179

1,062,569,162

498,561,829

50,086,434

35,156,604

18,609,334

Unamortised discount from forward exchange contracts

157,955,797

185,529,121

246,928,814

157,955,797

185,529,121

246,928,815

Others

146,586,104

81,058,709

64,055,054

40,165,074

16,195,821

10,773,125

Total non-current assets

46,422,020,818

43,299,199,677

40,816,832,344

40,320,892,854

25,194,801,337

23,596,494,497

Total assets

94,758,647,821

83,277,406,512

74,776,636,361

51,207,364,022

33,749,468,900

33,145,303,933

Deferred tax assets

The accompanying notes are an integral part of the financial statements.

ANNUAL REPORT 2012

121

Thai Union Frozen Products Public Company Limited and its subsidiaries Statement of financial position (continued) As at 31 December 2012 (Unit: Baht) Consolidated financial statements

Note

Separate financial statements

As at

31 December 2012

31 December 2011

1 January 2011

31 December 2012

31 December 2011

1 January 2011

(restated)

Liabilities and shareholders' equity Current liabilities Bank overdrafts and short-term loans from financial institutions Trade and other payables

22,511,200,366

14,477,174,817

8,363,776,804

9,787,924,156

3,553,985,552

1,992,669,842

9,18

10,544,727,744

7,919,074,759

7,194,757,157

1,928,711,772

1,372,242,118

1,297,504,736 245,840,000

Short-term loans from subsidiaries

Current portion of long-term loans

399,000,000

983,548,345

516,057,950

112,500,000

Current portion of debentures

500,000,000

3,200,000,000

500,000,000

3,200,000,000

Income tax payable

116,397,844

202,584,061

187,665,033

36,862,821

25,084,196

1,477,549,180

1,559,477,746

1,479,031,528

201,891,448

343,641,837

265,745,009

35,548,875,134

25,141,859,728

20,941,288,472

12,531,027,376

5,306,732,328

7,026,843,783

8,896,807,865

Other current liabilities Total current liabilities Non-current liabilities Long-term loans - net of current portion

2,424,826,880

14,615,040,023

22,500,817,529

2,137,500,000

2,250,000,000

Debentures - net of current portion

6,733,847,032

7,228,325,702

500,000,000

6,733,847,032

7,228,325,702

500,000,000

Convertible bond

2,439,562,712

2,462,169,097

2,390,745,712

2,439,562,712

2,462,169,097

2,390,745,712

Provision for long-term employee benefits

1,476,893,699

1,005,703,635

584,648,625

341,674,259

190,432,553

161,865,407

Deferred tax liabilities

4,925,039,153

4,918,293,992

4,641,052,228

49,902,896

626,052

88,683,600

Forward exchange contracts payable - net of current portion

339,211,088

411,350,702

88,683,600

324,647,375

362,851,125

526,758,955

377,786,026

465,575,140

154,334,132

88,236,570

47,267,248

Total non-current liabilities

18,866,139,519

31,018,669,177

31,171,522,834

12,181,468,406

12,582,641,099

12,085,369,832

Total liabilities

54,415,014,653

56,160,528,905

52,112,811,306

24,712,495,782

17,889,373,427

19,112,213,615

1,202,000,000

1,000,000,000

1,202,000,000

1,000,000,000

Other non-current liabilities

Shareholders' equity Share capital

Registered 1,202,000,000 ordinary shares of Baht 1 each (31 December 2011 and 1 January 2011: 1,000,000,000 ordinary shares of Baht 1 each) Issued and paid-up 1,147,593,829 ordinary shares of Baht 1 each (31 December 2011 and 1 January 2011: 956,329,407 ordinary shares of Baht 1 each) Share premium

1,147,593,829

956,329,407

1,147,593,829

956,329,407

17,500,508,871

8,158,890,230

17,500,508,871

8,158,890,230

Retained earnings Appropriated - statutory reserve Unappropriated

120,200,000

100,000,000

89,000,000

120,200,000

100,000,000

89,000,000

17,699,516,062

15,247,385,852

11,336,526,710

7,546,976,011

6,644,875,836

4,828,870,681

Other components of shareholders' equity Equity attributable to owners of the Company

747,611,124 37,215,429,886

Non-controlling interests of the subsidiaries

(4,663,468) 24,457,942,021

(87,474,610) 20,453,271,737

179,589,529

26,494,868,240

15,860,095,473

14,033,090,318

3,128,203,282

2,658,935,586

2,210,553,318

Total shareholders' equity

40,343,633,168

27,116,877,607

22,663,825,055

26,494,868,240

15,860,095,473

14,033,090,318

Total liabilities and shareholders' equity

94,758,647,821

83,277,406,512

74,776,636,361

51,207,364,022

33,749,468,900

33,145,303,933

The accompanying notes are an integral part of the financial statements.

122

THAI UNION FROZEN PRODUCTS PCL.

Thai Union Frozen Products Public Company Limited and its subsidiaries Income statement For the year ended 31 December 2012 (Unit: Baht) Consolidated financial statements Note

2012

2011

Separate financial statements 2012

2011

(restated)

Revenues Sales

106,697,622,358

98,670,377,747

25,071,942,048

23,725,730,352

72,000

828,755

1,421,743,357

1,214,008,607

11,796,393

9,813,442

987,553,868

1,049,605,168

Other income Dividend income Interest income Exchange gains

496,804,699

304,755,850

217,898,692

47,608,703

Others

472,831,214

603,149,130

222,018,667

203,671,429

981,504,306

918,547,177

2,849,214,584

2,514,893,907

107,679,126,664

99,588,924,924

27,921,156,632

26,240,624,259

90,335,525,090

82,253,268,454

22,649,962,345

20,907,995,795

Total other income Total revenues Expenses Cost of sales Selling expenses

4,826,874,163

4,943,658,813

878,763,235

793,262,577

Administrative expenses

4,666,036,936

3,938,537,211

720,930,137

731,729,179

99,828,436,189

91,135,464,478

24,249,655,717

22,432,987,551

7,850,690,475

8,453,460,446

3,671,500,915

3,807,636,708

69,830,149

83,729,560

3,671,500,915

3,807,636,708

Total expenses Profit before share of profit from investments in associates, finance cost and income tax expenses Share of profit from investments in associates Profit before finance cost and income tax expenses Finance cost Profit before income tax expenses Income tax expenses

Profit for the year

7,920,520,624

8,537,190,006

(2,328,874,222)

(2,272,152,444)

5,591,646,402

6,265,037,562

(120,158,878)

(192,158,813)

(706,000,826) 2,965,500,089 (30,365,070)

(675,156,144) 3,132,480,564 (110,110,413)

5,471,487,524

6,072,878,749

2,935,135,019

3,022,370,151

4,693,736,006

5,117,224,138

2,935,135,019

3,022,370,151

777,751,518

955,654,611

5,471,487,524

6,072,878,749

4.39

5.35

2.74

3.16

4.29

5.21

2.71

3.11

Profit attributable to: Equity holders of the Company Non-controlling interests of the subsidiaries

Earnings per share

Basic earnings per share Profit attributable to equity holders of the Company Diluted earnings per share Profit attributable to equity holders of the Company

The accompanying notes are an integral part of the financial statements.

ANNUAL REPORT 2012

123

Thai Union Frozen Products Public Company Limited and its subsidiaries Statement of comprehensive income For the year ended 31 December 2012 (Unit: Baht) Consolidated financial statements 2012

Separate financial statements

2011

2012

2011

(restated)

Profit for the year

(restated)

5,471,487,524

6,072,878,749

2,935,135,019

3,022,370,151

88,925,545

80,905,135

5,373,974

1,168,445

39,803,020

(28,937,425)

Other comprehensive income: Exchange differences on translation of financial statements in foreign currency Gain on change in value of available-for-sale investments, net of income tax Gain (loss) on change in the value of pension fund Gain on revaluation of land, net of income tax Actuarial losses, net of income tax Increase (decrease) in other reserves

725,773,616

179,589,529

(391,975,886)

(128,882,502)

7,369,252

(5,471,986)

Other comprehensive income for the year

475,269,521

47,664,169

50,707,027

Total comprehensive income for the year

5,946,757,045

6,120,542,918

2,985,842,046

3,022,370,151

5,108,557,144

5,200,035,280

2,985,842,046

3,022,370,151

838,199,901

920,507,638

5,946,757,045

6,120,542,918

Total comprehensive income attributable to: Equity holders of the Company Non-controlling interests of the subsidiaries

The accompanying notes are an integral part of the financial statements.

124

THAI UNION FROZEN PRODUCTS PCL.

Thai Union Frozen Products Public Company Limited and its subsidiaries Cash flow statement For the year ended 31 December 2012 (Unit: Baht) Consolidated financial statements 2012

Separate financial statements

2011

2012

2011

(restated)

Cash flows from operating activities Profit before tax

5,591,646,402

6,265,037,562

2,965,500,089

3,132,480,564

1,902,394,522

1,616,173,839

335,581,784

273,012,582

71,257,387

63,014,522

75,921,504

63,413,780 111,307,543

Adjustments to reconcile profit before tax to net cash provided by (paid from) operating activities: Depreciation and amortisation Amortisation of premium/discount from forward foreign exchange contracts Amortisation of issue cost of convertible bond, debentures 676,369,715

163,988,942

11,678,945

Loss on write-off of unclaimed prepaid income tax

and long-term loans from financial institutions

7,981,413

Allowance for doubtful accounts

1,871,776

14,684,702

97,797

22,572,912

Decrease of inventory to net realisable value (Reversal)

308,412,675

84,431,465

(28,312,207)

34,941,812

Allowance for loss on impairment of assets (Reversal)

(28,702,970)

17,938,239

(29,365,348)

29,772,627

Allowance for loss on impairment of goodwill

16,743,910

Reversal of allowance for impairment loss of investments Share of profit from investments in associates Loss on sale of investments Provision for long-term employee benefits Gain on dissolution of subsidiaries

(26,136,437)

(69,830,149)

(83,729,560)

1,277,548

1,401,327

190,278,148

146,852,225

25,755,163

24,739,652

5,076,340

(24,209)

(1,113)

Loss on sale / write-off of property, plant and equipment and other intangible assets Loss on write-off of leasehold right Unrealised exchange loss (gain) Gain on share swap of investments in associates Dividend income Interest income Interest expense

167,823,203

30,275,050

155,811,526

4,189,487

1,504,070

(168,914,350) (54,763,471) (72,000) (11,796,393)

812,917,376 -

(29,795,259) (54,763,471)

611,414,570 -

(828,755)

(1,421,743,357)

(1,214,008,607)

(9,813,442)

(987,553,868)

(1,049,605,168)

2,247,595,457

2,063,502,112

687,393,166

558,153,628

10,836,994,191

11,204,092,471

1,688,051,440

2,603,272,235

Profit from operating activities before change in operating assets and liabilities Decrease (increase) in operating assets Trade and other receivables Inventories Other current assets Other non-current assets

(930,089,533)

(1,617,843,008)

(223,928,951)

(950,398,721)

(7,805,934,416)

(4,351,469,787)

(1,201,128,853)

(1,227,300,688)

59,827,190

(225,389,433)

(63,592,655)

32,891,163

(97,530,874)

10,984,622

(24,510,095)

(16,194,681)

653,779,147

517,297,852

111,324,157

(40,764,766)

15,797,820

Increase (decrease) in operating liabilities Trade and other payables

2,623,837,551

Other current liabilities

74,789,851

Other non-current liabilities

94,249,717

115,970,729

61,468,027

49,125,541

4,856,143,677

5,788,295,764

712,891,999

618,516,826

(121,493,013)

(107,022,356)

591,398,986

511,494,470

Cash flows from operating activities Cash paid for corporate income tax Net cash from operating activities The accompanying notes are an integral part of the financial statements.

(405,330,451) 4,450,813,226

(1,828,977)

(328,043,131) 5,460,252,633

ANNUAL REPORT 2012

125

Thai Union Frozen Products Public Company Limited and its subsidiaries Cash flow statement (continued) For the year ended 31 December 2012 (Unit: Baht) Consolidated financial statements 2012

Separate financial statements

2011

2012

2011

(restated)

Cash flows from investing activities Increase in restricted deposits with financial institutions

(1,742,870)

(735,191)

(3,615,104,967)

(3,364,840,178)

(859,456,519)

(556,106,161)

Acquisitions of intangible assets

(22,959,172)

(37,306,973)

(1,570,670)

(640,038)

Acquisitions of leasehold rights

(9,207,473)

(2,365,337)

Acquisitions of property, plant and equipment

Decrease (increase) in short-term loans to subsidiaries Increase in short-term loans to other companies

(11,652,013)

Decrease (increase) in long-term loans to subsidiaries Decrease (increase) in long-term loans to other companies

(2,478,533)

Increase in investments in subsidiaries Increase in investments in associates Increase in other long-term investments Dissolution of subsidiaries

(1,356,907,200)

545,824,650

(5,465,000)

(3,845,397,970)

1,119,297,720

1,304,154

(1,674,840)

(9,470,294,026)

(773,459,946)

(44,548,168)

(200,368)

(1,040,989) (174,911)

(773,459,946) -

(169,862,535) -

Interest received

12,215,820

9,802,775

1,085,063,999

1,040,025,013

Dividend received

55,249,439

35,828,755

1,421,743,357

1,214,008,607

4,782,221

3,154,823

Proceeds from sale of investments

24,209

Proceeds from sales of property, plant and equipment and intangible assets Net cash from (used in) investing activities

81,502,668

222,988,668

25,479,854

1,262,886

(4,283,030,985)

(3,177,932,572)

(13,781,938,961)

3,193,810,142

8,248,147,433

5,838,799,223

6,233,938,604

1,561,315,710

(245,840,000)

(6,750,000,000)

3,550,000,000

Cash flows from financing activities Increase in bank overdrafts and short-term loans from financial institutions Decrease in short-term loans from subsidiaries Decrease in long-term loans from financial institutions

(13,439,584,588)

Increase in debentures Cash paid for interest expense

(2,256,563,390)

(7,964,450,950) 3,550,000,000 (2,059,765,423)

(685,902,735)

(560,455,101)

Cash paid for unamortised front end and deferred debentures fees Proceeds from issued additional share capital Decrease in non-controlling interests of the subsidiaries Dividend paid

9,532,883,063

(23,964,321) -

9,532,883,063 -

(23,964,321) -

(368,932,205)

(511,604,091)

(1,883,952,342)

(1,195,364,996)

(1,883,952,342)

(1,195,364,996)

(168,002,029)

(3,664,308,708)

(2,366,350,558)

13,196,966,590

Increase (decrease) in translation adjustment

497,744,242

(50,745,814)

Net increase (decrease) in cash and cash equivalents

497,524,454

(134,776,311)

6,426,615

40,995,904

Cash and cash equivalents at beginning of year

902,520,399

1,037,296,710

55,908,174

14,912,270

1,400,044,853

902,520,399

62,334,789

55,908,174

Net cash from (used in) financing activities

Cash and cash equivalents at end of year (Note 7)

The accompanying notes are an integral part of the financial statements.

126

THAI UNION FROZEN PRODUCTS PCL.

Thai Union Frozen Products Public Company Limited and its subsidiaries Cash flow statement (continued) For the year ended 31 December 2012 (Unit: Baht) Consolidated financial statements 2012

Separate financial statements

2011

2012

2011

(restated)

Supplement cash flows information Non-cash items: Undue installment of acquisition of property, plant and equipment Unrealised gain on changes in the value of investments

188,809,392

72,278,789

24,143,691

(1,168,445)

57,056,539

3,371,006

41,360,857

152,767,975

210,456,642

511,329,935

(5,373,974)

95,370,986

Transfer of properties foreclosed to property, plant and equipment Transfer of property, plant and equipment to other current assets Transfer of property, plant and equipment to leasehold rights Transfer of property, plant and equipment to intangible assets An adjustment provision for long-term employee benefits to the beginning balance of retained earnings

161,865,408

725,773,616

179,589,529

investment in associate

34,579,160

Increase in actuarial losses

(391,975,886)

(128,882,502)

Increase in revaluation surplus on land Transfer of other long-term investment to

The accompanying notes are an integral part of the financial statements.

accounting policy for inventories (Note 4)

1,147,593,829 -

17,500,508,871

9,341,618,641

8,158,890,230

Share premium

The accompanying notes are an integral part of the financial statements.

Balance as at 31 December 2012

to statutory reserve (Note 25)

Unappropriated retained earnings transferred

191,264,422

Issued ordinary share capital (Note 24)

Total comprehensive income for the year

956,329,407

Dividend paid (Note 32)

Balance as at 1 January 2012 - as restated

956,329,407

Balance as at 1 January 2012

Cumulative effect of change in

956,329,407

share capital

fully paid-up

Issued and

Balance as at 31 December 2011

of the subsidiaries

Increase in non-controlling interests

to statutory reserve (Note 25)

Unappropriated retained earnings transferred

- as restated

Total comprehensive income for the year

Dividend paid (Note 32)

Balance as at 1 January 2011 - as restated

accounting policy for inventories (Note 4)

Cumulative effect of change in

Balance as at 1 January 2011

For the year ended 31 December 2012

Statement of changes in shareholders' equity

Thai Union Frozen Products Public Company Limited and its subsidiaries

120,200,000

20,200,000

100,000,000

11,000,000

89,000,000

Appropriated

17,699,516,062

(20,200,000)

4,356,282,552

(1,883,952,342)

15,247,385,852

40,298,498

15,207,087,354

15,247,385,852

(11,000,000)

5,117,224,138

(1,195,364,996)

11,336,526,710

(2,385,256)

11,338,911,966

Unappropriated

Retained earnings

Exchange

in value of

on changes

163,550,536

95,136,852

68,413,684

116,052,108

(47,638,424)

foreign currency

(11,569,973)

5,373,974

(16,943,947)

1,168,445

(18,112,392)

investments

statements in available-for-sale

financial

translation of

differences on Surplus (deficit)

(16,798,419)

39,803,020

(56,601,439)

(28,937,425)

(27,664,014)

pension fund

the value of

changes in

Provision for

604,591,494

surplus on land

Revaluation

Other comprehensive income

Other components of shareholders' equity

Equity attributable to owners of the Company

Consolidated financial statements

7,837,486

7,369,252

468,234

(5,471,986)

5,940,220

reserves

Other

Total other

747,611,124

752,274,592

(4,663,468)

82,811,142

(87,474,610)

equity

shareholders'

components of

Total equity

37,215,429,886

9,532,883,063

5,108,557,144

(1,883,952,342)

24,457,942,021

40,298,498

24,417,643,523

24,457,942,021

5,200,035,280

(1,195,364,996)

20,453,271,737

(2,385,256)

20,455,656,993

the Company

owners of

attributable to

3,128,203,282

116,100,008

838,199,901

(485,032,213)

2,658,935,586

7,542,469

2,651,393,117

2,658,935,586

(16,284,303)

920,507,638

(455,841,067)

2,210,553,318

2,099,033

2,208,454,285

the subsidiaries

interests of

to non-controlling

Equity attributable

40,343,633,168

9,648,983,071

5,946,757,045

(2,368,984,555)

27,116,877,607

47,840,967

27,069,036,640

27,116,877,607

(16,284,303)

6,120,542,918

(1,651,206,063)

22,663,825,055

(286,223)

22,664,111,278

equity

shareholders'

Total

(Unit: Baht)

1,147,593,829

The accompanying notes are an integral part of the financial statements.

Balance as at 31 December 2012

statutory reserve (Note 25)

Unappropriated retained earnings transferred to

191,264,422

Total comprehensive income for the year

Issued ordinary share capital (Note 24)

956,329,407

Dividend paid (Note 32)

Balance as at 1 January 2012 - as restated

accounting policy for inventories (Note 4)

956,329,407

Balance as at 1 January 2012

Cumulative effect of change in

956,329,407

Balance as at 31 December 2011

statutory reserve (Note 25)

Total comprehensive income for the year

Unappropriated retained earnings transferred to

956,329,407

share capital

fully paid-up

Issued and

Dividend paid (Note 32)

Balance as at 1 January 2011 - as restated

accounting policy for inventories (Note 4)

Cumulative effect of change in

Balance as at 1 January 2011

For the year ended 31 December 2012

Statement of changes in shareholders' equity

17,500,508,871

9,341,618,641

8,158,890,230

Share premium

Thai Union Frozen Products Public Company Limited and its subsidiaries

120,200,000

20,200,000

100,000,000

11,000,000

89,000,000

Appropriated

7,546,976,011

(20,200,000)

2,806,252,517

(1,883,952,342)

6,644,875,836

26,552,918

6,618,322,918

6,644,875,836

(11,000,000)

3,022,370,151

(1,195,364,996)

4,828,870,681

27,292,786

4,801,577,895

Unappropriated

Retained earnings

179,589,529

equity

shareholders'

179,589,529

Surplus on land

Revaluation

Total other components of

shareholders' equity

Other components of

Other comprehensive income

Separate financial statements

26,494,868,240

9,532,883,063

2,985,842,046

(1,883,952,342)

15,860,095,473

26,552,918

15,833,542,555

15,860,095,473

3,022,370,151

(1,195,364,996)

14,033,090,318

27,292,786

14,005,797,532

equity

shareholders'

Total

(Unit: Baht)

ANNUAL REPORT 2012

129

Thai Union Frozen Products Public Company Limited and its subsidiaries Notes to consolidated financial statements For the year ended 31 December 2012 1.

General information Thai Union Frozen Products Public Company Limited (“the Company”) is a public company incorporated and domiciled in Thailand. The Company operates its business in Thailand and its subsidiaries operate their businesses in Thailand and overseas. Their principal activities in Thailand are the manufacture and export of frozen and canned seafood, and local subsidiaries are also engaged in the packaging, printing and pet food businesses. The principal activities of the overseas subsidiaries such as the subsidiaries in United States are the manufacture and distribution of canned seafood, and the import of shrimp and other frozen seafood products for sale to restaurant chains, retailing, and wholesaling, the subsidiaries in Europe are the manufacturer and distributor of ambient seafood products to countries in Europe under their trademarks, and two subsidiaries in Asia, principally located in Indonesia and Vietnam are the manufacturer and distributor of seafood. The Company’s registered address is 72/1 Moo 7, Sethakit 1 Road, Tambon Tarsrai, Amphur Muang, Samutsakorn. The Company has 7 branches in Bangkok and Samutsakorn.

Basis of preparation

2.1

The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Profession Act B.E. 2547, except for the early adoption of TAS No. 12 “Income Taxes”. The presentation of the financial statements has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 28 September 2011, issued under the Accounting Act B.E. 2543. The financial statements in Thai language are the official statutory financial statements of the Company. The financial statements in English language have been translated from the Thai language financial statements. The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the accounting policies.

130

THAI UNION FROZEN PRODUCTS PCL.

2.2

Basis of consolidation a) The consolidated financial statements include the financial statements of Thai Union Frozen Products Public Company Limited (“the Company”) and the following subsidiary companies (“the subsidiaries”):

Company’s name

Nature of business

Country of

Percentage of

incorporation

shareholding 2012

2011

Percent

Held by the Company Thai Union Manufacturing Co., Ltd.

Manufacturer & exporter of

Thailand

90.08

Thailand

90.44

Thailand

51.00

canned tuna and pet food Songkla Canning Pcl.

Manufacturer & exporter of canned seafood

Thai Union Seafood Co., Ltd.

Manufacturer & exporter of frozen shrimp

T-Holding Co., Ltd.

Distributor

Thailand

90.00

Thai Union Feedmill Co., Ltd.

Manufacturer & distributor of

Thailand

51.00

Thailand

74.00

USA

100.00

Indonesia

88.78

Mauritius

100.00

USA

100.00

USA

82.00

USA

100.00

Canada

100.00

animal feeds Thai Union Graphic Co., Ltd.

Printing manufacturer

Thai Union International, Inc. (TUI)

Holding company

PT Juifa International Foods

Manufacturer & distributor of seafood

Thai Union Investment Holding

Holding company

Co., Ltd. (TUIH) Held by subsidiaries Tri-Union Seafoods, LLC (100% held by TUI)

Manufacturer & distributor of canned tuna and seafood

Tri-Union Frozen Products, Inc. (TUFP) (82% held by TUI) US Pet Nutrition, LLC (USPN) (99% held by TUI and 1% held by

Importer and distributor of frozen seafood Manufacturer & distributor of premium pet food

Tri-Union Seafoods, LLC) Canadian Pet Nuttrition, ULC (100% held by USPN)

Distributer of pet food

131

ANNUAL REPORT 2012

Companyâ&#x20AC;&#x2122;s name

Asian-Pacific Can Co., Ltd.

Nature of business

Manufacturer &

incorporation

shareholding 2012

2011

Percent

81.85

Vietnam

46.12

Shrimp breeding and rearing

Thailand

51.00

Shrimp breeding and species

Thailand

48.45

Shrimp breeding and rearing

Thailand

38.25

Shrimp breeding and rearing

Thailand

40.80

Shrimp breeding and rearing

Thailand

26.01

90.08

distributor of packaging

Pcl.)

for food products Manufacturer &

(51% held by Songkla

distributor of canned

Canning Pcl.)

tuna and seafood

Thai Union Hatchery Co., Ltd.

Percentage of

Thailand

(90.5% held by Songkla Canning

Yueh Chyang Canned Food Co., Ltd.

Country of

(99.99% held by Thai Union Feedmill Co., Ltd.) Thai Quality Shrimp Co., Ltd. (95% held by Thai Union Feedmill

developer

Co., Ltd.) TCM Fishery Co., Ltd. (75% held by Thai Union Feedmill Co., Ltd.) TMK Farm Co., Ltd. (80% held by Thai Union Feedmill Co., Ltd.) TMAC Co., Ltd. (51% held by Thai Union Feedmill Co., Ltd.) Siam Fishing Pte. Ltd.

General wholesale trade

Singapore

(100% held by Thai Union

(including importers

Manufacturing Co., Ltd.)

and exporters)

Thai Union EU Seafood 1 SA

Holding company

Luxembourg

100.00

Holding company

Luxembourg

100.00

(100% held by TUIH) Thai Union EU Seafood 2 SA (100% held by Thai Union EU Seafood 1 SA)

132

THAI UNION FROZEN PRODUCTS PCL.

Companyâ&#x20AC;&#x2122;s name

Thai Union France Holding 2 SAS

Nature of business

Country of

Percentage of

incorporation

shareholding 2012

2011

Percent

Holding company

France

100.00

Headquarter activity

France

100.00

Seychelles

100.00

France

100.00

Portugal

100.00

Ghana

100.00

Italy

100.00

United

100.00

Seychelles

60.00

United

100.00

(100% held by Thai Union EU Seafood 1 SA) MW Brands SAS (100% held by Thai Union France Holding 2 SAS) MW Brands Seychelles Limited

Exporter of canned Tuna

(100% held by MW Brands SAS) Etablissements Paul Paulet SAS (100% held by MW Brands SAS)

Manufacturer, importer, distributor and exporter of canned seafood

European Seafood Investment Portugal (74% held by MW Brands SAS and 26% held by Thai Union France

Manufacturer and exporter of canned sardines and mackerel

Holding 2 SAS) Pioneer Food Cannery Limited

Manufacturer of canned tuna

(100% held by Etablissements Paul Paulet SAS) Mareblu SRL (74% held by MW Brands SAS and

Importer and distributor of canned seafood

26% held by Thai Union France Holding SAS) UK Seafood Investments Limited

Holding company

(100% held by MW Brands SAS) Indian Ocean Tuna Limited (60% held by MW Brands SAS) John West Foods Limited (100% held by UK Seafood

Kingdom Manufacturer and exporter of canned tuna Importer and distributor of canned seafood

Kingdom

Investments Limited) Irish Seafood Investments Limited (100% held by MW Brands SAS)

Importer and distributor of canned seafood

Ireland

ANNUAL REPORT 2012

Company’s name

John West Holland BV (100% held by Irish Seafood

Nature of business

Importer and distributor of

Country of

Percentage of

incorporation

shareholding

133

2012

2011

Percent

Netherland

100.00

Ghana

50.00

canned seafood

Investments Limited) TTV Limited (50% held by Etablissements Paul

Deep-sea fishing fleet operation

Paulet SAS)

During the year, Thai Union Feedmill Co., Ltd. established TCM Fishery Co., Ltd., TMK Farm Co., Ltd. and TMAC Co., Ltd. to engage in the shrimp breeding and rearing, as mentioned in Note 13. b) Subsidiaries are fully consolidated, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. c) The financial statements of the subsidiaries are prepared using the same significant accounting policies as the Company. d) The assets and liabilities in the financial statements of overseas subsidiaries are translated to Baht using the exchange rate prevailing on the end of reporting period, and revenues and expenses translated using monthly average exchange rates. The resulting differences are shown under the caption of “Exchange differences on translation of financial statements in foreign currency” in the statements of changes in shareholders’ equity. e) Material balances and transactions between the Company and its subsidiaries have been eliminated from the consolidated financial statements. f)

Non-controlling interests represent the portion of profit or loss and net assets of the subsidiaries that are not held by the Group and are presented separately in the consolidated profit or loss and within equity in the consolidated statement of financial position.

2.3

The separate financial statements, which present investments in subsidiaries and associates under the cost method, have been prepared solely for the benefit of the public.

134

THAI UNION FROZEN PRODUCTS PCL.

New accounting standards not yet effective The Federation of Accounting Professions issued the following new/revised accounting standards that are effective for fiscal years beginning on or after 1 January 2013. Accounting standards: TAS 12

Income Taxes

TAS 20 (revised 2009) Accounting for Government Grants and Disclosure of Government Assistance TAS 21 (revised 2009) The Effects of Changes in Foreign Exchange Rates Financial Reporting Standard: TFRS 8

Operating Segments

Accounting Standard Interpretations: SIC 10

Government Assistance - No Specific Relation to Operating Activities

SIC 21

Income Taxes - Recovery of Revalued Non-Depreciable Assets

SIC 25

Income Taxes - Changes in the Tax Status of an Entity or its Shareholders

The Company adopted TAS 12 and SIC 21 and SIC 25. For TAS 20 (revised 2009), TAS 21 (revised 2009), TFRS 8 and SIC 10, the Companyâ&#x20AC;&#x2122;s management believes that these accounting standards will not have any significant impact on the financial statements for the year when they are initially applied. In addition, the Federation of Accounting Professions has issued Notification No. 30/2555 - 34/2555, published in the Royal Gazette on 17 January 2013, mandating the use of accounting treatment guidance and accounting standard interpretations as follows. Effective date Accounting Treatment Guidance for Transfers of Financial Assets

1 January 2013

Accounting Standard Interpretation: SIC 29

Service Concession Arrangements: Disclosures

1 January 2014

Financial Reporting Standard Interpretations: TFRIC 4

Determining whether an Arrangement

1 January 2014

contains a Lease TFRIC 12

Service Concession Arrangements

1 January 2014

TFRIC 13

Customer Loyalty Programmes

1 January 2014

ANNUAL REPORT 2012

135

The management of the Company has assessed the effect of these standards and believes that SIC 29 and TFRIC 12 are not relevant to the business of the Company. Management is still evaluating the first-year impact to the financial statements of the adoption of Accounting Treatment Guidance for Transfers of Financial Assets, TFRIC 4 and TFRIC 13 and has yet to reach a conclusion. 4.

Change in accounting policies

4.1

In 2012, the Company and its subsidiaries have changed their accounting policy on land, from presenting it at cost basis to presenting it under a revaluation method to reflect the market value of such assets. The amounts of adjustments affecting the financial statements as at 31 December 2012 resulted in property, plant and equipment increase of Baht 907 million (Separate financial statements: Baht 224 million), deferred tax liabilities increase of Baht 181 million (Separate financial statements: Baht 45 million) and other components of shareholders' equity increase of Baht 726 million (Separate financial statements: Baht 179 million).

4.2

In 2012, the Company and its subsidiaries have changed their accounting policy on inventories for raw material, from first-in, first-out to average cost method which is more suitable for the businesses of the group. The change in the accounting policy on inventories for raw material has been applied retrospectively as though the financial statements had originally been prepared using the average cost. The cumulative effect of the changes in the accounting policy has been separately presented in the statements of changes in shareholdersâ&#x20AC;&#x2122; equity. The amounts of adjustments affecting the statements of financial position as at 31 December 2011, and 1 January 2011 and the income statements for the year ended 31 December 2011 are summarised below. (Unit: Thousand Baht) Consolidated financial statements 31 December

1 January

2011

Statements of financial position Increase (decrease) in inventories

47,842

(286)

Increase (decrease) in unappropriated retained earnings

40,299

(2,385)

7,543

2,009

Increase in non-controlling interest of the subsidiaries

136

THAI UNION FROZEN PRODUCTS PCL.

(Unit: Thousand Baht) Separate financial statements 31 December

1 January

2011

Statements of financial position Increase in inventories

26,553

27,293

Increase in unappropriated retained earnings

26,553

27,293

(Unit: Thousand Baht) Consolidated

Separate

financial

statements

For the year ended 31 December 2011 Income and comprehensive income statements Decrease (increase) in cost of sales

48,127

(740)

0.05

(0.001)

Increase (decrease) in basic earnings per share (Baht)

Significant accounting policies

5.1

Revenue recognition Sales of goods Sales of goods are recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. Sales are the invoiced value of goods supplied, excluding value added tax, of goods supplied after deducting discount and allowances. Sales of merchandise by an overseas subsidiary under commercial agreements are recognised when the subsidiaryâ&#x20AC;&#x2122;s distributor sells such merchandise. The overseas subsidiary may be reimbursed for bank charges, warehousing, and certain other costs incurred in connection with these agreements, and the subsidiary records such reimbursements as a deduction from cost of sales. Interest income Interest income is recognised as interest accrues based on the effective rate method. Dividends Dividends are recognised when the right to receive the dividends is established.

ANNUAL REPORT 2012

137

Tax coupon received Subsidies granted by the Ministry of Finance in the form of tax coupons are recognised as income when the Company obtains written notification of approval of the tax coupon. 5.2

Cash and cash equivalents Cash and cash equivalents included cash in hand and at banks, and all highly liquid investments with an original maturity of three months or less and not subject to withdrawal restrictions.

5.3

Trade accounts receivable Trade accounts receivable are stated at the net realisable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in collection of receivables. The allowance is generally based on collection experiences and analysis of debt aging.

5.4

Inventories Finished goods and work in process are valued at the lower of standard cost (which approximates actual cost) and net realisable value. Standard cost includes all production costs and attributable factory overheads. Raw materials, ingredients and packaging are valued at cost (average method).

5.5

Investments a) Investments in available-for-sale securities are stated at fair value. Changes in the fair value of these securities are recorded in other comprehensive income, and will be recorded in profit or loss when the securities are sold. b) Investments in non-marketable equity securities, which the Company classifies as other investment, are stated at cost net of allowance for loss on diminution in value (if any). c) Investments in associates are accounted for in the consolidated financial statements using the equity method. d) Investments in subsidiaries and associates are accounted for in the separate financial statements using the cost method. The weighted average method is used for computation of the cost of investments.

138

THAI UNION FROZEN PRODUCTS PCL.

In the event the Company reclassifies investments from one type to another, such investments will be readjusted to their fair value as at the reclassification date. The difference between the carrying amount of the investments and the fair value on the date of reclassification are recorded in profit or loss or recorded as other components of shareholders’ equity, depending on the type of investment that is reclassified. 5.6

Property, plant and equipment and Depreciation Land is stated at cost or revalued amount. Land improvement, plant and equipment are stated at cost less accumulated depreciation and allowance for impairment of assets (if any). Land is initially recorded at cost on the acquisition date, and subsequently revalued by an independent professional appraiser to fair values of land. Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from fair value at the end of reporting period. Differences arising from the revaluation are dealt with in the financial statements as follows: -

When an asset’s carrying amount is increased as a result of a revaluation of the Company’s assets, the increase is credited directly to the other comprehensive income and the cumulative increase is recognised equity under the heading of “Revaluation surplus”. However, a revaluation increase is recognised as income to the extent that it reverses a revaluation decrease in respect of the same asset previously recognised as an expense.

When an asset’s carrying amount is decreased as a result of a revaluation of the Company’s assets, the decrease is recognised in profit or loss. However, the revaluation decrease is charged to the other comprehensive income to the extent that it does not exceed an amount already held in “Revaluation surplus” in respect of the same asset.

Depreciation of land improvement, plant and equipment is calculated by reference to their costs on the straight-line basis over the following estimated useful lives: Land improvement, buildings and construction

5 - 40

years

Machinery and equipment

3 - 20

years

Furniture and fixtures

3 - 20

years

Motor vehicles

3 - 20

years

ANNUAL REPORT 2012

139

Depreciation of machinery and equipment, furniture and fixtures and motor vehicles of an overseas subsidiary is calculated on the declining balance basis over their estimated useful lives of 5 - 20 years. The effect of the difference in accounting policy is immaterial to profit or loss. No depreciation is provided for land and construction in progress. Equipment under a capital lease is stated at the present value of the minimum lease payments and amortised on a straight-line method over the lesser of the lease term or the estimated useful life of the equipment. Depreciation is included in determining income. 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 arising on disposal of an asset is included in profit or loss when the asset is derecognised. 5.7

Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

5.8

Intangible assets Intangible assets acquired through business combination are initially recognised at their fair value on the date of business acquisition while intangible assets acquired in other cases are recognised at cost. Following the initial recognition, the intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses (if any). Intangible assets with finite lives are amortised on a systematic basis over the economic useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method of such intangible assets are reviewed at least at each financial year end. The amortisation expense is charged to profit or loss.

140

THAI UNION FROZEN PRODUCTS PCL.

A summary of the intangible assets with finite useful lives is as follows. Useful lives Trademarks

5, 10 ,20, 40

years

Copyrights

3, 5, 10

years

Computer software

3, 5, 10

years

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually either individually or at the cash generating unit level. The assessment of indefinite useful lives of the intangible assets is reviewed annually. 5.9

Goodwill Goodwill is initially recorded at cost, which equals to the excess of cost of business combination over the fair value of the net assets acquired. If the fair value of the net assets acquired exceeds the cost of business combination, the excess is immediately recognised as gain in profit or loss. Goodwill is carried at cost less any accumulated impairment losses. Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Company and its subsidiariesâ&#x20AC;&#x2122; cash generating units (or group of cash-generating units) that are expected to benefit from the synergies of the combination. The Company and its subsidiaries estimate 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 relating to goodwill cannot be reversed in future periods.

5.10 Leasehold right and amortisation Leasehold right is stated at cost less accumulated amortisation. Amortisation of leasehold right is calculated by reference to its cost on a straight-line basis over the period of lease.

ANNUAL REPORT 2012

141

5.11 Deferred financial fees Financial expenses related to borrowings that are typically incurred on or before signing facility agreements and before actual draw down of the loans are recorded as deferred financial fees. A portion of deferred financial fees proportionate to the amount of the loan facility already drawn is presented as a deduction against the related loan account and amortised using the effective interest rate method over the term of the loans. The amortisation of deferred financial fees is included in determining borrowing costs. 5.12 Related party transactions Related parties comprise enterprises and individuals that control, or are controlled by, the Company, whether directly or indirectly, or which are under common control with the Company. They also include associates and individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, key management personnel, directors and officers with authority in the planning and direction of the Companyâ&#x20AC;&#x2122;s operations. 5.13 Long-term leases Leases of property, plant or equipment which transfer substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The outstanding rental obligations, net of finance charges, are included in other long-term payables, while the interest element is charged to profit or loss over the lease period. The assets acquired under finance leases is depreciated over the useful life of the leased assets. Leases of property, plant or equipment which do not transfer substantially all the risks and rewards of ownership are classified as operating leases. Operating lease payments are recognised as an expense in profit or loss on a straight line basis over the lease term. 5.14 Foreign currencies Transactions in foreign currencies are translated into Baht at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into Baht at the exchange rate ruling at the end of reporting period. Gains and losses on exchange are included in determining income.

142

THAI UNION FROZEN PRODUCTS PCL.

5.15 Impairment of assets At the end of each reporting period, the Company and its subsidiaries perform impairment reviews in respect of the property, plant and equipment and other intangible assets whenever events or changes in circumstances indicate that an asset may be impaired. The Company and its subsidiaries also carries out annual impairment reviews in respect of goodwill and intangible assets with indefinite useful lives. An impairment loss is recognised when the recoverable amount of an asset, which is the higher of the assetâ&#x20AC;&#x2122;s fair value less costs to sell and its value in use, is less than the carrying amount. In determining value in use, the estimated future cash flows 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 a valuation model that, based on information available, reflects the amount that the Company and its subsidiaries could obtain from the disposal of the asset in an armâ&#x20AC;&#x2122;s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. The Company and its subsidiaries recognised an impairment loss in profit or loss. 5.16 Employee benefits Short-term employee benefits Salaries, wages, bonuses and contributions to the social security fund are recognised as expenses when incurred. Post-employment benefits (Defined contribution plans) The Company and its subsidiaries and its employees have jointly established a provident fund. The fund is monthly contributed by employees and by the Company and its subsidiaries. The fundâ&#x20AC;&#x2122;s assets are held in a separate trust fund and the Company and its subsidiaries' contributions are recognised as expenses when incurred. Post-employment benefits (Defined benefit plans) The Company and its subsidiaries have obligations in respect of the severance payments it must make to employees upon retirement under labor law. The Company and its subsidiaries treat these severance payment obligations as a defined benefit plan. The obligation under the defined benefit plan is determined by a professionally qualified independent actuary based on actuarial techniques, using the projected unit credit method.

ANNUAL REPORT 2012

143

Actuarial gains and losses arising from post-employment benefits are recognised immediately in other comprehensive income. The defined benefits liability comprises the present value of the defined benefit obligation less unrecognised past service cost and unrecognised actuarial gains or losses. For the first-time adoption of TAS 19 Employee Benefits in 2011, the Company and its subsidiaries elected to recognised the transitional liability, which exceeds the liability that would have been recognised at the same date under the previous accounting policy, through an adjustment to the beginning balance of retained earnings in 2011. The oversea subsidiary has a define benefit plan covering all of its former production employees in American Samoa. The benefit are based on a percentage of compensation during each year of service. The oversea subsidiary makes annual contributions to the plan equal to the minimum required by applicable regulations. 5.17 Provisions Provisions are recognised when the Company and its subsidiaries have a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 5.18 Income tax Income tax expense represents the sum of corporate income tax currently payable and deferred tax. Current tax Income tax is provided in the accounts at the amount expected to be paid to the taxation authorities, based on taxable profits determined in accordance with tax legislation. Income tax of the overseas subsidiaries is provided for in the accounts based on the taxable profits determined in accordance with tax legislation of their countries. Deferred tax Deferred income tax is provided on temporary differences between the tax bases of assets and liabilities and their carrying amounts at the end of each reporting period, using the tax rate enacted at the end of the reporting period.

144

THAI UNION FROZEN PRODUCTS PCL.

The Company and its subsidiaries recognise deferred tax liabilities for all taxable temporary differences while they recognise deferred tax assets for all deductible temporary differences and tax losses carried forward to the extent that it is probable that future taxable profit will be available against which such deductible temporary differences and tax losses carried forward can be utilised. At each reporting date, the Company and its subsidiaries review and reduce the carrying amount of deferred tax assets 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. The Company and its subsidiaries record deferred tax directly to shareholders' equity if the tax rates to items that are recorded directly to share holders' equity. 5.19 Derivatives Forward exchange contracts Receivables and payables arising from forward exchange contracts are translated into Baht at the rates of exchange ruling at the end of reporting period. Unrecognised gains and losses from the translation are included in determining income. Premiums or discounts on forward exchange contracts are amortised on a straight-line basis over the contract periods. Interest rate swap contracts The net amount of interest to be received from or paid to the counterparty under the interest rate swap contracts is recognised as income or expenses on an accrual basis. Foreign currency option agreements The notional amounts of the foreign currency option agreements utilised by the Company and its subsidiaries are not recognised as assets or liabilities upon inception of the agreements. Gain and loss from the translation are included in determining income. 6.

Significant accounting judgments and estimates The preparation of financial statements in conformity with financial reporting standards at times requires management to make subjective judgments and estimates regarding matters that are inherently uncertain. These judgments and estimates affect reported amounts and disclosures; and actual results could differ from these estimates. Significant judgments and estimates are as follows:

ANNUAL REPORT 2012

Leases In determining whether a lease is to be classified as an operating lease or finance lease, the management is required to use judgment regarding whether significant risk and rewards of ownership of the leased asset have been transferred, taking into consideration terms and conditions of the arrangement. Allowance for doubtful accounts In determining an allowance for doubtful accounts, the management needs to make judgment and estimates based upon, among other things, past collection history, aging profile of outstanding debts and the prevailing economic condition. Impairment of investments The Company and its subsidiaries treat available-for-sale investments and other investments as impaired when the management judges that there has been a significant or prolonged decline in the fair value below their cost or where other objective evidence of impairment exists. The determination of what is “significant” or “prolonged” requires judgment of the management. Property plant and equipment/Depreciation In determining depreciation of plant and equipment, the management is required to make estimates of the useful lives and residual values of the Company’s plant and equipment and to review estimate useful lives and residual values when there are any changes. The Company and its subsidiaries measure land at revalued amounts. Such amounts are determined by the independent valuer using the market approach for land. The valuation involves certain assumptions and estimates. In addition, the management is required to review property, plant and equipment for impairment on a periodical basis and record impairment losses in the period when it is determined that their recoverable amount is lower than the carrying amount. This requires judgments regarding forecast of future revenues and expenses relating to the assets subject to the review. Goodwill and intangible assets The initial recognition and measurement of goodwill and other intangible assets, and subsequent impairment testing, require management to make estimates of cash flows to be generated by the asset or the cash generating units and to choose a suitable discount rate in order to calculate the present value of those cash flows.

145

146

THAI UNION FROZEN PRODUCTS PCL.

Deferred tax assets Deferred tax assets are recognised for deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the temporary differences and losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of estimate future taxable profits. Post-employment benefit under defined benefit plans The obligation under the defined benefit plan is determined based on actuarial techniques. Such determination is made based on various assumptions, including discount rate, future salary increase rate, mortality rate and staff turnover rate. Litigation The Company and its subsidiaries have contingent liabilities as a result of litigation. The management has used judgement to assess of the results of the litigation and believes that no loss will result. Therefore no contingent liabilities are recorded as at the end of reporting period. 7.

Cash and cash equivalents (Unit: Thousand Baht) Consolidated financial statements 2012 Cash Bank deposits Bill of exchange Total

2011

Separate financial statements 2012

2011

4,410

3,398

1,282

1,572

1,387,110

899,122

61,053

54,336

8,525

1,400,045

902,520

62,335

55,908

As at 31 December 2012, bank deposits in saving accounts and bill of exchange carried interests between 0.10% and 2.47% per annum (2011: between 0.17% and 1.93% per annum).

ANNUAL REPORT 2012

147

Trade and other receivables (Unit: Thousand Baht) Separate financial statements

Consolidated financial statements 2011

2012

2011

Trade receivables - related parties Aged on the basis of due dates Not yet due

48,963

21,050

1,508,041

1,134,315

6,149

40,341

712,228

534,394

31 - 60 days

33,971

358,201

61 - 90 days

447,824

55,112

61,391

2,254,240

2,474,734

9,322,154

9,222,755

1,448,326

1,226,524

1,573,063

1,421,944

215,571

170,386

31 - 60 days

397,745

210,035

41,023

5,791

61 - 90 days

232,978

102,888

319

1,560

91 - 120 days

90,924

58,582

358

121 - 180 days

56,859

37,279

226

Past due 1 - 30 days

Total trade receivables - related parties Trade receivables - unrelated parties Aged on the basis of due dates Not yet due Past due 1 - 30 days

181 - 365 days

68,593

66,298

1,028

Over 365 days

174,903

164,281

24,719

20,915

11,917,219

11,284,062

1,731,570

1,425,176

11,972,331

11,345,453

3,985,810

3,899,910

Total trade receivables - unrelated parties Total trade receivables Less: Allowance for doubtful accounts Total trade receivables - net

(251,190)

(250,793)

(25,616)

(25,518)

11,721,141

11,094,660

3,960,194

3,874,392

87,115

184,652

Other receivables Interest receivables - related parties Interest receivable Accrued income Advance payment Total other receivables

156

576

150,041

26,688

137,035

11,668

46,820

38,867

12,022

17,475

197,017

66,131

236,199

213,795

11,918,158

11,160,791

4,196,393

4,088,187

Total trade and other receivables - net

As at 31 December 2012, certain trade accounts receivable of three overseas subsidiaries have secured their credit facilities as mentioned in Note 17. Insurance claim receivable On 11 February 2012, there was a fire incident in shrimp section of the Companyâ&#x20AC;&#x2122;s plant located in Samutsakorn province, which has no effect to other production lines. The Company assessed the damage caused by the fire incident and found damage to inventories with costs amounting to Baht 261 million and damage to building and

148

THAI UNION FROZEN PRODUCTS PCL.

machineries with total net book value of Baht 123 million. However, the Company has insurance coverage for direct asset damage and filed a claim with the insurance company. In February 2012, the insurerâ&#x20AC;&#x2122;s surveyor conducted an assessment for the damage in order to quantify the indemnification. The Company received a compensation payment of Baht 110 million and Baht 165 million and Baht 135 million on 23 March 2012 and 28 June 2012, and 28 February 2013, respectively. The Company recorded insurance recovery income amounting to Baht 410 million by offsetting it with the loss from the fire incident in the income statement for the year ended 31 December 2012. 9.

Related party transactions During the years, the Company and its subsidiaries had significant business transactions with related parties. Such transactions are summarised below. (Unit: Million Baht) Consolidated

Separate

financial statements

2012

2011

2012

2011

10,061

10,348

Transfer Pricing Policy

Transactions with subsidiaries: (Eliminated from consolidated financial statements) Sales

Cost plus margin

Dividend income

1,404

1,178

As declared

Interest income

987

1,049

1.22 - 6.25% per annum (2011: 2.55 - 6.40% per annum)

Other income

Purchases of goods

1,827

1,115

Interest expense

Near market price Cost plus margin 2.85% per annum (2011: 2.50% per annum)

Management fee

Contract price

Other expenses

105

Near market price

Sales

Cost plus margin

Dividend income

Other income

Near market price

193

182

Cost plus margin

Sales

1,099

1,064

244

238

Cost plus margin

Purchases of goods

3,794

4,775

2,802

3,910

Cost plus margin

Near market price

133

132

Near market price

Transactions with associates:

Purchases of goods

As declared

Transactions with related companies:

Transportation expense Expenses relating to assets

The Company and its subsidiaries have insured with Asia-Pacific Risk Consultants (Thailand) Co., Ltd. which is an insurance broker related by way of having common shareholders and directors. During the year 2012, insurance premiums paid through that company amounted to Baht 84 million (2011: Baht 52 million).

ANNUAL REPORT 2012

The relationships between the Company and the related parties are summarised below. List of related companies

Relationship

Songkla Canning Pcl.

Subsidiary

Thai Union Manufacturing Co., Ltd.

Subsidiary

Thai Union Seafood Co., Ltd.

Subsidiary

T-Holding Co., Ltd.

Subsidiary

Thai Union Feedmill Co., Ltd.

Subsidiary

Thai Union Graphic Co., Ltd.

Subsidiary

Thai Union International, Inc. (TUI)

Subsidiary

PT Juifa International Foods

Subsidiary

Thai Union Investment Holding Co., Ltd. (TUIH)

Subsidiary

Tri-Union Seafoods, LLC

Subsidiary (Held by subsidiary)

Tri-Union Frozen products, Inc. (TUFP)

Subsidiary (Held by subsidiary)

US Pet Nutrition, LLC (USPN)

Subsidiary (Held by subsidiary)

Canadian Pet Nutrition, ULC

Subsidiary (Held by subsidiary)

Asian-Pacific Can Co., Ltd.

Subsidiary (Held by subsidiary)

Yueh Chyang Canned Food Co., Ltd.

Subsidiary (Held by subsidiary)

Thai Union Hatchery Co., Ltd.

Subsidiary (Held by subsidiary)

Thai Quality Shrimp Co., Ltd.

Subsidiary (Held by subsidiary)

TCM Fishery Co., Ltd.

Subsidiary (Held by subsidiary)

TMK Farm Co., Ltd.

Subsidiary (Held by subsidiary)

TMAC Co., Ltd.

Subsidiary (Held by subsidiary)

Siam Fishing Pte. Ltd.

Subsidiary (Held by subsidiary)

Thai Union EU Seafood 1 S.A.

Subsidiary (Held by subsidiary)

Thai Union EU Seafood 2 S.A.

Subsidiary (Held by subsidiary)

MW Brands SAS

Subsidiary (Held by subsidiary)

European Seafood Investment Portugal

Subsidiary (Held by subsidiary)

UK Seafood Investment Limited

Subsidiary (Held by subsidiary)

John West Food Limited

Subsidiary (Held by subsidiary)

Mareblu SRL

Subsidiary (Held by subsidiary)

MW Brands Seychelles Limited

Subsidiary (Held by subsidiary)

Indian Ocean Tuna Limited

Subsidiary (Held by subsidiary)

Pioneer Food Cannery Limited

Subsidiary (Held by subsidiary)

TTV Limited

Subsidiary (Held by subsidiary)

Thai Union France Holding 2 SAS

Subsidiary (Held by subsidiary)

Etablissements Paul Paulet SAS

Subsidiary (Held by subsidiary)

Irish Seafood Investments Limited

Subsidiary (Held by subsidiary)

149

150

THAI UNION FROZEN PRODUCTS PCL.

List of related companies

Relationship

John West Holland BV

Subsidiary (Held by subsidiary)

Lucky Union Foods Co., Ltd.

Associated company

Biz Dimension Co., Ltd.

Associated company

Pakfood Pcl. (PPC)

Associated company

Avanti Feeds Limited

Associated company

Century Trading (Shanghai) Co., Ltd.

Associated company (Held by subsidiary)

TN Fine Chemicals Co., Ltd.

Associated company (Held by subsidiary)

Moresby International Holdings Inc.

Associated company (Held by subsidiary)

LDH (La Doria) Limited

Associated company (Held by subsidiary)

Geminai & Associate Co., Ltd.

Shareholders/ Director related to director

Chansiri Real Estate Co., Ltd.

Common major shareholders/Common directors

Thai Union Securities Co., Ltd.

Common major shareholders/Common directors

Asian Pacific Thai Tuna Co., Ltd.

Common major shareholders/Common directors

T.C. Union Global Pcl.

Common major shareholders/Common directors

Jana Fish Industries Limited

Common major shareholders/Common directors

T.C. Union Agrotech Co., Ltd.

Common major shareholders/Common directors

Waithai Co., Ltd.

Common major shareholders/Common directors

Merchant Partners Securities Co., Ltd.

Common shareholders/Common directors

Thaipatana Stainless Steel Co., Ltd.

Common major shareholders/Common directors

Thai Union Properties Co., Ltd.

Common major shareholders/Common directors

Hanhong Kanchang Registered Ordinary Partnership Lucky Surimi Products Co., Ltd.

Common major shareholders/Common directors Common directors

Asia-Pacific Risk Consultants (Thailand) Co., Ltd. Common shareholders/Common directors Asia-Pacific Risk Insurance Broker Co., Ltd.

Common shareholders/Common directors

Ahead Way International Co., Ltd.

Common major shareholders/Common directors

Ekawat Products Co., Ltd.

Common major shareholders/ Director related to director

Geminai Watercrafts Co., Ltd.

Shareholders/ Director related to director

Miss Rungtiwa Boonmechote

Relative of director

Pae Parichart Boonmechote

Relative of director

151

ANNUAL REPORT 2012

The balances of the accounts as at 31 December 2012 and 2011 between the Company and those related parties are as follows: (Unit: Thousand Baht) Consolidated

Separate

financial statements

2012

2011

2012

2011

Trade and other receivables - related parties (Note 8) Subsidiaries

2,326,986

2,650,176

Associated companies

22,496

4,622

1,051

1,056

Related companies

32,616

56,769

13,318

8,154

Total trade and other receivables - related parties

55,112

61,391

2,341,355

2,659,386

337,790

220,906

12,305

1,584

11,367

Related companies

177,071

64,724

84,067

28,636

Total trade and other payables - related parties

189,376

66,308

433,224

249,590

Thai Union Graphic Co., Ltd.

80,000

Thai Union International, Inc.

1,337,041

Total

1,417,041

80,000

Thai Union Investment Holding Co., Ltd.

20,453,595

15,207,249

Thai Union International, Inc.

676,118

2,240,991

Total

21,129,713

17,448,240

21,129,713

Trade and other payables - related parties (Note 18) Subsidiaries Associated companies

Short-term loans to subsidiaries (Eliminated from consolidated financial statements)

Long-term loans to subsidiaries (Eliminated from consolidated financial statements)

Less: Current portion Thai Union International, Inc. Net

(440,335) 17,007,905

During 2012, movements of loans to/from related parties were as follows: (Unit: Thousand Baht) Separate financial statements Balance as at

During the year

1 January 2012

Increase

Decrease

Balance as at Revaluation

31 December 2012

Short-term loans to subsidiaries Thai Union Manufacturing Co., Ltd.

70,000

(70,000)

Songkla Canning Pcl.

66,450

(66,450)

Thai Union Graphic Co., Ltd.

80,000

Thai Union International, Inc.

1,515,507

(158,200)

Thai Union Investment Holding Co., Ltd.

756,200

(756,200)

80,000

2,407,757

(1,050,850)

(19,866) (19,866)

80,000 1,337,041 1,417,041

152

THAI UNION FROZEN PRODUCTS PCL.

(Unit: Thousand Baht) Separate financial statements Balance as at

During the year

1 January 2012

Increase

Decrease

Balance as at Revaluation

31 December 2012

Long-term loans to subsidiaries Thai Union Investment Holding Co., Ltd.

15,207,249

5,386,570

2,240,991

284,760

17,448,240

Thai Union Manufacturing Co., Ltd. Songkla Canning Pcl.

Thai Union International, Inc.

(140,224)

20,453,595

(1,825,932)

(23,701)

676,118

5,671,330

(1,825,932)

(163,925)

21,129,713

76,290

(76,290)

45,150

(45,150)

121,440

(121,440)

Short-term loans from subsidiaries

Directors and managementâ&#x20AC;&#x2122;s benefits During the years ended 31 December 2012 and 2011, the Company and its subsidiaries had employee benefits expenses payable to their directors and management as follows: (Unit: Million Baht) Consolidated financial

Separate financial

statements

2012 Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Total

2011

2012

2011

725

614

780

681

ANNUAL REPORT 2012

10.

153

Inventories (Unit: Thousand Baht) Consolidated financial statements Reduce cost to net Cost

realisable value 2011

2012

Inventories - net

2011

2012

2011

(Restated) Finished goods Work in process Raw materials

(Restated)

16,449,282

13,932,395

(473,601)

(251,014)

15,975,681

13,681,381

137,864

66,796

(328)

137,536

66,468

10,752,836

7,095,832

(172,720)

(112,276)

10,580,116

6,983,556

1,638,343

1,477,321

(90,815)

(70,225)

1,547,528

1,407,096

617,779

542,705

(12,995)

(9,206)

604,784

533,499

4,445,837

3,507,796

(1,003)

4,444,834

3,507,796

34,041,941

26,622,845

(751,462)

33,290,479

26,179,796

Ingredient and packaging Goods in transit Spare parts Total

(443,049)

(Unit: Thousand Baht) Separate financial statements Reduce cost to net Cost 2012

realisable value 2011

2012

Inventories - net

2011

2012

(Restated) Finished goods Work in process Raw materials

2011 (Restated)

1,690,448

1,248,738

18,553

21,529

2,525,137

1,771,557

(4,051)

309,401

260,433

(10,866)

377,517

421,724

(1,003)

23,974

23,115

4,945,030

3,747,096

(58,080) -

(45,032)

1,632,368

1,203,706

18,553

21,529

(43,817)

2,521,086

1,727,740

(13,463)

298,535

246,970

376,514

421,724

23,974

23,115

4,871,030

3,644,784

Ingredient and packaging Goods in transit Spare parts Total

(74,000)

(102,312)

Three overseas subsidiaries have mortgaged the certain inventories of that company to financial institutions to secure its credit facilities as mentioned in Note 17. During the current year, the Company has written off damaged inventories for the net book values amounting to Baht 261 million from a fire incident in one section of the Company's plant located in Samutsakorn province, as mentioned in Note 8.

154

THAI UNION FROZEN PRODUCTS PCL.

During the current year, the Company and its subsidiaries have changed its accounting policy on inventories for raw material, from first-in, first-out to average cost as mentioned in Note 4. 11.

Restricted bank deposits These represent fixed deposits pledged with financial institution to secure credit facilities.

12.

Investments in associates

12.1 Details of associates: (Unit: Thousand Baht) Consolidated financial statements

Company's name

Nature

Country of

of business

incorporation

Carrying amounts Shareholding percentage

Cost

2012

2011

(%)

Thailand

25.00

37,500

Thailand

based on equity method

2012

2011

2012

2011

Investments in associates, directly held by the Company Lucky Union Foods Co., Ltd.

Manufacturer & exporter of

37,500

329,523

298,386

crab sticks Biz Dimension Co., Ltd.

E-Commerce under website

Avanti Thai Aqua Feeds Private

Manufacturer & distributor

Limited

20.00

1,010

21,934

19,711

India

50.00

27,721

India

25.12

117,064

120,816

Thailand

49.97

773,460

734,987

The People's

45.04

75,900

34,916

25,265

Thailand

44.14

44,070

51,256

44,894

British Virgin

30.03

96,981

20.00

95,940

415,860

411,010

1,241,925

379,122

1,806,273

923,968

of animal feeds

Avanti Feeds Limited

Manufacturer & exporter of animal feeds and shrimp products

Pakfood Pcl.

Manufacturer & distributed of frozen foods and aquatie animals

Investments in associates, directly held by subsidiaries Century Trading (Shanghai) Co., Ltd. (50% held by Thai Union

Importer & exporter of food products

Republic of China

Manufacturing Co., Ltd.) TN Fine Chemical Co., Ltd.

Manufacturer & exporter

(49% held by Thai Union

of by-products from

Manufacturing Co., Ltd.) Moresby International Holdings Inc. (33% held by Thai Union

seafoods Holding in fishing company

Island

Manufacturing Co., Ltd.) LDH (La Doria) Limited

Distributor of food products

(20% held by MW Brands)

United Kingdom

(Unit: Thousand Baht) Separate financial statements

Company's name

Nature of business

Country of

Shareholding

incorporation

percentage

Cost

2012

2011

(%)

2012

2011

Lucky Union Foods Co., Ltd.

Manufacturer & exporter of crab sticks

Thailand

25.00

37,500

Biz Dimension Co., Ltd.

E-Commerce under website

Thailand

20.00

1,010

Avanti Thai Aqua Feeds Private Limited

Manufacturer & distributor of animal feeds

India

50.00

27,721

Avanti Feeds Limited

Manufacturer & exporter of animal

India

25.12

117,064

Thailand

49.97

773,460

929,034

66,231

feeds and shrimp products Pakfood Pcl.

Manufacturer & distributed of frozen foods and aquatie animals animals

155

ANNUAL REPORT 2012

12.2 Share of profit/loss and dividend received During the years, the Company and its subsidiaries have recognised its share of profit/loss from investments in associates in the consolidated financial statements and dividend income in the separate financial statements as follows:

(Unit: Thousand Baht) Consolidated

Separate

financial statements

Share of profit/loss from Companyâ&#x20AC;&#x2122;s name

investments in associates

Dividend received

during the year

2012 Lucky Union Foods Co., Ltd.

2011

2012

2011

38,637

38,287

7,500

35,000

4,623

1,801

2,400

9,651

6,927

6,362

6,894

LDH (La Doria) Limited

37,185

29,821

Avanti Feeds Limited

11,844

8,092

777

(38,473)

83,730

17,992

35,777

Biz Dimension Co., Ltd. Century Trading (Shanghai) Co., Ltd. TN Fine Chemicals Co., Ltd.

Pakfood Pcl. Total

69,830

12.3 Fair value investments in listed associated company In respect of investment in associated company that is listed company on the Stock Exchange of Thailand, its fair value is as follows: (Unit: Million Baht) Companyâ&#x20AC;&#x2122;s name Pakfood Pcl.

Fair values as at 31 December 2012 749.5

156

THAI UNION FROZEN PRODUCTS PCL.

12.4 Summarised financial information of associates Financial information of associates is summarised below. (Unit: Million Baht) Total revenues

Companyâ&#x20AC;&#x2122;s name

Lucky Union Foods Co., Ltd.

Biz Dimension Co., Ltd.

Profit (loss) for the

Paid-up capital as at

Total assets as at

Total liabilities as at

for the years ended

years ended

31 December

2012

2011

2012

2011

Baht 150

2,619

1,726

1,002

560

million

Baht 25

million

Rupee

1,242

Avanti Thai Aqua Feeds Private Limited

2012

2011

2012

2011

2012

2011

1,822

1,297

155

153

103

470

3,280

158

3,550

3,817

1,905

2,099

6,642

7,244

217

110

295

3,949

3,758

2,857

76.9 million

Avanti Feeds Limited

Rupee

90.8 million Pakfood Pcl.

Century Trading (Shanghai) Co., Ltd. TN Fine Chemicals Co., Ltd.

Moresby International Holdings Inc. LDH (La Doria) Limited

Baht 300

million

USD 4

million

Baht 90

million

USD 9.4

million

GBP 1

million

(77)

190

225

100

2,796

12,422

11,567

450

363

On 20 April 2012, the Company purchased 12 million ordinary shares of Pakfood Public Company Limited (PPC) (or 40% of the total 30 million issued and paid up shares of PPC) at a purchase price of Baht 51 per share, or a total of Baht 612 million. On 18 December 2012, the Company purchased 3 million ordinary shares of Pakfood Public Company Limited (PPC) at a purchase price of Baht 54 per share, or a total of Baht 161 million. As at 31 December 2012, the Company hold 15 million ordinary shares of PPC or 49.97% of the total issued and paid up shares of PPC. The Company has no control in PPC, therefore the Company does not included the financial statements of PPC in the Company's consolidated financial statements.

157

ANNUAL REPORT 2012

During the third quarter of the current year, the Company sold investment in Avanti Thai Aqua Feeds Private Limited by swapping ordinary shares of Avanti Feeds Limited, and thus the investment proportion in Avanti Feeds Limited increased from 14.99% to 25.12%. The Company changed the recording of the investment in Avanti Feeds Limited from other long-term investment to investment in associated company. Gain on ordinary share swap, totaling Baht 54.8 million, is included in the income statement for the year ended 31 December 2012. Investments in some associates were determined on the basis of financial information provided by those companiesâ&#x20AC;&#x2122; managements. These were unaudited by their external auditors due to time constraints. However, the values of the investments in associates are immaterial. 13.

Investments in subsidiaries Details of investments in subsidiaries as presented in separate financial statements are as follows. (Unit: Thousand Baht) Shareholding Companyâ&#x20AC;&#x2122;s name

Paid-up capital 2012

Dividend received

percentage 2011

2012

2011

Cost 2012

during the year 2011

2012

2011

Songkla Canning Pcl.

Baht 360 million

90.44

1,379,791

219,759

569,744

Thai Union Manufacturing

Baht 300 million

90.08

1,212,172

837,786

270,254

Thai Union Seafood Co., Ltd.

Baht 300 million

51.00

189,316

140,760

T-Holding Co., Ltd.

Baht 70 million

90.00

20,699

19,530

3,150

Thai Union Feedmill Co., Ltd.

Baht 500 million

51.00

255,000

137,700

307,020

Thai Union Graphic Co., Ltd.

Baht 40 million

74.00

45,331

7,400

5,180

Thai Union International, Inc.

USD 61.6 million

USD 13.1 million

100.00

1,977,465

482,170

USD 2.7 million

88.78

82,972

40,817

22,884

EUR 222 million

EUR 22 million

100.00

8,900,256

925,256

14,063,002

4,592,707

1,403,752

1,178,232

Co., Ltd.

(TUI) PT Juifa International Foods Thai Union Investment Holding Co., Ltd. (TUIH) Total Less: Allowance for impairment of investments Net

14,063,002

(26,136) 4,566,571

On 8 May 2012, Thai Union Seafood Co., Ltd. registered the decrease of its registered share capital from Baht 400 million (40 million ordinary shares of Baht 10 each) to Baht 300 million (30 million ordinary shares of Baht 10 each) with the Ministry of Commerce, by canceling 10 million registered shares that had yet to be allocated.

158

THAI UNION FROZEN PRODUCTS PCL.

During the current year, the Company additionally invested EUR 200 million or Baht 7,975 million in Thai Union Investment Holding Co., Ltd. During the current year, Thai Union France Holding 2 SAS additionally invested EUR 61 million or Baht 2,363 million in MW Brands SAS (par value of Baht 473 million and share premium of Baht 1,890 million). During the current year, Thai Union Investment Holding Co., Ltd. additionally invested EUR 210 million in Thai Union EU Seafood 1 S.A. through the conversion of a part of the inter-company loan. During the current year, the Company additionally invested USD 48.5 million or Baht 1,495.3 million in Thai Union International, Inc. During the current year, Thai Union Feedmill Co., Ltd. formed TCM Fishery Co., Ltd., in which it holds 5.25 million ordinary shares (or 75% of the 7 million issued and paid-up shares of such company) with a par value of Baht 10 per share, fully paid-up, for a total payment of Baht 52.5 million. During the current year, Thai Union Feedmill Co., Ltd. formed TMK Farm Co., Ltd., in which it holds 12 million ordinary shares (or 80% of the 15 million issued and paid-up shares of such company) with a par value of Baht 10 per share, fully paid-up, for a total payment of Baht 120 million. During the current year, Thai Union Feedmill Co., Ltd. formed TMAC Co., Ltd., in which it holds 28.56 million ordinary shares (or 51% of the 56 million issued and paid-up shares of such company) with a par value of Baht 10 per share, 25% paid up, for a total payment of Baht 71.4 million. On 20 February 2012, Siam Fishing Pte Ltd., a subsidiary of Thai Union Manufacturing Co., Ltd. was liquidated. On 24 December 2012, Thai Union Eu Seafood 2 S.A., a subsidiary of Thai Union Eu Seafood 1 S.A. was liquidated and merged with Thai Union Eu Seafood 1 S.A., the common subsidiary of Thai Union Investment Holding Co., Ltd. On 28 December 2012, Board of Directors meeting No. 1/2013 of Thai Union Manufacturing Co., Ltd. passed resolution on forming New Frontier Foods Co., Ltd., in which it holds 1 million ordinary shares (100% of the 1 million issued and paid-up shares of such company) with a par value of Baht 10 per share, 25% paid up, for a total payment of Baht 2.5 million. The said company registered in forming with the Ministry of Commerce on 21 January 2013. During the current year, the Company has reversed allowance for impairment loss of investment in subsidiary in full amount.

159

ANNUAL REPORT 2012

14.

Other long-term investments (Unit: Thousand Baht) Consolidated financial statements 2011

2012 Fair value

Cost

Fair value

Other long-term investments Available-for-sale securities - Unit trusts

46,104

50,646

31,653

33,677

Unrealised loss on changes in the value of investments

value of investments (16,969)

(14,451)

Total available-for-sale securities

31,653

33,677

664

36,628

32,317

70,305

Other investments - Ordinary shares Total other long-term investments

(Unit: Thousand Baht) Separate financial statements 2012

2011

Other long-term investments

Other investments - ordinary shares

34,579

During the current year, the Company swapped ordinary shares of Avanti Thai Aqua Feeds Private Limited with those of Avanti Feeds Limited, and thus the investment proportion in Avanti Feeds Limited increased from 14.99% to 25.12%. The Company also changed the recording of the investment in Avanti Feeds Limited from other long-term investment to investment in associated company, as mentioned in Note 12. 15.

Property, plant and equipment (Unit: Thousand Baht) Consolidated financial statements Revaluation Cost basis

basis Buildings Land and

Assets under

and

Machinery

Furniture

installation and

land

building

and

Motor

under

improvement

equipment

fixtures

vehicles

construction

1,616,905

6,664,102

14,698,794

654,933

662,853

1,597,546

25,895,133

44,332

65,307

370,512

27,239

47,848

2,724,477

3,279,715

(145,839)

(301,968)

(42,436)

(27,660)

Total

Cost/Revalued amount 1 January 2011 Additions

(12,412)

(530,315)

(156,138)

1,595,738

71,631

25,349

(2,245,936)

153,337

15,467

6,337

7,768

253,147

16,516,413

726,834

714,727

1,915,305

28,741,542

Disposals/write off

Transfer to other assets

Transfer in (out)

6,830

546,388

Translation adjustment

3,233

67,005

1,671,300

7,196,963

31 December 2011

160

THAI UNION FROZEN PRODUCTS PCL.

(Unit: Thousand Baht) Consolidated financial statements Revaluation Cost basis

basis Buildings Land and

Additions Disposals/write off

Transfer in (out) Translation adjustment 31 December 2012

Machinery

Furniture

installation and

land

building

and

Motor

under

improvement

equipment

fixtures

vehicles

construction

180,895 (29)

Transfer to other assets Revaluation

Assets under

and

16,807

457,234

70,393

55,859

(326,196)

(246,835)

(32,213)

(123,452)

907,217

35,385

896,941

1,419,151

16,902

74,667

(2,956)

(38,582)

(161,528)

(5,565)

(4,579)

2,927,354

Total 3,708,542

(60,502)

(789,227)

(251,817)

(2,443,046) (15,575)

907,217 (228,785)

2,791,812

7,745,933

17,984,435

776,351

717,222

2,071,719

32,087,472

22,707

2,603,830

8,136,561

439,922

450,181

11,653,201

4,722

325,686

1,094,947

72,736

53,608

1,551,699

Accumulated depreciation 1 January 2011 Depreciation for the year Depreciation for disposals/ (137,489)

(111,802)

(40,153)

(23,443)

(312,887)

19,468

90,485

9,220

4,667

123,929

27,518

2,811,495

9,210,191

481,725

485,013

13,015,942

4,964

310,046

1,334,920

35,735

60,833

1,746,498

write off

Translation adjustment 31 December 2011 Depreciation for the year Depreciation for disposals/ write off Translation adjustment 31 December 2012

(74) 32,408

(182,419)

(213,269)

(31,383)

(117,972)

(545,043)

(15,741)

(69,786)

(3,920)

(3,676)

(93,197)

2,923,381

10,262,056

482,157

424,198

14,124,200

Allowance for loss on impairment of assets 1 January 2011

32,371

15,905

3,483

51,759

Increase during the year

33,255

Decrease during the year

(15,317)

Translation adjustment

943

31 December 2011

65,626

5,014

70,640

Decrease during the year

(28,703)

Translation adjustment

31 December 2012

31 December 2011 31 December 2012

(11,834)

(3,483)

(28,703)

(1,934)

36,923

3,080

40,003

1,643,782

4,319,842

7,301,208

245,109

229,714

1,915,305

15,654,960

2,759,404

4,785,629

7,719,299

294,194

293,024

2,071,719

17,923,269

Net book value

Depreciation for the years 2011 (Baht 1,446 million include in manufacturing cost and the balances in selling and administrative expenses)

1,551,699

2012 (Baht 1,671 million include in manufacturing cost and the balances in selling and administrative expenses)

1,746,498

ANNUAL REPORT 2012

161

(Unit: Thousand Baht) Separate financial statements Revaluation basis

Cost basis Buildings

Assets under

and

Machinery

Furniture

installation and

Land

building

and

Motor

under

improvement

equipment

fixtures

vehicles

construction

Total

Cost /Revalued amount 1 January 2011

740,113

1,702,826

1,838,440

57,823

136,195

548,762

5,024,159

Additions

41,758

120,531

5,134

23,464

318,751

509,638

Disposals/write off

2,257

Transfer in (out) 31 December 2011

(14,192)

(257)

(7,913)

(114)

269,410

160,925

441

(6,484)

(426,549)

(22,476) -

742,370

2,013,994

2,105,704

63,141

145,262

440,850

Additions

289,024

5,681

26,647

586,240

907,592

Disposals/write off

(29,242)

(37,577)

(417,323)

Revaluation

(302,120)

(48,371)

(13)

224,487

13,470

309,553

128,842

25,827

17,359

(495,051)

980,327

2,021,427

2,475,199

94,636

160,026

494,462

6,226,077

1 January 2011

642,584

1,209,503

32,972

98,504

1,983,563

Depreciation for the year

62,929

190,820

9,381

9,409

272,539

(7,851)

(15,100)

31 December 2011

705,513

1,393,301

42,126

100,062

2,241,002

Depreciation for the year

85,317

228,450

11,667

9,830

335,264

(166,403)

(41,717)

(27,899)

(236,031)

624,427

1,580,034

53,781

81,993

2,340,235

Transfer in (out) 31 December 2012

5,511,321

224,487 -

Accumulated depreciation

Depreciation for disposals/ write off

(7,022)

(227)

Depreciation for disposals/ write off 31 December 2012

(12)

Allowance for loss on impairment of assets 1 January 2011

32,371

3,483

35,854

Increase

33,255

(Decrease)

(3,483)

31 December 2011

65,626

Decrease during the year

(29,365)

31 December 2012

36,261

31 December 2011

742,370

1,242,855

712,403

21,015

45,200

440,850

3,204,693

31 December 2012

980,327

1,360,739

895,165

40,855

78,033

494,462

3,849,581

(3,483)

Net book value

Depreciation for the years 2011 (Baht 255 million include in manufacturing cost and the balances in selling and administrative expenses)

272,539

2012 (Baht 302 million include in manufacturing cost and the balances in selling and administrative expenses)

335,264

162

THAI UNION FROZEN PRODUCTS PCL.

As breakdown of the land carried on the revaluation basis as at 31 December 2012 is as follows: (Unit: Thousand Baht) Consolidated

Separate

financial statement

1,509,815

742,370

907,217

224,487

2,417,032

966,857

Historical cost Surplus from revaluation Revaluated amount

As at 31 December 2012, the Company and its subsidiaries had equipment under finance lease agreements with net book values amounting to Baht 520 million (2011: Baht 373 million). As at 31 December 2012, certain plant and equipment items of the Company and its subsidiaries have been fully depreciated but are still in use. The gross carrying amount (before deducting accumulated depreciation) of those assets amounted to approximately Baht 5,767 million (2011: Baht 5,189 million). During the current year, the Company has written off damaged assets by Baht 123 million for the net book values of damaged assets from a fire incident in one section of the Companyâ&#x20AC;&#x2122;s plant located in Samutsakorn province, as mentioned in Note 8. In 2012, the Company and its subsidiaries have changed their accounting policy for land, from presenting in at a cost basis to presenting it under a revaluation method to reflect the market value, as mentioned in Note 4. As at 31 December 2012, an overseas subsidiary mortgaged some buildings and equipment of that company to financial institution to secure its credit facility, as mentioned in Note 17. 16.

Intangible assets (Unit: Million Baht) Consolidated financial statements Covenant

Licences

Trademark

Patents

Customer

not to

Computer

Distributor

relationships

complete

software

relationships

Others

Total

Cost At 1 January 2011

252

12,837

127

249

225

Additions

Disposal/write off

(36)

13,741

Translation adjustment

376

405

At 31 December 2011

264

13,214

134

289

232

14,149

233

234

Addition

Disposal/write off

(5)

Translation adjustment

(5)

(4)

(3)

(173)

14,205

31 December 2012

267

(164) 13,051

129

513

229

163

ANNUAL REPORT 2012

(Unit: Million Baht) Consolidated financial statements Covenant

Licences

Trademark

Patents

Customer

not to

Computer

Distributor

relationships

complete

software

relationships

Others

Total

Amortisation At 1 January 2011

268

145

540

Amortisation

Translation adjustment

At 31 December 2011

281

113

177

620

Amortisation

101

144

(9)

(4)

(14)

Translation adjustment

(1)

274

122

277

750

At 1 January 2011

174

Translation adjustment

At 31 December 2011

179

Translation adjustment

At 31 December 2012

177

At 31 December 2011

237

12,754

112

223

13,350

At 31 December 2012

228

12,600

236

204

13,278

At 31 December 2012 Impairment

(2)

Net book value

(Unit: Million Baht) Separate financial statements Computer software Cost At 1 January 2011

9.0

Additions

0.7

At 31 December 2011

9.7

Additions

1.5

At 31 December 2012

11.2

Amortisation At 1 January 2011

7.5

Amortisation

0.5

At 31 December 2011

8.0

Amortisation

0.3

At 31 December 2012

8.3

Net book value At 31 December 2011

1.7

At 31 December 2012

2.9

As at 31 December 2012, some trademark â&#x20AC;&#x153;Children of the seaâ&#x20AC;? was used as collateral of credit facilities of an overseas subsidiary as mentioned in Note 17.

164

17.

THAI UNION FROZEN PRODUCTS PCL.

Bank overdrafts and short-term loans from financial institutions The Company entered into interest rate swap agreements for short-term loans from financial institution to hedge interest rate risk, as mentioned in Note 34.1. Tri-Union Frozen Products, Inc. (TUFP) entered into an amended and restated credit facilities agreement with Bank of America N.A. (BOA). The TUFP credit facility provides for a USD 85 million revolving facility and expires on 15 October 2013. Borrowings under the credit facility bear interest, at TUFPâ&#x20AC;&#x2122;s option, at LIBOR plus a margin of 2.00% to 2.50% per annum, or the bankâ&#x20AC;&#x2122;s prime rate plus 1.00% to 1.50% per annum, subject to excess availability evaluated on a quarterly basis. An unused line fee is charged at 0.25% per annum, subject to adjustment, on the average daily unused portion of the credit facility. The credit facility is secured by all accounts receivable and inventory of TUFP. This revolving credit agreement includes a requirement that all borrowers maintain a lockbox arrangement whereby cash receipts are used to repay the amounts outstanding under the revolving agreement. Therefore, all borrowings made under the TUFP credit agreement will be classified as short-term. On 16 February 2011, TUFP entered into a second amendment to the TUFP credit agreement with Bank of America, N.A. for USD 15 million temporary increase in the availability under the TUFP Credit Agreement through 16 May 2011, which was extended through 15 June 2011 under a TUFP third amendment. Borrowings under the TUFP amendments No. 2, 3 and 4 bear interest at LIBOR plus 2.25% per annum or the bank's prime rate plus 1.25% per annum, subject to excess availability evaluated on a quarterly basis. The unused line fee remains at 0.25% per annum, subject to adjustment on the average daily unused portion of the credit facility. On 6 June 2011, TUFP entered into a fourth amendment to the Credit Agreement (TUFP Amendment No. 4) with BOA, which increased the temporary credit line to USD 115 million through 15 July 2011. On 16 July 2011, TUFP further amended the TUFP Credit Agreement (TUFP Amendment No. 5) to increase the credit line to USD 140 million through the 15 October 2013 expiration date, with other terms remaining unchanged from the initial TUFP Credit Agreement. On 28 September 2012, TUFP amended the TUFP Credit Agreement No. 6 with BOA to increase the credit line to USD 160 million through October 2012 to February 2013. The Additional Revolving Loans shall bear interest at LIBOR plus 3% per annum. As at 31 December 2012, the balance under the credit facility was USD 100 million (2011: USD 126 million) at interest rate between 2.21% to 4.25% per annum and (2011: between 2.28% to 4.25% per annum) actual unused availability, which is based upon substantially all of the collateralized assets, was approximately USD 36 million.

ANNUAL REPORT 2012

TUFP is subject to certain financial covenants including interest coverage ratio and leverage coverage ratio and others. As at 31 December 2012, TUFP determined it was in compliance with these covenants. On 11 March 2011, Tri-Union Seafoods, LLC (Tri-U) entered into an amended revolving credit facility agreement with BOA. The credit facility, which expires on 11 March 2014, provides for borrowings and the issuance of letters of credit up to USD 95 million subject to limitations based on eligible accounts receivable and inventory. The issuance of letters of credit reduces the amount of borrowing capacity. Borrowings under the credit facility bear interest, at Tri-Uâ&#x20AC;&#x2122;s option, at LIBOR plus a margin of 2.00% or 2.25% per annum, the bank's prime rate, or the bankâ&#x20AC;&#x2122;s prime rate plus 1.00% or 1.25% per annum, depending upon the ratio of amounts outstanding to secured accounts receivable and inventory, subject to quarterly adjustment. An unused line fee is charged at 0.375% per annum, subject to adjustment, on the average daily unused portion of the credit facility. The credit facility is secured by accounts receivable and inventory of Tri-U. On 6 June 2011, Tri-U amended its credit facility with BOA to incorporate the "Chicken of the Sea" trademark as eligible collateral with USD 10 million additional availability component loan at LIBOR plus a margin of 3.75% or 4.00% per annum or the bank's prime rate plus 2.75% or 3.00% per annum within the USD 95 million credit line. Until repayment in full of the additional component loan, borrowing under Tri-U credit facility bears interest at LIBOR plus 2.25% or 2.50% per annum, or the bank's prime rate plus 1.25% or 1.50% per annum at Tri-U option. On 23 March 2012, Tri-U entered into the second amendment revolving credit facility agreement to increase the credit line to USD 110 million through 11 March 2014. On 22 August 2012, Tri-U entered into the third amendment of its credit facility with BOA, which has a "Keep-well" provision allowing Tri-U to utilise equity contributions from its member funded within a 45-day grace period when calculating the leverage ratio for purposes of assessing compliance with covenants. Tri-U agreed to a 0.25% increase in the annual interest rate in consideration of this provision. As at 31 December 2012, the balance under the credit facility was USD 96 million (2011: USD 87 million), with interest rate at 3.00% to 6.50% per annum (2011: interest rate at 2.63% to 6.00% per annum) and actual unused availability was approximately USD 10 million (2011: USD 5 million). Tri-U is subject to certain financial covenants including an interest coverage ratio and leverage ratio and other covenants, including limitations on indebtedness, capital leases, capital expenditures, transactions with affiliates, distributions, and dividends. Tri-U obtained USD 2 million of additional equity contributions from the member in order to maintain compliance with the covenants as of 31 December 2012.

165

166

THAI UNION FROZEN PRODUCTS PCL.

As at 31 December 2012, Yueh Chyang Canned Food Co., Ltd. (YCC) obtained credit facilities from four financial institutions amounting to USD 14 million (2011: USD 7 million). The credit facilities bears interest rate at 2.8% per annum and cost of fund plus 1% and 2.25% per annum (2011: cost of fund plus 1% per annum). As at 31 December 2012, the balance under the credit facilities was USD 7 million (2011: USD 2 million). The unused available was approximately USD 7 million (2011: USD 5 million). The credit facilities were secured by accounts receivable, inventory, plant and equipment of YCC. 18.

Trade and other payables (Unit: Thousand Baht) Consolidated financial

Separate financial

statements

2012 Trade payables - related parties Trade payables - unrelated parties

2011

2012

2011

85,302

28,047

381,475

231,330

8,940,811

6,444,194

1,179,377

833,626

92,465

24,328

41,763

11,904

1,237,340

1,327,135

253,817

271,230

11,609

13,933

9,985

6,348

177,201

81,438

62,294

17,796

10,544,728

7,919,075

1,928,712

1,372,242

Accrued interest expenses to related parties Accrued expenses - related parties Accrued expenses Other payables - construction and equipment purchase - related party Other payables - construction and equipment purchase - unrelated parties Total trade and other payables

19.

Long-term loans Long-term loans as at 31 December 2012 and 2011 consist of: (Unit: Million Baht) Consolidated financial

Separate financial

statements

2012

2011

2012

2011

USD loans

Baht loans

2,815

3,092

2,250

EUR loans

13,162

Less: Deferred financial fees

2,250

Total Less: Current portion Net

2,824 (399) 2,425

(664) 15,599 (984) 14,615

(112) 2,138

2,250

ANNUAL REPORT 2012

167

During the second quarter of 2007, a local subsidiary drew Baht 380 million of two loan agreements from a local financial institution. The loans carry interest at 4.85% per annum, and THBFIX plus 0.5% per annum. These loans are repaid during the current year. During the third quarter of 2007, a local subsidiary entered into a 7-year loan agreement amounting to Baht 1,190 million with a local financial institution. The loan carries interest at THBFIX plus 0.39% per annum and is to be repaid in semi-annually installments, the first of which will be due in January 2011. The loan contains covenants relating to various matters stipulated in the agreement. As at 31 December 2012, the balance of this loan was Baht 545 million (2011: Baht 818 million). In 2010, an overseas subsidiary has entered into loan agreements with four overseas financial institutions to acquire EUR 340 million loans. The loans carry interest at the LIBOR plus 4.5 to 5.0% per annum. These loans repaid in full amount during the current year. During the third quarter of 2011, the Company has entered into a 7-year loan agreement amounting to Baht 2,250 million with a local financial institution. The loan carries interest at THBFIX per annum and is to be repaid in quarterly installments, the first of which will be due in October 2013. The loan contains covenants relating to various matters stipulated in the agreement. As at 31 December 2012, the balance of this loan was Baht 2,250 million (2011: Baht 2,250 million). During the fourth quarter of 2012, a local subsidiary entered into a 2-year loan agreement amounting to Baht 20 million with a local financial institution. The loan carries interest at MLR less 3% per annum and is to be repaid in quarterly installment. As at 31 December 2012, the balance of this loan was Baht 20 million. 20.

Debentures On 26 October 2005, a meeting of the Companyâ&#x20AC;&#x2122;s Board of Directors approved the issuance of debentures of the Company and/or its subsidiary companies in an amount of up to Baht 8,500 million or the equivalent of another currency, for the purposes of refinancing debt and future expansion. Such debentures may be offered to the public and/or institutional investors and/or local and/or foreign investors. On 12 November 2008, the Company issued the 2-year debentures of Baht 1,500 million (1,500,000 units of debentures of Baht 1,000 each) of registered, unsubordinated, unsecured debentures with no trustee, with interest rate at 4.7% per annum, which redeemed on the maturity date in 2010 and the 5-year debentures of Baht 500 million (500,000 units of debentures of Baht 1,000 each) of registered, unsubordinated, unsecured debentures with no trustee, with interest rate at 5.5% per annum and the redemption is due in 2013.

168

THAI UNION FROZEN PRODUCTS PCL.

On 25 April 2011, the Annual General Meeting of Shareholders approved the increase of credit limit for issuance of debentures of the Company and/or its subsidiaries in an amount of up to Baht 15,000 million or the equivalent in other currencies, for the purpose of refinancing debt and future expansion. Such debentures may be offered to the public and/or institutional investors and/or local and/or foreign investors. On 27 July 2011, the Company issued three debentures the 3 to 10 year debentures of Baht 6,750 million (6,750,000 units of debentures of Baht 1,000 each) of registered, unsubordinated, unsecured debentures with no trustee, with interest rate at 4.51 to 5.02% per annum and the redemption is due in 2014, 2016 and 2021. The debentures contain covenants relating to various matters such as the maintenance of debt to shareholders’ equity ratio and interest cover ratio, and certain conditions in issuance of debentures agreements, for example, annual dividend payment in the form of cash exceeding 60 percent of net income of the year is prohibited, etc. 21.

Convertible bond On 2 September 2010, the Extraordinary General Meeting of Shareholders approved the issuance non-secured convertible bond to specific investors (Private Placement) of EUR 60 million. The bond has a tenor of 4 years and an annual coupon of 5% p.a. and an overall yield of 8% p.a. unless converted into common shares. The bond can be converted into common shares at any time after the first year at a conversion price of Baht 56 per share. On 27 October 2010, the Company issued these convertible bond. The convertible bond contains covenants relating to various matters. On 6 March 2012, the meeting of the Company's Board of Directors approved the change of conversion price to Baht 52.91 per share. According to the Thai Accounting Standard No. 107 “Financial Instruments: Disclosure and Presentation”, the issuer of convertible bond is required to classify the bond’s liability and equity components and present them separately from the owner’s equity in the statements of financial position. However, the rate of interest payable in the future on the convertible bond was the same as the market rate prevailing on the date of bond issuance. The Company therefore recorded all the convertible bond as liabilities. The liability component continues to be presented on an amortised cost basis, until conversion to ordinary shares or maturity of the bond.

ANNUAL REPORT 2012

22.

169

Provision for long-term employee benefits The amount related to long-term employee benefits recognised in profit or loss and the statements of financial position are summarised below. (Unit: Thousand Baht) Consolidated financial

Separate financial

statements

2012

2011

2012

2011

Current service cost

80,338

85,501

17,175

16,958

Interest cost

57,465

54,491

8,580

7,782

137,803

139,992

25,755

24,740

Long-term employee benefit expenses for the years

Line items under which such expenses are included in profit or loss Cost of sales

90,437

85,449

19,473

15,662

47,366

54,543

6,282

9,078

Selling and administrative expenses

The changes in the present value of the defined benefit obligation are as follow: (Unit: Thousand Baht) Consolidated financial

Separate financial

statements

2012

2011

2012

2011

966,024

251,337

190,433

603,395

169,096

Current service cost

80,338

85,501

17,175

16,958

Interest cost

57,465

54,491

8,580

7,782

Benefits paid during the year

(29,756)

(37,855)

(5,919)

(3,403)

Actuarial losses

407,786

Defined benefit obligation at beginning of year Cumulative effect of change in accounting policy for employee benefits adjusted against beginning balance of retained earnings

Translation adjustment

(7,196)

599

131,405

8,556

966,024

341,674

190,433

Defined benefit obligation at end of year

1,474,661

170

THAI UNION FROZEN PRODUCTS PCL.

Principal actuarial assumptions at the valuation date were as follows: Consolidated financial statements

Separate financial statements

2012

2011

2012

2011

(% per annum)

Discount rate

2.8 - 20.0

4.2 - 12.4

3.7

4.7

3.0 - 15.0

3.0 - 10.0

3.5 - 10.0

1.0 - 30.0

2.5 - 30.0

Future salary increase rate (depending on age of employee) Staff turnover rate

Amounts of defined benefit obligation for the current and previous two years are as follows: (Unit: Thousand Baht) Experience adjustments arising on the plan liabilities

Defined benefit obligation Consolidated

Separate

Consolidated

Separate

financial

statements

Year 2012

1,474,661

341,674

323,133

112,228

Year 2011

966,024

190,433

6,459

Year 2010

540,345

(3,064)

The oversea subsidiary has a define benefit plan as mentioned in Note 5.16. The amount related to such defined benefit plan recognised in profit or loss and the statement of financial position are summarised below. (Unit: Thousand Baht) Consolidated financial statements 2012 Interest cost Expected return on plan asset Amortisation of net loss

2011

2,265

8,331

(1,334)

(2,818)

745

1,347

Expenses recognition due to settlements

50,762

Long-term employee benefit expenses for the years

52,438

6,860

Defined benefit obligation

29,421

110,146

Fair value of plan assets

(27,188)

(70,467)

2,233

39,679

Provisions for long-term employee benefits

ANNUAL REPORT 2012

The changes in the present value of the defined benefit obligation are as follow: (Unit: Thousand Baht) Consolidated financial statements 2012

2011

110,146

159,602

2,265

8,331

(1,427)

(87,471)

8,874

23,368

Translation adjustment

(2,565)

6,316

Settlement gain

(9,960)

(77,912)

Defined benefit obligation at beginning of year Interest cost Benefits paid during the year Actuarial losses

Curtailments and settlements Defined benefit obligation at end of year

29,421

110,146

The change in the fair value of plan assets is as follows: (Unit: Thousand Baht) Consolidated financial statements Fair value of plan assets at beginning of year

2012

2011

70,467

115,292

Expected return on plan assets

124

(3,369)

Contributions

35,031

41,745

Benefits paid during the year

(1,241)

(87,471)

Settlements

(75,430)

Translation adjustments

(1,763)

4,270

Fair value of plan assets at end of year

27,188

70,467

The major categories of plan assets as a percentage of total plan assets are as follows: Consolidated financial statements 2012

2011

Equity securities

Debt securities

100

171

172

THAI UNION FROZEN PRODUCTS PCL.

Principal actuarial assumptions at the valuation date were as follows: Consolidated financial statements 2012

2011

(% per annum)

Discount rate

4.1

5.5

Expected long-term rate of return on plan assets

8.0

Amounts of defined benefit obligation for the current and previous two years are as follows: (Unit: Thousand Baht) Experience adjustments arising on the plan

23.

Defined benefit obligation

liabilities

Consolidated

financial statements

Year 2012

2,233

4,951

Year 2011

39,679

998

Year 2010

44,304

(3,342)

Income tax Income tax expenses for the years ended 31 December 2012 and 2011 are made up as follows: (Unit: Million Baht) Consolidated

Separate

financial statements

2012

2011

Current income tax: Current income tax charge Translation adjustment Income in deferred income tax Income tax expense reported in profit or loss

350

586

119

(229)

(405)

(8)

(9)

120

192

(1)

110

ANNUAL REPORT 2012

Reconciliation between income tax expenses and the product of accounting profit multiplied by the applicable tax rates for the years ended 31 December 2012 and 2011. (Unit: Million Baht) Consolidated

Separate

financial statements

2012

2011

2012

2011

(restated) Accounting profit before income tax Applicable tax rate

5,592

6,265

10-35%

(restated) 2,966

3,133

10-35%

23%

30%

2,075

682

940

Accounting profit before tax multiplied by applicable tax rate

984

Tax adjust for prior year

(12)

Tax effect of intercompany transactions

(2)

(16)

(345)

Tax effect for: investment promotion (Note 27)

(713)

(1,310)

(264)

(481)

(88)

(168)

(380)

(341)

(155)

(9)

(139)

(4)

120

192

tax-exempt incomes and non-deductible expenses Decrease (increase) in deferred tax assets Increase (decrease) in deferred tax liabilities Income tax expenses in income statements

110

The components of deferred tax assets and deferred tax liabilities are as follows: (Unit: Million Baht) Consolidated

Separate

financial statements

2012

2011

2012

2011

Deferred tax assets Tax losses brought forward

503

566

135

118

Tax effect of non-deductible expenses Allowance for diminution in value of Accounts receivable Inventories Assets value Others Provision for long-term employee benefits

173

174

THAI UNION FROZEN PRODUCTS PCL.

(Unit: Million Baht) Consolidated

Separate

financial statements

2012

2011

2012

2011

Accrued liabilities

168

125

Inventory cost capitalisation

212

142

1,164

1,063

603

472

Intangible assets

3,784

3,853

Prepaid expense

Others reserves

213

207

Surplus on revaluation of land

181

Others

128

367

4,925

4,918

Others Total Deferred tax liabilities Depreciation and amortisation

Total

The above deferred tax liabilities included the deferred tax liabilities of EUR 100 million from the appraised value of fair value of intangible assets at acquisition date. In October 2011, the cabinet passed a resolution to reduce the corporate income tax rate from 30 percent to 23 percent in 2012, and then to 20 percent from 2013. In addition, in order to comply with the resolution of the cabinet, in December 2011, the decreases in tax rates for 2012 - 2014 were enacted through a royal decree. The Company reflected the changes in tax rates in its deferred tax calculation, as presented above. 24.

Share capital On 10 April 2012, the Extraordinary General Meeting of the Companyâ&#x20AC;&#x2122;s Shareholders no. 1/2012 passed resolutions on the following matters. -

Approval was given to decrease the Companyâ&#x20AC;&#x2122;s registered share capital from Baht 1,000 million (1,000 million ordinary shares of Baht 1 each) to Baht 999 million (999 million ordinary shares of Baht 1 each), by canceling 813,450 registered shares that had yet to be allocated. The Company registered the decrease of its share capital with the Ministry of Commerce on 23 April 2012.

ANNUAL REPORT 2012

175

Approval was given to increase the Companyâ&#x20AC;&#x2122;s registered share capital from Baht 999 million (999 million ordinary shares of Baht 1 each) to Baht 1,202 million (1,202 million ordinary shares of Baht 1 each) for the support of the issuance of new shares to existing shareholders (Rights Offering) according to Pro rata basis of shares and/or to the private placement and for the support of the conversion of debentures which were allocated to the private placement on 27 October 2010. The Company registered the increase of its share capital with the Ministry of Commerce on 24 April 2012.

Reconciliation of the number of issued and paid-up shares capital (Unit: Share) Consolidated financial statements / Separate financial statements 31 December 2012 Number of ordinary shares at the beginning of year

2011

956,329,407

191,264,422

1,147,593,829

956,329,407

Increase in the number of ordinary shares due to share capital increase* Number of ordinary shares at the end of year

* The Company allocated the new 191,264,422 shares to the existing shareholders at the ratio of 5 existing common shares to 1 newly issued shares at the subscription price of Baht 50 per share. The Company registered its additional shares with the Ministry of Commerce on 28 May 2012 and the shares were first traded on the Stock Exchange of Thailand on 30 May 2012. 25.

Statutory reserve Pursuant to section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside a statutory reserve at least 5% of its net income after deducting accumulated deficit brought forward (if any) until the reserve reaches 10% of the registered share capital. The statutory reserve is not available for dividend distribution. At present, the statutory reserve has fully been set a side.

176

THAI UNION FROZEN PRODUCTS PCL.

26.

Expenses by nature Significant expenses by nature are as follow: (Unit: Thousand Baht) Consolidated financial statements 2012

Separate financial statements

2011

2012

2011

Salary and wages and other employee benefits

9,978,011

8,620,366

2,343,165

1,944,049

Depreciation

1,746,498

1,551,699

335,265

272,539

Amortisation expenses

155,897

64,475

317

473

Loss on impairment (reversal)

(28,703)

34,681

(29,365)

29,772

1,184,108

737,568

357,570

184,220

66,383,009

59,485,850

18,322,331

17,867,630

(2,587,955)

(2,056,615)

Rental expenses under operating lease agreements Raw materials, consumables used and finished goods purchased Changes in inventories of finished goods and work in progress

27.

(438,734)

(409,086)

Promotional privileges The Company has been granted promotional privileges by the Board of Investment to carry on the activity of producing frozen seafood, processed and semi- processed food and others. In addition, five subsidiaries were granted promotional privileges by the Board of Investment to produce frozen seafood, processed and semi-processed food, processed animal feeds and others. Subject to certain imposed conditions, the tax privileges of the Company and these subsidiaries include the following: -

Exemption from corporate income tax on income from the promoted activities for a period of 8 years, to the extent that the amount of tax exempted does not exceed investment capital exclusive of land and working capital for manufacturing frozen seafood and canned pet food and for a period of 8 years for semi-canned food and frozen ready-meal commencing as from the date of first earning operating income. In case that there are losses incurred during the corporate income tax exemption period, the Company and its subsidiaries are allowed to utilise the losses as a deduction against net income of future years after the expiry of the tax exemption period but with a time limit of 5 years after that period.

Exemption from income tax on dividend paid to the shareholders from the income of the promoted operation during the corporate income tax exemption period.

ANNUAL REPORT 2012

177

Exemption from import duty on raw materials and essential materials imported for use specifically in producing for export for a period of 1 year and/or 5 years as from the date of first import.

Exemption from import duty on items which the promoted person imports for reexport for a period of 1 year and/or 5 years as from the date of first import.

Five percent of any increment in export income over that of the preceding year is deductible from taxable income for a period of 10 years commencing as from the date of first earning operating income, provided that the export sales of that year are not lower than the average export sales of the past three years, except for the first two years.

Exemption from import duty on machinery as approved by the Board.

In addition, subsidiaries have been accorded the following additional privileges: -

A fifty percent reduction of corporate income tax on their net income, for a period of 5 years after the corporate income tax exemption expired.

Permission to double deduct the costs of transportation, electricity and water supply for corporate income tax purpose, for a period of 10 years, commencing as from the date of first earning operating income.

Permission to deduct twenty five percent of the cost of public utilities, in addition to normal depreciation charges.

The Companyâ&#x20AC;&#x2122;s operation revenues for the years are below shown divided according to promoted and non-promoted activities. (Unit: Thousand Baht) Promoted operations 2012

Non-promoted operations

2011

2012

2011

Total 2012

2011

Sales Domestic sales Export sales Other income Total revenues

28.

2,412,520

2,784,983

1,623,981

775,403

4,036,501

3,560,386

19,843,900

19,735,527

1,191,541

429,818

21,035,441

20,165,345

276,101

126,051

2,573,114

2,388,842

2,849,215

2,514,893

22,532,521

22,646,561

5,388,636

3,594,063

27,921,157

26,240,624

Earnings per share Basic earnings per share is calculated by dividing profit for the year attributable to equity holders of the Company (excluding other comprehensive income) by the weighted average number of ordinary shares in issue during the year.

178

THAI UNION FROZEN PRODUCTS PCL.

Diluted earnings per share is calculated by dividing profit for the year attributable to equity holders of the Company (excluding other comprehensive income) by the weighted average number of ordinary shares in issue during the year plus the weighted average number of ordinary shares which would need to be issued to convert all dilutive potential ordinary shares into ordinary shares. The calculation assumes that the conversion took place either at the beginning of the year or on the date the potential ordinary shares were issued. For the year ended 31 December 2012 Weighted Profit for the year

average

Earnings per share

Consolidated

Separate

number of

Consolidated

Separate

financial

ordinary

financial

statement

Million Baht

Million share

Baht

4,694

2,935

45.3

4,787

3,028

1,115.6

Basic earnings per share Profit attributable to equity holders of the parent

1,070.3

4.39

2.74

4.29

2.71

Add: Interest expense from convertible bond recognised during the year Effect of dilutive potential ordinary shares Diluted earning per share Profit of ordinary shareholders assuming the conversion of warrants to ordinary shares

For the year ended 31 December 2011 Profit for the year

Weighted

Earnings per share

(restated)

average

(restated)

Consolidated

Separate

number of

Consolidated

Separate

financial

ordinary

financial

statement

Million Baht

Million share

Baht

5,117

3,022

42.9

5,207

3,112

999.2

Basic earnings per share Profit attributable to equity holders of the parent

956.3

5.35

3.16

5.21

3.11

179

ANNUAL REPORT 2012

29.

Segment information The operations of the Company and its subsidiaries principally involve the production, distribution and export of frozen seafood products. Some overseas subsidiaries of which the principal business activity is overseas investments. These activities are carried out in Thailand and overseas. Their income comes from both local and export sales. Below is the consolidated financial information for the years ended 31 December 2012 and 2011 (Restated) of the Company and its subsidiaries by segment. (Unit: Million Baht) Frozen and canned food products 2012

2011

Other businesses 2012

(Restated)

2011

Total 2012

Elimination 2011

(Restated)

2012

(Restated)

Grand total

2011

2012

2011

(Restated)

Sales - Local

5,469

4,571

11,963

11,221

17,432

15,792

(6,896)

(6,129)

10,536

9,663

- Export

110,166

102,509

977

898

111,143

103,407

(14,981)

(14,400)

96,162

89,007

Total sales

115,635

107,080

12,940

12,119

128,575

119,199

(21,877)

(20,529)

106,698

98,670

6,017

7,820

1,340

1,323

7,357

9,143

455

(646)

7,812

8,497

Segment operating income Unallocated income (expenses): Interest income

Administrative expenses

(54)

Share of profit from investment in associates

Finance cost Income tax expenses Profit attributable to non-controlling interests of the subsidiaries

(2,329)

(2,272)

(120)

(192)

(778)

Profit attributable to equity holders of the company

(956)

4,694

5,117

Financial information of the Company and its subsidiaries presented by geographical segment for the years ended 31 December 2012 and 2011 (Restated) is as follows: (Unit: Million Baht) Thailand 2012

2011

Overseas 2012

Total

2011

2012

Elimination 2011

2012

Grand total

2011

2012

2011 (Restated)

Sales - Frozen and canned food products - Other businesses Total sales

55,525

51,330

60,110

55,750

115,635

107,080

(18,383)

(18,433)

97,252

88,647

12,940

12,119

12,940

12,119

(3,494)

(2,096)

9,446

10,023

68,645

63,449

60,110

55,750

128,575

119,199

(21,877)

(20,529)

106,698

98,670

7,812

8,497

Segment operating income Property, plant and

17,923

15,655

Unallocated assets

equipment

11,425

9,248

6,325

6,219

17,750

15,467

173

188

76,836

67,622

Total assets

94,759

83,277

Transfer prices between the Company and its subsidiaries are as set out in Note 9.

180

30.

THAI UNION FROZEN PRODUCTS PCL.

Provident fund The Company, the local subsidiaries and their employees have jointly established provident funds under the Provident Fund Act B.E. 2530. The funds are contributed to on a monthly basis, by the employees at rates ranging from 2 to 5 percent of the basic salaries, and by the Company and its local subsidiaries at rates ranging from 2 to 10 percent, based on the length of employment. The Company’s fund is managed by MFC Asset Management Pcl. and the local subsidiaries’ fund is managed by American International Assurance Co., Ltd. and TISCO Asset Management Co., Ltd. During the year 2012, the Company and its local subsidiaries contributed approximately Baht 52 million (2011: Baht 45 million) to the fund.

31.

Provision for changes in the value of pension fund An overseas subsidiary has established a pension fund under which it matches participants’ contributions under these plans at a rate of 50 percent of an employee’s contribution up to a maximum of 6 percent of eligible compensation. The overseas subsidiary contributed USD 0.5 million to the fund in the year 2012 (2011: USD 0.4 million).

32.

Dividends Dividends declared in 2012 and 2011 consist of the following: Dividend Approved by Dividends on income for

per share

(Million Baht)

(Baht)

Annual General Meeting

the period 1 July 2011 to

of the shareholders on

31 December 2011

26 March 2012

Interim dividends for 2012

Total dividends

622

0.65

1,262

1.10

Board of Directors’ meeting on 8 August 2012

Total for 2012 Dividends on income for

1,884 Annual General Meeting

the period 1 October 2010

of the shareholders on

to 31 December 2010

25 April 2011

Interim dividends for 2011

325

0.34

870

0.91

Board of Directors’ meeting on 5 August 2011

Total for 2011

1,195

ANNUAL REPORT 2012

33.

181

Commitments and contingent liabilities

33.1 Commitments The Company and its subsidiaries have the following commitments: a) The Company and its subsidiaries have the commitments under the following agreements: As at 31 December 2012 Payable within Less than 1 year Office rental and service agreements Baht 119 million EUR Land lease agreements

Baht

million

2 million

EUR

million

Machine lease agreements

More than 5 years Baht

million

Total Baht

178

million

EUR

million

Baht

2 million

Baht

million

Baht

million

Baht

million

USD

3 million

USD

million

USD

million

USD

million

EUR

million

EUR

million

EUR

million

Baht

33 million

Baht

million

Baht

million

EUR

1 million

EUR

million

EUR

million

Baht

2 million

Baht

million

Baht

million

USD

million

USD

million

Baht

million

Baht

million

Vehicle lease agreements

1 to 5 years

Computer & copy machine lease agreements

Baht

17 million

Warehouse and factory construction agreements

Baht 388 million

Baht

388

million

Baht

54 million

Baht

million

USD

3 million

USD

million

Purchase machinery, equipment and vehicle agreements

Communication agreements

Baht

1 million

Baht

million

Advisory agreements

Baht

11 million

Baht

million

Internet network service agreements

Baht

4 million

Baht

million

Security service agreements

Baht

3 million

Baht

million

Baht

118

million

Baht

million

As at 31 December 2011 Payable within Less than 1 year

1 to 5 years

Office rental and service agreements Baht

52 million

Baht

million

EUR

1 million

EUR

million

Baht

USD EUR Baht

Land lease agreements

USD

3 million -

Car lease agreements

Machine lease agreements

Baht

5 million

EUR

1 million

Baht

2 million -

More than 5 years 9

EUR

million

Baht

million

Baht

million

USD

million

USD

million

EUR

million

EUR

million

Baht

million

EUR

million

Total

Baht

million

Baht

million

USD

million

USD

million

Baht

million

Baht

105

million

Baht

million

Computer and copy machine lease Agreements

Baht

39 million

Baht

65 million

Warehouse and factory construction agreements

182

THAI UNION FROZEN PRODUCTS PCL.

As at 31 December 2011 Payable within Less than 1 year

1 to 5 years

More than 5 years

Total

Purchase machinery, equipment Baht

58 million

Baht

million

Advertising agreements

and vehicle agreements

Baht

9 million

Baht

million

Communication agreements

Baht

1 million

Baht

million

Advisory agreements

Baht

14 million

Baht

million

Baht

1 million

Baht

million

Baht

3 million

Baht

million

Baht

million

Marketing and management service agreements Internet network service agreements

Baht

million

b) The Company and its subsidiaries are committed to pay the uncalled portions of their investments as follows: As at 31 December 2012

2011

The local subsidiary

Baht

214.2 million

Baht

51.0 million

The overseas subsidiary

USD

1.9 million

USD

1.9 million

The overseas associates

USD

0.3 million

USD

2.3 million

c) The overseas subsidiary has agreed to make payments under royalty agreements for the use of certain production machinery and equipment. The agreements require fixed payments plus an additional sum based on output. Total payments made under these arrangement for the year ended 2012 amounting to USD 1 million (2011: USD 1 million). d) The Office of the Attorney General of a US state filed a lawsuit against the three largest canned tuna companies in the US, including TUI, for failure to warn consumers that certain tuna contains mercury. Such case was dismissed on 8 January 2007. However, the plaintiff filed a notice of appeal and the appeal was granted on 19 August 2008. TUI filed a petition for an en banc appeal, which was denied. On 13 January 2009, TUI filed a petition with the Supreme Court, which the Court has declined to hear. Each party has subsequently filed motions and are currently awaiting the Judgeâ&#x20AC;&#x2122;s rulings. TUI is unable to predict the probable outcome of this matter. As such, TUI has no accrual related to this matter as of 31 December 2012.

ANNUAL REPORT 2012

183

33.2 Guarantees a) As at 31 December 2012, there were outstanding bank guarantees of approximately Baht 61 million and USD 2 million (2011: Baht 54 million and USD 4 million) issued by banks on behalf of the Company in respect of certain performance bonds as required in the normal course of business. b) As at 31 December 2012, there were outstanding bank guarantees of approximately Baht 156 million (2011: Baht 92 million) issued by banks on behalf of the subsidiaries in respect of certain performance bonds as required in the normal course of business. 34.

Financial instruments

34.1 Financial risk management The Company and its subsidiaries’ financial instruments, as defined under Thai Accounting Standard No. 107 “Financial Instruments: Disclosure and Presentations”, principally comprise cash and cash equivalents, restricted bank deposits, trade accounts receivable, loans, investments, accounts payable, short-term loans, long-term loans, debentures and convertible bond. The financial risks associated with these financial instruments and how they are managed are described below. Credit risk The Company and its subsidiaries are exposed to credit risk primarily with respect to trade accounts receivable and loans. The Company and its subsidiaries manage the risk by adopting appropriate credit control policies and procedures and therefore do not expect to incur material financial losses. The maximum exposure to credit risk is limited to the carrying amounts of receivables and loans as stated in the statement of financial position. Interest rate risk The Company and its subsidiaries’ exposure to interest rate risk relates primarily to its deposits at financial institutions, bank overdrafts, short-term borrowings, long-term borrowings, debentures and convertible bond. Most of the Company and its subsidiaries’ financial assets and liabilities bear floating interest rates or fixed interest rates which are close to the market rate, including the Company and its subsidiaries had entered into interest rate swap agreements.

184

THAI UNION FROZEN PRODUCTS PCL.

Significant financial assets and liabilities classified by type of interest rates are summarised in the table below, with those financial assets and liabilities that carry fixed interest rates further classified based on the maturity date, or the repricing date if this occurs before the maturity date. Consolidated financial statement as at 31 December 2012 Fixed interest rates Within 1 year

1-5 years

Over

Floating

Non- interest

5 years

interest rate

bearing

Total

Interest rate

(Million Baht)

(% p.a.)

Financial assets Cash and cash equivalents

1,310

1,400

Trade and other receivables

11,918

Restricted bank deposits

1.20 - 3.00

3.05 - 7.50 3.00 - 7.50

Short-term loans to other companies Long-term loans to other companies

1,322

12,002

13,375

0.10 - 2.47

Financial liabilities Bank overdrafts and short-term loans from financial institutions

1.11 - 4.01

Trade and other payables

10,545

Long-term loans

2,815

2,824

3.05 - 3.39

500

5,239

1,495

7,234

4.68

2,440

5.00

516

7,688

1,495

2,822

10,545

23,066

Debentures Convertible bond

Consolidated financial statement as at 31 December 2011 Fixed interest rates Within 1 year

1-5 years

Over

Floating

Non- interest

5 years

interest rate

bearing

Total

Interest rate

(Million Baht)

(% p.a.)

Financial assets Cash and cash equivalents

543

360

903

Trade and other receivables

Restricted bank deposits

Long-term loans to other companies

0.17 - 1.93

11,161

0.62

3.00 - 3.75

555

11,521

12,105

7,673

6,804

14,477

7,919

15,580

15,599

3.69 - 5.00

Debentures

5,733

1,495

7,228

4.69

Convertible bond

2,462

5.00

7,683

8,195

1,504

22,384

7,919

47,685

Financial liabilities Bank overdrafts and short-term loans from financial institutions Trade and other payables Long-term loans

2.43 - 4.70

ANNUAL REPORT 2012

185

Separate financial statement as at 31 December 2012 Fixed interest rates Within 1 year

1-5 years

Over

Floating

Non- interest

5 years

interest rate

bearing

Total

Interest rate

(Million Baht)

(% p.a.)

Financial assets Cash and cash equivalents

0.10 - 2.50

Trade and other receivables

4,197

3.10 - 3.40

Short-term loans to subsidiaries

1,337

1,417

Short-term loans to other companies

7.50

Long-term loans to subsidiaries

15,798

5,332

21,130

1.11 - 5.50

Long-term loans to other companies

7.50

15,798

6,683

4,245

26,814

9,788

1.28

1,929

2.60

Financial liabilities Bank overdrafts and short-term loans from financial institutions Trade and other payables Long-term loans Debentures Convertible bond

2,250

500

5,239

1,495

7,234

4.68

2,440

5.00

10,288

7,679

1,495

2,250

1,929

23,641

Separate financial statement as at 31 December 2011 Fixed interest rates Within 1 year

1-5 years

Over

Floating

Non- interest

5 years

interest rate

bearing

Total

Interest rate

(Million Baht)

(% p.a.)

Financial assets Cash and cash equivalents

Trade and other receivables

4,088

0.17 -

Short-term loans to subsidiaries

3.05

Long-term loans to subsidiaries

440

15,207

1,801

17,448

0.48 - 6.25

520

15,207

1,831

4,114

21,672

3,554

Trade and other payables

1,372

Long-term loans

2,250

3.91

Debentures

5,733

1,495

7,228

4.69

Convertible bond

2,462

5.00

3,554

8,195

1,495

2,250

1,372

16,866

Financial liabilities Bank overdrafts and short-term loans from financial institutions

The Company and its subsidiaries entered into interest rate swap agreements to manage risk associated with the financial liabilities carrying floating interest. The details of short-term loans from financial institutions and long-term loans are set out in Notes 17 and 19. The details of the interest rate swap agreements outstanding as at 31 December 2012 and 2011 is as follows:

3.24

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THAI UNION FROZEN PRODUCTS PCL.

The Company As at 31 December 2012 Principal amount

Interest Revenue Rate Swap agreements Floating rate 3-month THBFIX plus 1.50% (first 2 years) Floating rate 3-month THBFIX plus 1.75% (remaining 4 years)

Interest Expense Rate Swap agreements Fixed rate 4.522%

October 2016

Termination date

Baht 2,040 million (first 2 years) Baht 170 - 1,700 million (remaining 4 years)

Baht 510 million (first 2 years) Baht 42.5 - 425 million (remaining 4 years)

Floating rate 3-month THBFIX plus 1.50% (first 2 years) Floating rate 3-month THBFIX plus 1.75% (remaining 4 years)

Fixed rate 4.48%

October 2016

Baht 500 million

Floating rate 6-month THBFIX

Fixed rate 3.50%

August 2015

As at 31 December 2011 Principal amount 1

Baht 2,040 million

Interest Revenue Rate

Interest Expense Rate

Swap agreements

Float rate 3-month

(first 2 years)

THBFIX-Reuters

Baht 170-1,700

plus 1.50% (first

million (remaining 4 years)

Termination date

Fixed rate 4.522%

October 2016

Fixed rate 4.48%

October 2016

Fixed rate 3.39%

August 2015

Fixed rate 3.50%

August 2015

2 years) Float rate 3-month THBFIX-Reuters plus 1.75% (remaining 4 years)

Baht 510 million

Float rate 3-month

(first 2 years)

THBFIX-Reuters

Baht 42.5-425

plus 1.50% (first

million (remaining 4 years)

2 years) Float rate 3-month THBFIX-Reuters plus 1.75% (remaining 4 years)

Baht 500 million

Float rate 3-month

Baht 500 million

Float rate 6-month

THBFIX-Reuters THBFIX

ANNUAL REPORT 2012

Subsidiaries As at 31 December 2012

Principal amount 1

EUR 88 million

Interest Revenue Rate

Interest Expense Rate

Swap agreements

Float rate 3-month

Termination date

Fixed rate 2.70 %

October 2017

Fixed rate 2.73 %

October 2017

Fixed rate 1.85 - 2.55%

February 2016

Fixed rate 1.85 - 2.55%

February 2016

EURIBOR 2

EUR 123 million

USD 40 million

Float rate 3-month EURIBOR Float rate 3-month LIBOR Float rate 3-month LIBOR

As at 31 December 2011

Principal amount 1

EUR 94 million

Interest Revenue Rate

Interest Expense Rate

Swap agreements

Float rate 3-month

Termination date

Fixed rate 2.70 %

October 2017

Fixed rate 2.73 %

October 2017

Fixed rate 1.85 - 2.55%

February 2016

Fixed rate 1.85 - 2.55%

February 2016

EURIBOR 2

EUR 132 million

Float rate 3-month EURIBOR

USD 40 million

Float rate 3-month LIBOR

USD 40 million

Float rate 3-month LIBOR

Cross currency and interest rate swap agreements The Company As at 31 December 2012 Currency and Interest Revenue Rate Swap agreements Principal amount

Interest rate

Currency and Interest Expense Rate Swap agreements Principal amount

Termination date

Interest rate

Baht 1,134 million

Floating rate 3month THBFIX

USD 35 million

Floating rate 3-month LIBOR-BBA plus 0.665%

July 2013

Baht 674 million

Floating rate 3month THBFIX plus 2.31%

USD 22 million

Floating rate 3-month LIBOR plus 3.00%

June 2014

Baht 2,640 million

Fixed rate 1.78%

EUR 66 million

June 2015

Baht 1,997 million

Floating rate 6month THBFIX minus 1.75%

EUR 50 million

June 2017

Baht 285 million

Floating rate 3month THBFIX

USD 9 million

Floating rate LIBOR plus 0.42%

July 2013

187

188

THAI UNION FROZEN PRODUCTS PCL.

As at 31 December 2011 Currency and Interest Revenue Rate Swap agreements Principal amount

Interest rate

Currency and Interest Expense Rate Swap agreements Principal amount

Termination date

Interest rate

Baht 397.8 million

Float rate 3-month THBFIX

USD 12 million

Fixed rate 4.4086%

July 2012

Baht 1,134 million

Float rate 3-month THBFIX

USD 35 million

Float rate 3-month LIBOR-BBA plus 0.665%

July 2013

Baht 674 million

Float rate 3-month THBFIX plus 2.31%

USD 22 million

Float rate 3-month LIBOR plus 3.00%

June 2014

* No initial exchange

Subsidiary As at 31 December 2012 and 2011 Currency and Interest Revenue Rate Swap agreements Principal amount 1

Baht 976 million

Interest rate Float rate 3-month THBFIX plus 2.94%

Currency and Interest Expense Rate Swap agreements Principal amount

Termination date

Interest rate

USD 32 million

Fixed rate 5.65%

March 2015

Foreign currency risk The Company and its subsidiariesâ&#x20AC;&#x2122; exposure to foreign currency risk arises mainly from trading transactions and borrowings that are denominated in foreign currencies. The Company and its subsidiaries seek to reduce this risk by entering into forward exchange contracts when it considers appropriate. The balances of financial assets and liabilities denominated in foreign currencies of the Company and its subsidiaries are summarised below. Foreign

Financial assets

Financial liabilities

Average exchange rate

currency

as at 31 December

2012

2011

2012

2011

(Million)

2012

2011

(Baht per 1 foreign currency unit)

USD

311

308

30.58

31.64

JPY

149

239

0.35

0.41

EUR

513

376

40.50

40.97

VND

6,515

2,062

0.0015

ANNUAL REPORT 2012

Foreign exchange contracts outstanding are summarised below. As at 31 December 2012

Foreign currency

Bought

Sold

amount

(Million)

Contractual exchange rate Bought

Sold

Contractual maturity date

The Company USD against Baht

198

30.30 - 32.40

January 2013 - June 2014

JPY against Baht

143

0.36 - 0.41

January 2013 - June 2013

EUR against Baht

448

39.10 - 42.96

March 2013 - June 2017

USD against Baht

209

30.73 - 32.48

May 2013 - December 2014

USD against GBP

1.61

May 2013

EUR against GBP

0.81

June 2013

Subsidiaries

As at 31 December 2011

Foreign currency

Bought

Sold

amount

(Million)

Contractual exchange rate Bought

Sold

Contractual maturity date

The Company USD against Baht

213

29.89 - 43.00

January 2012 - December 2014

JPY against Baht

107

0.41

April 2012 - June 2012

EUR against Baht

320

41.29 - 41.93

39.10 - 44.66

January 2012 - December 2014

USD against Baht

164

30.26 - 32.13

January 2012 - January 2013

USD against GBP

1.58

December 2012

USD against EUR

1.45

January 2012 - March 2012

EUR against GBP

0.84

January 2012 - December 2012

Subsidiaries

As at 31 December 2012, the Company and its local subsidiaries have outstanding option agreements with special conditions with financial institutions under which they have obligations to sell amounts of between USD 28 million up to USD 67 million (2011: between USD 30 million up to USD 76 million), depending on conditions stipulated in the agreements, at rates of Baht 30.85 to Baht 32.30 per USD 1 (2011: at rates of Baht 30.25 to Baht 31.70 per USD 1). These agreements will terminate within December 2013 (2011: September 2012) and the Company has outstanding option agreements with two local banks under which the Company has obligations to sell a total of EUR 200 million at rates of Baht 42.00 and Baht 42.50 per EUR 1. These agreements will terminate within May 2017. At the same time, the two local banks have

189

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THAI UNION FROZEN PRODUCTS PCL.

obligations to buy a total of EUR 200 million at rates of Baht 42.00 and Baht 42.50 per EUR 1. These agreements will terminate within May 2017. Moreover the overseas subsidiaries have outstanding option agreements as follow. As at 31 December 2012 Contractual exchange rate

Contractual

Bought

Sold

amount

(Million)

EUR against USD

42.0

33.5

1.33

1.38

December 2013

GBP against USD

23.0

15.4

16.40

December 2013

EUR against GBP

38.1

30.1

0.79

Foreign currency

Bought

Sold

maturity date

0.79 June 2013 - December 2013

As at 31 December 2011 Contractual exchange rate

Contractual

Bought

Sold

amount

(Million)

EUR against USD

18.6

26.8

1.4435

December 2012

GBP against USD

24.2

40.0

1.6500

December 2012

EUR against GBP

34.0

41.8

0.8125

December 2012

Foreign currency

Bought

Sold

maturity date

34.2 Fair values of financial instruments Since the majority of the Company and its subsidiaries’ financial instruments bear floating interest rates, their fair value is not expected to be materially different from the amounts presented in the statement of financial position. A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. The fair value is determined by reference to the market price of the financial instrument or by using an appropriate valuation technique, depending on the nature of the instrument. 35.

Capital management The primary objective of the Company’s capital management is to ensure that it has an appropriate financial structure in order to support its business and maximise shareholder value. As at 31 December 2012, the Group’s debt to equity ratio was 1.35:1 (2011: 2.07:1) and the Company’s was 0.93:1 (2011: 1.13:1).

ANNUAL REPORT 2012

36.

191

Events after the reporting period On 4 January 2013, the Extraordinary General Meeting of the Shareholders of Thai Union Hatchery Co., Ltd., a subsidiary of Thai Union Feedmill Co., Ltd. no 1/2013 passed resolution on the increase its share capital from Baht 300 million (30 million ordinary shares of Baht 10 each) to Baht 420 million (42 million ordinary shares of Baht 10 each). The said company registered the increase of its share capital with the Ministry of Commerce on 9 January 2013. On 28 January 2013, the Extraordinary General Meeting of the Shareholders of the Company no. 1/2013 passed resolution on additional purchase in ordinary shares of Pakfood Public Company Limited (PPC) from 49.97% to exceed 50% and up to 100% holding of the issued and paid-up share of PPC which it resulted in changing of the PPC’s status from the associated company to subsidiary. On 21 February 2013, the Company purchased ordinary shares of PPC of 2,984,787 shares at a purchase price of Baht 50 per share, or a total of Baht 149 million. This purchase made the investment proportion in PPC increase from 49.97% to 54.46%. On 1 March 2013, the meeting of the Company’s Board of Directors No. 1/2013 passed resolution to approve dividend payment of Baht 2.10 per share from its net operating profit of the year 2012, to the Company’s shareholders. However, by the resolution of the meeting of the Company's Board of Directors No. 4/2012 held on 8 August 2012, the Company had paid out the interim dividend payment of Baht 1.10 per share from the six-month operating profit ended 30 June 2012, to the Company's shareholders totaling Baht 1,262 million on 31 August 2012. The remaining dividend is Baht 1.00 per share or totaling Baht 1,148 million. The dividend will be paid on 22 April 2013.

37.

Approval of financial statements These financial statements were authorised for issue by the Audit Committee and the Company’s management on 1 March 2013.

192

THAI UNION FROZEN PRODUCTS PCL.

NOTE