Cma Case Study

Copy Right Reserved Institute of Certified Management Accountants of Sri Lanka May 2013 Examination Integrative Case Study (ICS – 405) Instructions to candidates: The Integrative Case Study (ICS – 405) of May 2013 Examination comprises of two scenarios; Scenario I, Scenario II and the Question paper. Scenario I Scenario I is provided in this web site and has information about the company and industry, on which the question paper will be based. This is not allowed in the examination hall. Scenario II Scenario II is a continuation of Scenario I.

Scenario I together with Scenario II will be provided with the Question paper, at the Examination. Question paper The question paper will be of 3 hours duration and will have one question based on Scenarios I and II. 1 Prospects of Fraser & Neave Limited and Takeover Scenario I Introduction Southeast Asian companies have become more active in mergers and acquisitions in the recent past. It was the financial news around the world that major shareholders were trying to gain the control of Fraser & Neave Limited (F&N), a well established group of companies mainly in the businesses of food & beverages, Properties and Printing and Publication.

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Mr. Charoen, a major shareholder of Thai Beverage Public Company Limited (Thai Beverage) showed the interest of acquiring F&N by convincing other major shareholder: Japan’s Kirin Holdings company that had 15% stake in F&N. Mr. Charoen’s offer price was 4. 3% above the closing price of $8. 51 when the offer was made. Prior to this, Overseas Chinese Bank Nominees Pte Ltd (OCBC) Group and Lee Rubber Company (Pte) Limited (“Lee Rubber”), other two major shareholders of F&N agreed to sell their combined stake of 22% in F&N at a price of $8. 88 and 8. 6% stake in Asia Pacific Breweries Limited

(APBL) at $45 per share, to Thai Beverage Public Company Limited and Kindest Place Groups Limited respectively. Heineken NV offered $50 per share for F&N’s direct and indirect stakes in APBL and $163 million for non-APBL assets in Asia Pacific Investment Pte Ltd (APIPL) in July 2012. During the month of August 2012, F&N Board announced the recommendation for sale of direct and indirect stakes in APBL to Heineken NV, at an improved offer of $53 per share (Total consideration of $5. 6 billion) and non-APBL assets in APIPL for $163 million thus divesting a substantial part of its beer business.

APIPL was the 50:50 joint venture company through which F&N and Heineken held their joint 64. 8% interest in APBL. The share price of F&N was affected by this tense situation irrupted due to of takeover bids and the changes in other socio economic factors. As a result, market price of shares of F&N fluctuated during the year 2012. Share price of F&N fell as the market digested news of Heineken’s final offer to acquire its stake in APBL. Heineken and F&N were the two largest shareholders in APBL. Subsequently, F&N sold its entire 39. 7% stake in APBL to Heineken by registering a gain of around $4. 8 billion.

As a result, Heineken’s direct and deemed interest in APBL has gone up to 84. 24%. Subsequent to this, Group’s beer portfolio now consists of a 55%-held brewery in Myanmar Brewery Limited (MBL) in Myanmar. MBL manufactures and sells Myanmar’s leading beer brands such as Myanmar Beer, Myanmar Double Strong and Andaman Gold. However, the Myanmar government issued several new beer licenses to other companies in the year thus creating another challenge that would be likely to be faced in future. Hence, a capacity upgrading plan was completed with a new high-speed bottling line installed during the year.

In connection with the takeover bid offered by Thai Beverage, other giant investors also launched takeover bids. Accordingly, TCC Assets Limited launched a mandatory conditional cash offer at $8. 88 per share of F&N in September 2012 followed by another voluntary conditional cash offer by Union Enterprise Limited (OUE) to buy shares of F&N at $9. 08 per share. The battle of taking the control of F&N ended in February 2013 by giving more than 90% of stake to the Thai businessman, Mr. Charoen through Thai beverage. 2 Brief History of F&N F&N was established in 1883 and commenced its operations in food and beverage industry and.

It is driven by the philosophy of providing pure enjoyment and pure goodness to consumers by fulfilling their health and wellness needs. The vision of F&N is to be a world-class multinational enterprise with an Asian base, providing superior returns with a focus on Food & Beverage, Properties and Publishing & Printing businesses. Operations are carried out with many fully owned subsidiaries (Both listed and unlisted), joint ventures and associate companies as exhibited in the group structure given in figure 1. F&N is now operating over 20 countries with a workforce of more than 17,000 people.

Through the years, F&N has built a strong portfolio of brands known for their refreshing tastes and nourishing goodness, a regional network of manufacturing plants and sales and distribution channels, and most importantly a sound reputation as one of the region’s leading Food and Beverage producers. F&N holds the number 1 position in Malaysia for soft drinks, and maintains key positions in dairies and beer segments in this region. The position of brand image was further validated as F&N took the top spot in the Food & Beverage category in the 2012 Malaysia’s Most Valuable Brands awards competition.

The soft drinks division maintained the focus by vigorously defending on its leading position despite the emergence of a partner (The Coca-Cola Company-TCCC) turned a competitor. The F&N ended its licensing partnership with TCCC in Singapore, Malaysia and Brunei. This transformative step created challenges for the group to better place its own products in a competitive environment. Accordingly, the efforts were made in marketing activities and boosted investment in research and development facilities to expand products.

The core soft drinks brands led by 100 PLUS continued to lead the overall soft drinks category with a volume expansion of about 12% to 57. 3 million cases from 51. 2 million cases in the year 2012 with an additional sales boost coming from Brunei. Strong performances from F&N SEASONS brand in the Asian Soft Drinks category powered the growth performance from “F&N Clearly Citrus”, a new entrant in the lemon- lime segment. Initially, F&N manufactured soft drinks and later on ventured into brewing beer in 1931 followed by dairy operations started in 1959. It

started manufacturing glass bottles needed for its food and beverage section in 1972. By further diversifying its operations, F&N started property development and management in 1990 and then moved to printing and publishing business in the year 2000. F&N was subsequently listed on Singapore Stock Exchange and at present, F&N is among the top 25 listed companies on the Singapore stock exchange. Overshadows of continuing Euro debt crisis, recent region’s economic and political uncertainties and operational problems slowed down the growth of F&N in the year 2012.

The financial year 2012 began without the business from Coca-Cola, a business partner for 73 years due to the expiration of licensing agreements. As a result, revenue and the profit for the year 2012 were lower when compared to the previous year. The revenue was further affected due to temporary cessation of production at flood-hit Dairies Thailand (A subsidiary) though it was possible to bring the operations back to normal due to prompt actions taken and the commitment of the management.

Diaries Thailand maintained its supply pipeline via importation and managed to sustain its market position despite the floods thus generating 79% of expected revenue even the factory was shut down for 55 days. Dairies Thailand returned to full production by June 2012, and the division was rewarded for its resilience and commitment when it achieved complete recovery to resume full production one month ahead of the schedule. The Thai Food and Drug Administration awarded Dairies Thailand a certificate of recognition for being the fastest to recover and its outstanding achievement in teamwork and strength.

3 Table 1: Group Structure of F&N Food and Beverage Fraser & Neave Holdings Bhd ? 23 Subsidiaries ? 1 Associate (Cocoaland Holdings Berhad) Other Listed & Unlisted Companies ? 12 Subsidiaries Asia Dairies F&NBev Manufacturing F&N Dairy Investments F&N Foods F&N United F&N Interflavine Magnolia – PDL Dairies Myanmar Brewery Red Lion Holdings Tiger Taverns PT F&N Indonesia F&N Creameries Group 4 Subsidiary companies ? 1 Joint venture with Asia Pacific Investment ? Asia Pacific Breweries Group 66 Subsidiaries 4 Joint ventures 2 Associates ? Heineken-Asia Pacific Breweries 7 Subsidiaries 1

Joint venture Property Frasers Centrepoint Group ? 166 Subsidiaries ? 16 Joint ventures ? 6 Associates Listed companies ? Frasers Centrepoint Trust ? Frasers Commercial Trust Unlisted Company ? Vacaron Company Publishing and Printing Times Publishing Group ? 43 Subsidiaries ? 2 Joint ventures ? 4 Associates Listed companies ? Fung Choi Media Group ? PMP Limited Other Other Unlisted Companies ? 7 Subsidiaries F&N Investments F&N Services F&N Treasury Fannet Online Fraser & Neave (Singapore) Fraser & Neave Investments (HK) International Theme Parks (Singapore) 4 Operations in Food and Beverage Section

Soft drinks and dairies business, with operations and investments in Singapore, Malaysia, Thailand, China and Vietnam, are operated primarily through Fraser & Neave Holdings Bhd; while Beer business is operated mainly through Asia Pacific Breweries Limited (APBL), in 37 breweries in 14 countries in the Asia Pacific region. The product portfolio comprises of F&N Nutrisoy, 100PLUS, F&N SEASONS, F&N Magnolia milk, F&N Fruit Tree Juices, F&N Ice Mountain, F&N aLIVE yoghurt, NutriTea and a range of F&N sparkling drinks for the soft drinks and dairies. Tiger, Anchor, Baron’s and ABC are the major brands for Beer section.

F&N has been awarded with many accolades including HACCP accreditation since 2003. Soft drink operation transformed into a highly competitive environment, following the entry of a former partner, Coca- Cola which turned to be a competitor. As a result, measures were taken to energize the marketplace by improving touch points to improve product availability, cold equipment services, merchandising intensity, increasing depth of inventory and selling space. Despite the challenges faced, the strength built over 129 years helped F&N to grow volume and revenue by 12% and 10% respectively.

A year after the separation with Coca-Cola, the division has grown ahead of the market with volume growth in almost all categories. 100PLUS continued to be a mainstay at all major sporting events as the preferred isotonic beverage. Malaysians from all walks of life rallied to support the national contingent to the London Olympics in the 100PLUS Road to London Campaign. In conjunction with the campaign, national celebrity athletes including Datuk Lee Chong Wei, Pandalela Rinong, Khairul Fahmi Che Mat and Safee Sali were signed on as 100PLUS ambassadors.

F&N Clearly Citrus was introduced in November 2011 to complement the current exciting flavoured soft drinks line up. Major towns across Malaysia were invaded by F&N Clearly Citrus agents in bright yellow and green outfits, displaying the refreshing sight of lemons and limes. Soft Drinks division extended its leadership positions in the F&B industry with new products armed with well-established brands like the 100PLUS isotonic drink, F&N Sparkling Drinks, F&N SEASONS Asian-inspired drinks and teas, as well as the F&N ICE MOUNTAIN water range.

100PLUS EDGE was introduced at the beginning of the year to herald the division’s efforts to offer more choices and to drive new and differentiated products across the soft drinks portfolio. While maintaining the growth in key markets of Singapore, Malaysia and Thailand, new ASEAN markets are also expected to grow in dairy business. 5 Properties Properties section is operated by a Frasers Centrepoint Limited (FCL), a wholly owned subsidiary.

F&N started its operations with a single shopping mall and has stretched its operations into businesses of property development, property investment, running serviced residences and maintaining investment funds in Australia, China, Japan, Hong Kong, Korea, New Zealand, Philippines, Thailand, UAE, Vietnam and the UK. In 2012, the Malaysian property market continued its growth but at a slower pace compared to 2011. The housing sector continues to be the primary driver of the Malaysian property market while residential property development continued at an active pace with good sales returns amidst rising prices of those properties.

For the year ahead, the property market is expected to present a more challenging landscape in view of continuous construction cost pressures and new projects coming into the market. Take-up rates for residential units in Singapore were encouraging in the year 2012 despite some cooling measures implemented by the Singapore Government. FCL launched four projects and sold 3,047 units during the current year and remains one of Singapore’s top three developers in terms of number of private non-landed residential (including Executive Condominium) units sold.

The entire interest in Frasers Property China Limited (FPCL), a subsidiary of FCL was sold during the year. In Australia, strong pre-sales of about 580 units was recorded in the year 2012. During the year, Frasers Commercial Trust (FCOT) acquired the remaining 50% interest in Caroline Chisholm Centre in Canberra and successfully unlocked value in the Key point which was divested at a gain of $73 million. In October 2012, FCOT completed its portfolio reshaping strategy which began two years ago, when it divested its remaining Japanese portfolio by focusing on its portfolios in Singapore and Australia.

However, the revenue from properties section dropped during the year partly because of changes in accounting policy as a result of adoption of IFRs. Under this new rule, earnings of overseas and certain Singapore residential developments are recognized only upon completion, and not according to construction progress. Consequently, despite achieving strong pre-sales of private residential units in Australia and China as well as executive condominium units in Singapore, such revenue and profit were not recognized in the year 2012.

Specifically, earnings of the 573unit Esparina Residences (99% sold), an executive condominium in Singapore, and phases 1 and 2 of the mixed-use Central Park project in Australia (74% sold) would only be recognized upon construction completion in the coming financial year. On the other hand, development property earnings were lifted by a $68 million gain from the Group’s sale of its 50% stake in the mixeduse Central Park project in Australia to Sekisui House Ltd. Singapore’s residential market remained resilient despite economic uncertainties and the government’s effort to cool the property market.

The first nine months of 2012 saw primary home sales totaling 17,927 units, up 12. 7% from 15,904 units in 2011 and about 10% in 2010. It has been estimated that the aggregate residential sales in 2012 is between 20,000 and 23,000 units. Overall, private home prices rose by 0. 6% in 2012 indicating the highest increase this year. 6 Even though Singapore office market is concerned about the Eurozone debt crisis and is propensity to slow the growth momentum, the group managed to maintain it’s grow as expected.

Suppressed leasing activities could be seen among large space occupiers including major banks and financial institutions, as they remained cautious of the economic uncertainties. It was observed that the majority of the takeups in the last quarter of the year were of Grade A office spaces of less than 20,000 square feet. The City Hall/Marina and Raffles Place/New Downtown micro-markets saw the biggest jump by 2. 6% and 1. 7% respectively during the quarter. The city fringe micro-market continued to enjoy the highest occupancy at 98.

7%, whilst the Orchard Road micro-market experienced the lowest rate at 87. 4% as at end of September 2012. In general, the overall improvement in occupancy rate of Grade A office space in Singapore has helped moderate rental decline for two consecutive quarters. On the other hand, the retail property market in Singapore stayed buoyant with the opening of new malls, stores and restaurants. Renowned F&B entrepreneurs and international brands are still looking for viable locations in new and existing malls to establish their presence in Singapore.

As a result, retail rents in both Orchard Road and Regional Centres (suburban residential estates) have been steady. The monthly prime rents in Orchard Road at the end of September 2012 remained unchanged from the previous quarter staying firm at $31. 60 per square foot, whilst the average monthly gross rent of prime space in suburban stabilized at $29. 75 per square foot per month. Meanwhile, the hospitality sector continued to see positive demand in 2012, boosted by strong visitor arrivals as well as new setups by regional headquarter offices in Singapore.

In general, occupancy rates for serviced residences in Singapore are stronger than for hotels, clocking an average occupancy of 91. 8% in 2012 against an average of 86% for hotels. Publishing & Printing Times Publishing Limited is the largest publishing and printing company in Singapore. It comprises of publishing, printing, direct sales, distribution and retailing of books, magazines and the provision of educational services and operated through a global network established in South-East Asia, Hong Kong, China, Japan, Australia, Europe and the USA.

During the year under-performing Library reference business in the US was discontinued with a view to focus on Education Publishing which has gained strong growth. A new office in Chile was recently set up to drive the growth in education publishing business in Latin America. Times Publishing Group’s revenue grew by 1% driven mainly by strong growth in Education Publishing and increased contribution from the distribution of lifestyle products amidst a decline of print demand from Western markets and weak retail sentiments.

During the year, Education Publishing delivered a stellar performance with double-digit growth in revenue and PBIT. The success was underpinned by investment foresight and proactive management of the education publishing unit to improve both revenue and earnings. Overseas sales grew from 49% to 62% of total education revenue over the last three years, as Education Publishing continued to gain momentum in international market. The Group continued to face challenges in the Printing business as the print volume in Western markets declined.

However the efforts to diversify our revenue base to non-publishing segments and to increase our market shares from domestic markets in Malaysia and China registered positive results. In the year, Times Printers embraced digital opportunities by launching a host of digital services such as e-book conversion, app development and QR (Quick Response) codes to seamlessly integrate print and web requirements of customers. An affirmation of superior quality was displayed as Times Printers once again garnered recognition by winning numerous international awards.

Distribution division, achieved improvement in revenue through the diversification to lifestyle products and expansion of its distribution network for non-book customers in Singapore, Malaysia and Hong Kong. Even though there were closures of major bookstores in Singapore. 7 Distribution Network F&N maintains an unparalleled nationwide distribution system to ensure the pervasiveness of brands and products in marketplaces and townships. In addition, the partnership with a strong network of distributors ensures the flow of deliveries, stocks and inventories to combined operation and service of 90,000 outlets.

Apart from doubling the investments in the installation of coolers, the F&N Partner Rewards program was enhanced with emphasis on strengthening partner relationships. Partner loyalty reflects the division’s commitment in helping them transform alongside F&N while establishing greater equity and pride in being an F&N distributor. With an established and demographically-organized distribution network, the division is able to position products in the marketplace and effectively gain insight into trends relating to on-ground market activities.

Information technology was a major enabler in advancing product and cooler penetration. The investment in 3G-enabled hand held computers facilitated the provision of real time data processing and marinating the intelligence by helping the division to respond faster to the market. Food and Beverage section in Malaysia harnessed the strength of employees from across the Group to transform and reenergize the market in a four-day merchandising blitz. Over 600 employees across the Group covered 2,800 outlets in Peninsular Malaysia to execute in-outlet merchandising thereby increasing F&N brand presence.

F&N products are available in 90% of the outlets nationwide making F&N brands the most pervasive among FMCG products distributed in Malaysia itself. Over time, with the experience and tacit knowledge gained, Food Beverage section of F&N regained control of all aspects of its soft drinks business, from manufacturing and marketing to sales and distribution. F&N Foods Pte Ltd, a subsidiary of F&N became the sole distributor of all F&N beverages in Singapore and Malaysian-listed subsidiary, Fraser & Neave Holdings Bhd.

, covers Malaysia and Brunei distribution. This new structure allowed F&N to aggressively push marketing and sales activities for all F&N beverages regionally as the Group consolidating position as one of ASEAN’s leading F&B players. New investment in Diaries Malaysia After 52 years, plant at Dairies Malaysia was transformed to the state-of-the-art of technology with integrated cannery, processing and filling facility and now it operates the most advanced technologies in canned milk production with the move of its manufacturing facility.

Manufacturing plant now operates in a 37. 4 acre site within the Selangor Halal Hub. Further, it enhanced capabilities and capacity and reinforced the plant to have ‘Halal’ credentials by aiming relatively untapped markets of the Middle East, Africa and Indonesia. Investments in technology continue to be a primary enabler to optimise efficiencies and output for faster response across the extensive distribution network. The commercial production capacity of the new plant is 1. 5 million cans per day.

Technology has been incorporated to implement just-in-time supply of cans by connecting Warehouse Distribution Centre is equipped with automated storage and retrieval systems (ASRS) that amongst other things enables better inventory control and tracking, increased workplace safety and most significantly, produce major savings in inventory storage costs by creating greater storage density. Further, it incorporates heat recovery and integrated wastewater treatment process for pollution controls.

Immediate benefits of the new plant include the introduction of a new nitrogen filling process, improved controls on viscosity of products and even better hygiene and quality processes. The halftray packaging capability available at the plant ensures greater visibility of finished product and promotes better handling while reducing the use of packaging material. Dairies Malaysia plant is accredited with ISO 9001:2008, ISO22000:2005, HACCP Codex and MS 1480 certification to validate its high standards of manufacturing and food safety. 8 Corporate Governance

The Company is fully committed to good corporate governance practices and fair dealings in all its activities by aligning with the principles and best practices. Board comprises of 9 directors and six subcommittees namely Group Executive, Food & Beverage Committee, Risk Management, Audit, Nominating, and Remuneration & Staff Establishment Committee. All the nine directors are nonexecutive directors and an independent non-executive Chairman heads the Board. A formal evaluation process has been implemented to assess the effectiveness of the Board and this is conducted by an external consultant.

The Board’s ratings were especially noteworthy in the areas of corporate social responsibility. To strengthen corporate governance, the Board of Directors has adopted the Singapore Exchange Listing Ruling, which requires companies listed on the Singapore Stock Exchange (SGX) to have a robust and effective system of internal controls that address financial, operational and compliance risks. Working Culture Adequate investment is made to provide necessary training for employees on continuous basis.

Recognizing the importance of diversity in cultivating agility and creativity in the workplace, knowledge sharing initiatives across the organization have begun with inter-placements of key senior managers in the soft drinks and dairies division. Traditional hierarchy barriers are broken down with the introduction of an enterprise social network that promotes employee interaction and collaboration on a social platform. It is intended to cross-fertilize of talents contributing to the skills of human capital. Executives’ Share Option Scheme

The ESOS which was established in October 2007 is in operation. Details of all the options granted to and exercised by executives are given in table 2. Table 2: Number of share options given and exercised in ESOS The fair value of share options granted as at the date of grant is determined using the binomial valuation model taking into account the terms and conditions upon which the options were granted. The inputs to the model used are given in table 3 below. 9 Table 3: Inputs used valuation model Financial Information

Selected financial information of F&N for the last five years is given in figures 1, 2 and 3 below. Figure 1: Financial performance Year ended 30 September Note 1 Profit statement ($ millions) Revenue Profit before taxation – before interest – before impairment, fair value adjustment & exceptional items – after exceptional items Attributable profit 2 – before fair value adjustment & exceptional items – after exceptional items Balance sheet ($ millions) 3 Net asset value Total assets employed  Long-term borrowings Market Capitalisation ($ millions) at close of business

on then first trading day after preliminary announcement of results 1 Financial ratio (%) Return on average shareholders’ equity – profit before impairment, fair value adjustment & exceptional items 2 – attributable profit before fair value adjustment & exceptional items 4 Gearing ratio – without non-controlling interest – with non-controlling interest 1 Per share Profit before impairment, fair value adjustment, taxation and exceptional items (cents) Attributable profit (cents) (basic) – before fair value adjustment and exceptional items – after exceptional items 3 Net asset value ($) Dividend – net (cents) 5 – cover (times) Stock exchange Prices ($) at close of business on the first trading day after preliminary announcement of results 10 FY2008 FY2009 FY2010 FY2011 FY2012 4,990 766  701  737  372  436  5,283  13,526  3,355 5,146 799  737  614  462  357  5,585  13,868  3,608 5,697 1,071  1,009  1,172  584  728  6,143  13,523  2,666 6,355 1,177  1,123  1,438  643  898  6,843  13,924  3,216 5,570 952  868  1,239  472  836  7,591  14,651  2,972 4,308 5,408 9,127 8,745 13,355 13. 4 7. 1 83. 3 68. 6 13. 6 8. 5 65. 5 54. 7 17. 2 10. 0 46. 8 41. 4 17. 3 9. 9 34. 5 30. 8 12. 0  6. 5 29. 8  27. 4 50. 5 26.

8 31. 4 3. 80 13. 5 2. 0 53. 0 33. 2 25. 7 4. 01 13. 5 2. 5 72. 2 41. 8 52. 1 4. 38 17. 0 2. 5 79. 8 45. 7 63. 8 4. 85 18. 0 2. 5 61. 1 33. 2  58. 9 5. 31    18. 0  1. 8 3. 10 3. 88 6. 51 6. 20 9. 35 Figure 2: Balance sheets as at 30th September 2012 (in $’000)    SHARE CAPITAL AND RESERVES  Share capital   Treasury shares   Reserves     Non? Controlling Interest      Represented by:  NON? CURRENT ASSETS  Fixed assets    Investment properties   Subsidiary companies   Joint venture companies   Associated companies   Intangible assets   Brands   Other investments   Other receivables   Other assets   Deferred tax assets    TOTAL NON? CURRENT ASSETS

2012   1,499,329 (23)   6,092,150 7,591,456      663,048   8,254,504 The Group  2011 (Restated)  1,417,404 ? 5,425,965 6,843,369      831,204   7,674,573 2010 (Restated)  1,374,502 ? 4,707,223 6,081,725      803,055   6,884,780 The Company  2012  2011       1,499,329  1,417,404 (23)     2,840,319  4,339,625                      ? 4,339,625      ? ?  3,829,665  ? 82,383  ? 212  8,877  ? ?                      ? 3,921,137 ?   2,755,660 4,173,064                    ? 4,173,064 747,447 2,837,787 ? ? 1,495,514 163,475 30,337 374,978 83,970 42,400        38,700  5,814,608 1,188,098 2,476,740 ? 60,101 1,382,200 569,609 73,519 404,583 65,212 41,000        14,649  6,275,711 1,104,216 2,139,026 ?

89,839 1,355,249 576,219 74,275 323,531 61,556 41,000        25,251  5,790,162 ? ? 3,676,408 434,421 82,383 ? ? 8,672 ? ?                    ? 4,201,884 CURRENT ASSETS  Properties held for sale   Inventories   Trade receivables   Other receivables  Subsidiary companies   Joint venture companies   Associated companies   Short? term investments    Bank fixed deposits  Cash and bank balances     Assets held for sale    TOTAL CURRENT ASSETS 4,441,491 265,936 551,668 132,439 ? 1,662 13,122 60,448 604,112   1,044,833 7,115,711   1,720,659   8,836,370 4,254,487 373,497 961,457 317,142 ? 6,117 13,181 3,604 1,180,935      418,672 7,529,092      119,542   7,648,634 4,488,047 391,916 1,021,283 252,327 ?

6,540 10,798 3,429 1,274,626          424,290 7,873,256            38,262      7,911,518 ?  ? ?  24  16,552  ? ?  ? 64,489           91,793  172,858         434,421         607,279 ? ? ? 316 50,898 ? ? ? 98,566           1,002 150,782                    ? 150,782 Deduct: CURRENT LIABILITIES  Trade payables   Other payables  Subsidiary companies   Joint venture companies   Associated companies    Borrowings   Provision for taxation     Liabilities held for sale    TOTAL CURRENT LIABILITIES 529,751 905,456 ? 3 1,787 936,296       176,739   2,550,032       690,111   3,240,143 673,442 1,012,643 ? 14,263 3,043 747,546       310,240 2,761,177         38,292   2,799,469 724,740 1,013,210 ?

6,350 954 1,908,709       295,603 3,949,566           2,297  3,951,863 ?  8,338  17,823  ? ?  ? 12,244  38,405                      ? 38,405 ? 5,125 5,164 ? ? ? 18,961 29,250                    ? 29,250 NET CURRENT ASSETS 5,596,227 4,849,165 3,959,655 568,874 121,532 Deduct: NON? CURRENT LIABILITIES  Other payables   Borrowings   Provision for employee benefits  Deferred tax liabilities 38,630 2,971,647 17,346       128,708   3,156,331    8,254,504 39,251 3,215,900 20,405       174,747   3,450,303    7,674,573 15,577 2,666,032 25,044          158,384      2,865,037           6,884,780 ?  150,000  ? 386         150,386     4,339,625 ? 150,000 ? 352       150,352    4,173,064 11

Figure 3: Cash Flow Statement for the year ender 30th September 2012 The Group  2012    ($’000)    CASH FLOWS FROM OPERATING ACTIVITIES  Profit before taxation and exceptional items from continuing operations   Profit before taxation and exceptional items from discontinued operations   Profit before taxation and exceptional items   Adjustments for:  Depreciation of fixed assets   Impairment of fixed assets and intangible assets   Impairment reversal of fixed assets and intangible assets   Fixed assets and intangible assets written off   Provision for employee benefits   Write back of provision for employee benefits   Allowance for foreseeable losses on properties held for sale (net)   Loss on disposal of fixed assets   Amortization of brands and intangible assets   Amortization of deferred income   Interest income   Interest expenses   Share of joint venture companies’ profits   Share of associated companies’ profits   Investment income Profit on properties held for sale   Employee share?

based expense   Fair value adjustment of financial instruments   Fair value adjustment of investment properties   Loss on disposal of financial instruments   Operating cash before working capital changes   Change in inventories   Change in receivables   Change in joint venture and associated companies’ balances   Change in payables   Progress payment received/receivable on properties held for sale   Development expenditure on properties held for sale  Currency realignment   Cash generated from operations   Interest income received   Interest expenses paid  Income taxes paid   Payment of employee benefits  Payment of cash? settled options  Net cash from operating activities             12 2011  ($’000)  (Restated)  926,087            337,189  1,263,276     119,615  4,921  (2,213)  983  2,237  (2,907)  12,034  3,100  21,223  (8,005)  (17,623)  52,922  (17,342)  (51,937)  (11,549)  (488,407)  41,696  (2,471)  (140,057)              16,647  796,143  7,362  (220,877)  8,664  30,454  2,460,962  (1,600,099)             (3,925)  1,478,684  17,623  (54,795)  (267,182)  (3,313)           (25,690)        1,145,327 798,491              411,423   1,209,914      130,439   15,513   (1,569)  56   4,568   (348)  34,751   2,462   17,655   ?

(21,875)  82,814   (16,245)  (60,838)  (18,076)  (281,936)  21,140   8,505   (341,585)              18,664   804,009   (36,531)  175,448   (11,002)  20,024   1,467,107   (1,376,111)             (1,564)  1,041,380   16,989   (79,107)  (310,460)  (2,884)            (7,018)          658,900 CASH FLOWS FROM INVESTING ACTIVITIES  Dividends from joint venture and associated companies   Investment income   Proceeds from sale of fixed assets and assets held for sale   Proceeds from disposal of associated companies   Proceeds from sale of other and short term investments Proceeds from disposal of intangible assets   Proceeds from disposal of subsidiary companies   Proceeds from sale of investment properties    Purchase of fixed assets and investment properties   Purchase of other investments   Acquisition of non?

controlling interests in subsidiary companies  Payment for intangible assets and brands   Development expenditure on investment properties under construction   Investments in associated and joint venture companies   Acquisition of subsidiary and joint venture companies   Repayment of loan from an associated company   Additional trade advances   Net cash used in investing activities   CASH FLOWS FROM FINANCING ACTIVITIES  Proceeds from/(Repayment of ) term loans and bank borrowings   Proceeds from issue of bonds   Purchase of treasury shares   Proceeds from issue of shares:   ? by subsidiary companies to non? controlling interests   ? by the Company to shareholders   Payment of dividends:  ? by subsidiary companies to non? controlling interests   ?

by the Company to shareholders   Net cash used in financing activities   Net increase/(decrease) in cash and cash equivalents   Cash and cash equivalents at beginning of year   Reclassified to assets held for sale  Effects of exchange rate changes on cash and cash equivalents   Cash and cash equivalents at end of year 89,949   18,076   3,487   37,603   703   1,688   55,946   ? (265,825)  ? (4,054)  (18,512)  (53,232)  (22,234)  (146,794)  9,607                  1,643           (291,949)     323,522   ? (8,093)     21,482   65,236      (163,018)          (255,527)  (16,398)  350,553   1,597,635   (279,312)             (21,399)          1,647,477 71,773  11,549  15,660  97,957  294  ? 28,748  54,654  (348,773)  (17,401)  (7,584)  (15,799)  (228,813)  (37,412)  (27,086)  ? 663         (401,570)     (709,944)  300,000  ?

20,682  35,072     (206,826)          (253,381)  (814,397)  (70,640)  1,695,123  (1,383)             (25,465)          1,597,635 Cash and cash equivalents at end of year comprise:  Cash and bank deposits   Bank overdrafts 1,648,945               (1,468)          1,647,477 1,599,607               (1,972)          1,597,635      12,135  ? 4,211  16,498  (103)  (9,249)  (2,315)  (831)                  7,036  27,382 Analysis of acquisition and disposal of subsidiary and joint venture companies  Net assets acquired:  Fixed assets  Investment properties  Other non? current assets  Current assets  Bank Borrowings  Non? current liabilities  Current liabilities  Non? controlling interests  Cash    13 12,616  266,688  213  14,155  (82,692)  (23,965)  ?

(471)                12,340  198,884 Investment in associated company previously accounted for Goodwill on acquisition (net)  Consideration  Contribution of capital by non? controlling interests  Cash and cash equivalents of subsidiary and joint venture companies  Cash outflow on acquisition net of cash and cash equivalents acquired (43,878)               18,306  173,312  (14,178)            (12,340)            146,794 ?                 6,740  34,122  ? (7,036)              27,086 Net assets disposed:  Fixed assets  Investment properties  Properties held for sale  Other non? current assets  Current assets  Non? current liabilities  Current liabilities  Non?

controlling interests  Cash  Realization of translation difference  Provision for cost of disposal  Fair value of retained interest reclassified to investment in associated company  Consideration satisfied by other receivable  Gain on disposal  Consideration received  Less: Cash of subsidiary companies disposed off  Cash inflow on disposal net of cash and cash equivalents disposed (278)  (235,402)  (303,213)  (1,421)  (3,028)  222,621  77,215  191,455          (205,675)  (257,726)  (34,632)  (100)  69,316  ? (38,479)  (261,621)            205,675            (55,946) (228)  ? ?  (2,079)  (169,693)  1,510  62,591  7,933              (4,002)  (103,968)  5,498  ? ?  84,352           (18,632)  (32,750)                4,002           (28,748) Some details of properties currently under development are given in figure 4, 5 and 6 14 Figure 4: Properties under Development – Singapore 15 Figure 5: Properties under Development –Australia

Figure 6: Properties under Development –China 16 Growth Drivers Underlying fundamentals of F&N’s connected with the strategic path for the future growth of businesses, the following value drivers have been identified in generating value for shareholders in a responsible and sustainable manner. 1. 2. 3. 4. 5. Forging strategic business partnerships and networks to gain entry and build our foundation in new markets & Printing businesses. Leveraging our strong global network to expand our market reach and tap on new business opportunities. Harnessing R&D to enhance our innovative edge and deliver quality products in line with current lifestyle trends.

Grooming leaders and developing staff systematically to ensure a continuous pool of talent. Sharpening capital management and extracting operational efficiencies to enhance shareholder return. 17 CMA INTEGRATIVE CASE STUDY – (ICS – 405) May 2013 Examination – Marking Grid Marks A High level of Management Accounting awareness relating to world examples B Good Management Accounting awareness relating to case study examples C Some level of Management Accounting awareness relating to few case study examples D Low level Management Accounting awareness Lack of Management Accounting awareness E 1. Management Accounting Sound technical knowledge in Management Accounting 20 17-20 11-16

Good level of application of theory in an analytical manner solving problems in the case study. 10-14 Some level of application of theory in an analytical manner solving problems in the case study. 5-9 Low level of application of theory in solving problems in the case study 0-4 Lack of application of theory in solving problems 2. Application of theories Diverse knowledge clearly applied in an analytical and practical manner in solving the problems in the case study. High level of application of theory in an 20 analytical manner in solving problems in the case study 17-20 11-16 Good level of recognition of issues and these being prioritized logically 10-14

Some level of recognition of issues and these being prioritized 5-9 Low level of recognition of issues 0-4 Lack of recognition of issues 3. Identifying key issues Issues to be identified and prioritized manner rationale. in with a a logical clear High level of recognition of key 10 issues and these being prioritized logically with a clear rational. 8-10 5-7 Good level of ability to recognize and present alternate solutions and make effective judgment in a logical and rational manner. 3-4 Some level of ability to recognize and present alternate solutions in a logical and rational manner 1-2 Low level of ability to recognize alternate solutions 0 Lack of ability to recognize alternate solutions 4.

Decision making skills Ability to recognize present effective High level of and ability to appropriate judgment in a 20 recognize and present appropriate alternate solutions and make effective judgment in a logical and rational manner alternate solutions and make logical & rational manner. 17-20 11-16 Good level of ability to communicate effectively with realistic recommendations in a concise manner 10-14 Some level of ability to communicate effectively with realistic recommendations in a concise manner 5-9 Low level of ability to communicate effectively 0-4 Lack of ability to communicate effectively 5. Logical arguments Ability to communicate effectively with realistic in a High level of ability to 20

communicate effectively with realistic recommendations in a concise and logical manner recommendations concise and logical manner. 17-20 11-16 Good style in writing a Management Report encompassing ideas and recommendations with some appendixes 10-14 Some style in writing a Management Report encompassing ideas and recommendations 5-9 Poor style in writing a Management Report 0-4 Lack of knowledge in writing a Management Report 6. Communication skills Style and synthesis to higher management. High level of in 10 combining ideas and experiences in a professional manner using relevant appendixes evaluation of a good report 8-10 TOTAL 5-7 3-4 1-2 0 100 18

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