COVER SHEET

A S 0 9 4 0 5 0 6 6
SEC Registration Number

S W I F T F O O D S , I N C .

(Company’s Full Name)

R F M B u i l d i n g , C o r n e r P i o n e e r a n d

S h e r i d a n S t r e e t s , M a n d a l u y o n g

C I t y

(Business Address: No. Street City/Town/Province)

Irene M. Joven 631-8101

(Contact Person) (Company Telephone Number)

1 2 3 1 S E C 17 A
Month Day (Form Type) Month Day
(Calendar Year) (Annual
2006 Meeting)

N/A
(Secondary License Type, If Applicable)

N/A
Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

STAMPS
Remarks: Please use BLACK ink for scanning purposes.
 SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-A

ANNUAL REPORT UNDER SECTION 17

OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES

1. For the fiscal year ended 31 December 2006

2. SEC Identification Number AS094-005066 3. BIR Tax Identification Number 003-973-161

4. Exact name of registrant as specified in its charter SWIFT FOODS, INC.

5. Province, Country or other jurisdiction of incorporation or organization: Manila, Philippines

6. Industry Classification Code: (SEC Use Only)

7. Address of registrant’s principal office

RFM Building
Corner Pioneer and Sheridan Streets
Mandaluyong City

Postal Code 1603

8. Registrant's telephone number, including area code (632) 631-81-01

9. Former name, former address, and former fiscal year, if changed since last report

Not applicable

10. Securities Registered pursuant to Sections 8 and 12 of the SRC or Sections 4 and 8 of the RSA

Title of Each Class Number of Shares of Stock Outstanding

COMMON 912,098,273
PREFERRED 139,267,532
Amount of Debt Outstanding P 177,579M
(as of 31 December 2006)

11. Are any or all of these securities listed in the Philippine Stock Exchange?

Yes [ X ] No [ ]

12. Check whether the registrant:

(a) has filed all reports required to be filed by Section 17 of the Securities Regulation Code
(SRC) and SRC Rule 17 par. 2 thereunder and Sections 26 and 141 of The Corporation Code of
the Philippines during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports);

2
 Yes [ X ] No [ ]

(b) has been subject to such filing requirements for the past 90 days

Yes [ X ] No [ ]

13. State the aggregate market value of the voting stock held by non-affiliates of the registrant.
(P118,532,637)

3
 SWIFT FOODS, INC.
Supplementary Schedules Required
By the Securities and Exchange Commission
As of and for the Year Ended December 31, 2006

TABLE OF CONTENTS
Page No.

PART I - BUSINESS AND GENERAL INFORMATION

ITEM 1 BUSINESS 5
ITEM 2 PROPERTIES 8
ITEM 3 LEGAL PROCEEDINGS 9
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9

PART II - OPERATIONAL AND FINANCIAL INFORMATION

ITEM 5 MARKET PRICE OF AND DIVIDENDS ON REGISTRANT’S COMMON

EQUITY AND RELATED STOCKHOLDER MATTERS 9
ITEM 6 MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 12
ITEM 7 FINANCIAL STATEMENTS 24
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
AND FINANCIAL DISCLOSURE 25

PART III - CONTROL AND COMPENSATION INFORMATION

ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS 25

ITEM 10 EXECUTIVE COMPENSATION 28
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 31
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 32

PART IV CORPORATE GOVERNANCE 33

PART V - EXHIBITS AND SCHEDULES

ITEM 13 A. EXHIBITS 33

SIGNATURES 34

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY

SCHEDULES 35

INDEX TO EXHIBITS 36

STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

SIGNED UNDER OATH 37-38

ADDITIONAL FINANCIAL DISCLOSURE CHECKLIST

ANNEX “A” - TOP 100 COMMON & PREFERRED STOCKHOLDERS

ANNEX “B” - AUDITED FINANCIAL STATEMENTS

ANNEX “C” - SUPPLEMENTARY SCHEDULES

4
Part 1 : Business and General Information

Item 1. Business

Swift Foods Inc (SFI or the “Company”) was incorporated on 6 June 1994 to assume RFM’s
business of manufacturing, marketing and distributing processed and canned meat products, poultry
products, and commercial feeds.
The Company was primarily organized into two business divisions, namely, agribusiness
(poultry and feeds) and meat (meat processing and sales & distribution) divisions.
In November 2001, the employees of Meat Division went on strike, which effectively caused
the closure of the Cabuyao plant. As a result, the Board of Directors decided to transfer the
marketing, selling and distribution activities of the Meat Division to RPM Corporation to join the
latter’s branded food group business effective 1 October 2002.
RFM Corporation began its agribusiness operations in 1965 when it diversified into feed
milling. In 1970, it expanded into the poultry business when it entered into a licensing agreement with
Peterson Industries and H & N Layers to breed day-old chicks in the Philippines. In 1977, the
Company expanded its poultry business by establishing a broiler farm and dressing plant in Cebu.
The Company undertook an extensive expansion program in 1987 in response to increased
market demand. Integrated branches were established across the country. To date, the Company has 10
integrated branches nationwide engaged in hatching, growing, dressing and distribution operations
which supply poultry to customers within its geographic area.
In June 1994, the Agribusiness and Meat Division of RPM were spun-off to form Swift Foods,
Inc.
Swift’s agribusiness division produces and sells poultry products: live and dressed/ processed
chicken. In 2005, dressed chicken accounted for approximately 80% of volume sold, with live sales
taking the balance of 20%. Dressed chickens branded as “Swift Sariwanok” are sold either whole, cut-
up into parts and/or customized and marinated according to customer’s requirements.
About 70-80% of the company’s products are sold to its distributors which sell mainly to
downline accounts or wet markets. The balance of 20-30% are sold to both Key and Secondary
Accounts Group representing mainly the supermarkets, groceries, hotels, restaurants including the
food service/fast food segment.
Swift produces feeds for the internal requirements of its poultry business. Swift uses feeds in
its farms and supplies feeds to its contact growers nationwide. In 2006, 100% of the feeds produced by
Swift were used to supply its internal requirement.
The Philippine poultry industry consists of members of the Philippine Association of Broiler
Integrators (PABI) which account for about 70% of total production and commercial raisers which
represent about 30%. Members of PABI include San Miguel Foods, Swift Foods. Inc., Tyson’s Agro
Ventures, Universal Robina, and Vitarich Corporation. Through the years, competition has become
more intense, due not only to the increase in domestic production but increase in imports as well. The
Government, recognizing the critical role of the industry in agricultural growth, has continued to
provide support through the minimum access volume, safeguards law and other measures that give
some level of protection to the industry from import surges, smuggling and unfair trade competition.
Swift had 382 employees at 31 December 2006, broken down as follows:

5
 Executives 5
Managers/Supervisors 92
Rank & File 285

There is only one (1) union for the Agribusiness division namely Independent Union-SFI-
Agribusiness Division (IU-SFI-ABD) for NCR Poultry operations. It has a Collective Bargaining
Agreement for a period of five (5) years and can be renegotiated by both parties at the end of the third
year.
Swift’s poultry production involves four processes: breeding, hatching, broiler growing
operations and dressing/processing operations. Breeding starts with the importation of grandparent
breeder chicks from the US and/or Europe. The chicks are raised for 25 weeks and then bred over a
41-week period in Swift’s grandparent contract farm to produce parent stock breeders. Parent stock
breeders are again raised for 21 weeks and then bred over a period of 41 weeks in Swift’s contract
breeder farms to produce broiler-hatching eggs. The eggs are shipped to hatcheries where broiler
chicks are hatched. The broiler chicks are placed in the company’s broiler contract farms and mature
in about 40 days. These are either sold live to traders or sent to Swift’s plants for
slaughtering/processing.
Under Swift’s contract growing arrangements, contract growers provide the following
services: housing for the birds that meets Swift’s requirement and oilier specifications; labor for day-
to-day operations of the farm; and overhead costs such as water, electricity and fuel. The contract also
requires the farmer to comply with the vaccination programs and to provide bio-security measures
specified by Swift. In return, Swift supplies day-old chicks, feeds, medication and technical assistance.
Swift’s feeds are formulated using the Brill Feeds Formulation, a software program
that identifies the formulation of feed that meets certain nutrient specifications. Feeds are either pre-
ground or post-ground. In Swift’s pre-grinding feeds operations, bulk raw materials are ground and
then mixed separately with micro-ingredients before batch mixing. In Swift’s post grinding feed
operations, bulk raw materials are ground simultaneously and poured into the batch mixer where
micro-ingredients are added.
The primary raw materials used in Swift’s feeds are corn, soybean meal, and coconut oil.
Raw materials are available when needed. The Company is not dependent upon one or
a limited number of suppliers for essential raw materials and there are no existing supply contracts.
The principal suppliers of the Company for its major raw materials include Philippine Superfeeds,
Great Harvest Enterprise, Simon Enterprises, New Millennium, and PG Ang, among others.
The Company secures the following government approval/permits for its principal
products or services:

PRODUCT ACTIVITY APPROVAL/PERMITS BEING GOVERNMENT AGENCY

SECURED
FEEDS/FEEDS INGREDIENTS MANUFACTURING. NFA, BAI
IMPORTING, ETC.
GRANDPARENT/PARENT IMPORT PERMIT BAI. NEDA
STOCKS
CHICKEN LEG QUARTERS IMPORT PERMIT. VQC BAI(BUREAU OF ANIMAL
INDUSTRY)
DRESSING OF BROILERS INSPECTION FEE- NATIONAL MEAT
PO.15/HEAD FOR ANTE- INSPECTION COMMISSION
MORTEM &P0.25/KG FOR (NMIC)
POST MORTEM
CHICKEN PRODUCTS - EXPORT PERMIT. VQC NMIC. BAT

6
Trademarks:
The Company has registered trademarks and has also applied for trademark registration for its
products. A trademark has a life of 20 years from registration date. It has a term of ten (10) years and
is renewable for another ten (10) years. Once registered, a company is granted the exclusive right over
the trademark. Filing of affidavit of use every 5th and 10th year anniversary is necessary to show proof
the trademarks are in use.
While Swift retains ownership over the trademarks, RFM Corporation was granted the
license to use some of the trademarks for its meat products.
The Company recognizes the fact that its business operations are always exposed to certain
risks which, if not properly managed, could be detrimental to the profitability of the Company. The
Company is continuously faced with the following business risks:
1. Foreign Exchange Risk

Although most of the raw materials, feeds ingredients, medicines and vaccines used by the
company are imported, majority of these are purchased from local suppliers, thereby minimizing the
company’s risk on foreign exchange. The materials which are directly imported by the company
usually arrive after one or two months following the issuance of the purchase order.
2. Credit Risk
The Company chooses its credit customers upon recommendation of the Sales Department.
These recommended customers are evaluated by the Credit and Collection Department as to their
credit risk. A customer is normally given a credit limit equivalent to 15-30 days projected sales. Credit
concentration trade receivables are as follows: 31% for territorial distributions, 24% for supermarkets,
and 20% for service group such as fastfood chains, hotels and restaurants.
The Company controls this credit risk through strict monitoring procedures and regular
coordination with customers. The accounts receivables are monitored on a daily basis. All exceptions
are noted and resolved with the concerned parties. Statements of accounts are issued out to customers
and reconciled on a monthly basis.
3. Interest Rate Risk
The Company’s exposure to changes in interest rates relates primarily to the company’s
short-term and long-term borrowings, as well as interest on trust receipts. The Company controls this
interest risk by closely monitoring the same with various banks and other financial institutions and
maximizing borrowing period based on market volatility of interest rates.

The following is the maturity profile of the Company’s interest-bearing loans (amount in
thousands) as of December 31, 2006 and 2005:

Maturity Period 2006 2005

(In thousands)
In less than one year P
=117,179 =
P134,578
>1 year to 2 years 47,083 7,774
>2 years to 3 years 47,083 47,083
>3 years to 4 years 43,160 47,083
>4 years to 5 years – 43,160
P
=254,505 =
P279,678

7
These loans are subject to interest computed at a prevailing market rate and is repriced either on a
monthly and quarterly basis (see Notes 6, 12 and 14).
4. Liquidity Risk
The Company manages its liquid funds through cash planning on a monthly and weekly basis
The Company uses historical figures, experience, forecasts from its collections and disbursements, as
well as projections based on the annual business plan. Likewise, the Company places excess funds in
short term cash investments. The Company also enters into restructuring agreements with creditor
banks as the need arises.
5. Financial and Other Risk Relating to Livestock
The Company is exposed to financial risks due to changes in the cost of feeds and raw materials.
Other risks include the volatility of chicken selling price, and other products which are determined by
the supply and demand in the market. Other factors which contribute to this risk which the Company
has little control over are government regulations, climate, and diseases that may affect the livestock.
Inherent risks in food manufacturing, particularly in the fresh meat processing, are spoilage and
contamination. Food manufacturing is generally regulated by government agencies. The Company
employs controls in its manufacturing processes to ensure that all finished products passed through
rigid quality control. In addition, government representatives deployed to all of the Company’s
dressing plants are always on the lookout to attest the quality of the finished product through issuance
of corresponding certificates. The authorities, however, may impose additional regulators’
requirements that may require significant capital investment at short notice. The Company ensures that
this possibility is considered during the financial budgeting process.
Major raw materials for livestock production such as yellow corn expose the Company to risk,
particularly with regard to the supply and the price of such raw materials. The fluctuation of the price
of yellow corn is dependent on the harvest results. Production cost will be unfavorably affected if
there will be shortage in the supply of yellow corn. The Company closely monitors production
requirements, particularly of bulk raw materials, to avail of competitive prices. In case of shortages in
certain areas, the Company sources raw materials from other areas of the country if the prices are
competitive. However, whenever domestic supply of yellow corn falls short of industry requirements,
the government is flexible in regulating the supply of corn by allowing importation of corn when
domestic supply is short. Another option is to use a substitute feed ingredient like wheat, which are
readily available in the international market and priced competitively.
Item 2. Properties
Swift’s poultry production facilities include two broiler farms located in Tanay, Rizal and San Jose,
Bulacan; a parcel of land in Manggahan with a building constructed thereon for the Company’s
dressing plant operations, and a parcel of land in Tagaytay with a building constructed thereon to serve
as the Corporation’s Parent Stock hatchery. Swift also owns hatchery, dressing plants and feedmill
equipment installed in the plants of its contract operators nationwide.
A portion of the Company’s property, plant and equipment is mortgaged as collateral for the long-
term debt.
The Corporation also has leased properties as listed below:
PROPERTY LOCATION
Pioneer Office Building Mandaluyong City
Isabela — Office . Cauayan, Isabela
Isabela — Warehouse Cauayan. Isabela
Palawan — Office Puerto Princesa, Palawan
Palawan — Feeds Warehouse - Bgv. Tinigiban. Puerto Princesa. Palawan
Palawan — Cold Storage Bgy. Masipag. Puerto Princesa, Palawan

8
 PROPERTY LOCATION
Cebu-office Mandaue City Cebu.
Cebu — Feedmill Mandaue City
Iloilo — Office Jibao-an Pavia, Iloilo
Iloilo - Warehouse-D.Plant Jibao-an Pavia, Iloilo
Iloilo - Warehouse - Feeds Mulley loney, Iloilo
Bacolod — Office Mandalagan, Bacolod City
Bacolod — Feedmill Warehouse Mandalagan, Bacolod City
Bacolod — Storage Magsaysay ave., Bacolod City
Tacloban — Office & Warehouse Brgy, 69 Anibong Tacloban City
Ormoc – Office Ormoc City
Cagayan de Oro — Office Tagoloan Misamis Oriental
Cagayan de Oro — Warehouse Tagoloan. Misamis Oriental
Cagayan de Oro — Blast freezer Tagoloan. Misamis Oriental
Cagavan de Oro — Animal Health Lab & Ofc Tagoloan. Misamis Oriental
Cagayan de Oro — Warehouse –corn,soya Sayre Hiway, Casisang Malaybalay
Cagayan de Oro — Cold Storage Gusa, Cagayan de Oro City
General Santos — Office General Santos
Zamboanga — Office Sta. Catalina, Zamboanga City
Zamboanga – Cold Storage Sta. Catalina, Zamboanga City

Item 3. Legal Proceedings

Based on the Company’s records, the pending cases involving SFI are in the nature of
collection cases. The Company’s Board of Directors is not aware of any proceedings pending or
threatened to be filed against the Company, or any facts likely to give rise to any proceedings which
might materially affect the position of the Company.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the calendar year covered by
this report.
PART II – OPERATIONAL AND FINANCIAL INFORMATION
Item 5. Market for Registrant’s Common/Preferred Equity and Related Stockholder Matters
There were no dividends declared in favor of common stockholders for the years 2006 and
2005. Preferred shareholders are not entitled to receive dividends.

As of 31 December 2006, long-term loan agreement of the Company has prohibitions

conditions on cash dividend declaration.

(1) Market Information

(a) Common Stocks

The common shares of stock of SFI are traded on the Philippine Stock Exchange (PSE).
The high and low sales prices for each quarter within the last two fiscal years are as follows:

Date High Low Close

First Quarter-March 31, 2006 P0.19 P0.19 P0.19
Second Qtr-May 25, 2006 0.245 0.245 0.245
Third Qtr.-Sept. 27, 2006 0.24 0.22 0.24
9
Fourth Qtr-Dec.29, 2006 0.33 0.33 0.33
First Qtr - March 9, 2007 0.40 0.40 0.40
The price as of the last trading date for this report is P0.40 on 13 April 2007.
There are 8,557 stockholders of 912, 098,273 common shares of stock of SFI as of 31 December
2006.
(b) Preferred Stocks
The preferred shares of stock of SFI are traded on the Philippine Stock Exchange (PSE).
There are 27 stockholders of 139,267,532 preferred shares of stock of SFI as of 31 December 2006.
(2) Holders
A list of the top one hundred (100) common and preferred stockholders of SFI as of 31 December
2006 is attached hereto as Annex “A”.
(a) Common Stocks
The names of the top twenty (20) shareholders of the common shares of stock of the Issuer are as
follows:
NAME NO. OF SHARES HELD PERCENTAGE OF
TOTALSHARES HELd

1. PCD Nominee Corporation 266,348,726 29.202%

2. Triple Eight Holdings, Inc. 136,145,444 14.927%
3. RFM Corporation 109,479,175 12.003%
4. Horizons Realty, Inc. 105,977,644 11.619%
5. BJS Development Corporation 52,210,099 5.724%
6. Renaissance Property
Management Corp. 28,498,316 3.124%
7. Feati University 27,878,294 3.056%
8. Concepcion Industries, Inc. 17,766,734 1.948%
9. FEBTC A/C No. 216-00145 17,606,213 1.930%
10. Chilco Holdings, Inc. 12,530,414 1.374%
11. Sahara Management &
Development Corp. 9,342,729 1.024%
12. Select Two Corporarion 8,607,526 0.944%
13. Republic Commodities Corp. 8,242,083 0.904%
14. Philippine International Life
Insurance Co., Inc. 7,377,541 0.809%
15. S & A Industrial Corp. 6,167,888 0.676%
16. Sole Luna Inc. 5,954,948 0.653%
17. Macric Incorporated 5,799,693 0.636%
18. Young Concepts Inc. 5,793,820 0.635%
19. Lace Express Inc. 5,793,795 0.635%
20. Monaco Express Corp. 5,793,754 0.635%
(b) Preferred Stocks

The names of the top twenty (20) shareholders of the preferred shares of stock of the Issuer are as
follows:

10
 NAME NO. OF SHAREHOLDERS PERCENTAGE OF
TOTAL SHARES HELD

1. RFM Corporation 139,245,969 99.985%

2. Ma. Elizabeth Macapagal and/or
Alex and/or Andrei Macapagal 5,625 0.004%
3. Jesus M. Manalastas 2,109 0.002%
4. Arturo B. Diago, Jr. 1,593 0.001%
5. Helen Gamboa Sotto 1,406 0.001%
6. Carlos Go 1,406 0.001%
7. Benedicto Jose R. Arcinas 1,281 0.001%
8. Victor Y. Lim, Jr. 938 0.001%
9. Apolonia Tan 937 0.001%
10. Antonio G. Arellano 843 0.001%
11. Kerry Securities (Phils.), Inc. 563
12. Romeo S. Patricio 562
13. William Gaw See 469
14. Robero C. Lozada 440
15. Jesus P. Mangrobang 422
16. HDI Securities 420
17. Alice C. Morada 346
18. Rolland R. Thompson 281
19. Mary Anne O. Aboitiz 281
20. Venture Securities, Inc. 281

(3) Dividends

Prior to 7 July 2004, the preferred stock earns cumulative dividends up to a maximum of 15%.
The dividend rate is based on the issue price of P10 per share. The dividends are payable quarterly.
One preferred share is convertible to 10 common shares at any time after the issuance up to 7 August
2003. The holders of the convertible preferred share have the option to put the said shares to the
Company on any date commencing two years after the end of the offer period until 7 August 2003,
which was extended until 27 February 2004. Upon the exercise of said right, the Company shall
redeem the convertible preferred shares at the offer price plus any accumulated dividends.

On 12 May 2004, the stockholders amended the terms of the convertible preferred shares by
extending the conversion period until 7 August 2038, and the put option period until 7 August 2038.
Likewise, the preferred shareholders shall not be entitled to receive dividend at any time and neither
shall such shares participate in any other dividends declare in favor of common shares. The above
amendment was approved by the stockholders during the annual stockholders’ meeting on 25 June
2004 approved by the Securities and Exchange Commission on 7 July 2004.

On 1 September 2005, the stockholders further amended the terms of the convertible preferred
shares by granting the Company as issuer the option to redeem the convertible preferred shares on any
date commencing from the time of approval by the SEC of the amendments and until 7 August 2038 at
the offer price. Previously, the holder has the option to put the convertible preferred shares to the
Company but this option was removed in the September 1, 2005 amendments. The Company has no
obligation to redeem any preferred shares that remain outstanding after 7 August 2038. These
amendments were approved by the Securities and Exchange Commission on 19 October 2005.

On 11 October 2006, the stockholders removed the term of the convertible preferred shares
formerly set at 7 August 2038. Hence, the Corporation shall have the option to redeem the convertible
preferred shares at the offer price on any date commencing from the time of the approval by the SEC
of the amendment. SEC approved the amendment on 6 December 2006.

11
(4) Recent Sales of Unregistered Securities
There are no sales of unregistered securities in the last four (4) years.

Item 6. Management’s Discussion and Analysis of Financial Conditions and Results of

Operations –

Basis of Preparation

The financial statements have been prepared on a historical cost basis, except for agricultural
produce and investment properties, which are carried at fair value. The financial statements are
presented in Philippine peso, which is the Company’s functional currency. All values are rounded
off to the nearest thousand (P
=000), except the number of shares or when otherwise indicated.
Statement of Compliance

The accompanying financial statements have been prepared in compliance with Philippine
Financial Reporting Standards (PFRS).

New Accounting Standards and Interpretations Effective in 2006 and in Subsequent Years
On January 1, 2006, the Company has adopted the following new and amended accounting
standards and Philippine Interpretation of International Financial Reporting Interpretations
Committee (IFRIC) interpretations.

• Amendments to Philippine Accounting Standard (PAS) 19, Employee Benefits - Actuarial

Gains and Losses, Group Plans and Disclosures. The Company chose to apply the new
option offered to recognize in full the actuarial gains and losses outside the statement of
income and presented a Statement of Recognized Income and Expense (SORIE).
As a result, actuarial loss as of December 31, 2003 amounting to =
P1.35 million was credited to
retirement benefitS obligation and recognized in the SORIE as of January 1, 2004. Actuarial
gains in 2005 and 2004 amounting to = P0.46 million and =
P4.93 million, net of tax effect of =
P
0.49 million and = P1.68 million, respectively, were recognized directly in the SORIE.
Amortization of actuarial gains in 2005 amounting to = P0.12 million was reversed, decreasing
net income in 2005 and increasing deficit as of December 31, 2005 by the same amount.
There was no amortization of actuarial loss in 2004.
Prior to the adoption of this amendment, actuarial gains and losses were recognized as income
or expense when the cumulative unrecognized actuarial gains and losses exceeded 10% of the
higher of the present value of defined benefit obligation and the fair value of plan assets at that
date.
Additional disclosures are made providing information about trends in the assets and liabilities
in the defined benefit plan and the assumptions underlying the components of the defined
benefit cost (see Note 22).

• Philippine Interpretation IFRIC-4, Determining Whether an Arrangement Contains a Lease,

provides guidance in determining whether arrangements contain a lease to which lease
accounting must be applied. The Company has arrangements with various suppliers, such as
the tolling agreement for the dressing of chicken, agreements for the hatching of eggs,
agreements with breeders and with feed millers, which have lease components that qualify as
operating leases. However, since the arrangements are cancellable by the Company, lease
payments were not subject to levelization. Adoption of this Interpretation has no effect on the
fees paid under these agreements, which are included in the cost of biological assets and
agricultural produce. Additional disclosures required were included in the financial
statements (see Note 26).

12
The following are the amendments to existing standards and interpretations that are not relevant to
the Company:

• PAS 21, Amendment - The Effects of Changes in Foreign Exchange Rates

• PAS 39, Amendment - Financial Instruments: Recognition and Measurement

Amendment for financial guarantee contracts

Amendment for hedges of forecast intergroup transactions

Amendment for fair value option

• Philippine Interpretation IFRIC-5, Rights to Interests Arising from Decommissioning,

Restoration and Environmental Rehabilitation Funds
• Philippine Interpretation IFRIC-6, Liabilities Arising from Participating in a Special Market-
Waste Electrical and Electronic Equipment
Future Changes in Accounting Policies
The Company has not adopted the following new and amended PFRS and interpretations already
issued but are not yet effective as of December 31, 2006:

• PFRS 7, Financial Instruments: Disclosures, and the complementary amendment to PAS 1,

Presentation of Financial Statements: Capital Disclosures (effective for annual periods
beginning on or after January 1, 2007). PFRS 7 introduces new disclosures to improve the
information about financial instruments. It requires the disclosure of qualitative and
quantitative information about exposure to risks arising from financial instruments, including
specified minimum disclosures about credit risk, liquidity risk and market risk, as well as
sensitivity analysis to market risk. It replaces PAS 30, Disclosures in the Financial Statements
of Banks and Similar Financial Institutions, and the disclosure requirements in PAS 32,
Financial Instruments: Disclosure and Presentation. It is applicable to all entities that report
under PFRS. The amendment to PAS 1 introduces disclosures about the level of an entity’s
capital and how it manages capital. The Company is currently assessing the impact of PFRS 7
and the amendment to PAS 1 and expects that the main additional disclosures will be the
sensitivity analysis to market risk and the capital disclosures required by PFRS 7 and the
amendment to PAS 1. The Company will apply PFRS 7 and the amendment to PAS 1 in 2007.
The required additional disclosures will be included in the financial statements when these
standards and amendment are adopted.

• PFRS 8, Operating Segments (effective for annual periods beginning on or after January 1,
2009). This PFRS adopts a management approach to reporting segment information. PFRS 8
will replace PAS 14, Segment Reporting, and is required to be adopted only by entities whose
debt or equity instruments are publicly traded, or are in the process of filing with the Securities
and Exchange Commission for purposes of issuing any class of instruments in a public
market. This new standard is currently not applicable to the Company as it only has one
business which is poultry.

• Philippine Interpretation IFRIC-7, Applying the Restatement Approach under PAS 29

“Financial Reporting in Hyperinflationary Economies” (effective for annual periods
beginning on or after March 1, 2006), provides a guidance on how to apply the requirements
of PAS 29 in a reporting period in which an entity identifies the existence of hyperinflation in
the economy of its functional currency when that economy was not hyperinflationary in the
prior period, and the entity therefore restates its financial statements in accordance with PAS
29. This Interpretation is not applicable to the Company and will have no impact in the
financial statements.

• Philippine Interpretation IFRIC-8, Scope of PFRS 2 (effective for annual periods beginning on
or after May 1, 2006). This Interpretation requires PFRS 2 to be applied to any arrangements
where equity instruments are issued for consideration which appears to be less than fair value.

13
 The Company will apply this Interpretation in 2007. The Interpretation has no impact on the
financial position of the Company upon initial adoption because it has no share-based
payments.

• Philippine Interpretation IFRIC-9, Reassessment of Embedded Derivatives (effective for

financial years beginning on or after June 1, 2006). This Interpretation establishes that the
date to assess the existence of an embedded derivative is the date an entity first becomes a
party to the contract, with reassessment only if there is a change to the contract that
significantly modifies the cash flows. The Company will adopt this Interpretation starting
January 1, 2007 and expects that the adoption of this Interpretation will have no impact on the
financial statements.

• Philippine Interpretation IFRIC-10, Interim Financial Reporting and Impairment (effective for
financial years beginning on or after November 1, 2006). This Interpretation provides that the
frequency of financial reporting does affect the amount of impairment charge to be recognized
in the annual financial reporting with respect to goodwill and available-for-sale investments. It
prohibits the reversal of impairment losses on goodwill and available-for-sale equity
investments recognized in the interim financial reports even if impairment is no longer present
at the annual balance sheet date. The Company will adopt this Interpretation starting
January 1, 2007 and does not expect the adoption to have a significant impact on the financial
statements of the Company.

• Philippine Interpretation IFRIC-11, Group and Treasury Share Transactions (effective for
annual periods beginning on or after March 1, 2007). This Interpretation requires
arrangements whereby an employee is granted rights to an entity’s equity instruments to be
accounted for as an equity-settled scheme by the entity even if (a) the entity chooses or is
required to buy those equity instruments (e.g., treasury shares) from another party, or (b) the
shareholders of the entity provide the equity instruments needed. It also provides guidance on
how subsidiaries, in their separate financial statements, account for such schemes when their
employees receive rights to the equity instruments of the parent. The Company will adopt this
Interpretation in 2008 and does not expect the adoption to have an impact on its financial
statements.

• Philippine Interpretation IFRIC-12, Service Concession Arrangements (effective for annual

periods beginning on or after January 1, 2008). This Interpretation covers contractual
arrangements arising from private entities providing public services and is not relevant to the
Company’s current operations.

Cash and Cash Equivalents

Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash with original maturities of three
months or less and that are subject to an insignificant risk of change in value.

Financial Instruments
Financial assets and financial liabilities
Financial assets and financial liabilities are recognized initially at fair value. Transaction costs are
included in the initial measurement of all financial assets and financial liabilities, except for
financial instruments measured at fair value through profit or loss.

Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or
a component that is a financial liability, are reported as expense or income. Distributions to
holders of financial instruments classified as equity are charged directly to equity net of any
related income tax benefits. Financial instruments are offset when there is a legally enforceable

14
right to offset and there is intention to settle either on a net basis or to realize the asset and settle
the liability simultaneously.

Financial assets and financial liabilities are classified into the following categories: Financial
assets and financial liabilities at fair value through profit or loss (FVPL), loans and receivables,
held-to-maturity (HTM) investments, available-for-sale (AFS) financial assets and other financial
liabilities. The Company determines the classification at initial recognition and, where allowed
and appropriate, reevaluates this designation at every reporting date.

The Company’s financial assets and financial liabilities consist of loans and receivables and other
financial liabilities.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments and are not quoted
in an active market. Such assets are carried at cost or amortized cost using the effective interest
method. Gains and losses are recognized in income when the loans and receivables are
derecognized or impaired, as well as through the amortization process.

The Company’s receivables which arise directly from its operations (i.e., trade receivables, due
from contract growers and related parties) are classified as loans and receivables.
Other financial liabilities
These are financial liabilities that are not held for trading or not designated as at FVPL upon the
inception of the liability.
These liabilities are initially recognized at the fair value of the consideration received less directly
attributable transaction costs. After initial recognition, these liabilities are subsequently measured
at amortized cost taking into account the impact of applying the effective interest method of
amortization or accretion for any related premium, discount and any directly attributable
transaction costs.
As of December 31, 2006 and 2005, the Company’s trust receipts payable, short-term bank loans
and long-term debt are classified under this category.
Derecognition of Financial Assets and Financial Liabilities
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is derecognized where:

• The rights to receive cash flows from the asset have expired;

• The Company retains the right to receive cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to a third party under a “pass-through”
arrangement; or

• The Company has transferred its rights to receive cash flows from the asset, and either
(a) has transferred substantially all the risks and rewards of the asset, or (b) has neither
transferred nor retained substantially all the risks and rewards of the asset, but have transferred
control of the asset.
A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or expired.

15
Where an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognized in profit or loss.
Where the Company has transferred its rights to receive cash flows from an asset and has neither
transferred nor retained substantially all the risks and rewards of the asset nor transferred control
of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the
asset. Continuing involvement that takes the form of a guarantee over the transferred asset is
measured at the lower of the original carrying amount of the asset and the maximum amount of
consideration that the Company could be required to repay.
Impairment of trade and other receivables
The Company assesses at each balance sheet date whether a financial asset or group of financial
assets is impaired.
A provision for impairment is made when there is objective evidence (such as the probability of
insolvency or significant financial difficulties of the debtor) that the Company will not be able to
collect all of the amounts due under the original terms of the invoice. The carrying amount of the
receivable is reduced through the use of the allowance account. Impaired debts are derecognized
when they are assessed as to be uncollectible.
If there is objective evidence that an impairment loss on receivables carried at cost or amortized
cost has been incurred, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial asset’s original effective interest rate
(i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset
shall be reduced either directly or through the use of an allowance account. The amount of the
loss is recognized in the statement of income.
The Company first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial
assets that are not individually significant. If it is determined that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, the asset
is included in a group of financial assets with similar credit risk characteristics and that group of
financial assets is collectively assessed for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is or continues to be recognized are not included in
a collective assessment of impairment.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is
recognized in the statement of income to the extent that the carrying value of the asset does not
exceed its amortized cost at the reversal date.
Inventories
Inventories are valued at the lower of cost (computed principally on the moving average method)
and net realizable value (NRV). The initial cost of finished goods is the fair value less cost to sell
of agricultural produce at point of harvest (see related policy).

NRV, except for spare parts and supplies, is the selling price in the ordinary course of business,
less the estimated costs necessary to make the sale. For spare parts and supplies, NRV is the
current replacement cost.

16
Agricultural Produce
Agricultural produce which consists of live broilers harvested from the Company’s biological
assets, are carried at fair value less estimated point-of-sale costs at the point of harvest. The fair
value is determined based on the most recent market price at the point of harvest based on relevant
market prices published by the Bureau of Agricultural Statistics (BAS). The Company, generally,
does not maintain any inventory of agricultural produce at any given time as these are either sold
as live chicken or are immediately transferred as live broilers to the Company’s dressing plants for
processing as dressed chicken.

Biological Assets
The Company’s biological assets include breeding stocks, growing livestock (broilers before
reaching harvestable weight) and goods in process (i.e. hatching eggs and day-old chicks), which
are grouped mainly according to their transformation capacity (growing or laying) as well as their
particular stage in the production process. These biological assets are categorized according to
their inherent characteristics in the production cycle.

The Company’s growing breeding stocks are raised until they reach the laying stage where they
produce day-old chicks. These day-old chicks will be grown as livestock which will either be sold
as live chicken or transferred to the dressing plant for processing as dressed chicken.

Growing livestocks and hatching eggs are classified as current assets while growing and laying
breeding stocks are classified as noncurrent.

Growing livestock and goods in process are carried at accumulated cost while breeding stocks are
carried at accumulated cost, less accumulated amortization and any accumulated impairment
losses. This measurement is adopted by the Company since fair value cannot be determined due
to the absence of a relevant active market and other reliable market basis to measure at fair value.
Moreover, estimates necessary to compute for the current value of expected net cash flows involve
various data which will not result to a reliable basis in fair value computation.

Depreciation of laying breeding stocks is calculated using the unit-of-production method whereby
all costs and expenses incurred by the Company during the approximately 25-week growing stage
of its breeding stock are accumulated and amortized starting on about the 26th week over the
expected total egg production of such breeders until, on the average, the 65th week (65 weeks
useful life). Depreciation is included under the cost of goods sold account in the statement of
income.
Any indication of impairment of biological assets is assessed at each balance sheet date. As of
December 31, 2006 and 2005, there is no indication of impairment of biological assets.

Investment Properties
Investment properties which pertain mostly to land and buildings held for capital appreciation or
for rentals, are measured at fair value.

The fair value of the land has been determined based on appraisal reports conducted by
independent appraisers or on the basis of recent sales of similar properties in the same areas as the
investment properties and taking into account the economic conditions prevailing at the time the
valuations were made. The independent appraisers hold a recognized and relevant professional
qualification and has a recent experience in the location and category of the investment properties
being valued.
An investment property is derecognized when either it has been disposed of or when it is
permanently withdrawn from use and no future economic benefit is expected from its disposal.
Any gain or loss in the derecognition on an investment property is recognized in the statement of
income in the year of derecognition.
17
Expenditures incurred after the investment properties have been put into operations, such as
repairs and maintenance costs, are normally charged to income in the period in which the costs are
incurred.
Transfers are made to investment properties when, and only when, there is a change in use,
commencement of an operating lease to another party or ending of construction or development.
Transfers are made from investment properties when, and only when, there is a change in use,
evidenced by commencement of the Company’s occupation or commencement of development
with a view to sale. The difference between the fair value of the property, plant and equipment and
its net book value at the time the property, plant equipment is transferred to investment property is
credited to the Revaluation increment account in the equity.
For a transfer from investment property to owner-occupied property, the deemed cost of property
for subsequent accounting is its fair value at the date of change in use. If the property occupied by
the Company as an owner-occupied property becomes an investment property, the Company
accounts for such property in accordance with the policy stated under property, plant, and
equipment up to the date of change in use. The difference between the fair value of the property
transferred to investment property and its carrying value is credited to the revaluation increment
account.
Property, Plant and Equipment
Property, plant and equipment, except land, are stated at cost less accumulated depreciation,
amortization and any impairment in value.
The initial cost of property, plant and equipment comprises its purchase price, including import
duties and nonrefundable purchase taxes, capitalized borrowing costs and any directly attributable
costs of bringing the asset to its working condition and location for its intended use. Expenditures
incurred after the fixed assets have been put into operation, such as repairs and maintenance costs,
are normally charged to income in the period in which the costs are incurred. In situations where
it can be clearly demonstrated that the expenditures have resulted in an increase in the future
economic benefits expected to be obtained from the use of an item of property, plant and
equipment beyond its originally assessed standards of performance, the expenditures are
capitalized as an additional cost of property, plant and equipment. When assets are sold or retired,
their costs and accumulated depreciation and amortization and any impairment in value are
removed from the accounts and any gain or loss resulting from their disposal is included in the
statement of income.
Land is measured initially at fair value as of January 1, 2004 as permitted by PFRS 1. This fair
value is the “deemed cost” of the land, which is subjected to impairment loss. The fair value of
the land has been determined based on the appraisal reports conducted by independent appraisers
and taking into account the economic conditions prevailing at the time the valuations were made.
The difference between the fair value of the land and the carrying value was credited to deficit.

Depreciation and amortization are computed using the straight-line method over the estimated
useful lives of the assets as follows:
Number of Years
Silos, buildings and improvements 20
Machinery and equipment 10
Transportation and delivery equipment 5
Office furniture, fixtures and equipment 5
The useful lives, residual value of the assets and depreciation and amortization methods are
reviewed periodically to ensure that the periods, residual value of the assets and method of
depreciation and amortization are consistent with the expected pattern of economic benefits from
items of property, plant and equipment.

18
Construction in progress is stated at cost. This includes cost of construction, plant and equipment
and other direct costs. Construction in progress is not depreciated until such time as the relevant
assets are completed and available for use.
Software Costs
The Company capitalizes software licensing and development costs, shown under “Other
noncurrent assets” account in the balance sheet, after technological feasibility has been established
and are amortized using the straight-line method over the estimated useful life of the software : 5
years commencing 2006 (20 years in 2005 and prior years). The change in estimated finite useful
life, which was based on management’s evaluation of the remaining useful life of the software, is
considered a change in estimate and is accounted for prospectively. The amortization of software
costs is included under “Depreciation and amortization” account in the statement of income.
Impairment of Long-lived Nonfinancial Assets
The carrying values of property, plant and equipment, biological assets, and software costs are
reviewed for impairment when events or changes in circumstances indicate that the carrying value
may not be recoverable. If any such indication exists and where the carrying values exceed the
estimated recoverable amount, the assets or cash-generating units are written down to their
recoverable amount. The recoverable amount of property, plant and equipment, biological assets
and software costs is the greater of net selling price and value in use. In assessing 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.
For an asset that does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs. Impairment losses, if any, are
recognized in the statement of income.
Provisions
Provisions are recognized when: a) the Company has a present obligation (legal or constructive) as
a result of a past event; b) it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and c) a reliable estimate can be made of the amount of
the obligation. If the effect of the time value of money is material, provisions are discounted using
the pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risk specific to the liability. Where discounting is used, the increase in the
provision due to the passage of time is recognized as an interest expense.

Revenue Recognition
Revenue is recognized when it is probable that the economic benefit associated with the
transaction will flow to the Company and the amount of revenue can be measured reliably. The
following specific recognition criteria must also be met before revenue is recognized:

Sale of Goods

Revenue from sale of goods is recognized when delivery has taken place and the significant
risks and rewards of ownership have passed to the buyer and the amount of revenue can be
measured reliably, which is normally upon delivery.

Fair Valuation of Agricultural Produce

Revenue from fair value of agricultural produce is recognized at the point of harvest. Fair
value is based on the most recent relevant market price (see related policy on agricultural produce)
at transaction date.

19
Interest

Interest income is recognized as the interest accrues using the effective interest rate method.

Pension Costs
The Company has an unfunded defined benefit pension plan covering all permanent, regular, full-
time employees. The cost of providing benefits under the defined benefit plan is determined using
the projected unit credit actuarial valuation method. Actuarial gains and losses are recognized
outside of profit or loss, in the statement of recognized income and expense. See Note 2 for the
change in accounting for actuarial gains and losses in 2006.

The past service cost is recognized as an expense on a straight-line basis over the average period
until the benefits become vested. If the benefits are already vested immediately following the
introduction of, or changes to, a pension plan, past service cost is recognized immediately. Gains
or losses on the curtailment or settlement of pension benefits are recognized when the curtailment
or settlement occurs.

The defined benefit liability is the aggregate of the present value of the defined benefit obligation
reduced by past service cost not yet recognized.

Borrowing Costs

Borrowing costs are generally expensed as incurred. Borrowing costs are capitalized if they
are directly attributable to the acquisition or construction of a qualifying asset. Capitalization of
borrowing costs commences when the activities to prepare the asset are in progress and
expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the
assets are substantially ready for their intended use. If the carrying amount of the asset exceeds its
recoverable amount, an impairment loss is recorded.

Foreign Currency Transactions

The functional and presentation currency of the Company is the Philippine peso. Transactions in
foreign currencies are initially recorded in Philippine peso at exchange rate at the date of the
transaction. Outstanding foreign-currency denominated monetary assets and liabilities are
translated at the functional currency rate of exchange ruling at the balance sheet date. All
differences are taken to the statement of income.

Income Taxes
Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted at the balance
sheet date.

Deferred income tax

Deferred income tax is provided, using the balance sheet liability method on all temporary
differences at the balance sheet date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred
income tax assets are recognized for all deductible temporary differences.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply
to the year when the asset is realized or the liability is settled, based on tax rates and tax laws that
have been enacted or substantively enacted at the balance sheet date.

20
 The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the deferred income tax assets to be utilized.
Leases

The determination of whether an arrangement is, or contains a lease as provided in Philippine

Interpretation IFRIC-4 is based on the substance of the arrangement and requires an assessment of
whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and
the arrangement conveys a right to use the asset. A reassessment is made after inception of the
lease only if one of the following applies:

a. There is a change in contractual terms, other than a renewal or extension of the arrangement;

b. A renewal option is exercised or extension granted, unless that term of the renewal or
extension was initially included in the lease term;

c. There is a change in the determination of whether fulfillment is dependent on a specific asset;

or

d. There is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gives rise to the reassessment for scenarios a, c or d above, and at the date
of renewal or extension period for scenario b.
For arrangements entered into prior to January 1, 2005, the date of inception is deemed to be
January 1, 2005 in accordance with the transitional requirements of the Interpretation.
Operating Leases
Lease payments under an operating lease are recognized as an expense in the statement of income
on a straight-line basis over the term of the lease.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed based on the weighted average number of common
shares outstanding during the year and after giving retroactive effect to any stock dividends
declared during the year.

Diluted earnings per share is determined based on the weighted average number of common
shares outstanding after giving retroactive effect to any stock dividend declared during the year.
Where the basic earnings per share effect of the assumed conversion of preferred shares on net
income would be anti-dilutive, no diluted earnings per share is presented.

Segment

For management purposes, the Company has one business segment only - agribusiness and is
solely on poultry. Accordingly, no segment information is presented.

21
 Contingencies

Contingent liabilities are not recognized in the financial statements. They are disclosed unless
the possibility of an outflow of resources embodying economic benefits is remote. Contingent
assets are not recognized in the financial statements but disclosed when an inflow of economic
benefits is probable.

Events After the Balance Sheet Date

Post year-end events that provide additional information about the Company’s position at the
balance sheet date (adjusting events) are reflected in the financial statements. Post year-end
events that are not adjusting events are disclosed in the notes to the financial statements when
material.

Results of Operation — CY2006 vs CY2005

Results of Operations. The Company was able to make a turn-around from previous years’
losses of P82 million and P485 million for the year 2005 & 2004 respectively to a net income of P80
million for CY2006. This was made possible by better selling prices and reduced cost and operating
expenses as management continues to implement cost saving measures.
Net revenue for the year 2006 amounted to P3.73 billion as compared to P3.71 billion for CY
2005. Cost of sales was 91% this year as against 96% and 108% for CY 2005 & CY 2004
respectively. Gross profit increased from 3.9% in CY2005 to 9.27% this year.
The Company single-mindedly focused on programs to expand market coverage, lower cost
and operating expenses. The Company implemented its just-in-time program for its inventories to
prevent huge storage costs. It has also been able to invest in a technology that allowed fresh produce to
be shipped from its Mindanao plant to different markets nationwide, including Metro Manila. Hand in
hand with this, the Company strengthened its direct selling and distributorship operations to be able to
regain and penetrate new markets.
Financial Position. The Company’s assets as of December 31, 2006 totaled to P1.87 billion as
compared to P2.04 billion as of December 31, 2005. Current ratio for the year 2006 is 0.52:1, slightly
better that last year current ratio of P0.50:1. Available cash on hand and in banks slightly increased by
31%. Accounts Receivable decreased by about 29% due to collection efforts and shorter terms with
customers. Inventories went down by about 12% mainly due to management effort to maintain a JIT
policy for finished goods and raw materials. Other current assets decreased by 29% due to payment of
income tax using creditable withholding taxes. Other non-current assets decreased by 37% due to
changed in useful life of software assets from 20 years to 10 years. Retirement benefits obligation was
up by 280% mainly because of the adjustment made on actuarial losses.

Net cash from operations amounted to P14 million. Cash from investing activities amounted to
P36 million while Cash used in financing activities amounted to P42 million. In summary, cash &
cash equivalents for the period increased by about 31% mainly due to better results of operations for
the year.
The Company continues to closely monitor its key performance indicators in all areas to ensure that
efficiency standards are attained. The Company is currently pouring its efforts on to major aspects of
its business operations: 1) developing their human resources who are key to the attainment of their
objectives; and 2) creating, executing and sustaining processes that would permanently address
systems losses that significantly affect the Company’s financial performance.

22
Results of Operation — CY2005 vs CY2004

The Company performed more favorably in 2005 vs. the previous years, reducing losses to only P82
million as against previous year’s level of P485 million. Improved prices, coupled with tighter cost
and operating expenses management all helped bring about better financial results for the year.
Revenues for the year totaled to ‘P3.7 billion, 18% of which came from the fair value of the
agricultural produce. This is a decrease about 16% when compared to 2004 of P4.45 ‘billion, of which
16% came from fair value of agricultural produce. Cost of Sales amounted to P3.57 billion or a
decrease by about 25% versus last year of P4.81 billion. Operating expenses increased to P256 million
from P222 million in 2004 or an increase of about 15%. Financing charges decreased by about 19%
due to time restructuring of existing long-term loan. , ‘
Financial Position
The Company’s asset as of December 2005 and 2004 is P2.035 billion and P2.338 billion
respectively. The reduction in asset in 2005 against 2004 is primarily a result of the losses incurred for
the year. Current ratio decreased to 0.50 in ‘2005 from 0.62 for 2004 due reclassification of portion of
biological assets to non-current and the reclassification of long-term loan to current.
Cash & Cash equivalents decreased by about 59% when compared to 2004 due to the payments of
loans and use in current operations. ,
Accounts Receivable decreased by 7% or P25M as compared to 2004.
Inventories decreased by about 40% when compared to 2004 due to the implementation of the Just-
In-Time (JIT) method for inventories. ‘Biological assets-current and non-current decreased by about
15% and 27% respectively due to early culling and cut back in production.
Other Current Assets decreased by about compared to 2004, primarily due to decrease in deposit on
purchases for bulk raw materials and decrease in prepaid expenses.
Investment properties increased by about 27% due to increase in the fair market value of Land not
used in business.
Bank loans decreased by .33% as compared 2004 due to payments made. Likewise, long- term loans
and its current portion decreased by about 24% & 19% respectively due to payments made.
Trust receipts and acceptances payable decreased by 23% due to lesser purchases of raw materials as
J-l-T policy is implemented.
Retirement benefits obligations decreased by 53% due to payments of retrenchment benefits.
In July 2005, the Japanese government imposed a ban on imports of chicken products front the
Philippines. Thus, the Company’s export operations were temporarily stopped and the Company
concentrated mainly on domestic operations balance of the year.
The Company continues to single-mindedly focus on attaining better efficiencies to lower cost and
operating expenses. Programs and projects have been identified and are being implemented to achieve
this, among which include just-in-time production and sale of our fresh produce, to lower storage cost;
enhancing cost competitiveness of our Cagayan de Oro (CDO) plant thru better utilization of
capacities; expansion of market coverage thru direct selling and strengthening of distributorship
operations; and close monitoring of key performance indicators to ensure that fauna and plants are
attaining standards that have been set by the company.

23
Key Performance Indicators:

CY2006 CY2005
Sales Revenue Growth (0.36%) (16.54%)
Operating Margin 3.74% (2.99%)
Net income (Loss) 80.51M (81.95 M)
ROS ‘ 2.16%) (2.21%)
“
Current Ratio “ 0.52 0.50

Sales Revenue Growth = Sales this period -1

Sales this prior period

Operating Margin = Income from operations

Net Sales

ROS = Net Income

Net Sales

Current Ratio = Current Assets

Current Liabilities

Item 7. Financial Statements

See Audited Financial Statements as of December 31, 2006, attached hereto as Annex “B”.

ACCOUNTS RECEIVABLES: The Breakdown follows:

2006 2005
(In thousands)
Trade P
=175,608 =
P202,525
Contract growers 52,837 74,846
Related companies (Note 19) 18,831 32,847
Officers and employees 6,975 7,618
Others 11,891 34,403
266,142 352,239
Less allowance for doubtful accounts 37,517 28,885
=228,625
P =
P323,354

There is no advance made to any director, stockholder, officer or related interests (DOSRI) or any
affiliates as of December 31, 2006.

Prepaid Expenses and Other Current Assets:

Other Current Assets:

2006 2005
(In thousands)
Prepaid income tax P
= =
P32,467
Deposits on purchases 6,073
Prepayments 506 1,566
Others 8,423 8,393
P
=42,518 =
P60,115

24
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

The Company’s external auditors since incorporation have been Sycip, Gorres, Velayo & Co. In
compliance with SEC Memorandum Circular No. series of 2003, changes were made in the
assignment of SGV’s engagement partners.
There are no disagreements with accountants on accounting and financial disclosures.

PART III – CONTROL AND COMPENSATION INFORMATION

Item 9. Directors and Executive Officers of the Registrant

(1) Directors and Executive Officers – The Directors of the Corporation are elected at the regular
annual meeting of stockholders to serve for one (1) year until their successors are elected and
qualified. The Officers of the Corporation are elected by a majority vote of the Board of Directors
and are enumerated below, with a description of their business experience over the past five years.

Directors / Officers Designation Citizenship Term

1. Jose Concepcion, Jr. Director / Chairman Filipino

of the Board / CEO 1 yr.
2. Luis Bernardo A. Concepcion Director / President / Filipino 1 yr.
COO
3. Francisco A. Segovia Director Filipino 1 yr.
4. Felicisimo Nacino, Jr. Director Filipino 1 yr.
5. Lauro B. Ramos Director Filipino 1 yr.
6. Senen C. Bacani Director Filipino 1 yr.
7. Antonette Palma-Angeles Director Filipino 1 yr.
8. Jose A. Bernas Corporate Secretary Filipino 1 yr.
9. Susan A. Kalalo Vice –President Filipino
10. Irene M. Joven Chief Finance Officer
& VP-Comptroller Filipino
11. Eugenio B. Bayta AVP – Northern
Mindanao Production
Manager Filipino
12. Ferdinand S. Sahagun AVP – Visayas & Mindanao
Sales Operation
Operations & Export Filipino

Jose Concepcion, Jr., 75, born on 29 December 1931, has an Associate’s Degree in Business
Administration from De La Salle University and a Bachelor’s Degree in Agriculture from Araneta
University. He is the Chairman of the Board and the Chief Executive Officer of Swift Foods, Inc. He is
also the Chairman of the Board of RFM Corporation, RFM Foundation Incorporated and Executive
Committee of the ASEAN Chamber of Commerce and Industry. Mr. Concepcion also holds Co-
Chairman position in the Bishops-Businessmen’s Conference. He was previously designated as the
Secretary of the Department of Trade and Industry, Chairman of the Board of Investments, member of
the Central Bank Monetary Board, National President of the Council of Laity (Philippines) and the
Society of Vincent Paul, National Chairman of the National Citizens Movement for Free Elections,
Founding President of the Pasay City Citizen League for Good Government, delegate to the 1971
Constitutional Convention of the first District of Rizal, the Charter President of the Capitol Jaycees, and
Trustee of the Oblate Educational System, Notre Dame University. Mr. Jose S. Concepcion, Jr. is the
father of Mr. Jose Ma. A. Concepcion III, the current President and Chief Executive Officer of RFM

25
Corporation, Bernardo Concepcion, the President and Chief Operating Officer of Swift Foods, Inc., and
John Marie Concepcion, the Managing Director and Chief Executive Officer of Selecta.
Luis Bernardo A. Concepcion, 46, born on 20 August 1960, has a degree in Business
Administration from St. Ambrose College and completed the International Course on Swine and Poultry
Husbandry from the Barneveld College, The Netherlands. Mr. Concepcion became President and Chief
Operating Officer of Swift Foods, Inc., in July 1996. Mr. Concepcion is an active member of the
Philippine Association of Broiler Integrators (PABI) and was President of this association in 1988-1989.
He currently serves as Co-Chairman of the Bishops Business Conference Committee on Food Security,
and as Board Member of the Chamber of Agriculture & Food, Inc.
Felicisimo Nacino, Jr., 54, born on 9 May 1952, obtained a Bachelor of Arts degree in Economics
and a Master’s Degree in Business Administration from the University of the Philippines. He is
presently the Executive Vice President and Chief Operating Officer of RFM and serves as a director
for the following corporations: Philippine Townships, Inc., RFM Insurance Brokers, Inc., Rizal
Lighterage Corporation, Unilever-RFM Ice Cream Co., and other companies in the RFM group.
Lauro B. Ramos, 56, born on 3 February 1951, obtained his degree of Bachelor of Science in
Business Administration and Accountancy from the University of the East. He passed the CPA board
exam in 1972. He is the Assistant Treasurer of RFM Corporation. He is also the General Manager and
Director of Rizal Lighterage Corporation. He is a Director of RFM Insurance Brokerage, Inc.,
Interbake Commissary Corporation and RFM Equities, Inc. He became a director of Swift Foods, Inc.
in January 2005.
Francisco A. Segovia, 53, born on 17 January 1954, obtained a Bachelor of Science degree in
Business Management from the Ateneo de Manila University. He is Vice-Chairman of Rizal
Lighterage Corporation. He is President of Segovia & Company., Inc., Fritz International Philippines,
Inc., Horseworld, Inc., Big A Aviation Corporation, Intellicon, Inc., Regina Realty/Chico Holdings,
VLA Properties, Inc., Victoneta, Inc., Victoneta Investment, Araneta Institute of Agriculture, Republic
Dynamic Corporation, and Republic Consolidated Corporation. He is a director of RFM Corporation,
Rizal Lighterage Corporation, RFM Insurance Brokers, Inc., RFM Equities, Inc., Philippine
Township, Inc., and Invest Asia Corporation.
Senen C. Bacani, 61, born on 30 July 1945 in Guagua, Pampanga, he obtained a Bachelor of
Science in Commerce from De La Salle University in 1965, Summa cum Laude & class valedictorian.
A Certified Public Accountant, he was granted an East-West Center Scholarship in 1966 and
graduated from the University of Hawaii with a Master of Business Administration in 1968. He started
his career with Dole Company in Honolulu and for the next 22 years, he progressively occupied
management positions of increasing responsibility in the Philippines, Thailand, Ecuador and Costa
Rica. He was appointed Secretary of Agriculture in 1989 by former President Corazon C. Aquino. He
holds several key positions in various companies & institutions as follows: President of Ultrex
Management and Investments Corp., Chairman of La Frutera, Inc., Filipinas Palm Oil Industries
Holding, Inc., Member of the Board of Directors of T’boli Agro-Industrial Dev. Inc., Swift Foods,
Inc., Central Azucarera de la Carlota, Member of the Board of Directors & Vice Pres. of Agriculture &
Food-Phil. Chamber of Commerce & Industry, Member of the Board of Trustees & Auditor of
National Agribusiness Development Center Foundation, Member of the Board of Directors of Phil.
Chamber of Agriculture & Food, Inc., Co-chairman, MAP, ABCD Foundation, Inc., Member of the
Board of Directors of the Phil. Chamber of Food Manufacturers, Inc., Member-Eminent Persons
Group-DTI, Chairman of the National Cooperative Movement Service, Member of the Board of
Trustees of Citizen’s Committee for Agricultural Competitiveness of the DA, Member of the
Development Committee of the School of Agribusiness of the University of Asia and the Pacific,
Member of the Board of Advisers of the Mindanao Business Council, Member of the Board of
Trustees and Treasurer of Peace & Equity Foundation, Member of the Board of Advisers of
Biotechnology Conference of the Philippines, and Member of Export Development. He is an
independent director.

26
 Antonette Palma-Angeles, 50, born on 25 August 1956, is the newly elected independent
director of SFI. She is currently the Academic Vice-President of Ateneo de Manila University. She
holds a bachelor’s degree in Philosophy and Communication Arts and a Master of Arts degree in
Philosophy from Ateneo de Manila University. She likewise has a Ph.D. in Philosophy from the
Katholieke Universteit Lueven. She is currently an Associate Professor in the Ateneo de Manila
University. She is a member of the Board of Trustees of the Asian Institute of Management. She is
very active in public service as a Lecturer in Business Ethics for some Philippine corporations, as well
as Lecturer in Ethics in Government for various government agencies, notably the Bureau of Internal
Revenue and National Electrification Authority.
Jose A. Bernas, 47, was appointed Corporate Secretary on 2 November 2006. He teaches
Public International Law and Government Contracts at the Ateneo de Manila University School of
Law, the Pamantasan ng Lungsod ng Maynila and the La Salle –Far Eastern University Law School.
He is the Managing Partner of the Bernas Law Office
Susan A. Kalalo, 48, born on 5 November 1958, is currently the Senior Vice President and
also Assistant to the President-COO of Agribusiness division. She obtained a degree in Economics
from De la Salle University. She was hired by the Company on 1 April 1993, and previously worked
at the National Development Company.
Irene M. Joven, 52, born on 21 October 1954 in Pililla, Rizal, obtained a Bachelor of Science
in Commerce, major in Accounting, minor in Economics from Tomas Claudio Memorial College in
1975, summa cum laude and class valedictorian. A certified public accountant, she started her career
with RFM Corporation in 1975 and later transferred to Selecta Dairy Products, Inc. in 1990. She
joined Swift Foods, Inc. as CFO/VP Comptroller on 1 August 2005.
Eugenio B. Bayta, 43, born on 11 March 1964, is currently the Asst. Vice-President and
OATS Group Head. He obtained his BSAE from UP Los Baños, Laguna. He was formerly connected
with The Science and Technology Alternative Institute for Rural Services. He joined and became an
officer of the Corporation on 16 February 2000.
Ferdinand S. Sahagun, 45, born on 21 August 1961, obtained his Bachelor of Science degree
in Agriculture from Central Mindanao University. He joined the Corporation on 16 May 1991. He was
promoted as Asst. Vice President, Northern Mindanao Business Unit on 1 July 2003. He is a member
of the Oro Chamber of Commerce, Rotary International, Regional National Meat Inspection
Commission (NMIC) Advisory Committee, and Philippine Association of Broiler Integrators (PABI).
(2) Significant Employees None

(3) Family Relationships

There are no family relationships between and among the directors and officers of the
Corporation, except for Jose Concepcion, Jr. who is the father of Jose Ma. A. Concepcion III. Luis
Bemardo A. Concepcion, and Francisco A. Segovia is the latter’s first cousin.
(4) Involvement in Certain Legal Proceedings

To the knowledge and information of the company, the above-named directors and executive
officers were not involved during the past five (5) years in any bankruptcy proceeding. Neither have
they been convicted by final judgment in any criminal proceeding or have been subject to any order,
judgment or decree of competent jurisdiction, permanently or temporarily enjoining, barring,
suspending, or otherwise limiting their involvement in any type of business, securities, commodities or
banking activities. Nor have they been found in action by any court or administrative bodies to have
violated a securities or commodities law.

27
(5) Independent Directors
Mr. Senen C. Bacani and Ms. Antonette Palma-Angeles are independent minority stockholders
who are not employees nor officers of the Corporation, and whose shareholdings are .00022% percent
of the Corporation’s equity pursuant to Section 38 of the Securities Regulation Code. The Chairman of
the Board, nominated the candidates for independent directors.

Item 10. Executive Compensation

The Chief Executive Officer and five most highly compensated executives receive a total of
approximately P11,488,880.00 for the year 2007 and P11,754,980 in CY 2006, broken down as
follows:
2007 2006
Salary P10,650,347.00 P10,881,832.00
Bonus 853.838.00 873,148.00
The Chief Executive Officer and five most highly compensated executives are the following:
Name Position
Jose S. Concepcion Jr. Chief Executive Officer
Luis Bernardo A. Concepcion President & Chief Operating Officer
Susan A. KaIalo Senior Vice-President
Irene M. Joven Chief Finance Officer & VP-Comptroller
Eugene B. Bayta Asst. Vice-President
Ferdinand S. Sahagun Asst. Vice-President

There is no standard arrangement for the compensation of directors, other than a per diem of
P5,000.00 for every Board of Directors’ Meeting as of 30 August 2002 and a per diem of P5,000.00
for every Committee (Nomination, Compensation and Audit) Meeting as of 30 January 2004. The
Chairman of the Audit Committee is entitled to a monthly allowance of P50,000.00 as of 30 January
2004.
The Company’s executive officers are entitled to the following pecuniary benefits, bonus
scheme, major benefits and retirement plan:
1. Pecuniary Benefits
(a) Option to purchase assigned vehicle after six (6) years at market value, or return the same to
the company and get a replacement vehicle at such time;
(b) All expenses, related to registration, comprehensive insurance, repairs and maintenance to
be borne by the Corporation
(c) Reimbursement of gasoline expenses up to a certain amount of liters per month
2. Bonus Scheme
The grant of bonus will be on the basis of performance and attainment of business plan,
particularly the specific objectives for the year, and in accordance with the company policy.
3. Major Benefits
(a) Hospitalization Plan for the executive officer and his/her immediate dependents, in
accordance with company policy
(b) Vacation Leave of fifteen (15) days per year, which may be accumulated up to 30 days, but
not convertible to cash

28
 (c) Sick Leave of fifteen (15) days per year, which may be accumulated up to 45 days, but not
convertible to cash
(d) Executive check-up once every four (4) years, including SPEC 23 KSAT blood test every
two years
4. Retirement Plan
The retirement plan is available to any individual who has rendered at least five (5) years of
service with the Company, which benefit is equivalent to twenty-five percent (25%) of the basic pay
per year of service, to be increased by five percent (5%) per additional year of service up to a
maximum of 125%.
5. Others
The Company has no compensatory plan or arrangement, including payments to be received
from the registrant, with respect to a named executive officer, if such plan or arrangement results or
will result from the resignation, retirement or any other termination of such executive officer
employment with the registrant and its subsidiaries or from a change-in-control of the registrant or a
change in the named executive officer’s responsibilities following a change-in-control and the amount
involved, including all periodic payment or installments, which exceeds P2,500,000.

A. Commitments and Contingent Liabilities

The following are the significant commitments and contingencies involving the Company:

There are no significant commitments and contingencies involving the Company.

Others

The Philippines continues to experience economic difficulties relating to currency

fluctuations, volatile stock markets and slowdown in growth. In addition, there are commitments,
guarantees, litigations, and contingent liabilities that arise in the normal course of the Company’s
operations which are not reflected in the accompanying financial statements. Management is of the
opinion that losses, if any, from these commitments and contingencies will not have material effects
on the Company’s financial statements.

2) Subsequent Events

There were no material events transpired from January 1 to April 15, 2007.

3) Earnings per share.

Earnings per share were computed as follows:

2006 2005

Net Income Php80,510,000 Php (82,078,000)

Divided by the Weighted

Average Common Shares
outstanding 912,098,273 912,098,273

Earnings per Share P0.09 (P0.09)

============== ===========

29
 4) Capital Stock:
Information on capital stock follows:

Number of shares
2006 2005
Preferred stock - =
P1 par value
Authorized 200,000,000 200,000,000
Issued and outstanding:
Balance at beginning of year 139,267,532 150,216,054
Acquisition of treasury shares – (10,948,522)
Balance at end of year 139,267,532 139,267,532
Common stock - =
P1 par value
Authorized 2,500,000,000 2,500,000,000
Issued 912,098,273 912,098,273

6) Retained Earnings(Deficit)

As of 31 December 2005 and 2006, the retained earnings of the Company is as follows :

2006 2005

Retained earnings at end of year (P3,094,504) (P3,175,014)

Restricted for treasury shares (P - ) (P - )

Unrestricted retained earnings P - P -____

There is no stock purchase agreement, stock agreement, stock split or other dividends.

2006 2005
7) Treasury Stock 0 0
Preferred shares 110,982 110,982

Supplementary Schedules F & I only, others are either not applicable or the information required to be
presented is included in the Company’s financial statements or notes to financial statements.

The Supplementary Schedules are attached hereto as Annex “C”.

Item 11.1 Security Ownership of Certain Beneficial Owners

Owners of more than five (5%) of the Corporation’s securities as of 31 January 2007 are as
follows:
Name and Address Name of Beneficial Number of
of Record Owner Owner / Relationship Shares Percentage
Title with Record Owner Citizenship Held Held

Title of Name and Address of Name of Beneficial Citizenship Number of Percentage

Class Record Owner Owner Shares Held Held
Common Invest Asia Corporation Invest Asia Corp. Filipino 148,331,321 16.263%
RFM Corporate Center,
Pioneer St., Mandaluyong
City
Common Triple Eight Holdings, Inc. Triple Eight Holdings, Filipino 136,145,444 14.927%
RFM Corporate Center, Inc.
30
 Pioneer St., Mandaluyong
City
Common RFM Corporate Center , Same Filipino 109,479,175 12.003%
Pioneer corner Sheridan Sts.
Mandaluyong City
Common Horizons Realty, Inc. Horizons Realty, Inc. Filipino 105,977,644 11.619%
RFM Corporate Center,
Pioneer corner Sheridan
Street, Mandaluyong City
Common BJS Development Corp. BJS Development Corp. Filipino 52,210,099 5.724%
1869 P. Domingo Street, Same
Makati City
Preferred RFM Corporation RFM Corporation Filipino 139,245,969 99.984%
RFM Corporate Center,
Pioneer corner Sheridan
Street, Mandaluyong City

Item 11.2 Security Ownership of Management

Title of Name of Beneficial Owner Amount & Nature of Citizenship % of Class

Class Beneficial Ownership
Common Jose Concepcion, Jr. 477,259 (“r”) Filipino 0.059%
Common Luis Bernardo A. Concepcion 437,137 (“r”) Filipino 0.054%
Common Francisco A. Segovia 3 (“b”) Filipino 0.000%
Common Senen C. Bacani 1 (“b”) Filipino 0.000%
Common Felicisimo M. Nacino, Jr. 498 (“r”) Filipino 0.000%
Common Susan A. Kalalo 3,733 (“r”) Filipino 0.000%
Common Lauro B. Ramos 4,977 (“r”) Filipino 0.000%
Common Antonette Palma-Angeles 2,000 (“b”) Filipino 0.000%
Common Irene M. Joven 497 (“r”) Filipino 0.000%
Common Ferdinand S. Sahagun 0 Filipino 0.000%
Common Eugene B. Bayta 0 Filipino 0.000%
Common Jose A. Bernas 0 Filipino 0.000%

The total number of shares owned by the Directors and Executive Officers of the Corporation
is 926,106 common shares.
Jose Ma. A. Concepcion III is authorized to vote the shares held by Invest Asia Corporation,
Horizons Realty Corporation, Triple Eight Holdings, Inc. and RFM Corporation.
There are no persons holding more than 5% of a class under a voting trust or similar
agreement.

Item 12. Certain Relationships and Related Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control
the other party or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subjected to common control or common
significant influence. Related parties may be individuals or corporate entities.

Related Party Transactions

In the normal course of business, the significant transactions of the Company and its subsidiary
with related parties are described below:

31
The Company has transactions with related parties which consist mainly of the following:

a. Purchases of products from RFM amounting to =

P2.18 million in 2006, =
P2.81 million in 2005
and =
P3.64 million in 2004. The Company and RFM are subjected to common control of its
major stockholders.

b. Lease of the Company’s main office from Philippine Townships, Inc. (PTI), a wholly-owned
subsidiary of RFM. The lease covers a period of one year renewable for another year upon mutual
agreement of the parties concerned. Rental expense amounted to = P5.0 million in 2006, = P4.34
million in 2005 and =
P5.07 million in 2004.

c. Availment of hauling services from Rizal Lighterage Corporation (RLC), a majority-owned

subsidiary of RFM, for the handling of its feeds raw materials. Hauling service expenses incurred
amounted to =P25.59 million in 2006, =
P5.98 million in 2005 and =P18.10 million in 2004.

In 2006, amount payable to RLC for handling services amounting to =

P17.5 million was
assigned to PTI to offset against the Company’s receivable from PTI.

d. The balances of accounts with related parties are as follows:

2006 2005
(In thousands)
Due from related companies (included under
accounts receivable (Note 5)
PTI P
=– =
P23,762
Others 18,831 9,085
P
=18,831 =
P32,847
Due to related companies (included under
accounts payable and accrued expenses
(Note 13)
RFM P
=124,438 =
P106,881
PTI 3,329 –
P
=127,767 =
P106,881

e. The aggregate compensation and benefits paid to the Company’s key management personnel
follow:

2006 2005 2004

(In thousands)
Salaries and allowances P
=10,881 =
P11,432 =
P12,045
Retirement benefits cost 1,935 1,792 1,336
Other short-term employee benefits 873 371 359
P
=13,689 =
P13,595 =
P13,740

f. The Company recognized an impairment loss on its receivables from a dormant affiliate
amounting to P8.32 million in deficit as of January 1, 2005 upon adoption of PAS 39.

Discussion on Compliance with leading practice on Corporate Governance

The Compliance Officer is monitoring and evaluating the compliance of the Board of
Directors and top management with its Manual on Corporate Governance.

32
 The Company has fully complied with the requirements of the Manual on Corporate
Governance, as certified by the Compliance Officer, except for some areas where steps are continually
being undertaken to ensure full compliance.

There are no deviations from the Manual of Corporate Governance of the Company.

Improvement of the Company’s corporate governance will be done when appropriate.

PART IV – EXHIBITS AND SCHEDULES

Item 14. Exhibits and Reports on SEC Form 17-A

(a) Exhibits

1. List of Top One Hundred (100) Stockholders as of 31 December 2006, referred to in Item
5(2) as Annex “A”
2. Audited Financial Statements & report of Independent Auditors as of 31 December 2006,
referred to in Item 7 as Annex “B”
3. Supplementary Schedules as Annex “C”

33
34
 INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES

Form 17-A

. Page

Report of Independent Public Accountants

Balance Sheets as of December 31, 2006, 2005 & 2004
Statements of Income for the years Ended December 31, 2006, 2005, & 2004
Statements of Recognized Income & Expense
for the years Ended December 31, 2006, 2005 & 2004
Statements of Cash Flows for the years ended
December 31, 2006, 2005 & 2004
Notes to Financial Statements

SUPPLEMENTARY SCHEDULES
A Marketable Securities *

B Amounts Receivable from Directors, Officers, Employees, Related Parties, and

Principal Stockholders (Other than Related Parties) *

C Non-Current Marketable Equity Securities, Other Long-Term

Investments in Stocks, and Other Investments *

D Indebtedness of Unconsolidated Subsidiaries and Related Parties *

E Intangible Assets – Other Assets *

F Long-Term Debt X

G Indebtedness to Related Parties *

H Guarantees of Securities of Other Issuers *

I Capital Stock X

____________________

* - Not Applicable
X - Attached

35
 INDEX TO EXHIBITS

Form 17-A

No. Page No.

(3) Plan of Acquisition, Reorganization, Arrangement
Liquidation, or Succession NA

(5) Instruments Defining the Rights of Security Holders,

Including Indentures NA

(8) Voting Trust Agreement NA

(9) Material Contracts NA

(10) Annual Report to Security Holders, Form 11-Q or

Quarterly Report to Security Holders NA

(13) Letter re Change in Certifying Accountant NA

(16) Report Furnished to Security Holders NA

(18) Subsidiaries of the Registrant NA

(19) Published Report Regarding Matters Submitted to Vote

of Security Holders NA

(20) Consent of Experts and Independent Counsel NA

(21) Power of Attorney NA

(29) Additional Exhibits NA

_______

NA - Not Applicable

36
37
38
 COVER SHEET

A S 0 9 4 0 5 0 6 6
SEC Registration Number

S W I F T F O O D S , I N C .

(Company’s Full Name)

R F M C o r p o r a t e C e n t e r , P i o n e e r

c o r n e r S h e r i d a n S t r e e t s ,

M a n d a l u y o n g C i t y

(Business Address: No. Street City/Town/Province)

Irene M. Joven 631-8101

(Contact Person) (Company Telephone Number)

1 2 3 1 A A F S
Month Day (Form Type) Month Day
(Calendar Year) (Annual Meeting)

Not Applicable
(Secondary License Type, If Applicable)

Not Applicable
Dept. Requiring this Doc. Amended Articles Number/Section

Total Amount of Borrowings

Total No. of Stockholders Domestic Foreign

To be accomplished by SEC Personnel concerned

File Number LCU

Document ID Cashier

STAMPS
Remarks: Please use BLACK ink for scanning purposes.

39
SWIFT FOODS, INC.

Financial Statements
December 31, 2006 and 2005
and Years Ended December 31, 2006, 2005 and 2004

and

Independent Auditors’ Report

40
41
42
SGV & CO SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Phone: (632) 891-0307
Fax: (632) 819-0872
www.sgv.com.ph
BOA/PRC Reg. No. 0001
SEC Accreditation No. 0012-FR-1

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of Directors

Swift Foods, Inc.
RFM Corporate Center
Pioneer corner Sheridan Streets
Mandaluyong City

We have audited the accompanying financial statements of Swift Foods, Inc., which comprise the
balance sheets as at December 31, 2006 and 2005, and the statements of income, statements of
recognized income and expense and statements of cash flows for each of the three years in the period
ended December 31, 2006, and a summary of significant accounting policies and other explanatory
notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Philippine Financial Reporting Standards. This responsibility includes: designing,
implementing and maintaining internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error; selecting
and applying appropriate accounting policies; and making accounting estimates that are reasonable in
the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with Philippine Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance 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.

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

SGV & Co is a member practice of Ernst & Young Global

43
 -2-

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of
Swift Foods, Inc. as of December 31, 2006 and 2005, and its financial performance and its cash flows
for each of the three years in the period ended December 31, 2006 in accordance with Philippine
Financial Reporting Standards.

Without qualifying our opinion, we draw attention to Note 1 to the financial statements which states
that the Company has been able to reduce the excess of its current liabilities over its current assets by
=
P163.57 million, from = P797.81 million in 2005 to = P634.24 million in 2006. However, this excess
position of current liabilities over current assets may have an effect on the Company’s ability to
continue operating in the normal course of business. Management plans, in regard to this matter, is
fully discussed in Note 1 to the financial statements.

SYCIP GORRES VELAYO & CO.

Teresita M. Baes
Partner
CPA Certificate No. 27222
SEC Accreditation No. 0065-AR-1
Tax Identification No. 102-081-050
PTR No. 0266525, January 2, 2007, Makati City

April 12, 2007

44
SWIFT FOODS, INC.
BALANCE SHEETS
(Amounts in Thousands)

December 31
2005
(As restated,
2006 Note 2)
ASSETS
Current Assets
Cash and cash equivalents (Notes 4 and 21) P
=67,074 =
P51,027
Accounts receivable - net (Notes 5, 19 and 21) 228,625 323,354
Inventories - net (Note 6) 196,891 223,306
Biological assets (Note 7) 146,030 127,042
Other current assets (Note 8) 42,518 60,115
Total Current Assets 681,138 784,844
Noncurrent Assets
Investment properties (Notes 9 and 14) 729,999 744,484
Property, plant and equipment - net (Notes 10 and 14) 299,252 322,317
Biological assets - net (Note 7) 141,218 156,690
Other noncurrent assets - net (Note 11) 16,792 26,685
Total Noncurrent Assets 1,187,261 1,250,176
TOTAL ASSETS P
=1,868,399 =
P2,035,020

LIABILITIES AND EQUITY

Current Liabilities
Bank loan (Notes 12 and 21) P
=2,000 =
P14,000
Accounts payable and accrued expenses (Notes 13, 19 and 21) 1,198,196 1,448,074
Trust receipts and acceptances payable (Notes 6 and 21) 74,926 57,817
Current portion of long-term debt (Notes 9, 10, 14 and 21) 40,253 62,761
Total Current Liabilities 1,315,375 1,582,652
Noncurrent Liabilities
Long-term debt - net of current portion (Notes 9, 10, 14 and 21) 137,326 145,100
Retirement benefits obligation (Note 22) 41,085 10,811
Deferred income tax liabilities - net (Note 23) 94,279 97,258
Other long-term liability (Note 13) 31,416 –
Total Noncurrent Liabilities 304,106 253,169
Total Liabilities 1,619,481 1,835,821
Equity (Note 15)
Capital stock 1,062,464 1,062,464
Capital in excess of par value 2,097,119 2,097,119
Deficit (3,094,504) (3,175,014)
Revaluation increment in investment properties (Note 9) 321,577 321,577
Cumulative actuarial gains (losses) (26,756) 4,035
Treasury shares - preferred (110,982) (110,982)
Total Equity 248,918 199,199
TOTAL LIABILITIES AND EQUITY P
=1,868,399 =
P2,035,020

See accompanying Notes to Financial Statements.

45
SWIFT FOODS, INC.
STATEMENTS OF INCOME
(Amounts in Thousands, Except Basic/Diluted Earnings [Loss] Per Share)

Years Ended December 31

2005 2004
(As restated, (As restated,
2006 Note 2) Note 2)

NET REVENUE
Sale of goods P
=3,117,760 =
P3,044,744 =
P3,719,440
Fair value of agricultural produce (Note 6) 609,863 669,357 730,808
3,727,623 3,714,101 4,450,248

COST OF GOODS SOLD (Notes 7, 16, 19 and 26) 3,382,132 3,569,334 4,813,148

GROSS INCOME (LOSS) 345,491 144,767 (362,900)

GENERAL AND ADMINISTRATIVE EXPENSES

(Note 17) (112,955) (115,326) (100,884)

SELLING AND MARKETING EXPENSES

(Note 18) (93,192) (140,630) (121,367)

OTHER GAINS AND LOSSES

Fair value gain (loss) on investment properties (Note 9) (14,597) 60,909 15,478
Foreign exchange gain (loss) - net 7,367 (2,011) (2,231)
Gain (loss) on sale of property, plant and equipment 4,492 (478) 237,142
Interest income (Note 4) 554 261 1,386
Others 1,995 12,379 10,919

INTEREST EXPENSE (Notes 12 and 14) (52,379) (36,107) (44,530)

INCOME (LOSS) BEFORE INCOME TAX 86,776 (76,236) (366,987)

PROVISION FOR INCOME TAX (Note 23)

Current 7,072 5,401 –
Deferred (806) 441 118,558
6,266 5,842 118,558

NET INCOME (LOSS) P

=80,510 (P
=82,078) (P
=485,545)

Basic/Diluted Earnings (Loss) Per Share (Note 25) P

=0.09 (P
=0.09) (P
=0.53)

See accompanying Notes to Financial Statements.

46
SWIFT FOODS, INC.
STATEMENTS OF RECOGNIZED INCOME AND EXPENSE
(Amounts in Thousands)

Years Ended December 31

2006 2005 2004

Actuarial gain (loss) on defined benefit plan (Note 22) (P

=32,963) =
P947 =
P6,614
Tax effect – (489) (1,683)
NET INCOME (EXPENSE) RECOGNIZED
DIRECTLY IN EQUITY (32,963) 458 4,931

NET INCOME (LOSS) FOR THE YEAR 80,510 (82,078) (485,545)

TOTAL RECOGNIZED INCOME (EXPENSE)

FOR THE YEAR P
=47,547 (P
=81,620) (P
=480,614)

See accompanying Notes to Financial Statements.

47
SWIFT FOODS, INC.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)

Years Ended December 31

2005 2004
(As restated, (As restated,
2006 Note 2) Note 2)
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before income tax P
=86,776 (P
=76,236) (P
=366,987)
Adjustments for:
Interest expense (Notes 12 and 14) 52,379 36,107 44,530
Depreciation and amortization (Notes 10, 11, 16, 17
and 18) 43,702 35,122 48,336
Unrealized foreign exchange loss (gain) (8,376) 317 2,486
Loss (gain) on sale of property and equipment (4,492) 478 (237,142)
Provision for retirement benefits cost (Note 22) 2,539 4,996 2,096
Interest income (Note 4) (554) (261) (1,386)
Operating income (loss) before working capital changes 171,974 523 (508,067)
Decrease (increase) in:
Accounts receivable 94,729 17,067 285,480
Inventories 26,415 180,586 (22,560)
Biological assets (3,516) 81,773 57,680
Other current assets 12,495 (11,627) (41,602)
Increase (decrease) in:
Accounts payable and accrued expenses (268,491) (144,792) 256,910
Trust receipts and acceptances payable 17,109 (17,614) (12,729)
Cash generated from operations 50,715 105,916 15,112
Interest paid (29,721) (38,805) (45,066)
Retirement benefits paid (Note 22) (5,228) (23,575) –
Income taxes paid, including creditable withholding taxes (1,971) (1,275) (3,310)
Interest received 554 261 1,386
Net cash from (used in) operating activities 14,349 42,522 (31,878)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase (decrease) in:
Advances to affiliates 27,322 39,408 (7,120)
Other noncurrent assets – 50 (108)
Fair value loss (gain) on investment properties (Note 9) 14,597 (60,909) (15,478)
Additions (deductions) to:
Property, plant and equipment (Note 10) (11,640) (31,442) (11,117)
Investment properties (Note 9) (112) (2,526) –
Proceeds from sale of property and equipment 5,437 7,697 122
Net cash from (used in) investing activities 35,604 (47,722) (33,701)
(Forward)

48
 -2-

Years Ended December 31

2006 2005 2004
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt (P
=30,282) (P
=61,951) (P
=11,250)
Repayments of bank loan (12,000) (7,000) (9,000)
Payment for redemption of preferred stock – – (1,497)
Increase in advances from affiliates – – (1,461)

Cash used in financing activities (42,282) (68,951) (23,208)

NET EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS 8,376 (317) (2,486)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 16,047 (74,468) (91,273)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 51,027 125,495 216,768
CASH AND CASH EQUIVALENTS
AT END OF YEAR (Note 4) P
=67,074 =
P51,027 =
P125,495

See accompanying Notes to Financial Statements.

49
SWIFT FOODS, INC.
NOTES TO FINANCIAL STATEMENTS

1. Corporate Information and Status of Operations

Swift Foods, Inc. (“SFI” or the “Company”) was incorporated in the Philippines on June 6, 1994
to assume RFM Corporation’s business of manufacturing, marketing, and distributing processed
and canned meat products, poultry products and commercial feeds. As of December 31, 2006 and
2005, the Company’s only business is the poultry business.

Its registered office address is RFM Corporate Center, Pioneer corner Sheridan Streets,
Mandaluyong City.

Status of Operations
The Company has been able to turn-around its operation in 2006, registering a net income of
=
P80.51 million for the year. The Company successfully trimmed down its losses in previous years,
incurring a net loss of only =
P82.08 million in 2005, lower by 83% from 2004’s net loss level.

The Company single-mindedly focused on programs to expand market coverage, lower cost and
operating expenses. The Company implemented its just-in-time program for its inventories to
prevent huge storage costs. It has also been able to invest in a technology that allowed fresh
produce to be shipped from its Mindanao plant to different markets nationwide, including Metro
Manila. Hand in hand with this, the Company strengthened its direct selling and distributorship
operations to be able to regain and penetrate new markets.

The Company continues to closely monitor its key performance indicators in all areas to ensure
that efficiency standards are attained. The Company is currently pouring its efforts on to major
aspects of its business operations: 1) developing their human resources who are key to the
attainment of their objectives; and 2) creating, executing and sustaining processes that would
permanently address systems losses that significantly affect the Company’s financial performance.

In terms of current assets and current liabilities, the Company has been able to significantly reduce
the excess of its current liabilities over current assets by =
P163.57 million, from P
=797.81 million in
2005 to =P634.24 million in 2006. This condition may have an effect on the Company’s normal
course of business.

The accompanying financial statements do not include any adjustments that might result from the
current working capital situation. Related effects will be reported in the financial statements as
these become known and estimable.

The accompanying financial statements were authorized for issue by the Board of Directors
(BOD) on April 12, 2007.

2. Summary of Significant Accounting and Financial Reporting Policies

Basis of Preparation
The financial statements have been prepared on a historical cost basis, except for agricultural
produce and investment properties, which are carried at fair value. The financial statements are
presented in Philippine peso, which is the Company’s functional currency. All values are rounded
off to the nearest thousand (P
=000), except the number of shares or when otherwise indicated.

50
 -2-

Statement of Compliance
The accompanying financial statements have been prepared in compliance with Philippine
Financial Reporting Standards (PFRS).

New Accounting Standards and Interpretations Effective in 2006 and in Subsequent Years
On January 1, 2006, the Company has adopted the following new and amended accounting
standards and Philippine Interpretation of International Financial Reporting Interpretations
Committee (IFRIC) interpretations.

• Amendments to Philippine Accounting Standard (PAS) 19, Employee Benefits - Actuarial

Gains and Losses, Group Plans and Disclosures. The Company chose to apply the new
option offered to recognize in full the actuarial gains and losses outside the statement of
income and presented a Statement of Recognized Income and Expense (SORIE).

As a result, actuarial loss as of December 31, 2003 amounting to =

P1.35 million was credited to
retirement benefit obligation and recognized in the SORIE as of January 1, 2004. Actuarial
gains in 2005 and 2004 amounting to = P0.46 million and =
P4.93 million, net of tax effect of
=
P0.49 million and = P1.68 million, respectively, were recognized directly in the SORIE.
Amortization of actuarial gains in 2005 amounting to = P0.12 million was reversed, decreasing
net income in 2005 and increasing deficit as of December 31, 2005 by the same amount.
There was no amortization of actuarial loss in 2004.

Prior to adoption of this amendment, actuarial gains and losses were recognized as income or
expense when the cumulative unrecognized actuarial gains and losses exceeded 10% of the
higher of the present value of defined benefit obligation and the fair value of plan assets at that
date.

Additional disclosures are made providing information about trends in the assets and liabilities
in the defined benefit plan and the assumptions underlying the components of the defined
benefit cost (see Note 22).

• Philippine Interpretation IFRIC-4, Determining Whether an Arrangement Contains a Lease,

provides guidance in determining whether arrangements contain a lease to which lease
accounting must be applied. The Company has arrangements with various suppliers, such as
the tolling agreement for the dressing of chicken, agreements for the hatching of eggs,
agreements with breeders and with feed millers, which have lease components that qualify as
operating leases. However, since the arrangements are cancellable by the Company, lease
payments were not subject to levelization. Adoption of this Interpretation has no effect on the
fees paid under these agreements, which are included in the cost of biological assets and
agricultural produce. Additional disclosures required were included in the financial
statements (see Note 26).

Following are the amendments to existing standards and interpretations that are not relevant to the
Company:

• PAS 21, Amendment - The Effects of Changes in Foreign Exchange Rates

• PAS 39, Amendment - Financial Instruments: Recognition and Measurement
- Amendment for financial guarantee contracts
- Amendment for hedges of forecast intergroup transactions
- Amendment for fair value option

51
 -3-

• Philippine Interpretation IFRIC-5, Rights to Interests Arising from Decommissioning,

Restoration and Environmental Rehabilitation Funds
• Philippine Interpretation IFRIC-6, Liabilities Arising from Participating in a Special Market-
Waste Electrical and Electronic Equipment

Future Changes in Accounting Policies

The Company has not adopted the following new and amended PFRS and interpretations already
issued but are not yet effective as of December 31, 2006:

• PFRS 7, Financial Instruments: Disclosures, and the complementary amendment to PAS 1,

Presentation of Financial Statements: Capital Disclosures (effective for annual periods
beginning on or after January 1, 2007). PFRS 7 introduces new disclosures to improve the
information about financial instruments. It requires the disclosure of qualitative and
quantitative information about exposure to risks arising from financial instruments, including
specified minimum disclosures about credit risk, liquidity risk and market risk, as well as
sensitivity analysis to market risk. It replaces PAS 30, Disclosures in the Financial Statements
of Banks and Similar Financial Institutions, and the disclosure requirements in PAS 32,
Financial Instruments: Disclosure and Presentation. It is applicable to all entities that report
under PFRS. The amendment to PAS 1 introduces disclosures about the level of an entity’s
capital and how it manages capital. The Company is currently assessing the impact of PFRS 7
and the amendment to PAS 1 and expects that the main additional disclosures will be the
sensitivity analysis to market risk and the capital disclosures required by PFRS 7 and the
amendment to PAS 1. The Company will apply PFRS 7 and the amendment to PAS 1 in 2007.
The required additional disclosures will be included in the financial statements when these
standards and amendment are adopted.

• PFRS 8, Operating Segments (effective for annual periods beginning on or after January 1,
2009). This PFRS adopts a management approach to reporting segment information. PFRS 8
will replace PAS 14, Segment Reporting, and is required to be adopted only by entities whose
debt or equity instruments are publicly traded, or are in the process of filing with the Securities
and Exchange Commission for purposes of issuing any class of instruments in a public
market. This new standard is currently not applicable to the Company as it only has one
business which is poultry.

• Philippine Interpretation IFRIC-7, Applying the Restatement Approach under PAS 29

“Financial Reporting in Hyperinflationary Economies” (effective for annual periods
beginning on or after March 1, 2006), provides a guidance on how to apply the requirements
of PAS 29 in a reporting period in which an entity identifies the existence of hyperinflation in
the economy of its functional currency when that economy was not hyperinflationary in the
prior period, and the entity therefore restates its financial statements in accordance with
PAS 29. This Interpretation is not applicable to the Company and will have no impact in the
financial statements.

• Philippine Interpretation IFRIC-8, Scope of PFRS 2 (effective for annual periods beginning on
or after May 1, 2006). This Interpretation requires PFRS 2 to be applied to any arrangements
where equity instruments are issued for consideration which appears to be less than fair value.
The Company will apply this Interpretation in 2007. The Interpretation has no impact on the
financial position of the Company upon initial adoption because it has no share-based
payments.

52
 -4-

• Philippine Interpretation IFRIC-9, Reassessment of Embedded Derivatives (effective for

financial years beginning on or after June 1, 2006). This Interpretation establishes that the
date to assess the existence of an embedded derivative is the date an entity first becomes a
party to the contract, with reassessment only if there is a change to the contract that
significantly modifies the cash flows. The Company will adopt this Interpretation starting
January 1, 2007 and expects that the adoption of this Interpretation will have no impact on the
financial statements.

• Philippine Interpretation IFRIC-10, Interim Financial Reporting and Impairment (effective for
financial years beginning on or after November 1, 2006). This Interpretation provides that the
frequency of financial reporting does affect the amount of impairment charge to be recognized
in the annual financial reporting with respect to goodwill and available-for-sale investments. It
prohibits the reversal of impairment losses on goodwill and available-for-sale equity
investments recognized in the interim financial reports even if impairment is no longer present
at the annual balance sheet date. The Company will adopt this Interpretation starting
January 1, 2007 and does not expect the adoption to have a significant impact on the financial
statements of the Company.

• Philippine Interpretation IFRIC-11, Group and Treasury Share Transactions (effective for
annual periods beginning on or after March 1, 2007). This Interpretation requires
arrangements whereby an employee is granted rights to an entity’s equity instruments to be
accounted for as an equity-settled scheme by the entity even if (a) the entity chooses or is
required to buy those equity instruments (e.g., treasury shares) from another party, or (b) the
shareholders of the entity provide the equity instruments needed. It also provides guidance on
how subsidiaries, in their separate financial statements, account for such schemes when their
employees receive rights to the equity instruments of the parent. The Company will adopt this
Interpretation in 2008 and does not expect the adoption to have an impact on its financial
statements.

• Philippine Interpretation IFRIC-12, Service Concession Arrangements (effective for annual

periods beginning on or after January 1, 2008). This Interpretation covers contractual
arrangements arising from private entities providing public services and is not relevant to the
Company’s current operations.

Cash and Cash Equivalents

Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash with original maturities of three
months or less and that are subject to an insignificant risk of change in value.

Financial Instruments
Financial assets and financial liabilities
Financial assets and financial liabilities are recognized initially at fair value. Transaction costs are
included in the initial measurement of all financial assets and financial liabilities, except for
financial instruments measured at fair value through profit or loss.

Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or
a component that is a financial liability, are reported as expense or income. Distributions to
holders of financial instruments classified as equity are charged directly to equity net of any
related income tax benefits. Financial instruments are offset when there is a legally enforceable
right to offset and there is intention to settle either on a net basis or to realize the asset and settle
the liability simultaneously.

53
 -5-

Financial assets and financial liabilities are classified into the following categories: Financial
assets and financial liabilities at fair value through profit or loss (FVPL), loans and receivables,
held-to-maturity (HTM) investments, available-for-sale (AFS) financial assets and other financial
liabilities. The Company determines the classification at initial recognition and, where allowed
and appropriate, reevaluates this designation at every reporting date.

The Company’s financial assets and financial liabilities consist of loans and receivables and other
financial liabilities.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments and are not quoted
in an active market. Such assets are carried at cost or amortized cost using the effective interest
method. Gains and losses are recognized in income when the loans and receivables are
derecognized or impaired, as well as through the amortization process.

The Company’s receivables which arise directly from its operations (i.e., trade receivables, due
from contract growers and related parties) are classified as loans and receivables.

Other financial liabilities

These are financial liabilities that are not held for trading or not designated as at FVPL upon the
inception of the liability.

These liabilities are initially recognized at the fair value of the consideration received less directly
attributable transaction costs. After initial recognition, these liabilities are subsequently measured
at amortized cost taking into account the impact of applying the effective interest method of
amortization or accretion for any related premium, discount and any directly attributable
transaction costs.

As of December 31, 2006 and 2005, the Company’s trust receipts payable, short-term bank loans
and long-term debt are classified under this category.

Derecognition of Financial Assets and Financial Liabilities

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is derecognized where:

• The rights to receive cash flows from the asset have expired;

• The Company retains the right to receive cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to a third party under a “pass-through”
arrangement; or

• The Company has transferred its rights to receive cash flows from the asset, and either
(a) has transferred substantially all the risks and rewards of the asset, or (b) has neither
transferred nor retained substantially all the risks and rewards of the asset, but have transferred
control of the asset.

A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or expired.

54
 -6-

Where an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognized in profit or loss.

Where the Company has transferred its rights to receive cash flows from an asset and has neither
transferred nor retained substantially all the risks and rewards of the asset nor transferred control
of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the
asset. Continuing involvement that takes the form of a guarantee over the transferred asset is
measured at the lower of the original carrying amount of the asset and the maximum amount of
consideration that the Company could be required to repay.

Impairment of trade and other receivables

The Company assesses at each balance sheet date whether a financial asset or group of financial
assets is impaired.

A provision for impairment is made when there is objective evidence (such as the probability of
insolvency or significant financial difficulties of the debtor) that the Company will not be able to
collect all of the amounts due under the original terms of the invoice. The carrying amount of the
receivable is reduced through the use of the allowance account. Impaired debts are derecognized
when they are assessed as to be uncollectible.

If there is objective evidence that an impairment loss on receivables carried at cost or amortized
cost has been incurred, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial asset’s original effective interest rate
(i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset
shall be reduced either directly or through the use of an allowance account. The amount of the
loss is recognized in the statement of income.

The Company first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial
assets that are not individually significant. If it is determined that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, the asset
is included in a group of financial assets with similar credit risk characteristics and that group of
financial assets is collectively assessed for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is or continues to be recognized are not included in
a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is
recognized in the statement of income to the extent that the carrying value of the asset does not
exceed its amortized cost at the reversal date.

Inventories
Inventories are valued at the lower of cost (computed principally on the moving average method)
and net realizable value (NRV). The initial cost of finished goods is the fair value less cost to sell
of agricultural produce at point of harvest (see related policy).

55
 -7-

NRV, except for spare parts and supplies, is the selling price in the ordinary course of business,
less the estimated costs necessary to make the sale. For spare parts and supplies, NRV is the
current replacement cost.

Agricultural Produce
Agricultural produce which consists of live broilers harvested from the Company’s biological
assets, are carried at fair value less estimated point-of-sale costs at the point of harvest. The fair
value is determined based on the most recent market price at the point of harvest based on relevant
market prices published by the Bureau of Agricultural Statistics (BAS). The Company, generally,
does not maintain any inventory of agricultural produce at any given time as these are either sold
as live chicken or are immediately transferred as live broilers to the Company’s dressing plants for
processing as dressed chicken.

Biological Assets
The Company’s biological assets include breeding stocks, growing livestock (broilers before
reaching harvestable weight) and goods in process (i.e. hatching eggs and day-old chicks), which
are grouped mainly according to their transformation capacity (growing or laying) as well as their
particular stage in the production process. These biological assets are categorized according to
their inherent characteristics in the production cycle.

The Company’s growing breeding stocks are raised until they reach the laying stage where they
produce day-old chicks. These day-old chicks will be grown as livestock which will either be sold
as live chicken or transferred to the dressing plant for processing as dressed chicken.

Growing livestocks and hatching eggs are classified as current assets while growing and laying
breeding stocks are classified as noncurrent.

Growing livestock and goods in process are carried at accumulated cost while breeding stocks are
carried at accumulated cost, less accumulated amortization and any accumulated impairment
losses. This measurement is adopted by the Company since fair value cannot be determined due
to the absence of a relevant active market and other reliable market basis to measure at fair value.
Moreover, estimates necessary to compute for the current value of expected net cash flows involve
various data which will not result to a reliable basis in fair value computation.

Depreciation of laying breeding stocks is calculated using the unit-of-production method whereby
all costs and expenses incurred by the Company during the approximately 25-week growing stage
of its breeding stock are accumulated and amortized starting on about the 26th week over the
expected total egg production of such breeders until, on the average, the 65th week (65 weeks
useful life). Depreciation is included under the cost of goods sold account in the statement of
income.

Any indication of impairment of biological assets is assessed at each balance sheet date. As of
December 31, 2006 and 2005, there is no indication of impairment of biological assets.

Investment Properties
Investment properties which pertain mostly to land and buildings held for capital appreciation or
for rentals, are measured at fair value.

The fair value of the land has been determined based on appraisal reports conducted by
independent appraisers or on the basis of recent sales of similar properties in the same areas as the
investment properties and taking into account the economic conditions prevailing at the time the
valuations were made. The independent appraisers hold a recognized and relevant professional
qualification and has a recent experience in the location and category of the investment properties
being valued.
56
 -8-

An investment property is derecognized when either it has been disposed of or when it is

permanently withdrawn from use and no future economic benefit is expected from its disposal.
Any gain or loss in the derecognition on an investment property is recognized in the statement of
income in the year of derecognition.

Expenditures incurred after the investment properties have been put into operations, such as
repairs and maintenance costs, are normally charged to income in the period in which the costs are
incurred.

Transfers are made to investment properties when, and only when, there is a change in use,
commencement of an operating lease to another party or ending of construction or development.
Transfers are made from investment properties when, and only when, there is a change in use,
evidenced by commencement of the Company’s occupation or commencement of development
with a view to sale. The difference between the fair value of the property, plant and equipment and
its net book value at the time the property, plant equipment is transferred to investment property is
credited to the Revaluation increment account in the equity.

For a transfer from investment property to owner-occupied property, the deemed cost of property
for subsequent accounting is its fair value at the date of change in use. If the property occupied by
the Company as an owner-occupied property becomes an investment property, the Company
accounts for such property in accordance with the policy stated under property, plant, and
equipment up to the date of change in use. The difference between the fair value of the property
transferred to investment property and its carrying value is credited to the revaluation increment
account.

Property, Plant and Equipment

Property, plant and equipment, except land, are stated at cost less accumulated depreciation,
amortization and any impairment in value.

The initial cost of property, plant and equipment comprises its purchase price, including import
duties and nonrefundable purchase taxes, capitalized borrowing costs and any directly attributable
costs of bringing the asset to its working condition and location for its intended use. Expenditures
incurred after the fixed assets have been put into operation, such as repairs and maintenance costs,
are normally charged to income in the period in which the costs are incurred. In situations where
it can be clearly demonstrated that the expenditures have resulted in an increase in the future
economic benefits expected to be obtained from the use of an item of property, plant and
equipment beyond its originally assessed standards of performance, the expenditures are
capitalized as an additional cost of property, plant and equipment. When assets are sold or retired,
their costs and accumulated depreciation and amortization and any impairment in value are
removed from the accounts and any gain or loss resulting from their disposal is included in the
statement of income.

Land is measured initially at fair value as of January 1, 2004 as permitted by PFRS 1. This fair
value is the “deemed cost” of the land, which is subjected to impairment loss. The fair value of
the land has been determined based on the appraisal reports conducted by independent appraisers
and taking into account the economic conditions prevailing at the time the valuations were made.
The difference between the fair value of the land and the carrying value was credited to deficit.

57
 -9-

Depreciation and amortization are computed using the straight-line method over the estimated
useful lives of the assets as follows:

Number of Years
Silos, buildings and improvements 20
Machinery and equipment 10
Transportation and delivery equipment 5
Office furniture, fixtures and equipment 5

The useful lives, residual value of the assets and depreciation and amortization methods are
reviewed periodically to ensure that the periods, residual value of the assets and method of
depreciation and amortization are consistent with the expected pattern of economic benefits from
items of property, plant and equipment.

Construction in progress is stated at cost. This includes cost of construction, plant and equipment
and other direct costs. Construction in progress is not depreciated until such time as the relevant
assets are completed and available for use.

Software Costs
The Company capitalizes software licensing and development costs, shown under “Other
noncurrent assets” account in the balance sheet, after technological feasibility has been established
and are amortized using the straight-line method over the estimated useful life of the software of
5 years starting in 2006 (20 years in 2005 and prior years). The change in estimated finite useful
life, which was based on management’s evaluation of the remaining useful life of the software, is
considered a change in estimate and is accounted for prospectively. The amortization of software
costs is included under “Depreciation and amortization” account in the statement of income.

Impairment of Long-lived Nonfinancial Assets

The carrying values of property, plant and equipment, biological assets, and software costs are
reviewed for impairment when events or changes in circumstances indicate that the carrying value
may not be recoverable. If any such indication exists and where the carrying values exceed the
estimated recoverable amount, the assets or cash-generating units are written down to their
recoverable amount. The recoverable amount of property, plant and equipment, biological assets
and software costs is the greater of net selling price and value in use. In assessing 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.
For an asset that does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs. Impairment losses, if any, are
recognized in the statement of income.

Provisions
Provisions are recognized when: a) the Company has a present obligation (legal or constructive) as
a result of a past event; b) it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and c) a reliable estimate can be made of the amount of
the obligation. If the effect of the time value of money is material, provisions are discounted using
the pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risk specific to the liability. Where discounting is used, the increase in the
provision due to the passage of time is recognized as an interest expense.

58
 - 10 -

Revenue Recognition
Revenue is recognized when it is probable that the economic benefit associated with the
transaction will flow to the Company and the amount of revenue can be measured reliably. The
following specific recognition criteria must also be met before revenue is recognized:

Sale of Goods
Revenue from sale of goods is recognized when delivery has taken place and the significant risks
and rewards of ownership have passed to the buyer and the amount of revenue can be measured
reliably, which is normally upon delivery.

Fair Valuation of Agricultural Produce

Revenue from fair value of agricultural produce is recognized at the point of harvest. Fair value is
based on the most recent relevant market price (see related policy on agricultural produce) at
transaction date.

Interest
Interest income is recognized as the interest accrues using the effective interest rate method.

Pension Costs
The Company has an unfunded defined benefit pension plan covering all permanent, regular, full-
time employees. The cost of providing benefits under the defined benefit plan is determined using
the projected unit credit actuarial valuation method. Actuarial gains and losses are recognized
outside of profit or loss, in the statement of recognized income and expense. See Note 2 for the
change in accounting for actuarial gains and losses in 2006.

The past service cost is recognized as an expense on a straight-line basis over the average period
until the benefits become vested. If the benefits are already vested immediately following the
introduction of, or changes to, a pension plan, past service cost is recognized immediately. Gains
or losses on the curtailment or settlement of pension benefits are recognized when the curtailment
or settlement occurs.

The defined benefit liability is the aggregate of the present value of the defined benefit obligation
reduced by past service cost not yet recognized.

Borrowing Costs
Borrowing costs are generally expensed as incurred. Borrowing costs are capitalized if they are
directly attributable to the acquisition or construction of a qualifying asset. Capitalization of
borrowing costs commences when the activities to prepare the asset are in progress and
expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until the
assets are substantially ready for their intended use. If the carrying amount of the asset exceeds its
recoverable amount, an impairment loss is recorded.

Foreign Currency Transactions

The functional and presentation currency of the Company is the Philippine peso. Transactions in
foreign currencies are initially recorded in Philippine peso at exchange rate at the date of the
transaction. Outstanding foreign-currency denominated monetary assets and liabilities are
translated at the functional currency rate of exchange ruling at the balance sheet date. All
differences are taken to the statement of income.

59
 - 11 -

Income Taxes
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted at the balance
sheet date.

Deferred income tax

Deferred income tax is provided, using the balance sheet liability method on all temporary
differences at the balance sheet date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred
income tax assets are recognized for all deductible temporary differences.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply
to the year when the asset is realized or the liability is settled, based on tax rates and tax laws that
have been enacted or substantively enacted at the balance sheet date.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available to
allow all or part of the deferred income tax assets to be utilized.

Leases
The determination of whether an arrangement is, or contains a lease as provided in Philippine
Interpretation IFRIC-4 is based on the substance of the arrangement and requires an assessment of
whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and
the arrangement conveys a right to use the asset. A reassessment is made after inception of the
lease only if one of the following applies:

a. There is a change in contractual terms, other than a renewal or extension of the arrangement;

b. A renewal option is exercised or extension granted, unless that term of the renewal or
extension was initially included in the lease term;

c. There is a change in the determination of whether fulfillment is dependent on a specific

asset; or

d. There is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gives rise to the reassessment for scenarios a, c or d above, and at the date
of renewal or extension period for scenario b.

For arrangements entered into prior to January 1, 2005, the date of inception is deemed to be
January 1, 2005 in accordance with the transitional requirements of the Interpretation.

Operating Leases
Lease payments under an operating lease are recognized as an expense in the statement of income
on a straight-line basis over the term of the lease.

60
 - 12 -

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed based on the weighted average number of common
shares outstanding during the year and after giving retroactive effect to any stock dividends
declared during the year.

Diluted earnings per share is determined based on the weighted average number of common shares
outstanding after giving retroactive effect to any stock dividend declared during the year. Where
the basic earnings per share effect of the assumed conversion of preferred shares on net income
would be anti-dilutive, no diluted earnings per share is presented.

Segment
For management purposes, the Company has one business segment only - agribusiness and is
solely on poultry. Accordingly, no segment information is presented.

Contingencies
Contingent liabilities are not recognized in the financial statements. They are disclosed unless the
possibility of an outflow of resources embodying economic benefits is remote. Contingent assets
are not recognized in the financial statements but disclosed when an inflow of economic benefits
is probable.

Events After the Balance Sheet Date

Post year-end events that provide additional information about the Company’s position at the
balance sheet date (adjusting events) are reflected in the financial statements. Post year-end
events that are not adjusting events are disclosed in the notes to the financial statements when
material.

3. Significant Accounting Judgments and Estimates

The preparation of the Company’s financial statements in conformity with PFRS requires
management to make judgments, estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes.

In the opinion of management, these financial statements reflect all adjustments necessary to
present fairly the results for the years presented. Actual results could differ from these estimates.

Judgments

Determination of functional currency

Based on the economic substance of the underlying circumstances relevant to the Company, the
functional currency has been determined to be the Philippine peso. It is the currency that mainly
influences the selling prices for the Company’s products and the currency that influences labor,
materials and other costs of producing the products.

Determining whether an arrangement contains a lease and classifying the lease

The Company has assessed that its dressing plant, feedmill and hatching plant agreements contain
a lease under Philippine Interpretation IFRIC-4 on the basis that the arrangements include a
provision wherein counterparties are guaranteed a minimum pay per month equal to the minimum
volume of units to be processed or produced to an agreed fee per unit. The lease component is
determined to be an operating lease where a significant portion of the risk and rewards of
ownership are retained by the counterparties. The lease payments are not subject to levelization
since the agreements are cancellable by the Company.
61
 - 13 -

Operating lease commitments

The Company entered into various lease agreements on its office space and warehouse.
Management has determined that it does not retain the significant risks and rewards of ownership
of the properties and has classified the leases as operating leases.

Classification of biological assets

The Company classifies its biological assets as current or noncurrent in accordance with the
provision of PAS 1 which provides the base criteria for classifying assets and liabilities as current
or noncurrent based on existing conditions as of balance sheet date.

Consequently, the Company classifies as current the biological assets, such as growing stocks and
goods in process (hatching eggs) which are expected to be realized or utilized within a very short
period of time (less than one year). Laying breeding stocks which are expected to be productive
for an average of 65 weeks (more than one year) and growing breeders, which will become laying
breeders after 25 weeks, are classified as noncurrent biological assets.

Estimates

Estimating allowance for doubtful accounts

Provisions are made for specific and groups of accounts where objective evidence of impairment
exists. The level of this allowance is evaluated by management on the basis of factors that affect
the collectibility of the accounts. These factors include, but are not limited to, the length of the
Company’s relationship with the customer, the customer’s payment behavior, known market
factors and historical loss experiences.

The Company makes an individual assessment of financial assets that are individually significant.
Then a collective assessment is done by grouping the financial assets according to its market
segments. This market segment as defined by the Company is the group of debtors with similar
line of business. Accordingly, these grouping would reflect its own credit risk characteristics.
Moreover, the historical loss experience per segment were determined for purposes of assessing
the impairment for each segment.

The allowance for doubtful accounts amounted to = P37.52 million and =P28.89 million as of
December 31, 2006 and 2005, respectively. The carrying value of accounts receivable, net of the
allowance, amounted to = P228.63 million and =
P323.35 million as of December 31, 2006 and 2005,
respectively (see Note 5).

Fair value of agricultural produce

The Company determines the fair value of its agricultural produce based on the most recent
market transaction price at the date which approximates the point of harvest, provided that there
has been no significant change in economic circumstances between the date of transactions and
balance sheet date. Point-of-sale cost is estimated based on most recent transaction and is
deducted from the fair value in order to measure agricultural produce at point of harvest.

Market price is obtained from the monthly commercial farmgate prices of chicken issued by the
Philippine BAS for provinces which the Company considered as its relevant markets.
Management believes that the monthly market prices from BAS are the only available reliable
basis of fair value of agricultural produce at the point of harvest.

Fair value adjustment of agricultural produce that formed part of the carrying value of finished
goods inventories as of December 31, 2006 and 2005 amounted to = P1.83 million and
=
P10.12 million, respectively (see Note 6); and for inventories that were harvested and sold during
the year, =
P608.04 million in 2006, =
P659.24 million in 2005 and =P703.24 million in 2004.

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 - 14 -

Estimating NRV of inventories

The Company determines the NRV of inventories by reference to the current selling price of the
product and the estimated cost to sell, which is based on the Company’s budget for the succeeding
year.

As of December 31, 2006 and 2005, the cost of inventories, net of allowance for obsolescence
is lower than NRV. The carrying amount of inventories, net of the allowance, amounted to
=
P196.89 million and =
P223.31 million as of December 31, 2006 and 2005, respectively (see
Note 6).

Estimating the useful lives and residual values of property, plant and equipment
The Company estimates the useful lives and residual values of property, plant and equipment
based on a collective assessment of similar business, internal technical evaluation and experience
with similar assets. The useful lives of the property, plant and equipment are estimated based on
the period over which these assets are expected to be available for use. The estimated useful lives
of property, plant and equipment are reviewed periodically and are updated if expectations differ
from previous estimates due to physical wear and tear, technical and commercial obsolescence and
other limits on the use of the assets.

The carrying value of property, plant and equipment, net of accumulated depreciation, amounted
to =
P299.25 million and =P322.32 million as of December 31, 2006 and 2005, respectively (see
Note 10).

Estimating the useful life of software

The useful life of software is estimated based on a finite period over which it was expected to be
available for use and is periodically reviewed for changes in expected pattern of consumption of
future economic benefits embodied in the asset.

In 2006, as a result of management’s review, the estimated useful life of the software was
shortened from 20 years to 10 years resulting in increase in amortization for 2006 amounting to
=
P9.9 million as against =
P1.8 million in 2005. The net carrying value of software amounted to
=
P16.54 million and =
P26.48 million as of December 31, 2006 and 2005, respectively (see Note 11).

Estimating asset impairment

Asset impairment test is performed when events or changes in circumstances indicate that the
carrying value of the assets may not be recoverable. This requires an estimation of the recoverable
amount of the asset which is the higher of its net selling price or its value in use. The Company
determined the net selling price of its property, plant and equipment based on appraisal reports
prepared by independent professional appraisers on the properties to establish the recoverable
amount. Recoverable amount was higher than the carrying value of the fixed assets at balance
sheet date. Management believes that use of the net selling price is more practicable and reliable
rather than calculating value in use in estimating recoverable value. Based on management’s
evaluation, there is no impairment loss to be recognized in the financial statements in 2006, 2005
and 2004.

Recognizing deferred income tax assets

The Company reviews the carrying amount of the deferred income tax assets at each balance sheet
date and reduces the carrying amount to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred income tax assets to be utilized.
Deferred income tax assets have been set up only to the extent of the deferred income tax
liabilities that will reverse on the same period as the deferred income tax assets will reverse.

63
 - 15 -

Deferred income tax liabilities amounted to =

P94.28 million and =
P97.26 million in 2006 and 2005,
respectively, net of deferred income tax assets of =
P0.57 million as of December 31, 2006 and
=
P3.54 million as of December 31, 2005 (see Note 23).

Retirement benefits cost

The determination of the Company’s obligation and retirement benefits is dependent on
management’s selection of certain assumptions used by actuaries in calculating such amounts.

While it is believed that the Company’s assumptions are reasonable and appropriate, significant
differences in actual experience or significant changes in assumptions may materially affect the
Company’s pension obligation. The assumptions for retirement benefits cost are described in
Note 22, and include among others, discount rates and the rate of salary increase.

As of December 31, 2006 and 2005, the retirement benefits obligation amounted to =P41.08 million
and =P10.81 million, respectively. Retirement benefits cost amounted to = P2.54 million,
=
P5.00 million and =
P2.10 million in 2006, 2005 and 2004, respectively (see Note 22).

Contingencies
The Company has various pending court cases. Based on management’s and its in-house
counsel’s opinion, no provision for losses is required to be accrued in 2006, 2005 and 2004 (see
Note 26b).

4. Cash and Cash Equivalents

2006 2005
(In thousands)
Cash on hand and in banks P
=66,914 =
P50,867
Temporary cash investments 160 160
P
=67,074 =
P51,027

Cash in banks earn interest at the prevailing bank deposit rates. Temporary cash investments are
made for varying periods of up to three months depending on the immediate cash requirements of
the Company, and earn interest at the prevailing temporary cash investment rate.

5. Accounts Receivable

2006 2005
(In thousands)
Trade P
=175,608 =
P202,525
Contract growers 52,837 74,846
Related companies (Note 19) 18,831 32,847
Officers and employees 6,975 7,618
Others 11,891 34,403
266,142 352,239
Less allowance for doubtful accounts 37,517 28,885
P
=228,625 =
P323,354

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 - 16 -

6. Inventories

2006 2005
(In thousands)
At cost - spare parts and supplies P
=13,407 =
P18,073
At NRV:
Finished goods 3,283 33,860
Raw materials - feeds and feed ingredients 180,201 171,373
P
=196,891 =
P223,306

The cost of raw materials carried at NRV amounted to = P185.97 million as of December 31, 2006
and =
P182.88 million as of December 31, 2005, and the cost of finished goods carried at NRV
amounted to =P7.11 million in 2006 and =
P61.51 million in 2005.

Finished goods include the fair value adjustment of agricultural produce transferred to the dressing
plants amounting to = P1.83 million in 2006 and = P10.12 million in 2005. These amounts are
included in “Fair value of agricultural produce” account under “Net Revenue” in the statement of
income.

Allowance for inventory obsolescence amounted to =

P9.59 million and =
P39.16 million as of
December 31, 2006 and 2005, respectively.

Under the terms of the agreements covering liabilities under trust receipts, certain spare parts and
raw materials with carrying value of = P74.93 million and = P57.82 million as of December 31, 2006
and 2005, respectively, have been released to the Company in trust for the banks. The Company
is accountable to the banks for the value of the trusteed items or their sales proceeds.

7. Biological Assets

2006 2005
(In thousands)
Current:
Growing stocks P
=94,293 =
P77,498
Goods in process 51,737 49,544
Total 146,030 127,042
Noncurrent - breeding stocks - net of amortization 141,218 156,690
P
=287,248 =
P283,732

Changes in the carrying value of biological assets are as follows:

2006 2005
(In thousands)
Balance at beginning of year P
=283,732 =
P365,505
Increase due to purchases 3,908,451 4,155,495
Decrease due to harvest (3,163,059) (3,536,325)
Decrease due to sales (597,985) (569,254)
431,139 415,421
Accumulated amortization (143,891) (131,689)
P
=287,248 =
P283,732

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 - 17 -

Changes in accumulated amortization are as follows:

2006 2005
(In thousands)
Beginning P
=131,689 =
P159,888
Amortization 226,993 273,821
Disposal (214,791) (302,020)
P
=143,891 =
P131,689

In 2006, the Company harvested approximately 46.72 million kilograms of grown broilers, which
had a fair value less estimated point-of-sale costs of =
P2.77 billion at the date of harvest.

8. Other Current Assets

2006 2005
(In thousands)
Prepaid income tax P
=27,516 =
P32,467
Deposits on purchases 6,073 17,689
Prepayments 506 1,566
Others 8,423 8,393
P
=42,518 =
P60,115

9. Investment Properties

The movements in this account follow:

Buildings and 2006 2005

Land Improvements Total Total
(In thousands)

Balances, January 1 =
P653,745 =
P90,739 P
=744,484 =
P681,049
Additions 112 – 112 2,526
Balances, December 31 653,857 90,739 744,596 683,575
Changes in fair value during
the year 283 (14,880) (14,597) 60,909
Fair value, December 31 =
P654,140 =
P75,859 P
=729,999 =
P744,484

Investment properties are stated at fair value, which have been determined by independent
appraisers as of December 31, 2006 and 2005. These appraisers are industry specialists in valuing
these types of investment properties. The fair value represents the amount at which the assets
could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller
in an arm’s length transaction at the date of valuation.

As of December 31, 2006, the fair values of the investment properties decreased by =
P14.60 million
which was charged to income.

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 - 18 -

Investment properties consist of:

2006 2005
(In thousands)
Investments in real estate properties P
=711,236 =
P725,721
Real estate properties acquired in settlement of
trade receivables 18,763 18,763
P
=729,999 =
P744,484

Income from the investment properties and costs of maintaining them are not significant in
relation to the Company’s results of operations in 2006, 2005 and 2004.

Investment properties with total fair value amounting to =

P294.98 million and =P299.86 million as
of December 31, 2006 and 2005, respectively, are included as collateral pool under the Mortgage
Trust Indentures (MTI) with local trustee banks to secure the Company’s long-term debt (see
Note 14).

10. Property, Plant and Equipment

As of December 31, 2006

Office
Machinery Silos, Transportation Furniture,
and Buildings and and Delivery Fixtures and Construction
Land Equipment Improvements Equipment Equipment in Progress Total
(In thousands)
Cost
At January 1 P
=171,754 P
=697,842 P
=100,271 P
=24,749 P
=3,229 P
=936 P
=998,781
Additions – 9,324 1,071 995 – 250 11,640
Disposals – (11,696) (1,809) (1,529) (3) (936) (15,973)
At December 31 171,754 695,470 99,533 24,215 3,226 250 994,448
Accumulated Depreciation
At January 1 – 555,246 93,672 24,337 3,209 – 676,464
Depreciation – 32,149 1,194 403 13 – 33,759
Disposals – (11,686) (1,809) (1,529) (3) – (15,028)
At December 31 – 575,709 93,057 23,211 3,219 – (695,196)
Net Book Values at
December 31 P
=171,754 P
=119,761 P
=6,476 P
=1,004 P
=7 P
=250 P
=299,252

As of December 31, 2005

Office
Machinery Silos, Transportation Furniture,
and Buildings and and Delivery Fixtures and Construction
Land Equipment Improvements Equipment Equipment in Progress Total
(In thousands)
Cost
At January 1 =
P171,754 =
P704,724 =
P100,808 =
P30,420 =
P3,672 =
P– =
P1,011,378
Additions – 30,472 – – 34 936 31,442
Disposals – (37,354) (537) (5,671) (477) – (44,039)
At December 31 171,754 697,842 100,271 24,749 3,229 936 998,781
Accumulated Depreciation
At January 1 – 554,802 91,357 29,231 3,617 – 679,007
Depreciation – 29,805 2,852 595 69 – 33,321
Disposals – (29,361) (537) (5,489) (477) – (35,864)
At December 31 – 555,246 93,672 24,337 3,209 – 676,464
Net Book Values at
December 31 =
P171,754 =
P142,596 =
P6,599 =
P412 =
P20 =
P936 =
P322,317

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 - 19 -

The cost of fully depreciated property, plant and equipment that are still in use amounts to
=
P526.15 million and =
P304.73 million as of December 31, 2006 and 2005, respectively.

Land, machinery and equipment and buildings and improvements, with total carrying value of
=
P188.65 million and = P202.08 million as of December 31, 2006 and 2005, respectively, are
included as collateral pool under the Mortgage Trust Indentures (MTI) with local trustee banks to
secure the Company’s long-term debt (see Note 14).

11. Other Noncurrent Assets

2006 2005
(In thousands)
Software:
Cost P
=33,668 =
P33,668
Accumulated amortization 17,130 7,187
Net carrying amount 16,538 26,481
Others 254 204
P
=16,792 =
P26,685

In 2006, as a result of management’s review, the estimated remaining useful life of the software
was assessed to be 10 years. Amortization in 2006 accordingly increased to = P9.94 million as
compared to =P1.80 million in 2005 and =
P1.49 million in 2004.

12. Bank Loan

The bank loan consists of unsecured peso-denominated short-term loan obtained from a local bank
which bears annual interest rates ranging from 12.4% to 12.6% in 2006 and 10.5% to 12.5% in
2005.

13. Accounts Payable and Accrued Expenses

2006 2005
(In thousands)
Trade payables P
=851,882 =
P1,101,780
Payables to related companies (Note 19 ) 127,767 106,881
Accrued expenses 94,294 152,911
Customers’ deposits 34,083 15,385
Others 90,170 71,117
P
=1,198,196 =
P1,448,074

As of December 31, 2006, the Company has long-term payable to a third party amounting to
=
P84.15 million. The current portion amounting to = P52.73 million is included in trade payables
while the noncurrent portion is presented under other long-term liability in the 2006 balance sheet.

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 - 20 -

14. Long-term Debt

Long-term debt consists of peso-denominated promissory notes obtained from local banks with
the following terms and conditions:

2006 2005
(In thousands)
a. Interest rate based on bank’s prevailing rate at
time of repricing (monthly interest repricing),
payable monthly through 2010; = P8,700 of the
restructured amount is payable in 25 equal
monthly installments of = P350 starting in
November 2005 and the balance is payable in 36
equal monthly installments of =P3,924 to
commence in December 2007 P
=145,100 =
P149,300
b. Interest rate computed at a prevailing market
rate based on three-month MART 1 subject to
quarterly repricing, payable quarterly in arrears
through 2008; principal amount is payable in
12 equal quarterly amortizations of
=
P3,708 commencing in February 2006 29,667 44,500
c. Interest equivalent to 3.00% spread over the
MART 1 (three-month Treasury Bills) interest
rate or 3.00% above the three-month PHIBOR if
the difference between the MART 1 plus spread
and this rate is 2% or more, payable quarterly;
principal amount is payable in 16 equal
quarterly installments of =
P2,812 2,812 14,061
177,579 207,861
Less current portion 40,253 62,761
P
=137,326 =
P145,100

On December 28, 2005, the Company entered into a debt restructuring agreement (DRA) with a
local bank creditor (see item a). Under the original loan agreement, quarterly installment of
=
P16.67 million must be paid until November 2007. With the DRA, the term of payment for the
remaining balance of the original loan of =
P150.00 million as of October 30, 2005 was changed to
five years beginning November 2005. Monthly amortization of = P0.35 million and =
P3.92 million
are payable from November 14, 2005 to November 14, 2007 and from December 14, 2007 to
November 14, 2010, respectively. The restructuring did not qualify as extinguishment of debt.

The long-term loans are secured under the MTI with local trustee banks by a collateral pool
consisting of the Company’s parcels of land, buildings and improvements and machinery and
equipment included under “Property, plant and equipment” account with a total net carrying value
of =
P188.65 million and =P202.08 million, and “Investment properties” account with total fair value
of =
P294.98 million and = P299.86 million as of December 31, 2006 and December 31, 2005,
respectively (see Notes 9 and 10).

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 - 21 -

15. Equity

Changes in equity follow:

Revaluation
Capital in Excess Increment Cumulative Treasury
Capital Stock of Par Value in Investment Actuarial Shares -
Preferred Common Preferred Common Deficit Properties Gains (Losses) Preferred
BALANCES AT
DECEMBER 31, 2003,
AS PREVIOUSLY
REPORTED P
= 150,365 P
= 802,622 P
= 1,230,224 P
= 866,895 (P
= 2,599,070) P
=– P
=– P
=–
Effect of adopting the amendment
to PAS 19 (Note 2) – – – – – – (1,354) –
BALANCES AT
DECEMBER 31, 2003,
AS RESTATED 150,365 802,622 1,230,224 866,895 (2,599,070) – (1,354) –
Net loss for the year – – – – (485,545) – – –
Acquisition of treasury shares-
preferred – – – – – – – (1,497)
Revaluation increment on
property, plant and equipment
transferred to investment
property (Note 9) – – – – – 321,577 – –
Effect of adopting the amendment
to PAS 19 (Note 2) – – – – – – 4,931 –
BALANCES AT
DECEMBER 31, 2004,
AS RESTATED P
= 150,365 P
= 802,622 P
= 1,230,224 P
= 866,895 (P
= 3,084,615) P
= 321,577 P
= 3,577 (P
= 1,497)
BALANCES AT
DECEMBER 31, 2004,
AS PREVIOSULY
REPORTED P
= 150,365 P
= 802,622 P
= 1,230,224 P
= 866,895 (P
= 3,084,615) P
= 321,577 P
=– (P
= 1,497)
Effect of adopting the amendment
to PAS 19 (Note 2) – – – – – – 3,577 –
BALANCES AT
DECEMBER 31, 2004,
AS RESTATED 150,365 802,622 1,230,224 866,895 (3,084,615) 321,577 3,577 (1,497)
Effects of changes in
accounting for financial
instruments - PAS 39
(Note 19f) – – – – (8,321) – – –
BALANCES AT
JANUARY 1, 2005,
AS RESTATED 150,365 802,622 1,230,224 866,895 (3,092,936) 321,577 3,577 (1,497)
Net loss for the year,
as previously reported – – – – (81,954) – – –
Effect of adopting the amendment
to PAS 19 (Note 2) – – – – (124) – – –
Net loss for the year, as restated – – – – (82,078) – – –
Issuance of common shares
(Note 15) – 109,477 – – – – – –
Acquisition of treasury
shares - preferred (Note 15) – – – – – – – (109,485)
Effect of adopting the amendment
to PAS 19 (Note 2) – – – – – – 458 –
BALANCES AT
DECEMBER 31, 2005
AS RESTATED P
= 150,365 P
= 912,099 P
= 1,230,224 P
= 866,895 (P
= 3,175,014) P
= 321,577 P
= 4,035 (P
= 110,982)
BALANCES AT
DECEMBER 31, 2005,
AS PREVIOUSLY
REPORTED P
= 150,365 P
= 912,099 P
= 1,230,224 P
= 866,895 (P
= 3,174,890) P
= 321,577 =–
P (P
= 110,982)
Effect of adopting the amendment
to PAS 19 (Note 2) – – – – (124) – 4,035 –
BALANCES AT
DECEMBER 31, 2005,
AS RESTATED 150,365 912,099 1,230,224 866,895 (3,175,014) 321,577 4,035 (110,982)
Net income for the year – – – – 80,510 – – –
Effect of adopting the amendment
to PAS 19 (Note 2) – – – – – – (30,791) –
BALANCES AT
DECEMBER 31, 2006 P
= 150,365 P
= 912,099 P
= 1,230,224 P
= 866,895 (P
= 3,094,504) P
= 321,577 (P
= 26,756) (P
= 110,982)

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 - 22 -

Information on capital stock follows:

Number of shares
2006 2005
Preferred stock - =
P1 par value
Authorized 200,000,000 200,000,000
Issued and outstanding:
Balance at beginning of year 139,267,532 150,216,054
Acquisition of treasury shares – (10,948,522)
Balance at end of year 139,267,532 139,267,532
Common stock - =
P1 par value
Authorized 2,500,000,000 2,500,000,000
Issued 912,098,273 912,098,273

Preferred Shares
a. The terms of the Company’s convertible preferred shares as amended during the stockholders’
meeting on October 11, 2006 and as approved by the Securities and Exchange Commission
(SEC) on December 6, 2006 follow:

i. The convertible preferred shares have no voting rights, except as may be provided by law.
ii. Holders of the convertible preferred shares shall not be entitled to receive dividend.
iii. The holders of convertible preferred shares shall have the right to convert such shares into
common shares anytime at the ratio of ten (10) common shares for every one (1)
convertible preferred shares held.
iv. The Company shall have the option to redeem the convertible preferred shares on any date
at the offer price.

On September 1, 2005, the terms of the preferred shares were amended to grant the Company
(issuer) the option to redeem the convertible preferred shares on any date commencing from
the time of the approval by the SEC of the amendment and until August 7, 2038 at the offer
price. The Company has no obligation to redeem any preferred shares that remain outstanding
after August 7, 2038.These amendments were approved by the SEC on October 19, 2005.

b. On March 29, 2005, RFM paid the balance of its subscriptions in the Company’s capital stock
amounting to = P109.48 million (representing 109,476,777 common shares) through exercise of
its put option on the Company’s preferred shares (10,947,677 preferred shares).

As of December 31, 2006 and 2005, the Company has a total of 11,098,270 preferred shares in
treasury acquired by the Company at =
P10 per share or a total of =
P110.98 million.

Revaluation Increment in Investment Properties

This represents the difference between the fair value of the property, plant and equipment and its
net book value at the time the property, plant and equipment was reclassified to investment
properties in 2004 amounting to =P321.58 million (net of =
P20.82 million deferred tax).

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 - 23 -

16. Cost of Goods Sold

2005 2004
(As restated, (As restated,
2006 Note 2) Note 2)
(In thousands)
Raw materials used and changes in
inventories P
=2,192,723 =
P2,275,970 =
P3,157,744
Personnel costs (Note 18) 454,940 474,913 623,260
Outside services 282,039 323,732 394,065
Freight and handling 188,316 162,263 180,619
Supplies and facilities 93,450 106,838 147,591
Communication, light and water 36,826 39,829 40,423
Depreciation and amortization (Note 18) 20,571 27,828 27,801
Rental (Note 26) 23,162 21,961 37,435
Taxes and licenses 17,210 14,402 15,816
Insurance 9,498 10,937 11,811
Provision for inventory obsolescence 7,883 34,152 81,853
Repairs and maintenance 3,734 4,058 16,523
Others 51,780 72,451 78,207
P
=3,382,132 =
P3,569,334 =
P4,813,148

17. General and Administrative Expenses

2005 2004
(As restated, (As restated,
2006 Note 2) Note 2)
(In thousands)
Personnel costs (Note 18) P
=35,121 =
P38,354 =
P12,699
Depreciation and amortization (Note 18) 21,984 6,215 16,137
Outside services 10,462 10,272 12,289
Provision for doubtful accounts 9,146 5,429 17,472
Taxes and licenses 8,678 23,127 13,445
Communication, light and water 7,977 8,880 8,886
Rental (Note 26) 6,855 6,573 6,580
Transportation and travel 3,328 3,267 4,307
Supplies and facilities 2,090 1,967 2,331
Repairs and maintenance 497 2,794 3,036
Others 6,817 8,448 3,702
P
=112,955 =
P115,326 =
P100,884

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 - 24 -

18. Selling and Marketing Expenses

2005 2004
(As restated, (As restated,
2006 Note 2) Note 2)
(In thousands)
Personnel costs P
=24,284 =
P26,648 =
P10,730
Outside services 15,599 10,433 16,587
Freight and handling 10,747 29,496 27,658
Rental (Note 26) 8,191 28,474 32,947
Advertising and promotions 4,407 7,039 5,467
Communication, light and water 4,013 4,855 4,185
Transportation and travel 2,683 3,157 2,489
Supplies and facilities 1,925 2,878 3,097
Commissions 1,639 1,988 3,442
Repairs and maintenance 1,263 955 1,293
Depreciation and amortization 1,147 1,079 4,399
Taxes and licenses 980 793 769
Others 16,314 22,835 8,304
P
=93,192 =
P140,630 =
P121,367

Depreciation and amortization expenses charged to cost of goods sold, general and administrative
and selling and marketing expenses pertain to:
2006 2005 2004
(In thousands)
Property, plant and equipment (Note 10) P
=33,759 =
P33,321 =
P46,845
Software (Note 11) 9,943 1,801 1,492
P
=43,702 =
P35,122 =
P48,337

Depreciation and amortization expenses were booked under:

2005 2004
(As restated, (As restated,
2006 Note 2) Note 2)
(In thousands)
Cost of goods sold (Note 16) P
=20,571 =
P27,828 =
P27,801
General and administrative expenses
(Note 17) 21,984 6,215 16,137
Selling and marketing expenses (Note 18) 1,147 1,079 4,399
P
=43,702 =
P35,122 =
P48,337

Personnel costs pertain to:

2005 2004
(As restated, (As restated,
2006 Note 2) Note 2)
(In thousands)
Salaries and wages P
=487,667 =
P496,361 =
P608,112
Retirement benefits cost (Note 22) 2,539 4,996 2,096
Other employee benefits 24,139 38,558 36,481
P
=514,345 =
P539,915 =
P646,689

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 - 25 -

Personnel costs were booked under:

2005 2004
(As restated, (As restated,
2006 Note 2) Note 2)
(In thousands)
Cost of goods sold (Note 16) P
=454,540 =
P474,913 =
P623,260
General and administrative expenses
(Note 17) 35,121 38,354 12,699
Selling and administrative expenses
(Note 18) 24,284 26,648 10,730
P
=514,345 =
P539,915 =
P646,689

19. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the
other party or exercise significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subjected to common control or
common significant influence. Related parties may be individuals or corporate entities.

The Company has transactions with related parties which consist mainly of the following:

b. Purchases of products from RFM amounting to =

P2.18 million in 2006, =
P2.81 million in 2005
and =
P3.64 million in 2004. The Company and RFM are under the common control of their
major stockholders.

b. Lease of the Company’s main office from Philippine Townships, Inc. (PTI), a wholly-owned
subsidiary of RFM. The lease covers a period of one year renewable for another year upon
mutual agreement of the parties concerned. Rental expense amounted to =
P5.0 million in 2006,
=
P4.34 million in 2005 and =
P5.07 million in 2004.

c. Availment of hauling services from Rizal Lighterage Corporation (RLC), a majority-owned

subsidiary of RFM, for the handling of its feeds raw materials. Hauling service expenses
incurred amounted to =
P25.59 million in 2006, =P5.98 million in 2005 and =
P18.10 million in
2004.

In 2006, amount payable to RLC for handling services amounting to = P17.5 million was
assigned to PTI to offset against the Company’s receivable from PTI.

d. The balances of accounts with related parties are as follows:

2006 2005
(In thousands)
Due from related companies (included under
accounts receivable (Note 5)
PTI P
=– =
P23,762
Others 18,831 9,085
P
=18,831 =
P32,847

(Forward)

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 - 26 -

2006 2005
(In thousands)
Due to related companies (included under
accounts payable and accrued expenses
(Note 13)
RFM P
=124,438 =
P106,881
PTI 3,329 –
P
=127,767 =
P106,881

e. The aggregate compensation and benefits paid to the Company’s key management personnel
follow:

2006 2005 2004

(In thousands)
Salaries and allowances P
=10,881 =
P11,432 =
P12,045
Retirement benefits cost 1,935 1,792 1,336
Other short-term employee benefits 873 371 359
P
=13,689 =
P13,595 =
P13,740

f. The Company recognized an impairment loss on its receivable from a dormant affiliate
amounting to =
P8.32 million in deficit as of January 1, 2005 upon adoption of PAS 39.

20. Financial Risk Management Objectives and Policies

The Company’s principal financial instruments comprise of cash and cash equivalents, short-term
bank loans, trust receipts and acceptances payable and long-term debt. The Company has other
financial instruments such as accounts receivable and accounts payable and accrued expenses
arising directly from its operations.

It is the Company’s policy that no trading in financial instruments shall be undertaken.

The Company recognizes the fact that their business operations are always exposed, in one way or
the other, to some level of uncertainties or risks which, if not properly addressed and managed,
could be detrimental to the profitability of the Company. Listed below are the business risks the
Company is exposed to:

Foreign Exchange Risk

Although most of the raw materials, feeds ingredients, medicines and vaccines used by the
Company are imported, majority of these are purchased from local suppliers, thereby minimizing
the Company’s risk on foreign exchange. The materials that are directly imported by the
Company usually arrive within 1 to 2 months upon issuing the purchase order.

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 - 27 -

Credit Risk
The Company chooses its credit customers upon recommendation of the Sales Department. These
recommended customers are evaluated by the Credit and Collection Department as to their credit
risk. A customer is normally given a credit limit equivalent to 15-30 days of its projected sales.
Credit concentration trade receivables are as follows: 31% for territorial distributions, 24% for
supermarkets and 20% for service group such as fastfood chains, hotels and restaurants. The
maximum credit risk exposure of the Company amounts to = P266.14 million and P =352.24 million
as of December 31, 2006 and 2005, respectively (see Note 5).

The Company controls credit risk through strict monitoring procedures and regular coordination
with customers. The accounts receivable are monitored on a daily basis. All exceptions are noted
and resolved with the concerned parties. Statements of accounts are issued out to customers and
reconciled on a monthly basis.

Interest Rate Risk

The Company’s exposure to changes in interest rates relates primarily to the Company’s short-
term and long-term borrowings, as well as interest on trust receipts payable. Management
manages its exposure to interest rate risk by closely monitoring the same with various banks and
other financial institutions and maximizing borrowing period based on market volatility of interest
rates.

The following is the maturity profile of the Company’s interest-bearing loans (amount in
thousands) as of December 31, 2006 and 2005:

Maturity Period 2006 2005

(In thousands)
In less than one year P
=117,179 =
P134,578
>1 year to 2 years 47,083 7,774
>2 years to 3 years 47,083 47,083
>3 years to 4 years 43,160 47,083
>4 years to 5 years – 43,160
P
=254,505 =
P279,678

These loans are subject to interest computed at a prevailing market rate and is repriced either on a
monthly or quarterly basis (see Notes 6, 12 and 14).

Liquidity Risk
The Company manages its liquid funds through cash planning on a monthly and weekly basis.
The Company uses historical figures and experiences and forecasts from its collections and
disbursements, as well as projections based on the annual business plan. Likewise, the Company
places excess funds in short-term cash investments. The Company also enters into restructuring
agreements with creditor banks, as the need arises.

76
 - 28 -

21. Financial Assets and Liabilities

Due to the short-term nature of transactions related to the financial assets and financial liabilities
listed below, the fair values of the following accounts approximate the carrying amounts as of
December 31, 2006 and 2005 (amounts in thousands).

2006 2005
Financial Assets
Cash and cash equivalents P
=67,074 =
P51,027
Receivables 228,625 323,354
Financial Liabilities
Bank loan 2,000 14,000
Accounts payable and accrued expenses 1,198,196 1,448,073
Trust receipts and acceptances payable 74,926 57,817
Long-term debt 177,579 207,861

The carrying value of long-term debt for which interest rates are repriced on a monthly and
quarterly basis, approximates fair value.

22. Retirement Plan

The Company has an unfunded, noncontributory defined benefit retirement plan (the Plan)
covering all of its regular employees. The benefits are based on the years of service and
compensation of the employees.

The following tables summarize the components of retirement benefits cost recognized in the
statements of income and amounts recognized in the balance sheets for the retirement plan.

Net retirement benefits cost

2005 2004
(As restated, (As restated,
2006 Note 2) Note 2)
(In thousands)
Current service cost P
=1,355 =
P764 =
P951
Interest cost 1,184 4,232 4,493
Curtailment gain – – (3,348)
Net retirement benefits cost for
the year P
=2,539 =
P4,996 =
P2,096

Changes in present value of obligation (PVO)

2005
(As restated,
2006 Note 2)
(In thousands)
Opening PVO P
=10,811 =
P30,337
Current service cost 1,355 764
(Forward)

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 - 29 -

2005
(As restated,
2006 Note 2)
(In thousands)
Interest cost 1,184 4,232
Actuarial loss on experience adjustment 32,963 –
Retirement benefits payment (5,228) (23,575)
Actuarial gain for the year – (947)
Closing PVO P
=41,085 =
P10,811

On April 12, 2004, the Company closed the operations of its Feedmill Plant located in Pioneer
Street, Mandaluyong City, the effect of which is a curtailment due to involuntary separation
(retrenchment) of affected employees which are covered by the Plan.

Following is the effect on PVO as of curtailment date assumed to be on April 1, 2004:

Before After
Curtailment Loss (Gain) Curtailment
(In thousands)
PVO as of curtailment date =
P55,208 (P
=23,078) =
P32,130
Retrenchment benefit payment – 19,730 –
Curtailment loss included under
retirement benefits cost in 2004 (P
=3,348)

The principal actuarial assumptions used to determine retirement benefits cost as of January 1
follow:

2006 2005 2004

Discount rate 10.95% 13.95% 11.91%
Salary increase 5% 5% 5%

The discount rate as of December 31, 2006 is 7.03%.

23. Income Tax

a. The provision for income tax as of December 31 follows:

2006 2005 2004

(In thousands)
Current - MCIT P
=7,072 =
P5,401 =
P–
Deferred (806) 441 118,558
P
=6,266 =
P5,842 =
P118,558

There was no MCIT in 2004 because the Company was in a gross loss position.

b. The Company recognized deferred income tax assets related to the allowance for inventory
obsolescence amounting to = P0.57 million as of December 31, 2006 and = P3.54 million as of
December 31, 2005, the amounts expected to have benefits when the deferred income tax
liabilities on the unrealized gain on fair value of agricultural produce is realized.

78
 - 30 -

The Company did not recognize deferred income tax assets on the following deductible
temporary differences, NOLCO and excess MCIT, since the Company believes that there is no
sufficient taxable profits against which to apply these items:

2005
(As restated,
2006 Note 2)
(In thousands)
NOLCO P
=974,240 =
P1,752,934
Retirement benefits obligations 41,085 10,811
Allowance for:
Doubtful accounts 37,517 28,885
Inventory obsolescence 9,593 39,157
Unrealized foreign exchange loss – 317
Unamortized past service cost 4,257 6,190
Excess MCIT 12,473 5,401

The details of the NOLCO outstanding as of December 31, 2006 follow:

Year Incurred Expiry Date NOLCO Tax effect

(In thousands)
2004 December 31, 2007 =
P960,475 =
P336,166
2005 December 31, 2008 13,765 4,818
=
P974,240 =
P340,984

Following are the movements of NOLCO and MCIT:

2006 2005 2004 2006 2005 2004

NOLCO MCIT
(In thousands)
At January 1 P
=1,752,934 =
P3,306,327 =
P2,384,451 P
=5,401 =
P– =
P20,926
Additions – 13,765 960,475 7,072 5,401 –
Application (108,632) – – – – –
Expiration (670,062) (1,567,158) (38,599) – – (20,926)
At December 31 P=974,240 =
P1,752,934 =
P3,306,327 P
=12,473 =
P5,401 =
P–

c. The components of the Company’s net deferred income tax liabilities follow:
2005
(As restated,
2006 Note 2)
(In thousands)
Deferred income tax liabilities on:
Fair value adjustment of agricultural produce P
=639 =
P3,541
Fair value adjustment of investment properties 43,790 44,666
Revaluation increment on land under
property, plant and equipment 50,420 50,420
Cumulative actuarial gain – 2,172
94,849 100,799
Less deferred income tax asset on allowance for
inventory obsolescence 570 3,541
Net deferred income tax liabilities P
=94,279 =
P97,258

79
 - 31 -

d. The reconciliation of benefit from income tax on loss before income tax computed at the
statutory income tax rates, to provision for income tax as shown in the statements of income is
summarized as follows:
2005 2004
(As restated, (As restated,
2006 Note 2) Note 2)
(In thousands)
Provision for (benefit from) income tax P
=30,372 (P
=24,736) (P
=117,436)
Addition to (reduction in) income tax
resulting from:
Utilization of NOLCO without
deferred income tax asset set up (38,021) – –
Deductible temporary differences,
NOLCO and MCIT for which no
deferred income tax assets were
recognized (2,487) 19,951 223,086
Nondeductible expenses and interest 11,487 30,508 18,304
Nondeductible (nontaxable) loss (gain)
on fair value changes of investment
properties 5,109 (19,796) (4,952)
Interest income subjected to final tax (194) (85) (444)
P
=6,266 =
P5,842 =
P118,558

e. On May 24, 2005, the new Expanded Value-Added Tax (E-VAT) law was signed into a law as
Republic Act (RA) No. 9337 or the E-VAT Act of 2005. The law took effect on November 1,
2005 following the approval on October 19, 2005 of Revenue Regulations 16-2005 which
provides for the implementation of the rules and regulations of the new E-VAT law. Among
the relevant provisions of RA No. 9337 are:

i. Change in regular corporate income tax rate from 32% to 35% for the next three years
effective on November 1, 2005, and 30% starting January 1, 2009 and thereafter;

ii. Increase in the rate of VAT from 10% to 12% subject to certain conditions effective
February 1, 2006;

iii. Input VAT on capital goods should be spread evenly over the useful life or 60 months,
whichever is shorter, if the acquisition cost excluding the VAT component thereof
exceeds =
P1 million; and

iv. Input VAT credit in every quarter shall not exceed 70% of the output VAT.

On October 9, 2006, RA No. 9361 “An Act Amending Section 110 (B) of the National
Internal Revenue Code of 1997, As Amended, and for Other Purposes,” was passed by the
House of Senate, removing the 70% cap on input VAT.

24. Registration with the Board of Investments (BOI)

The Company is registered with the BOI under the Omnibus Investment Code of 1987 as a
preferred, nonpioneer enterprise for its production of poultry, meat “broilers” and table eggs,
integrated poultry project (new and expansion), and feed millings and as a new producer of poultry

80
 - 32 -

meat under the NES/contract growing scheme with entitlement to pioneer incentives under certain
conditions. Under the terms of these registrations, the Company is subject to certain requirements,
principally that of maintaining at least 60% Filipino ownership or voting equity.

25. Basic/Diluted Earnings (Loss) Per Share

2005 2004
(As restated, (As restated,
2006 Note 2) Note 2)
a. Net income (loss) attributable to
common stock P
=80,510 (P
=82,078) (P
=485,545)
b. Weighted average common shares
outstanding 912,098,273 912,098,273 912,098,273
c. Basic/diluted earnings (loss) per share
(a/b) P
=0.09 (P
=0.09) (P
=0.53)

The potential common shares from conversion of preferred stock are 1,392,675,320 shares in 2006
and 2005. The effect of the assumed conversion of preferred shares is anti-dilutive, and
accordingly, no diluted earnings (loss) per share is presented.

26. Other Matters

a. Long-term commitments

Toll agreements
The Company has a toll processing agreement with a local business partner who provides the
manpower of the Company’s main dressing plant in Northern Mindanao. The contract is for
20 years, which commenced on March 2002, renewable upon mutual agreement between the
Company and the local business partner. As provided in the contract, the toll processing fee is
fixed per head of chicken dressed subject to a minimum guaranteed volume per month of
about 1.13 millions heads.

Other agreements
The Company also has agreements with various contract growers, breeders, hatchery plant
owners, feedmillers and other business partners (collectively referred to as the “Parties”). The
terms of the agreements, among others, include the following:

• The Parties have the necessary manpower, technical know-how and facilities to perform
the contracted services specified in the contract;

• Fees paid to the Parties are based on the agreed rate per output and are normally subject to
review in cases of changes in costs, volume and other factors; and

• The contracts are for varying periods up to a maximum of 20 years, renewable upon
mutual agreement between the Company and the Parties.

Except for the agreements with contract growers and breeders, the agreements are subject to a
guaranteed minimum volume of output and are cancellable either by the Company or the
Parties.

81
 - 33 -

Total toll processing and manufacturing costs included under raw materials used in the
statements of income amounted to = P657.71 million, =
P730.38 million and =
P913.45 million in
2006, 2005 and 2004, respectively.

Long-term lease agreements

The Company entered into various operating property leases with third parties (lessors) for the
lease of its office space used for administrative and operational purposes. The leases are for
varying periods of up to five years subject to renewal and have fixed monthly rental rates
ranging from = P150,000 to =P800,000. The minimum annual rental payment for the next five
years amounts to = P400,000.

b. Other

The Company, in the normal course of business, is involved in legal cases, mainly labor cases
and recovery of receivables, the outcome of which are presently not determinable. In the
opinion of management and its legal counsel, the Company has strong legal basis on the cases,
and the liability on these law suits, if any, will not have a material effect on the financial
statements.

82
83
SWIFT FOODS, INC.
List of Top 100 Stockholders(Common)
as of December 31, 2006
Rank Shareholder# N a m e/A d d r e s s Citizenship Class Code Number of Shares Percentage
1 850223092 PCD NOMINEE CORPORATION FILIPINO A 266,348,726.00 29.201758
37/F ENTERPRISE BLDG.
AYALA AVENUE, MAKATI CITY

2 850006401 TRIPLE EIGHT HOLDINGS, INC. FILIPINO A 136,145,444.00 14.92662

C/O ELSIE EVANGELISTA NO. 18 GEN. CAPINPIN STREET
SAN ANTONIO VILL., PASIG CITY

3 850166447 RFM CORPORATION FILIPINO A 109,479,175.00 12.003002

RFM BUILDING COR. PIONEER & SHERIDAN STS.
MANDALUYONG CITY

4 858004503 HORIZONS REALTY, INC. FILIPINO A 105,977,644.00 11.619104

11 KAWAYAN ROAD, NORTH FORBES
PARK, MAKATI, METRO MANILA

5 852005805 BJS DEVELOPMENT CORPORATION FILIPINO A 52,210,099.00 5.724175

1869 P. DOMINGO STREET
MAKATI, METRO MANILA

6 858006576 RENAISSANCE PROPERTY MANAGEMENT CORPORATION FILIPINO A 28,498,316.00 3.124479

FEATI UNIVERSITY BUILDING CARLOS PALANCA, STA. CRUZ
MANILA

7 856006146 FEATI UNIVERSITY FILIPINO A 27,878,294.00 3.056501

HELIOS STREET, STA. CRUZ
MANILA

8 853013311 CONCEPCION INDUSTRIES, INC. FILIPINO A 17,766,734.00 1.947897

308 BUENDIA AVENUE EXTENSION
MAKATI, METRO MANILA

9 856006183 FEBTC A/C NO. 216-00145 FILIPINO A 17,606,213.00 1.930298

C/O MS.SUSAN A. BONDOC 17/F BPI BLDG.
AYALA AVE.,COR.PASEO DE ROXAS, MAKATI CITY

10 853013310 CHILCO HOLDINGS, INC. FILIPINO A 12,530,414.00 1.373801

C/O FRITZ INTERNATIONAL PHILS. UNIT 506 5/F METROSTAR BLDG.
1007 METROPOLITAN AVENUEMETRO MAKATI CITY

11 859011708 SAHARA MANAGEMENT & DEVELOPMENT CORPORATION FILIPINO A 9,342,729.00 1.024312

237 M.H. DEL PILAR,GRACE PARK
CALOOCAN, METRO MANILA

12 859027071 SELECT TWO CORPORATION FILIPINO A 8,607,526.00 0.943706

#9 URDANETA AVENUE
URDANETA VILLAGE, MAKATI CITY

13 858006563 REPUBLIC COMMODITIES CORP. FILIPINO A 8,242,083.00 0.90364

308 BUENDIA AVENUE EXTENSION
MAKATI, METRO MANILA

14 850238278 PHILIPPINE INTERNATIONAL LIFE INSURANCE CO., INC. FILIPINO A 7,377,541.00 0.808854
3/F TANCO BLDG., 55 TIMOG AVE.,
CORNER MORATO, QUEZON CITY

15 859018837 S & A INDUSTRIAL CORPORATION FILIPINO A 6,167,888.00 0.676231

C/O DANILO H. SANTIAGO ARANETA UNIVERSITY,MALABON
METRO MANILA

16 859027070 SOLE LUNA INC. FILIPINO A 5,954,948.00 0.652884

11 KAWAYAN ROAD NORTH FORBES PARK
MAKATI CITY

17 853017913 MACRIC INCORPORATED FILIPINO A 5,799,693.00 0.635863

11 KAWAYAN ROAD
NORTH FORBES, MAKATI CITY

18 855004608 YOUNG CONCEPTS INC. FILIPINO A 5,793,820.00 0.635219

43 CABILDO ST
URDANETA VILLAGE, MAKATI CITY

19 852016550 LACE EXPRESS INC. FILIPINO A 5,793,795.00 0.635216

43 MC KINLEY ROAD
FORBES PARK, MAKATI CITY

20 853017912 MONACO EXPRESS CORPORATION FILIPINO A 5,793,754.00 0.635212

11 KAWAYAN ROAD
NORTH FORBES, MAKATI CITY

84
SWIFT FOODS, INC.
List of Top 100 Stockholders(Common)
as of December 31, 2006
Rank Shareholder# N a m e/A d d r e s s Citizenship Class Code Number of Shares Percentage

21 850184518 EMILIO B. SUAREZ, III FILIPINO A 3,813,968.00 0.418153

1952 MPI BUILDING EDSA
EDSA MAGALLANES VILL. MAKATI CITY

22 856006162 FEBTC 216-145 A/C NO. 2 FILIPINO A 3,419,964.00 0.374956

C/O MS. SUSAN A. BONDOC 17/F BPI BLDG.
AYALA AVE.,COR. PASEO DE ROXAS, MAKATI CITY

23 856006164 FEBTC 216-145 A/C NO. 1 FILIPINO A 3,248,786.00 0.356188

C/O MS. SUSAN A. BONDOC 17/F BPI BLDG.
AYALA AVE.,COR PASEO DE ROXAS, MAKATI CITY

24 859027067 S & A INDUSTRIAL CORP. FILIPINO A 2,921,394.00 0.320294

FRITZ INTL PHILS INC U506 5F METROSTAR BLDG
1007 METROPOLITAN AVE MAKATI CITY

25 850223106 PCD NOMINEE CORPORATION (NON-FILIPINO) FOREIGNER A 2,824,015.00 0.309617

37/F ENTERPRISE BLDG.
AYALA AVENUE, MAKATI CITY

26 853013353 CONGLOMERATE SEC. & FINANCING CORPORATION FILIPINO A 2,547,916.00 0.279347

C/O RAYMOND AZCARATE RFM CORPORATION, PIONEER ST.
MANDALUYONG CITY

27 856006163 FEBTC 216-145 A/C NO. 3 FILIPINO A 2,165,856.00 0.237459

C/O MS.SUSAN A. BONDOC 17/F BPI BLDG.
AYALA AVE.,COR.PASEO DE ROXAS, MAKATI CITY

28 858004490 EUMELIA CONCEPCION HECHANOVA FILIPINO A 1,929,856.00 0.211584

#2 JACARANDA STREET NORTH FORBES PARK
MAKATI CITY

29 859027048 S & A INDUSTRIAL CORPORATION FILIPINO A 1,599,845.00 0.175403

19 BADJAO ST., LA VISTA SUBD.
QUEZON CITY

30 858004491 RAFAEL HECHANOVA &/OR EUMELIA C. HECHANOVA FILIPINO A 1,050,581.00 0.115183

#2 JAKARANDA STREET NORTH FORBES PARK
MAKATI, METRO MANILA

31 853013322 WILLINGTON CHUA FILIPINO A 1,004,304.00 0.110109

R-307 WELLINGTON BUILDING ORIENTE STREET, BINONDO
MANILA

32 853017910 MERCURY MANAGEMENT CORPORATION FILIPINO A 955,067.00 0.104711

SAHARA BLDG I,VICTONETA AVE CORMC ARTHUR HIGHWAY,POTRERO
MALABON, M.M.

33 858008764 HOME DEVELOPMENT MUTUAL FUND FILIPINO A 866,167.00 0.094964

RM.407 4/F INVESTMENT DEPARTMENT
THE ATRIUM OF MAKATI BLDG., MAKATI AVE.,MAKATI CITY

34 857015835 GAMOCA ESTATE, INC. FILIPINO A 783,979.00 0.085953

229 RECOLETOS ST., URDANETA VILL.
MAKATI CITY

35 850236046 MARY ANG TOLENTINO &/OR JOSE A. TOLENTINO JR &/OR GABINO

FILIPINO
TOLENTINOA 750,150.00 0.082244
1359 MAYHALIGUE ST.,
TONDO MANILA

36 852016538 EDWARD LIM FILIPINO A 641,578.00 0.070341

7/F MORNING STAR CENTRE
347 GIL PUYAT AVE, MAKATI

37 850153892 RONALD PO FILIPINO A 611,244.00 0.067015

KIMBERLY HOMES, 8 LA GUARDIA EXTENTION
LAHUG CEBU CITY

38 850095906 RAFAEL G. HECHANOVA FILIPINO A 600,000.00 0.065782

#2 JACARANDA STREET NORTH FORBES PARK, MAKATI
METRO MANILA

39 853013268 REYNALDO CONCEPCION FILIPINO A 572,096.00 0.062723

308 BUENDIA AVENUE EXTENSION
MAKATI, METRO MANILA

40 853021963 CONSTANTINO CHUA &/OR WILLINGTON CHUA &/OR GEORGE CHUA

FILIPINO A 559,921.00 0.061388
RM 307 WELLINGTON BLDG.
ORIENTE ST. BINONDO, MANILA

85
SWIFT FOODS, INC.
List of Top 100 Stockholders(Common)
as of December 31, 2006
Rank Shareholder# N a m e/A d d r e s s Citizenship Class Code Number of Shares Percentage

41 859027066 SEGOVIA & CO. INC. FILIPINO A 557,509.00 0.061124

U506 5F METROSTAR BLDG 1007 METROPOLITAN AVE
MAKATI CITY

42 850000512 TONY D. CHING &/OR MEILAN CHING FILIPINO A 497,776.00 0.054575

#50 BINHAGAN ST., BO. SAN JOSE,
CALOOCAN CITY

43 853021502 JOSE CONCEPCION, JR. FILIPINO A 477,259.00 0.052325

C/O RFM CORPORATION PIONEER CORNER SHERIDAN STS.
MANDALUYONG CITY

44 853013263 MA. VICTORIA A. CONCEPCION FILIPINO A 362,616.00 0.039756

11 KAWAYAN ROAD NORTH FORBES PARK
MAKATI CITY

45 850129584 MEDRANO JR., JR., VICTORINO S. &/OR OFELIA MEDRANO FILIPINO A 350,000.00 0.038373
91 SCOUT FUENTABELLA ST.
KAMUNING, QUEZON CITY

46 852007448 LOPEZ SUGAR CENTRAL MILLS INCORPORATED FILIPINO A 349,125.00 0.038277

FABRICA, NEGROS OCCIDENTAL

47 855004598 JOHNSON YU FILIPINO A 336,828.00 0.036929

NO. 3595 P. SANCHEZ STREET
STA. MESA, MANILA

48 858008754 RAFAEL G. HECHANOVA &/OR EUMELIA C. HECHANOVA FILIPINO A 334,754.00 0.036702

2 JACARANDA ROAD NORTH FORBES PARK
MAKATI CITY

49 853021580 BERNARDO A. CONCEPCION FILIPINO A 328,997.00 0.03607

C/O RFM CORPORATION PIONEER CORNER SHERIDA STS.
MANDALUYONG CITY

50 853013256 RAUL T. CONCEPCION &/OR CARMENCITA A. CONCEPCION FILIPINO A 314,220.00 0.03445

308 BUENDIA AVENUE EXTENSION
MAKATI, MM.

51 850238637 RAFAEL G. GRANDE FILIPINO A 301,155.00 0.033018

#2 RECOLETOS CIRCLE URDANETA VILLAGE
MAKATI CITY

52 851002542 URBAN ENVIRONMENT REALTY,INC. FILIPINO A 277,624.00 0.030438

405 URBAN BLDG.
SEN.GIL PUYAT AVE., MAKATI CITY

53 857006899 GAMOCA ESTATES, INCORPORATED FILIPINO A 256,526.00 0.028125

229 RECOLETOS STREET
URDANETA VILLAGE, MAKATI, MM.

54 858004531 RAFAEL HECHANOVA FILIPINO A 253,320.00 0.027773

NO. 2 JACARANDA ROAD NORTH FORBES PARK
MAKATI CITY

55 850000385 JUAN GOCHANGCO FILIPINO A 248,888.00 0.027287

APPLIANCE CENTRUM, LACSON-RIZAL ST.
BACOLOD CITY

56 850180679 SFI IN TRUST FOR EMPLOYEES FILIPINO A 228,940.00 0.0251

C/O RFM CORP., RFM BLDG. COR. PIONEER & SHERIDAN STS.
MANDALUYONG CITY

57 858015277 CELY C. REAPORT &/OR SENEN C. REAPORT FILIPINO A 211,554.00 0.023194

133, 2ND ST. COR. 9TH AVE. EAST STANDARD BLDG
GRACE PARK, CALOOCAN CITY

58 850006412 WILFRIDO C. TECSON FILIPINO A 211,223.00 0.023158

4900 PASAY ROAD
DASMARINAS VILL., MAKATI CITY

59 853013299 ANGELITA A. CRUZ FILIPINO A 210,770.00 0.023108

800 E. DE LOS SANTOS AVENUE
CUBAO, QUEZON CITY

60 858010814 RFM EQUITIES, INCORPORATED FILIPINO A 193,343.00 0.021198

C/O RFM CORPORATION 125 PIONEER ST.,MANDALUYONG
METRO MANILA

86
SWIFT FOODS, INC.
List of Top 100 Stockholders(Common)
as of December 31, 2006
Rank Shareholder# N a m e/A d d r e s s Citizenship Class Code Number of Shares Percentage

61 853021776 MA. VICTORIA CONCEPCION FILIPINO A 185,438.00 0.020331

#11 KAWAYAN ROAD NORTH FORBES PARK
MAKATI, METRO MANILA

62 850009929 ALL ASIA LIFE ASS. CORP. FILIPINO A 185,000.00 0.020283

2/F BASIC PETROLEUM BLDG. CARLOS PALANCA ST.
LEGASPI VILL., MAKATI CITY

63 850115028 CELIA Y. LEONG FILIPINO A 171,000.00 0.018748

#29 DAVID STREET CORINTHIAN GARDEN
QUEZON CITY

64 850126089 RENEE B. MANGUIAT FILIPINO A 170,500.00 0.018693

#37 LIMASAWA STREET MAGALLANES VILLAGE
MAKATI CITY

65 850233225 LIBRADO S. CALILUNG FILIPINO A 170,024.00 0.018641

#37 SULTAN KUDARAT AYALA HEIGHTS VILLAGE
QUEZON CITY

66 851030220 ZENAIDA ALANO FILIPINO A 163,121.00 0.017884

#6 ST.MATTHEW STREET CHARBEL EXEC. VILLAGE PHASE 2
TANDANG SORA, 1116 QUEZON CITY

67 852002578 VICTONETA INVESTMENT CORP. FILIPINO A 159,542.00 0.017492

VICTONETA PARK, MALABON, MM.

68 850192308 JESUS Q. TAN FILIPINO A 157,500.00 0.017268

CORTIJOS GREENHILLS UNIT 10-G, #25 EISENHOWER ST.
SAN JUAN, METRO MANILA

69 851003735 KNIGHTS OF COLUMBUS FRATERNAL ASSOCIATION OF THE PHILS.

FILIPINO
INC A 152,070.00 0.016673
GEN. LUNA STREET CORNER STA. POTENCIANA STREETS
INTRAMUROS, MANILA

70 850000407 JOSE GAN SUA YUC FILIPINO A 149,332.00 0.016372

1513 G. PASTRANA STREET
KALIBO, AKLAN 5600

71 853021962 CONSTANTINO WY CHUA &/OR WILLINGTON WY CHUA &/OR GEORGE

FILIPINO
WY CHUA
A 149,332.00 0.016372
ROOM 307 WELLINGTON BLDG.
ORIENTE ST. BINONDO MANILA

72 850010533 SHIRLEY TANG FILIPINO A 147,001.00 0.016117

19 ZARAGOSA STREET
QUEZON CITY

73 850194149 CORA TANGLAW &/OR MAR TANGLAW FILIPINO A 141,000.00 0.015459

22 DON MANOLO BLVD. ALABANG HILLLS VILL.
MUNTINLUPA, METRO MANILA

74 850180393 ERNEST FRITZ SERVER FILIPINO A 140,083.00 0.015358

RFM BUILDING COR. PIONEER & SHERIDAN STS.
MANDALUYONG CITY

75 850152276 PHILIPPINE OVERSEAS TELECOMMUNICATIONS CORPORATION FILIPINO A 135,000.00 0.014801

12TH FLR., TELECOM PLAZA #316 SEN. GIL J. PUYAT AVENUE
MAKATI CITY

76 853021717 CONSTANTINO CHUA FILIPINO A 134,260.00 0.01472

RM. 307 WELLINGTON BLDG. ORIENTE STREET, BINONDO
MANILA

77 853021353 RAUL ANTHONY CONCEPCION FILIPINO A 132,742.00 0.014553

C/O RFM CORPORATION PIONEER CORNER SHERIDAN STS.
MANDALUYONG CITY

78 850228078 JUAN ZARATE FILIPINO A 130,000.00 0.014253

706 GAISANO TOWER
328 CARLOS PALANCA ST.,QUIAPO, MANILA

79 850238286 LAO BUN THIAM &/OR JANET DY LAO FILIPINO A 124,889.00 0.013692
#935 GEN. SOLANO ST.,
SAN MIGUEL MANILA

80 853017895 RODOLFO G. MENDOZA &/OR ALBINA M. MENDOZA FILIPINO A 124,444.00 0.013644

8 JACQUELINE STREET PLEASANT VIEW SUBDIVISION
TANDANG SORA, QUEZON CITY

87
SWIFT FOODS, INC.
List of Top 100 Stockholders(Common)
as of December 31, 2006
Rank Shareholder# N a m e/A d d r e s s Citizenship Class Code Number of Shares Percentage

81 857006898 GAMBOA, RODRIGUEZ, RIVERA & COMPANY, INC. FILIPINO A 123,380.00 0.013527
229 RECOLETOS STREET
URDANETA VILLAGE, MAKATI,MM.

82 856008049 PO YONG YONG FILIPINO A 119,466.00 0.013098

#8 13TH STREET, NEW MANILA
QUEZON CITY

83 853021915 CHERYL LADD U. CHING OR CHING T. CHIONG FILIPINO A 114,521.00 0.012556

#103 KAMUNING ROAD,
QUEZON CITY

84 850010549 TIONG CHAY TIU FILIPINO A 114,488.00 0.012552

#36 BIAK NA BATO ST.
QUEZON CITY

85 850045607 MANUEL S. CHILIP FILIPINO A 112,500.00 0.012334

2ND FLR. LUCKY TEX BLDG. #888 ALVARADO STREET
BINONDO, MANILA

86 850056137 ESTHER C. COSIQUIEN FILIPINO A 112,250.00 0.012307

SPRING CINEMA BLDG. LIBERTAD COR. P. BURGOS ST.
PASAY CITY

87 850054282 LUIS BERNARDO A. CONCEPCION FILIPINO A 108,140.00 0.011856

C/O RFM CORP., RFM BLDG. COR. PIONEER & SHERIDAN STS.
MANDALUYONG CITY

88 850046794 BOBBY G. CHUA FILIPINO A 101,500.00 0.011128

#241-A KANLAON STREET
QUEZON CITY

89 850238642 JONATHAN BARTHOLOMEW D. YOUNG FILIPINO A 100,000.00 0.010964

80 10TH ST., NEW MANILA
QUEZON CITY

90 850235597 LAURO C. SY &/OR LIBERATA C. SY FILIPINO A 100,000.00 0.010964

#53 3RD AVENUE (EAST) GRACE PARK
CALOOCAN CITY

91 850237026 GRACE C. PO FILIPINO A 100,000.00 0.010964

KIMBERLY HOMES, 8 LA GUARDIA EXT.
LAHUG, CEBU CITY

92 850232075 CHUA KEE LIN CHINESE A 100,000.00 0.010964

C/O WHA AN TRADING CO.,
614 M. DE SANTOS STREET, BINONDO MANILA

93 850053243 LINA FLOR P. CO FILIPINO A 100,000.00 0.010964

C/O P. O. BOX 108
BAGUIO CITY

94 850000563 ERNESTO R. CRUZ &/OR HELEN A. CRUZ FILIPINO A 99,555.00 0.010915

#24 JASMIN ST., LOPEZVILLE SUMULONG HIGHWAY
ANTIPOLO CITY

95 852009458 HANS JOSEPH BANZHAF FILIPINO A 99,368.00 0.010894

1869 P. DOMINGO STREET
MAKATI CITY

96 853021965 RAUL JOSEPH CONCEPCION FILIPINO A 97,439.00 0.010683

1193 TAMARIND RD DASMARINAS VILLAGE
MAKATI CITY

97 856006138 VICTORIA FRANCISCO FILIPINO A 93,104.00 0.010208

90 P. PATERNO STREET BINAN, LAGUNA
HOLD FOR PICKUP

98 856006130 ERLINDA FRANCISCO FILIPINO A 93,104.00 0.010208

BINAN, LAGUNA 4024

99 853013248 JOHN MARIE A. CONCEPCION FILIPINO A 92,081.00 0.010096

11 KAWAYAN ROAD, NORTH FORBES
PARK, MAKATI, MM.

100 851012220 ALITA C. ALMEDA FILIPINO A 91,877.00 0.010073

NO. 5 ARGUILLA STREET SAN LORENZO VILLAGE, MAKATI
METRO MANILA

==================== ===========
TOTAL TOP 100 ===> 887,579,001.00 97.311773
==================== ===========

==================== ===========
OTHER STOCKHOLDERS ===> 24,519,272.00 2.688227
==================== ===========

88
SWIFT FOODS, INC.
List of Top 100 Stockholders(Preferred)
as of December 31, 2007
Rank Shareholder# N a m e/A d d r e s s Citizenship Class Code Number of Shares Percentage
1 850166447 RFM CORPORATION FILIPINO P 139,245,969.00 99.984517
RFM BUILDING COR. PIONEER & SHERIDAN STS.
MANDALUYONG CITY
2 850237484 MA. ELIZABETH MACAPAGAL &/OR ALEX &/OR ANDREI MACAPAGAL FILIPINO P 5,625.00 0.004039
C/O ARTURO MACAPAGAL, #411 SHAW BLVD.,
MANDALUYONG CITY
3 850125325 JESUS M. MANALASTAS FILIPINO P 2,109.00 0.001514
3/F VERNIDA IV BUILDING ALFARO STREET, SALCEDO VILLAGE
MAKATI, METRO MANILA
4 850063303 ARTURO B. DIAGO, JR. FILIPINO P 1,593.00 0.001144
16F DPC BLDG., 2322 PASONG TAMO EXT.,
MAKATI CITY
5 850184143 HELEN GAMBOA SOTTO FILIPINO P 1,406.00 0.00101
#2 GREYSTONE WHITE PLAINS VILL
QUEZON CITY
6 850087369 CARLOS GO FILIPINO P 1,406.00 0.00101
C/O ALL ASIA SECURITIES-CEBU ABOITIZ BLDG., BANILAD
CEBU CITY
7 850019398 BENEDICTO JOSE R. ARCINAS FILIPINO P 1,281.00 0.00092
#27 MATIWASAY STREET
U.P. VILLAGE, QUEZON CITY 1101
8 850116229 VICTOR Y. LIM, JR. FILIPINO P 938 0.000674
#82 SANSO STREET CORINTHIAN GARDENS
QUEZON CITY
9 850231028 APOLONIA TAN FILIPINO P 937 0.000673
251 DON MIGUEL SAN JUAN
METRO MANILA
10 850019452 ANTONIO G. ARELLANO FILIPINO P 843 0.000605
ALEXANDRA CONDOMINIUM, E2 MERALCO AVENUE, PASIG
METRO MANILA
11 850107262 KERRY SECURITIES (PHILS), INC. FILIPINO P 563 0.000404
UNIT 604-A, LEVEL 6, SHANGRI-LA PLAZA MALL,
EDSA COR. SHAW BLVD., MANDALUYONG CITY
12 850148058 ROMEO S. PATRICIO FILIPINO P 562 0.000404
C/O DOLE PHILIPPINES, INC. 14/F BA-LEPANTO BUILDING
PASEO DE ROXAS, MAKATI METRO MANILA
13 850179727 WILLIAM GAW SEE FILIPINO P 469 0.000337
#810 T. ALONZO STREET
STA. CRUZ, MANILA
14 850121389 ROBERTO C. LOZADA FILIPINO P 440 0.000316
#195 P. DEL ROSARIO EXT.
6000 CEBU CITY
15 850126038 JESUS P. MANGROBANG FILIPINO P 422 0.000303
#8 MERCURY AVENUE CORNER E. RODRIGUEZ JR., LIBIS
QUEZON CITY
16 850223319 HDI SECURITIES, INC. FILIPINO P 420 0.000302
11/F AYALA TOWER I, AYALA
AVE., MAKATI CITY
17 850134375 ALICE C. MORADA FILIPINO P 346 0.000248
SINGSON CMPD.,
#1993 BRGY. GUADLUPE, CEBU CITY
18 850237018 ROLLAND R. THOMPSON FILIPINO P 281 0.000202
C/O AMSPEC KM.21 SOUTH SUPER H-WAY
MUNTINLUPA CITY
19 850234205 MARY ANNE O. ABOITIZ FILIPINO P 281 0.000202
C/O ABOITIZ & CO., INC. BANILAD
CEBU CITY
20 850208557 VENTURE SECURITIES, INC. FILIPINO P 281 0.000202
7TH FLR. ALL ASIA CENTER PASEO DE ROXAS
MAKATI CITY
21 850036284 JUSTINO CACANINDIN FILIPINO P 281 0.000202
4TH FLR., SYCIP-LAW CENTER #105 PASEO DE ROXAS
MAKATI, METROMANILA
22 850218676 CITYTRUST SECURITIES CORP FILIPINO P 278 0.0002
3/F CTBC BLDG 379 SEN GIL
PUYAT AVE, MAKATI CITY
23 850213038 ROSA C. YAM &/OR MARY YAM FILIPINO P 193 0.000139
615 INT. PROTACIO EXT.
PASAY CITY
24 850236852 CARLO A. CARAG FILIPINO P 188 0.000135
12 MASIGLA STREET
TEACHERS VILL., QUEZON CITY
25 850142947 OLGA B. ORONCE FILIPINO P 140 0.000101
C/O C.F. SHARP & CO., INC. #290-292 ADUANA CORNER
GEN. LUNA, INTRAMUROS, MANILA
26 850066884 EASTERN SECURITIES DEVELOPMENT CORPORATION FILIPINO P 140 0.000101
#1701 TYTANA CENTER BLDG.
BINONDO, MANILA
27 850062234 HERMIE T. DEANO FILIPINO P 140 0.000101
#1513 ANASTACIO, GUADALUPE
MAKATI, METRO MANILA
===============================
TOTAL TOP 100 ===> 139,267,532.00 100
===============================

====================
===========
OTHER STOCKHOLDERS ===> 0 0
====================
===========

===============================
TOTAL OUTSTANDING ===> 139,267,532.00 100
===============================

89
SWIFT FOODS, INC.
Schedule F. Long-term Debt
December 31, 2006

Amount Amount Amount

Name of Issuer and Authorized by Shown as Shown as
Type of Obligation Indenture Current Long-term Remarks

Land Bank of the Philippines P 200,000,000 P 7,774,000 P 137,326,000 Principal payment

due quarterly
through 2010

United Coconut Planters Bank 44,500,000 29,666,667 - Principal payment

due quarterly
through 2008

Metropolitan Bank and Trust Company 36,562,500 2,812,500 - Principal payable

due quarterly
through 2007

P 281,062,500 P 40,253,167 P 137,326,000

SWIFT FOODS, INC.

Schedule I. Capital Stock
December 31, 2006

Number of
Shares Reserved Number of Shares Held By
Number of for Options,
Number of Shares Issued Warrants, Directors,
Shares and Conversions, and Officers and
Title of Issue Authorized Outstanding Other Rights Affiliates Employees Others

Common 2,500,000,000 912,098,273 551,982,356 926,106 359,189,811

Preferred 200,000,000 139,267,532 139,245,969 - 21,563

2,700,000,000 1,051,365,805 691,228,325 926,106 359,211,374

90
91