From the Chairman

(Extracted from Annual Report 2016)

In 2017, we will keep up our efforts to leverage on our strong branding to deliver our growth strategies as we penetrate deeper into markets such as Vietnam, Myanmar, China and other Southeast Asia countries.

Dear Valued Shareholder,

Chairman2016 was a year that marked our corporate recovery, despite headwinds from economic volatility and currency fluctuations which continue to dominate international headlines. Several factors such as the strengthening of the Russian Ruble and the slow recovery in oil prices bode well for the Russia economy and impacted us positively. Together with increased stability in our Russia market as well as higher contributions from our Indochina markets, 2016 was a year whereby the Group was able to catch a glimpse of the clearing of storm clouds over the horizon. Thus, it is with great pleasure that I present to you our scorecard for the financial year ended 31 December 2016 ("FY2016").

FINANCIAL OVERVIEW

Revenue for FY2016 was US$242.2 million, a year-on-year increase of 4.2% compared with the US$232.5 million recorded in FY2015.

In FY2016, the Ukrainian Hryvnia weakened from 23.9 Hryvnia per US dollar on 31 December 2015 to 27.2 Hryvnia per US dollar on 31 December 2016. Over the same period, the Russian Ruble strengthened to 60.6 Ruble per US dollar on 31 December 2016, compared with 72.9 Ruble per US dollar on 31 December 2015. Against this backdrop, the Group's largest market, Russia, posted a marginal increase in revenue of 0.6% to US$107.9 million compared to US$107.3 million. Sales in the Group's Ukraine market declined 5.4% from US$24.8 million in FY2015 to US$23.5 million in FY2016 due to the weakening of the Ukrainian Hryvnia against the US dollar. In local currency terms, both Russia and Ukraine markets recorded higher revenue due to higher selling prices. FY2016 sales in the Group's Kazakhstan and CIS markets also fell 24.1% due to softer consumer sentiment and the weakening of local currencies, while the Group's Indochina market as well as Other Markets recorded higher sales for FY2016.

For FY2016, net profit after tax was US$13.8 million as compared to a net loss after tax of US$0.1 million in FY2015 due to more favourable exchange rates and better performance in key markets as a result of higher selling prices.

SUCCESSFUL DIVERSIFICATION OF MARKETS

We are beginning to reap the benefits of our efforts to diversify our markets. Sales in the Group's Indochina market increased by 36.2% from US$29.4 million in FY2015 to US$40.1 million in FY2016. Building on this positive growth momentum, we have set sights to deepen market penetration in China for 2017.

In 2011, the Group purchased a plot of land at 81 Playfair Road in Singapore. On 22 February 2016, we officiated the opening of this new Food Empire Building located adjacent to our existing headquarters building at 31 Harrison Road. The new Food Empire Building houses 14 office units for lease and is currently over 90% occupied. The rental lease also provides a source of recurring income for the Group.

EXPANDING ACROSS THE VALUE CHAIN

The Group made significant headway in our upstream expansion along the Food & Beverage ("F&B") value chain, with all our green-field projects (non-dairy creamer plant, snack factory and the new instant coffee plant in India) being profitable.

In March 2016, we made an investment in Caffe Bene Co., Ltd. ("Caffebene"), one of South Korea's largest coffee house chain with a global presence of about 800 stores worldwide. The investment is in line with our growth strategy to expand along the entire value chain of the F&B industry. Tapping on our counterparties' strengths and network, we remain cautiously optimistic of Caffebene's growth opportunities.

CREATING GREATER BRAND EQUITY

At Food Empire, we continue to grow our intangible assets and brands to create greater enterprise value in our international markets. Upholding a strong brand equity allows us to establish lasting relationships with our customers and our products and our commitment to do so is reflected in the numerous accolades and awards Food Empire has achieved over the years and likewise in 2016.

We are proud to be recognised as "Top 100 Singapore Brands" by Brand Finance, the world's leading independent intangible asset and brand valuation consultancy. On 16 November 2016, our MacCoffee was awarded Product of the Year within the coffee mix category in Russia, underscoring the hard work of the team behind MacCoffee to continuously innovate to deliver the best quality coffee to our consumers.

Food Empire's 2015 annual report was also internationally recognised at the International ARC Awards and was awarded one Gold and two Bronze awards under the "Food & Consumer Packaged Goods" classification. The accolades are an acknowledgment from the industry and reflection of our commitment to maintaining high internal standards to ensure accuracy and transparency in the most appealing and creative manner to effectively engage our stakeholders.

OUTLOOK

2016 was a year marked with major political events such as Brexit and the U.S. presidential election – both which may usher in greater political and economic challenges. While these are extraordinary times, we will remain vigilant in keeping a close watch on macroeconomic and geopolitical situations as well as their impact on our businesses.

Moving ahead, we are cautiously optimistic as we step into 2017 due to several factors. Firstly, the potential improvement in relationship between the U.S. and Russia may positively impact market trade. With the likely recovery in oil prices, we expect the economies of our key markets such as Russia, Kazakhstan and CIS countries to fare better relatively from a year ago.

In 2017, we will keep up our efforts to leverage on our strong branding to deliver our growth strategies as we penetrate deeper into markets such as Vietnam, Myanmar, China and other Southeast Asia countries. Meanwhile, we are embracing disruptive technologies which have been transforming the way businesses are conducted. We are increasingly seeing a consolidation of e-commerce and online platforms where making a purchase is more than just a physical transfer of goods.

As a Group, we have faced many challenging economic and business cycles in our journey so far and we have weathered each storm with resilience and grit, emerging stronger after every event. Today, we are well-poised for recovery and growth.

APPRECIATION

Our team of dedicated management and staff have worked tirelessly to achieve our results today and I would like to take this opportunity to thank all of them for their commitment and dedication. I would also like to thank all our Directors for their strategic input and stewardship during the past year. My heartfelt appreciation is also extended to our business partners, distributors, customers and shareholders for their continued trust and confidence in us, in good times and bad. We are thankful to you for keeping the faith with us. Let us look forward to a better 2017.

MR TAN WANG CHEOW

Executive Chairman