BREADTALK GROUP LIMITED

A N N U A L R E P O R T 2 0 0 8

BREADTALK GROUP LIMITED171 Kampong Ampat#05-01 to 06 KA FoodLinkSingapore 368330Tel : (65) 6285 6116Fax : (65) 6285 1661Website: www.breadtalk.comEmail: [email protected]

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CONTENTS Corporate Profile 1 Financial Highlights 2 Chairman’s Statement 4 Brand Accolades 7 Group Structure 8Bakery 10

CREATIvE RATIONALELet’s Talk. For at BreadTalk Group Limited (BreadTalk), it is a word that bears deep significance. The BreadTalk Annual Report 2008 – “Talk Around The Clock”, represents the Group’s growing success and highlights our diverse portfolio in the food and beverage industry. Be it quiet breakfast meals to lively dinner gatherings, the message alludes to BreadTalk’s various business operations that continue to enhance our customers’ lives, any time, any day. Beyond a reference to the Group’s brand name, it serves as a reminder that communication is central to the success of our organisation. Establishing an open channel of communication allows us to facilitate an effective flow of ideas and information that contribute to our growth. As an extension of the trusted partnerships we share with our staff, shareholders and customers, BreadTalk will continue to encourage “Talk Around The Clock”. This will enhance value creation, whether via internal feedback that fosters cohesion or consumer suggestions that result in the development of innovative products and services.

Food Atrium 14 Restaurant 18 Board of Directors 22 Senior Management 24 Corporate Information 25 Corporate Governance 26

Financial Statement 38 Statistics of Shareholdings 108 Notice of Annual General Meeting 110 Proxy Form 119

• A F O R T I F Y I N G B R E A K F A S T . A S A T I S F Y I N G L U N

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Founded in 2000 and listed on the SGX in 2003, our business is about innovating and creating distinctive flavours to satisfy your palate – literally! This has earned us numerous awards and growing popularity with customers here and in international markets.

In just over 9 years, we have spread our wings across 12 countries and territories, leaving our mark with more than 241 bakery outlets, 29 food courts and 8 restaurants, supported by a global staff strength in excess of 2,000 employees. For 2008, we have yet again registered another year of strong revenue growth following improvements across all business and geographical segments. Our earnings have improved and we have continued to introduce our unique products and dining experiences in new areas, and refreshed our brand in our existing markets.

We have a shared vision to be an international, trend-setting, lifestyle brand. To this end, we have taken bold strides in introducing new food cultures with revolutionary changes and ingenious differentiation. Our products are also crafted with passion and vibrancy to the highest quality. We are confident that our strategies will lend us a distinct competitive advantage and the platform for continued growth.

www.global-reports.com

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2(1) The earnings per ordinary share for FY2008 is computed based on the weighted average of 234,911,034 ordinary shares for the year.(2) Net assets per share and net tangible assets per share as at end of financial year 2008 are computed based on the share capital of

234,911,034 ordinary shares, representing shares issued and fully paid as at end of the year.(3) Gearing is computed based on total borrowings divided by total equity.(4) Return on shareholders’ funds is the profit after taxation and minority interests expressed as a percentage of the average shareholders’

funds.

BREADTALK GRoup LimiTED & iTs suBsiDiARiEs – GRoup finAnciAL hiGhLiGhTs

financial Results ($'000) fY2004 fY2005 fY2006 fY2007 fY2008

Revenue 50,186 95,297 123,569 156,610 212,249

Operating profit 1,182 3,582 7,394 12,150 13,227

Profit before tax 900 2,666 6,466 11,228 12,001

Profit attributable to equity holders of the Company (31) 164 3,476 7,319 7,770

financial positions ($'000) fY2004 fY2005 fY2006 fY2007 fY2008

Property, plant and equipment 12,151 24,571 34,141 44,893 58,156

Investment in associate / joint ventures 582 2,644 2,877 1,333 422

Intangible assets 751 8,881 8,427 9,665 9,205

Other non-current assets – 38 625 710 2,026

Current assets 15,293 28,492 36,833 59,089 77,348

Current liabilities (12,791) (35,097) (47,488) (62,996) (82,866)

Non-current liabilities (2,123) (4,793) (6,417) (5,428) (8,158)

Minority interests (1,262) (1,938) (3,058) (3,170) (3,623)

Shareholders' equity 12,601 22,798 25,940 44,096 52,510

Ratios fY2004 fY2005 fY2006 fY2007 fY2008

Earnings per share (cents) - Basic & Diluted(1) (0.02) 0.09 1.73 3.23 3.31

Net asset per share (cents)(2) 7.73 11.35 12.91 18.77 22.35

Net tangible asset per share (cents)(2) 7.27 6.93 8.72 14.66 18.43

Gearing (times)(3) 0.29 0.39 0.46 0.25 0.30

Return on shareholders' fund (%)(4) (0.2) 0.9 14.3 20.9 16.1

FINANCIAL HIGHLIGHTS

REVEnuE ($ miLLion)

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pRofiT BEfoRE TAX ($ miLLion)

REVEnuE miX BY BusinEss sEGmEnTfY2008

REVEnuE miX BY GEoGRAphicAL sEGmEnTfY2008

Bakery 44.7% Franchise 7.5%

Food

Atriu

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2.6%

Restaurant 15.2%

Singapore 49% Others 6.6%

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5.5%

H

ong Kong 8.9%

2004 2005 2006 2007 2008 2004 2005 2006 2007 2008

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our Group revenue increased by 35.5% from fY2007’s high of $156.6 million

to a new record-breaking $212.2 million in fY2008, driven by broad-based double-digit growth

across all business segments and geographical markets. Group operating profit,

likewise, surpassed previous records, reaching a new high of $13.2 million in fY2008.

During the course of the year, we added new franchisees in Korea, Bahrain, Saudi Arabia and Vietnam and 7 cities in the PRC. Correspondingly, our franchise revenue grew 45.6% to $16.0 million in FY2008 following higher master franchise fees, growth in royalty fees and raw materials sales to these franchised outlets. Overall, the bakery business registered an 11.3% rise in operating profit to $4.3 million in FY2008, mainly driven by higher profits from the PRC and Singapore bakery operations. Our strong showing was offset by start-up loss of $0.9 million incurred by J Co. Donuts and by an operating loss of $1.1 million from our Hong Kong bakery business.

Our reach has grown substantially during the year and as at 31 December 2008, we have 100 owner-operated bakeries compared to 73 the previous year. These consist of 69 BreadTalk stores and 29 Toast Box outlets spanning Singapore, the PRC, Hong Kong, Malaysia and Thailand. Our network of franchised outlets stood, as at year end 2008, at 141, compared with 97 in 2007 – 48 in Indonesia, 15 in the Philippines, 7 in Kuwait, 4 in UAE, 1 in Oman, 7 in India, 1 in Korea and 58 in the PRC.

food Atrium Business

Our food atrium business has performed well contributing 32.6% or $69.2 million of Group revenue, from higher revenue contribution from Singapore, the PRC and Hong Kong. This was a 42.9% increase over FY2007 with Singapore food atrium revenue surging 68.0% to $21.0 million in FY2008 mainly due to consolidation of revenue from MWA Pte Ltd, (“MWA”) as well as the maiden full-year revenue contribution from our Suntec City outlet, which commenced operations in May 2007. MWA was previously a 50% joint venture for the food court at Wisma Atria in Singapore which became a wholly-owned subsidiary after we acquired the remaining 50% equity stake in December 2007. The PRC and Hong Kong registered higher revenues of $32.5 million and $15.4 million, representing a 16.9% and 87.8% revenue increase respectively over FY2007 levels. We opened 4 additional food atria, closed 2 and renovated

1 in the PRC. Following the upgrade, sales increased significantly as we benefited from the full-year revenue contribution from the recently upgraded Shanghai Metro City food atrium. Hong Kong operations recorded higher revenue from the addition of 3 food atria. We are pleased to report that our foray into Malaysia at the end of 2007, with the first Food Republic food atrium at the upmarket Pavilion Shopping Centre in Kuala Lumpur, has proved to be a resounding success with a fast growing following from food enthusiasts.

Food atrium operating profit grew 74.3% to $6.1 million in FY2008, driven mainly by expansion and higher revenue from both the PRC and Singapore. This was offset by operating loss of $1.3 million incurred by our Hong Kong operations. They were, unfortunately, impacted by project cost overrun and delay in the opening of new outlets where operating leases had already commenced.

As at 31 December 2008, the Group owns 29 food atria, an increase of 5 from 31 December 2007, comprising 20 in the PRC, 5 in Hong Kong, 3 in Singapore and 1 in Malaysia.

Restaurant Business

The Restaurant segment, made up of our chain of 6 Din Tai Fung restaurants, 1 Station Kitchen and 1 Cosmopolitan Cafe in Singapore, contributed 15.2% or $32.2 million, representing a 13.5% increase over FY2007. The revenue growth was from higher same store sales from our famed Din Tai Fung restaurants and revenue consolidation from Cosmopolitan Cafe at Wisma Atria, Singapore, after it became a subsidiary of the Group in December 2007. The restaurant business operating profit declined by 34.8% to $3.0 million in

CHAIRMAN’S STATEMENT

Dear Shareholders

I am happy to report that the BreadTalk Group has turned in a steady set of results for financial year ended 31 December 2008 (“FY2008”), bettering our 2007 financial performance. We have achieved this by pursuing a resilient business strategy comprising a diversified product range of strong and innovative brands coupled with an extensive and growing market reach.

Our Group revenue increased by 35.5% from FY2007’s high of $156.6 million to a new record-breaking $212.2 million in FY2008, driven by broad-based double-digit growth across all business segments and geographical markets. Group operating profit, likewise, surpassed previous records, reaching a new high of $13.2 million in FY2008. This is a 8.9% improvement over the previous year’s operating profit. The improvement was spurred by solid performances by our bakery and food court operations, tempered by impairment charge and start-up expenses of our new businesses. But for these items, operating profit would have been $15.7 million, representing a growth of 29.3% over FY2007. On the back of the strong topline performance, net profit attributable to shareholders grew by 6.2% to $7.8 million.

In 2008, we continued the preceding year’s focus on fortifying and refreshing our brands with new products and retail concepts. Hence, for our bakery business, which turned eight years old in July, this meant giving our stores a total design overhaul and ushering in a new bakery boutique store concept. While maintaining our signature clean lines and bright atmosphere, our new store concept exudes a warmer, cosier feel. This is our ongoing effort to nurture our signature brand by updating our retail concepts so as to boost same store sales and to raise consumer recognition of our brands. As a trendsetter in food and dining concepts, our efforts are part and parcel of ensuring that we remain ahead of the competition in bringing fresh ideas to our products and stores. Our market diversification strategy saw us seizing growth opportunities in the region where these presented themselves. We thus increased the number of newly-owned bakeries and franchise outlets, adding a total of

27 new owned bakeries and an additional 44 franchised outlets across our existing markets as well as new markets in Asia. We added 5 new food courts to our regional stable, 3 more in Hong Kong and 2 in the PRC. We also took steps towards building new revenue streams both in Singapore and in the PRC by laying the groundwork for the introduction of a premium burger chain, Carl’s Jr.®, to be rolled out in the PRC later this year.

In view of the financial turmoil that plunged the global economy into a downward spiral from the second half of 2008, we were also judicious in our spending. We thus kept a tight rein on expenses, improving operational efficiencies, diversifying our sources of raw material and rationalising our businesses to focus on profitable stores while re-thinking our existing strategies for under-performing ones. In March 2009, we disposed off our stake in the J Co. Donuts business to better focus on our other brands with multiple market access.

Our efforts through the year have seen our earning per share on a diluted basis rise 2.5% to 3.31 cents while net asset value per share improved 18.6% to 22.3 cents as of 31 December 2008.

sEGmEnTAL REViEw

Bakery Business Bakery Business (direct-owned and franchised)The direct-owned bakery segment contributed 44.7% or $94.9 million to Group revenue, remaining as our largest revenue contributor. This was a marked 37.8% increase over FY2007, propelled by expansion in Singapore and the PRC as well as revenue consolidation from our Hong Kong and Malaysian units which had become subsidiaries of the Group in late 2007. Singapore sales remained robust, rising 27.9% to $50.0 million in FY2008, driven by 8 new outlets, higher same store sales and a maiden $3.1 million revenue contribution from the 2 J Co. Donuts and Coffee outlets. Revenue from the PRC also improved by a healthy 32.8% to $38.9 million, attributed to 7 new outlets which were added to the existing 29 and growth in same store sales.


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Food RepublicOverall Winner, Promising Brands categorySingapore Prestige Brand Award 2008Association of Small and Medium Enterprises (ASME) and Lianhe Zaobao

Davey AwardsSilver Winner Best Annual Report 2007International Academy of the Visual Arts

Most Transparent Company Award (SIAS)2004 and 2005 - Sesdaq Category Runner-Up2007 -Sesdaq Category Winner2008 -Catalist Category Runner-Up

George Quek Emerging Entrepreneur CategoryEntrepreneur of the Year 2006Ernst & Young

Five Star Diamond Brand Award 2006 Five Star Diamond Brand

Regional Brand Award 2006Singapore Promising Brand AwardAssociation of Small and Medium Enterprises (ASME) and Lianhe Zaobao

BRAND ACCOLADES

Finalist in Franchisor of the Year Award 2005Franchising and Licensing Association of Singapore (FLA)

Most Promising Brand 2002 to 2005Most Popular Brand 2002, 2005Most Distinctive Brand 2003 to 2005Silver Award 2004Gold Award 2005Singapore Promising Brand Award - ASME and Lianhe Zaobao

Design for Asia Award 2004Hong Kong Design Centre

Superbrand StatusSingapore version 2002/2003Singapore Superbrands Council

George Quek Entrepreneur of the Year 2002ASME and The Rotary Club

Ranked Number 1Enterprise 50 Start Up Award 2002Accenture and The Business Times

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FY2008 due to higher operating loss from Cosmopolitan Cafe and the Station Kitchen which suffered an impairment loss on fixed assets of $0.4 million, as well as start-up costs relating to Carl’s Jr.® restaurant business. On the other hand, Din Tai Fung enjoyed a 2.0% improvement in its operation profit following higher revenues, despite facing higher personnel and food cost.

BusinEss ouTLooK

Our sound business strategy, strong brands and diversified markets coupled with prudent cash management and a cautious investment approach, has lent resilience to the Group. Thus, despite the tough economic conditions anticipated for 2009, we are confident of being well-positioned to ride through the short-term economic challenges. We are also in a good position to take advantage of opportunities that still abound in this climate. We believe that Singapore and the PRC, which are our key markets, will continue to provide a steady income stream. Our differentiated dining concepts which offer top quality fare at very affordable prices are less likely to be impacted than more expensive alternatives by any expected decrease in consumer spending.

In ensuring continued growth, we will invest part of our profits in the construction of new platforms and infrastructure for future revenue growth, such as the introduction of Carl’s Jr.® restaurants into the PRC. As far as operational improvements are concerned, we will also continue to invest substantially in training our people across all levels of the organisation. This will ensure that our standards of service excellence are maintained. Such skills training and development will enable our personnel to progress within the organisation and ensure staff retention. We will also upgrade our IT systems and improve our operational efficiencies. These measures will strengthen our position in our existing markets and sustain our ability to extend our reach to new ones.

DiViDEnD

The Board is pleased to propose a first and final exempt (one-tier) dividend of 1.00 cent per ordinary share for FY2008 in appreciation for the loyalty and strong support shown by our shareholders. This represents approximately 30% of the Group’s net profits for the year. While we have a healthy cash balance of $47.9 million as at 31 December 2008, we are conscious of the need to manage our resources to ensure our ability to ride through this climate, and to make the necessary investments at the opportune time.

AccoLADEs

At BreadTalk, our pursuit for creative excellence extends beyond the culinary arts. In 2008, Food Republic was the overall winner in the Promising Brands category of the Singapore Prestige Brand Award 2008. On the corporate governance front, we received the Most Transparent Company Award (Sesdaq category) for 2004, 2005, 2007 and 2008. In addition, we had the honour of receiving the 2008 Davey Award (Silver) for Best Annual Report design for our 2007 Annual Report entitled, “Adding Flavour To Your Life” presented by the International Academy of the Visual Arts.

AppREciATion

The success of the BreadTalk Group is owed to a collective set of individuals – our loyal shareholders, our faithful customers, our supportive business partners and last but certainly not least, our dedicated and tireless staff. On behalf of the Board, I would like to convey to each of them our sincerest thanks. With their continued support and patronage, we believe we have the necessary fortitude to brave the challenges ahead.

GEORGE QUEK Chairman

CHAIRMAN’S STATEMENT

our sound business strategy, strong brands and diversified markets

coupled with prudent cash management and a cautious investment approach,

has lent resilience to the Group.

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100%

100%

100%

100%

100%

star food pte Ltd

shanghai star food f&Bmanagement co., Ltd

chongqing foodRepublic food & Beverage

co., Ltd

Beijing star food f&Bmanagement co., Ltd

shanghai hong Bu Rangfood & Beverage

management co., Ltd

BreadTalk concepthong Kong Limited

Investment Holding

Bakery

Food Court

Restaurant

Others

100%

100%

85%

100%

100%

100%

50%

30%

100%

50%

100% 60%

Topwin investmentholding pte Ltd

food Republic (shanghai) co., Ltd

(formerly known as Shanghai Xin Jia Fang Food & Beverage Co., Ltd)

Beijing Da shi Dai food& Beverage co., Ltd

megabite hong KongLimited

food Republic pte Ltd

megabite (s) pte Ltd mwA pte Ltd

megabite Eateries (m)sdn Bhd

food Art pte Ltd

Apex Excellent sdn Bhd

out of The Box pte Ltd

100%

100%

100%

GROUP STRUCTURE AS AT 31 DECEMBER 2008

BREADTALK GROUP

LIMITED

BreadTalkinternational pte Ltd

shanghai BreadTalkco., Ltd

shanghai BreadTalkGourmet co., Ltd

Beijing BreadTalkRestaurant management

co., Ltd

BreadTalk (Thailand)company Limited

mL Breadworks sdn. Bhd

BreadTalk pte Ltd

Taster food pte Ltd hong Kong BreadTalk Ltd

charcoal pte Ltd

Twin peaks Venturesingapore pte Ltd

90%

100%25%70%

75%

70%

100%100%


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早

餐

In just over 8 years, BreadTalk and Toast Box have travelled far

and wide, leaving footprints in 12 countries and territories with

more than 241 stores worldwide. As of end 2008, we owned and

operated 100 bakery outlets across Asia – with 69 BreadTalk and

29 Toast Box outlets spanning Singapore, Malaysia, Thailand,

Hong Kong and the People’s Republic of China (‘PRC’).

Our franchise network has since expanded to 141 stores in Asia

and the Middle East with new franchises in Korea, Vietnam,

Bahrain and Saudi Arabia.

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with never-before-seen queues forming outside the bakery.

We expanded our footprint in Philippines, opening stores in Cebu as

part of our strategy to extend the brand reach from the mainland into

the provinces and islands.

Our efforts to create global brand cohesiveness saw us hosting

the first ever International Franchisee Conference at the Meritus

Mandarin Singapore. The conference was attended by over 50

BreadTalk brand owners, marketing and operational personnel from

our franchise network. Through the conference, we were able to

exchange ideas on brand development to ensure the BreadTalk brand

leaves an indelible mark across the globe.

As a fast growing international brand, BreadTalk has pursued a more

active Corporate Social Responsibility programme, seeking to give

back to society, making a difference to the lives of people in need.

Thus, witnessing one of the world’s most horrifying disasters – the

Sichuan earthquake on 12th May 2008 – galvanised us into action.

To show our solidarity with the people of Sichuan and to play

a part in relief efforts, BreadTalk created ‘Ping Chuan Xiong’

平川熊 (Peace Panda) – Panda bear shaped bun with four different

expressions symbolising the terror of the 7.8 magnitude earthquake.

The proceeds raised went to the Chinese Embassy and Red Cross

Society’s ‘China Earthquake Appeal Fund’.

ThE icinG Room

Closer to home, we expanded our bakery concept, by opening

our latest store, The Icing Room, at Jurong Point. The store sells a

delectable range of cakes, pastries and cookies and brings with it a

unique proposition of allowing patrons to decorate their own cakes,

a meaningful gesture to show love and affection for those close at

heart. The store, exuding girlish charm in hues of pink is targeted

at young ladies between the ages of 14-35 with a creative slant

towards baking and craft. A growing clientele consists of mothers

with young children who find the activity a great way to spend an

afternoon together.

ToAsT BoX

Toast Box was developed in October 2005 to recreate the warm

atmosphere of local Nanyang coffee shops of the 60s and 70s. It

seeks to bring an old-world charm to the current vibrancy of life as

we know it now. Toast Box harks back to the simplicity of a bygone

era, with its pleasurable comforts of coffee and toast. It serves up

traditional favourites like peanut toast thick, mee siam, kaya toast

and soft-boiled eggs. South-east Asian coffee, the mainstay of the

concept, is made the traditional way where it is ‘pulled’ to bring out

the flavour.

Toast Box stores are fashioned in a wood-panelled, old-world setting

complete with gramophones, Rediffusion sets and other memorabilia

in a colonial setting. Since its beginnings as a food court stall in Food

Republic, the Toast Box brand has grown to become an immensely

popular chain with outlets at prominent, high traffic locations such as

Vivo City, Plaza Singapura, Suntec City and Centrepoint. In addition

to being well-situated at shopping malls, Toast Box has also made

its way into airport retail space with its 2 outlets at Terminals 1

and 3 of the Singapore Changi Airport. This welcomed nostalgia is

now enjoyed further afield in other Asian countries aside from 18 in

Singapore – 5 in Malaysia, 1 in Shanghai, 2 in Beijing, 1 in Thailand,

1 in the Philippines and 2 in Hong Kong.

BREADTALK

Distinctive, stylish and so delicious, every one of our baked

creations has garnered a loyal following, turning BreadTalk

into an award-winning boutique with over 1000 different

breads, buns and cakes created, each endowed with its

own unique name, personality and flavour. The brand

turned eight in 2008 and to celebrate our milestone,

we unveiled our new bakery boutique concept at

Singapore’s City Link Mall.

BreadTalk revolutionised the concept of bakeries with

our distinctive sleek and clean lines and signature

‘see-through’ kitchens showcasing the expertise of our

bakers. Nevertheless, having come of age and now

exuding a familiarity with our consumers, we wanted to

subtly introduce the warmth of close friendships into our

stores. Clean-cut, sleek and bright, the new store concept

exudes an understated artistic flair with fascinating wall

murals featuring BreadTalk’s new inspirational ‘Happy

Chefs’ characters portrayed in different nationalities.

These serve as a tribute to our chefs the world over for

their dedication, creativity and hard work in kneading out

wonderful pieces of artwork. The centrepieces of the

stores are the bread display cases. These are designed

with display bases, cut out like facets of a diamond,

bringing out our freshness and splendour of their jewels –

the freshly baked aromatic breads. The new stores, while

maintaining our trademark open-concept kitchen takes

on a more homely feel and recreates the atmosphere of a

friend’s kitchen. Equipped with new state-of-the-art bakery

equipment specially imported from Germany, Spain and

Japan, the taste, aroma, quality and texture consistency

of our breads are further enhanced. New staff uniforms

with French and Japanese influences and biodegradable

and environmentally-friendly packaging for all our products

complete the entire new look. The new concept stores will

be rolled out gradually in Singapore and overseas to further

reinforce a cohesive branding effort.

As part of this revamp, over 100 new breads were created

by our Research and Development (‘R&D’) Team in

consultation with top chefs and food consultants from

France, Japan, Spain and Taiwan. We have continued to

retain our top selling products such as Flosss, together

with a new product range to keep the brand fresh and

surprising. In fact, as an innovator and creative force in the

bakery business, our R&D team, works hard to create new

products every six months, always injecting an element

of fun and humour into our products. Characteristic of

our ability to remain in sync with current trends and the

latest happenings around the world, we created Flosss 1

and Ferraberri, in commemoration of the first ever 2008

FORMULA 1™ SingTel Singapore Grand Prix race held in

Singapore and OBUNMA, an allusion to the biggest political

event of 2008, the US Presidential Elections.

Our franchise network continued to grow, especially in the

the PRC and Indonesia where the most number of new

franchises were opened. We also established a store in

Seoul, South Korea which was met with great enthusiasm


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FOOD ATRIUM

午

时

The Group began its foray into the food atrium business with

its acquisition of an award-winning 大食代 (dashidai) chain

comprising 13 food atria in the People’s Republic of China

(“PRC”) back in 2005. Since then, we have reinvented the brand

and spread the Food Republic culture from the PRC to other

Asian countries. With great food at affordable prices, a casual

dining ambience and strong cultural concepts, Food Republic

adds another dimension to the dining experience.

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The Food Republic mantra

is to bring the best of local

hawker and street food under

one roof. It encourages an

appreciation of the indigenous

culture of the country through

the distinctive flavours of its

food and the craftsmanship

of its hawkers. Food Republic

invites and entices customers

using unique thematic

dining concepts, such as the

recreation of bygone eras of

the charming retrospective

styles of 60s and 70s in the

case of Singapore or the use

of contemporary décor in the case of Hong Kong and

Malaysia. Each of our food atria in these countries stays

true to its motto of uniting citizens of good taste.

During the year, Food Republic concentrated on creative

marketing efforts in order to further build up brand

awareness internationally, instill brand loyalty and increase

sales for our tenants. It also sought to spread the

appreciation of local culinary delights among tourists to

the region. In Singapore, our culinary offerings reflecting

Singaporean and Asian flavours put us in the pages of

the Singapore Tourism Board’s (STB’s) ‘Uniquely Passport

08’. The ‘passport’ was a new marketing initiative aimed

at tourists consisting of a ‘Do-It-Yourself’ kit containing

interesting activities to be indulged in while in Singapore.

We were also the only food atrium to be included in STB’s

food sampling promotion, one of the programmes in its

celebrated annual Singapore Food Festival.

We were part of the history-making

2008 FORMULA 1™ SingTel

Singapore Grand Prix race last

year, being the only Asian food

brand invited to provide our Asian

hawker specialities as part of food

and beverage offerings within

the FORMULA 1™ circuit. The

international appeal of the brand

was also evident when we were

invited by the Prime Minister’s

office to take part in Singapore

Day in Melbourne serving up our

trademark local fare to overseas

Singaporeans.

Our concerted branding efforts garnered us the accolade

as the Overall Category Winner , Promising Brands in

the Singapore Prestige Brand Award 2008. The award,

jointly organised by the Association of Small and Medium

Enterprises and Lianhe Zaobao, recognises and honours

Singapore brands that have developed and managed their

brands effectively through concrete Brand Architecture

and branding initiatives. This achievement clearly

demonstrates the popularity of the Food Republic brand

and gives the brand further leverage as it internationalises

and moves into new geographical territories.

As of end 2008, we own and operate 29 food atria in Asia

–10 in Shanghai, 6 in Beijing, 1 in Tianjin, 3 in Chongqing,

5 in Hong Kong, 3 in Singapore, and 1 in Malaysia.


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RESTAURANT

晚

餐

Celebrating a time-honoured tradition of exquisite culinary

indulgence, the Group’s restaurants, which include the famed

Din Tai Fung chain, have delighted food aficionados since its

inception. The numerous accolades and loyal following of our

restaurants are testament to our exquisite fare that never fail to

tantalise and satisfy the most discerning taste buds.

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cARL’s JR.®

An exciting development for the Group is the impending launch of Carl’s Jr.® in the People’s Republic of China (“PRC”). Carl’s Jr.® has long been reputed as the place to go for juicy, premium quality charbroiled burgers in Western United States. Exuding a hip, vibrant attitude, the chain is well known for bringing innovative ideas to the Quick Service Restaurant industry such as being the first to charboil over an open flame, which sears the juices and flavour into the great tasting burgers and chicken sandwiches.

During the year the Group had partnered with Aspac F&B International Pte Ltd (‘Aspac’), to form a joint venture company, Star Food Pte. Ltd. (‘Star Food’), to develop the Carl’s Jr. ® brand in the PRC. At least 100 Carl’s Jr.® restaurants will be opened in the PRC by 2016 in the municipalities of Beijing, Shanghai and Tianjin and the provinces of Zhejiang and Jiangsu. The first of these is planned for Shanghai in 2009 at popular high traffic shopping malls.

ThE sTATion KiTchEn

The Station Kitchen (TSK) is the Group’s integrated F&B

concept for diners at the 70,000 sq ft St James Power Station, one of Singapore’s latest clubbing hotspots. Established in December 2006, the 250-seat restaurant offers 2 cuisine

concepts in its 6,500 sq ft dining space – Charcoal and

Ah Wok. Charcoal is an offshoot of Yakiniku House, the popular

Taiwanese charcoal grill restaurant chain that has 5 branches in Taipei. With

traditional tatami seatings, diners can enjoy hands-on grilling over burning charcoal of the freshest meats, seafood and vegetables. Ah Wok serves up a host of local favourites such as bak kut teh and fish head curry in traditional goodness and flavour.

TSK features open concept kitchens that allow our chefs and guests to interact, and also houses brick walls, wooden benches and cast-iron lamps to create an inviting, congenial atmosphere. Its strategic location – residing within an entertainment complex, opposite Sentosa Island and adjacent to Singapore’s largest retail mall, Vivo City, makes it a popular hangout for clubbers, tourists, shoppers, and working professionals.

Din TAi funG

Famous for its delicious and healthy house specialties - especially its renowned xiao long bao (steamed pork dumplings) - Din Tai Fung originated in Taiwan over 30 years ago and was rated by The New York Times as ‘One of the World’s Top TEN Best Restaurants’ in 1993. In 2003, the Group won the franchise rights to operate the Din Tai Fung brand of restaurants in Singapore. In 2008, Din Tai Fung in Taiwan was recognised as one of the Taiwan’s best restaurants by food critics in the 2008 Taipei Top Restaurant Guide. The award bears testimony to the fact that the Din Tai Fung brand name is synonymous with consistency in serving quality and authentic fare and instills further confidence in how the band is managed internationally.

With an emphasis on fresh quality ingredients and superior cooking techniques, Din Tai Fung’s food preparation and cooking methods have been standardised worldwide with a view to strict quality standards. In Singapore, customers can relax amid our restaurants’ elegant décor and oriental facade, and relish mouth-watering dishes such as steamed chicken soup, pork chop, fried rice and noodles and our famous hearty and flavourful dumplings.

In December 2008, Din Tai Fung opened its sixth outlet in Singapore at Jurong Point, bringing the unmistakeable flavours of the restaurant chain closer to our customers in the west of the island. Styled in the same style of oriental chic décor, it offers shoppers a respite from the hustle and bustle of the busy shopping mall and a chance to indulge in over 70 favourite menu items. One of the exciting dishes introduced at the latest Din Tai Fung restaurant is ‘xiao long tang pao’ 小笼汤包 (steamed mini pork dumplings with

soup), a famed Taiwanese delicacy requiring tremendous skill and effort to create. The introduction of this specialty has been long awaited in Singapore. In fact, so popular and highly regarded is this dish that it has been said to be worth flying across the globe for!

Over the course of the past year, Din Tai Fung held exciting customer programmes to further enhance the experience of our culinary delights. In addition to special promotions to mark annual calendar highlights such as Chinese New Year and Christmas, we held a culinary workshop as part of our Mother’s Day 2008 celebrations to fantastic response.

Doing our bit to promote Asian contemporary theatre and intercultural work, Din Tai Fung was one of the food sponsors for the inaugural Asian Intercultural Conference – AIC 2008 organised by the Theatre Training & Research Programme held in Singapore. The programme allowed participants, among whom were renowned director Stan Lai, playwrights and the literary set, to experience Din Tai Fung’s exceptional cuisine. Din Tai Fung was also a sponsor of The Esplanade’s Huayi – Chinese Festival of Arts which celebrates traditional and contemporary Chinese arts by outstanding Chinese artistes the world over. The Festival has grown over the years, to become a focus of Singapore’s Lunar New Year celebrations for the community.

Currently, the Group operates 6 Din Tai Fung restaurants in Singapore, all at convenient, high-traffic locations – Paragon, Junction 8, Tampines Mall, Wisma Atria, Raffles City and Jurong Point. Our award of the Din Tai Fung franchise right in Thailand, will see this exquisite food culture finding its way to the land of smiles soon.


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GEoRGE QuEK mEnG TonGChairman

George, founder of the Group, was appointed to the Board on 6 March 2003 and re-elected on 28 April 2008. Having led and grown the Company to its outfit today, George continues to drive our strategic direction and development. With more than 30 years of industry experience, he has been instrumental in setting new standards in food trends in Asia and the Middle East.

George started his food and beverage business in Taiwan in 1982, successfully growing it into a chain of 21 Southeast Asia food outlets within a decade. Returning to Singapore in 1992, he founded Topwin Singapore and subsequently Megabite China in 1996, establishing the food court businesses. In 2000, he started the bakery business with BreadTalk Pte Ltd and eventually brought it to list on the SGX in 2003. To facilitate expansion plans, the bakery and food court businesses were strategically merged in 2005.

George holds a Doctorate in Business Administration (Honorary) from Wisconsin International University, USA. Amongst other awards, he won the Ernst & Young “Entrepreneur of the Year 2006” (Emerging Entrepreneur Category) and “Entrepreneur of the Year 2002” organised by the Association of Small and Medium Enterprises and The Rotary Club of Singapore.

KAThERinE LEE Lih LEnG Deputy Chairman Katherine was appointed to the Board on 6 March 2003 and last re-elected on 30 April 2007. She oversees the Group’s research and development, as well as pioneers new ideas and concepts. Responsible for product development and enhancement for our various brands both locally and globally, Katherine also formulates product training and technical skill upgrade programmes to ensure proper transfer of knowledge and skills to our franchisees in line with our local operations

so as to sustain product quality. In addition, Katherine spearheads product costing, which is an integral part of strategic pricing. Katherine has more than 15 years of experience in the industry. She was previously the Finance Director of Topwin Singapore prior to which she was in charge of the human resource and operations of more than 20 food and beverage outlets in Taiwan.

chEn Kuo huANon-Executive Director

Kuo Hua was appointed to the Board on 30 April 2003 and last re-elected on 27 April 2006. He sits in the Audit Committee, Nominating Committee and Remuneration Committee of the Company and is also the President of the Group’s China operations.

Kuo Hua has more than 20 years of industry experience in providing consultation and strategic planning in various countries such as the PRC, Hong Kong, Taiwan and Singapore. He has held various senior positions in Topwin Singapore and Megabite China prior to joining the Group, whereby the food court businesses were merged into the Group.

Kuo Hua holds a degree in Drama and Mass Communication from the Chinese Culture University, Taipei, Taiwan.

onG KiAn minIndependent Director

Kian Min was appointed to the Board on 30 April 2003 and last re-elected on 30 April 2007. He is the Lead Independent Director, Chairman of the Audit Committee and Nominating Committee, and member of the Remuneration Committee of the Company.

He was called to the Bar of England and Wales in 1988 and to the Singapore Bar the following year. In addition to practising as a consultant with Drew & Napier LLC,

a leading Singapore law firm, he is a senior adviser of Alpha Advisory Pte. Ltd. (a financial and corporate advisory firm) and an executive director of Katana Asset Management Pte. Ltd. He also serves as an independent director and chairs most of the audit committees of several other SGX-ST listed companies.

Kian Min was awarded the President’s Scholarship and Police Force Scholarship in 1979. He holds a Bachelor of Laws (Honours) external degree from the University of London and a Bachelor of Science (Honours) Degree from the Imperial College of Science and Technology in England. He has been a Member of Parliament of Singapore since January 1997, and serves as Deputy Chairman of the Government Parliamentary Committee (GPC) for Transport.

chAn soo sEnIndependent Director Soo Sen was appointed to the Board on 14 August 2006. He is the Chairman of the Remuneration Committee, as well as member of the Audit Committee and Nominating Committee of the Company.

Soo Sen is currently the Director, Chairman’s Office of Keppel Corporation Limited. He also holds directorships for a few listed companies in Singapore.

Soo Sen is a Member of Parliament for Joo Chiat Constituency. He was previously a Minister of State and had served in several ministries including the Ministry of Community Development, Youth and Sports, Ministry of Education, and Ministry of Trade and Industry. Before entering the political scene, he was involved in the starting up of the China-Singapore Suzhou Industrial Park as its founding chief executive officer in 1994, laying the foundation and framework for infrastructure and utilities development for the industrial park. He holds a Master in Management Science from the University of Stanford, USA.

BOARD OF DIRECTORS

From left: ONG KIAN MIN, KATHERINE LEE LIH LENG, GEORGE QUEK MENG TONG, CHAN SOO SEN AND CHEN KUO HUA

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SENIOR MANAGEMENT

Goh TonG pAKChief Executive Officer

Tong Pak joined the Company on 1 January 2008. As Group CEO, Tong Pak oversees the Group’s global operations, focusing on strategic planning and business development. One of his main roles is to strategise on systems and talent development.

Prior to joining the Company, Tong Pak was a well known veteran in the education sector, having spent 37 years with the Ministry of Education (MOE). He started out as a teacher and was promoted through the ranks to the position of deputy director for MOE’s school appraisal branch. With his years of professional and management experience, Tong Pak helps to spearhead the Group’s expansion globally. His background and expertise in administrating monitoring systems stands him in good stead as he works towards improvement of the Group’s quality control procedures and enhancement of the business operation systems.

Tong Pak who holds an honours degree in arts from the former Nanyang University and a post graduate diploma in education from the National Institute of Education (NIE) also lectures part-time for the Master’s degree course in Education Administration at NIE, Singapore.

fRAnKiE QuEK swEE hEnGChief Operating Officer

Frankie assists our Chairman in overseeing the development and growth of the Group, focusing on the Group’s expansion into the PRC. Frankie has been based in Shanghai since January 2005 where he oversees the growing bakery operations in Shanghai and Beijing. His expertise has further led to the successful export of the BreadTalk brand name to more than 16 cities through a franchise model system run by the in-house franchise team.

Prior to joining the Group in 2001, Frankie was an Associate Manager in the residential properties division of the Dennis Wee Group. From 1993 to 1999, Frankie held various positions in Topwin Singapore where he helped set up the Raffles City food court and managed the operations of several food courts.

Frankie holds a Master of Business Administration (Honorary) from the American University of Hawaii, USA.

cAThERinE LEE KhiA YEEChief Financial Officer

Catherine oversees the Group’s financial function, including financial reporting, compliance, internal controls, tax, financial planning and treasury operations. She is also in charge of investments and investor relations.

A non-practicing Certified Public Accountant by training with more than 15 years of financial management experience in various industries, Catherine is an experienced banker and investment professional with a strong corporate finance and private equity background.

Prior to joining the Group in 2004, Catherine worked for Transpac Capital where she managed an investment portfolio of public-listed companies and private companies in the USA, Singapore, Malaysia, Indonesia and Australia. She was concurrently financial controller and business development manager to companies from a spectrum of industries. She also sat on the board of several companies to assist in implementing good corporate governance practices and participated in strategic planning.

Catherine holds a Bachelor of Accountancy (Honours) degree from the Nanyang Technological University, Singapore.

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CORPORATE INFORMATION

BoARD of DiREcToRs

George Quek Meng Tong Chairman

Katherine Lee Lih Leng Deputy Chairman

Chen Kuo Hua Non-Executive Director

Ong Kian Min Independent Director

Chan Soo Sen Independent Director

compAnY sEcRETARY

Tan Cher Liang

REGisTERED officE

171 Kampong Ampat#05-05 KA FoodLinkSingapore 368330Tel : (65) 6285 6116Fax: (65) 6285 1661

shARE REGisTRAR

Boardroom Corporate & Advisory Services Private Limited3 Church Street #08-01 Samsung HubSingapore 049483

AuDiToRs

Ernst & Young LLPPublic Accountants and Certified Public AccountantsOne Raffles Quay North Tower Level 18Singapore 048583

Partner-in-charge : Philip Ling (appointed since financial year ended 31 December 2006)

pRincipAL BAnKERs

DBS Bank Limited

Malayan Banking Berhad

Oversea-Chinese Banking Corporation Limited

Standard Chartered Bank

United Overseas Bank Limited

inVEsToR RELATions

Spin Capital Asia158 Cecil Street #05-06B Dapenso BuildingSingapore 069545Tel : (65) 6227 7790

Michael TanEmail : [email protected]

Dawn SooEmail : [email protected]


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This report sets out BreadTalk Group Limited’s corporate governance processes and structures that were in place throughout the financial year ended 31 December 2008, with specific reference made to the principles and guidelines of the Code and the Best Practice Guide issued by the Singapore Exchange Securities Trading Limited (the “SGX-ST”).

The Board of Directors (the “Board”) is pleased to confirm that for the financial year ended 31 December 2008, the Company has generally adhered to the framework as outlined in the Singapore Code of Corporate Governance 2005 (the “Code”) and where there are deviations from the Code, the reasons for which deviation are explained accordingly.

A. BOARD MATTERS

Board’s Conduct of its Affairs

Principle 1: Every company should be headed by an effective board to lead and control the company. The board is collectively responsible for the success of the company. The board works with management to achieve this and the management remains accountable to the board.

The primary function of the Board is to protect and enhance long-term value and returns for its Shareholders. Besides carrying out its statutory responsibilities, the Board’s roles include:-

1. Providing entrepreneurial leadership, set strategic directions and overall corporate policies of the Group;

2. Supervising and monitoring the performance of the management team;3. Ensuring the adequacy of internal controls, risk management and periodic reviews of the Group’s

financial performance and compliance;4. Setting the Company’s values and standards, ensuring that the necessary human resources are

in place;5. Approving annual budget, major investments and divestment proposals;6. Assuming responsibility for good corporate governance practices; and7. Approving corporate or financial restructuring, share issuance, dividends and other returns to

Shareholders, Interested Person Transactions of a material nature and release of the Group’s half year and full year results.

To assist in the execution of its responsibilities, the Board has established three (3) Board committees, namely the Audit Committee (AC), Nominating Committee (NC) and Remuneration Committee (RC), to which the Board has delegated decisions on certain Board matters to the specialised Board committees.

Guideline 1.1 of the Code:

The Board’s role


Disclosure on delegation

of authority by Board to

Board Committees

The Board met five (5) times during the financial year to discuss the key activities and business strategies of the Group. All Directors were furnished with relevant information beforehand in order to enable them to obtain further explanation where necessary, and be adequately briefed prior to the respective meetings. Minutes of the meetings are also available to the respective Board members. Ad-hoc and non-scheduled meetings are convened by Board members to deliberate on urgent and substantive matters.

The Company’s Articles of Association has been amended to provide for telephone, videoconferencing, audio-visual or other electronic means of communication to facilitate meetings of the board.

Details of Directors’ attendance at Board and Board Committee meetings held during the financial year ended 31 December 2008 is summarised as follows:


Board to meet regularly

Corporate GovernanCe Corporate GovernanCe

ATTENDANCE AT BOARD AND BOARD COMMITTEE MEETINGS

Name of Director Board Audit Committee Nominating Committee Remuneration Committee

Number of Meetings Held 5 4 1 2

ATTENDANCE

George Quek Meng Tong 5 NA NA NA

Katherine Lee Lih Leng 4 NA NA NA

Chen Kuo Hua 4 4 1 1

Ong Kian Min 5 4 1 2

Chan Soo Sen 5 4 1 2

Matters that are specifically reserved to the Board for approval are:

(a) matters involving a conflict of interest for a substantial Shareholder or Director;(b) material acquisitions and disposal of assets;(c) corporate or financial restructuring;(d) share issuances, dividends and other returns to Shareholders;(e) matters which require Board approval as specified in the Company’s Interested Person Transactions

policy; and(f) substantial expenditures exceeding a prescribed limit.


Matters requiring Board

approval

All Directors are appointed to the Board by way of a formal letter of appointment indicating the amount of time commitment required and scope of duties.

The Company provides a comprehensive orientation programme to familiarise new Directors with the Company’s businesses and governance practices, as well as the Group’s history, core values, strategic direction and industry-specific knowledge so as to assimilate them into their new roles.

Directors also have the opportunity of visiting the Group’s operational facilities and meet with the management team to gain a better understanding of the Group’s business operations. Each Director is provided with an annually updated manual containing Board and Company policies relating to the disclosure of interests in securities and conflicts of interests in transactions involving the Company, prohibition on dealings in the Company’s securities, as well as restrictions on the disclosure of price sensitive information.

Board members are encouraged to attend seminars and receive training to improve themselves in the discharge of their duties as Directors. In addition, the Company works closely with professionals to provide Directors with updates on risk management and key changes to relevant regulatory requirements and accounting standards.


Formal appointment letter

Guidelines 1.6 and 1.8

of the Code: Directors

to receive appropriate

training

Board Composition and Guidance

Principle 2: There should be a strong and independent element on the board, which is able to exercise objective judgement on corporate affairs independently, in particular, from management. No individual or small group of individuals should be allowed to dominate the board’s decision-making.

The Board comprises five (5) members with more than one third majority of independent directors: (2) independent and non-executive Directors, one (1) non-executive Director and two (2) executive Directors. They are as follows:


Independence of Board

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Dr George Quek Meng Tong (Chairman)Ms Katherine Lee Lih Leng (Deputy Chairman)Mr Chen Kuo Hua (Non-executive Director)Mr Ong Kian Min (Independent Director)Mr Chan Soo Sen (Independent Director)

The Board has two (2) Independent Directors whose independence is reviewed by the NC annually. The NC considers an “independent” Director as one who has no relationship with the Company, its related companies or its officers that could interfere or be reasonably perceived to interfere, with the exercise of the Director’s independent judgement of the conduct of the Group’s affairs, and is not a substantial Shareholder, or a partner (with 5% or more stake) or executive officer of any for profit business organisation to which the Company has made or received significant payments (aggregated in excess of S$200,000 per year) in the current or immediate past financial year. Moreover, the Chairman of the NC is not associated, directly or indirectly, with a substantial Shareholder to enhance an independent view to the best interests of the Company. As a result of the NC’s review for financial year 2008, the NC is of the view that the Independent Directors are independent of the Company’s management as contemplated by the Code.


Independent Directors

The Board, in view of the nature and scope of business operations, considers that though small, the present Board size and composition facilitate efficient and effective decision-making with a strong independent element.


Appropriate Board size

Each Director has been appointed on the strength of his calibre, experience, grasp of corporate strategy and potential to contribute to the Company and its businesses. As each of the Directors brings valuable insights from different perspectives vital to the strategic interests of the Company, the Board considers that the Directors possess the necessary competencies to provide Management with a diverse and objective perspective on issues so as to lead and govern the Company effectively.

Guideline 2.4 of the

Code: Board to comprise

Directors with core

competencies

Once a year, a formal session is arranged for the non-executive Directors (NEDs) to meet without the presence of Management or executive Directors to review any matters that must be raised privately. The session is chaired by the Lead Independent Director, Mr Ong Kian Min, who is also the chairman of the NC.

Guidelines 2.5 and 2.6 of

the Code: Role of NEDs

and regular meetings of

NEDs

Chairman and Chief Executive Officer

Principle 3: There should be a clear division of responsibilities at the top of the company – the working of the board and the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.

The Company adopts a dual leadership structure whereby the positions of chairman and chief executive officer are separated. There is a clear division of responsibilities between the Company’s executive Chairman and Group Chief Executive Officer, which provides a balance of power and authority.

As Chairman, Dr George Quek is responsible for ensuring Board effectiveness and conduct, as well as strategic development of the Group in addition to which, he shall assume duties and responsibilities as may be required from time to time. The Group Chief Executive Officer, Mr Goh Tong Pak, has overall responsibility of the Group’s operations, organisational effectiveness and implementation of Board policies and decisions.

Notwithstanding the above, the Non-executive and Independent Directors fulfill a pivotal role in corporate accountability. Their presence is particularly important as they provide unbiased and independent views, advice and judgement to take care of the interests, not only of the Company but also of Shareholders, employees, customers, suppliers and the many communities in which the Company conducts business. The Board had on 14 August 2006 appointed Mr Ong Kian Min as the Lead Independent Director to act as an additional channel available to Shareholders.


Chairman and chief

executive officer should

be separate persons


Chairman’s role


Appointment of Lead

Independent Director

Board Membership and Board Performance

Principle 4: There should be a formal and transparent process for the appointment of new directors to the board. As a principle of good corporate governance, all directors should be required to submit themselves for re-nomination and re-election at regular intervals.

Principle 5: There should be a formal assessment of the effectiveness of the board as a whole and the contribution by each director to the effectiveness of the board.

The NC comprises the two (2) Independent Directors and the Non-executive Director who have been tasked with the authority and responsibility to devise an appropriate process to review and evaluate the performance of the Board as a whole as well as each individual Director on the Board. The chairman of the NC is an independent and non-executive Director, and is not a substantial Shareholder or directly associated with a substantial Shareholder:

Mr Ong Kian Min – chairmanMr Chen Kuo Hua – memberMr Chan Soo Sen – member


NC composition

At least one-third (1/3) of the Board of Directors shall retire from office by rotation and be subject to re-election at every Company annual general meeting, and the primary responsibilities of the NC are:

1. To make recommendations to the Board on the appointment of new executive and non-executive Directors, including making recommendations on the composition of the Board generally and the balance between executive and non-executive Directors appointed to the Board, as well as ensuring there are procedures in place for the selection and appointment of NEDs.

2. To regularly review the Board structure, size and composition and make recommendations to the

Board with regards to any adjustments that are deemed necessary.

3. To be responsible for assessing nominees or candidates for appointment or election to the Board, determining whether or not such nominees have the requisite qualifications and whether or not they are independent.

4. To make plans for succession, in particular for the Chairman and key executives.

5. To determine, on an annual basis, if a Director is independent. If the NC determines that a Director, who has one or more of the relationships mentioned under the Code is in fact independent, the NC would disclose in full, the nature of the Director’s relationship and bear responsibility for explaining why he should be considered independent.

6. To recommend Directors who are retiring by rotation to be put forward for re-election.

7. To decide whether or not a Director is able to and has been adequately carrying out his duties as a Director of the Company, particularly when he has multiple board representations.

8. To be responsible for assessing the effectiveness of the Board as a whole and for assessing the contribution of each individual Director to the effectiveness of the Board and disclosing annually, this assessment process.

Guidelines 4.2 to 4.6

of the Code: Duties of

the NC

For the year under review, with the Board’s approval, the NC has decided on how the Board’s performance is to be evaluated as a whole and proposed objective performance criteria including Board composition, size and expertise, Board information and timeliness, as well as Board commitment and accountability. In assessing each individual Director’s contribution and performance to the effectiveness of the Board, the NC takes into consideration factors such as attendance, preparedness, participation and candour.

Guidelines 5.1 to 5.4 of

the Code: Assessing the

Board’s effectiveness



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The NC has met once during the financial year under review on 28 February 2008. Each member of the NC shall abstain from voting on any resolution in respect of the assessment of his performance or re-nomination as a Director. Details of Board members’ qualifications and experience including the year of initial appointment are presented in this Annual Report under the heading “Board of Directors”.

Access to Information

Principle 6: In order to fulfill their responsibilities, board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.

The Board receives complete and adequate information on an on-going basis. The Management provides the Chairman and Deputy Chairman with monthly management accounts and the rest of the Board members with quarterly management accounts. The agenda for Board meetings is prepared in consultation with the Chairman and it will be circulated at least one (1) week in advance to Board members of each meeting.

Furthermore, the Board has separate and independent access to the Company Secretary and senior executives, and there is no restriction of access to the senior Management team of the Company or Group at all times in carrying out its duties.

The Company Secretary attends all formal Board meetings to respond to the queries of any Director and ensures that Board procedures are followed and that all applicable rules and regulations are complied with.

Where decisions to be taken by the Board require specialised knowledge or expert opinion, the Board takes independent professional advice as and when necessary to enable it or the Independent Directors to discharge the responsibilities effectively.

Guidelines 6.1 and 6.2 of

the Code: Information to

the Board


Access to and role of the

Company Secretary


Access to independent

professional advice

B. REMUNERATION MATTERS

Procedures for Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

The RC, established for the purpose of ensuring that there is a formal and transparent procedure for fixing the remuneration packages of individual Directors, comprises the two (2) Independent Directors and the Non-executive Director. The chairman of the RC is an independent and non-executive Director:

Mr Chan Soo Sen – chairmanMr Chen Kuo Hua – memberMr Ong Kian Min – member

The overriding principle is that no Director should be involved in deciding his own remuneration. The RC has adopted a written term of reference that defines its membership, roles, functions and administration.


RC to consist entirely

of NEDs and majority,

including RC chairman,

must be independent

During the financial year under review, the RC had held two (2) meetings. The primary responsibilities of the RC are as follows:

1. To review and recommend to the Board in consultation with the Chairman of the Board, a framework of remuneration and to determine the specific remuneration packages and terms of employment for each of the executive Directors and senior executives or divisional Directors (those reporting directly to the Chairman or Group Chief Executive Officer) and those employees related to the executive Directors and controlling Shareholders of the Group.


RC’s responsibilities

2. To review and recommend to the Board in consultation with the Chairman of the Board, any long term incentive schemes which may be set up from time to time and to do all acts necessary in connection therewith.

3. To administer the Group’s Employees’ Share Option Scheme (the “Scheme”) and shall have all the powers as set out in the Rules of the Scheme.

4. To administer the BreadTalk Restricted Share Grant Plan (the “RSG Plan”) and shall have all the powers as set out in the Rules of the RSG Plan.

5. To carry out its duties in the manner that it deems expedient, subject always to any regulations or restrictions that may be imposed upon the RC by the Board of Directors from time to time.

6. As part of its review, the RC shall ensure that:

(i) all aspects of remuneration including but not limited to Directors’ fees, salaries, allowances, bonuses, options and benefits-in-kind should be covered.

(ii) the remuneration packages should be comparable within the industry and comparable companies and shall include a performance-related element coupled with appropriate and meaningful measures of assessing individual executive Directors’ and senior executives’ or divisional Directors’ performance.

(iii) the remuneration package of employees related to executive Directors and controlling Shareholders are in line with the Group’s staff remuneration guidelines and commensurate with their respective job scopes and levels of responsibility.

Level and Mix of Remuneration

Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of remuneration, especially that of executive directors, should be structured so as to link rewards to corporate and individual performance.

The Company advocates a performance based remuneration system for executive Directors and key executives that is flexible and responsive to the market, comprising a base salary and other fixed allowances, as well as variable performance bonus and participation in an employee share award or Scheme based on the Company’s performance and linking it to the individual’s performance.

In determining such remuneration packages, the RC will ensure that they are adequate by considering, in consultation with the Chairman or Group Chief Executive Officer amongst other things, the respective individuals’ responsibilities, skills, expertise and contribution to the Company’s performance, and whether they are competitive and sufficient to ensure that the Company is able to attract and retain the best available executive talent, meanwhile keeping tabs that they are not excessive.

At an Extraordinary General Meeting held on 28 April 2008, the shareholders of the Company had approved the adoption of the RSG Plan. Under the RSG Plan, the aggregate number of shares to be issued shall not exceed fifteen per cent. (15%) of the total issued share capital excluding treasury shares of the Company and will be in force for a maximum period of 10 years commencing from 28 April 2008.

The award of shares under RSG Plan is performance based. The entitled participant will be allotted fully paid shares upon satisfactory achievement of pre-determined performance targets.


of the Code: RC to

recommend remuneration

of Directors and review

remuneration of key

executives


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The adoption of RSG Plan is consistent with the continuing efforts of the existing Scheme in rewarding, retaining and motivating employees to achieve superior performance standards and afford the Company greater flexibility to align the interests of employees with those of the shareholders. To date, the Company has not issued any shares under its RSG Plan.

The RC has adopted a framework which consists of a base fee to remunerate non-executive Directors based on their appointments and roles in the respective Committees, as well as the fees paid in comparable companies. Fees for the non-executive Directors will be tabled at the forthcoming Annual General Meeting to be held on 27 April 2009 (the “AGM”) for Shareholders’ approval.

The Company has entered into a service agreement with the Chairman, Dr George Quek, for an initial period of three (3) years commencing 2003 and renewable thereafter unless otherwise terminated by either party by giving six (6) months’ notice in writing. The RC has reviewed the existing terms and conditions of all service agreements and recommended to the Board any changes to such terms and conditions at the expiry of such service agreements.

All recommendations by the RC are submitted for endorsement by the entire Board. The Company confirms that there is no onerous removal clause in any of the service contracts.


Notice periods in service

contracts to be six (6)

months or less

Disclosure on Remuneration

Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedures for setting remuneration in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance.

A breakdown showing the level and mix of each Director’s remuneration for the year ended 31 December 2008 is set out below:

REMUNERATION OF DIRECTORS AND KEY EXECUTIVES


the Code: Directors’, key

executives’ and related

employees’

remuneration

Name of Director Salary(1) Bonus /Profit-Sharing Benefits-In-Kind Directors’ Fees(2) Total

S$500,000 to below S$600,000 % % % % %

George Quek Meng Tong 54 39 7 0 100

Chen Kuo Hua 67 33 0 0 100

S$300,000 to below S$400,000

Katherine Lee Lih Leng 65 35 0 0 100

Below S$100,000

Ong Kian Min 0 0 0 100 100

Chan Soo Sen 0 0 0 100 100

Name of Key Executives (who are not Directors)

Designation Salary(1) Bonus /Profit-Sharing

Benefits-In-Kind

Total

S$250,000 to below S$500,000 % % %

Goh Tong Pak Chief Executive Officer 59 41 0 100

Frankie Quek Swee Heng (3) Chief Operating Officer 66 34 0 100

Catherine Lee Khia Yee Chief Financial Officer 69 31 0 100

Chen Poh On Chief Executive Officer, Megabite China

78 22 0 100

Jenson Ong Chin Hock Managing Director, Megabite Hong Kong

78 17 5 100

Below S$250,000

Lee Henry (4) EVP, BTPL 87 13 0 100

Notes:

(1) Salary is inclusive of fixed allowance and CPF contribution.(2) Directors’ fees are only payable after approval by Shareholders at the AGM.(3) Frankie Quek is the brother of George Quek.(4) Henry Lee is the brother of Katherine Lee. Henry had resigned from BreadTalk Pte Ltd with effect 1 December 2008.

No other employee whose remuneration exceeded S$150,000 during the year is the immediate family of any of the members of the Board.

C. ACCOUNTABILITY AND AUDIT

Accountability

Principle 10: The board is accountable to the shareholders while the management is accountable to the board. The board should present a balanced and understandable assessment of the company’s performance, position and prospects.

For all announcements (including financial performance reporting) made to the public via SGXNET and the annual report to Shareholders, as required by the Singapore Exchange Securities Trading Limited (the “SGX-ST”), the Board has a responsibility to present a fair assessment of the Group’s position, including the prospects of the Group.

To enable effective monitoring and decision-making by the Board, Management provides the Board with a continual flow of relevant information on a timely basis as well as quarterly management accounts of the Group. Particularly, prior to the release of half year and full year results to the public, Management will present the Group’s financial performance together with explanatory details of its operations to the AC, which will review and recommend the same to the Board for approval and authorisation for the release of the results.

Guideline 10.1 of

the Code: Board’s

responsibility to the public


Code: Management’s

responsibility to the Board



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Audit Committee

Principle 11: The board should establish an audit committee with written terms of reference, which clearly set out its authority and duties.

The role of the AC is to assist the Board in the execution of its corporate governance responsibilities within the established Board’s references and requirements. The financial statements, accounting policies and system of internal accounting controls are responsibilities that fall under the ambit of the AC. The AC has its set of written terms of reference defining its scope of authority and further details of its major functions are set out below and also in the Report of the Directors.

The AC comprises three (3) members who are all non-executive Directors, two (2) of whom are also independent. The chairman of the AC is an independent and non-executive Director:

Mr Ong Kian Min – chairmanMr Chen Kuo Hua – memberMr Chan Soo Sen – member

The members of the AC collectively have expertise or experience in financial management, and are qualified to discharge the AC’s responsibilities.

Guidelines 11.1, 11.2 and

11.8 of the Code: Board

to establish AC and

composition of AC

In performing its functions, the AC confirms that it has explicit authority to investigate any matter within its terms of reference, full access to and co-operation from the Management, and has been given full discretion to invite any Director or executive officer to attend its meetings, as well as reasonable resources to enable it to discharge its functions properly.


Code: AC’s authority

The main functions of the AC are as follows:

1. Review the audit plan of the Company’s external auditors and adequacy of the system of internal accounting control;

2. Discuss and review external auditors’ reports;3. Review significant financial reporting issues and judgements so as to ensure the integrity of

the financial statements and any formal announcements relating to the Company’s or Group’s financial performance;

4. Review and recommend the nomination of the external auditors for appointment or re-appointment;

5. Review the Interested Person Transactions;6. Review the scope and result of the internal audit procedures; and7. Review the remuneration packages of the employees who are related to the Directors or substantial

Shareholders.

The AC held four (4) meetings during the financial year under review. It has reviewed the financial statements of the Group for the purpose of the half-yearly and annual results release before they were submitted to the Board for approval. It has also met with the Company’s internal and external auditors to review their audit plans and results, and has separate and independent access to the auditors. Upon reviewing the non-audit services provided by the external auditors which comprise tax services, the AC is satisfied that the independence of the external auditors is not impaired.

Where there is any suspected fraud or irregularity, or failure of internal controls, or infringement of any Singapore law, rule or regulation which has a material impact on the Company’s operating results, the AC will commission and review the findings of internal investigations into the matters. Endorsed by the AC, the Company has in place a whistle-blowing framework which provides an avenue for staff of the Company to access the AC chairman to raise concerns about improprieties and independent investigation of such matters by the AC. Contact details of AC have been made available to all staff.


Code: Duties of AC

Guidelines 11.5 and 11.6

of the Code: Meeting with

auditors and review of

their independence


Code: Whistle-blowing

arrangements

Internal Control

Principle 12: The board should ensure that the management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.

The Internal Auditors carried out internal audit on the system of internal controls and report the findings to the AC. The Group’s External Auditors, Ernst & Young LLP have also carried out, in the course of their statutory audit, a review of the effectiveness of the Group’s material internal controls. Material non-compliance and internal control weaknesses and recommendations for improvements noted during their audit are reported to the AC. The AC has reviewed the effectiveness of the actions taken by the management on the recommendations made by the Internal and External Auditors in this respect.

For the financial year ended 31 December 2008, the Board believes that in the absence of any evidence to the contrary, the system of internal controls maintained by the Group’s management that was in place throughout the financial period up to the date of this report, provides reasonable, but not absolute assurance against material financial misstatements or loss.

The Board notes that no system of internal control could provide absolute assurance against the occurrence of material errors, poor judgement in decision-making, human errors, losses, fraud or other irregularities.


Code: AC to review

adequacy of the

financial, operational and

compliance controls and

risk management policies.


Code: AC to comment on

the adequacy of internal

controls

Internal Audit

Principle 13: The company should establish an internal audit function that is independent of the activities it audits.

The Group outsourced its internal audit function to Stone Forest Consulting since 2006. The Internal Auditor adopted the Standards for Professional Practice of Internal Auditing set by the Institute of Internal Auditors. The Internal Auditors report directly to the Chairman of the AC. The AC has reviewed and approved the internal audit plan for FY2009.


the Code: IA to report to

AC chairman

Communication with Shareholders

Principle 14: A company should engage in regular, effective and fair communication with its shareholders.

Principle 15: A company should encourage greater shareholder participation at annual general meetings and allow its shareholders the opportunity to communicate their views on various matters affecting the company.

The Board has adopted a policy of openness and transparency in the conduct of the Company’s affairs while preserving the commercial interests of the Company. Financial results and other price sensitive information are disseminated to Shareholders via SGXNET, press releases, the Company’s website, and through media and analyst briefings.

The Board strives to ensure that all material information is disclosed to the shareholders on an adequate and timely basis. The Board informs and communicates with shareholders through annual reports, announcement released through SGXNET, press releases, advertisements of notice of meeting and general meetings in local newspapers.

Notices of general meetings are despatched to shareholders, together with the annual report or circulars within the time notice period as prescribed by the regulations. At general meetings, shareholders are given opportunities to voice their views and direct their questions to directors or management regarding the Company. The chairman of the Audit Committee, Nominating Committee and/or Remuneration Committee are present and available to address questions at general meetings. The External Auditors are also present to assist the Board.


of the Code: Regular,

effective and fair

communications with

shareholders


Code: Chairman and

external auditors present

at general meetings


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The Company has in place an investor relations programme to keep investors informed of material developments in the Company’s business and affairs beyond that which is prescribed, but without prejudicing the business interests of the Company.

The Company’s Articles of Association do not restrict the number of proxy a shareholder can appoint to attend and vote on his/her behalf at all general meetings. . There are separate resolutions at the general meetings for each distinct issue. The Board and Management are on hand at general meetings to address questions by shareholders.

Guideline 15.1-15.2

and 15.4 of the Code:

Shareholders should

be allowed to vote in

absentia, avoid bundling

of resolutions and limit

on proxy.

Minutes of general meetings are prepared and made available to shareholders upon their requests by the Company Secretary.


Code: Minutes of general

meetings

Accolade

The Company was awarded “Most Transparent Company” – Bronze award under the “SESDAQ” category by Securities Investors’ Association of Singapore (SIAS) at the SIAS Investor Choice Awards 2008 in October 2008. The award is based on key criteria such as timelines, substantiality and clarity of news releases, degree of media access, frequency of corporate results, availability of segmental information, as well as communication channels. Winners are selected from nominations received from investment analysts, head of research, fund managers and members of the mass media.

Dealing in Securities

The Company has adopted and implemented the Singapore Exchange’s best practices guide in relation to the dealing in shares of the Company. It has been highlighted that directors and officers who are in possession of unpublished material price sensitive information and use such information for their own material gain in relation to those securities is an offence. The Company, while having provided the window periods for dealing in the Company’s securities, has its own internal compliance code in providing guidance to its officers with regards to dealing in the Company’s securities including reminders that the law on insider trading is applicable at all the times.

Interested Person Transactions

When a potential conflict arises, the directors concerned do not participate in discussions and refrains from exercising any influence over other members of the Board.

The AC has reviewed the IPT entered into during the financial year by the Group and the aggregate value of interested person transactions entered during the financial year ended 31 December 2008 is as follows:

Name of Interested Person

Aggregate value (S$’000) of all IPTs during the financial year under review (excluding transactions less than S$100,000 and transactions conducted under shareholders’ mandate pursuant to Rule 920)

Aggregate value of all IPTs conducted during the financial year under

review under shareholders’ mandate pursuant to Rule 920 (excluding

transactions less than S$100,000)

Ah Koong Foods Pte Ltd- food court rental income / miscellaneous charges

283 (ceased to be interested with

effect from Oct 2008)

Not applicable - the Company does not have a shareholders’ mandate

under Rule 920

Material Contracts

Except as disclosed in Interested Person Transactions, there is no material contract or loan entered between the Company and any of its subsidiaries involving interests of any Director or controlling shareholder during the financial year ended 31 December 2008.

Risk Management

The Group regularly reviews and improves its business and operational activities to identify areas of significant business risks as well as taking appropriate measures to control and mitigate these risks. The Group reviews all significant control policies and procedures and highlights all significant matters to the AC and the Board. The financial risk management objectives and policies are outlined in the financial statements.

Use of Proceeds from Share Placement

The Company refers to the net proceeds raised in April 2007 from the share placement of 34,000,000 new ordinary shares in the capital of the Company at an issue price of S$0.36 per share.

As at 31 December 2008, the Company has utilised the net proceeds as follows:

Intended Use Amount allocated S$’000

Amount utilised S$’000

BalanceS$’000

(a) Food and beverage outlet expansion 5,000 4,600 400

(b) New market development 2,000 2,071 (71)

(c) Repayment of bank loans 500 500 -

(d) Working capital 1,290 1,198 92

(e) Upgrading of factory 3,000 500 2,500

Total 11,790 8,869 2,921



39

The directors are pleased to present their report to the members together with the audited financial statements of BreadTalk Group Limited (the Company) and its subsidiaries (collectively, the Group) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2008.

DIRECTORS

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

George Quek Meng Tong (Chairman)Katherine Lee Lih Leng (Deputy Chairman)Chen Kuo Hua (Non-Executive Director)Ong Kian Min (Independent Director)Chan Soo Sen (Independent Director)

ARRANGEMENTS TO ENABLE DIRECTORS TO ACqUIRE SHARES AND DEBENTURES

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

DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The following directors, who held office at the end of the financial year, had, according to the register of directors’ shareholdings required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest in shares of the Company as stated below:

Direct interest Deemed interest

Name of director

As at 1January2008

As at 31December

2008As at 21

January 2009

As at 1January2008

As at 31December

2008As at 21

January 2009

The Company(Ordinary shares)

George Quek Meng Tong 79,440,384 79,590,384 79,590,384 43,550,850 43,550,850 43,550,850Katherine Lee Lih Leng 43,550,850 43,550,850 43,550,850 79,440,384 79,590,384 79,590,384Chen Kuo Hua 12,443,100 11,443,100 11,443,100 – – – Ong Kian Min 100,000 100,000 100,000 – – –

By virtue of Section 7 of the Companies Act, Cap 50, George Quek Meng Tong and Katherine Lee Lih Leng are deemed to be interested in the shares held by the Company in its subsidiaries.

Except as disclosed in this report, no other director who held office at the end of the financial year had interest in shares or debentures of the Company, or of related corporations, either at the beginning or the end of the financial year or on 21 January 2009.

DIRECTORS’ CONTRACTUAL BENEFITS

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

DireCtors’ reportFINANCIAL STATEMENTS Directors’ Report 39 Statement By Directors 43 Independent Auditors’ Report 44 Consolidated Income Statement 45

Balance Sheets 46 Statements of Changes in Equity 48 Consolidated Cash Flow Statement 50 Notes to the Financial Statements 55

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DireCtors’ report

SHARE OPTION AND SHARE PLANS

The Company has a Share Option Scheme and a Restricted Share Grant Plan which are administered by the Remuneration Committee comprising three Directors namely Messrs Chan Soo Sen (Chairman), Ong Kian Min (Member) and Chen Kuo Hua (Member). Details of the Share Option Scheme and the Restricted Share Grant Plan are as follows:

(a) The BreadTalk Group Limited Employees’ Share Option Scheme

The BreadTalk Group Limited Employees’ Share Option Scheme (“ESOS”) was approved at an Extraordinary General Meeting held on 30 April 2003. The following persons are eligible to participate in the ESOS at the absolute discretion of the Remuneration Committee:

(i) Employees and Directors

Employees, executive directors and non-executive directors of the Group who are not on probation and have attained the age of 21 years on or before the Offering Date.

(ii) Controlling shareholders and their associates

Controlling shareholders or their associates whose participation and actual number of shares issued to them must be approved by independent shareholders in general meeting.

Size of ESOS

The total number of new shares over which options may be granted pursuant to the ESOS shall not exceed fifteen per cent (15%) of the issued share capital of the Company on the date preceding the grant of an option.

The aggregate number of Shares available to eligible Controlling Shareholders and their Associates under the ESOS shall not exceed twenty five per cent (25%) of the Shares available under the ESOS. In addition, the number of Shares available to each Controlling Shareholder or his Associate shall not exceed ten per cent (10%) of the Shares available under the ESOS.

Grant of ESOS

Options may be granted from time to time during the year when the ESOS is in force, except that options shall be granted on or after the second market day on which an announcement of any matter involving unpublished price sensitive information is released.

Acceptance of ESOS

The grant of an option shall be accepted not more than 30 days from the offering date of that option and accompanied by payment to the Company of a nominal consideration of $1 or such other amount as required by the Remuneration Committee.

During the commencement of the ESOS up to the end of the financial year, there were:

(i) no options granted by the Company or its subsidiaries to any person to take up unissued shares of the Company and its subsidiaries;

(ii) no shares issued by virtue of any exercise of option to take up unissued shares of the Company or its subsidiaries; and

(iii) no unissued shares of the Company or its subsidiaries under option.

SHARE OPTION AND SHARE PLANS (CONT’D)

(b) The BreadTalk Restricted Share Grant Plan

The BreadTalk Restricted Share Grant Plan (“RSG Plan”) was approved at an Extraordinary General Meeting held on 28 April 2008.

The RSG Plan is centred on the accomplishment of specific pre-determined performance objectives and service conditions, which is the prerequisite for the contingent award of fully paid Shares (“Award”). The reward structure allows the Company to target specific performance objectives and incentivise the Participants to put in their best efforts to achieve these targets.

The following persons shall be eligible to participate in the RSG Plan subject to the absolute discretion of the Remuneration Committee:

(i) Employees

Employees who are confirmed in their employment with the Company or employees of Associated Companies who hold such rank as may be designated by the Committee from time to time and who, in the opinion of the Committee, have contributed or will contribute to the success of the Group; and

(ii) Directors

Executive and non-executive Directors of the Company and its subsidiaries, provided always that any of the aforesaid persons:

- have attained the age of twenty-one (21) years on or before the Award Date; and - not undischarged bankrupts.

Controlling Shareholders and their Associates within the above categories are eligible to participate in the RSG Plan. Participation in the RSG Plan by Controlling Shareholders or their Associates must be approved by the independent Shareholders. A separate resolution shall be passed for each such Participation and to approve the number of Shares to be awarded to the Participant and the terms of such Award.

There shall be no restriction on the eligibility of any Participant to participate in any other share option or share incentive schemes implemented or to be implemented by the Company or another company within the Group.

Size of RSG Plan

The aggregate number of Shares available to eligible Controlling Shareholders and their Associates under the RSG Plan shall not exceed twenty five per cent (25%) of the Shares available under the RSG Plan. In addition, the number of Shares available to each Controlling Shareholder or his Associate shall not exceed ten per cent (10%) of the Shares available under the RSG Plan.

The aggregate number of Shares to be awarded pursuant to the RSG Plan when added to the number of Shares issued and issuable in respect of such other Shares issued and/or issuable under such other share-based incentive schemes of the Company, including but not limited to the ESOS, shall not exceed fifteen per cent (15%) of the total issued share capital excluding treasury shares of the Company on the day preceding the relevant Award Date.

Grant of RSG Plan

The grant of Awards under the RSG Plan may be made from time to time during the year when the RSG Plan is in force, except that it shall be granted on or after the second market day on which an announcement of any matter involving unpublished price sensitive information is released.

While Awards may be granted at any time in the year, it is anticipated that Awards under the RSG Plan would be made once a year, after the Company’s annual general meeting. It will be administered by the Remuneration Committee.

DireCtors’ report


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SHARE OPTION AND SHARE PLANS (CONT’D)

(b) The BreadTalk Restricted Share Grant Plan (Cont’d)

Acceptance of RSG Plan

During the commencement of the RSG Plan up to the end of the financial year:

(i) no shares were granted by the Company or its subsidiaries to any person to take up unissued shares of the Company and its subsidiaries under the RSG Plan;

(ii) no shares were issued by virtue of any Award under the RSG Plan to take up unissued shares of the Company or its subsidiaries; and

(iii) there were no unissued shares of the Company or its subsidiaries under the RSG Plan.

AUDIT COMMITTEE

The Audit Committee performed the functions specified in the Companies Act. The functions performed are detailed in the Report on Corporate Governance.

AUDITORS

Ernst & Young LLP have expressed their willingness to accept re-appointment as auditors.

On behalf of the board of directors:

George Quek Meng TongDirector

Katherine Lee Lih LengDirector

Singapore18 March 2009

We, George Quek Meng Tong and Katherine Lee Lih Leng, being two of the directors of BreadTalk Group Limited, do hereby state that, in the opinion of the directors,

(i) the accompanying balance sheets, consolidated income statement, statements of changes in equity, and consolidated cash flow statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008 and the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date, and

(ii) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the board of directors:

George Quek Meng TongDirector

Katherine Lee Lih LengDirector

Singapore18 March 2009

DireCtors’ report statement by DireCtors

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inDepenDent auDitors’ reportTo the members of BreadTalk Group Limited

We have audited the accompanying financial statements of BreadTalk Group Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 45 to 107, which comprise the balance sheets of the Group and the Company as at 31 December 2008, the statements of changes in equity of the Group and the Company, the income statement and cash flow statement of the Group for the year then ended, 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 the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss account and balance sheet and to maintain accountability of assets; 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 audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal 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.

OPINION

In our opinion,

(i) the consolidated financial statements of the Group, and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and

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

Ernst & Young LLPPublic Accountants and Certified Public Accountants Singapore18 March 2009

Notes 2008 2007$’000 $’000

Revenue 3 212,249 156,610

Cost of sales (96,803) (69,863)

Gross profit 115,446 86,747

Other operating income 4 7,784 6,319Distribution and selling expenses (77,942) (55,632)Administrative expenses (32,061) (25,284)

Profit from operations 5 13,227 12,150

Interest income 7 167 173Interest expense 7 (851) (908)Financial expenses, net (684) (735)

Profit before taxation and share of results of associates and joint ventures 12,543 11,415

Share of results of associates (496) (454)Share of results of joint ventures (46) 267

Profit before taxation 12,001 11,228

Taxation 8 (3,643) (2,791)

Profit for the year 8,358 8,437

Attributable to:

Equity holders of the Company 7,770 7,319Minority interests 588 1,118

8,358 8,437

Earnings per share (cents)

Basic and diluted 9 3.31 3.23

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

ConsoliDateD inCome statementFor the year ended 31 December 2008


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Notes Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Non-current assetsProperty, plant and equipment 10 58,156 44,893 69 15Intangible assets 11 9,205 9,665 – –Investment securities 12 1,494 316 – –Investment in subsidiaries 13 – – 23,739 23,139Investment in associates 14 200 1,051 – –Investment in joint ventures 15 222 282 – –Deferred tax assets 8 532 394 – –

69,809 56,601 23,808 23,154

Current assetsInventories 16 3,925 2,506 – –Trade receivables 17 4,761 3,027 – –Other receivables and deposits 18 17,884 13,105 9 11Prepayments 2,558 1,798 24 11Due from subsidiaries (non-trade) 19 – – 7,853 8,761Amount due from associates (non-trade) 19 – 7 – –Amount due from joint ventures (trade) 19 – 64 – –Amount due from joint ventures (non-

trade) 19 343 237 – –Fixed deposits 20 3,187 2,814 2,550 2,509Cash on hand and at bank 44,690 35,531 3,909 2,586

77,348 59,089 14,345 13,878Current liabilitiesTrade payables 21 11,630 8,861 – –Other payables 22 34,898 25,074 149 159Other liabilities 22 21,072 17,048 1,475 1,304Provision for reinstatement costs 1,809 1,487 – –Amount due to subsidiaries (non-trade) 19 – – 8 4Amount due to associates (trade) 19 – 5 – –Amount due to joint ventures (non-trade) 19 99 11 – –Amount due to landlord (non-trade) 27 90 190 – –Finance lease obligations, secured 24 191 244 – –Loans from minority shareholders of

subsidiaries 23 276 125 – –Short-term loans, secured 25 4,855 3,283 – –Long-term loans, secured 26 4,844 3,701 – –Tax payable 3,102 2,967 45 43

82,866 62,996 1,677 1,510Net current (liabilities) assets (5,518) (3,907) 12,668 12,368

balanCe sheetsAs at 31 December 2008

Notes Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Non-current liabilities

Long-term loans, secured 26 6,407 3,977 – –Finance lease obligations, secured 24 430 366 – –Amount due to landlord (non- trade) 27 197 240 – –Deferred tax liabilities 8 1,124 845 – –

8,158 5,428 – –

Net assets 56,133 47,266 36,476 35,522

Equity attributable to equity holders of the Company

Share capital 28 33,303 33,303 33,303 33,303Accumulated profits 16,408 10,394 3,173 2,219Statutory reserve fund 29 1,076 612 – –Translation reserve 30 545 (213) – –Fair value adjustment reserve 31 1,178 – – –

52,510 44,096 36,476 35,522Minority interests 3,623 3,170 – –

Total Equity 56,133 47,266 36,476 35,522


balanCe sheetsAs at 31 December 2008

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Attributable to equity holders of the Company

2007Group

Share capital

Accumulated profits

Statutory reserve

fundTranslation

reserve

Fair value adjustment

reserve Total Minorityinterests

Total equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000(Note 28) (Note 29) (Note 30) (Note 31)

At 1 January 2007 21,516 4,551 123 (250) – 25,940 3,058 28,998Net effect of currency translation

differences – – – 37 – 37 – 37

Net income recognised directly in equity – – – 37 – 37 – 37

Net profit for the year – 7,319 – – – 7,319 1,118 8,437

Total recognised income for the year – 7,319 – 37 – 7,356 1,118 8,474Dividends paid (Note 38) – (987) – – – (987) (1,148) (2,135)Transfer to statutory reserve – (489) 489 – – – – –Issuance of new shares 12,240 – – – – 12,240 – 12,240Share issue expense (453) – – – – (453) – (453)Issuance of new shares to minority

shareholders (1) – – – – – – 58 58Acquisition of a subsidiary – – – – – – 84 84

At 31 December 2007 33,303 10,394 612 (213) – 44,096 3,170 47,266

(1) Issuance of new shares to minority shareholders in 2007 relates to capitalisation of shareholders’ loan.

Attributable to equity holders of the Company

2008Group

Share capital

Accumulated profits

Statutory reserve

fundTranslation

reserve

Fair value adjustment

reserve Total Minorityinterests

Total equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000(Note 28) (Note 29) (Note 30) (Note 31)

At 1 January 2008 33,303 10,394 612 (213) – 44,096 3,170 47,266Net effect of currency translation

differences – – – 758 – 758 – 758

Net income recognised directly in equity – – – 758 – 758 – 758

Net profit for the year – 7,770 – – – 7,770 588 8,358

Total recognised income for the year – 7,770 – 758 – 8,528 588 9,116Dividends paid (Note 38) – (1,292) – – – (1,292) (985) (2,277)Transfer to statutory reserve – (464) 464 – – – – –Fair value adjustment – – – – 1,178 1,178 – 1,178Issuance of new shares to minority

shareholders – – – – – – 850 850

At 31 December 2008 33,303 16,408 1,076 545 1,178 52,510 3,623 56,133

statements of ChanGes in equityFor the year ended 31 December 2008

Share capital

Accumulated (losses) profits Total equity

$’000 $’000 $’000

(Note 28)

2007

Company

1 January 2007 21,516 (263) 21,253Net profit for the year – 3,469 3,469

Total recognised net income for the year – 3,469 3,469Dividends paid (Note 38) – (987) (987)Issuance of new shares 12,240 – 12,240Share issue expense (453) – (453)

At 31 December 2007 33,303 2,219 35,522

2008

Company

1 January 2008 33,303 2,219 35,522Net profit for the year – 2,246 2,246

Total recognised net income for the year – 2,246 2,246Dividends paid (Note 38) – (1,292) (1,292)

At 31 December 2008 33,303 3,173 36,476


statements of ChanGes in equityFor the year ended 31 December 2008


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Notes 2008 2007

$’000 $’000

Cash flows from operating activitiesProfit before taxation 12,001 11,228Adjustments for:

Depreciation expense 10 13,147 9,793Amortisation of intangible assets 11 582 555Impairment of plant and equipment 10 465 –Intangible assets written off 7 –Loss on disposal of plant and equipment 19 130Plant and equipment written off 799 593Share of results of associates 496 454Share of results of joint ventures 46 (267)Interest expense 851 908Interest income (167) (173)(Write back of) impairment of trade receivables (10) 10Impairment of other receivables 13 –(Write back of) impairment of amount due from associates (non-trade) (107) 275Impairment of investment in associate 385 –Bad debts written off – 8Dividend income from investment securities – (55)Gain on disposal of associate – (83)Loss on liquidation of an associate 32 –Unrealised foreign exchange gain (57) –Translation difference (426) 17

Operating profit before working capital changes 28,076 23,393(Increase) decrease in:

Inventories (1,419) (354)Trade receivables (1,724) (180)Other receivables and deposits (4,831) (2,298)Prepayments (760) (1,192)Amount due from related parties – 78Amount due from associates (trade) – 897Amount due from associates (non-trade) 114 (140)Amount due from joint ventures (trade) 64 50Amount due from joint ventures (non-trade) (106) (258)Amount due from minority shareholders (non-trade) – 150

Increase (decrease) in:Trade payables 2,769 464Other payables and other liabilities 13,849 10,456Amount due to associates (trade) (5) 5Amount due to associates (non-trade) – (360)Amount due to joint ventures (non-trade) 88 25

Cash flows generated from operations 36,115 30,736Tax paid (3,372) (2,040)

Net cash flows from operating activities 32,743 28,696

ConsoliDateD Cash flow statementFor the year ended 31 December 2008

Notes 2008 2007$’000 $’000

Cash flows from investing activitiesInterest income received 167 173Dividend income received – 235Purchase of property, plant and equipment B (25,603) (17,987)Acquisition of intangible assets (129) (157)Investment in associates – (1,200)Investment in joint ventures – (334)Proceeds from sale of plant and equipment 135 367Proceeds from disposal of associate – 178Net cash inflow on acquisition of subsidiaries C – 1,874

Net cash flows used in investing activities (25,430) (16,851)

Cash flows from financing activitiesInterest paid (826) (884)Dividends paid to shareholders of the Company (1,292) (987)Dividends paid to minority shareholders (985) (1,148)Proceeds from issuance of shares – 12,240Share issue expense – (453)Proceeds from long-term loans 7,531 4,062Repayment of long-term loans (4,214) (4,219)Proceeds from short-term loans 6,994 585Repayment of short-term loans (5,527) (2,242)Capital injection from minority shareholders of subsidiaries 850 –Repayment of finance lease obligations (266) (146)Loans from minority shareholders of subsidiaries 150 130Decrease in fixed deposits pledged 107 1,000Repayment of amount due to landlord (196) –

Net cash flows from financing activities 2,326 7,938

Net increase in cash and cash equivalents 9,639 19,783Cash and cash equivalents at the beginning of the year 38,238 18,455

Cash and cash equivalents at the end of the year A 47,877 38,238



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NOTE A. CASH AND CASH EqUIVALENTS

Cash and cash equivalents consist of cash on hand and at bank and unpledged fixed deposits. Fixed deposits pledged to banks for banking facilities granted to the Group are excluded from cash and cash equivalents.

For the purpose of the consolidated cashflow statement, cash and cash equivalents comprise the following as at 31 December:

2008 2007$’000 $’000

Cash on hand and at bank 44,690 35,531Fixed deposits 3,187 2,814

47,877 38,345Less: Fixed deposits pledged – (107)

Cash and cash equivalents at the end of year 47,877 38,238

NOTE B. PLANT AND EqUIPMENT HELD UNDER FINANCE LEASES

During the year, the Group acquired property, plant and equipment with an aggregate cost of approximately $25,879,000 (2007: $18,179,000) of which $276,000 (2007: $192,000) was financed via finance lease. Cash payments of $25,603,000 (2007: $17,987,000) were made to acquire property, plant and equipment.

NOTE C. ACqUISITION OF SUBSIDIARIES

(i) Acquisition of subsidiary, ML Breadworks Sdn Bhd

On 20 September 2007, BreadTalk International Pte Ltd (“BTI”) entered into an Investment and Shareholders Agreement with Memory Lane Sdn Bhd (“ML”) and ML Breadworks Sdn Bhd (“MLB”), a 49% owned associate.

Pursuant to the Investment Agreement, BTI would invest an additional RM2,000,000 ($873,000) in MLB in the form of an allotment of 2,000,000 new ordinary shares of RM1 each (the “Ordinary Shares”). In consideration of BTI’s investment, ML agreed to transfer a total of 1,030,000 ordinary shares owned by it in MLB upon the allotment of the Ordinary Shares to BTI, at nil consideration.

As a result of the above transactions, MLB has a paid up and issued share capital of RM5,000,000 represented by 5,000,000

ordinary shares of RM1 each, with BTI holding 90% equity interest and ML, the remaining 10%. Accordingly, MLB became a subsidiary of BTI.


NOTE C. ACqUISITION OF SUBSIDIARIES (CONT’D)

(i) Acquisition of subsidiary, ML Breadworks Sdn Bhd (Cont’d)

The fair values of the identifiable assets and liabilities of MLB as at the date of acquisition were as follows:

Recognised on acquisition

Carrying amount before combination

$’000 $’000

Plant and equipment 682 682Trademark – 364Inventories 130 130Other receivables and deposits 394 394Prepayments 30 30Cash on hand and at bank 70 70Trade payables (324) (324)Other payables and accrued expenses (259) (259)Amount due to related companies (604) (604)Finance lease obligations, secured (154) (154)

Net identifiable (liabilities) assets (35) 329

Add: Additional capital injection by BTI 873

Net assets after additional capital injection 838Less: Carrying value of investment in associate (199)Less: Minority interest (84)

Net assets acquired 555Goodwill arising from acquisition 327

Total purchase consideration 882

Less: Cash and cash equivalents acquired (943)

Net cash inflow 61



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NOTE C. ACqUISITION OF SUBSIDIARIES (CONT’D)

(ii) Acquisition of subsidiary, MWA Pte Ltd

On 10 December 2007, Megabite (S) Pte Ltd, a wholly-owned subsidiary, acquired the remaining 50% equity interest in its joint venture, MWA Pte Ltd (“MWA”) and its subsidiary, Food Art Pte Ltd (“FAPL”) for a cash consideration of $3,800,000. Upon the acquisition, MWA and FAPL became subsidiaries of the Group.

The fair values of the identifiable assets and liabilities of MWA and its subsidiary as at the date of acquisition were as follows:

Recognised on acquisition

Carrying amount before combination

$’000 $’000

Plant and equipment 2,278 2,278Location premium 31 31Trademark 10 10Deferred tax assets 43 43Inventories 19 19Trade receivables 11 11Other receivables and deposits 666 666Prepayments 69 69Amount due from related companies 42 42Cash on hand and at bank 5,613 5,613Trade payables (151) (151)Other payables and accrued expenses (2,588) (2,588)Provision for reinstatement cost (280) (280)Provision for income tax (683) (683)Amount due to shareholders (6) (6)Amount due to related companies (non-trade) (191) (191)

Net identifiable assets 4,883 4,883

Less: Carrying value of investment in joint ventures (2,351)

Net assets acquired 2,532Goodwill arising from acquisition 1,268

Total purchase consideration 3,800

Net cash inflow from acquisition:Total purchase consideration 3,800Less: Cash balances acquired (5,613)

Net cash inflow 1,813

As at 31 December 2007, the fair values of the assets and liabilities of MWA and FAPL were based on provisional amounts. As at 31 December 2008, these fair values had been ascertained to approximate the provisional amounts as at 31 December 2007 and hence there were no adjustments to the goodwill arising from this acquisition.


1. GENERAL

1.1 Corporate information

BreadTalk Group Limited (the Company) is a limited liability company, which is incorporated in the Republic of Singapore and listed on the Singapore Exchange Securities Trading Ltd.

The registered office and principal place of business of the Company is located at 171 Kampong Ampat, #05-05 KA Foodlink, Singapore 368330.

The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are shown in Note 13 to the financial statements.

1.2 Fundamental accounting assumption

The financial statements of the Group have been prepared on a going concern basis. The Group’s net current liabilities position as at 31 December 2008 of $5,518,000 (2007: $3,907,000) arose mainly from the use of cash and short-term bank borrowings to finance the purchase of plant and equipment for the bakery, food court and restaurant businesses during the year.

Included in other payables and other liabilities are food court tenant and stored value card deposits of $7,141,000 (2007: $5,195,000) and deferred revenue of $3,589,000 (2007: $3,703,000) respectively. Deferred revenue relates to unearned franchise fees received, unredeemed cash vouchers sold and the unutilised value on the food court stored value cards. These current liabilities, because of their nature, are not expected to result in significant cash outflow from the Group within the next 12 months.

In addition, the Group has unutilised banking facilities available for future use. The directors are confident that the Group will be able to pay its debts as and when they fall due.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation

The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

The financial statements have been prepared on a historical cost basis, except as disclosed in the accounting policies below.

The financial statements are presented in Singapore Dollars (SGD or $) and all values are rounded to the nearest thousand ($’000) except when otherwise indicated.

2.2 Future changes in accounting policies

The Group has not adopted the following FRS and INT FRS that have been issued but not yet effective:

Reference Description

Effective forannual periodsbeginning onor after

FRS 1 – Presentation of Financial Statements – Revised presentation – Presentation of Financial Statements – Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation

1 January 2009

1 January 2009

notes to the finanCial statements 31 December 2008

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

2.2 Future changes in accounting policies (cont’d)

Reference Description

Effective forannual periodsbeginning onor after

FRS 23 Borrowing Costs 1 January 2009

FRS 27 Consolidated and Separate Financial Statements – Amendments relating to Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

1 January 2009

FRS 32 Financial Instruments: Presentation – Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation

1 January 2009

FRS 39 Financial Instruments: Recognition and Measurement – Amendments relating to eligible hedged items

1 July 2009

FRS 101 First-Time Adoption of Financial Reporting Standards – Amendments relating to Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

1 January 2009

FRS 102 Share-based payment – Vesting conditions and cancellations 1 January 2009

FRS 108 Operating Segments 1 January 2009

INT FRS 113 Customer Loyalty Programmes 1 July 2008

INT FRS 116 Hedges of a Net Investment in a Foreign Operation 1 October 2008

INT FRS 117 Distribution of Non-cash Assets to Owners 1 July 2009

The directors expect that the adoption of the above pronouncements will have no material impact to the financial statements in the period of initial application, except for FRS 1 and FRS 108 as indicated below.

FRS 1 Presentation of Financial Statements – Revised Presentation

The revised FRS 1 requires owner and non-owner changes in equity to be presented separately. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line item. In addition, the revised standard introduces the statement of comprehensive income: it presents all items of income and expense recognised in profit or loss, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Group is currently evaluating the format to adopt.

FRS 108 Operating Segments

FRS 108 requires entities to disclose segment information based on the information reviewed by the entity’s chief operating decision maker. The impact of this standard on the other segment disclosures is still to be determined. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group when implemented in 2009.

2.3 Significant accounting estimates and judgements

Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances.



2.3 Significant accounting estimates and judgements (cont’d)

Key sources of estimation uncertainty

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

(i) Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill are allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of the Group’s goodwill at 31 December 2008 was $6,173,000 (2007: $6,173,000). More details are given in Note 11.

(ii) Valuation and estimated useful life of brand value arising from acquisition of a subsidiary, Topwin Investment Holding Pte Ltd (“Topwin”)

Brand value arising from the acquisition of Topwin was separately identified and recognised by management using the “relief from royalty method”. The premise of this valuation method is the assumption that the Group would be compelled to pay the rightful owner of the brand name if the Group did not have the legal right to utilise the brand name. The ownership of the brand therefore relieves the Group from making such royalty payments. This requires an estimation of the royalty payments including initial fees and continuing royalty payments based on a percentage of projected revenue. The basis used to determine the revenue projections is the revenue for each food court of Topwin achieved in the financial year ended 31 December 2004 projected into the future. The useful life of the brand value is estimated by the directors to be 15 years as this is the length of time that they expect the benefits of the brand to flow to the Group. Amortisation of the brand amounted to $213,000 (2007: $213,000) for the financial year ended 31 December 2008 and the carrying amount of the brand value at 31 December 2008 was $2,345,000 (2007: $2,558,000). More details are given in Note 11.

(iii) Income taxes

The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s tax payable and deferred tax liabilities at 31 December 2008 were approximately $3,102,000 (2007: $2,967,000) and $1,124,000 (2007:$845,000) respectively. The carrying amount of the Group’s deferred tax assets at 31 December 2008 was $532,000 (2007:$394,000).

A subsidiary, BreadTalk Pte Ltd (“BTPL”) obtained the Development and Expansion Incentive (“DEI”) which entitles the qualifying income of the company earned during the financial years ended 31 December 2003 to 2007 to be subject to the concessionary tax rate of 10%, subject to certain conditions to be met by year 2007. On 15 August 2006, the company was granted approval by the Economic Development Board (EDB) on the amendment of certain conditions laid down in its DEI award letter dated 19 February 2004. In view of the amendments, the company has met all qualifying conditions laid down by the EDB for the DEI incentive by 2007. Accordingly, income from the qualifying DEI activities has been brought to tax at the concessionary tax rate of 10%.

On 24 January 2008, BTPL was granted an extension of the DEI for a period of another 5 years commencing 1 January 2008.



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2.3 Significant accounting estimates and judgements (cont’d)

(iv) Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these assets to be within 2 to 20 years. The carrying amount of the Group’s property, plant and equipment as at 31 December 2008 was $58,156,000 (2007: $44,893,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. In particular, renovation costs incurred and capitalised for bakery outlets, food courts and restaurants may be subject to immediate impairment upon their unforeseen closure due to unfavourable operations.

2.4 Functional and foreign currency

(a) Functional currency

The management has determined the currency of the primary economic environment in which the Company operates i.e. functional currency, to be SGD. Sales prices and major costs of providing goods and services including major operating expenses are primarily influenced by fluctuations in SGD.

(b) Foreign currency transactions

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

Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the income statement except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in a separate component of equity as foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidated income statement on disposal of the subsidiary. In the Company’s separate financial statements, such exchange differences are recognised in the income statement.

(c) Foreign currency translation

The results and financial position of foreign operations are translated into SGD using the following procedures:

• Assets and liabilities for each balance sheet presented are translated at the closing exchange rate ruling at that balance sheet date; and

• Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions.

All resulting exchange differences are recognised in a separate component of equity as foreign currency translation reserve.

On disposal of a foreign operation, the cumulative amount of exchange differences deferred in equity relating to that foreign operation is recognised in the income statement as a component of the gain or loss on disposal.



2.5 Related party

An entity or individual is considered a related party of the Group for the purposes of the financial statements if: i) it possesses the ability (directly or indirectly) to control or exercise significant influence over the operating and financial decisions of the Group or vice versa; or ii) it is subject to common control or common significant influence.

2.6 Subsidiaries, minority interests and principles of consolidation

(a) Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.

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

(b) Principles of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances.

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

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

Acquisitions of subsidiaries are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.

Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity.

Any excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. The goodwill is accounted for in accordance with the accounting policy for goodwill stated in Note 2.10 below.

Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised in the income statement on the date of acquisition.

(c) Transactions with minority interests

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. They are presented in the consolidated balance sheet within equity, separately from the parent shareholders’ equity, and are separately disclosed in the consolidated income statement.

On acquisition of minority interests, the difference between the consideration and the book value of the share of the net assets acquired is recognised in goodwill. Gain or loss on disposal to minority interests is recognised in the income statement.


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2.7 Associates

An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. This generally coincides with the Group having 20% or more of the voting power, or has representation on the board of directors.

The Group’s investment in associates is accounted for using the equity method. Under the equity method, the investment in associate is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of the profit or loss of the associate is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associate. The associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.

Goodwill relating to an associate is included in the carrying amount of the investment.

Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is, instead included as income in the determination of the Group’s share of the associate’s profit or loss in the period in which the investment is acquired.

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

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

2.8 Joint ventures

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest.

The Group’s investment in joint ventures is accounted for using the equity method. Under the equity method, the investment in joint ventures is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the joint venture. The Group’s share of the profit or loss of the joint venture is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the joint venture. The joint venture is equity accounted for from the date the Group obtains joint control until the date the Group ceases to have joint control over the joint venture.

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

2.9 Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Subsequent to recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.



2.9 Property, plant and equipment (cont’d)

Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful life of the asset as follows:

Leasehold property – 20 yearsMachinery and equipment – 5 - 6 yearsElectrical works – 5 - 6 yearsFurniture and fittings – 5 - 6 yearsOffice equipment – 3 - 6 yearsRenovation – 2 - 6 yearsMotor vehicles – 5 - 6 years

Construction-in-progress is stated at cost. No depreciation is provided for construction-in-progress as these assets are not available for use.

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

The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.

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

2.10 Intangible assets

(a) Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination.

A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised in the income statement.

Impairment losses recognised for goodwill are not reversed in subsequent periods.

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



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2.10 Intangible assets (cont’d)

(a) Goodwill (cont’d)

Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.4.

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

(b) Other intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. The amortisation expense on intangible assets with finite lives is recognised in the income statement.

Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether the useful life assessment continues to be supportable.

Gain or loss arising from derecognition of an intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

(i) Trade mark

Costs relating to trade mark are capitalised and amortised on a straight-line basis over its estimated finite useful life of 5 years.

(ii) Franchise rights

Costs relating to master franchise fees paid are capitalised and amortised on a straight-line basis over the lease/franchise period ranging from 4 to 9 years.

(iii) Location premium

Consideration paid to previous tenants to vacate premises in order to secure the lease arrangement are amortised on a straight-line basis over the new lease agreement period of 4 years.

(iv) Brand value

Brand value was acquired through a business combinations. The useful life of the brand is assessed to be finite and estimated to be 15 years because this is the length of time that the management expects the economic benefits of the brand to flow to the Group.

Brand value is amortised on a straight-line basis over its estimated economic useful life.



2.11 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e. an intangible asset with an indefinite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. 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. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in the income statement except for assets that are previously revalued where the revaluation was taken to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the income statement unless the asset is measured at revaluated amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

2.12 Financial assets

Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.

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

(a) Loans and receivables

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

(b) Available-for-sale financial assets

The Group classifies its investment securities as available-for-sale financial assets.

Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of the other categories.

After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised directly in the fair value adjustment accrued in equity, except that impairment losses are recognised in the income statement. The cumulative gain or loss previously recognised in equity is recognised in the income statement when the financial asset is derecognised.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment losses.


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2.13 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and at bank, unpledged fixed deposits and short-term highly liquid investments which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

2.14 Impairment of financial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired.

(a) Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised 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 is reduced through the use of an allowance account. The amount of the loss is recognised in the income statement.

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

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

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

(b) Assets carried at cost

If there is objective evidence that an impairment loss on a financial asset carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

(c) Available-for-sale financial assets

Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from equity to the income statement.

Reversals of impairment losses in respect of equity instruments are not recognised in the income statement. Reversals of impairment losses on debt instruments are recognised in the income statement if the increase in fair value of the debt instrument can be objectively related to an event occurring after the impairment loss was recognised in the income statement.



2.15 Inventories

Inventories comprise raw materials, consumables, semi-finished goods and base inventory.

Inventories are valued at the lower of cost and net realisable value. Costs comprise purchase costs accounted for on a weighted average cost basis. In the case of semi-finished goods, costs also include an appropriate share of production overheads based on normal operating capacity.

Base inventory, comprising mainly cutlery and dining utensils, are written down to 50% of the original cost and all further replacement costs incurred in maintaining the base inventory is expensed.

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

Provision is made for deteriorated, damaged, obsolete and slow-moving inventories.

2.16 Financial liabilities

Financial liabilities include trade payables, which are normally settled on 30-90 day terms, other amounts payable, payables to related parties and interest-bearing loans and borrowings. Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. Financial liabilities are initially recognised at fair value of consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Gains and losses are recognised in the income statement when the liabilities are derecognised or impaired as well as through the amortisation process. The liabilities are derecognised when the obligation under the liability is discharged or cancelled or expired.

2.17 Borrowing costs

Borrowing costs are generally expensed as incurred.

2.18 Derecognition of financial assets

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

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

• The Group retains the contractual rights 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 Group 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 has transferred control of the asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of (a) the consideration received (including any new asset obtained less any new liability assumed) and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the income statement.



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2.19 Provisions

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

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

2.20 Leases

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

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

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

2.21 Employee benefits

(a) Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations.

Singapore

The Group makes contributions to the Central Provident Fund (CPF) scheme in Singapore, a defined contribution pension scheme. The Group makes monthly contributions based on stipulated contribution rates.

People’s Republic of China (“PRC”)

Subsidiaries incorporated and operating in the PRC are required to provide certain staff pension benefits to their employees under existing PRC regulations. Contributions are provided at rates stipulated by PRC regulations and are contributed to a pension fund managed by government agencies, which are responsible for administering these amounts for the subsidiaries’ PRC employees.

Hong Kong

Subsidiaries incorporated and operating in Hong Kong pay contributions to publicly or privately administered pension insurance plans on a mandatory basis. The subsidiaries have no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due and are not reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Contributions to national pension schemes are recognised as an expense in the period in which the related services are performed.



2.21 Employee benefits (cont’d)

(b) Employee leave entitlement

Employee entitlements to annual leave are recognised when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.

2.22 Income recognition

Income is recognised to the extent that it is probable that the economic benefits will flow to the Group and the income can be reliably measured. The following specific recognition criteria must also be met before income is recognised:

(a) Bakery sales, restaurant sales and sales to franchisee Revenue from the sale of goods is recognised net of goods and services tax and discounts upon the passing of title

to the customer which generally coincides with delivery and acceptance of the goods sold.

(b) Franchise income

Initial franchise income is recognised upon the grant of rights, completion of the designated phases of the franchise setup and transfer of know-how to the franchisee in accordance with the terms stated in the franchise agreement. Recurring franchise income is recognised on a periodic basis as a percentage of the franchisees’ revenue in accordance with terms as stated in the franchise agreement.

(c) Food court revenue

Revenue from operation of food court is recognised when rental is charged to the food court tenants based on a percentage of their gross sales. Revenue from sales of food and beverage is recognised upon delivery and acceptance by customers, net of sales discounts.

(d) Management fee

Management fee is recognised on an accrual basis.

(e) Interest income

Interest income is recognised as interest accrues (using the effective interest method) unless collectibility is in doubt.

(f) Dividend income

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

2.23 Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised in the income statement over the period necessary to match them on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is recognised as deferred capital grant on the balance sheet and is amortised to the income statement over the expected useful life of the relevant asset by equal annual instalments.


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2.24 Income taxes

(a) Current tax

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

(b) Deferred tax

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

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

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

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

• In respect of deductible temporary differences and carry-forward of unused tax credits and unused tax losses, if it is not probable that taxable profit will be available against which the deductible temporary differences and carry-forward of unused tax credits and unused tax losses can be utilised.

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

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

Deferred taxes are recognised in the income statement except that deferred tax relating to items recognised directly in equity is recognised directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

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

(c) Sales tax

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

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

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

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



2.25 Segment reporting

A business segment is a distinguishable component of the Group that is engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.

2.26 Share capital and share issue expenses

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

2.27 Contingencies

A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group.

Contingent liabilities and assets are not recognised on the balance sheet of the Group.

3. REVENUE

Group2008 2007$’000 $’000

Bakery sales 94,872 68,841Restaurant sales 32,173 28,345Sales to franchisee 8,106 5,951Franchise income 7,886 5,031Food court income 69,212 48,442

212,249 156,610

4. OTHER OPERATING INCOME

Group2008 2007$’000 $’000

Management fee income- Food court management 4,779 2,306- Others 190 406Dividend income from investment securities – 55Government grant (1) 775 1,153Gain on disposal of associate – 83Income from expired food court stored value cards 197 938Sponsorship income 227 241Sundry sales 596 627Compensation from landlord 326 –Miscellaneous income 694 510

7,784 6,319

(1) Government grant in relation to business expansion activities undertaken by certain subsidiaries in the PRC



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5. PROFIT FROM OPERATIONS

This is determined after charging/ (crediting) the following:

Group2008 2007$’000 $’000

Non-audit fees to auditors of the Company 139 126Amortisation of intangible assets (Note 11) 582 555Bad trade debts written off – 8(Write back of) impairment of loans and receivables- trade receivables (10) 10- other receivables 13 –- amount due from associates (non-trade) (107) 275Directors’ fees 105 96Depreciation expense (Note 10) 13,147 9,793Employee benefits (Note 6) 57,277 42,001Foreign exchange loss, net 26 89Loss on disposal of plant and equipment 19 130Loss on liquidation of an associate 32 –Operating lease expenses- fixed portion (1) 41,460 27,230- variable portion 4,618 4,817Plant and equipment written off 799 593Intangible assets written off 7 –Impairment of investment in associate 385 –Impairment of plant and equipment 465 –Pre-operating expenses 395 1

(1) Net of sublease rental income received from a related party amounting to $Nil (2007: $2,400)

6. EMPLOYEE BENEFITS

Group2008 2007$’000 $’000

Staff costs (including directors)Salaries and bonuses 44,049 32,201Central Provident Fund and other pension contributions 4,180 2,859Sales incentives and commission 2,334 2,143Other personnel benefits 6,714 4,798

57,277 42,001


7. INTEREST INCOME AND INTEREST EXPENSE

Group2008 2007$’000 $’000

Interest income from loans and receivables- Bank deposits 167 173

Interest expense- Term loans (792) (859)- Finance lease obligations (35) (25)- Others (24) (24)

(851) (908)

8. TAXATION

Major components of income tax expense were:

Group2008 2007$’000 $’000

Current tax- Current year 3,669 2,595- Over provision in prior year (354) (55)

Deferred tax- Origination and reversal of temporary differences 84 187- Under/(over) provision in prior year 85 (251)

Withholding tax 159 315

Taxation expense 3,643 2,791


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8. TAXATION (CONT’D)

A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax rate for the year ended 31 December is as follows:

Group2008 2007$’000 $’000

Profit before taxation 12,001 11,228

Tax at the domestic rates applicable to profits in the countries where the Group operates(1) 2,746 2,832

Tax effect of:Expenses not deductible for tax purposes 1,161 584Income not subject to taxation (4) (60)Effect of reduction in tax rate 2 (49)Share of associates’ and joint ventures’ tax 33 (189)Tax savings arising from development and expansion incentive (2) (176) (124)(Over)/Under provision in prior years- Current tax (354) (55)- Deferred tax 85 (251)Withholding tax expense 159 315Effect of partial tax exemption and tax relief (514) (587)Deferred tax assets not recognised 724 369Benefits from previously unrecognised deferred tax assets (201) (22)Others (18) 28

Taxation expense 3,643 2,791

(1) This is prepared by aggregating separate reconciliations for each national jurisdiction.

(2) In February 2004, the Economic Development Board granted the Development and Expansion Incentive under the International Headquarters (IHQ-DEI) Award to a subsidiary. Subject to certain conditions, the subsidiary enjoys a concessionary tax rate of 10% on its qualifying income for a period of 5 years commencing 1 January 2003. On 24 January 2008, the subsidiary was granted an extension of the DEI for another 5 years commencing 1 January 2008.

The corporate income tax rate applicable to PRC companies of the Group was reduced to 25% for the year of assessment 2009 onwards from 33% for the year of assessment 2008. The corporate income tax rate applicable to Malaysian companies of the Group was reduced to 26% for the year of assessment 2008 onwards from 27% for the year of assessment 2007.


8. TAXATION (CONT’D)

Deferred income tax as at 31 December relates to the following:

GroupBalance sheet Income statement

2008 2007 2008 2007$’000 $’000 $’000 $’000

Deferred tax liabilities: Differences in depreciation for tax purposes (1,086) (950) 136 21Provisions 17 105 88 –Dividend income (55) – 55 –

(1,124) (845)

Deferred tax assets: Provisions 315 389 97 (80)Excess of net book value over tax written

down value of fixed assets (20) – 20 –Unutilised tax losses 237 5 (227) (5)

532 394

Deferred income tax 169 (64)

In accordance with the “Income Tax Law of the PRC for Enterprises with Foreign Investment and Foreign Enterprises”, Shanghai BreadTalk Co., Ltd (“SHBT”), a wholly-owned subsidiary registered in the PRC, is entitled to full exemption from Enterprise Income Tax (“EIT”) for the first two years and a 50% reduction in EIT for the next three years, commencing from the first profitable year after offsetting all tax losses carried forward from the previous five years. SHBT achieved its fourth profitable year in the current financial year end.

Unrecognised tax losses and capital allowances

As at 31 December 2008, the Group has tax losses of approximately $5,495,000 (2007: $3,226,000) and unutilised capital allowances of approximately $823,000 (2007: $1,787,000) that are available for offset against future taxable profits, for which no deferred tax assets are recognised on these amounts due to uncertainty of their utilisation. The utilisation of the tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.

Tax consequences of proposed dividends

There are no income tax consequences attached to the dividends to the shareholders proposed by the Company but not recognised as a liability in the financial statements (Note 38).

9. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the Group’s profit for the year attributable to ordinary equity holders of the Company of $7,770,000 (2007: $7,319,000) by the weighted average number of ordinary shares of 234,911,034 (2007: 226,411,034) in issue during the year.

The basic and diluted earnings per share are the same as there are no potential dilutive shares.



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10. PROPERTY, PLANT AND EqUIPMENT

Leasehold property

Machinery and equipment Electrical works

Furniture and fittings

Office equipment

$’000 $’000 $’000 $’000 $’000

GroupCostAs at 1.1. 2007 8,268 10,189 5,607 6,259 2,491Additions – 2,503 3,059 3,636 631Reclassifications – – 12 – –Write offs – (247) (297) (290) (49)Disposals – (164) (22) (83) (11)Acquisition of subsidiaries – 400 341 267 43Translation difference 63 10 (109) (195) 12

As at 31.12.2007 and 1.1.2008 8,331 12,691 8,591 9,594 3,117Additions – 4,679 4,341 7,501 930Reclassifications (269) 93 (38) (671) (97)Write offs – (221) (337) (212) (77)Disposals – (124) – (13) (17)Translation difference 549 188 82 216 74

As at 31.12.2008 8,611 17,306 12,639 16,415 3,930

Accumulated depreciation and impairment lossesAs at 1.1. 2007 451 5,159 2,424 1,882 1,057Charge for the year 369 1,828 1,217 1,555 513Reclassifications – – 1 – –Write offs – (179) (271) (212) (37)Disposals – (49) (6) (26) (4)Translation difference 3 (85) (26) 67 (3)

As at 31.12.2007 and 1.1.2008 823 6,674 3,339 3,266 1,526Charge for the year 379 2,195 1,884 2,307 658Reclassifications (9) (39) (24) (266) (31)Write offs – (159) (315) (153) (61)Disposals – (93) – (3) (11)Impairment loss for the year – 57 131 38 17Translation difference 69 55 22 47 28

As at 31.12.2008 1,262 8,690 5,037 5,236 2,126

Net book valueAs at 31.12.2007 7,508 6,017 5,252 6,328 1,591

As at 31.12.2008 7,349 8,616 7,602 11,179 1,804


10. PROPERTY, PLANT AND EqUIPMENT (CONT’D)

Renovation Motor vehiclesConstruction-in-progress Total

$’000 $’000 $’000 $’000

GroupCostAs at 1.1.2007 18,750 1,022 394 52,980Additions 4,854 (1) 541 3,514 18,738Reclassifications (12) – – –Write offs (1,514) – – (2,397)Disposals (603) (212) – (1,095)Acquisition of subsidiaries 1,909 – – 2,960Translation difference 164 5 6 (44)

As at 31.12.2007 and 1.1.2008 23,548 1,356 3,914 71,142Additions 7,478 (1) 321 951 26,201Reclassifications 1,351 – (369) –Write offs (1,781) (38) – (2,666)Disposals (257) (51) – (462)Translation difference 904 26 283 2,322

As at 31.12.2008 31,243 1,614 4,779 96,537

Accumulated depreciation and impairment lossesAs at 1.1.2007 7,555 311 – 18,839Charge for the year 4,085 226 – 9,793Reclassifications (1) – – –Write offs (1,105) – – (1,804)Disposals (322) (191) – (598)Translation difference 63 – – 19

As at 31.12.2007 and 1.1.2008 10,275 346 – 26,249Charge for the year 5,426 298 – 13,147Reclassifications 353 16 – –Write offs (1,145) (34) – (1,867)Disposals (171) (30) – (308)Impairment loss for the year 222 – – 465Translation difference 465 9 – 695

As at 31.12.2008 15,425 605 – 38,381

Net book valueAs at 31.12.2007 13,273 1,010 3,914 44,893

As at 31.12.2008 15,818 1,009 4,779 58,156

(1) Amount includes provision for reinstatement costs of $322,000 (2007: $559,000).


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Assets held under finance leases

As at 31 December 2008, the net book values of property, plant and equipment acquired under finance leases are as follows:

Group2008 2007$’000 $’000

Machinery and equipment 236 172Renovation – 106Motor vehicles 357 545

Assets written off

Property, plant and equipment written off during the year arose mainly due to the refurbishment/closure of certain bakery outlets and food courts. The amount written off represents the total carrying value of the plant and equipment attributable to the bakery outlets and food courts at the date of refurbishment/closure.

The residual value of these assets has been assessed as nil.

Assets pledged as security

In addition to assets held under finance leases, the Group’s leasehold property with a carrying amount of $4,508,000 (2007: $4,443,000) is pledged to secure the Group’s bank loans (Note 26).

Impairment of assets

During the financial year, the subsidiaries, BreadTalk Pte Ltd and Charcoal Pte Ltd carried out a review of the recoverable amount of the assets of bakery outlets/restaurant that were making losses. A total impairment loss of $465,000, representing the write-down to amounts based on fair value less costs to sell, was recognised for the financial year.



Furniture andfittings

Officeequipment Total

$’000 $’000 $’000

CompanyCostAs at 1.1.2007 – 6 6Additions 1 13 14

As at 31.12.2007 and 1.1.2008 1 19 20Additions – 75 75

As at 31.12.2008 1 94 95

Accumulated depreciationAs at 1.1.2007 – 1 1Charge for the year – 4 4

As at 31.12.2007 and 1.1.2008 – 5 5Charge for the year – 21 21

As at 31.12.2008 – 26 26

Net book valueAs at 31.12.2007 1 14 15

As at 31.12.2008 1 68 69



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11. INTANGIBLE ASSETS

Group

Goodwill Brand value Trade MarkFranchise

rightsLocation Premium Total

$’000 $’000 $’000 $’000 $’000 $’000

CostAs at 1.1.2007 4,578 3,209 583 693 474 9,537Additions – – 99 58 – 157Acquisition of subsidiaries 1,595 – 10 – 31 1,636

As at 31.12.2007 and 1.1.2008 6,173 3,209 692 751 505 11,330Additions – – 72 57 – 129Write offs – – – (7) – (7)

As at 31.12.2008 6,173 3,209 764 801 505 11,452

Accumulated amortisationAs at 1.1.2007 – 438 280 244 148 1,110Amortisation – 213 127 95 120 555

As at 31.12.2007 and 1.1.2008 – 651 407 339 268 1,665Amortisation – 213 125 108 136 582Write offs – – – * – –

As at 31.12.2008 – 864 532 447 404 2,247

Net book valueAs at 31.12.2007 6,173 2,558 285 412 237 9,665

As at 31.12.2008 6,173 2,345 232 354 101 9,205

* Less than $1,000

Brand value, trade mark, franchise rights and location premium are determined to have finite useful lives and are amortised on a straight-line basis over their respective estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible assets may be impaired. Brand value, trade mark, franchise rights and location premium have remaining useful lives of 11 years, 1 to 5 years, 1 to 5 years and 1 year as at 31 December 2008 respectively.


11. INTANGIBLE ASSETS (CONT’D)

Impairment testing of goodwill

Goodwill arising from the acquisition of Topwin Investment Holding Pte Ltd and its subsidiaries in 2005 was allocated to 2 cash-generating units (“CGU”), which represent the 2 geographical segments (i.e. Shanghai and Beijing segments) in which the acquired food courts are located. The food courts located in the same geographical segment are managed by the same management team.

Goodwill arising from the acquisition of ML Breadworks Sdn Bhd in 2007 was allocated to the legal entity acquired which represents the CGU. Meanwhile, goodwill on the acquisition of MWA Pte Ltd in December 2007 was primarily attributable to the food court operations at Wisma Atria, Singapore.

Allocated goodwill based on the CGUs is as follows:

Carrying amount as at 31 December

Basis on which recoverable values are

determinedPre-tax discount

rate$’000

Shanghai segment 3,569 Value in use 10%

Beijing segment 1,009 Value in use 10%

ML Breadworks Sdn Bhd 327 Value in use 8%

Food court operation at Wisma Atria, Singapore 1,268 Value in use 8%

6,173

The recoverable amount is determined based on a value in use calculation using the cash flow projections based on financial budgets approved by management covering a five-year period. The discount rates applied to the cash flow projections are derived from cost of capital plus a reasonable risk premium at the date of assessment of the respective cash generating units.

No impairment loss on goodwill was required for the financial year ended 31 December 2008 as the recoverable amount was in excess of the carrying value.

12. INVESTMENT SECURITIES

Group2008 2007$’000 $’000

Available-for-sale financial assets- Equity instruments (quoted) 1,494 –- Equity instruments (unquoted) – 316

1,494 316


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13. INVESTMENT IN SUBSIDIARIES

Company2008 2007$’000 $’000

Unquoted equity shares at cost 23,739 23,139

Details of the subsidiaries are as follows:

NameCountry of

incorporation Principal activitiesProportion of

ownership interestCost of investment by

the Company2008 2007 2008 2007

% % $’000 $’000

Held by the Company

BreadTalk Pte Ltd (1) Singapore Bakers and manufacturers of and dealers in bread, flour and biscuits

100 100 6,739 6,739

BreadTalk International Pte Ltd (1)

Singapore Investment holding 100 100 6,158 6,158

Topwin Investment Holding Pte Ltd (1)

Singapore Investment holding 100 100 10,242 10,242

Star Food Pte Ltd (1)

(Note (a))Singapore Investment holding 60 – 600 –

Held through subsidiaries

Taster Food Pte Ltd (1) Singapore Operators of food and drinks outlets, eating houses and restaurants

70 70 – –

Charcoal Pte Ltd (1) Singapore Operators of food and drinks outlets, eating houses and restaurants

75 75 – –

Shanghai BreadTalkCo., Ltd (2)

People’s Republic of China

Bakers and manufacturers of and dealers in bread, flour and biscuits

100 100 – –

Shanghai BreadTalk Gourmet Co., Ltd (2)


Management of food and beverage, manufacture and retail of bakery, confectionery products

100 100 – –

Beijing BreadTalk Restaurant Management Co., Ltd (2)


Management of food and beverage, manufacture and retail of bakery, confectionery products

100 100 – –


13. INVESTMENT IN SUBSIDIARIES (CONT’D)

NameCountry of



the Company2008 2007 2008 2007

% % $’000 $’000

Food Republic (Shanghai) Co., Ltd (formerly known as Shanghai Xin Jia Fang Food & BeverageCo., Ltd) (2)


Food court operator 100 100 – –

Beijing Da Shi Dai Food and Beverage Co., Ltd (2)



Chongqing Food Republic Food & Beverage Co., Ltd (3)



Megabite Hong Kong Limited (4)

Hong Kong Food court operator 85 85 – –

Megabite (S) Pte Ltd (1) Singapore Investment holding and operator of food and beverage outlets

100 100 – –

Food Republic Pte Ltd (1) Singapore Food court operator 100 100 – –

BreadTalk (Thailand) Company Limited (5)

Thailand Management of food and beverage, manufacture and retail of bakery, confectionery products

100 100 – –

Megabite Eatery (M)Sdn Bhd (6)

Malaysia Operator of food and beverage outlets

100 100 – –

BreadTalk Concept Hong Kong Limited (4)

Hong Kong Management of food and beverage, manufacture and retail of bakery, confectionery products

85 85 – –

ML BreadworksSdn Bhd (2)

Malaysia Bakers and manufacturers of and dealers in bread, flour and biscuits

90 90 – –

MWA Pte Ltd (1) Singapore Food court operator 100 100 – –

Food Art Pte Ltd (1) Singapore Operators of food and beverage outlets

100 100 – –

Twin Peaks Venture Singapore Pte Ltd (1)

Singapore Retail of bakery and confectionery products

70 70 – –



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13. INVESTMENT IN SUBSIDIARIES (CONT’D)

NameCountry of



the Company2008 2007 2008 2007

% % $’000 $’000

Shanghai Star Food F&B Management Co., Ltd (2)

(Note (a))


Operators of restaurants 60 – – –

Beijing Star Food F&B Management Co., Ltd (2)

(Note (a))


Operators of restaurants 60 – – –

23,739 23,139

(1) Audited by Ernst & Young LLP, Singapore(2) Audited by member firms of Ernst & Young Global in the respective countries(3) Audited by Shanghai Xin Gao Xin Certified Public Accountants Co., Ltd, People’s Republic of China(4) Audited by S.F. Kwok & Co. Certified Public Accountants, Hong Kong(5) Audited by CNN & S Co., Ltd(6) Audited by RSM Robert Teo, Kuan & Co., Malaysia

(a) New subsidiaries

During the year, the Company subscribed for 600,000 new shares in Star Food Pte Ltd (“Star Food”) for a cash consideration of $600,000. Consequently, Star Food became a 60% owned subsidiary of the Company.

Star Food Pte Ltd subsequently incorporated two subsidiaries, namely Shanghai Star Food F&B Management Co., Ltd and Beijing Star Food F&B Management Co., Ltd, in the People’s Republic of China, in August and September 2008 respectively.

14. INVESTMENT IN ASSOCIATES

Group2008 2007$’000 $’000

Investment in shares, unquotedShares, at cost 1,252 1,439Impairment loss (385) –Loan to an associate 614 614Share of post-acquisition results of associates (1,281) (977)Unrealised profit on transaction with an associate – (40)Exchange difference – 15

At end of year 200 1,051

Loan to an associate is quasi-capital in nature, non-interest bearing and has no fixed terms of repayment.


14. INVESTMENT IN ASSOCIATES (CONT’D)

Details of the associates are as follows:

NameCountry of

incorporation Principal activitiesProportion of ownership

interest2008 2007

% %


Hong Kong BreadTalk Ltd (1),(3) Hong Kong Bakers and manufacturers of and dealers in bread, flour and biscuits

25 25

Taiwan BreadTalk Co., Ltd (2) Taiwan Bakers and manufacturers of and dealers in bread, flour and biscuits

– 30

Out of The Box Pte Ltd (“OOTB”) (1) Singapore Marketing and distribution of canned drinks

30 33.33

(1) Not a significant associate and unaudited financial statements have been used for the preparation of the consolidated financial statements of the Group

(2) Taiwan BreadTalk Co., Ltd ceased operations in April 2008 and was liquidated in September 2008, with the Group recognising a loss on liquidation of $32,000.

(3) Hong Kong BreadTalk Ltd had effectively ceased operations since September 2007.

The Group has not recognised losses relating to Hong Kong BreadTalk Ltd where its share of losses exceeds the Group’s interest in this associate. The Group’s cumulative share of unrecognised losses as at 31 December 2008 was $292,000 (2007: $332,000). The Group has no obligation in respect of these losses.

During the financial year, the Group carried out a review of the recoverable amount of investments in associates which had continuously been making losses. An impairment loss of $385,000 was recognised for the investment in OOTB. The recoverable amount was based on its value in use and the pre-tax discount rate used was 8%.

On 4 June 2008, OOTB increased its issued and paid up capital from $2.73 million to $3.03 million by an allotment of 333,334 ordinary shares to a new shareholder for a cash consideration of $300,000. Consequently, Topwin Investment Holding Pte Ltd’s shareholding in OOTB decreased from 33.33% to 30%.

The summarised financial information of the associates, not adjusted for the proportion of ownership interest held by the Group, is as follows:

Group2008 2007$’000 $’000

Assets and liabilities

Total assets 909 2,345

Total liabilities 3,581 3,708

Results

Revenue 495 3,775

Net loss for the year (1,466) (1,982)


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15. INVESTMENT IN JOINT VENTURES

Group2008 2007$’000 $’000

Investment in shares, unquoted

Shares, at cost 334 334Share of post-acquisition results of joint ventures (98) (52)Exchange difference (14) –

222 282

Details of the joint ventures are as follows:

NameCountry of

incorporation Principal activitiesProportion of ownership

interest2008 2007

% %


Shanghai Hong Bu Rang Food & Beverage Management Co., Ltd (1)


Operator of food and beverage outlets 50 50

Apex Excellent Sdn Bhd (2) Malaysia Food court operator 50 50

(1) Audited by Shanghai Xin Gao Xin Certified Public Accountants Co., Ltd, People’s Republic of China

(2) Audited by RSM Robert Teo, Kuan & Co., Malaysia

The aggregate amounts of each of the current assets, non-current assets, current liabilities, non-current liabilities, income and expenses related to the Group’s interests in the joint ventures are as follows:

Group2008 2007$’000 $’000

Assets and liabilitiesCurrent assets 1,170 1,333Non-current assets 268 317

Total assets 1,438 1,650

Current and total liabilities 1,216 1,368

ResultsRevenue 3,150 5,360Other income 462 450Expenses (3,658) (5,543)

(Loss)/profit for the year (46) 267


16. INVENTORIES

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Balance sheet:

Raw materials and consumables, at cost 3,350 2,152 – –Semi-finished goods 459 299 – –Base inventories (1) 116 55 – –

Total inventories at lower of cost and net realisable value 3,925 2,506 – –

(1) This is stated after writing down 50% of the original cost of base inventories

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Income statement:

Inventories recognised as an expense in cost of sales 55,599 42,821 – –

17. TRADE RECEIVABLES

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Trade receivables 4,761 3,027 – –

Trade receivables are non-interest bearing and are generally on 30 to 90 days terms. They are recognised at their original invoice amounts which represents their fair values on initial recognition.

Receivables that are past due but not impaired

The Group has trade receivables amounting to $1,847,000 (2007: $554,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:

Group2008 2007$’000 $’000

Trade receivables past due: Lesser than 30 days 622 225 30 to 60 days 716 46 61 to 90 days 202 37 91 to 120 days 33 246 More than 120 days 274 –

1,847 554



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17. TRADE RECEIVABLES (CONT’D)

Receivables that are impaired

The Group’s trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:

GroupIndividually impaired

2008 2007$’000 $’000

Trade receivables – nominal amounts – 10Less: Allowance for impairment – (10)

– –

Movement in allowance accounts:

At 1 January 10 –(Write back) Charge during the year (10) 10

At 31 December – 10

Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in financial difficulties. These receivables are not secured by any collateral or credit enhancements.

During the year, the Group wrote back the allowance of impairment of $10,000 as the receivables nominal amount was recovered from the trade debtor.

18. OTHER RECEIVABLES AND DEPOSITS

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Other receivables 5,731 3,422 9 11Less: Allowance for impairment (13) – – –

5,718 3,422 9 11Deposits 12,166 9,683 – –

17,884 13,105 9 11

Movement in allowance accounts:At 1 January – – – –Charge during the year 13 – – –

At 31 December 13 – – –

Other receivables are non-interest bearing and are generally on 30 to 180 days terms.


18. OTHER RECEIVABLES AND DEPOSITS (CONT’D)

Other receivables that are past due

The Group has other receivables amounting to $762,000 (2007: $1,038,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:

Group2008 2007$’000 $’000

Other receivables past due: Lesser than 30 days 297 270 30 to 60 days 124 512 61 to 90 days 58 184 91 to 120 days 86 9 More than 120 days 197 63

762 1,038

19. DUE FROM/TO SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

The amount due from/to associates and joint ventures are unsecured and non-interest bearing.

The amount due from/to subsidiaries are unsecured and non-interest bearing except for an amount due from a subsidiary of $600,000 (2007: $1,200,000) which bears interest of 7.5% per annum (2007: 7.5% per annum).

The trade and non-trade amounts due from subsidiaries, associates and joint ventures are generally on 30 to 60 days term.

Group


2008 2007$’000 $’000

Amount due from joint venture

(a) Trade

30 to 60 days – 14

(b) Non-trade

Lesser than 30 days 15 –30 to 60 days 15 –

Total as at 31 December 30 –


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19. DUE FROM/TO SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES (CONT’D)

Receivables that are impaired

Amount due from associates that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:

2008 2007$’000 $’000

Due from associates (non-trade) that are individually impaired - nominal amounts – 282Less: Allowance for impairment – (275)

– 7

Movement in allowance accounts:At 1 January 275 –(Write back) Charge for the year (107) 275Bad debt written off (168) –

At 31 December – 275

Company


Amount due from subsidiaries (non-trade)

2008 2007$’000 $’000

Lesser than 30 days 414 24330 to 60 days 427 24361 to 90 days 414 24391 to 120 days 7 243More than 120 days 1 243

Total 1,263 1,215

20. FIXED DEPOSITS

As at 31 December 2008, fixed deposits amounting to $Nil (2007: $107,000) were pledged to banks for banking facilities granted to a subsidiary and letters of guarantees issued by banks to lessors of premises occupied by a subsidiary.

Fixed deposits of the Group and the Company have maturity periods ranging from 3 months to 12 months (2007: 3 months to 12 months) with effective interest rates ranging from 0.93% to 4.14% (2007: 1.8% to 2.5%) per annum.


21. TRADE PAYABLES

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Trade payables 11,630 8,861 – –

Trade payables are non-interest bearing and are normally settled on 30 to 90 days terms.

22. OTHER PAYABLES AND OTHER LIABILITIES

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Other payables 34,898 25,074 149 159

Other liabilities

Accrued operating expenses 17,483 13,345 1,475 1,304Deferred revenue 3,589 3,703 – –

21,072 17,048 1,475 1,304

Other payables are non-interest bearing and have an average of 30 to 90 days term, except for retention sums included therein which have repayment terms of up to 1 year. Included in other payables are food court tenant and stored value card deposits of $7,141,000 (2007: $5,195,000).

23. LOANS FROM MINORITY SHAREHOLDERS OF SUBSIDIARIES

The loans from minority shareholders of subsidiaries are unsecured, non-interest bearing and have no fixed terms of repayment.



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24. FINANCE LEASE OBLIGATIONS, SECURED

The Group has finance leases for certain items of machinery and equipment, motor vehicles and renovation (Note 10).

Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

GroupTotal minimum lease payments

Present value of payments

Total minimum lease payments

Present value of payments

2008 2008 2007 2007$’000 $’000 $’000 $’000

Not later than one year 216 191 268 244Later than one year but not later than five

years 458 430 396 366

Total minimum lease payments 674 621 664 610Less: amounts representing finance charges (53) – (54) –

Present value of minimum lease payments 621 621 610 610

The leases have options to purchase at the end of the lease term. The effective interest rates of the leases range from 4.20% to 6.10% (2007: 4.82% to 6.10%) per annum. Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.

25. SHORT-TERM LOANS, SECURED

Group2008 2007$’000 $’000

Bank loans– USD 868 869 – HKD 2,141 927– RMB 846 1,487– SGD 1000 –

4,855 3,283

The effective interests on these short-term loans range from 2.03% to 7.88% (2007 : 5.86% to 7.44%) per annum. The interest rates of these floating rate loans are repriced from time to time at the discretion of the respective banks.

The bank loans are revolving term loans of 3 to 6 months (2007 :3 to 6 months) and are secured by several continuing guarantees by the Company.


26. LONG-TERM LOANS, SECURED

Group2008 2007

Term loans Maturity $’000 $’000

SGD loans 2008 - 2011 2,703 3,971HKD loans 2009 - 2012 6,934 1,414RMB loans 2008 - 2012 1,547 2,293RM loan Note 1 67 –

11,251 7,678

Note 1 - the loan is repayable by 36 monthly instalments upon full draw down of the loan to a specified sum.

Other than a SGD loan of $889,000 (2007 : $1,556,000) which is a fixed rate loan bearing an interest rate of 4.25% per annum, all other term loans are floating rate loans with effective interest rates ranging from 2.08% to 7.94% (2007 : 4.25% to 7.56%) per annum. The interest rates of these floating rate loans are repriced from time to time at the discretion of the respective banks.

Securities

A term loan of $1,547,000 (2007 : $1,896,000) is secured by a charge over a leasehold property held by Shanghai BreadTalk Co., Ltd.

A term loan of Nil (2007 : $397,000) was secured by continuing guarantees by the Company and Food Republic (Shanghai) Co., Ltd, a wholly owned subsidiary.

Term loans of $2,522,000 (2007 : $927,000) are secured by continuing guarantees by the Company and Topwin Investment Holding Pte Ltd, a wholly owned subsidiary.

All other term loans are secured by continuing guarantees by the Company.

27. AMOUNT DUE TO LANDLORD (NON-TRADE)

The balance is payable to a landlord, who paid renovation costs on behalf of a subsidiary. This amount is unsecured and non-interest bearing.

Group2008 2007

$’000 $’000

Current 90 190Non-current 197 240

287 430


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28. SHARE CAPITAL

Company2008 2007

Number ofshares $’000

Number ofshares $’000

Issued and fully paid

At beginning of the year 234,911,034 33,303 200,911,034 21,516Issuance of shares – – 34,000,000 12,240Share issue expense – – – (453)

At end of the year 234,911,034 33,303 234,911,034 33,303

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction.

29. STATUTORY RESERVE FUND

In accordance with the Foreign Enterprise Law applicable to subsidiaries in the People’s Republic of China (“PRC”), the subsidiaries are required to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the statutory after tax profits as determined in accordance with the applicable PRC accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiaries’ registered capital. Subject to the approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase the registered capital of the subsidiaries. The SRF is not available for dividend distribution to shareholders.

30. TRANSLATION RESERVE

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency.

31. FAIR VALUE ADJUSTMENT RESERVE

Fair value adjustment reserve represents the cumulative fair value changes, net of tax, of available-for-sale financial assets until they are disposed of or impaired.

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Net gain on available-for-sale financial assets:

- Net gain on fair value changes during the financial year 1,178 – – –


32. COMMITMENTS AND CONTINGENCIES

(a) Commitments

Expenditure contracted for as at the balance sheet date but not recognised in the financial statements is as follows:

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Commitment in respect of plant and equipment 168 16 87 –

Commitment for capital contribution in a subsidiary – – 3,000 –

(b) Contracted operating lease commitments

The Group has various operating lease agreements for equipment, office, central kitchen, food court and retail outlet premises. These non-cancellable leases have remaining non-cancellable lease terms of between less than 1 year and 9 years. Most leases contain renewable options. Some of the leases contain escalation clauses and provide for contingent rentals based on percentages of sales derived from assets held under operating leases. Lease terms do not contain restrictions on the Group’s activities concerning dividends, additional debt or further leasing.

Future minimum lease payments payable under non-cancellable operating leases as at 31 December are as follows:

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Not later than one year 39,865 33,411 – –Later than one year but not later than

five years 78,796 77,496 – –Later than five years 11,964 21,471 – –

130,625 132,378 – –

(c) Operating lease income

The Group has entered into non-cancellable operating leases to sublease its food court and retail outlet premises. Sublease rental receivable as at 31 December is as follows:

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Not later than one year 25,209 19,480 – –Later than one year but not later than

five years 12,569 12,024 – –

37,778 31,504 – –



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32. COMMITMENTS AND CONTINGENCIES (CONT’D)

(d) Letters of guarantees, secured

As at 31 December 2008, the banks issued letters of guarantees on behalf of the Group to lessors of premises amounting to approximately $5,254,000 (2007: $2,938,000). In 2007, these letters of guarantees were secured by fixed deposits of the Group amounting to approximately $107,000, a part of which was also pledged for a term loan of a subsidiary.

33. RELATED PARTY DISCLOSURES

(a) Sale and purchase of goods and services

In addition to those related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties took place during the year on terms agreed between the parties:

Group2008 2007$’000 $’000

Income Rental income earned from a company in which a director of the Company

has an interest – 2Rental income earned from an associate – 216Sale of goods to associates 2 271Sale of goods to joint ventures – 32Management fee income from joint ventures 190 406Franchise income from associates – 161Dividend income from joint venture – 180Rental and miscellaneous income from a party related to a director 283 406

ExpensesRental expense to joint ventures 103 327Rental expense to a minority shareholder 8 –Royalty fees to minority shareholders 879 813Management fee to a minority shareholder 15 –Staff cost recharged by a minority shareholder 21 –

OthersPurchase of plant and equipment from an associate – 126Franchise fee to minority shareholders 29 57


33. RELATED PARTY DISCLOSURES (CONT’D)

(b) Compensation of key management personnel

Group2008 2007$’000 $’000

Salaries and bonus 4,940 4,536Central Provident Fund contributions and other pension contributions 166 165Directors’ fees 105 96Other personnel expenses 627 566

Total compensation paid to key management personnel 5,838 5,363

Comprise amounts paid to: Directors of the Company 1,539 1,561Directors of subsidiaries 1,051 1,260Other key management personnel 3,248 2,542

5,838 5,363

34. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group and the Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include interest rate risk, foreign currency risk, credit risk, liquidity risk and market price risk. The Audit Committee provides independent oversight to the effectiveness of the risk management process.

The Group’s and Company’s principal financial instruments comprise bank loans, finance leases and cash and short term deposits. The main purpose of these financial instruments is to raise finance for the Group’s and Company’s operations. The Group and Company has various other financial assets and liabilities such as trade and other receivables, trade and other payables and related company balances, which arise directly from its operations.

It is, and has been throughout the year under review, the Group’s and Company’s policy that no trading in derivative financial instruments shall be undertaken.

The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

(a) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates.

The Group’s and the Company’s exposure to market risk for changes in interest rates relates primarily to its investment portfolio in fixed deposits and its debt obligations. The Group does not use derivative financial instruments to hedge its investment portfolio. The Group obtains additional financing through bank borrowings and leasing arrangements. The Group’s policy is to obtain the most favourable interest rates available without increasing its foreign exchange exposure.

Surplus funds are placed with reputable banks.


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34. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)

(a) Interest rate risk (cont’d)

Sensitivity analysis for interest rate risk

GroupEffect on profit net of tax

100 basis points increase

100 basis points decrease

$’000 $’000

2008

- Singapore dollar (2) 2- Renminbi (22) 22- Hong Kong dollar (91) 91- US dollar (6) 6

2007

- Singapore dollar (1) 1- Renminbi (33) 33- Hong Kong dollar (23) 23- US dollar (6) 6

(b) Foreign currency risk

The Group has transactional currency exposures arising from sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily SGD, Renminbi (RMB) and Hong Kong Dollar (HKD). The foreign currencies in which these transactions are denominated are mainly US dollars (USD), HKD, RMB and SGD.

Currently, the Chinese government imposes control over foreign currency. RMB, the official currency in the People’s Republic of China (“PRC”), is not freely convertible. Enterprises operating in the PRC can enter into exchange transactions through the People’s Bank of China or other authorised financial institutions. Payments for imported materials or services and remittance of earnings outside of the PRC are subject to the availability of foreign currency which depends on the foreign currency denominated earnings of the enterprises, or exchanges of RMB for foreign currency must be arranged through the People’s Bank of China or other authorised financial institutions. Approval for exchanges at the People’s Bank of China or other authorised financial institutions is granted to enterprises in the PRC for valid reasons such as purchase of imported materials and remittance of earnings. While conversion of RMB into Singapore dollars or other currencies can generally be effected at the People’s Bank of China or other authorised financial institutions, there is no guarantee that it can be effected at all times.

The Group is also exposed to currency translation risk arising from its net investments in foreign operations, in Malaysia, the PRC, Hong Kong, Thailand and Taiwan. The Group’s net investments in these countries are not hedged as currency positions in Ringgit Malaysia, RMB, Hong Kong dollar, Thai Baht and Taiwan dollar are considered to be long-term in nature.



(b) Foreign currency risk (cont’d)

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s profit net of tax to a reasonably possible change in the USD, HKD, RMB and SGD exchange rates against the respective functional currencies of the Group entities, with all other variables held constant.

GroupEffect on profit net of tax2008 2007$’000 $’000

Against SGD:

USD - strengthened 6% (2007 : 6%) 141 40 - weakened 6% (2007 : 6%) (141) (40)

HKD - strengthened 5% (2007 : 5%) 64 35 - weakened 5% (2007 : 5%) (64) (35)

RMB - strengthened 5% (2007 : 5%) 84 13 - weakened 5% (2007 : 5%) (84) (13)

Against RMB:

USD - strengthened 6% (2007 : 6%) (13) (63) - weakened 6% (2007 : 6%) 13 63

SGD - strengthened 5% (2007 : 5%) (9) (2) - weakened 5% (2007 : 5%) 9 2

Against HKD:

SGD - strengthened 5% (2007 : 5%) (67) (62) - weakened 5% (2007 : 5%) 67 62

(c) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including investment securities, cash and cash equivalents), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.



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(c) Credit risk (cont’d)

Exposure to credit risk

At the balance sheet date, the Group’s and the Company’s maximum exposure to credit risk is represented by:

– the carrying amount of each class of financial assets recognised in the balance sheets; and

– a nominal amount of $48,102,000 (2007: $27,128,000) relating to corporate guarantees provided by the Company to financial institutions on subsidiaries’ borrowings and other banking facilities.

Credit risk concentration profile

The Group determines concentrations of credit risk by monitoring the country of its trade receivables on an on-going basis. The credit risk concentration profile of the Group’s trade receivables at the balance sheet date is as follows:

Group2008 2007

$’000% oftotal $’000

% oftotal

By country:Singapore 559 12% 416 14%People’s Republic of China 3,218 68% 2,141 71%Indonesia 109 2% 154 5%The Philippines 753 16% 97 3%Thailand 94 2% 135 4%Kuwait 21 – 81 3%Others 7 – 3 –

4,761 100% 3,027 100%

Financial assets that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.

Financial assets that are either past due or impaired

Information regarding financial assets that are either past due or impaired is disclosed in Notes 17, 18 and 19 to the financial statements.

(d) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.

The Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the operations of the Group.

Short-term funding may be obtained from short-term loans where necessary.



(e) Market price risk

Market price risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investment in quoted equity instrument. This instrument is quoted on the SGX-ST in Singapore and is classified as available-for-sale financial asset. The Group does not have exposure to commodity price risk.

Sensitivity analysis for equity price risk

At the balance sheet date, if the share price had been 15% (2007: Nil) higher/lower with all other variables held constant, the Group’s Fair Value Adjustment Reserve account in equity would have been $224,000 (2007 : Nil) higher/lower, arising as a result of an increase/decrease in the fair value of equity instruments classified as available-for-sale.

The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities at the balance sheet date based on contractual undiscounted payments:

2008 20071 year or

less1 to 5years Total

1 year or less

1 to 5years Total

$’000 $’000 $’000 $’000 $’000 $’000

Group

Trade and other payables 46,528 – 46,528 33,935 – 33,935Other liabilities (Note 22) 17,483 – 17,483 13,345 – 13,345Amount due to associates, joint ventures

and landlord 189 197 386 206 240 446Loans and borrowings 10,166 6,837 17,003 7,353 4,343 11,696

74,366 7,034 81,400 54,839 4,583 59,422

Company

Trade and other payables 149 – 149 159 – 159Other liabilities 1,475 – 1,475 1,304 – 1,304Amount due to subsidiaries 8 – 8 4 – 4

1,632 – 1,632 1,467 – 1,467


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35. FINANCIAL INSTRUMENTS

(a) Financial assets and liabilities The carrying amount by category of financial assets and liabilities are as follows:

Group2008 2007$’000 $’000

Loans and receivables

Trade receivables 4,761 3,027Other receivables and deposits 17,884 13,105Amount due from associates (non-trade) – 7Amount due from joint-ventures (trade) – 64Amount due from joint-ventures (non-trade) 343 237Fixed deposits 3,187 2,814Cash on hand and at bank 44,690 35,531

Total 70,865 54,785

Available-for-sale financial assets

Investment securities 1,494 316

Financial liabilities carried at amortised cost

Trade payables 11,630 8,861Other payables 34,898 25,074Accrued operating expenses (Note 22) 17,483 13,345Amount due to associates (trade) – 5Amount due to joint-ventures (non-trade) 99 11Amount due to landlord (non-trade) (Note 27) 287 430Finance lease obligations, secured (Note 24) 621 610Short term loans, secured 4,855 3,283Long term loans, secured (Note 26) 11,251 7,678Loans from minority shareholders of subsidiaries 276 125

Total 81,400 59,422


35. FINANCIAL INSTRUMENTS (CONT’D)

(b) Fair values

The fair value of a financial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arm’s length transaction, other than in a forced or liquidation sale.

Financial instruments carried at fair value

The fair value of investment securities is determined by reference to the published market bid price at the balance sheet date.

The Group has no financial instruments that are classified as held for trading or derivative financial instruments, which would have been carried at their respective fair values as required by FRS 39.

Financial instruments whose carrying amount approximate fair value

Management has determined that the carrying amounts of cash and bank balances, fixed deposits, trade and other receivables, trade and other payables, related company balances, amount due to landlord and current bank loans, based on their notional amounts, reasonably approximate their fair values because these are mostly short term in nature or are repriced frequently.

Fixed interest rate term loan of $889,000 (2007: $1,556,000) approximates fair value based on available market information on similar loans as at financial year end.

Financial instruments carried at other than fair value

Set out below is a comparison of the carrying amount and fair value of the financial instrument that is carried in the financial statements at other than fair value as at 31 December.

Carrying amount Fair value2008 2007 2008 2007$’000 $’000 $’000 $’000

Financial liabilities:Obligations under finance leases 621 610 606 603

Fair value has been determined using discounted estimated cash flows. The discount rates used are the current market incremental lending rates for similar types of leasing agreements.

No disclosure of fair values are made for the quasi-capital loan to an associate, loans from minority shareholders of subsidiaries and long-term amount due to landlord as it is not practical to determine their fair values with sufficient reliability since the balances have no fixed terms of repayment.

No amount has been recognised in the income statement in relation to the change in fair value of financial assets or financial liabilities estimated using a valuation technique for the financial year ended 31 December 2008 and 2007.



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36. CAPITAL MANAGEMENT

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended 31 December 2008 and 2007.

As disclosed in Note 29, subsidiaries of the Group operating in the PRC are required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied with by the respective subsidiaries for the financial year ended 31 December 2008 and 2007.

The Group monitors capital using gearing ratio (which is total borrowings divided by total equity) and net gearing ratio (which is total borrowings less cash and cash equivalents divided by total equity).

Group2008 2007$’000 $’000

Total borrowings (1) 17,003 11,696Less: Cash and cash equivalents (2) (47,877) (38,345)

Net cash (30,874) (26,649)

Total equity 56,133 47,266

Gearing ratio 0.30 0.25

Net gearing Net cash Net cash

(1) including bank loans, finance lease obligations and loans from minority shareholders of subsidiaries(2) including all fixed deposits


37. SEGMENT INFORMATION

Reporting format

The primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affected predominantly by differences in the products and services produced. Secondary information is reported geographically. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

Business segments

The Group’s primary format for reporting segment information is business segments, with each segment representing a strategic business activity. For management purposes, the Group is organised into three business segments, namely bakery operations, food courts operations and restaurant operations.

Bakery operations: This relates to the manufacture and retail of all kinds of food, bakery and confectionery products including franchising.

Food court operations: This relates to the management and operation of food courts and operation of food and drinks outlets within the food courts.

Restaurant operations: This relates to the operation of food and drinks outlets, eating houses and restaurants.

Geographical segments

The Group’s main operations are in Singapore, the PRC and Hong Kong. Sales to external customers disclosed in geographical segments are based on geographical location of its customers.

Allocation basis

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly provision for taxation, borrowings, financial expenses and share of results of associates and joint ventures.

Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.


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37. SEGMENT INFORMATION (CONT’D)

(a) Analysis of business segment

Revenue and cost of sales are directly attributable to the segments. Operating expenses/income are allocated to the segments.

2008Bakery

operations (1)Restaurant operations

Food court

operations Others (2) Elimination Group$’000 $’000 $’000 $’000 $’000 $’000

RevenueExternal sales 110,864 32,173 69,212 – – 212,249Inter-segment sales 225 – 1,361 – (1,586) –

Total revenue 111,089 32,173 70,573 – (1,586) 212,249

Profit from operations 4,313 3,011 6,106 (201) (2) 13,227Financial expenses, net (684)

Profit before tax and associates and joint ventures’ results 12,543

Share of associates’ results (496)Share of joint ventures’ results (46)

Profit before tax 12,001Tax (3,643)

Profit for the year 8,358

Assets and liabilitiesSegment assets 54,590 19,544 72,448 14,324 (15,686) 145,220Investment in associates 200Investment in joint ventures 222Deferred tax assets 532

Total assets 146,174

Segment liabilities 31,593 8,731 42,249 1,638 (15,686) 68,525Unallocated liabilities 21,516

Total liabilities 90,041

Other informationCapital expenditure - Property, plant and equipment 13,607 1,629 10,890 75 – 26,201 - Intangible assets 67 29 33 – – 129Depreciation and amortisation 4,966 2,115 6,627 21 – 13,729Impairment of non-financial assets 47 418 – 385 – 850Plant and equipment written off 295 10 494 – – 799



(a) Analysis of business segment (cont’d)

2007Bakery

operations (1)Restaurant operations

Food court

operations Others (2) Elimination Group$’000 $’000 $’000 $’000 $’000 $’000

RevenueExternal sales 79,823 28,345 48,442 – – 156,610Inter-segment sales 201 – 774 – (975) –

Total revenue 80,024 28,345 49,216 – (975) 156,610

Profit from operations 3,873 4,571 3,457 250 (1) 12,150Financial expenses, net (735)

Profit before tax and associates and joint ventures’ results 11,415

Share of associates’ results (454)Share of joint ventures’ results 267

Profit before tax 11,228Tax (2,791)

Profit for the year 8,437

Assets and liabilitiesSegment assets 39,814 17,374 60,110 13,165 (16,500) 113,963Investment in associates 1,051Investment in joint ventures 282Deferred tax assets 394

Total assets 115,690

Segment liabilities 22,182 6,629 38,700 1,475 (16,500) 52,486Unallocated liabilities 15,938

Total liabilities 68,424

Other informationCapital expenditure - Property, plant and equipment 4,312 1,588 12,823 15 – 18,738 - Intangible assets 49 57 51 – – 157Depreciation and amortisation 4,291 1,763 4,290 4 – 10,348Plant and equipment written off 138 4 451 – – 593



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(b) Analysis by geographical segments

Segment revenue is based on location of customers regardless of where the business is conducted. Segment assets and capital expenditure are based on the geographical location of those assets.

Revenue Segment Assets Capital expenditure2008 2007 2008 2007 2008 2007$’000 $’000 $’000 $’000 $’000 $’000

Singapore 103,946 80,107 64,881 62,805 8,470 6,775PRC 75,260 59,242 58,745 39,695 7,234 8,020Hong Kong 18,981 8,740 18,047 8,216 9,630 3,561Rest of the world 14,062 8,521 3,547 3,247 996 539

Total 212,249 156,610 145,220 113,963 26,330 18,895

(1) Bakery operations comprise operation of bakery retail outlets as well as that operated through franchising.(2) The business segment “Others” pertains to investment holding activities.

38. DIVIDENDS

Group and Company2008 2007$’000 $’000

Dividends paid during the year:

• First and final exempt (one-tier) dividend for 2007 of 0.55 cent per share (2006: 0.42 per share) 1,292 987

Proposed but not recognised as a liability as at 31 December:

Dividends on ordinary shares, subject to shareholders’ approval at the Annual General Meeting:

• First and final exempt (one-tier) dividend for 2008 of 1.0 cent per share (2007: 0.55 cent per share) 2,349 1,292



39. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

Disposal of Subsidiary, Twin Peaks Venture Singapore Pte Ltd

On 18 March 2009, BreadTalk Pte Ltd (“BTPL”), a wholly owned subsidiary of the Company, entered into a Sale & Purchase Agreement with Spore Coffee & Donut Venture Pte Ltd for the disposal of BTPL’s 70% shareholding interest in Twin Peaks Venture Singapore Pte Ltd (“Twin Peaks”) for a consideration of approximately $0.4 million. Twin Peaks holds the J.Co Donuts and Coffee franchise for the Singapore market.

40. AUTHORISATION OF FINANCIAL STATEMENTS

The financial statements for the year ended 31 December 2008 were authorised for issue in accordance with a resolution of the directors on 18 March 2009.

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statistiCs of shareholDinGs As at 19 March 2009

Issued and fully Paid-up Capital : S$33,302,916Number of Ordinary Shares in Issue (excluding treasury shares) : 234,911,034 Number of Treasury Shares held : NilClass of Shares : Ordinary SharesVoting rights : One vote per share

DISTRIBUTION OF SHAREHOLDINGS

No. of Size of Shareholdings Shareholders % No. of Shares %

1 - 999 2 0.22 21 0.001,000 - 10,000 570 61.82 3,155,593 1.3410,001 - 1,000,000 325 35.25 19,265,164 8.201,000,001 and above 25 2.71 212,490,256 90.46

Total 922 100.00 234,911,034 100.00

TwENTY LARGEST SHAREHOLDERS

Name No. of Shares %

1 Citibank Nominees Singapore Pte Ltd 45,428,775 19.342 United Overseas Bank Nominees Pte Ltd 28,909,000 12.313 Hong Leong Finance Nominees Pte Ltd 27,820,000 11.844 Mayban Nominees (S) Pte Ltd 19,105,000 8.135 Katherine Lee Lih Leng 14,178,075 6.046 SBS Nominees Pte Ltd 12,000,000 5.117 Giant Winner Enterprise Ltd 9,200,000 3.928 Citibank Consumer Nominees Pte Ltd 7,512,000 3.209 Raffles Nominees Pte Ltd 7,033,000 2.9910 DBS Nominees Pte Ltd 6,203,397 2.6411 Oversea-Chinese Bank Nominees Private Limited 5,872,775 2.5012 HL Bank Nominees (S) Pte Ltd 5,153,000 2.1913 HSBC (Singapore) Nominees Pte Ltd 3,942,000 1.6814 Chen Kuo Hua 3,623,100 1.5415 Pineapples of Malaya Private Limited 2,500,000 1.0616 Tan Tiang Yong 2,356,000 1.0017 Phillip Securities Pte Ltd 1,840,000 0.7818 Kusdianto Soewarno 1,550,000 0.6619 George Quek Meng Tong 1,367,609 0.5820 DBS Vickers Securities (S) Pte Ltd 1,346,000 0.57

Total 206,939,731 88.08

Based on information available to the Company as at 19 March 2009, approximately 27.53% of the Company’s shares are held in the hands of public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of SGX-ST.

statistiCs of shareholDinGs As at 19 March 2009

SUBSTANTIAL SHAREHOLDERS(As recorded in the Register of Substantial Shareholders as at 19 March 2009)

Direct Interest Deemed InterestName of Substantial Shareholders Number of Shares % Number of Shares %

1. George Quek Meng Tong (1) 79,590,384 33.88 43,550,850 18.542. Katherine Lee Lih Leng (1) 43,550,850 18.54 79,590,384 33.883. Keywise Capital Management (HK) Ltd (holds in

the name of (i) Keywise Greater China Master Fund; and (ii) Keywise Asia Master Fund)

25,903,000 11.03 - -

4. UBS AG (2) - - 23,518,000 10.01

(1) Katherine Lee Lih Leng is the spouse of George Quek Meng Tong. Saved as disclosed above, there are no family relationship among our Directors and Substantial Shareholders.

(2) Positions held on behalf of prime brokerage clients, which includes a portion of the 25,903,000 shares held by Keywise Capital Management (HK) Ltd.


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notiCe of annual General meetinG

NOTICE IS HEREBY GIVEN that the Annual General Meeting of BreadTalk Group Limited (“the Company”) will be held at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 on Monday, 27 April 2009 at 9.30 a.m. for the following purposes:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and the Audited Financial Statements of the Company for the year ended 31 December 2008 together with the Auditors’ Report thereon. (Resolution 1)

2. To declare a first and final exempt (one-tier) dividend of 1.0 cent per share for the financial year ended 31 December 2008 (2007: 0.55 cent). (Resolution 2)

3. To re-elect the following Directors retiring pursuant to Article 104 of the Company’s Articles of Association: Mr Chen Kuo Hua (Resolution 3) Ms Katherine Lee Lih Leng (Resolution 4)

Mr Chen Kuo Hua will, upon re-election as a Director of the Company, remain as a member of the Remuneration Committee, Audit Committee and Nominating Committee. Mr Chen will be considered non-independent.

4. To approve the payment of Directors’ fees of S$105,000 for the year ended 31 December 2008 (2007: S$96,250). (Resolution 5)

5. To re-appoint Messrs Ernst & Young LLP as the Company’s Auditors and to authorise the Directors to fix their remuneration. (Resolution 6)

6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.

AS SPECIAL BUSINESS

To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications:

7. Authority to issue shares

That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Directors of the Company be authorised and empowered to:

(a) (i) issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fit; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors of the Company while this Resolution was in force,

provided that:

(1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed fifty per cent. (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares and Instruments to be issued other than on a pro rata basis to existing shareholders of the Company shall not exceed twenty per cent. (20%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such calculation as may be prescribed by the Singapore Exchange Securities Trading Limited) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, after adjusting for:

(a) new shares arising from the conversion or exercise of any convertible securities;

(b) new shares arising from exercising share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and

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

(3) the 50% limit in sub-paragraph (1) above may be increased to 100% for the Company to undertake pro-rata renounceable rights issues;

(4) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the Singapore Exchange Securities Trading Limited for the time being in force (unless such compliance has been waived by the Singapore Exchange Securities Trading Limited) and the Articles of Association of the Company; and

(5) unless revoked or varied by the Company in a general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

[See Explanatory Note (i)] (Resolution 7)

8. Authority to issue shares other than on a pro-rata basis pursuant to the aforesaid share issue mandate at discounts not exceeding twenty per cent. (20%) of the weighted average price for trades done on the SGX-ST.

That subject to and pursuant to the aforesaid share issue mandate being obtained, the Directors of the Company be hereby authorised and empowered to issue shares other than on a pro-rata basis at a discount not exceeding twenty per cent. (20%) to the weighted average price for trades done on the SGX-ST for the full market day on which the placement or subscription agreement in relation to such shares is executed (or if not available for a full market day, the weighted average price must be based on the trades done on the preceding market day up to the time the placement or subscription agreement is executed), provided that :-

(a) in exercising the authority conferred by this Resolution, the Company complies with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST); and

(b) unless revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

[See Explanatory Note (ii)] (Resolution 8)


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9. Authority to issue shares under the BreadTalk Group Limited Employees’ Share Option Scheme

That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and empowered to offer and grant options under the BreadTalk Group Limited Employees’ Share Option Scheme (“the Scheme”) and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted by the Company under the Scheme, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of new ordinary shares to be issued pursuant to the Scheme, the Plan (defined below) and any other share based schemes (if applicable) shall not exceed fifteen per cent. (15%) of the total number of issued shares excluding treasury shares in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

[See Explanatory Note (iii)] (Resolution 9)

10. Authority to issue shares under the BreadTalk Group Limited Restricted Share Grant Plan

That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and empowered to offer and grant awards in accordance with the provisions of the BreadTalk Group Limited Restricted Share Grant Plan (the “Plan”) and to issue from time to time such number of fully-paid shares as may be required to be issued pursuant to the vesting of the awards under the Plan, provided always that the aggregate number of new ordinary shares to be issued pursuant to the Scheme, the Plan and any other share based schemes (if applicable), which the Company may have in place, shall not exceed fifteen per cent. (15%) of the total issued share capital excluding treasury shares in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

[See Explanatory Note (iv)] (Resolution 10)

11. Authority to grant awards to Participants pursuant to the Rules of, and issue shares under, the Plan

That, contingent upon the passing of Resolution 10, in order to reward, retain and motivate employees who had met specific performance objectives set by the Company, the Directors of the Company be authorised and empowered to grant awards in accordance with the provisions of the Plan to the following participants of the Plan (“the Participants”) and to issue shares in the Company to the Participants of awards granted by the Company under the Plan, provided always that the aggregate number of shares available to Controlling Shareholders and their associates under the Plan shall not exceed twenty five per cent. (25%) of all the shares available under the Plan and that the number of shares available to each Controlling Shareholder or his associate shall not exceed ten per cent. (10%) of all the shares available under the Plan. Such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the Company’s next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

Name of Participants No. of shares to be awarded

Controlling Shareholders

Mr. George Quek Meng Tong 82,000 (Resolution 11)

Ms. Katherine Lee Lih Leng 55,000 (Resolution 12)

Associates of Controlling Shareholders

Mr. Frankie Quek Swee Heng 55,000 (Resolution 13)

[See Explanatory Note (v)]

12. Renewal of Share Purchase Mandate

That for the purposes of Sections 76C and 76E of the Companies Act, Cap. 50, the Directors of the Company be and are hereby authorised to make purchases or otherwise acquire issued shares in the capital of the Company from time to time (whether by way of market purchases or off-market purchases on an equal access scheme) of up to ten per cent. (10%) of the total issued shares (excluding treasury shares) in the capital of the Company (as ascertained as at the date of Annual General Meeting of the Company) at the price of up to but not exceeding the Maximum Price as defined in paragraph 3.4 of the Appendix to the Annual Report to Shareholder dated 10 April 2009, in accordance with the terms of the Share Purchase Mandate set out in the Appendix, and this mandate shall, unless revoked or varied by the Company in general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

[See Explanatory Note (vi)] (Resolution 14)

By Order of the Board

Tan Cher LiangCompany SecretarySingapore10 April 2009



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Explanatory Notes:

(i) Resolution 7 in item 7 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant instruments convertible into shares and to issue shares pursuant to such instruments, up to a number not exceeding, in total, 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to shareholders. The 50% limit referred to in the preceding sentence may be increased to 100% for the Company to undertake pro-rata renounceable rights issues.

For determining the aggregate number of shares that may be issued, the total number of issued shares (excluding treasury shares) will be calculated based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time Resolution 7 is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time when Resolution 7 is passed and any subsequent bonus issue, consolidation or subdivision of shares.

The 100% renounceable pro-rata rights issue limit is one of the new measures implemented by the SGX-ST as stated in a press release entitled “SGX introduces further measures to facilitate fund raising” dated 19 February 2009 and which became effective on 20 February 2009. It will provide the Directors with an opportunity to raise funds and avoid prolonged market exposure by reducing the time taken for shareholders’ approval, in the event the need arises. Minority shareholders’ interests are mitigated as all shareholders have equal opportunities to participate and can dispose their entitlements through trading of nil-paid rights if they do not wish to subscribe for their rights shares. It is subject to the condition that the Company makes periodic announcements on the use of the proceeds as and when the funds are materially disbursed and provides a status report on the use of proceeds in the annual report.

(ii) Resolution 8 in item 8 above is pursuant to measures implemented by the SGX-ST as stated in a press release entitled “SGX introduces further measures to facilitate fund raising” dated 19 February 2009 and which became effective on 20 February 2009. Under the measures implemented by the SGX-ST, issuers will be allowed to undertake non pro-rata placements of new shares priced at discounts of up to 20% to the weighted average price for trades done on the SGX-ST for a full market day on which the placement or subscription agreement in relation to such shares is executed, subject to the conditions that (a) shareholders’ approval be obtained in a separate resolution at a general meeting to issue new shares on a non pro-rata basis at discount exceeding 10% but not more than 20%; and (b) that the resolution seeking a general mandate from shareholders for issuance of new shares on a non pro-rata basis is not conditional upon such resolution.

It should be noted that under the Listing Manual of the SGX-ST, shareholders’ approval is not required for placements of new shares, on a non pro-rata basis pursuant to a general mandate, at a discount of up to 10% to the weighted average price for trades done on the SGX-ST for a full market day on which the placement or subscription agreement in relation to such shares is executed.

(iii) Resolution 9 in item 9 above, if passed, will empower the Directors of the Company, from the date of this Meeting until the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the Company pursuant to the exercise of options granted or to be granted under the Scheme up to a number not exceeding in total (for the entire duration of the Scheme) 15% of the total number of issued shares excluding treasury shares in the capital of the Company from time to time, and the aggregate number of ordinary shares which may be issued pursuant to the Scheme, the Plan and any other share based schemes (if applicable) is limited to 15% of the total issued share capital of the Company excluding treasury shares from time to time. Resolution 9 is independent from Resolution 10 and the passing of Resolution 9 is not contingent on the passing of Resolution 10.

(iv) Resolution 10 in item 10 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the next Annual General Meeting, to offer and grant awards under the BreadTalk Group Limited Restricted Share Grant Plan (the “Plan”) in accordance with the provisions of the Plan and to issue from time to time such number of fully-paid shares as may be required to be issued pursuant to the vesting of the awards under the Plan subject to the maximum number of shares prescribed under the terms and conditions of the Plan. The aggregate number of ordinary shares which may be issued pursuant to the Scheme, the Plan and any other share based schemes (if applicable) is limited to 15% of the total issued share capital of the Company excluding treasury shares from time to time. Resolution 10 is independent from Resolution 9 and the passing of Resolution 10 is not contingent on the passing of Resolution 9.


(v) Resolutions 11, 12 and 13, in item 11 above, if passed, will empower the Directors of the Company to issue shares in the Company to the Controlling Shareholders and their associates, granted by the Company under the Plan. The resolutions in item 11 are independent from each other and the passing of each such resolution is not contingent on the passing of any of the other resolutions in item 11. Resolution 12 is contingent on the passing of Resolution 4. Shareholders who are eligible to participate in the Plan shall abstain from voting on Resolutions 11, 12 and 13.

The rationale for Resolution 11 Mr. George Quek Meng Tong (George quek) is the Chairman of the Group and he holds an aggregate of 52.42% of the

shareholding (directly and indirectly). He is one of the co-founders of the Group and has been instrumental in the Group’s development over the years. He is responsible for overseeing the overall management of the Group and is pivotal in charting the direction and growth of the Group.

George Quek has been with the Company since the start in 2000 and has played a pivotal role in steering the growth of the Group in their operations locally and in this region and building up a good track record and reputation for the Group.

His knowledge and contacts in the food and beverage industry, of which he has more than 3 decades of experience, are key factors to the success of the Group. His invaluable experience has not only been instrumental in establishing the “BreadTalk” brand name, but also in setting new F&B trends and redefining the Asian food scene. He also played a significant role in the Company’s foray into the food court business in Shanghai and Beijing, People’s Republic of China.

George Quek continues to play an instrumental role in charting our Group’s expansion and business development plans. As the Chairman of the Company, he has in-depth knowledge of the needs of the business as it evolved over the years. His ability to anticipate business trend and demand has enabled the Company to grow the business rapidly.

The Company believes that George Quek will continue to play a key role in the growth and future development of the Group and there are further potential contributions that he can make. The Company intends to have the flexibility to structure his remuneration package to include such Awards in future if it is in the interest of the Company to do so. By extending the Plan to George Quek, the Company will have an additional tool to craft a more balanced and innovative remuneration package that will link his total remuneration to the performance of the Group.

The Directors are of the view that the remuneration package of George Quek is fair given his contributions to the Group. The extension of the Plan to George Quek is consistent with the Company’s objectives to motivate its employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company. Although George Quek already has a shareholding interest in the Company, the extension of the Plan to him will ensure that he is equally entitled, with the other employees who are not Controlling Shareholders, to take part in and benefit from this system of remuneration, thereby enhancing his long term commitment to the Group.

During the year in review George Quek identified the new businesses to diversify the revenue base of the Group. It resulted in the announced expansion of the Group’s business that will contribute to the growth in the Group’s top and bottom line in future.

The participation of and grant of the Awards to George Quek under the Plan has been approved in principle by shareholders when they approved the Plan at the Extraordinary General Meeting held on 28 April 2008. Resolution 11 seeks for the above stated reasons, shareholders approval for the Directors decision to grant 82,000 shares to George Quek in accordance with the Plan.


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The rationale for Resolution 12

Ms. Katherine Lee Lih Leng (Katherine Lee), if re-elected, will remain as Deputy Chairman of the Company and she holds an aggregate of 52.42% of the Company’s shareholding (directly or indirectly). She is one of the co-founders of the Group and has been assisting the Chairman, George Quek in the Group’s development since its inception. She oversees the Research and Development Department where she is responsible for product development for local and overseas markets. She is also responsible for steering the Group’s new concept developments for the various brands, pioneering new ideas and concepts. She has therefore contributed greatly in the increase and development of the range and quality of the Group’s products, which is one of its unique strengths and factors for its success. In the areas of training, Katherine Lee has actively organized product training and technical skill upgrades to ensure systematic transfers of knowledge and skills to the franchisees and their operations teams to maintain their competitive edge.

The Company believes that Katherine Lee will continue to contribute to the success of the Group. The Company intends to have the flexibility to structure her remuneration package to include such Awards in future if it is in the interests of the Company to do so. By allowing her to participate in the Plan, the Company will have an additional tool to craft a more balanced and innovative remuneration package that will link her total remuneration to the performance of the Group.

The extension of the Plan to Katherine Lee is consistent with the Company’s objectives to motivate its employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company. Although Katherine Lee already has a shareholding interest in the Company, the extension of the Plan to her will ensure that she is equally entitled, with the other employees who are not Controlling Shareholders, to take part in and benefit from this system of remuneration, thereby enhancing her continued commitment to the Group.

The participation of and grant of Awards to Katherine Lee under the Plan has been approved in principle by shareholders when they approved the Plan at the Extraordinary General Meeting held on 28 April 2008. Resolution 12 seeks for the above stated reasons, shareholders approval for the Directors decision to grant 55,000 shares to Katherine Lee in accordance with the Plan.

The rationale for Resolution 13

Mr. Frankie Quek Swee Heng (Frankie quek), the Group’s Chief Operating Officer, holds an aggregate of 0.45% of the Company’s shareholding (directly or indirectly). He is involved in the formulation and implementation of the expansion plans of the Group. With his business acumen and extensive knowledge of the local food and beverage industry, he is assisting the Chairman, George Quek, in overseeing the growth and expansion as well as daily operations of the Group, focusing on the Group’s expansion into the People’s Republic of China. Frankie Quek has been based in Shanghai since 2005 where he has been overseeing the growing bakery and food court operations in Shanghai and Beijing. His expertise has further led to the successful export of the BreadTalk brand name in eleven (11) cities through a franchise model system managed by the in house franchise team. The Company therefore believes that he has the potential and ability to contribute to the further success of the Group.

By allowing him to participate in the Plan, the Company will have an additional tool to craft a more balanced and innovative remuneration package that will link his total remuneration to the performance of the Group. Frankie Quek will also be able to share in any future appreciation of the Company’s share price that is commensurate with the Company’s future growth through an increase in his shareholdings to a more significant level.

The Directors are of the view that the remuneration package of Frankie Quek is fair given his contributions to the Group. The extension of the Plan to Frankie Quek is consistent with the Company’s objectives to motivate its employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company.


As the Plan serves as recognition of the past contributions of those eligible to participate in the Plan, as well as to secure future contributions for the Company and the Group from them, the Directors consider it important that Frankie Quek should be included in the Plan. The Directors consider it crucial for the Company to provide sufficient incentives which will instill a sense of commitment to the Group.

The participation of and grant of Awards to Frankie Quek under the Plan has been approved in principle by shareholders when they approved the Plan at the Extraordinary General Meeting held on 28 April 2008. Resolution 13 seeks for the above stated reasons, shareholders approval for the Directors decision to grant 55,000 shares to Frankie Quek in accordance with the Plan.

(vi) Resolution 14 proposed in item 12 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier, to repurchase ordinary shares of the Company by way of market purchases or off-market purchases of up to 10% of the total number of issued shares (excluding treasury shares) in the capital of the Company at the Maximum Price as defined in Paragraph 3.4 to the Appendix. The rationale for, the authority and limitation on, the sources of funds to be used for the purchase or acquisition including the amount of financing and the financial effects of the purchase or acquisition of ordinary shares by the Company pursuant to the Share Purchase Mandate on the audited consolidated financial accounts of the Group for the financial year ended 31 December 2008 are set out in greater detail in the Appendix.

Notes:

1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a Member of the Company.

2. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 not less than 48 hours before the time appointed for holding the Meeting.



BREADTALK GROUP LIMITEDCompany Registration No. 200302045G(Incorporated In Singapore)

proXy form(Please see notes overleaf before completing this Form)

I/We,

of being a member/members of BREADTALK GROUP LIMITED (the “Company”), hereby appoint:

Name NRIC/Passport No. Proportion of ShareholdingsNo. of Shares %

Address

and/or (delete as appropriate)

Name NRIC/Passport No. Proportion of ShareholdingsNo. of Shares %

Address

or failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held on 27 April 2009 at 9.30 a.m. at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

(Please indicate your vote “For” or “Against” with a tick [] within the box provided.)

No. Resolutions relating to: For Against

1 Directors’ Report and Audited Financial Statements for the year ended 31 December 2008.

2 Payment of proposed first & final exempt (one-tier) dividend.

3 Re-election of Mr Chen Kuo Hua as a Director.

4 Re-election of Ms Katherine Lee Lih Leng as a Director.

5 Approval of Directors’ fees amounting to S$105,000 for the year ended 31 December 2008.

6 Re-appointment of Messrs Ernst & Young LLP as Auditors.

7 Authority to issue new shares.

8 Authority to issue new shares up to discount of 20%.

9 Authority to issue shares under the BreadTalk Group Limited Employees’ Share Option Scheme.

10 Authority to issue shares under the BreadTalk Group Limited Restricted Share Grant Plan.

11 Share award under the Plan to George Quek Meng Tong.

12 Share award under the Plan to Katherine Lee Lih Leng.

13 Share award under the Plan to Frankie Quek Swee Heng.

14 Renewal of Share Purchase Mandate.

Dated this day of 2009

Total number of Shares in: No. of Shares

(a) CDP Register

Signature of Shareholder(s) (b) Register of Members

or, Common Seal of Corporate Shareholder

IMPORTANT:

1. For investors who have used their CPF monies to buy BreadTalk Group Limited’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf.

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1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint such number of proxies as required to attend and vote in his/her stead. A proxy need not be a member of the Company.

3. Where a member appoints more than one proxy, the appointments shall be invalid unless he/she specifies the proportion of his/her shareholding to be represented by each proxy. If no proportion or number of shares is specified, the first named proxy may be treated as representing 100% of the shareholding and any second named proxy as an alternate to the first named.

4. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 not less than 48 hours before the time appointed for the Meeting.

5. The instrument appointing a proxy or proxies must be executed under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised or in such manner as appropriate under applicable laws. Where the original instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the original power of attorney or other authority, if any, under which the instrument of proxy is signed or a duly certified copy of that power of attorney or other authority (failing previous registration with the Company) shall be attached to the original instrument of proxy and must be left at the Registered Office, not less than forty-eight hours before the time appointed for the holding of the Meeting or the adjourned Meeting at which it is to be used failing which the instrument may be treated as invalid.

6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore. The Company shall be entitled to treat an original certificate under the seal of the corporation as conclusive evidence of the appointment or revocation of appointment of a representative.

GENERAL:

The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.


A N N U A L R E P O R T 2 0 0 8

BREADTALK GROUP LIMITED171 Kampong Ampat#05-01 to 06 KA FoodLinkSingapore 368330Tel : (65) 6285 6116Fax : (65) 6285 1661Website: www.breadtalk.comEmail: [email protected]

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BREADTALK GROUP LIMITED