Admission to the Official List

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This document the “Prospectus”, which comprises a prospectus relating to Domino’s Pizza UK & IRL Plc (the “Company’’) has been

prepared in accordance with the Prospectus Rules made by the Financial Services Authority (the “Prospectus Rules’’) pursuant to

section 73A of the Financial Services and Markets Act 2000 (“FSMA’’) and has been approved by the Financial Services Authority

in accordance with s.87A of FSMA. This document has been filed with the Financial Services Authority and will be made available

to the public in accordance with the Prospectus Rules.

Application has been made to the Financial Services Authority and to the London Stock Exchange respectively for admission of all

of the Ordinary Shares to: (i) the Official List; and (ii) to trading on the London Stock Exchange’s market for listed securities (together

“Admission’’). No application has been made or is currently intended to be made for the Ordinary Shares to be admitted to listing or

dealt with on any other exchange. It is expected that Admission will become effective and that dealings on the London Stock Exchange

in the Ordinary Shares will commence on 19 May 2008 (International Security Identification Number: GB00B1S49Q91).

The Ordinary Shares are admitted to trading on AIM, a market operated by the London Stock Exchange. The Company intends to

terminate the admission of the Ordinary Shares to trading on AIM as soon as Admission has occurred.

The Ordinary Shares have not been, and will not be, registered under the United States Securities Act 1933 or under the securities laws

of any state, district or other jurisdiction of the United States, or of Canada, Japan or Australia, or any other jurisdiction and no

regulatory clearances in respect of the Ordinary Shares have been, or will be, applied for in any jurisdiction other than the UK.

The Company and its Directors (whose names appear on page 22 of Part III of this document) accept responsibility for the information

contained in this document. To the best of the knowledge and belief of the Company and the Directors (who have taken reasonable

care to ensure that such is the case), the information contained in this document is in accordance with the facts and contains no

omission likely to affect its import.

Prospective investors should read the entire document and, in particular, the Risk Factors set out in Part II when considering an

investment in the Company. Numis Securities Limited, which is authorised and regulated in the United Kingdom by the Financial

Services Authority, is acting only for the Company and no-one else in connection with Admission and will not regard any other person

as its client or be responsible to any person other than the Company for providing the protections afforded to its clients or for advising

any other person on the contents of this document.

Investors should rely only on the information in this document. No person has been authorised to give any information or make any

representations other than those contained in this document and, if given or made, such information or representations must not be

relied on as having been authorised by the Company. Without prejudice to any obligation of the Company to publish a supplementary

prospectus pursuant to section 87G of FSMA or paragraph 3.4 of the Prospectus Rules, the publication of this document does not,

under any circumstances, create any implication that there has been no change in the affairs of the Group since, or that the information

contained herein is correct at any time subsequent to, the date of this document. The information on the Company’s website does not

form a part of this document.

The contents of this document are not to be construed as legal, business or tax advice. Each prospective investor should consult his,

her or its own solicitor, independent financial adviser or tax adviser for legal, financial or tax advice.

DOMINO’S PIZZA UK & IRL PLC(incorporated in England and Wales under registered number 03853545)

Introduction to the Official List

Sponsor, financial adviser and joint broker

The Company is not offering any Ordinary Shares nor any other securities in connection with Admission. This document does not

constitute an offer to sell, or the solicitation of an offer to subscribe for or buy any Ordinary Shares nor any other securities in any

jurisdiction. The Ordinary Shares will not be generally made available or marketed to the public in the UK or in any other jurisdiction

in connection with Admission.

The distribution of this document in certain jurisdictions may be restricted by law and therefore persons into whose possession this

document comes should inform themselves about and observe any such restrictions, including those in the paragraphs that follow. Any

failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. No action has been

taken or will be taken in any jurisdiction that would permit possession or distribution of this document or any other publicity material

relating to the Ordinary Shares, in any country or jurisdiction where action for that purpose is required. Accordingly, neither this

document nor any other material in relation to the Ordinary Shares may be distributed or published in any jurisdiction where to do so

would breach any securities laws or regulations of any such jurisdiction or give rise to an obligation to obtain any consent, approval

or permission, or to make any application, filing or registration.

References to Defined TermsCertain terms used in this document, including certain capitalised terms and certain technical and other terms, are defined, and certain

selected industry and technical terms used in this document are defined and explained, in Part IV.

AIII 10.1

AI 5.1.1(e) & S.1.2

AI 1.1 & 1.2

AIII 1.1 & 1.2

AIII 6.2

AIII 4.1, 6

CONTENTS

Page

PART I SUMMARY 3

PART II RISK FACTORS 8

PART III DIRECTORS, SECRETARY, REGISTERED OFFICE AND ADVISERS 22

PART IV DEFINITIONS 23

PART V INFORMATION ON THE GROUP 28

PART VI OPERATING AND FINANCIAL REVIEW 38

PART VII FINANCIAL INFORMATION ON THE GROUP 55

SECTION A: ACCOUNTANT’S REPORT ON IFRS HISTORICAL 55

FINANCIAL INFORMATION RELATING TO DOMINO’S PIZZA UK & IRL PLC FOR THE 52 WEEKSENDED 31 DECEMBER 2006 AND 30 DECEMBER 2007

SECTION B: GAAP HISTORICAL FINANCIAL INFORMATION 113

RELATING TO DOMINO’S PIZZA UK & IRL PLC FOR THE 52 WEEKS ENDED 31 DECEMBER 2006

SECTION C: GAAP HISTORICAL FINANCIAL INFORMATION 149

RELATING TO DOMINO’S PIZZA UK & IRL PLC FOR THE 52 WEEKS ENDED 1 JANUARY 2006

PART VIII ADDITIONAL INFORMATION 183

2

PART I

SUMMARY

This summary should be read as an introduction to this Prospectus. Any decision by a prospectiveinvestor to invest in the Ordinary Shares should be based on consideration of the Prospectus as awhole. Where a claim relating to the information contained in this Prospectus is brought before a courtin a member state of the European Economic Area (“EEA”), the claimant may, under the nationallegislation of the EEA state in which the claim is brought, be required to bear the cost of translatingthis Prospectus before legal proceedings are initiated. Civil liability attaches to those persons who areresponsible for this summary, including any translation hereof, but only if this summary is misleading,inaccurate or inconsistent when read together with the other parts of this Prospectus.

1. Introduction

The Domino’s brand was founded in the United States of America in 1960 by Tom Monaghan. Since then,

that business has grown into a global network of over 8,000 stores in more than 50 countries, employing

around 170,000 staff and involving over 2,000 franchises.

DPG is the master franchisee in the UK and Ireland of Domino’s Pizza, one of the world’s leading home

delivery pizza brands. Since the business of the Group was purchased from DPII in 1993, it has developed

to become the leading UK home delivery pizza brand. DPII subsequently assigned the Master Franchise

Agreement to DPIF on 16 April 2007. The Group is not affiliated to DPI, DPIF or DPII other than by virtue

of the terms of the Master Franchise Agreement and the Know How Agreement. Since the first store opened

in the UK in 1985 and in Ireland in 1991, the Group has expanded to 501 stores (as at 30 December 2007)

in the UK and Ireland and is accessible to 50 per cent. of UK and 37 per cent. of Irish households. Of these

stores, 398 are located in England, 38 in Scotland, 19 in Wales, 12 in Northern Ireland and 34 in Ireland.

The Group’s total system sales for the 52 weeks ended 30 December 2007 amounted to £296.3 million,

representing growth of 23.4 per cent. over prior year sales. The Group’s operating profits from continuing

operations increased from £13.7 million to £18.3 million over the same period.

The Group is well placed to continue the rollout of this proven concept by the further development of the

franchise system. The Group’s target is to reach a total of 1,000 stores in the UK and Ireland by

approximately 2017, opening 50 new stores on an annual basis. The Directors believe that sales at existing

stores will be increased through the continued use of targeted marketing, the growth in the advertising

budget, the growth of the e-commerce channel and the superior product quality and service proposition.

2. The Business of the Group

(a) The Domino’s Pizza Concept

The Directors believe that the Group’s stores offer a focused menu of high quality pizza along with a

range of starters, desserts and drinks. Pizzas are “slapped out” by hand in store from a fresh dough

ball and topped with pizza sauce made from Portuguese vine-ripened tomatoes, real mozzarella

cheese, and a choice of high quality meats and fresh vegetables.

The Group is committed to the use of fresh produce, where possible, in the preparation of its pizzas

and the Group constantly reviews the quality of its ingredients with a view to maintaining the highest

standards and identifying opportunities to improve the nutritional content of its food. One particular

aspect of this commitment that the Directors believe distinguishes a Domino’s pizza from the majority

of its major competitors is the use of fresh, as opposed to frozen dough. The dough is prepared to

Domino’s own recipe at the Company’s commissaries in Milton Keynes, Naas and Penrith.

(b) Key Strengths

The Directors believe the key strengths of the Group are:

LR 2.1.2

LR 2.1.6

LR 2.1.7

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• its distinctive brand;

• an emphasis on consistently high quality product as a result of the stringent selection of high

quality ingredients and delivery across the portfolio of stores;

• an emphasis on service whereby stores aim to consistently deliver their product to the customer

in less than 30 minutes, through a focus on staff training, exacting brand standards and the use

of standardised systems and processes;

• its proven management team;

• a loyal customer base;

• its market leading position;

• its highly cash generative business model; and

• a scalable business concept that provides the Group with the opportunity to roll-out a further

50 new stores each year in order to reach the Group’s longer term goal of targeting 1,000 stores

in total in the UK and Ireland by approximately 2017.

(c) Master Franchise Agreement

The success of the Group’s business is substantially dependent on the rights included in the Master

Franchise Agreement. The Master Franchise Agreement sets out how DPG has to introduce, manage

and grow its franchised business in the UK and Ireland.

Under the Master Franchise Agreement, DPG enjoys rights to the Domino’s System in the UK and

Ireland indefinitely until all of the franchise agreements that DPG has with its franchisees (and itself

for corporate stores) have expired or otherwise been terminated, subject to DPIF’s rights on breach by

DPG. Therefore, so long as any franchise agreements with DPG remain in force, the Master Franchise

Agreement shall remain in force as well.

DPG is required to meet minimum store growth targets under the Master Franchise Agreement and

must confirm that these have been achieved on an annual basis. These minimum targets are for a net

27 store openings per annum until the development rights under this agreement are reviewed in 2016

and are materially below the Group’s own target of 50 store openings per annum. As stated in the

Company’s AGM announcement which was released on 24 April 2008, the Group is on track at this

stage to meet the target of 50 new stores for this year. The Group has opened on average 47 stores

each year over the past five years.

DPG is required to pay a continuing royalty fee to DPIF calculated on the total sales of all stores

(excluding VAT). The royalty fee payable to DPIF on a monthly basis is currently 2.7 per cent. of all

store sales (excluding VAT) for the preceding month. If the minimum store growth requirements are

not met, the royalty percentage increases by 0.3 per cent. to 3.0 per cent.

Breaches of the Master Franchise Agreement may lead to termination of the Master Franchise

Agreement and also the Know-How Agreement pursuant to which DPG is granted the right by DPIF

to establish and operate the commissaries. DPIF has the right to require the sale or assignment to it of

any stores or franchise agreements at their fair value on termination of the Master Franchise

Agreeement by DPIF due to a breach by DPG. DPG has never received such a notice and the Directors

consider that their compliance with the material terms of the Master Franchise Agreement is such that

this is highly unlikely.

(d) Franchisee Relationship

Franchisees are granted franchise agreements by DPG for ten years, with an option to renew at the

franchisee’s option. The renewed franchise agreement will be subject to further renewal in accordance

with the provisions in the standard terms at that time. Each franchise covers a defined geographical

area. There are currently approximately 144 franchisees in the Domino’s System operating an average

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of approximately 3.5 stores each. Currently there are 56 franchisees with three or more stores of which

43 franchisees hold four or more stores.

DPG supports its franchisees by providing comprehensive training, infrastructure and marketing

support and this has resulted in very low failure rates. The Directors believe that the economic model

on which the stores are based is attractive to franchisees as evidenced by historic sales growth (for

example, the average annual increase in like-for-like sales is 9.1 per cent. over the last five years) and

also by the number of franchisees with more than one store. It allows franchisees to recoup the initial

store investment cost within an average of less than three years. DPG encourages an open dialogue

with franchisees by holding regular meetings workshops, training and an annual awards banquet.

There are also a number of advisory committees at which franchisees consider such matters as

marketing, menu developments and operational issues.

(e) Commissaries

The Group has recently embarked on a major capital expenditure programme that will result in the

doubling in size of the Penrith commissary and the construction of a new state-of-the-art commissary

and headquarters on a newly acquired ten acre site in Milton Keynes which is scheduled to be in

operation during the latter part of 2009. The project cost of £25 million for the Milton Keynes project

will be incurred over the two financial years 2008 and 2009 and funded from a loan facility. The

expansion of the commissary in Penrith, which will cost £4 million during the current financial year,

will double that facility’s capacity. The Group also intends to expand the commissary operation in

Naas to meet the increasing demand for Domino’s Pizza in Ireland. These developments, combined

with the addition of a fourth commissary, which it is anticipated will be needed by 2012 in the UK,

will complete the infrastructure required for 1,000 stores.

3. Risk Factors

Prior to investing in the Ordinary Shares, prospective investors should consider the risks associated

therewith, including:

Specific risks relating to the business of the Group

The Group is highly dependant on the Master Franchise Agreement. The Master Franchise Agreement may

be terminated by DPIF if DPG is in breach of the terms of the agreement.

The Group may not be able to achieve its planned rate of expansion.

In relation to securing new locations, the Group cannot predict the timing or ultimate success of the site

selection and franchise process or any lease negotiations.

The failure of a franchisee could damage the Group’s reputation and brand.

The efforts of the Group or DPIF to protect the Domino’s brand could prove to be inadequate.

DPIF or the Group may from time to time receive negative publicity in relation to its own operations or the

operations and activities of one or more of its franchisees or particular stores.

A reduction in the volume of sales of the Group due to a failure in the Group’s manufacturing and delivery

processes would be likely to have an adverse affect on the profits, financial condition and prospects of the

Group.

The Group’s business is dependent on the successful operation and maintenance of various supply contracts

with third party suppliers in respect of raw materials required to make the pizzas and other food products

provided to customers at the Group’s stores.

Failure of the Group’s IT systems could impact the volume of the Group’s sales.

This expansion and future growth will increase demands on the Group’s management team, systems and

resources, financial controls and information systems.

5

General risks

The Group could be affected by general economic conditions and political and market factors beyond the

Group’s control.

The Group’s failure to comply with existing or increased regulations, or the introduction of changes to

existing regulations, could adversely affect its business, financial and other conditions, profitability and

results of operations.

As the Group is primarily dependent on a single product type, if consumer demand for pizza should decrease,

the Group’s business will suffer more than it may otherwise do so if it had a more diversified menu.

Difficulty in securing suitable management, sites for new stores, suitable franchisees and hourly employees,

could adversely affect the Group’s business, results of operations, financial condition or prospects.

Increases to menu prices may lead to a fall in demand from end customers.

The Group may also be subject to clean-up costs and liability for contaminated land or water pollution which

may exist on or under any of its properties or which may result from its operations.

Failure to comply with health and safety legislation could lead to fines on the Group and even the resultant

shutdown of certain stores or the Group’s commissaries.

There is a risk that franchisee employees may handle food in an unhygienic or unsafe manner so as to lead

to the possibility of customers contracting food borne illnesses or that premises or plant and machinery are

maintained in a way that gives rise to a risk to human health.

Sales by the stores are generally at their highest during winter and lower during summer months. The

Group’s sales experience moderate seasonal fluctuations.

The Group’s indebtedness could impact on the overall profitability of the Group’s business, result of

operations, financial condition and future prospects.

If the Group’s business does not generate sufficient cash flow from operations the Group’s financial

condition and results of its operations may be adversely affected.

If the Group’s existing stores do not increase sales in line with the Group’s targets, it is possible that the

Group will not achieve its targeted revenue growth.

The Group’s future success is substantially dependent on the continued services and continuing contributions

of its Directors, senior management and other key personnel and its ability to continue to attract and retain

highly skilled and qualified personnel.

The early termination of any of the Group’s leases due to non-compliance with the lease terms or the failure

to renew leases that have expired or default by licencees or assignees, could adversely affect the Group’s

profitability.

6

4. Selected Financial Information

The summary financial information set out below has been extracted or derived without material adjustment

from the financial information of the Group set out in Part VII of this document. Investors should read the

whole of the document and not rely on this summarised information.

52 weeks 52 weeks 52 weeks 52 weeksended ended ended ended

1 January 31 December 31 December 30 December2006 2006 2006 2007

UK GAAP UK GAAP IFRS IFRS£000 £000 £000 £000

System sales 200,678 240,115 240,115 296,349

Group revenue 81,660 94,965 94,965 114,891

Profit before taxation 11,169 14,292 14,189 18,576

Earnings per share – basic (pence) 5.08* 6.49* 6.23* 8.38*

Equity dividends paid (3,169) (4,234) (4,234) (5,816)

Cash and cash equivalents 5,885 10,262 10,262 14,629

Net indebtedness (4,141) (5,582) (5,582) (1,568)

* Adjusted for the share split of 3.2 ordinary shares of 1.5625 pence each for 1 ordinary share of 5 pence approved at the Annual

General Meeting held on 26 April 2007.

5. Strategy for Growth

The Directors intend to grow the Group’s business through the opening of 50 new stores each year without

diluting the quality associated with the Domino’s brand. The immediate growth will be generated by

increasing the number of stores with the longer term goal of targeting 1,000 in total in the UK and Ireland

by approximately 2017.

6. Reasons for moving to the Official List

Since its AIM Admission in 1999, the Group has expanded from 190 to 501 stores (as at 30 December 2007)

and as such the Directors believe that a move to the Official List and to trading on the main market of the

London Stock Exchange is now appropriate. In addition, the Directors believe that due to the higher number

of institutional investors who regularly trade in companies admitted to the Official List and the higher profile

of such companies, the Company will be better placed to achieve improved liquidity in the Ordinary Shares

following Admission.

7

PART II

RISK FACTORS

The Group’s business, financial condition or results of operations could be materially and adversely affectedby the risks described below. In such cases, the market price of the Ordinary Shares may decline due to anyof these risks and investors may lose all or part of their investment. Additional risks and uncertainties notpresently known to the Directors, or which the Directors currently deem immaterial, may also have anadverse effect upon the Group. In particular, the Group’s performance may be affected by changes in marketand/or economic conditions and/or in legal, regulatory and tax requirements. Investors should consider thefollowing risk factors together with all of the other information included in this document before they makea decision to purchase Ordinary Shares in the Company. This document also contains forward-lookingstatements that involve risks and uncertainties. Actual results could differ materially from those anticipatedin those forward-looking statements as a result of certain factors, including the risks faced by the Group,described below and elsewhere in this document.

1. RISKS SPECIFIC TO THE BUSINESS OF THE GROUP

1.1 Reliance on key contracts and business relationships

The Group is highly dependant on the Master Franchise Agreement. This agreement provides DPG

with the exclusive right to develop, own, operate and franchise Domino’s stores and to use and license

the use of the Domino’s System and the associated trademarks in the operation of stores in the UK,

Northern Ireland and the Republic of Ireland. Pursuant to the Know-How Agreement, DPG also has

the exclusive right for the duration of the Master Franchise Agreement to establish commissaries to

supply food, ingredients and other supplies and materials to all Domino’s stores in the territory under

the Master Franchise Agreement.

The term of the Master Franchise Agreement continues indefinitely until all of the franchise

agreements that DPG has with its franchisees (and itself for corporate stores) have expired or

otherwise been terminated. Therefore, so long as any franchise agreements with DPG remain in force,

the Master Franchise Agreement shall remain in force as well. Franchise agreements have an initial

term of ten-years and can be renewed at the franchisee’s option. The renewed franchise agreement will

be subject to further renewal in accordance with the provisions in the standard terms at that time. If

all franchisees and DPG itself in respect of corporate stores, do not renew their expired franchise

agreements and DPG cannot find suitable replacement franchisees, there would eventually come a

time when there are no franchise agreements in effect and therefore the term of the Master Franchise

Agreement would end. This would have an adverse effect on the financial condition and future

prospects of the Group.

The Master Franchise Agreement may be terminated by DPIF if DPG breaches the agreement. All

potential breaches of the Master Franchise Agreement are within the direct control of DPG.

Depending on the nature of the breach DPG may have the right to cure the breach within an allocated

time period. Should the Master Franchise Agreement be terminated, the business of the Group would

be seriously adversely affected.

If DPIF elects to terminate the Master Franchise Agreement for a breach by DPG of its obligations,

DPIF will be entitled to require the sale or assignment to it of any stores or franchise agreements. Any

such sale or assignment will be at a fair market value determined by an independent valuer but will

exclude any payment for goodwill. In addition, DPIF will be entitled to require the sale to it of the

commissaries from DPG or such portion of the commissaries as relates to the operation of Domino’s

stores. This could have a material adverse effect on the Group’s financial condition and business

operations.

DPG’s exclusive right to grant franchises for new Domino’s stores is dependant on the continuation

of the development term of the Master Franchise Agreement. The development term is a ten year

AI 6.4

8

PR 2.2.10(c)

AI 4

AI 12.2

AIII 2

renewable term that was last renewed with effect from 1 January 2007. The current development term

requires DPG to increase the number of stores in the territory by 27 stores per year over the next ten

years, from a base of 450 stores. If these targets are met or exceeded, DPG receives a royalty waiver

of 0.3 per cent., which effectively reduces the royalty it pays to DPIF from 3 per cent. to 2.7 per cent.

of system sales. The minimum number of stores required at the end of 2007 was 477 (450 plus 27)

whereas the actual number of stores was 501. DPG therefore had headroom of 24 stores, which is

carried forward against the following year’s target. If DPG were to continue opening stores at the rate

of 50 per year, the full requirement of the current ten year development term would be met in five and

a half years.

Prior to the expiry of the current development term in 2016, DPG may request an additional ten-year

development schedule which will establish the minimum number of stores to be opened and

maintained for years 2017 through 2027. This process requires both DPG and DPIF to submit

proposals and negotiate in good faith a new development term. Failing agreement, an expert would

decide which proposal was fairest. DPIF is not obliged to renew the development term (and DPG’s

exclusive rights to grant new Domino’s franchises) if DPG is in material breach of the Master

Franchise Agreement or has failed to open and maintain the total minimum stores. If there is a

shortfall in the total minimum stores at any year end and which is unremedied within 180 days after

DPG receives notice of a default from DPIF, then DPIF would have the right to terminate DPG’s

development rights and to undertake the development of additional Domino’s stores itself, or through

another party, subject to any prior rights granted by DPG to franchisees (and itself for corporate

stores). Although DPG would still serve as the franchisor to all of the existing stores, pursuant to the

Master Franchise Agreement, it would not be able to grant franchises for any new Domino’s stores.

In such a case, the royalty waiver of 0.3 per cent. of the royalty fee currently enjoyed by DPG pursuant

to the Master Franchise Agreement would fall away. Therefore any failure to meet the minimum total

stores would adversely impact on the financial condition and further prospects of the Group.

DPG has the right to terminate the Master Franchise Agreement on the winding up or liquidation of

DPIF. If DPG were to choose this course of action and were then not able to secure a continuing

intellectual property licence from the liquidator, the US courts or any purchaser of the DPIF assets,

DPG may not be able to use certain trademarks and other intellectual property relating to the

Domino’s brand. Although this would not prevent DPG from continuing as an independent business,

it would have to rebrand the stores and this may have a material adverse impact on the Group’s

revenues and profits, particularly in the short term.

The Group’s business is also highly dependant on its ability to establish and maintain arrangements

with suitable franchisees who adhere to the Group’s business model and strategy and successfully

promote the Domino’s brand. Some of these franchisees operate a large number of the Group’s stores

and are material to the Group’s business. There is a risk that such material franchisees may exert a

potential degree of influence over the Group and could put pressure on the Group to change or

abandon certain policies and procedures. There is also a risk that material franchisees may deviate

from the Group’s established business model or select alternative supplier’s to the Group’s

commissary sites (although the Group must first approve the products, the suppliers and their

standards). Any deviation by a material franchisee could have an adverse affect on the overall success

of the Group’s operations and could impact on the financial condition and future prospects of the

Group.

The Group has the right to terminate the franchise agreement with a franchisee who fails to comply

with prescribed specifications, standards, operating procedures or rules. A termination of the franchise

agreement for such reasons could adversely impact on the reputation of the Group and on the revenue

and profitability of the Group’s business.

1.2 Expansion opportunities for the Group

The Group may not be able to achieve its planned rate of expansion. If the Group is unable to open

new stores successfully, the Group’s future growth in revenue and profits may be adversely affected.

9

In order to expand the business of the Group successfully, new stores must be opened on schedule and

in a profitable manner. The Group currently plans to expand at a rapid rate, opening a targeted 50 new

stores per year. If the Group is unable to secure both suitable sites for the development of new stores

and suitable franchisees who are capable of effectively operating the sites and developing the brand

name, this is likely to impact on the ability of the Group to meet these expansion plans and to increase

revenues and operating income. This could adversely affect the Group’s financial condition or

prospects. Consequently, there can be no assurance that the Group will be able to achieve its

expansion goals, that new stores will be opened in a timely fashion or that new stores opened will be

profitable.

The Group’s ability to expand successfully will depend on a number of factors, many of which are

beyond the Group’s control. Some of these factors are highlighted under the paragraph 1.3 below

(Securing new locations). Other factors include, but are not limited to:

(a) the loyalty of the Group’s customers and the reliability of its market studies;

(b) consumer trends (including greater awareness of healthy eating) and the Group’s ability to

adapt its format and offering to take best advantage;

(c) obtaining and training qualified franchisees and personnel;

(d) creating consumer awareness of the franchisees’ stores in new markets;

(e) competition in the Group’s markets, in terms of the fast food sector, the home delivery sector,

and the convenience food sector (which includes non-branded and branded pizzas and ready-

meals offered by supermarket stores);

(f) sourcing and managing the cost of expansion of the Group’s principal food products and

identifying suitable supply and delivery resources; and

(g) general economic conditions.

Expansion of the Group may require considerable management time which may in turn inhibit

management’s ability to conduct the day to day business of the Group.

1.3 Securing new locations

In order to achieve the Group’s projected rate of new store growth, the Group must identify suitable

and available store locations and successfully negotiate and finalise the terms of store leases and

franchises at these locations. Due in part to the fact that sites selected must meet certain selection

criteria, the Group cannot predict the timing or ultimate success of the site selection and franchise

process or any lease negotiations. The Group is also dependant on securing successful planning

permission in respect of development of new store sites. Delays encountered in obtaining the

necessary permissions and in negotiating and finalising, to the Group’s satisfaction, the terms of store

leases may slow the Group’s actual rate of new store openings and cause a significant variance from

the Group’s projected growth rate. In addition, the Group’s scheduled rate of new store openings may

be adversely affected by other factors, some of which are beyond the Group’s control, including the

following:

(a) the availability and cost of suitable store locations for development;

(b) the Group’s ability to compete successfully for suitable store sites;

(c) the availability of adequate financing;

(d) fit-out costs;

(e) securing required governmental or local authority permits and approvals;

(f) any labour shortages or disputes experienced by outside contractors;

10

(g) the availability of adequately experienced franchisees; and

(h) general economic conditions.

As a result of these factors, and other inefficiencies typically associated with new stores, such as lack

of market awareness and the need to attract and train sufficient management and store personnel, the

Group anticipates that new stores will generally take a couple of months to reach planned operating

levels. A delay in establishing fully operative and efficient stores may therefore impact on the growth

of the Group’s revenue and profits.

1.4 Performance of franchisees and exposure to brand damage

The Group depends, in large part, on the Domino’s brand. The vast majority of stores are owned and

operated by franchisees who are responsible for delivering the high standards of the Domino’s brand

to customers. Whilst franchisees are required to operate within the Group’s standards for store

operation, they are given a degree of autonomy to ensure they operate in a way that suits their local

area. The Group provides that franchisees must adhere to strict quality, safety and image regulations

that the Group enforces through the implementation of training and careful monitoring, funded by

both the franchisees and the Group, and through store visits and frequent appraisals. Despite these

controls and absent a decision to remove such franchisees from its business, the Group may be unable

to prevent its franchisees from operating outside of the Group’s operational regulations, franchise

manual and business model.

The failure of a franchisee, and in particular, the failure of a material franchisee responsible for the

management of a significant number of stores, to operate within the Group’s business model in

relation to matters such as the appearance of the franchised store, the menu, and the training of staff

or cleanliness, could damage the Group’s reputation and adversely impact on the overall financial

performance of the Group. However, the Directors believe that the Group’s selective and rigorous

interviewing strategy ensures that only the most promising candidates capable of adhering to the

Group’s strict policies are selected as franchisees, and that this, when coupled with initiatives

launched by the Group to assist franchisees in achieving high standards expected in areas of health

and safety, employment practices and environmental health standards, operates to maintain very high

standards of quality across the franchisees’ stores, upholding the reputation of the Domino’s brand

and its products.

Franchisees, as independent business operators, may from time to time disagree with the Group’s

business strategy or with the Group’s interpretation of respective rights and obligations under the

relevant franchise agreements. This may lead to disputes between the Group and the franchisees,

which the Group expects to occur from time to time. To the extent the Group has disputes with one or

a number of franchisees, who may be able to exercise a degree of influence over the Group’s business

and pressurise the Group to resolve the disputes in their favour, this could have a material adverse

effect on the Group’s profitabilty, results of operations and/or cash flows. Any such disputes would

also have the effect of diverting the attention of the Group’s management from their normal business.

1.5 The reputation, value and protection of the Domino’s brand

The Group is reliant on the Domino’s brand and associated trademarks and is dependant, in part, on

the continued ability to use existing registered trademarks and service marks to promote its products,

increase brand awareness, and further develop the business of the Group. If the Group’s or DPIF’s

efforts to protect its intellectual property prove to be inadequate, the value of the Domino’s brand

could be harmed, which could adversely affect the Group’s business, results of operations, financial

condition and/or prospects.

Although the Domino’s brand name is a registered trademark in the United Kingdom and the Republic

of Ireland and the logo used to distinguish the Domino’s brand is protected, such intellectual property

rights might not be enough to prevent imitation of the Domino’s brand and concepts by others or to

prevent third parties from claiming violations of their trademarks and proprietary rights by the Group.

Furthermore, although the Group has sought to ensure that it has adequate controls over the use of the

AI 6.4

11

Domino’s trademark in the UK, it is possible that franchisees could take certain action resulting in

damage to the reputation of the Domino’s brand and intellectual property, this potentially impacting

on overall sales revenues.

For example, any wrongful trading by any franchisee of the Group or poor quality of products

associated with the Domino’s brand, could impact on consumer perception of the brand and affect

consumer demand for the Group’s products. In addition, any business failure of one or more of the

Group’s franchisees, and in particular the failure of a material franchisee, could adversely affect the

Group’s business, results of operations, financial condition or prospects, due to the association of

failure with the Group’s business model.

1.6 Negative publicity

DPII or the Group may from time to time receive negative publicity in relation to its own operations

or the operations and activities of one or more of its franchisees or particular stores. Due to the

branded nature of the Group’s business, any adverse publicity, whether disseminated in the UK or

Ireland or elsewhere in the world, associated with the Domino’s name may negatively affect the

Group’s reputation and impact on the overall success of operations, regardless of whether the

allegations are valid, whether they are limited to just a single location or whether the Group itself or

a particular franchisee is at fault.

For example, there is a risk that, despite the controls put in place by the Group for the monitoring of

franchisees’ operations, one or more of the Group’s franchisees (or, to a lesser extent any Domino’s

franchisee outside of the UK and Ireland) could trade in such a manner as to attract negative publicity.

In particular, adverse media coverage in relation to the failure by any franchisee to materially comply

with health and safety standards or the poor treatment of employees could have an adverse affect on

the reputation of the Domino’s brand, potentially resulting in a reduction of overall sales of the Group.

This could lead to an adverse impact on the financial performance and future prospects of the Group.

1.7 Timely manufacture and distribution by the Group’s commissary sites

One of the key functions of the Group’s business is the manufacture and distribution of all food items

used in the stores by the Group’s own commissaries based in Milton Keynes (UK), Penrith (UK), and

Naas (Ireland). The Group’s commissaries produce and co-ordinate the delivery of fresh food to every

store three times per week, at times when the stores are not in operation. Meeting such a specification

requires a significant logistical effort for which the Group needs the best facilities and systems. A

failure in the Group’s operational and delivery systems, shortages or interruption in the supply of food

(caused by weather or other conditions) and a resultant failure to maintain the frequency of deliveries

to the stores or the quality of produce delivered would be likely to impact on the ability of stores to

service the end customer, thus reducing overall volume of sales. A reduction in the volume of sales of

the Group due to a failure in the Group’s manufacturing and delivery processes would be likely to

have an adverse affect on the profits, financial condition and prospects of the Group.

The Directors however believe that the planned expansion of the Penrith commissary during 2008 and

the construction of a commissary on a newly acquired ten acre site in Milton Keynes (expected to be

operative in late 2009) will provide the Group’s business with significant additional capacity,

operating efficiency and resilience to help ensure that the high standards demanded by the Group’s

manufacture and delivery schedules will continue to be achieved.

1.8 Reliance on third party suppliers

The Group’s business is dependant on the successful operation and maintenance of various supply

contracts with third party suppliers in respect of raw materials required to make the pizzas and other

food products provided to customers at the Group’s stores. There can be no guarantee that the Group’s

suppliers will continue to deliver their products in a timely fashion and in accordance with the terms

of the supply contracts or that current suppliers will be able to continue to meet and service the

requirements of the Group as the Group’s business and need for increased resources continues to

expand.

12

There can be no guarantee that the Group will not perform such acts so as to breach its obligations

under any of its supply contracts, thereby potentially causing one or more suppliers to terminate their

arrangements, or that suppliers themselves will not breach their obligations to the Group or seek to

vary the terms of their respective supply contracts. There can also be no guarantee that the various

supply contracts will be renewed on expiry and if so renewed, that the terms of such renewals will be

favourable to the Group, nor can there be any guarantee that suppliers of the Group will remain

solvent, in business and fully operative throughout the term of their contracts with the Group, which

could have a material adverse effect on the operations and financial performance of the Group.

Failure by the Group’s suppliers or by the Group to meet obligations under the supply contracts would

be likely to impact on the Group’s ability to manufacture dough and deliver the required volumes of

Domino’s food products to the Group’s stores as scheduled. In particular, the raw materials required

by the Group can currently only be obtained from a small number of suppliers trading in the UK and

Ireland. There is a risk that one or more of these existing suppliers could discontinue operations,

which could adversely impact on the Group’s ability to source raw materials and meet the order

requirements of the Group’s stores. A failure to meet these requirements would impact on the ability

of the Group’s stores to service the end customer, thereby reducing the volume of products sold. This

would be likely to have a material adverse effect on the overall profits and financial prospects of the

Group. Furthermore, any shortage of raw materials in the market place generally could impact on the

prices imposed by the Group’s suppliers, making the cost of raw materials more expensive for the

Group which if passed on to franchisees could result in an increase in prices to the end customer

which may reduce demand and therefore affecting the Group’s overall financial performance.

1.9 Failure of IT systems and reliance on e-commerce

The Group’s business is becoming increasingly dependant on the generation of sales of its products

through the means of e-commerce, which continues to be the fastest-growing channel to the market

for the Group. In 2007, e-commerce, including online and SMS ordering, accounted for 16 per cent.

of the Group’s delivered pizzas sold in the UK. In the first sixteen weeks of 2008, e-commerce

accounted for 21 per cent. of the Group’s delivered pizzas sold in the UK. The Irish service, which

was launched in February 2007, is already delivering close to 5 per cent. of delivered sales.

The success of the Group’s sales through channels of e-commerce is highly dependant on the ability

of the Group to maintain operational and efficient IT systems in order to facilitate online sales and

orders made via SMS. A failure in the Group’s IT systems resulting in an inability for customers to

conveniently place orders online, via the internet or interactive television, or by SMS, could impact

on the overall volume of the Group’s sales. Furthermore, the Group’s stores utilise IT systems to place

delivery orders to the Group’s commissary sites and the Group also uses the same IT systems to

calculate the royalties payable by each of the stores. A failure in the Group’s IT systems would be

likely to impact on the efficiency of the ordering process which could result in a failure to provide the

required quantities of fresh food products to the various stores and on the Group determining royalties

payable by the stores. This could lead to an inability of the Group’s or the franchisee’s stores to meet

customer demand, which could adversely impact on the profitability, financial condition and prospects

of the Group, as customers may take their business to competitors of the Group offering more

accessible ordering services.

Similarly, a failure of the Group to keep up with changing developments and innovations in the e-

commerce, technological and marketing industries and an inability to adapt to changing consumer

needs and meet increased demands caused by the expansion of the Group’s business may also impact

on the Group’s future financial performance.

1.10 Strain of infrastructure and resources

The Group aims to open approximately 50 new stores in the current financial year and each

subsequent financial year until it reaches its target of 1,000 stores in total in the UK and the Republic

of Ireland. This expansion and future growth will increase demands on the Group’s management team,

systems and resources, financial controls and information systems. These increased demands may

13

adversely affect the Group’s ability to open new stores and to oversee its existing franchising

arrangements. If the Group fails to continue to improve its infrastructure or to manage other factors

necessary for the Group to meet its expansion objectives, its growth rate and operating results could

be adversely affected.

2. GENERAL RISKS

2.1 General economic conditions and political and market factors beyond the Group’s control

Many factors affect the level of consumer spending in the food retail and home delivery markets,

including interest rates, currency exchange rates, recession, inflation, deflation, political uncertainty,

the availability of consumer credit, taxation, stock market performance, unemployment, consumer

perceptions and other matters that influence consumer confidence.

While the Directors believe that a number of prevailing trends benefit the Group’s business (including

a population with increasingly greater disposable income who are cash rich and time poor, and an

increased trend of busier and more hectic lifestyles leaving limited time for home cooking), the

performance of the Group may decline during recessionary periods or in other periods where one or

more macro-economic factors, or potential macro-economic factors, negatively affect disposable

incomes, the level of consumer spending or the amount that consumers spend on eating out and

therefore this may lower revenues for the Group.

Movements in interest and inflation rates may impact on the Group’s cost of raising and maintaining

debt financing and may also affect consumer spending patterns. For example, an increase in interest

rates may cause consumers to tighten spending, leading to a possible reduction in spending and sales

in the convenience food and home delivery markets, this potentially impacting on the Group’s overall

sales, profits and financial prospects. The current economic climate of restricted consumer credit

availability could lead to a reduction in disposable income for many customers and this may have an

adverse impact on the Group’s business and profits as consumers may limit their spending on

recreational activities such as ordering in food from outside the home. Changes in such market

conditions may affect the ultimate value of the Company’s share price regardless of operating

performance.

The Group could be affected by unforeseen events outside of its control, including natural disasters,

terrorist attacks and change in government policy. In addition, factors such as local demographics and

type, number and location of competing businesses may adversely affect the performance of

individual stores.

2.2 Failure of the Group to comply with existing regulatory and legislative requirements and changesto the current regulatory and legislative framework within which the Group operates

The Group’s failure to comply with existing or increased regulations, or the introduction of changes

to existing regulations, could adversely affect its business, financial and other conditions, profitability

and results of operations.

The Group is subject to significant government regulation at a national and local level, including

various health, sanitation, planning permission, licensing, fire and safety standards and advertising

standards. The Group is also subject to various UK and EU regulations governing the Group’s

relationship with employees, including such matters as minimum wage requirements, the treatment of

part-time workers, employers’ National Insurance contributions, overtime and other working

conditions. There is a risk that the cost of compliance with these regulations to the Group may

increase over time, particularly if additional regulation is to be introduced by the UK government or

other regulatory bodies or if existing obligations are extended. Increased compliance costs are likely

to create an additional administrative burden and may impact on the overall profitability and financial

condition of the Group.

Furthermore, a failure of the Group or any of its franchisees to comply with one or more regulations

in place could result in the imposition of sanctions, including the closing of facilities for an

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AI 9.2.3

14

indeterminate period of time, recalling of certain products, fines, or third-party litigation, any of which

could have a material adverse effect on the Group’s business. Failure of compliance and consequent

sanctions, if widely publicised, may also negatively affect the Group by damaging the reputation of

the Domino’s brand.

A change in the VAT or other tax regimes applicable to the Group’s business may result in uncertainty,

disruption to operations and/or implementation costs which the Group may not be able to pass on to

end customers or which may lead to higher prices being charged to consumers, making ordering take-

out/home delivery food less attractive and leading to a decline in sales. In particular, the possible

introduction of a so-called ‘fat tax’ which would require customers to pay additional tax on the

purchase of food products with a high fat, salt and sugar content, may have an adverse impact on the

overall financial performance and profitability of the Group. This additional tax could apply to some

of the products offered by the Group and could therefore increase the end cost to customers who might

potentially turn to competitors of the Group offering healthier and less expensive alternatives. This

could adversely affect the overall sales of the Group and its financial condition and prospects.

In addition, changes to advertising laws which regulate the Group’s promotion of the Domino’s brand

and products in the UK and Northern Ireland may adversely affect the profitability and financial

performance of the Group. A growing concern amongst the government, media and general public

with increased obesity levels amongst children and teenagers in particular could result in the

imposition of tighter advertising restrictions affecting the Group’s business. For example, certain

pressure groups are asking the government to consider further restricting the advertisement of fast

food and food products with a high fat, sugar, salt and additive content to children and teenagers

through further limiting the content of television, internet, and radio advertisements to brand

promotion only and preventing the promotion of the food products themselves. If introduced, such

increased regulation may require the Group to alter its existing advertising strategy, and may also

require the Group to invest in and develop alternative means of promoting its products. If the Group

fails to comply with such regulation it may be subject to fines or sanctions. Further capital expenditure

may increase if it is necessary to take any remedial measures in this regard. Such increased regulation

could therefore have an adverse affect on both consumer brand and product awareness, leading to a

potential reduction in overall sales revenues of the Group, and on the amount of resources dedicated

to advertising strategy, thus impacting on the general financial condition and future prospects of the

Group’s business.

2.3 Change to consumer preferences and perceptions

Food service businesses are affected by changes in consumer tastes, national, regional and local

economic conditions and demographic trends. Market perception of the home delivery and

convenience food industry may change which could impact on the continued trading success of the

Group and future profitability. Whilst the home delivered and convenience food services offered by

the Group are presently popular, there can be no assurance that changes in consumer preference will

not affect its appeal in the future.

In particular, an increasing number of government and media initiatives to create increased awareness

of healthy eating could impact on the public’s perception of the home delivered and convenience food

industry, which could adversely affect the Group’s business, financial condition or prospects, through

resulting decreased sales. Customers of the Group may turn to competitors of the Group offering

healthier convenience food options such as lower calorie ready meals. If the Group is unwilling or

incapable of adapting its products to successfully meet changes in consumer tastes and trends, its

business and financial condition may be materially adversely affected. As the Group is primarily

dependent on a single product type, if consumer demand for pizza should decrease, the Group’s

business will suffer more than it may otherwise do so if it had a more diversified menu.

2.4 Market competition

The Group’s stores compete with a wide variety of branded and non-branded home delivery and

convenience food businesses, some of which may offer higher amenity levels or lower prices and/or

AI 9.2.3

15

are backed by greater financial and operational resources. The Group may experience increased

competition from existing or new companies. Existing competitors of the Group include other

takeaway and pizza delivery stores as well as supermarkets offering a selection of convenience food

products such as ready meals and branded and non-branded pizzas. Some of these competitor products

may be positioned as a healthier alternative to the products sold in the Group’s stores. The Group’s

stores may not be successful in competing against any or all of these alternatives. A sustained loss of

customers to competitors or an increased consumption of and consumer preference for supermarket

bought ready meals could have a material adverse effect on the Group’s operations and financial

prospects.

The Group’s competitors with greater resources may be able to react more effectively to changes in

pricing, marketing and other factors affecting the home delivery and convenience food sector. The

Group’s franchisees also compete with other businesses for suitable management and employees. If

the Group is unable to maintain its competitive position, its’ franchisees could experience downward

pressure on prices, lower demand for their products, reduced margins, an inability to take advantage

of new business opportunities and a loss of market share, all of which could adversely affect the

Group’s business. The Group also competes with other businesses for management and hourly

employees and suitable real estate sites and qualified franchisees. Difficulty in securing suitable

management, hourly employees, sites for new stores and suitable franchisees could adversely affect

the Group’s business, results of operations, financial condition or prospects.

2.5 Increased costs of raw materials, labour and other costs

The overall profits and financial prospects of the Group are dependant in part on the cost of raw

materials. The prices of commodities such as wheat and cheese, all of which are essential ingredients

in the production of the Group’s pizzas and other food products, can be volatile. During 2007, the

Group experienced unprecedented increases in prices, which had an effect on the Group and its

franchisees, due to the need to devote increased management time and resources to the purchase of

raw materials. This was exacerbated by one of the Group’s cheese supplier entering into receivership

and the consequential end of the Group’s fixed priced contract. As a result, new supply arrangements

saw the cost of cheese increase by over 50 per cent. during the course of 2007.

Further factors such as increased labour and energy costs may also adversely affect operating costs.

The Group seeks to pass on increases in these costs to the franchisees who are able, if they so wish,

to reflect these increases in their menu prices. However, there is a risk that further increases to menu

prices may lead to a fall in demand from end customers, especially if other operators of home delivery

or take away stores or other providers of convenience food products do not increase their prices in a

similar fashion. Further there can be no guarantee that the Group will be able to pass these costs on

in the future. This could adversely impact on the overall financial performance and future prospects

of the Group. However, increases in raw material prices during 2007 which, for the most part, were

passed on to the Group’s franchisees, who in turn put up their prices, appear not to have had an

adverse impact on demand as witnessed by the continued momentum in Group sales since these

increases.

2.6 Environmental

The Group’s operations are subject to environmental regulation (including requirements to obtain

environmental permits). Such regulations cover a wide variety of matters, including, without

limitation, waste management, obligations in relation to packaging waste, air emissions and trade

effluent control and noise and odour control. The Group may also be subject to clean-up costs and

liability for contaminated land or water pollution which may exist on or under any of its properties or

which may result from its operations.

Enforcement and legislative authorities are likely, over time, to adopt stricter environmental standards

than those now in effect and move towards more stringent enforcement of those laws and regulations.

The costs of any clean-up or rehabilitation may also be higher than expected. Such higher costs or

AI 9.2.3

AI 8.1

AI 8.2

16

breach of any environmental obligations could result in penalties and civil liabilities and/or

suspension of operations, any of which could adversely affect the Group’s business, financial

conditions or prospects.

The introduction of more stringent environmental regulations, including regulations associated with

indirect carbon and noise emissions, may result in the Group having to pay increased building costs

in relation to the sites it develops. The Group will look to pass on any increased regulatory costs to its

franchisees through increasing rental or service charge costs. Franchisees may however be unwilling

to accept any increased costs and may look to expand by moving outside of the Group’s business

model. An inability to pass on any increased regulatory costs or the loss of franchised stores as a result

of such increases (and in particular the loss of any material franchisee), would be likely to impact on

the financial performance, prospects and overall profitability of the Group.

2.7 Health and safety

The Group’s activities are and will continue to be subject to health and safety regulations. Health and

safety legislation is likely to evolve in a manner which will require stricter standards and enforcement,

increased fines and penalties for non-compliance and a heightened degree of responsibility for

companies and their directors and employees. Failure by the Group to comply with such requirements

in respect of its own operations in its commissaries may result in fines, penalties, closure of facilities

and/or litigation which could adversely affect the Group’s reputation and business, results of

operations, financial condition or prospects.

For example, should asbestos be found at any of the Group’s stores or commissary sites, employees

or others may bring claims against the Group in respect of any resultant health problems suffered. In

addition, local authorities may impose remedial requirements or close down facilities where they

represent a risk to health. Prosecutions may also be brought which could lead to fines on the Group.

Any employee claims or fines levied on the Group or any resultant shutdown of contaminated stores

or in particular of the Group’s commissaries, would be likely to have a material adverse affect on the

Group’s reputation, financial condition, result of operations and future prospects.

2.8 Illness associated with the Group’s food products

The Group can give no assurance that its internal controls and training will be fully effective in

maintaining adequate food health and safety standards or that franchisees of the Group will fully

adhere to and implement the Group’s standard controls and procedures in order to ensure that the

contamination of its food products is entirely prevented. There is a risk that franchisee employees may

handle food in an unhygienic or unsafe manner so as to lead to the possibility of customers contracting

food borne illnesses or that premises or plant and machinery are maintained in a way that gives rise

to a risk to human health. Illness resulting from the consumption of food products sold by the Group’s

stores, or the recall of products even where no illness has been caused, could subject the Group to

third party litigation and if publicised on a large scale, reduce the Group’s turnover.

Furthermore, the actions of third-party food suppliers outside of the Group’s control could fail to meet

required health and safety standards so as to lead to the contamination of the Group’s food products.

New bacterial strains resistant to the Group’s current precautions may develop in the future, or

illnesses with long incubation periods could arise that could give rise to claims or allegations on a

retroactive basis. One or more instances of poor food management practices or illness arising from

food prepared in franchisee stores which, if highly publicised, could adversely affect the Group. If any

person becomes ill, or alleges illness as a result of eating food prepared by the Group or any franchisee

of the Group, the Group may be liable for damages, or be subject to regulatory action or adverse

publicity (as described at paragraph 1.5 (The reputation, value and protection of the Domino’s brand)above). Such brand damage and negative publicity could adversely affect the Group’s business,

financial, prospects and results of operations. This risk exists even if it were later determined that the

illness was wrongly attributed to one of the Group’s stores.

AI 9.2.3

17

2.9 The Group’s sales are subject to seasonality

The Group’s sales experience moderate seasonal fluctuations. Overall, sales by the stores are

generally at their highest in the winter and lower during the summer months, due to a reduced demand

for hot food during warmer periods. In the past, particularly hot summers have impacted on the

Group’s financial performance. It follows that future changes to the climate in the UK and Ireland

such as increasing temperatures and prolonged and warmer summers, may have an adverse impact on

the Group’s revenues, sales and financial performance.

2.10 Financing arrangements

The Group has a moderate amount of debt currently, but may incur additional borrowings from time

to time. The Group may be unable to service interest payments levied on such borrowings and

principal repayments or to comply with other requirements of its financing arrangements, rendering

borrowings (subject to various grace periods) capable of being declared immediately repayable in

whole or in part, together with any associated cost. In addition, a decline in the value of the Group’s

assets may result in a breach of the loan to value and/or the debt service cover ratios specified in the

Group’s financing arrangements, thereby causing an event of default with the result that the lenders

could enforce their security and take possession of the Group’s assets. Any cross-default provisions

would magnify the effect of an individual default, which could result in a substantial loss for the

Group.

The Group’s indebtedness could:

(a) require the Group to dedicate much of its cashflow to servicing repayments, this reducing the

availability of cashflow to fund its working capital, capital expenditures, service development

and other general corporate purposes;

(b) limit the Group’s ability to obtain additional financing to fund future working capital, capital

expenditures, service development and other general corporate purposes;

(c) increase the Group’s vulnerability to adverse economic and industry conditions; or

(d) limit the Group’s flexibility in planning for, or reacting to changes in its business, in the home

delivery and convenience food industry, and in the economy generally,

thereby impacting on the overall profitability of the Group’s business, result of operations, financial

condition and future prospects.

This risk factor does not in any way prejudice or qualify the working capital statement set out in

paragraph 19 of Part VIII of this document as it is only a risk outside the 12 month period to which

the working capital statement relates.

2.11 Cashflow

The Group’s ability to make principal and interest payments on its indebtedness and dividend

payments will depend on its ability to generate cash in the future. This is, to a certain extent, subject

to general economic, financial, competitive, regulatory, legislative and other factors that are beyond

the Group’s control. If (amongst other things) the Group’s business does not generate sufficient cash

flow from operations or if anticipated cost savings and operating improvements are not realised on

schedule, the Group’s financial condition and results of its operations may be adversely affected.

2.12 Strategic factors may affect operations

The level of growth in revenues from the Group’s stores will be a critical factor affecting profit

growth. The Group’s ability to increase revenue depends in part on the ability of franchisees to grow

sales by offering good service, attractive menu items and competitive prices. If the Group’s existing

stores do not increase sales in line with the Group’s targets, it is possible that the Group will not

achieve its targeted revenue growth or that the change in revenue may be negative and could adversely

impact on the Group’s overall profit growth and financial results.

18

2.13 Dependence on key personnel and franchisees

The Group’s future success is substantially dependent on the continued services and continuing

contributions of its Directors, senior management and other key personnel and its ability to continue

to attract and retain highly skilled and qualified personnel. There can be no assurance that the

Company will be able to retain its Directors, senior management or other key personnel. The

individual success of each of the Group’s stores substantially depends on the Group’s ability to attract

and retain suitable franchisees, who in turn need to attract and retain qualified store managers and

staff. The loss of the services of any of the Directors or the Company’s senior management, key

personnel, or existing franchisees (in particular material franchisees operating a number of the

Group’s stores) could adversely affect the Group’s business, results of operations, financial condition

or prospects.

2.14 Reliance on leased premises and failure to renew or extend the terms of any of the Group’s leases

The premises on which the Group’s and its franchisees’ stores are situated within the UK and

Republic of Ireland are generally leased. The early termination of any of the Group’s leases due to

non-compliance with the lease terms or the failure to renew leases that have expired or default by

licencees or assignees, could adversely affect the Group’s profitability.

The Group’s operating performance depends in part on its ability to secure leases for its stores in

appropriate locations at rents it believes to be cost effective for that business. The Group will typically

take a twenty year lease subject to five yearly upward only rent reviews to the prevailing market rent,

and the store will then be sublet (on the same terms and conditions) to an appropriate franchisee for

a ten year term to match that of his franchise agreement. Personal guarantees are required in the event

that the sublease and franchise agreement are taken in the name of a company. The franchise

agreement has an automatic right of renewal upon expiry, which would also trigger the renewal of the

sublease, up to the unexpired term of the superior lease.

Barring the failure of a franchisee’s business, the Group’s exposure is thus limited to those periods

that a store is vacant, either because it is awaiting a franchisee or because it has been decided that it

is an unprofitable trading location and the lease has yet to be surrendered or assigned. The franchising

nature of the Group’s operations means that it becomes readily aware of any financial issues affecting

a franchisee and enables it to take immediate measures to minimise any potential losses, through

action such as terminating the sublease and franchise agreement and selling the store to another

franchisee.

The nature of the Group’s property portfolio, which is concentrated in properties in secondary

locations with local landlords, means that although it believes that it will be able to renew its leases

as they expire, it can offer no assurances in this respect.

2.15 Past performance is not an indicator of future performance

This document includes information about the historical financial performance of the Group. Past

performance is not however a guarantee as to the future financial performance of the Company and

the Group, which may be materially different from its past performance and which may be adversely

affected by, amongst other things, the risk factors described in this Part II.

2.16 Fluctuations in the value of the Euro

Exchange rate fluctuations could have an adverse effect on the Group’s operations. The Group’s sales

in the Republic of Ireland will be made in Euros. Euros may become less valuable prior to conversion

to Pounds Sterling as a result of exchange rate fluctuations. Unfavourable currency fluctuations could

result in lower revenues for the Group, on a Pounds Sterling basis, from such customers and

franchisees.

19

3. RISKS ASSOCIATED WITH THE ORDINARY SHARES

3.1 Maintaining an active public market for the Ordinary Shares post Admission

Although the Company has applied for Admission, and it is expected that these applications will be

approved, the Group can give no assurance that an active trading market for the Ordinary Shares in

the Company will develop or, if developed, will be sustained following Admission. If an active trading

market is not developed or maintained, the liquidity and trading price of the Ordinary Shares could be

adversely affected.

3.2 Share price volatility and liquidity

The share price of quoted companies can be highly volatile and shareholdings illiquid. The price at

which the Ordinary Shares are quoted and the price which investors may realise for their Ordinary

Shares will be influenced by a large number of factors, some of which are specific to the Group and

its operations and some of which may affect quoted companies generally. These factors could include

the performance of the Group, large purchases or sales of the Ordinary Shares, legislative changes and

general economic, political or regulatory conditions.

3.3 Dividends

As a holding company, the Company’s ability to pay dividends will depend upon the level of

distributions, if any, received from its operating subsidiaries and the level of cash balances. There can

be no guarantee that the Company will have sufficient distributable reserves after the receipt of

amounts from its subsidiary companies. Therefore, there is no guarantee that the Company will be in

a position to pay out dividends to investors.

3.4 Additional future capital

The Group’s capital requirements depend on numerous factors, including cash generated from the

Group’s stores. If its capital requirements vary materially from its current plans, the Group may

require further financing. Any additional equity financing may be dilutive to Shareholders and debt

financing, if available, may involve restrictions on financing and operating activities. In addition, there

can be no assurance that the Group will be able to raise additional funds when needed or that such

funds will be available on terms favourable to the Group. This risk factor does not in any way

prejudice or qualify the working capital statement set out in paragraph 19 of Part VIII of this

document as it is only a risk outside the 12 month period to which the working capital statement

relates.

3.5 Taxation

Any change in the Company’s tax status or in taxation legislation could negatively affect the

Company’s ability to provide returns to Shareholders. Statements in this document concerning the

taxation of investors in Ordinary Shares are based on current tax law and practice which is subject to

change. The taxation of an investment in the Company depends on the individual circumstances of the

relevant investor.

3.6 Future sales of Ordinary Shares

The Company is unable to predict when and if substantial numbers of Ordinary Shares will be sold in

the open market following Admission. Any such sales, or the perception that such sales might occur,

could result in a material adverse effect on the market price of the Ordinary Shares.

4. FORWARD LOOKING STATEMENTS

Some of the statements in this document include forward looking statements which reflect the Directors’

current views with respect to financial performance, business strategy, plans and objectives of management

for future operations (including development plans relating to the Group’s products and services). These

statements include forward looking statements both with respect to the Group and the sectors and industries

in which the Group operates. Statements which include the words “expects’’, “intends’’, plans’’, “believes’’,

20

“projects’’, “anticipates’’, “will’’, “targets’’, “aims’’, “may’’, “would’’, “could’’, “continue’’ and similar

statements are of a future or forward looking nature.

All forward looking statements address matters that involve risks and uncertainties. Accordingly, there are

or will be important factors that could cause the Group’s actual results to differ materially from those

indicated in these statements. These factors include but are not limited to those described in the part of this

document entitled “Risk Factors’’, which should be read in conjunction with the other cautionary statements

that are included in this document. Any forward looking statements in this document reflect the Directors’

current views with respect to future events and are subject to these and other risks, uncertainties and

assumptions relating to the Group’s operations, results of operations, growth strategy and liquidity. Given

these uncertainties investors are cautioned not to place any undue reliance on such forward looking

statements.

These forward looking statements speak only as of the date of this document. Subject to any obligations

under the Prospectus Rules, the Listing Rules, Disclosure Rules and Transparency Rules or as otherwise

required by law, the Company undertakes no obligation to publicly update or review any forward looking

statement, whether as a result of new information, future developments or otherwise. All subsequent written

and oral forward looking statements attributable to the Group or individuals acting on behalf of the Group

are expressly qualified in their entirety by this paragraph. Prospective investors should specifically consider

the factors identified in this document which could cause actual results to differ before making an investment

decision.

21

PART III

DIRECTORS, SECRETARY, REGISTERED OFFICE AND ADVISERS

Directors Stephen Hemsley (Executive Chairman)Colin Halpern (Non-Executive Vice Chairman)Christopher Moore (Chief Executive Officer)Lee Ginsberg (Chief Financial Officer)Nigel Wray (Non-Executive Director)John Hodson (Independent Non-Executive Director)Michael Shallow (Senior Independent Non-Executive Director)Dianne Thompson (Independent Non-Executive Director)

Company Secretary Adam Batty

Registered Office Domino’s House

Lasborough Road

Kingston

Milton Keynes

MK10 0AB

Sponsor and Joint Broker Numis Securities Limited

The London Stock Exchange Building

10 Paternoster Square

London EC4M 7LT

Joint Broker Altium Capital Limited

30 St James Square

London SW1Y 4AL

Solicitors to the Company Mayer Brown International LLP

11 Pilgrim Street

London EC4V 6RW

Solicitors to Numis Travers Smith

10 Snow Hill

London EC1A 2AL

Ernst & Young LLP

400 Capability Green

Luton LU1 3LU

Bankers Barclays Bank plc

Eagle Point

1 Capability Green

Luton LU1 3US

Registrars Capita Registrars Limited

Bourne House

34 Beckenham Road

Beckenham

Kent BR3 4TU

AIII 4.3

AI 2.1Reporting Accountants

and Auditor

AIII 10.1

AI 1.1

AIII 1.1

22

PART IV

DEFINITIONS

The following definitions apply throughout this document, unless the context otherwise requires:

“1985 Act” the Companies Act 1985 of England and Wales, as amended from

time to time;

“1999 Schemes” the Approved Scheme and the Unapproved Scheme;

“2006 Act” the Companies Act 2006 of England and Wales, as amended from

time to time;

“2001 Regulations” the Uncertified Securities Regulations 2001, as amended or

replaced from time to time and any subordinate legislation or rules

made under them for the time being in force;

“Admission” admission of the Ordinary Shares to trading on the Official List of

the Financial Services Authority and to trading on the London Stock

Exchange’s main market for listed securities;

“AGM” an Annual General Meeting of the Company;

“AIM” the AIM market operated by the London Stock Exchange;

“AIM Rules for Companies” the rules and guidance for companies whose shares are admitted to

trading on AIM entitled “AIM Rules for Companies” published by

the London Stock Exchange, as amended from time to time;

“Approved Scheme” Domino’s Pizza Share Option (Approved) Scheme (as amended);

“Articles” the amended articles of association of the Company as adopted by

a special resolution of members passed on 24 April 2008;

“Auditor” an auditor of the Company;

Ernst & Young LLP, of 400 Capability Green, Luton LU1 3LU;

“Barclays” Barclays Bank plc;

“Board” the board of directors of the Company from time to time, including

any duly constituted committee thereof;

“Business Day” a day on which banks are open for business in London;

“Capita” Capita Registrars Limited, whose registered office is at The

Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, the

Company’s registrars;

“Certificated Share” a share which is not for the time being an Uncertificated Share;

“Combined Code” The Combined Code on Corporate Governance (June 2006);

“Companies Acts” the 1985 Act and the 2006 Act, as amended from time to time;

“Company” Domino’s Pizza UK & IRL plc, a company registered in England

and Wales with registered number 03853545 having its registered

office at Domino’s House, Lasborough Road, Kingston, Milton

Keynes, MK10 0AB;

“Auditors”, “E&Y”, or

“Reporting Accountants”

AIII 4.1

23

“Connected Person” has the meaning given in section 252 of the 2006 Act;

“CREST” the computerised settlement system operated by Euroclear UK &

Ireland Limited to facilitate the transfer of title to shares in

uncertificated form;

“CREST Regulations” the Uncertified Securities Regulations 2001 as amended or replaced

from time to time and any subordinate legislation or rules made

under them for the time being in force;

“Daily Official List” the Daily Official List of the London Stock Exchange;

“Direction Notice” a notice issued under the 2006 Act, following a failure to comply

with a Disclosure Notice issued pursuant to section 793 of the 2006

Act;

“Directors” the directors of the Company as at the date of this document whose

names are set out in Part III of this document;

“Disclosure Notice” a notice served pursuant to section 793 of the 2006 Act;

the disclosure and transparency rules made by the Financial

Services Authority under section 73A of the Financial Services and

Markets Act 2000;

“Domino’s” the brand name owned by Domino’s IP Holder LLC which the

Group has the right to use in the UK and the Republic of Ireland

under the Master Franchise Agreement;

“Domino’s System” the comprehensive system and business model developed by DPII

and operated by the Group for the sale of pizza, including carry out

and delivery services, specially designed equipment, recipes,

methods, procedures and designs;

“DP Capital” DP Capital Limited, a wholly owned Subsidiary of the Company;

“DPD” DP Group Developments Limited, a wholly owned Subsidiary of

the Company;

“DPG” Domino’s Pizza Group Ltd, a wholly owned Subsidiary of the

Company;

“DPGHL” DPG Holdings Limited, a wholly owned Subsidiary of the

Company;

“DPI” Domino’s Pizza, Inc.;

“DPIF” Domino’s Pizza International Franchising Inc.;

“DPII” Domino’s Pizza International, Inc.;

“DPP (Ireland)” DP Pizza Limited, a wholly owned Subsidiary of the Company;

“DPR” DP Realty Limited, a wholly owned Subsidiary of the Company;

“DTL” Dough Trading Limited;

“EBT” Domino’s Pizza UK & IRL plc Employee Benefit Trust;

“EMI Scheme” Domino’s Pizza UK & IRL plc 2003 Enterprise Management

Incentive Scheme (as amended);

“Disclosure Rules and

Transparency Rules”

24

“EPS” earnings per share;

the Financial Services Authority of the UK;

“franchisee” any franchisee who has been granted a franchise by DPG pursuant

to the Master Franchise Agreement;

“FSMA” the Financial Services and Markets Act 2000 of England and Wales,

as amended and supplemented from time to time;

“gross dividend” in respect of an individual shareholder’s liability to income tax, the

sum of the dividend and tax credit received;

“Group” the Company and its Subsidiaries;

“HMRC” HM Revenue & Customs;

“HS Real” HS Real Company LLC, a company owned by a discretionary trust,

the beneficiaries of which are the adult children of Colin Halpern;

“IFRS” International Financial Reporting Standards;

“IFS” International Franchise Systems, Inc.;

“Ireland” the Republic of Ireland;

“Know-How Agreement” know-how and technical knowledge licence and management

agreement made between (1) DPII and (2) DPG, dated

29 December 1993 as subsequently assigned by DPII to DPIF on

16 April 2007;

“Listing Rules” the listing rules made by the Financial Services Authority under

section 73A of the Financial Services and Markets Act 2000;

“London Stock Exchange” London Stock Exchange plc;

“Master Franchise Agreement” the master franchise agreement made between (1) DPII and (2)

DPG, dated 29 December 1993 (as amended and supplemented by

agreements dated 28 September 1995, 26 May 1997, 24 June 1997,

31 August 1998, 15 September 1999, 21 July 2003 and

20 September 2006) as subsequently assigned by DPII to DPIF on

16 April 2007;

“Memorandum of Association” the memorandum of association of the Company;

“Merchant Agreement” the agreement made between (1) DPG and (2) Midland Bank plc,

dated 23 September 1999;

“NAF” the National Advertising Fund of the Group;

“NatWest” National Westminster Bank plc;

“Non-Executive Directors” the non-executive directors of the Company as at the date of this

document who are identified as such in Part III of this document;

“Numis” Numis Securities Limited, the Company’s Sponsor;

“Official List The Official List of the Financial Services Authority;

“Old options” Options held over shares in DPG pursuant to the Old Scheme;

“Financial Services Authority” or

“FSA”

25

“Old Scheme” Domino’s Pizza Group Limited (Unapproved) Share Option

Scheme;

“Option” or “Options” any option to purchase Ordinary Shares in the Company, granted by

the Company under the Share Schemes;

“Ordinary Share” each ordinary share of 1.5625p, issued and to be issued, in the

capital of the Company;

“Placing” the admission of the Company to trading on AIM on 24 November

1999;

“Prospectus Rules” the prospectus rules made by the Financial Services Authority under

section 73A of the Financial Services and Markets Act 2000;

“Registrar” Capita Registrars Limited;

“Regulatory Information Service” a Regulatory Information Service that is approved by the FSA and

that is on the list of regulatory information service providers

maintained by the FSA;

“Relevant Shares” shares subject to and identified in a Direction Notice delivered by

the Company pursuant to the 2006 Act;

“Relevant System” any computer-based system, and procedures, permitted by the 2001

Regulations and the rules of the UK Listing Authority, which enable

title to units of a security to be evidenced and transferred without a

written instrument and which facilitate supplementary and

incidental matters;

“Rollover options” options over shares in the Company held under the Unapproved

Scheme granted to holders of Old options under the Old Scheme in

exchange for the release of their rights over shares in DPG;

“Royalty Fee” the royalty fee paid by DPG to DPIF pursuant to the terms of the

Master Franchise Agreement;

“RPI” Retail Price Index;

“SDRT” Stamp Duty Reserve Tax;

“section 80 authority” authority granted to the Directors, pursuant to section 80 of the

1985 Act, to allot Ordinary Shares and other relevant securities (as

defined in section 80(2) of the 1985 Act);

“Seventh Amendment Agreement” the seventh amendment agreement to the Master Franchise

Agreement, made between (1) DPII and (2) DPG, dated

20 September 2006;

“Shareholders” holders of Ordinary Shares;

“Sharesave Scheme” the sharesave scheme implemented by the Group on 29 December

2005 (as amended);

“SMS” Short Message Service;

“Sponsor” Numis, acting as sponsor to the Company pursuant to the

requirements of the Listing Rules;

26

“Sponsor’s Agreement” the sponsor’s agreement made between (1) the Company and (2)

Numis, dated 14 May 2008, pursuant to which Numis agrees to act

as Sponsor of the Company;

“Subsidiary” or “Subsidiaries” a subsidiary and/or subsidiary undertaking of the Company as each

of those terms is defined in the 2006 Act;

“Territory” the UK and the Republic of Ireland;

“UK” or “United Kingdom” the United Kingdom of Great Britain and Northern Ireland;

“Unapproved Scheme” Domino’s Pizza Share Option (Unapproved) Scheme (as amended);

“Uncertificated Share” a share or any other security of the Company title to which is

evidenced and which may be transferred by the use of a Relevant

System;

“US Dollars” the currency of the United States of America; and

“VAT” Value Added Tax.

27

PART V

INFORMATION ON THE GROUP

1. Introduction

The Domino’s brand was founded in the United States of America in 1960 by Tom Monaghan. Since then,

that business has grown into a global network of over 8,000 stores in more than 50 countries, employing

around 170,000 staff and involving over 2,000 franchises.

DPG is the master franchisee in the UK and Ireland of Domino’s Pizza, one of the world’s leading home

delivery pizza brands. Since the business of the Group was purchased from DPII in 1993, it has developed

to become the leading UK home delivery pizza brand. DPII subsequently assigned the Master Franchise

Agreement to DPIF on 16 April 2007. The Group is not affiliated to DPI, DPIF or DPII other than by virtue

of the terms of the Master Franchise Agreement and the Know How Agreement. Since the first store opened

in the UK in 1985 and in Ireland in 1991, the Group has expanded to 501 stores (as at 30 December 2007)

in the UK and Ireland and is accessible to 50 per cent. of UK and 37 per cent. of Irish households. Of these

stores, 398 are located in England, 38 in Scotland, 19 in Wales, 12 in Northern Ireland and 34 in Ireland.

The Group’s total annual system sales for the 52 weeks ended 30 December 2007 amounted to £296.3

million, representing growth of 23.4 per cent. over prior year sales. The Group’s operating profits from

continuing operations increased from £13.7 million to £18.3 million over the same period.

The Group is well placed to continue the rollout of this proven concept by the further development of the

franchise system. The Group’s target is to reach a total of 1,000 stores in the UK and Ireland by

approximately 2017, opening 50 new stores on an annual basis. The Directors believe that sales at existing

stores will be increased through the continued use of targeted marketing, the growth in the advertising

budget, the growth of the e-commerce channel and the superior product quality and service proposition.

2. The Business of the Group

(a) The Domino’s Pizza Concept

The Directors believe that the Group’s stores offer a focused menu of high quality pizza along with a

range of starters, desserts and drinks. Pizzas are “slapped out” by hand in store from a fresh dough ball

and topped with pizza sauce made from Portuguese vine-ripened tomatoes, real mozzarella cheese, and

a choice of high quality meats and fresh vegetables.

The Group is committed to the use of fresh produce, where possible, in the preparation of its pizzas and

the Group constantly reviews the quality of its ingredients with a view to maintaining the highest

standards and identifying opportunities to improve the nutritional content of its food. One particular

aspect of this commitment that the Directors believe distinguishes a Domino’s pizza from the majority

of its major competitors is the use of fresh, as opposed to frozen dough. The dough is prepared to

Domino’s own recipe at the Company’s commissaries in Milton Keynes, Naas and Penrith.

The Group’s target is to safely deliver its product to its customers within 30 minutes of an order being

placed. To accomplish this, the focus in-store is on efficiency and speed of process. Since 2000, the

Group has reduced the average time to make a pizza by one minute (which represents a 22 per cent.

improvement) and the average time to get the customers order out of the door and on its way by two

minutes (which represents a 14 per cent. improvement). The average delivery leaves the store within

13.5 minutes after the order has been placed.

(b) Key Strengths

The Directors believe the key strengths of the Group are:

• its distinctive brand;

• an emphasis on consistently high quality product as a result of the stringent selection of high

quality ingredients and delivery across the portfolio of stores;

AI 6.2

AI 6.1.1

AI 6.1.2

AI 6.4

AI 5.1.5

AI 6.5

28

• an emphasis on service whereby stores aim to consistently deliver their product to the customer

in less than 30 minutes, through a focus on staff training, exacting brand standards and the use

of standardised systems and processes;

• its proven management team;

• a loyal customer base;

• its market leading position;

• its highly cash generative business model; and

• a scalable business concept that provides the Group with the opportunity to roll-out a further

50 new stores each year in order to reach the Group’s longer term goal of targeting 1,000 stores

in total in the UK and Ireland by approximately 2017.

(c) Master Franchise Agreement

The success of the Group’s business is substantially dependent on the rights included in the Master

Franchise Agreement. The Master Franchise Agreement sets out how DPG has to introduce, manage

and grow its franchised business in the UK and Ireland.

Under the Master Franchise Agreement, DPG enjoys rights to the Domino’s System in the UK and

Ireland indefinitely until all of the franchise agreements that DPG has with its franchisees (and itself

for corporate stores) have expired or otherwise been terminated, subject to DPIF’s rights on a breach

by DPG. Therefore, so long as any franchise agreements with DPG remain in force, the Master

Franchise Agreement shall remain in force as well.

DPG is required to meet minimum store growth targets under the Master Franchise Agreement and

must confirm that these have been achieved on an annual basis. These minimum targets are for a net

27 store openings per annum and are materially below the Group’s own target of 50 store openings

per annum. As stated in the Company’s AGM announcement which was released on 24 April 2008,

the Group is on track at this stage to meet the target of 50 new stores for this year. The Group has

opened an average of 47 stores each year over the past five years.

DPG is required to pay a continuing royalty fee to DPIF calculated on the total sales of all stores

(excluding VAT). The royalty fee payable to DPIF on a monthly basis is currently 2.7 per cent. of all

store sales (excluding VAT) for the preceding month. If the minimum store growth requirements are

not met, the royalty percentage increases by 0.3 per cent. to 3.0 per cent.

Breaches of the Master Franchise Agreement may lead to termination of the Master Franchise

Agreement, and also the Know-How Agreement pursuant to which DPG is granted the right by DPIF

to establish and operate the commissaries. DPIF has the right to require the sale or assignment to it of

any stores or franchise agreements at their fair value on termination of the Master Franchise

Agreement by DPIF due to a breach by DPG. DPG has never received such a notice and the Directors

consider that their compliance with the material terms of the Master Franchise Agreement is such that

this is highly unlikely.

Further descriptions of the terms of the Master Franchise Agreement and the Know-How Agreement

are set out at paragraphs 18.1 and 18.2 respectively, of Part VIII of this document.

(d) Franchisee Relationship

Franchisees are granted franchise agreements by DPG for ten years, with an option to renew at the

franchisee’s option. The renewed franchise agreement will be subject to further renewal in accordance

with the provisions in the standard terms at that time. Each franchise covers a defined geographical

area. There are currently approximately 144 franchisees in the Domino’s System operating an average

of approximately 3.5 stores each. Currently there are 56 franchisees with three or more stores of which

43 franchisees hold four or more stores.

AI 6.4

29

DPG supports its franchisees by providing comprehensive training, infrastructure and marketing

support and this has resulted in very low failure rates. The Directors believe that the economic model

on which the stores are based is attractive to franchisees as evidenced by historic sales growth (for

example, the average annual increase in like-for-like sales is 9.1 per cent. over the last five years) and

also by the number of franchisees with more than one store. It allows franchisees to payback the initial

store investment cost within an average of less than three years. DPG encourages an open dialogue

with franchisees by holding regular meetings, workshops, training and an annual awards banquet.

There are also a number of advisory committees at which franchisees consider such matters as

marketing, information technology, menu developments and operational issues.

In addition, the Company, through its subsidiary DP Capital, provides leasing finance to franchisees

for new equipment and the refurbishing of existing stores. DP Capital has in place a facility out of

which it makes leasing finance available to franchisees on a back-to-back basis with the facility from

Barclays Bank. The availability of specialist financing for refurbishments allows franchisees to

improve the appearance and quality of the older stores and upgrade store equipment where necessary.

(e) The Group’s stores

Each store is awarded a franchise in respect of a defined geographical area that is designed to ensure

that pizzas can be safely and consistently delivered within 30 minutes of an order being received.

Typically 75 per cent. of sales (by value) are delivered to customers homes with the balance being

carryout.

Since Domino’s Pizza was founded in the United States, it has developed a simple, cost effective

model. The stores are designed for delivery and do not offer an eat-in service. As a result the Group’s

stores require relatively modest floor space and limited capital expenditure and can be generally found

in locations where the franchisee does not pay premium rent. The straight forward menu and simple

operating model also help to ensure a consistent quality of product and controllable store operating

costs.

In terms of site selection, the Group identifies parts of the UK and Ireland that have a high number of

its core potential customers but no current store. Once a target area has been identified, the Group’s

surveyors visit the area and assess the local property market for the Group’s size, access to parking

and other site requirements. If a site is identified as matching the Group’s requirements, it will

approach the landlord or agent to secure a lease at a rent that is consistent with the local market and

is economically viable for a store.

Properties for new stores are fitted out to the Group’s corporate specification either by the Group (at

the franchisee’s cost) or by the franchisee under the Group’s supervision. During 2007, DPG

commissioned a new store design to further enhance the image of the store design which was

introduced seven years ago. Recent store openings have already started to feature this new design and

it is envisaged that up to 100 refits to some of the Group’s oldest stores will be carried out during 2008

with the balance to be updated over the next four years.

The Group’s estate of stores is held and managed by DP Realty, which owns nine freehold properties

and 472 short leasehold properties. The Group holds the head lease and then those properties are sub-

leased to franchisees for sole use as Domino’s stores. Most franchisees pay a rent equivalent to the

rent payable on the head lease, and a management fee of five per cent. Freehold properties are leased

to franchisees at market rates.

In line with the Group’s strategy to focus on developing the business through the franchise model, the

Group has disposed of all its wholly owned corporate stores. However the Group does have an interest

in 25 stores through joint venture agreements with Full House Restaurants Limited (which owns 14

stores) Dominoid Limited (which owns six stores), DP Peterborough Limited (which owns four

stores) and DP Milton Keynes Limited (which owns one store).

AI 8.1

30

(f) Commissaries

The Group’s headquarters are located in Milton Keynes and it is from here that the Group’s stores are

provided with support functions. These functions include: dough production, ingredients and

equipment purchasing and supply, training, operations, IT, marketing, franchise sales, warehousing,

property, franchise development and administration. The Group operates three commissaries in

Milton Keynes, Penrith and Naas.

The commissaries are central to the Company’s commitment to the use of fresh produce, where

possible, in the preparation of its pizzas and the maintenance of the highest standards. Fresh dough is

prepared daily to Domino’s own recipe at the commissaries and the Group’s dedicated refrigerated

transport fleet then delivers the trays of dough balls and all other pizza toppings and side orders to all

stores throughout the UK and Ireland, three times per week.

The Group has recently embarked on a major capital expenditure programme that will result in the

doubling in size of the Penrith commissary and the construction of a new state-of-the-art commissary

and headquarters on a newly acquired ten acre site in Milton Keynes which is scheduled to be in

operation during the latter part of 2009. The project cost of £25 million for the Milton Keynes project

will be incurred over the two financial years 2008 and 2009 and funded from a loan facility. The

expansion of the commissary in Penrith, which will cost £4 million during the current financial year,

will double that facility’s capacity. The Group also intends to expand the commissary operation in

Naas to meet the increasing demand for Domino’s Pizza in Ireland. These developments, combined

with the addition of a fourth commissary, which it is anticipated will be needed by 2012 in the UK,

will complete the infrastructure required for 1,000 stores.

The commissaries at Penrith and Milton Keynes are freehold properties owned by DP Group

Developments Limited, a subsidiary of the Company. The commissary at Naas is a long leasehold and

is owned by DPP (Ireland).

(g) Marketing

Each UK store currently contributes five per cent. of net sales (four per cent. for each Irish store) to

the NAF that is administered by the Group on behalf of franchisees. The NAF also draws some

additional revenue from e-commerce sales. The majority of the NAF is spent on TV advertising and

sponsorship properties which includes Britain’s Got Talent on ITV channels and The Simpsons on

Sky One. Resources are also spent on print and production in respect of store menus, local store

marketing, public relations, direct mail shots and on-line promotions. It is forecast that the NAF will

collect £18 million in the 2008 financial year which will be allocated to new product campaigns,

which will include around 20 weeks of TV advertising and sponsorship of Britain’s Got Talent on

ITV, Britain’s Got More Talent on ITV2 and America’s Got Talent on ITV2.

The Group launched its e-commerce channel in 1998 and now approximately 21 per cent. of its

delivered sales in the UK are generated via e-commerce. An important factor behind this sales growth

is the popularity of online shopping. According to the Mintel Group (“Mintel”), online shopping is

continuing to rise with online sales having risen by 42 per cent. since 2006. E-commerce is the

Group’s fastest growing channel to market and in 2007 total sales through these platforms reached

£32.2 million, an increase of over 60 per cent. on the previous year.

(h) Brand standards and other considerations

DPG regularly inspects every store to ensure that quality is maintained and each store is objectively

assessed for compliance with health, safety and operating standards. The Group aims to conduct a

minimum of three unannounced standards audits a year. To encourage high standards, special

incentive prizes are given to the managers of those stores that achieve high marks. Franchisees who

consistently underperform to the required standards are ultimately required to leave the system.

During 2007, the Group substantially removed added hydrogenated fats and MSG (Monosodium

Glutamate) from its products on its menu. This was in addition to the long-standing policy of

prohibiting the inclusion of any GMO’s (Genetically Modified Organisms) in its ingredients.

AI 6.2

AI 11

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31

A portion of the Group’s truck fleet which deliver food to the stores are already registered “Euro 5”,

currently the highest standard in emissions control and it is anticipated that half the fleet will be

registered “Euro 5” by the end of the current year and that all trucks will be registered to this level by

2012. The Group also investigates from time to time the use of new fuel alternatives, such as biodiesel,

to operate the truck fleet.

Currently 80 per cent. of every pizza box used by the Group is made with recycled board and therefore

100 per cent. recyclable. Furthermore all invoices and statements are now sent to franchisees

electronically. Not only is this more efficient but it saves substantial paper, fuel and wastage in the

process.

The new commissary and headquarters in Milton Keynes, which are scheduled to be completed

towards the latter part of 2009, are being designed to be certified to BREEAM excellence (Building

Research Establishment Environmental Assessment Method).

3. Market Overview

Mintel has estimated that the value of the home delivery market (all foods) in the UK reached £1,474 million

(gross) in 2007 and expects the market to grow 30 per cent. to £1,918 million by 2011. Furthermore, it has

been observed that although home delivery represents only five per cent. of the overall eating out market in

the UK, it is the fastest-growing sector and increased 40 per cent. between 2001 and 2006. In contrast, the

eat-in sector (restaurants) grew by 25 per cent. over the same period.

Mintel has stated that 80 per cent. of the UK home delivery market is represented by three cuisine types,

pizza, chinese and indian. Pizza is currently the largest segment at 41 per cent. and the only segment that

features national branded chains. The Directors’ believe that the Group currently accounts for £1 of every £6

spent on (based on current Mintel data) home delivered meals in the UK.

The Directors believe that the home delivery market is being driven by a number of factors including:

• consumers increasingly having busier working lifestyles and the development of a “cash-rich, time-

poor” society; it has been reported that 55 per cent. of adults state they are under time pressure on a

regular basis whereas this figure rises to 70 per cent. for those with families. This time pressure,

combined with higher disposable income has led to an increased reliance being placed by consumers

on pre-prepared food and meals, including home delivery meals;

• the number of women in the workforce. This is estimated to have increased four per cent. since 2001

with 14.4 million women in employment in 2006. As a group, working women will tend to have less

inclination to prepare food at home;

• more single person households which tend to favour home delivery; and

• home as a leisure destination. It has been reported that £39 billion was spent on in-home leisure in

1999, rising to £63 billion by 2005 (and estimated to grow to £91 billion by 2010). Home leisure tends

to complement home delivery as consumers seek to combine their leisure activities with eating.

4. Strategy for Growth

The Directors intend to grow the Group’s business through the opening of 50 new stores each year without

diluting the quality associated with the Domino’s brand. The immediate growth will be generated by

increasing the number of stores with the longer term goal of targeting 1,000 in total in the UK and Ireland

by approximately 2017.

AI 5.2.2, 5.23

32

Fig. 1

Fig. 1 shows a compound annual growth rate in stores of 12.09 per cent. over the period from1999 to 2007

5. Selected summary financial information

The summary financial information set out below has been extracted or derived without material adjustment

from the financial information of the Group set out in Part VII of this document. Investors should read the

whole of the document and not rely on this summarised information.

52 weeks 52 weeks 52 weeks 52 weeks ended ended ended ended

1 January 31 December 31 December 30 December2006 2006 2006 2007

UK GAAP UK GAAP IFRS IFRS£000 £000 £000 £000

System sales 200,678 240,115 240,115 296,349

Group revenue 81,660 94,965 94,965 114,891

Profit before taxation 11,169 14,292 14,189 18,576

Earnings per share – basic (pence) 5.08* 6.49* 6.23* 8.38*

Equity dividends paid (3,169) (4,234) (4,234) (5,816)

Cash and cash equivalents 5,885 10,262 10,262 14,629

Net indebtedness (4,141) (5,582) (5,582) (1,568)

* Adjusted for the share split of 3.2 ordinary shares of 1.5625 pence each for 1 ordinary share of 5 pence approved at the Annual

General Meeting held on 24 April 2007.

6. Current trading and prospects

Trading in the first 16 weeks of 2008 has got off to a strong start with like-for-like sales for stores which

have been open for 12 months up 13.3 per cent. (2006: 14.6 per cent.). This is particularly encouraging given

the strong comparatives of last year. E-commerce has continued to show robust growth with an increase of

95.2 per cent. in the same 16 week period. E-commerce in the first 16 weeks of 2008 accounted for 21.0 per

cent. of all UK delivered sales.

The Group’s store opening programme is looking more encouraging than at the same stage last year. The

Group has more sites in the pipeline with planning than at the same time last year and the Group is optimistic

at this stage that it is on track to again achieve its target of 50 new store openings this year.

Cash flows remains strong and we have the debt facilities in place to secure the expansion of our existing

commissary in Penrith and the investment in our new commissary in Milton Keynes. Accordingly it is the

Directors’ intention to continue to return surplus cash to Shareholders by further share buybacks and

dividends.

The Directors believe that the Company is well positioned for another year of strong growth.

AI 12.2

AI 3.1

600

500

400

300

200

100

0

Financial year end

Num

ber

of S

tore

s

201

1999 2000 2001 2002 2003 2004 2005 2006 2007

215237

269

318

357

407

451

501

33

7. Biographies of Directors and senior management

The Board currently consists of eight directors, brief biographies of whom are set out below. Details of the

service contracts and letters of appointment of the Directors are set out in paragraph 11 of Part VIII of this

document.

Stephen Hemsley, Age 50 (Executive Chairman)

Stephen joined the Company as Finance Director in April 1998 and saw the Company through its admission

to AIM in 1999. In January 2001, he was appointed Chief Executive of the Company heading up the

Company’s UK and Irish system from its head quarters in Milton Keynes. Stephen qualified as a Chartered

Accountant in 1982 and in 1984 joined the venture capital specialists 3i, rising to the position of Investment

Director with direct responsibility for an offshore portfolio of approximately £100 million. In 1994, after a

brief return to the profession, Stephen was appointed Group Finance Director of Meltek Group plc, an

international computer services company, which became one of the first to float on the newly launched AIM

market in 1995. Stephen was appointed Executive Chairman of the Company at the beginning of 2008.

Christopher Moore, Age 48 (Chief Executive Officer)

Following an early career in international advertising working with McCann Erickson, Chris joined DPII in

1990 to set up their European marketing department with a remit that covered France, Holland, Belgium and

Spain as well as the UK and later, Ireland. Since 1993, following DPG’s acquisition of the master franchise

for Domino’s Pizza in the UK and Ireland, Chris has focused full-time on these two markets. He completed

an MBA with the London Business School in 1996, was appointed to the board of DPG in 1998 and became

a board Director of the Company in 1999, becoming Chief Operating Officer in 2006. Chris was appointed

Chief Executive Officer of the Company at the beginning of 2008.

Lee Ginsberg, Age 50 (Chief Financial Officer)

Lee joined the Company as Finance Director in November 2004. Previously he held the position of Group

Finance Director at Health Club Holdings Limited, formerly Holmes Place plc, and an 18 month role as

Deputy Chief Executive of the former company. Born and educated as a Chartered Accountant in South

Africa, Lee moved to the UK in 1993 after being transferred to a new post within the Anglo American

Group/Hunt Leuchars and Hepburn Group. Lee acted as UK Finance Director of Signet Group plc from June

1995 to March 1996. Lee acted as Finance Director and Company Secretary of Etam plc for two years and

subsequently joined Holmes Place assuming responsibility for driving UK and international growth in

September 1998. Whilst at Holmes Place plc, he successfully secured the financing of a £250 million capital

expenditure programme.

Colin Halpern, Age 71 (Non-Executive Vice Chairman and Member of Nomination Committee)

In 1993, Colin acquired the Domino’s Master Franchise Agreement in the UK and Ireland through

International Franchise Systems Inc (the then parent company of DPG). In November 1999, with Colin as

Chairman, the Company was taken public and listed on AIM. Colin is the Chairman of Cheval Property

Finance plc, Dayenn Limited and several other companies. Colin was appointed Non-Executive Vice

Chairman at the beginning of 2008.

Nigel Wray, Age 60 (Non-Executive Director)

Nigel was appointed to the Board on 15 November 1999. He is the Chairman of Saracens Rugby Club and

British Seafood Group Holdings Limited, Non-Executive Director of Prestbury Investment Holdings

Limited, Play Holdings Limited, Networkers International Plc, English Wines Group Plc, Seymour Pierce

Holdings Limited and several other private companies.

John Hodson, Age 62 (Independent Non-Executive Director, Chairman of the Remuneration Committeeand Member of the Audit Committee)

John previously worked with the Singer and Friedlander Group since 1970 where he was a board member

since 1987. In 1993 he was appointed Chief Executive of the Singer and Friedlander Group, a position he

held until December 2004. John is Non-Executive Chairman of Cenkos Securities plc, UBC Media Group

AI 14.1

AIII 1.1

34

and Strategic Equity Capital plc and is a director of Prestbury Group. John was appointed to the Domino’s

Board as a Non-Executive Director in 2005 and is Chairman of the Remuneration Committee.

Michael Shallow, Age 53 (Senior Independent Non-Executive Director, Chairman of the Audit Committee,Member of the Remuneration Committee and Nomination Committee)

Michael Shallow joined the Board of the Company in January 2006 and was appointed as the Senior

Independent Non-Executive Director on 24 April 2008. Michael, a Chartered Accountant, was Finance

Director for Greene King plc from 1991 to 2005. Michael is also a non-executive director of Britvic plc and

Spice plc.

Dianne Thompson, Age 57 (Independent Non-Executive Director, Member of the RemunerationCommittee and Chairperson of the Nomination Committee)

Dianne Thompson joined the Board of the Company as a Non-Executive Director in February 2006. Dianne

is the Chief Executive Officer of Camelot Group plc which she joined in 1997. She was Veuve Clicquot

Business Woman of the Year in 2000 and was voted Marketer of the Year by the Marketing Society in 2001.

Dianne is a fellow of the Royal Society of Arts, the Marketing Society, the Chartered Institute of Marketing

and is a Companion of the Chartered Management Institute. Dianne sits on the Press Compliants

Commission and is a Trustee of Born Free. She was awarded a CBE in the New Year’s Honours List 2006

and in 2006 was awarded the Chartered Institute of Management Gold Medal.

Senior Management

In addition to the executive management on the Board of the Company, the following Senior Managers

(whose management expertise and experience is set out below) are considered relevant to establishing that

the Group has the appropriate expertise and experience for the management of its business:

Robin Auld, Age 35 (Sales and Marketing Director)

Robin Auld is the Group’s Sales and Marketing Director. Robin joined the Group in 2004 to take up the

position of Brand Controller and took up his current position in 2007. Robin was previously employed by

HeadlightVision Limited as a Senior Consultant and by Carlsberg Tetley plc as a Senior Brand Manager.

Adam Batty, Age 36 (General Counsel and Company Secretary)

Adam Batty is the Group’s General Counsel and Company Secretary. He is a qualified solicitor and joined

the Group in 2008. Previously Adam was Director of Legal Affairs at Mitchells & Butlers plc and a corporate

lawyer at Six Continents plc and Norton Rose.

Jon Campbell, Age 40 (Procurement Director)

Jon Campbell is the Group’s Procurement Director. Jon joined the Group in 2008 to take up the position of

Procurement Director. Jon was previously employed by the Sara Lee Group as Head of Purchasing and more

recently by Bakkavor as Purchasing Director.

Andrew Emmerson, Age 46 (Business Development Director)

Andrew Emmerson is the Group’s Business Development Director. Andrew joined the Group in 2006.

Previously, Andrew was employed by Compass Group plc latterly as Managing Director of Millie’s Cookies

and before that as Global Brand Director of Upper Crust.

Gareth Franks, Age 42 (Food Service Director)

Gareth Franks is the Group’s Food Service Director. Gareth joined the Group in 1991 as commissary

manager, becoming Head of Food Service in 2003. Gareth previously worked in logistics for the Burton

Group.

Jane Kimberlin, Age 48 (IT Director)

Jane Kimberlin is the Group’s IT Director. Jane joined the Group in 2006. Jane previously was employed by

Spirit Group plc and Powergen plc, both as IT director.

35

Patricia Thomas, Age 50 (Operations Director)

Patricia Thomas is the Group’s Operations Director. Patricia joined the Group in 2006 to take up the position

of Operations Director. Patricia was previously employed by DPI where she held the roles of Area Vice

President for Distribution, Vice President of Quality Assurance and Vice President of Learning and

Development.

8. Corporate Governance

The Directors recognise the value of the Principles of Good Governance and Code of Best Practice (the

“Combined Code”) and, following Admission, they will take appropriate measures to ensure that the

Company complies with the Combined Code to the extent appropriate for a company of its size and nature

of business. Upon Admission, it is expected that the Company will not be fully compliant with the Combined

Code, notably the Company is not in compliance with provision A.2.2 of the Combined Code as the

Executive Chairman (Stephen Hemsley) did not on appointment meet the Combined Code’s independence

criteria and furthermore, Stephen was Chief Executive of the Company before his appointment as Executive

Chairman. The Directors believe Stephen’s appointment as Executive Chairman was, and continues to be, in

the best interests of the shareholders and is vitally important to the success of the Group. Stephen enjoys a

strong and effective working relationship with Chris Moore and the Directors consider that the continuity of

strong management within the Company is an absolute priority in order to implement the Group strategy of

continued growth.

There is a clear division of the responsibilities of the Chairman and Chief Executive as detailed below:

Chairman

• setting a vision for the Company and formulating its strategy;

• providing leadership to the Board and ensuring its effectiveness;

• ensuring there is effective communication with shareholders; and

• facilitating the effective contribution of non-executive directors.

Chief Executive

• supporting the executive chairman in the delivery and implementation of strategy;

• setting the operating plans and budgets to deliver the agreed strategy;

• managing the Group’s day to day activities;

• developing the executive and senior management team; and

• supporting the executive chairman in effective communication with various stakeholders in the

business.

Upon Admission, the Board will comprise eight members, five of whom, being Colin Halpern, Nigel Wray,

John Hodson, Michael Shallow and Dianne Thompson, are Non-Executive Directors. John Hodson, Michael

Shallow and Dianne Thompson are viewed by the Company as independent for the purposes of the

Combined Code and Michael Shallow is considered to be the senior independent Non-Executive Director.

Upon Admission, the Company will be considered a small company for the purposes of the Combined Code.

Provision A.3.2 of the Combined Code requires that except for smaller companies, at least half the Board,

excluding the Chairman, should comprise non-executive directors determined by the Board to be

independent. Currently less than half the Board are considered to be independent Non-Executive Directors.

As the Company grows from a small company into a size that will take it into the FTSE350 the Board will

review the requirement to appoint additional independent non-executive directors.

The corporate governance framework includes terms of reference for the audit, nomination and remuneration

committees of the Board.

Audit Committee

The Audit Committee currently comprises Michael Shallow (Chairman) and John Hodson. It meets not less

than four times a year and is responsible for ensuring that the financial performance of the Group is properly

AI 16.3

AI 16.4

36

reported on and monitored, for meeting the auditors and reviewing the reports from the auditors relating to

the financial statements and internal control systems. As the Company moves from a smaller company into

a size that will take it into the FTSE350 the Board will consider the requirement to appoint an additional

independent non-executive director to the Audit Committee in accordance with provision C.3.1 of the

Combined Code.

Nomination CommitteeThe Nomination Committee currently comprises Dianne Thompson (Chairperson), Colin Halpern and

Michael Shallow. It meets not less than twice a year and is responsible for the skill and composition of the

Board and for appointing and replacing Directors.

Remuneration CommitteeThe Remuneration Committee currently comprises of John Hodson (Chairman), Dianne Thompson and

Michael Shallow. It meets not less than twice each year and has a primary responsibility to review the

performance of Executive Directors and senior management and set the scale and structure of their

remuneration.

9. Reasons for moving to the Official ListSince its AIM Admission in 1999, the Group has expanded from 190 to 501 stores (30 December 2007) and

as such the Directors believe that a move to Official List and to trading on the main market of the London

Stock Exchange is now appropriate. In addition, the Directors believe that due to the higher number of

institutional investors who regularly trade in companies admitted to the Official List and the higher profile

of such companies, the Company will be better placed to achieve improved liquidity in the Ordinary Shares

following Admission.

10. EmployeesDuring the year ended 30 December 2007, the Group had an average monthly number of 633 employees

consisting of 316 employees involved in administration, production and distribution and 317 employed in

subsidiary company stores.

11. Dividend policyThe Group intends to maintain its existing policy of returning cash not required for the growth and expansion

of the business to Shareholders through its share buy backs programme and dividends. The final dividend for

the 52 weeks ended 30 December 2007 was 2.50 pence per share (2006: 1.76 pence per share) and the total

dividend for the year was 4.40 pence per share (2006: 3.06 pence per share) a 43.8 per cent. increase

compared to the previous financial year. The full year dividend was 1.9 times covered by profits after tax

(2006: 2.1 times).

12. TaxationThe attention of investors is drawn to the information contained in paragraph 17 of Part VIII (Additional

Information) of this document.

13. CREST and trading in Ordinary SharesCREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by a

certificate and transferred otherwise than by a written instrument. The Articles of Association of the

Company permit the holding of Ordinary Shares under the CREST system. The Company’s Ordinary Shares

were admitted to CREST on the date of its admission to AIM.

Accordingly, settlement of transactions of the Ordinary Shares following Admission may take place with

CREST if any Shareholder wishes. However, CREST is a voluntary system and holders of Ordinary Shares

who wish to receive and retain certificates will be able to do so.

14. Further informationProspective investors should carefully consider the additional information set out in the other parts of this

document and in particular the risk factors set out in Part II of this document.

AIII 4.3

AIII 4.11

AI 20.1

AI 17.1

37

PART VI

OPERATING AND FINANCIAL REVIEW

1. INTRODUCTION

This operating and financial review contains financial information stated under UK GAAP for the two 52

week financial periods ended 1 January 2006 and 31 December 2006, and financial information stated under

International Financial Reporting Standards (“IFRS”) as adopted by the European Union, for the two 52

week financial periods ended 30 December 2007 and 31 December 2006.

2007 is the first financial year in which the consolidated financial statements of the Company have been

prepared in accordance with IFRS and the comparative amounts for 2006 have been restated from UK

Generally Accepted Accounting Practice (UK GAAP) to comply with IFRS. The Group’s date of transition

to IFRS was 1 January 2006, and the results for the 52 weeks ended 1 January 2006 have been restated from

UK GAAP to IFRS.

Investors should not rely solely on the summary information contained in this Part VI in making an

investment decision, but instead, should read the whole of this Prospectus and use the financial information

contained in this Part VI as reference only.

For the purposes of the discussion below, the term “financial year” means the 52 weeks ended 1 January

2006 with regard to 2005, the 52 weeks ended 31 December 2006 with regard to 2006, and the 52 weeks

ended 30 December 2007 with regard to 2007.

2. OVERVIEW

DPG is a wholly owned subsidiary of the Company which is quoted on AIM. DPG is the UK and Ireland’s

leading pizza delivery company and holds the master franchise to own, operate and franchise Domino’s Pizza

stores in these markets. The first UK store opened in 1985 and the first Irish store opened in 1991.

DPG awards the right to operate local Domino’s Pizza stores to entrepreneurs (franchisees) who, once

approved, have to pay around £250,000 to own their Domino’s Pizza business. Franchisees are both DPG’s

customers and business partners.

It is part of DPG’s role to support franchisees in their efforts to run profitable local Domino’s Pizza

businesses and to ensure that high brand standards are achieved at all stores. To do this, DPG employs a team

of over 300 team members who work in a range of store support functions at locations in the UK (Milton

Keynes and Penrith) and Ireland (Naas). These functions include: dough production, ingredients and

equipment purchasing and supply, training, operations, IT, marketing, finance, HR, property, franchise sales,

leasing, transport, warehousing and administration.

The majority of the stores are operated by franchisees who are responsible for delivering the brand’s high

standards to customers. There are over 500 Domino’s Pizza stores in a growing number of towns and cities

throughout England, Scotland, Wales and Ireland.

3. FINANCIAL INFORMATION

3.1 Basis of preparation

As noted in section 1 of this Part VI, this operating and financial review contains financial information stated

under UK GAAP for the two 52 week financial periods ended 1 January 2006 and 31 December 2006, and

financial information stated under IFRS for the two 52 week financial periods ended 31 December 2006 and

30 December 2007.

Other than the cessation of goodwill amortisation, lease inducements spread over the full lease term and the

treatment of the exercise of share options by employees under IFRS, there are no material differences

between the financial information reviewed herein under UK GAAP compared to IFRS. Consequently the

AI 3, 9, 20, 25

38

comments included in this operating and financial review apply equally to the UK GAAP and IFRS

information.

3.2 Key accounting policies

Details of all key accounting policies adopted in the preparation of the IFRS results, balance sheets and cash

flow statements for the 2006 and 2007 financial years are set out in full in Part VII.

The main differences between IFRS and UK GAAP, which impact on the Group’s results, are:

• Goodwill amortisation

• Taxation impact of share options exercised by employees

• Non current assets held for sale

• Treatment of lease incentives over the period of the lease

3.3 Historical Profit and Loss Accounts

The Group 52 weeks 52 weeks 52 weeks 52 weeks

ended ended ended ended1 January 31 December 31 December 30 December

2006 2006 2006 2007UK GAAP UK GAAP IFRS IFRS

£000 £000 £000 £000

System sales* 200,678 240,115 240,115 296,349———— ———— ———— ————

Group Revenue 81,660 94,965 94,965 114,891———— ———— ———— ————

Cost of sales (48,778) (57,811) (57,811) (70,736)———— ———— ———— ————

Gross margin 32,882 37,154 37,154 44,155

Distribution costs (8,538) (8,177) (8,177) (9,246)

Administrative costs (13,504) (14,860) (14,963) (16,240)———— ———— ———— ————

Group operating profit before exceptional

items and accelerated LTIP charge 10,840 14,117 14,014 18,670

Exceptional operating items and accelerated

LTIP charge (626) (499) (499) (507)———— ———— ———— ————

Group operating profit 10,214 13,618 13,515 18,163

Share of profit of associated undertakings 164 171 171 158

Profit on the sale of non current assets

and assets held for sale 206 159 159 288

Profit on the sale of subsidiary undertakings 670 454 454 58

Net finance charges (85) (110) (110) (91)———— ———— ———— ————

Profit before taxation 11,169 14,292 14,189 18,576

Taxation (2,922) (3,865) (4,193) (5,337)———— ———— ———— ————

Profit for the financial period after taxation 8,247 10,427 9,996 13,239

———— ———— ———— ————Earnings per share

– Basic (pence) 5.08 6.49 6.23 8.38

– Diluted (pence) 4.83 6.38 6.12 8.24

*System sales are the total sales of the Group’s franchisee system in the UK and the Republic of Ireland, to

external customers.

3.4 Key factors affecting the Group’s results of operations

Set out below are certain key factors which the Directors believe have affected the Group’s results of

operations, or could affect its results of operations in the future.

39

(a) Expansion and accelerating roll-out

During 2005 the Group took the decision to move away from corporately owned stores, and as a result

two subsidiary companies (which included twelve stores) where disposed of. Since then the Group

has disposed of further corporately owned stores in 2006 (three stores) and 2007 (one store). During

2007 the Group also disposed of a further subsidiary undertaking (which included 5 stores). At the

end of 2007, the Group owned one corporate store and has a further interest in nine stores in three

subsidiary companies.

In 2007 the Group opened 50 new stores (2006: 46, 2005: 50) and closed none (2006: two, 2005:

none) bringing the year-end store count to 501 stores (2006: 451, 2005: 407). Whilst the Group

continues to experience some inconsistency in planning decisions, this has not significantly hampered

its expansion over the past three years. The aim of many local authorities appears to be the

regeneration of secondary retail space and this has worked in the Group’s favour, with its franchisees

being recognised as a responsible and attractive occupant of previously redundant units.

It is important to the Group that the number of stores operated by each franchisee is increased so that

they have a viable, long-term business. However, the Group only allows franchisees with the highest

standards to expand which in turn assures the quality growth of its system. As at 30 December 2007,

the Group had 144 franchisees (2006: 150), of whom 56 are single unit operators. Each franchisee has

an average of 3.5 stores. (2006: 3.0 stores). This consolidation of the number of stores for each

franchisee also means that the Group can manage its growing system more efficiently and further

improve operational gearing.

(b) Consumer spending

The home delivery market has been steadily growing throughout the three year period under review,

and this growth is forecast to continue, mainly driven by consumers increasing preference for

socialising at home instead of going out.

The UK eating out market was estimated by Mintel to be worth £30bn in 2007. The home-delivered

food market continues to grow at a fast pace and in 2007 was worth an estimated £1.5bn which is a

third more than it was just 5 years ago. The extent of current research by Mintel predicts that the

market is expected to grow at a compound rate of 7 per cent. a year over the next four years. Based

on these estimates the Group is currently accounting for £1 in every £6 spent on home delivered

meals. The popularity of home delivered food shows no signs of slowing down and lifestyle factors

such as longer working weeks, more dual income households, more in-home entertainment and more

one person households work in the Group’s favour.

(c) Operating costs

Unprecedented increases in the prices of raw materials since the middle of 2007, in particular wheat

and cheese, had a significant effect on both the Group and its franchisees. This was exacerbated by

the Group’s cheese supplier going into receivership and the consequential ending of the Group’s fixed

price contract with that supplier. As a result, new supply arrangements saw the cost of cheese

increasing by over 50 per cent. over the course of 2007. Wheat also increased significantly in price

over this same period.

These increases in raw material prices, were for the most part, passed on to the Group’s franchisees

who have had time to reflect them in their menu prices. The new menu pricing, saw increases average

around 4 per cent. This new pricing has been accepted by customers as witnessed by the continued

momentum in sales since November 2007 when prices first increased.

3.4 Key factors affecting the Group’s results of operations (continued)

A number of fixed contracts have been negotiated for the duration of the 2008-year notably for wheat

and boxes, to eliminate the impact of any further price increases. The outlook for pricing in 2008 looks

more stable.

AI 5.2.1, 5.2.2

40

(d) Seasonality

Traditionally seasonality plays a part in the sale of pizza in that more pizzas are sold during the colder

winter months when it is dark and people are in their houses – the prime point of sale for home

delivery pizza. Pizza sales do slow down during initial periods of hot weather but revert to normal

trends in prolonged periods of hot weather.

Furthermore pizza sales respond particularly well to promotional and price based offerings and to this

extent sales can be driven as a result of these activities.

Over the past three years system sales for the Group have remained at fairly stable levels at 45 per

cent. in the first half and 55 per cent. in the second half of the year.

(e) Trends

Trading in the first six weeks of 2008 got off to a strong start with like-for-like sales up 11.0 per cent.

(2007: 14.3 per cent.). This is particularly encouraging given the strong comparatives of last year. E-

commerce has continued to show robust growth with an increase of 90.6 per cent. in the same period

(2007: 36.2 per cent.). E-commerce sales in the first six weeks accounted for 21 per cent. of all UK

delivered sales.

The Group’s store opening programme is looking more encouraging than at the same stage last year,

with more sites in the pipeline with planning than at the same time last year. This gives the Group

optimism, at this early stage, that it is on track to once again achieve its target of 50 new store

openings in 2008.

Cash flows remains strong and the Group has the debt facilities in place to secure the expansion of its

existing commissary in Penrith and the investment in its new commissary in Milton Keynes.

Accordingly it is the Directors’ intention to continue to return surplus cash to shareholders by further

share buybacks and dividends.

3.5 Comparison of results of the Group for its 2005, 2006 and 2007 financial years

System Sales

During the 2006 financial year, system sales rose by 19.7 per cent. to £240.1 million. Like-for-like sales in

the 357 stores open for more than twelve months in both periods grew by 9.7 per cent.. During the 2007

financial year system sales rose by 23.4 per cent. and like-for-like sales in the 404 stores open for more than

twelve months in both periods grew by 14.7 per cent., the highest percentage increase recorded since 2001.

To further reinforce its leading position in the home delivery pizza market, during the 2006 financial year

the Group agreed with its UK franchisees to increase the contribution franchisees make to the NAF. This has

provided the Group with a greater opportunity for more integrated marketing campaigns that included a mix

of targeted direct mail, online activity, local store marketing, PR and TV. At the heart of these campaigns are

new product launches, which provide news flow and generate sales right across the menu.

Group Revenue

Group revenue, which includes the sales generated by the Group from royalties, fees on new store openings,

food sales, finance lease and rental income, as well as the turnover of corporately owned and operated stores,

grew by 16.3 per cent. to £95.0 million during the 2006 financial year. This rate of growth was marginally

slower than the system sales growth rate due to lower revenues from corporately owned and operated stores,

following the sale of DPGS Limited (14 stores disposed of with the subsidiary undertaking) during the first

half of the 2005 financial year and a further three corporate store disposals in 2006.

The 2007 financial year witnessed Group revenue growth of 21.0 per cent. to £114.9 million. This rate of

growth was marginally slower than the system sales growth rate due to lower revenues from corporately

owned and operated stores, following the sale of DP Newcastle & Sunderland Limited during the first half

of the 2007 financial year (five stores disposed with the subsidiary undertaking) and the corporate store

located in Sunderland.

AI 12

41

Revenue recognition

Revenue consists of and is recognised as follows:

Pizza delivery – on delivery of pizzas to franchisee customers

Commissary and equipment sales – on delivery to franchisees

Royalties (based on system sales) – on delivery of pizzas by franchisees to customers

Franchise fee income for initial services – recognised when the services have been substantially

performed which is on commencement of franchisee trading

Finance lease interest income – as set out in lease accounting policy

Rental income on leasehold properties – on a straight line basis in accordance with the lease terms

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and

the revenue can be reliably measured.

Revenue is measured at the fair value of consideration net of returns, rebates and value-added taxes.

Gross margin influencers

The gross profit growth during the 2005 and 2006 financial years reflects revenue growth. The dilution of

gross margin from 40.2 per cent. for the 2005 financial year to 39.1 per cent. for the 2006 financial year is

a function of the reduction in the number of corporate stores owned by the Group as a result of the sale of

DPGS Limited in the first half of 2005.

The dilution of gross margin from 39.1 per cent. for the 52 weeks ended 31 December 2006 to 38.4 per cent.

for the 52 weeks ended 30 December 2007 is a function of food cost pressures absorbed in 2007 and changes

in the level of the commissary rebate scheme as well as the sale of corporate stores in 2006 and 2007

financial years.

The Group saw unprecedented increases in the prices of many raw materials towards the latter part of the

2007 financial year. This had an adverse impact to the Group’s food margin of £0.5 million during the 2007

financial year, as the Group was unable to pass those increases onto the ultimate consumers as quickly as

they impacted the Group.

The commissary rebate scheme, first launched during the 2005 financial year in order to assist the Group’s

franchisees overcome the burden of new external cost pressures, continued to benefit the system strongly

during the 2007 financial year. This scheme enhances the profitability of franchisees who achieve like-for-

like sales targets and fully comply with the Group’s operating standards. Included in Group operating profit

is the cost of this rebate, which amounted to £1.4 million during the 2007 financial year (2006: £0.6 million).

The rebate was substantially higher than that provided during the 2006 financial year as a result of stronger

like-for-like sales and an increase in the number of franchisees qualifying for participation in the scheme.

Distribution costs

Distribution costs includes the costs of the vehicles used to distribute the fresh dough and ingredients to the

stores of the franchisees (fuel, insurance, rentals and repairs), the wages and salaries of the employees in the

distribution process and the in-store labour and distribution costs of the Subsidiaries with stores.

Distribution costs for the commissaries reduced from 9.8 per cent. of commissary sales for the 2005 financial

year to 8.8 per cent. for the 2006 financial year, and to 8.6 per cent. for the 2007 financial year. The reduction

across the 2005 and 2006 financial years was mainly due to the implementation of software used to

determine the most efficient routes for the delivery of product to the stores and vehicle utilisation. The

reduction in percentage terms from the 2006 financial year to the 2007 financial year is due to distribution

costs being linked to the number of stores and vehicle efficiency. This reflects the operational gearing as the

distribution costs grow at a lesser rate that the sales growth.

42

Administration charges

Administration charges include the compensation and overhead costs for the head office and commissaries

administration functions as well as the overheads for the Subsidiaries.

Administration charges have reduced from 16.5 per cent. of Group revenue for the 2005 financial year to

15.6 per cent. for the 2006 financial year. The administration charges increased by 10.0 per cent. for the 2006

financial year compared to the 2005 financial year. The increase was predominantly driven by the investment

in the operations team in 2006 to ensure the high standards of service and standards in store are achieved and

adhered to by the store teams and franchisees.

Administration charges further reduced to 14.1 per cent. of Group revenue for the 52 weeks ended 30

December 2007 and increased 8.3 per cent. compared to the charges for the 52 weeks ended 31 December

2006. This increase was driven by the investment in the IT and Business Development teams to enable the

business to reach its growth targets.

The decrease in the percentage of Group revenue for both periods reflects the operational gearing in the

business as the overhead costs are growing at a lesser rate than the sales growth.

Exceptional operating items

During the 2005 financial year the Group accelerated the charge relating to reversionary interests in ordinary

shares granted in 2003, as the performance targets set were achieved earlier than expected. This resulted in

an additional charge of £626,000 for the 2005 financial year.

The Group took the decision during the 2005 financial year not to invest in or trade in corporately owned

stores and therefore sold DPGS Limited (which held 14 stores at the time of the sale) and a further two

corporately owned stores. During the 2006 financial year an additional three corporately owned stores were

sold and one closed. Exceptional costs (£499,000) relating to these stores sold and closed in 2006 related to

the assets written off, lease finance and other bad debts provided for, onerous lease and dilapidation

provisions and restructuring and reorganisation costs incurred in the disposal and closure of these stores.

During the 2007 financial year the Group accelerated the charge relating to reversionary interests in Ordinary

Shares granted in 2004, as the performance targets set were achieved earlier than expected. This resulted in

an additional charge of £174,000 in 2007.

In addition, exceptional charges of £333,000 were incurred by the Group in the disposal of a further

corporate store and providing for the net book value and onerous lease and dilapidation provisions for a

corporate store trading under a management agreement with a franchisee.

Profit on the sale of non current assets and assets held for sale

Profit on the disposal of non current assets and assets held for sale relate to the disposal of tangible fixed

assets and corporately owned stores. DP Newcastle & Sunderland Limited (included five stores at the date

of disposal) was disposed of during the 2007 financial year. During the 2006 financial year the Group

disposed of three corporate stores (2005: two).

Profit on the sale of subsidiary undertakings

During the 2005 financial year the Group disposed of DPGS Limited (which owned 14 stores at the date of

the disposal) and provided for certain future legal and property costs in relation to this disposal. During the

2006 and 2007 financial years partial resolution relating to the conditions for the provisions made were

reached and as a result the portion of the provisions created and no longer required were released.

Net finance charges

Interest charges included bank interest on the Employee Benefit Trust (“EBT”) loan, the revolving facility

and finance charges on the Group’s finance leases and hire purchase contracts.

Interest received relates to bank interest earned on monies placed on deposit, interest earned on loans to

franchisees and interest charged to the NAF on debit balances of the fund.

43

Interest paid increased during the 2006 financial year compared to 2005 due to interest charged on the EBT

loan and interest on the revolving facility for the fourth quarter of the 2006 financial year. This was partially

offset by an increase in the interest earned on monies placed on deposit throughout the year.

During the 2007 financial year the interest charged on the revolving facility increased compared to 2006, due

to the facility being utilised for only part of the 2006 financial year as opposed to the majority of the period

in 2007. This increase in the interest expense was more than offset by the interest charged to the NAF.

3.6 Historical Balance Sheets

A summary of the balance sheets for the Group for the three 52 week financial periods ended 1 January 2006,

31 December 2006 and 30 December 2007, which has been extracted without material adjustment from the

UK GAAP and IFRS historical information in Part VII, is set out in the two tables below:

UK GAAPAs at As at

1 January 31 December2006 2006£000 £000

Fixed assetsIntangible assets 1,326 2,159

Tangible assets 13,593 13,780

Investment in joint ventures 451 589———— ————

15,370 16,528———— ————

Current assetsInventories 2,186 1,838

Debtors 12,921 12,244

Cash at bank and in hand 5,885 10,262———— ————

Total current assets 20,992 24,344

Creditors: amounts falling due within one year (13,742) (22,607)———— ————

Net current assets 7,250 1,737———— ————

Total assets less current liabilities 22,620 18,265———— ————

Creditors: amounts falling due after more than one year (9,085) (9,009)

Provision for liabilities (1,447) (652)———— ————

12,088 8,604———— ————

Capital and reservesCalled up share capital 2,645 2,574

Share premium account 4,677 4,765

Capital redemption reserve 171 261

Treasury shares held by Employee Benefit Fund (7,500) (4,216)

Profit and Loss Account 12,013 5,172———— ————

Equity shareholders’ funds 12,006 8,556

Minority interest 82 48———— ————

12,088 8,604

———— ————

44

IFRS

At At31 December 30 December

2006 2007£000 £000

Non current assetsGoodwill and intangible assets 1,496 713

Property, plant and equipment 12,378 13,816

Prepaid operating lease charges 683 702

Net investment in finance leases 1,748 1,923

Investments in associates 589 685

Deferred tax asset 1,209 565———— ————

18,103 18,404

Current assetsInventories 1,818 2,340

Trade and other receivables 9,632 10,071

Net investment in finance leases 864 857

Prepaid operating lease charges 247 220

Cash and cash equivalents 10,262 14,629———— ————

22,823 28,117

Non current assets held for sale 1,172 1,772———— ————

Total assets 42,098 48,293———— ————

Current liabilitiesTrade and other payables (13,433) (18,187)

Deferred income (31) (68)

Financial liabilities (6,835) (6,817)

Current tax liabilities (2,339) (2,503)———— ————

(22,638) (27,575)

Non current liabilitiesProvisions (233) (155)

Financial liabilities (9,009) (9,380)

Deferred income (989) (1,071)

Deferred tax liabilities (243) (215)———— ————

Total liabilities (33,112) (38,396)———— ————

Net assets 8,986 9,897———— ————

Shareholders’ equityCalled up share capital 2,574 2,538

Share premium account 4,765 5,307

Capital redemption reserve 261 319

Treasury share reserve (4,216) (4,403)

Currency translation reserve (21) 209

Retained earnings 5,575 5,888———— ————

Equity shareholders’ funds 8,938 9,858

Minority interest 48 39———— ————

Total equity 8,986 9,897

———— ————

45

Intangible non-current assets

For the financial periods reported under UK GAAP this represents the goodwill on the purchase of stores or

Subsidiaries, the franchise fees in connection with the Master Franchise Agreement and the interest in leases.

The increase from the 2005 to the 2006 financial year was due to goodwill on the purchase of a franchisee

owned store by a subsidiary undertaking of the Group, costs incurred on the renewal of the Master Franchise

Agreement and additional lease premiums.

Under IFRS software is recognised under intangible non-current assets and prepaid operating lease charges

disclosed separately on the balance sheet under non-current assets. The majority of the movement in

intangible non-current assets from the 2006 to 2007 financial year was due to the transfer of corporately

owned stores and subsidiary undertakings with stores, to assets held for sale.

Tangible non-current assets

Tangible non-current assets include freehold land and buildings, leasehold improvements and equipment.

The movement from the 2006 to 2007 financial year was predominantly due to the assets under construction

(£1.4 million) for the new Milton Keynes commissary and the extension to the Penrith commissary.

Non-current assets held for sale reflects the net book value of the corporate stores and the Subsidiaries with

trading stores.

Investment in associates

The Group has a 41 per cent. interest in Full House Restaurants Limited and a 50 per cent. interest in

Dominoid Limited, private companies which manage pizza delivery stores in the United Kingdom.

Deferred tax asset

Under IFRS the benefit of the exercise of share options by employees is reflected in reserves and not through

the corporation tax charge in the profit and loss as per UK GAAP.

The reduction in the deferred tax asset from the 2006 to 2007 financial year was due to the exercise of share

options by employees and the reduction in the share price of the Company as at 30 December 2007 compared

to 31 December 2006.

Current assets

The inventories within current assets represent the inventory on hand at the commissaries.

The remainder of the current assets is made up of trade receivables, prepayments for rents payable and other

debtors (includes NAF and store deposits for new stores). Under IFRS the net investment in finance leases

is disclosed separately under non-current and current assets. Under UK GAAP this was included, in total,

within current assets.

There has not been any significant movements year on year within current assets.

46

Current liabilities

Current liabilities include trade creditors, other taxes (PAYE/NIC) and liabilities (VAT) and overhead and

inventory accruals.

The increase between from the 2005 to 2006 financial year was predominantly due to the revolving credit

facility, which was utilised during the fourth quarter of the 2006 financial year as part of the share buyback

programme in that year.

The increase in current liabilities between the 2006 and 2007 financial years was due to the following:

• Trade payables – increase in the payment terms with certain food suppliers and increase in volumes

due to the higher sales in quarter 4, 2007.

• Accruals – share buyback accrual for share buybacks in December 2007, increase in inventory

accruals due to sales volume increases in the fourth quarter of the 2007 financial year and an increase

in rent accruals due to store openings.

Non-current liabilities

Non-current liabilities under UK GAAP and IFRS comprise the EBT loan and finance leases between the

Group and franchisees for the purchase of the equipment in store. These have not varied significantly over

the past three financial years.

Under IFRS rent free periods are spread over the term of the lease and the long-term portion is included

under non-current liabilities as deferred income. There has not been a significant movement in this balance

year on year.

Provisions for liabilities and charges

These comprise deferred tax provisions and provisions for legal and property costs on the disposal of

subsidiary undertakings. The most significant movement in the provisions balance has been between the

2005 and 2006 financial years and related to the utilisation and release of provisions made on the disposal

of DPGS Limited during 2005.

Capital and reserves

The called up share capital account and the share premium account has increased over the three financial

years due to the exercise of share options by employees (2007: 1.4 million, 2006: 1.2 million).

The capital redemption reserve has increased due to the share buyback programme (2007: 3.7 million

Ordinary Shares, 2006: 5.8 million Ordinary Shares).

The treasury share reserve reduced by £3.3 million in the 2006 financial year due to the vesting of LTIP’s

granted in 2003, equity-settled in 2006.

The profit and loss reserve reduced by £6.8 million in the 2006 financial year, despite £10.4 million profit

after taxation for the period. This was mainly due to the vesting of the LTIP’s mentioned above (£3.3 million)

and share buybacks of £10.2 million during the financial year.

47

3.7 Historical cash flows

The Group has had a net cash inflow for the last three 52 week financial periods as follows:

UK GAAP52 weeks 52 weeks

ended ended1 January 31 December

2006 2006£000 £000

Operating profit after exceptional items 10,214 13,618Depreciation and amortisation charges 1,639 1,832Share option and LTIP charge 963 344Decrease in stocks 489 349Decrease in debtors 337 82(Decrease)/increase in creditors (968) 2,764

———— ————Net cash inflow from operating activities 12,674 18,989

Returns on investment and servicing of financeInterest received 273 389Interest paid (307) (455)Interest element of finance lease payments (4) (4)Dividends received from joint ventures – 21

———— ————Profit on disposal of non current assets (38) (49)

———— ————TaxationCorporation tax paid (1,549) (3,755)

———— ————Capital expenditure and financial investmentPayments to acquire intangible fixed assets (395) (898)Payments to acquire tangible fixed assets (2,246) (2,262)Receipts from sales of intangible and tangible fixed assets 576 453Receipts from the repayment of joint venture loan 60 105Payments to acquire finance lease assets and advance of franchisee loans (1,166) (1,026)Receipts from repayment of finance leases and franchisee loans 1,172 1,349

———— ————(1,999) (2,279)

———— ————Acquisitions and disposalsSale of subsidiary undertakings – net of costs 3,354 –Utilisation of provisions relating to the disposal of subsidiary undertakings (309) (221)Cash balances disposed of with subsidiary undertakings (5) –Sale of minority interest 90 30Purchase of minority interest (82) (133)

———— ————3,048 (324)

———— ————Equity dividends paid (3,169) (4,234)

———— ————Net cash inflow before financing 8.967 8,348

———— ————FinancingIssue of ordinary capital 472 403New loan term loans 2,146 1,244Repayment of long term loans (1,146) (1,445)Repayment of capital element of finance leases and hire purchase contracts (16) (12)Short term loans – bank overdraft* – 6000Purchase of own shares by Employee Benefit Trust (1,140) –Purchase of own shares (8,222) (10,161)

———— ————(7,906) (3,971)

———— ————Increase in cash 1,061 4,377

———— ————*Adjustment made to the reported UK GAAP accounts.

The bank balance per the UK GAAP accounts was shown net of this inflow in the reported accounts.

48

IFRS52 weeks 52 weeks

ended ended31 December 30 December

2006 2007£000 £000

Cash flows from operating activitiesProfit before taxation 14,189 18,576

Net finance costs 110 91

Share of post tax profits of associates (171) (158)

Amortisation and depreciation 1,815 1,545

Profit on disposal of non current assets (613) (346)

Share option and LTIP charge (including accelerated LTIP charge) 344 880

(Increase)/decrease in inventories 349 (535)

(Increase)/decrease in debtors 82 (685)

Increase in creditors 2,764 4,956

Increase in deferred income 120 119

Decrease in provisions (221) (20)———— ————

Cash generated from operations 18,768 24,423

UK corporation tax (3,624) (4,117)

Overseas corporation tax paid (131) (218)———— ————

Net cash generated by operating activities 15,013 20,088

Cash flows from investing activitiesInterest received 389 528

Dividends received 21 62

Receipts from repayment of associate loan 105 171

Receipts from repayment of franchisee finance leases 1,349 1,127

Purchase of property, plant and equipment (2,294) (3,509)

Purchase of other non current assets (866) (451)

Net cash acquired on the disposal of subsidiary undertaking – 1,118

Receipts from the sale of other non current assets 453 335

Purchase of minority interests (103) –———— ————

Net cash used by investing activities (946) (619)———— ————

Cash inflow before financing 14,067 19,469

Cash flow from financing activitiesInterest paid (459) (619)

Issue of ordinary share capital 403 700

Purchase of own shares (10,161) (8,346)

Short term loans – bank overdraft 6,000 (6,000)

Bank revolving facility – 6,000

New long term loans 1,244 1,302

Repayment of long term loans (1,457) (1,169)

Payments to acquire finance lease assets (1,026) (1,295)

Equity dividends paid (4,234) (5,816)———— ————

Net cash used by financing activities (9,690) (15,243)———— ————

Net increase in cash and cash equivalents 4,377 4,226

Cash and cash equivalents at beginning of period 5,885 10,262

Foreign exchange gains on cash and cash equivalents – 141———— ————

Cash and cash equivalents at end of period 10,262 14,629

———— ————

49

Cash generated from operations is higher than operating profit primarily as a consequence of positive

working capital movements.

Working capital movements

• Inventories – despite inventories increasing between the 2006 and 2007 financial years (£0.5 million),

inventory days have decreased from 23 days in 2006 to 22 days in 2007. The increased level of

inventories was driven by the sales volume increases.

• Debtors – debtor balances have increased between the 2006 and 2007 financial years (£0.7 million)

due to the invoicing in December 2007 for two stores, which were built in December 2007 and opened

in January 2008, and due to the increase in sales and the number of new store openings in the 2007

financial period.

• Creditors – creditor balances have increased between the 2006 and 2007 financial years (£5.0 million)

due to the increase in the payment terms for certain food suppliers, the increase in sales volumes and

an increase in accruals at the 2007 financial period end. The accruals increased due to the accrual for

the payment of share buybacks in December 2007 (£1.5 million), increase in the inventory accruals

due to volume increases and an increase in the rent accruals due to new store openings.

Capital expenditure

Purchase of property, plant and equipment relates principally to computer equipment, and fixtures and

fittings for the Group’s commissaries. During the 2007 financial year, £1.4 million of capital expenditure was

incurred relating to the new Milton Keynes commissary and the extension to the existing Penrith

commissary.

Issue of ordinary share capital

During the 2007 financial year 1.4 million (2006: 1.2 million) Ordinary Shares were issued by the Company

pursuant to which the Company received £700,000 (2006: £403,000) to satisfy share options that were

exercised.

Purchase of own shares

During the 2007 financial year the Company bought back a total of 3.7 million (2006: 5.8 million) Ordinary

Shares for a total value of £8.3 million (2006: £10.2 million).

AI 10.2

50

4. CAPITAL RESOURSES, LIQUIDITY AND INDEBTEDNESS

4.1 Capital resources

The net cash flow movements for the three 52 week financial periods resulted in the following year end cash

and net debt balances, the latter reflecting the following gearing levels:

UK GAAP IFRS52 weeks 52 weeks 52 weeks 52 weeks

ended ended ended ended1 January 31 December 31 December 30 December

2006 2006 2006 2007£000 £000 £000 £000

Net cash 5,885 10,262 10,262 14,629

Bank loan (7,500) (7,500) (7,500) (7,721)

Other loans (2,500) (2,299) (2,299) (2,448)

Finance leases (26) (45) (45) (28)

Bank overdraft/ Bank revolving facility – (6,000) (6,000) (6,000)———— ———— ———— ————

Net debt (4,141) (5,582) (5,582) (1,568)

Share capital and reserves 12,006 8,556 8,938 9,858

Gearing 34.5% 65.2% 62.4% 15.9%

Interest cover (times) 132.4 130.9 130.0 205.1

Net cash

The Group’s cash position continues to remain strong. Cash generated from operations reached £24.4 million

for the 2007 financial year, up from £18.8 million for 2006 (See table on page 41). This increase was mainly

attributable to the higher operating profits as well as an improvement in working capital. Until 2006 the

Group had never entered into or applied for bank overdraft or revolving facilities. The facility obtained

during the 2006 financial year was required for the Company’s share buyback programme implemented due

to the structure of the distributable reserves within the Group.

New store openings generate a net cash inflow to the Group and therefore do not deplete the Group’s cash

reserves.

During the fourth quarter of the 2007 financial year, the Group secured a £25 million rolling credit facility

(“RCF”) to finance the building of the new commissary in Milton Keynes and the purchase of the equipment

for the commissary. The facility is available until December 2012. The Group has covenants in place

whereby the ratio of net borrowings to EBITDA shall not be more than 2.5:1 and the ratio of EBITDAR to

fixed charges shall not be less than 1.5:1.

As at 30 December 2007, the Group had committed to £5 million for plant, property and equipment in

relation to the new commissary in Milton Keynes and the extension to the Penrith commissary.

Bank loans

The Group has entered into an agreement to obtain bank loans and mortgage facilities. These are secured by

a fixed and floating charge over the Group’s assets and an unlimited guarantee provided by the Company. At

30 December 2007 the balance due under these facilities was £7.7 million (2006: £7.5 million) all of which

is in relation to the Employee Benefit Trust. During the 2007 financial year, the terms of this loan were

renegotiated and transferred from National Westminster Bank plc to Barclays Bank plc. The loan bears

interest at 0.50 per cent. (2006: 0.625 per cent. above National Westminster Bank plc base rate) above

LIBOR. The loan has a term of seven years and matures on 31 January 2014.

Other loans

The Group’s other loans relate to the financing arm of the Group, DP Capital Limited. Franchisees have the

opportunity to finance the purchase of the equipment to be installed in the stores through DP Capital Limited.

AI 10.1

51

DP Capital Limited purchases the equipment and in turn finances the purchase with bank loans. These loans

are repayable in equal instalments over a period of up to five years and are unsecured.

Finance lease obligations

The Group’s exposure in terms of finance lease and hire purchase commitments is not significant.

Revolving credit facility

The Group has entered into an agreement to obtain a revolving credit facility from Barclays Bank plc. The

limit for this facility is £6.0 million. The facility is repayable within three to twelve months and interest is

charged at 0.50 per cent. per annum above LIBOR. The facility is secured by share pledges, constituting first

fixed charges over the shares of DPGHL and DPG as well as negative pledges given by the Company,

DPGHL and DPG.

Other available facilities

At 30 December 2007, the Group had available £25.0 million of undrawn committed borrowing facilities in

respect of which all conditions precedent had been met. The facilities are available until December 2012.

Share capital and reserves

Share capital and reserves at 30 December 2007 consists of share capital and associated share premium of

£7.8 million, retained earnings and other reserves.

Share buybacks and dividends

In line with the Group’s strategy of returning cash not required for the growth and expansion of the business

to Shareholders, the Company has a progressive dividend policy. The full year dividend for the 2007

financial year was 1.9 times covered by profits after tax (2006: 2.1 times).

Since 2005 the Company has returned £26.7 million to shareholders via share buybacks and £13.2 million

via dividends. The Company has returned 127 per cent. of profit after tax during this three-year period.

Borrowing costs

The Group’s borrowing costs are currently 0.50 per cent. above LIBOR for all facilities and bank loans (EBT

loan and RCF’s).

Borrowing requirements

At 30 December 2007 the Group had in place a RCF for £25 million for the purchase of the land, building

of the new Milton Keynes commissary and the equipment needed.

Other than the new commissary and the extension to the Penrith commissary, the Group is not committed to

any future capital expenditure plans, which would require it to raise funds.

Restrictions on use of capital resources

The Group is not subject to any material restrictions over the use of its capital resources other than the facility

limits and covenants outlined above.

4.2 Liquidity

The Group’s gearing decreased to 15.9 per cent. at the end of the 2007 financial period, despite the increase

in the dividends paid and the share buyback programme, reflecting the strong cash generation of the

business.

Interest cover has increased during the 3 year period as operating profit growth has increased at a

significantly greater rate than interest charges, reflecting the semi-fixed nature of the Group’s overhead cost

base.

52

4.3 Capitalisation and indebtedness statement

The following tables show the capitalisation and the indebtedness of the Group as at 30 March 2008:

4.3.1 Capitalisation

As at30 March

2008£000

Share Capital 2,543

Share Premium 5,604

Capital Redemption Reserve 279

Treasury Share Reserve (7,906)

Currency Translation Reserve 356

Retained Earnings 7,997————

8,873————

4.3.2 Indebtedness

As at30 March

2008£000

Total current debt

Guaranteed and secured –

Secured 6,000

Unguaranteed/unsecured 857————

6,857————

Total non current debt

Guaranteed and secured 12,035

Secured –

Unguaranteed/unsecured 1,719

13,754————

Total indebtedness as at 30 March 2008 20,611————

4.3.3 Net financial indebtedness

As at30 March

2008£000

Cash 13,445————

Total liquidity 13,445————

Current bank revolving facility (6,000)

Finance leases - current (9)

Current loans – DP Capital Limited (848)————

Current financial indebtedness (6,857)————

Net current financial liquidity 6,588————

Non current loans – DP Capital Limited (1,705)

Bank loans – EBT (12,035)

Finance leases – non current (14)

Non current financial indebtedness (13,754)————

Net financial indebtedness as at 30 March 2008 (7,166)————

53

54

5. QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISKS

The Group’s financial risk management objectives consist of identifying and monitoring those risks, which

have an adverse impact on the value of the Group’s financial assets and liabilities or on reported profitability

and on the cash flows of the Group.

The Group’s principal financial liabilities comprise bank loans, bank overdrafts, other loans and finance

leases. The Group has various financial assets such as trade receivables and cash and short-term deposits,

which arise directly from its operations.

The Group has not entered into any derivative transactions such as interest rate swaps or financial foreign

currency contracts.

It is the Group’s policy, as it has been during the period under review, that no trading in derivatives shall be

undertaken.

The main risks arising from the Group’s financial instruments are credit risk, price risk, liquidity risk and

cash flow interest rate risk.

The Board reviews and agrees policies for managing each of these risks, which are summarised below. In

view of the low level of foreign currency transactions the Board does not consider there to be any significant

foreign currency risks.

5.1 Credit risk

Due to the nature of customers who trade on credit terms, being predominantly franchisees, the franchisee

selection process is sufficiently robust to ensure an appropriate credit verification procedure.

In addition, trade debtor balances are monitored on an ongoing basis with the result that the Group’s

exposure to bad debts is not significant. Since the Group trades only with franchisees that have been subject

to the franchisee selection process and provide personal guarantees as required under the franchisee

agreements, there is no requirement for collateral.

5.2 Price risk

The Board considers that the Group’s exposure to changing market prices on the values of financial

instruments does not have a significant impact on the carrying value of financial assets and liabilities. As

such no specific policies are applied currently, although the Board will continue to monitor the level of price

risk and its exposure should the need occur.

5.3 Liquidity risk

The Group aims to mitigate liquidity risk by managing cash generation by its operations with cash collection

targets set throughout the Group. All major investment decisions are considered by the Board as part of the

project appraisal and approval process. In this way the Group aims to maintain a good credit rating to

facilitate fund raising.

5.4 Interest rate risk

The Board has a policy of ensuring a mix of fixed and floating rate borrowings. Whilst fixed rate interest

bearing debt is not exposed to cash flow interest rate risk, there is no opportunity for the Group to benefit

from a reduction in borrowing costs when market rates are declining. Conversely, whilst floating rate

borrowings are not exposed to changes in fair value, the Group is exposed to cash flow interest rate risk as

costs increase if market rates rise.

6. TRANSITION TO IFRS

The Group’s financial statements have been prepared in accordance with International Financial Reporting

Standards (“IFRS”) as adopted by the European Union as they apply to the financial statements of the Group

for the 52 weeks ended 30 December 2007 and applied in accordance with the Companies Act 1985.

The 52 weeks ended 30 December 2007 is the first financial period in which the consolidated financial

statements of the Company have been prepared in accordance with IFRS and the comparative amounts for 2006

have been restated from UK Generally Accepted Accounting Practice (UK GAAP) to comply with IFRS.

PART VII

FINANCIAL INFORMATION ON THE GROUP

SECTION A: ACCOUNTANT’S REPORT ON IFRS HISTORICAL FINANCIAL INFORMATIONRELATING TO DOMINO’S PIZZA UK & IRL PLC FOR THE YEARS ENDED

31 DECEMBER 2006 AND 30 DECEMBER 2007

The Directors 14 May 2008

Domino’s Pizza UK & IRL plc

Domino House

Lasborough Road

Kingston

Milton Keynes

MK10 0AB

Dear Sirs

Domino’s Pizza UK & IRL plc

We report on the financial information set out on pages 57 to 112. This financial information has been

prepared for inclusion in the prospectus dated 14 May 2008 of Domino’s Pizza UK & IRL plc on the basis

of the accounting policies set out in 1 to the financial information. This report is required by Annex I item

20.1 of the Prospectus Directive Regulation and is given for the purpose of complying with that paragraph

and for no other purpose.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent

there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept

any liability to any other person for any loss suffered by any such other person as a result of, arising out of,

or in connection with this report or our statement, required by and given solely for the purposes of complying

with item 23.1 of Annex I to the Prospectus Directive Regulation, consenting to its inclusion in the

prospectus.

Responsibilities

The Directors of Domino’s Pizza UK & IRL plc are responsible for preparing the financial information on

the basis of preparation set out in note 1 to the financial information and in accordance with International

Financial Reporting Standards as adopted by the European Union.

It is our responsibility to form an opinion as to whether the financial information gives a true and fair view,

for the purposes of the prospectus, and to report our opinion to you.

Basis of opinion

We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing

Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the

amounts and disclosures in the financial information. It also included an assessment of significant estimates

and judgments made by those responsible for the preparation of the financial information and whether the

accounting policies are appropriate to the entity's circumstances, consistently applied and adequately

disclosed.

We planned and performed our work so as to obtain all the information and explanations which we

considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the

financial information is free from material misstatement whether caused by fraud or other irregularity or

error.

AI 20.1, 20.3,

20.4.1, 20.5.1

55

Our work has not been carried out in accordance with auditing or other standards and practices generally

accepted in other jurisdictions and accordingly should not be relied upon as if it had been carried out in

accordance with those standards and practices.

Opinion

In our opinion, the financial information gives, for the purposes of the prospectus dated 14 May 2008, a true

and fair view of the state of affairs of Domino’s Pizza UK & IRL plc as at the dates stated and of its profits,

cash flows and changes in equity for the periods then ended in accordance with International Financial

Reporting Standards as adopted by the European Union.

Declaration

For the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of the prospectus

and declare that we have taken all reasonable care to ensure that the information contained in this report is,

to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.

This declaration is included in the prospectus in compliance with item 1.2 of Annex I of the Prospectus

Directive Regulation.

Yours faithfully

Ernst & Young LLP

56

57

Group income statement

52 weeks 52 weeksended ended

31 December 30 December2006 2007

Notes £000 £000

Revenue 2 94,965 114,891

Cost of sales (57,811) (70,736)––––––– –––––––

Gross profit 37,154 44,155

Distribution costs (8,177) (9,246)

Administrative costs (including operating exceptional

charges) (15,462) (16,746)––––––– –––––––

13,515 18,163

Share of post tax profits of associates 171 158––––––– –––––––

Operating profit 4 13,686 18,321

Accelerated LTIP charge 7 – (174)

Operating exceptional charges 6 (499) (333)

Operating profit before exceptional charges 4 14,185 18,828

Profit on the sale of non current assets and assets held for sale 6 159 288

Profit on the sale of subsidiary undertakings 6 454 58––––––– –––––––

Profit before interest and taxation 14,299 18,667

Finance income 8 397 528

Finance expense 9 (507) (619)––––––– –––––––

Profit before taxation 14,189 18,576

Taxation 10 (4,193) (5,337)––––––– –––––––

Profit for the year 9,996 13,239––––––– –––––––

Profit for the year attributable to:

Equity holders of the parent 10,084 13,245

Minority interest (88) (6)––––––– –––––––

9,996 13,239––––––– –––––––

Earnings per share – Basic (pence) 11 6.23 8.38

– Diluted (pence) 11 6.12 8.24

Group balance sheet

At At31 December 30 December

2006 2007Notes £000 £000

Non current assetsGoodwill and intangible assets 14 1,496 713

Property, plant and equipment 15 12,378 13,816

Prepaid operating lease charges 16 683 702

Net investment in finance leases 17 1,748 1,923

Investments in associates 18 589 685

Deferred tax asset 10 1,209 565––––––– –––––––

18,103 18,404––––––– –––––––

Current assetsInventories 20 1,818 2,340

Trade and other receivables 21 9,632 10,071

Net investment in finance leases 17 864 857

Prepaid operating lease charges 16 247 220

Cash and cash equivalents 22 10,262 14,629––––––– –––––––

22,823 28,117

Non current assets held for sale 23 1,172 1,772––––––– –––––––

Total assets 42,098 48,293––––––– –––––––

Current liabilitiesTrade and other payables 24 (13,433) (18,187)

Deferred income (31) (68)

Financial liabilities 25 (6,835) (6,817)

Current tax liabilities (2,339) (2,503)––––––– –––––––(22,638) (27,575)

Non current liabilitiesProvisions 27 (233) (155)

Financial liabilities 25 (9,009) (9,380)

Deferred income (989) (1,071)

Deferred tax liabilities 10 (243) (215)––––––– –––––––

Total liabilities (33,112) (38,396)––––––– –––––––

Net assets 8,986 9,897––––––– –––––––

Shareholders’ equityCalled up share capital 30 2,574 2,538

Share premium account 4,765 5,307

Capital redemption reserve 261 319

Treasury share reserve (4,216) (4,403)

Currency translation reserve (21) 209

Retained earnings 5,575 5,888––––––– –––––––

Equity shareholders’ funds 8,938 9,858

Minority interest 48 39––––––– –––––––

Total equity 8,986 9,897––––––– –––––––

58

59

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Res

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––

––

–(7

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(70)

–(7

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–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

At

1 J

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–11,9

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11,9

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Exch

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dif

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on t

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g–

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–(2

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–(2

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–(2

1)

Tax

cre

dit

on e

mplo

yee

shar

e opti

ons

––

––

–883

883

–883

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

Tota

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–(2

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883

862

–862

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for

the

per

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––

––

–10,0

84

10,0

84

(88)

9,9

96

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

Tota

l in

com

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d e

xpen

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––

–(2

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10,9

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10,9

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(88)

10,8

58

Pro

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s fr

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19

384

––

––

403

–403

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(90)

(296)

90

––

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(10,4

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–(1

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Tre

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shar

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y E

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––

–3,2

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–(3

,284)

––

–S

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––

––

–344

344

–344

Equit

y d

ivid

ends

pai

d–

––

––

(4,2

34)

(4,2

34)

–(4

,234)

Min

ori

ty i

nte

rest

movem

ent

––

––

––

–54

54

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

At

31 D

ecem

ber

2006

2,5

74

4,7

65

261

(4,2

16)

(21)

5,5

75

8,9

38

48

8,9

86

Exch

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dif

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––

–230

–230

–230

Tax

cre

dit

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mplo

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shar

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––

––

–214

214

–214

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

Tota

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–230

214

444

–444

Pro

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for

the

per

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––

––

–13,2

45

13,2

45

(6)

13,2

39

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

Tota

l in

com

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–230

13,4

59

13,6

89

(6)

13,6

83

Pro

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22

678

––

––

700

–700

Shar

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(58)

–58

––

(8,2

10)

(8,2

10)

–(8

,210)

Tre

asury

shar

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BT

––

–(1

87)

––

(187)

–(1

87)

Shar

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ges

–(1

36)

––

––

(136)

–(1

36)

Shar

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ge

––

––

–880

880

–880

Equit

y d

ivid

ends

pai

d–

––

––

(5,8

16)

(5,8

16)

–(5

,816)

Min

ori

ty i

nte

rest

movem

ent

––

––

––

–(3

)(3

)–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

At

30 D

ecem

ber

2007

2,5

38

5,3

07

319

(4,4

03)

209

5,8

88

9,8

58

39

9,8

97

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

–––––––

Group cash flow statement

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Cash flows from operating activitiesProfit before taxation 14,189 18,576

Net finance costs 110 91

Share of post tax profits of associates (171) (158)

Amortisation and depreciation 1,815 1,545

Profit on disposal of non current assets (613) (346)

Share option and LTIP charge (including accelerated LTIP charge) 344 880

(Increase)/decrease in inventories 349 (535)

(Increase)/decrease in debtors 82 (685)

Increase in creditors 2,764 4,956

Increase in deferred income 120 119

Decrease in provisions (221) (20)––––––– –––––––

Cash generated from operations 18,768 24,423

UK corporation tax (3,624) (4,117)

Overseas corporation tax paid (131) (218)––––––– –––––––

Net cash generated by operating activities 15,013 20,088

Cash flows from investing activitiesInterest received 389 528

Dividends received 21 62

Receipts from repayment of associate loan 105 171

Receipts from repayment of franchisee finance leases 1,349 1,127

Purchase of property, plant and equipment (2,294) (3,509)

Purchase of other non current assets (866) (451)

Net cash acquired on the disposal of subsidiary undertaking – 1,118

Receipts from the sale of other non current assets 453 335

Purchase of minority interests (103) –––––––– –––––––

Net cash used by investing activities (946) (619)––––––– –––––––

Cash inflow before financing 14,067 19,469

Cash flow from financing activitiesInterest paid (459) (619)

Issue of ordinary share capital 403 700

Purchase of own shares (10,161) (8,346)

Short term loans – bank overdraft 6,000 (6,000)

Bank revolving facility – 6,000

New long term loans 1,244 1,302

Repayment of long term loans (1,457) (1,169)

Payments to acquire finance lease assets (1,026) (1,295)

Equity dividends paid (4,234) (5,816)––––––– –––––––

Net cash used by financing activities (9,690) (15,243)––––––– –––––––

Net increase in cash and cash equivalents 4,377 4,226

Cash and cash equivalents at beginning of period 5,885 10,262

Foreign exchange gains on cash and cash equivalents – 141––––––– –––––––

Cash and cash equivalents at end of period 10,262 14,629––––––– –––––––

60

Notes to the financial information

1. ACCOUNTING POLICIES

Basis of preparation

The financial information has been prepared in accordance with International Financial Reporting Standards

(“IFRS”) as adopted by the European Union as they apply to the financial statements of the Group for the

52 weeks ended 30 December 2007 and applied in accordance with the Companies Act 1985.

The year ended 31 Decembeeer 2007 is the first financial year in which the Group financial statements of

Domino’s Pizza UK & IRL plc have been prepared in accordance with IFRS and the comparative amounts

for 2006 have been restated from UK Generally Accepted Accounting Practice (UK GAAP) to comply with

IFRS.

Note 36 to the financial information sets out the reconciliations to IFRS from the previously published UK

GAAP financial statements.

The financial information is presented in sterling and all values are rounded to the nearest thousand pounds

(£000) except when otherwise indicated.

In the preparation of the financial information management has made certain estimates and assumptions that

effect the amounts reported for assets and liabilities as at balance sheet date and the amounts reported for

revenues and expenses during the financial period. The nature of estimation means that actual outcomes

could differ from those estimates.

Key source of estimation uncertainty

The key source of estimation uncertainty that has a significant risk of causing material adjustment to the

carrying amounts of assets and liabilities within the next financial year is the estimation of share-based

payment costs. The estimation of share-based payment costs requires the selection of an appropriate

valuation model, consideration as to the inputs necessary for the valuation model chosen and the estimation

of the number of awards that will ultimately vest, inputs for which arise from judgments relating to the

probability of meeting non-market performance conditions and the continuing participation of employees.

Basis of consolidation

The Financial information incorporates the results and net assets of Domino’s Pizza UK & Irl plc (the

“Company”) and its subsidiary undertakings (together the “Group”) drawn up to the nearest Sunday to 31

December each year.

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains

control, and continue to be consolidated until the date that such control ceases. Control comprises the power

to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is

achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential

voting rights; or by way of contractual agreement. The financial statements of subsidiaries used in the

preparation of the consolidated financial statements are prepared for the same reporting period as the parent

company and are based on consistent accounting policies. All inter-company transactions and balances

between Group entities, including unrealised profits arising from them, are eliminated upon consolidation.

Minority interests represent the portion of profit and loss and net assets in subsidiaries that is not held by the

Group and is presented separately within equity in the consolidated balance sheet, separately from parent

shareholders’ equity.

Interests in associates

The Group’s interests in its associates, being those entities over which it has significant influence and which

are neither subsidiaries nor joint ventures, are accounted for using the equity method of accounting.

61

1. ACCOUNTING POLICIES (continued)

Under the equity method, the investment in an associate is carried in the balance sheet at cost plus post

acquisition changes in the Group’s share of net assets of the associate, less distributions received and less

any impairment in value of individual investments. The Group’s income statement reflects the Group’s share

of the associate’s results after tax. The Group statement of changes in equity reflects the Group’s share of

any income and expense recognised by the associate outside profit and loss.

Any goodwill arising on the acquisition of an associate, representing the excess of the cost of the investment

compared to the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and

contingent liabilities, is included in the carrying amount of the associate and is not amortised. To the extent

that the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities is greater than

the cost of the investment, a gain is recognised and added to the Group’s share of the associate’s profit or

loss in the period in which the investment is acquired.

Financial statements of associates are prepared for the same reporting period as the Group. Where necessary,

adjustments are made to bring the accounting policies used in line with those of the Group; to take into

account fair values assigned at the date of acquisition and to reflect impairment losses where appropriate.

Adjustments are also made in the financial information to eliminate the Group’s share of unrealised gains

and losses on transactions between the Group and its associates.

Foreign currencies

Foreign operations

The income and expenses of overseas subsidiaries are translated at the average rate of exchange ruling during

the year. The balance sheet of the overseas subsidiary undertaking is translated into sterling at the rate of

exchange ruling at the balance sheet date. Exchange differences arising, if any, are included within equity

and transferred to the Group’s translation reserve. Such translation differences are recognised as income or

as expenses in the period in which the operation is disposed.

The Group has utilised the exemption available in IFRS 1 whereby cumulative translation differences are

deemed to be zero at the date of transition to IFRS.

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.

Foreign currency transactions

Transactions denominated in foreign currencies are translated at the exchange rate on the date of the

transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are

translated at the exchange rate ruling at that date. Foreign exchange differences arising on translation are

recognised in the income statement for the period.

Goodwill

Goodwill arising on consolidation represents the excess of the cost of an acquisition over the fair value of

the Group’s share of the identifiable net assets and contingent liabilities of the acquired subsidiary at the date

of acquisition. Goodwill is recognised as an asset on the Group’s balance sheet in the year in which it arises

and is not amortised. Any goodwill asset arising on the acquisition of equity accounted entities is included

within the cost of those entities.

Goodwill is recognised on the purchase of further minority interests under the parent entity extension

method, whereby the entire difference between the cost of the additional interest in the subsidiary and the

minority interest’s share of the assets and liabilities reflected in the consolidated balance sheet at the date of

the acquisition of the minority interest is reflected as goodwill.

After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying

value being reviewed for impairment, at least annually and more frequently if events or changes indicate that

the carrying value may be impaired.

62

1. ACCOUNTING POLICIES (continued)

For the purpose of impairment testing, goodwill is allocated to the related cash-generating units monitored

by management, usually at business segment level or statutory company level as the case may be. Where the

recoverable amount of the cash-generating unit is less than its carrying amount, including goodwill, an

impairment loss is recognised in the income statement.

The carrying amount of goodwill allocated to a cash-generating unit is taken into account when determining

the gain or loss on disposal of the unit, or of an operation within it.

Goodwill arising on acquisitions before 1 January 2006 (the date of transition to IFRS) has been recorded at

its carrying amount under UK GAAP, subject to being tested for impairment at that date.

Intangible assets

Computer software

Computer software is carried at cost less accumulated amortisation and any impairment loss. Externally

acquired computer software and software licences are capitalised at the costs incurred to acquire and bring

into use the specific software. Internally developed computer software programs are capitalised to the extent

that costs can be separately identified and attributed to particular software programs, measured reliably, and

that the asset developed can be shown to generate future economic benefits. These assets are considered to

have finite useful lives and are amortised on a straight line basis over the estimated useful economic lives of

each of the assets, considered to be between three and five years.

The carrying value of intangible assets is reviewed for impairment whenever events or changes in

circumstances indicate the carrying value may not be recoverable.

Property, plant and equipment

Property, plant and equipment assets are carried at cost less accumulated depreciation and any recognised

impairment in value. Cost comprises the aggregate amount paid and the fair value of any other consideration

given to acquire the asset and includes costs directly attributable to making the asset capable of operating as

intended.

Depreciation is calculated to write down the cost of the assets to their residual values, on a straight-line

method on the following bases:

• Freehold buildings and leasehold properties – 50 years, or the lease term if shorter.

• Plant, equipment, fixtures and fittings and motor vehicles – at rates varying from 10 per cent. to 50

per cent.

• Leasehold building improvements – over the life of the lease.

• Freehold land is not depreciated.

Land and buildings under construction and non current assets held for sale are not depreciated.

The assets’ residual values, useful lives and methods of depreciation are reviewed, and adjusted if

appropriate on an annual basis. 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 (calculated as the difference between the net disposal proceeds and the carrying

amount of the asset) is included in the income statement in the year that the asset is derecognised.

All property, plant and equipment are reviewed for impairment in accordance with IAS 36, Impairment of

Assets, when there are indications that the carrying value may not be recoverable.

Prepaid short leasehold costs

Prepaid short lease hold property costs are classified as non-current prepayments. On initial recognition these

assets are held at cost and subsequently at amortised cost over the length of the lease.

63

1. ACCOUNTING POLICIES (continued)

Non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered through sales rather

than continuing use. This condition is regarded as met if a sale is expected to materialise within twelve months

after the balance sheet date and the asset is available for immediate disposal in its present condition. Non-

current assets classified as held for sale are measured at the lower of carrying amount and fair value less costs

to sell. After classification as assets held for sale, no further depreciation is provided for on the assets.

Leases

Group as lessee

Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and

rewards of ownership to the Group. All other leases are classified as operating leases.

Assets held as finance leases are recognised as assets of the Group at their fair value or, if lower, at the present

value of the minimum lease payments during the lease term at the inception of the lease. Lease payments are

apportioned between the reduction of the lease liability and finance charges in the income statement so as to

achieve a constant rate of interest in the remaining balance of the liability. Assets held under finance leases are

depreciated over the shorter of the estimated useful life of the assets and the lease term.

Assets leased under operating leases are not recorded on the balance sheet. Rental payments are charged

directly to the income statement. Lease incentives, primarily up-front cash payments or rent-free periods, are

capitalised and spread over the period of the lease term. Payments made to acquire operating leases are

treated as prepaid lease expenses and amortised over the life of the lease.

Group as lessor

Assets leased out under operating leases are included in property, plant and equipment and depreciated over

their useful lives. Rental income, including the effect of lease incentives, is recognised on a straight line basis

over the lease term.

Where the Group transfers substantially all the risks and benefits of ownership of the asset, the arrangement

is classified as a finance lease and a receivable is recognised for the initial direct costs of the lease and the

present value of the minimum lease payments. As payments fall due, finance income is recognised in the

income statement so as to achieve a constant rate of return on the remaining net investment in the lease.

Impairment of 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 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. Where the carrying amount of an asset exceeds its recoverable amount, the asset is

considered impaired and is written down to its recoverable amount. 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. Impairment losses on

continuing operations are recognised in the income statement in those expense categories consistent with the

function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognised

impairment losses 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. Such reversal is recognised in profit or loss.

64

1. ACCOUNTING POLICIES (continued)

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.

Provisions

Provisions are recognised when there is a present legal or constructive obligation as a result of past events,

for which it is probable that an outflow of economic benefit will be required to settle the obligation and

where the amount of the obligation can be reliably measured.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on a first in, first out

basis. Net realisable value is based on estimated selling price less any further costs expected to be incurred

to disposal.

Trade and other receivables

Trade receivables, which generally have 7 – 28 days terms, are recognised and carried at the lower of their

original invoiced value and recoverable amount. Provision is made when it is likely that the balance will not

be recovered in full. Balances are written off when the probability of recovery is considered remote.

Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits

with an original maturity of three months or less.

Interest bearing loans and borrowings

Obligations for loans and borrowings are recognised when the Group becomes party to the related contracts

and are measured initially at fair value less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost

using the effective interest method. Gains and losses arising on the repurchase, settlement or otherwise

cancellation of liabilities are recognised respectively in finance revenue and finance cost.

Income taxes

Current tax assets and liabilities are measured at the amount expected to be recovered or paid to the taxation

authorities, based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is recognised using the balance sheet liability method, providing for temporary

differences between the tax bases and the accounting bases of assets and liabilities. Deferred tax is calculated

on an undiscounted basis at the tax rates that are expected to apply in the period when the liability is settled

or the asset is realised, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Deferred income tax liabilities are recognised for all temporary differences, with the following exceptions:

• where the temporary difference 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

the accounting profit nor taxable profit or loss;

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and

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

• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will

be available against which the deductible temporary differences, carried forward tax credits or losses

can be utilised.

65

1. ACCOUNTING POLICIES (continued)

Income tax is charged or credited to the income statement, except when it relates to items charged or credited

directly to equity, in which case the income tax is also dealt with in equity.

Deferred tax assets and liabilities are offset against each other when the Group has a legally enforceable right

to set off current tax assets and liabilities and the deferred tax relates to income taxes levied by the same tax

jurisdiction on either the same taxable entity, or on different taxable entities which intend to settle current

tax assets and liabilities on a net basis or to realise the assets and settle the liabilities simultaneously in each

future period in which significant amounts of deferred tax liabilities are expected to be settled or recovered.

Derecognition of financial assets and liabilities

A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold,

cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different

terms, or the terms of an existing liability are substantially modified, such an exchange or modification is

treated as a derecognition of the original liability and the recognition of a new liability, such that the

difference in the respective carrying amounts together with any costs or fees incurred are recognised in profit

or loss.

Pensions

The Group contributes to the personal pension plans of certain staff. The contributions are charged as an

expense as they fall due. Any contributions unpaid at the balance sheet date are included as an accrual at that

date. The Group has no further payment obligations once the contributions have been paid.

Treasury shares

Domino’s Pizza UK & IRL plc shares held by the Group are classified in shareholders’ equity as “treasury

shares” and are recognised at cost. Consideration received for the sale of such shares is also recognised in

equity, with any difference between the proceeds from sale and the original cost being taken to revenue

reserves except that where the proceeds exceed the consideration paid then the excess is transferred to the

share premium account. No gain or loss is recognised on the purchase, sale issue or cancellation of equity

shares.

The Employee Benefit Trust has waived its entitlement to dividends. The Group will meet the expenses of

the trust as and when they fall due.

Revenue recognition

Revenue consists and is recognised as follows:

Pizza delivery – on delivery of pizzas to franchisee customers

Commissary and equipment sales – on delivery to franchisees

Royalties (based on system sales) – on delivery of pizzas by franchisees to customers

Franchise fee income for initial services – recognised when the services have been substantially

performed which is on commencement of franchisee

trading

Finance lease interest income – as set out in lease accounting policy

Rental income on leasehold properties – on a straight line basis in accordance with the lease

terms

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and

the revenue can be reliably measured.

Revenue is measured at the fair value of consideration net of returns, rebates and value-added taxes.

66

1. ACCOUNTING POLICIES (continued)

Borrowing costs

Borrowing costs are generally expensed as incurred. Borrowing costs that are directly attributable to the

acquisition or construction of an asset are capitalised while the asset is being constructed as part of the cost

of that asset.

The policy is adopted for all assets that meet the definition of qualifying assets under the standard.

Capitalisation of borrowing costs should commence when:

• expenditures for the asset and borrowing costs are being incurred; and

• activities necessary to prepare the asset for its intended use are in progress.

Capitalisation ceases when the asset is substantially ready for its intended use. If active development is

interrupted for an extended period, capitalisation is suspended. When construction occurs piecemeal and use

of each part is possible as construction continues, capitalisation for each part ceases on substantial

completion of that part.

For borrowing associated with a specific asset, the actual rate on that borrowing is used. Otherwise, a

weighted average cost of borrowings is used.

Exceptional items

The Group presents as exceptional items on the face of the income statement, those material items of income

and expense which, because of the nature and expected infrequency of the events giving rise to them, merit

separate presentation to allow shareholders to understand better the elements of financial performance in the

year, so as to facilitate comparison with prior periods and to assess better trends in financial performance.

Share based payments

The Group provides benefits to employees (including Directors) in the form of share based payment

transactions, whereby employees render services in exchange for rights over shares (“equity-settled

transactions”). The cost of the equity-settled transactions with employees and Directors are measured by

reference to the fair value at the date at which they are granted and is recognised as an expense over the

vesting period, which ends on the date at which the relevant employees become fully entitled to the award.

Fair values of employee share option plans are calculated using the Black-Scholes and Binomial models. In

valuing equity settled transactions, no account is taken of any vesting conditions, other than conditions

linked to the price of the shares of the Company (market conditions).

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is

conditional upon a market condition, which are treated as vesting irrespective of whether or not the market

condition is satisfied, provided that all other performance conditions are satisfied.

At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to

which the vesting period has expired and the Directors’ best estimate of the number of equity instruments

that will ultimately vest on achievement or otherwise of non-market conditions or in the case of an

instrument subject to a market condition, be treated as vested as described above. The movement in the

cumulative expense since the previous balance sheet date is recognised in the income statement, with the

corresponding increase in equity.

Where the terms of an equity-settled award are modified or a new award is designated as replacing a

cancelled or settled award, the cost based on the original award terms continues to be recognised over the

original vesting period. In addition, an expense is recognised over the remainder of the new vesting period

for the incremental fair value of any modification, based on the difference between the fair value of the

original award and the fair value of the modified award, both as measured on the date of the modification.

No reduction is recognised if this difference is negative.

67

1. ACCOUNTING POLICIES (continued)

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and

any cost not yet recognised in the income statement for the award is expensed immediately. Any

compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from

equity, with any excess over fair value being treated as an expense in the income statement.

The Group has taken advantage of the transitional provisions of IFRS 2 in respect of equity-settled awards

so as to apply IFRS 2 only to those equity-settled awards granted after 7 November 2002 that had not vested

before 3 January 2005.

New standards and interpretations not applied

During the year ended 30 December 2007, the IASB and IFRIC have issued the following standards and

interpretations with an effective date after the date of this financial information:

International Accounting Standards (IAS/IFRS) Effective date

IFRS 8 – Operating segments 1 January 2009

IAS 23 – Borrowing cost (revised) 1 January 2009

IAS 27 – (Revised) Consolidations 1 July 2009

IFRS 3 – (Revised) Business combinations 1 July 2009

International Financial Reporting Interpretations Committee (IFRIC)

IFRIC 11 – IFRS 2 group and treasury share transactions * 1 March 2007

IFRIC 12 – Service concession arrangements * 1 January 2008

IFRIC 13 – Customer Loyalty Programmes * 1 July 2008

IFRIC 14 – Limit on Defined Benefit Asset, Minimum Funding Requirements

and their interaction * 1 January 2008

* Not yet adopted by the European Union

The Directors do not anticipate that the adoption of these standards and interpretations will have a material

impact on the Group’s financial statements in the period of application.

Upon adoption of IFRS 8, the Group will be required to disclose financial and descriptive information about

its reportable segments. Whilst the criteria used to identify the reportable segments differs from that currently

applied in accordance with IAS 14, there will be no effect on reported income or net assets.

The revisions to IFRS 3 and IAS 27 will impact the way in which acquisitions of minority interests are

accounted for that will impact the amount of goodwill recognised, the results in the period that an acquisition

occurs and future revenues reported. However the size of minority interest transactions are not significant to

the results of the Group.

2. REVENUE

Revenue recognised in the income statement is analysed as follows:

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Royalties and sales to franchisees 87,269 106,147

Rental income on leasehold and freehold property 7,406 8,479

Finance lease income 290 265––––––– –––––––

94,965 114,891––––––– –––––––

68

3. SEGMENT INFORMATION

For management purposes, the Group is organised into two geographical business units, United Kingdom

and Ireland, based on the territories governed by the Master Franchise Agreement.

In both the current and the prior year all assets held for sale are included within the United Kingdom

segment.

Primary reporting format – Geographical segments

The following tables present revenue and profit and certain asset and liability information regarding the

Group’s geographical segments for the 52 weeks ended 31 December 2006 and 30 December 2007:

52 weeks ended 31 December 2006United

Ireland Kingdom Total£000 £000 £000

RevenueSales to external customers 9,500 85,465 94,965

–––––– –––––– ––––––Segment revenue 9,500 85,465 94,965

–––––– –––––– ––––––ResultsSegment result 2,042 11,473 13,515

Unallocated expenses

Share of profit of associates – 171 171–––––– –––––– ––––––

Group operating profit 2,042 11,644 13,686

Profit on sale of subsidiary undertakings – 454 454

Profit on sale of assets and assets held for sale – 159 159–––––– –––––– ––––––

2,042 12,257 14,299

Net finance costs (110)––––––

Profit before taxation 14,189

Taxation (4,193)––––––

Profit for the period 9,996––––––

Assets and liabilitiesSegment assets 2,226 29,021 31,247

Equity accounted investments – 589 589

Unallocated assets – – 10,262–––––– –––––– ––––––

Total assets 2,226 29,610 42,098–––––– –––––– ––––––

Segment liabilities 584 16,689 17,273

Unallocated liabilities – – 15,839–––––– –––––– ––––––

Total liabilities 584 16,689 33,112–––––– –––––– ––––––

Other segment informationCapital expenditure:

Property, plant and equipment:

– Freehold land and buildings 38 – 38

– Assets under construction – 56 56

– Leasehold improvements – 311 311

– Equipment 41 1,848 1,889

Intangible assets – 950 950

Depreciation 76 1,462 1,538

Amortisation – 277 277

Share-based payment expense – 344 344

Write-off of inventories – 13 13

69

3. SEGMENT INFORMATION (continued)

52 weeks ended 30 December 2007

UnitedIreland Kingdom Total

£000 £000 £000RevenueSales to external customers 12,292 102,599 114,891

–––––––– –––––––– ––––––––Segment revenue 12,292 102,599 114,891

–––––––– –––––––– ––––––––ResultsSegment result 2,628 15,535 18,163

Unallocated expenses

Share of profit of associates – 158 158–––––––– –––––––– ––––––––

Group operating profit 2,628 15,693 18,321

Profit on sale of subsidiary undertakings – 58 58

Profit on sale of assets and assets held for sale – 288 288–––––––– –––––––– ––––––––

2,628 16,039 18,667

Net finance costs (91)––––––––

Profit before taxation 18,576

Taxation (5,337)––––––––

Profit for the period 13,239––––––––

Assets and liabilitiesSegment assets 2,614 30,365 32,979

Equity accounted investments – 685 685

Unallocated assets – – 14,629–––––––– –––––––– ––––––––

Total assets 2,614 31,050 48,293–––––––– –––––––– ––––––––

Segment liabilities 1,163 21,009 22,172

Unallocated liabilities – – 16,224–––––––– –––––––– ––––––––

Total liabilities 1,163 21,009 38,396–––––––– –––––––– ––––––––

Other segment informationCapital expenditure:

Property, plant and equipment:

– Freehold land and buildings 15 349 364

– Assets under construction – 1,444 1,444

– Leasehold improvements – 165 165

– Equipment 65 1,471 1,536

Intangible assets – 210 210

Depreciation 77 1,234 1,311

Amortisation – 234 234

Share-based payment expense – 880 880

Write-off of inventories 2 19 21

70

3. SEGMENT INFORMATION (continued)

Secondary reporting format – Business segments

The following tables present revenue, expenditure and certain information regarding the Group’s business

segments for the 52 weeks ended 31 December 2006 and 30 December 2007.

52 weeks ended 31 December 2006Rental

income onRoyalties and leasehold Finance

sales to and freehold leasefranchisees property income Total

£000 £000 £000 £000RevenueSales to external customers 86,625 8,050 290 94,965

–––––––– –––––––– –––––––– ––––––––Revenue from continuing operations 86,625 8,050 290 94,965

–––––––– –––––––– –––––––– ––––––––Other segment informationSegment assets 24,624 3,954 2,669 31,247

Equity accounted investments 589 – – 589

Unallocated assets – – – 10,262–––––––– –––––––– –––––––– ––––––––

Total assets 25,213 3,954 2,669 42,098–––––––– –––––––– –––––––– ––––––––

Capital expenditure:

Property, plant and equipment:

– Freehold land and buildings 38 – – 38

– Assets under construction 56 – – 56

– Leasehold improvements 268 43 – 311

– Equipment 1,889 – – 1,889

Intangible assets 950 – – 950

52 weeks ended 30 December 2007

Rentalincome on

Royalties and leasehold Financesales to and freehold lease

franchisees property income Total£000 £000 £000 £000

RevenueSales to external customers 105,333 9,293 265 114,891

–––––––– –––––––– –––––––– ––––––––Revenue from continuing operations 105,333 9,293 265 114,891

–––––––– –––––––– –––––––– ––––––––Other segment informationSegment assets 25,565 4,578 2,836 32,979

Equity accounted investments 685 – – 685

Unallocated assets – – – 14,629–––––––– –––––––– –––––––– ––––––––

Total assets 26,250 4,578 2,836 48,293–––––––– –––––––– –––––––– ––––––––

Capital expenditure:

Property, plant and equipment:

– Freehold land and buildings 64 300 – 364

– Assets under construction 1,444 – – 1,444

– Leasehold improvements 143 22 – 165

– Equipment 1,536 – – 1,536

Intangible assets 210 – – 210

71

4. GROUP OPERATING PROFIT

This is stated after charging/(crediting):

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Depreciation of property, plant and equipment 1,529 1,302

Depreciation of assets held under finance leases and hire

purchase contracts 9 9

Amortisation of prepaid lease charges 101 113

Amortisation of intangible assets 176 121–––––––– ––––––––

Total depreciation and amortisation expense 1,815 1,545–––––––– ––––––––

Net foreign currency gain/(losses) (16) 100–––––––– ––––––––

Cost of inventories recognised as an expense 40,719 50,516–––––––– ––––––––

Write-down of inventories to net realisable value 9 21–––––––– ––––––––

Operating lease payments

– land and buildings 7,217 8,287

– plant, machinery and vehicles 1,480 1,747–––––––– ––––––––

Total operating lease payments recognised in the income statement 8,697 10,034–––––––– ––––––––

5. AUDITORS’ REMUNERATION

The Group paid the following amounts to its auditors in respect of the audit of the financial statements and

for other services provided to the Group.

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Audit of the financial statements* 75 82–––––––– ––––––––

Other fees to auditors

– local statutory audit for subsidiaries 44 46

– other services 2 28–––––––– ––––––––

46 74–––––––– ––––––––

* of which £2,000 (2006: £2,000) relates to the Company

72

6. EXCEPTIONAL ITEMS

Recognised as part of operating profit

The Group has taken the decision not to invest in or trade in corporately owned stores. During the year one

(2006: three) corporately owned store was sold and none (2006: one) closed.

The Group has incurred the following exceptional charges relating to store closures and stores sold during

the financial period:

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Onerous lease and dilapidation provisions 76 45

Restructuring and reorganisation costs 252 143

Assets written off 52 145

Lease finance and other bad debts provided for* 119 ––––––––– ––––––––

499 333–––––––– ––––––––

* relates to a store owned and operated by a franchisee, closed during the 2006 financial year.

Except for the assets written off, for stores closed, the charges should be deductible for corporation tax

purposes. Except for the restructuring and reorganisation costs, these charges had no impact on the cash flow

of the Group during the year.

Recognised below operating profit

Profit on the sale of subsidiary undertakings

During the 2005 financial year the Group sold two subsidiary undertakings, DPGS Limited and Triple A

Pizza Limited (which included 12 corporate stores at the date of the transaction). As a result of this

transaction, certain legal and property provisions were made (see note 28).

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Movement in provisions 454 58–––––––– ––––––––

During the year partial resolution relating to the conditions for the provisions made in relation to the sale of

the subsidiary undertakings was reached and as a result £58,000 (2006: £454,000) of the provisions created

have been released. These are reported in the profit on sale of subsidiary undertakings line on the income

statement.

Profit on the sale of non current assets and assets held for sale

The Group disposed of its subsidiary undertaking, DP Newcastle & Sunderland Limited in June 2007,

generating a profit of £279,000. The gain in respect of this disposal will be exempt from corporation tax due

to the substantial shareholdings exemption. The transaction will however give rise to a degrouping or exit

charge which will result in a tax liability of circa £140,000.

73

6. EXCEPTIONAL ITEMS (continued)

In addition the Group sold one (2006: three) corporate store resulting in a profit of £6,000 (2006: £159,000).

The gain in respect of this disposal will be chargeable to corporation tax at the statutory rate of 30 per cent.

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Sale of one (2006: three) corporate store 159 6

Profit on sale of assets held for sale – DP Newcastle & Sunderland Limited – 279

Profit on sale of other non current assets – 3–––––––– ––––––––

159 288–––––––– ––––––––

7. EMPLOYEE BENEFITS AND DIRECTORS’ EMOLUMENTS

(a) Employee benefits expense

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Wages and salaries 11,717 12,939

Social security costs 1,136 1,158

Other pension costs 227 298

Share-based payments 344 880–––––––– ––––––––

13,424 15,275–––––––– ––––––––

During the 52 weeks ended 30 December 2007 the Group’s IFRS 2 charge relating to reversionary interests

in ordinary shares granted in 2004 has increased as the performance targets set are forecast to be achieved

earlier than expected, resulting in an accelerated charge of £174,000 (2006: £nil).

This charge was not and will not become deductible for taxation purposes (note 10). This charge had no

impact on the cash flow of the Group during the period.

The average monthly number of employees during the year was made up as follows:

52 weeks 52 weeksended ended

31 December 30 December2006 2007

No. No.

Administration 130 145

Production and distribution 157 171

Store employees 306 317–––––––– ––––––––

593 633–––––––– ––––––––

74

7. EMPLOYEE BENEFITS AND DIRECTORS’ EMOLUMENTS (continued)

(b) Directors’ emoluments

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Directors’ emoluments 1,631 1,829–––––––– ––––––––

Aggregate contributions to defined contribution pension schemes 59 61–––––––– ––––––––

Number of directors accruing benefits under:

– Defined contribution schemes 3 3–––––––– ––––––––

Additional information regarding directors’ emoluments:

The Remuneration Committee consists of John Hodson (Chairman), Dianne Thompson and Michael

Shallow. It has the primary responsibility to review the performance of executive directors and similar

employees and set the scale and structure of their remuneration. The underpinning objective is to recruit,

retain and motivate a top quality team of executive directors and senior executives through a competitive

remuneration structure, which provides incentives to deliver exceptional performance. This is achieved

through offering remuneration packages, which include salaries and bonuses benchmarked against similar

companies and a long-term incentive plan, which provides significant reward for achieving stretching targets.

These arrangements are described more fully below.

Service agreements

Stephen Hemsley, Lee Ginsberg and Christopher Moore have entered into service agreements with the

Company, which are subject to twelve month’s notice by the Company. The remuneration packages consist

of basic salary, pension contributions, health and life insurance benefits and the use of a company car or cash

equivalent allowance.

Colin Halpern is seconded to the Company from International Franchise System, Inc. (“IFS”) as non-

executive vice chairman under the terms of a management agreement. The agreement is reviewed annually

and the level of compensation paid to IFS agreed by the Remuneration Committee.

The non-executive directors are appointed on three-year agreements with the Company terminable at one

weeks notice. Fees for non-executive directors are set by the Board.

75

7. EMPLOYEE BENEFITS AND DIRECTORS’ EMOLUMENTS (continued)

Directors’ remuneration

Salary Pensionor fees Bonus Benefits contributions Total

52 weeks 52 weeks 52 weeks 52 weeks 52 weeksended ended ended ended ended

30 December 30 December 30 December 30 December 30 December2007 2007 2007 2007 2007£000 £000 £000 £000 £000

Executive directors:Stephen Hemsley 240 240 35 24 539

Lee Ginsberg 180 180 31 18 409

Christopher Moore 200 200 24 19 443

Non-executive directors:Colin Halpern 214 100 69 – 383

Nigel Wray 28 – – – 28

John Hodson 30 – – – 30

Michael Shallow 30 – – – 30

Dianne Thompson 28 – – – 28–––––––– –––––––– –––––––– –––––––– ––––––––

950 720 159 61 1,890–––––––– –––––––– –––––––– –––––––– ––––––––

Salary Pensionor fees Bonus Benefits contributions Total

52 weeks 52 weeks 52 weeks 52 weeks 52 weeksended ended ended ended ended

31 December 31 December 31 December 31 December 31 December2006 2006 2006 2006 2006£000 £000 £000 £000 £000

Executive directors:Colin Halpern 204 100 136 – 440

Stephen Hemsley 230 174 32 23 459

Lee Ginsberg 170 105 33 17 325

Christopher Moore 185 128 22 19 354

Non-executive directors:Nigel Wray 28 – – – 28

John Hodson 30 – – – 30

Michael Shallow 30 – – – 30

Dianne Thompson 24 – – – 24–––––––– –––––––– –––––––– –––––––– ––––––––

901 507 223 59 1,690–––––––– –––––––– –––––––– –––––––– ––––––––

The value of benefits relates primarily to the provision of a company car or equivalent allowance.

Colin Halpern is not remunerated by the Company. A management fee of £214,000 (2006: £204,000) and a

bonus of £100,000 (2006: £100,000) was paid to IFS in respect of his services. A further benefit of £36,000

(2006: £100,000) relating to life insurance premiums was paid to IFS during the year.

Nigel Wray was not directly remunerated by the Company. A management fee of £28,000 (2006: £28,000)

was paid to Brendon Street Investments Limited, a company of which Nigel Wray is a director, in respect of

his services.

The Company makes contributions of 10 per cent. of annual basic salary to personal pension plans of

Stephen Hemsley, Lee Ginsberg and Christopher Moore.

76

7. EMPLOYEE BENEFITS AND DIRECTORS’ EMOLUMENTS (continued)

Reversionary interests and share options

The Employee Benefit Trust (“EBT”) operates a long-term incentive plan under which senior executives may

be incentivised by the grant to them of reversionary interests over a portion of the assets of the trust.

The following is a summary of the reversionary interests granted by the EBT:

At Exercised Granted At31 December during during 30 December

2006 the year the year 2007No. No. No. No.

Stephen Hemsley 1,600,000 – 1,600,000 3,200,000

Christopher Moore 1,632,000 – 1,120,000 2,752,000

Lee Ginsberg 2,400,000 – 400,000 2,800,000–––––––– –––––––– –––––––– ––––––––5,632,000 – 3,120,000 8,752,000–––––––– –––––––– –––––––– ––––––––

Weighted average exercise price per

reversionary interest 111.84p – 210.00p 146.83p

At Exercised Granted At1 January during during 31 December

2006 the year the year 2006No. No. No. No.

Stephen Hemsley 6,400,000 (6,400,000) 1,600,000 1,600,000

Christopher Moore 2,400,000 (1,888,000) 1,120,000 1,632,000

Lee Ginsberg 2,400,000 – – 2,400,000––––––––– ––––––––– ––––––––– –––––––––11,200,000 (8,288,000) 2,720,000 5,632,000––––––––– ––––––––– ––––––––– –––––––––

Weighted average exercise price per

reversionary interest 50.65p 42.19p 151.56p 111.84p

77

7. EMPLOYEE BENEFITS AND DIRECTORS’ EMOLUMENTS (continued)

The following is a summary of the performance criteria and vesting conditions relating to the reversionary

interests granted to the directors:

InterestPotential Diluted represented by

vesting Grant price earnings Net profit such numberperiod per interest per share before tax of Shares

Stephen Hemsley

Grant date27 April 2006 151.56p 9.66p £22,300,000 1,600,000

6 March 2007 210.00p 12.50p £28,600,000 1,600,000

––––––––3,200,000––––––––

Christopher Moore

Grant date16 December 2004 62.50p 7.50p £17,000,000 512,000

27 April 2006 151.56p 9.66p £22,300,000 1,120,000

6 March 2007 210.00p 12.50p £28,600,000 1,120,000

––––––––2,752,000––––––––

Lee Ginsberg

Grant date16 December 2004 62.50p 7.50p £17,000,000 1,200,000

31 October 2005 92.19p 8.44p £20,000,000 1,200,000

6 March 2007 210.00p 12.50p £28,600,000 400,000

––––––––2,800,000––––––––

The performance conditions for the 1,712,000 reversionary interests granted during December 2004 have

been met. Based on the year end share price of 171.75p, the total number of shares receivable under the

scheme is 1,089,001 and have been included in the diluted earnings per share (see note 11).

These shares vest as follows:

Value atyear end

No. share price

Christopher Moore 325,682 559,360

Lee Ginsberg 763,319 1,311,000–––––––– ––––––––1,089,001 1,870,360–––––––– ––––––––

31 December 2010 –

31 December 2012

31 December 2008 –

31 December 2010

31 December 2007 –

31 December 2009

31 December 2010 –

31 December 2012

31 December 2009 –

31 December 2011

31 December 2007 –

31 December 2009

31 December 2010 –

31 December 2012

31 December 2009 –

31 December 2011

78

7. EMPLOYEE BENEFITS AND DIRECTORS’ EMOLUMENTS (continued)

Directors and their interests

The directors during the year under review and their interest in the share capital of the Company, other than

with respect to the reversionary interests held over ordinary shares (which are detailed in the analysis of

reversionary interests included in the Report on Directors’ Remuneration) were as follows:

At At31 December 30 December

2006 2007Ordinary Ordinary

shares shares

Colin Halpern (i) 20,427,328 15,007,328

Stephen Hemsley (ii) 7,865,059 7,040,000

Christopher Moore 2,880,077 2,880,077

Nigel Wray (iii) 45,327,120 36,495,120

Michael Shallow 48,000 48,000

John Hodson 48,000 48,000

(i) Nil (2006: 19,609,552) shares are held by International Franchise Systems Inc., beneficially for HS

Real Company LLC and 15,007,328 (2006: 817,776) shares are held by HS Real Company LLC (HS

Real Company LLC is owned by a discretionary trust, the beneficiaries of which are the adult children

of Colin and Gail Halpern).

(ii) 3,200,000 (2006: 3,200,000) shares are held by CTG Investment Limited, a discretionary trust of

which Stephen Hemsley and his family are potential beneficiaries.

(iii) 17,104,916 (2006: 24,364,800) shares are held by RBC Trustees (CI) Limited (previously held by

Abacus (CI) Limited which merged with RBC Trustees (CI) Limited), which is beneficially owned by

the family trusts of Nigel Wray, principal beneficiaries of which are Nigel Wray’s children.

19,377,404 (2006: 19,377,404) shares are held by Syncbeam Limited, a company wholly owned by

Nigel Wray.

During the period from the end of the financial year to 19 February 2008, there have been no changes in

directors’ shareholdings or their interests in share options or reversionary interests.

8. FINANCE INCOME

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Bank interest receivable 307 311

Franchisee loans 71 75

Other interest 19 142–––––––– ––––––––

Total finance income 397 528–––––––– ––––––––

79

9. FINANCE EXPENSE

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Bank loan in relation to the EBT 398 405

Bank credit facility interest payable 51 203

Finance charges payable under finance leases and hire purchase contracts 4 4

Other interest payable 54 7–––––––– ––––––––

507 619–––––––– ––––––––

10. TAXATION

(a) Tax on profit on ordinary activities

Tax charged in the income statement

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Current income tax:

UK corporation tax

– current year 4,677 5,497

– adjustment in respect of prior periods (418) (430)–––––––– ––––––––

4,259 5,067

Income tax of overseas operations on profits for the year 154 198–––––––– ––––––––

Total current income tax 4,413 5,265–––––––– ––––––––

Deferred tax:

Origination and reversal of temporary differences (220) (81)

Effect of change in tax rate – (28)

Adjustment in respect of prior periods – 181–––––––– ––––––––

Total deferred tax (220) 72–––––––– ––––––––

Tax charge in the income statement 4,193 5,337–––––––– ––––––––

The tax charge in the income statement is disclosed as follows:Income tax expense on continuing operations 4,193 5,337

–––––––– ––––––––

Tax relating to items (charged) or credited to equity:Reduction in current tax liability as a result of the exercise of share options 400 780

Origination and reversal of temporary differences in relation to unexercised

share options 483 (566)–––––––– ––––––––

Tax credit in the group statement of changes in equity 883 214–––––––– ––––––––

80

10. TAXATION (continued)

(b) Reconciliation of the total tax charge

The tax expense in the income statement for the 52 weeks ended 30 December 2007 is lower than the

statutory corporation tax rate of 30 per cent. (2006: 30 per cent.). The differences are reconciled below:

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Profit before taxation 14,189 18,576–––––––– ––––––––

Accounting profit before income tax 14,189 18,576–––––––– ––––––––

Accounting profit multiplied by the UK statutory rate of corporation tax

of 30 per cent. (2006: 30 per cent.) 4,257 5,573

Expenses not deductible for tax purposes 171 168

Profit on disposal of tangible assets – not taxable (6) 19

Accounting depreciation not eligible for tax purposes 196 135

Adjustments relating to prior years corporation tax (418) (247)

Effect of decreased tax rate – (28)

Tax rate differences (7) (283)–––––––– ––––––––

Total tax expense reported in the income statement 4,193 5,337–––––––– ––––––––

Effective tax rate 29.55% 28.73%–––––––– ––––––––

The standard UK rate of corporation tax will reduce to 28 per cent. from 1 April 2008. On the basis that the

Group’s deferred tax assets and liabilities are not expected to materially crystallise before 1 April 2008 the

Group’s deferred tax balances have been recognised at 28 per cent. at 30 December 2007.

(c) Temporary differences associated with Group investments

At 30 December 2007, there was no recognised deferred tax liability (2006: nil) for taxes that would be

payable on the unremitted earnings of the Group’s subsidiaries, or its associates, as:

• there are no corporation tax consequences of the Group’s UK subsidiaries or associates paying

dividends to their parent companies; and

• the Group has determined that undistributed profits of its Irish subsidiary will not be distributed in the

foreseeable future. The temporary difference associated with the investment in the Group’s Irish

subsidiary, for which deferred tax has not been recognised aggregate to £3,340,000 (2006:

£1,816,000).

There are no income tax consequences for the Group attaching to the payment of dividends by the Group to

its shareholders.

81

10. TAXATION (continued)

(d) Deferred tax

The deferred tax included in the balance sheet is as follows:

At At31 December 30 December

2006 2007£000 £000

Deferred tax liabilities (243) (215)

Deferred tax assets 1,209 565–––––––– ––––––––

966 350–––––––– ––––––––

At At31 December 30 December

2006 2007£000 £000

Gross movement in the deferred income tax accountOpening balance 263 966

Tax (charged)/credited to equity 483 (566)

Income statement (charge)/credit 220 (72)

Release on sale of subsidiary undertaking – 22–––––––– ––––––––

Closing balance 966 350–––––––– ––––––––

Deferred tax assets

Share Accelerated Goodwill based capital Lease and

payments allowances inducements amortisation Provisions Total£000 £000 £000 £000 £000 £000

At 1 January 2006 751 (671) 270 – 159 509

Credit to equity 483 – – – – 483

Credit/(charge) to income 41 290 36 (5) (145) 217–––––– –––––– –––––– –––––– –––––– ––––––

At 31 December 2006 1,275 (381) 306 (5) 14 1,209

Charge to equity (566) – – – – (566)

Credit/(charge) to income 68 (170) 13 (10) (1) (100)

Released on sale of

subsidiary undertaking – 22 – – – 22–––––– –––––– –––––– –––––– –––––– ––––––

At 30 December 2007 777 (529) 319 (15) 13 565–––––– –––––– –––––– –––––– –––––– ––––––

Deferred tax liabilities

Accelerated Roll over capital

relief allowances Total£000 £000 £000

At 1 January 2006 191 55 246

Credit to income – (3) (3)–––––––– –––––––– ––––––––

At 31 December 2006 191 52 243

Credit to income (13) (15) (28)–––––––– –––––––– ––––––––

At 30 December 2007 178 37 215–––––––– –––––––– ––––––––

82

11. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity

holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share are calculated by dividing the profit attributable to ordinary equity holders of the

parent by the weighted average number of ordinary shares outstanding during the year plus the weighted

average number of ordinary shares that would have been issued on the conversion of all dilutive potential

ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share

computations:

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Profit for the period 9,996 13,239

Adjusted for – minority interests 88 6–––––—–––– –––––—––––

Profit attributable to equity holders of the parent 10,084 13,245–––––—–––– –––––—––––

Analysed as:

Profit attributable to equity holders of the parent – adjusted

for the effect of dilution 10,084 13,245–––––—–––– –––––—––––

At At31 December 30 December

2006 2007No. No.

Reconciliation of basic and diluted weighted average number of shares*:

Basic weighted average number of shares (excluding treasury shares) 161,967,072 157,975,572

Dilutive potential ordinary shares:

Employee share options 2,342,486 1,759,797

Reversionary interests (see director’s remuneration report) 672,592 1,089,001–––––—–––– –––––—––––

Diluted weighted average number of shares 164,982,150 160,824,370–––––—–––– –––––—––––

*After the share split of 3.2 ordinary shares of 1.5625 pence each for 1 ordinary share of 5 pence approved at the Annual General

Meeting held on 26 April 2007.

There have been no other transactions involving ordinary shares or potential ordinary shares between the

reporting date and the date of completion of these financial statements.

The performance conditions for reversionary interests granted over 9,920,000 (2006: 6,640,000) shares and

share options granted over 3,097,485 (2006: 2,515,110) shares have not been met in the current financial

period and therefore the dilutive effect of the number of shares which would have been issued at the period

end have not been included in the diluted earnings per share calculation.

Earnings per share before exceptional items

The Group presents as exceptional items on the face of the income statement, those material items of income

and expense which, because of the nature and expected infrequency of the events giving rise to them, merit

separate presentation to allow shareholders to understand better the elements of financial performance in the

year, so as to facilitate comparison with prior periods and to assess better the trends in financial performance.

83

11. EARNINGS PER SHARE (continued)

To this end, basic and diluted earnings from continuing operations per share is also presented on this basis

and using the weighted average number of shares for both basic and diluted amounts as per the table above.

The amounts for earnings per share from continuing operations before exceptional items are as follows:

52 weeks 52 weeksended ended

31 December 30 December2006 2007

Basic earnings per share 6.10p 8.48p––––––––– –––––––––

Diluted earnings per share 5.99p 8.33p––––––––– –––––––––

Net profit before exceptional items and attributable to equity

holders of the parent is derived as follows:

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Profit for the period 9,996 13,239

Adjusted for – minority interests 88 6––––––––– –––––––––

Profit attributable to equity holders of the parent 10,084 13,245

Exceptional items after tax – attributable to equity holders of the parent (200) 148––––––––– –––––––––

Profit before exceptional items attributable to equity holders of the parent 9,884 13,393––––––––– –––––––––

12. DIVIDENDS PAID AND PROPOSED

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Declared and paid during the year:

Equity dividends on ordinary shares:

Final dividend for 2006: 1.76p (2005: 1.30p) 2,115 2,792

Interim dividend for 2007: 1.90p (2006: 1.30p) 2,119 3,024––––––––– –––––––––

Dividends paid 4,234 5,816––––––––– –––––––––

Proposed for approval by shareholders at the AGM

(not recognised as a liability at 30 December 2007 or 31 December 2006)

Final dividend for 2007: 2.50p (2006: 1.76p) 2,792 3,896

84

13. PROPERTY, PLANT AND EQUIPMENT

Freehold land Assets under Leasehold

and buildings construction improvements Equipment Total

£000 £000 £000 £000 £000

Cost or valuation:

At 1 January 2006 8,245 – 994 8,276 17,515

Additions 38 56 311 1,889 2,294

Disposals – – (13) (215) (228)

Transfers to non current assets

held for sale – – (647) (415) (1,062)–––––––– –––––––– –––––––– –––––––– ––––––––

At 31 December 2006 8,283 56 645 9,535 18,519

Additions 364 1,444 165 1,536 3,509

Disposals – – – (146) (146)

Transfers to non current assets

held for sale – – (527) (766) (1,293)

Foreign exchange on translation 80 – – 41 121–––––––– –––––––– –––––––– –––––––– ––––––––

At 30 December 2007 8,727 1,500 283 10,200 20,710–––––––– –––––––– –––––––– –––––––– ––––––––

Depreciation and impairment:

At 1 January 2006 648 – 106 4,177 4,931

Provided during the year 124 – 170 1,244 1,538

Disposals – – – (34) (34)

Transfers to non current assets

held for sale – – (135) (159) (294)–––––––– –––––––– –––––––– –––––––– ––––––––

At 31 December 2006 772 – 141 5,228 6,141

Provided during the year 130 – 79 1,102 1,311

Disposals – – (14) (198) (212)

Transfers to non current assets

held for sale – – (147) (223) (370)

Foreign exchange on translation 4 – – 20 24–––––––– –––––––– –––––––– –––––––– ––––––––

At 30 December 2007 906 – 59 5,929 6894–––––––– –––––––– –––––––– –––––––– ––––––––

Net book value at 30 December 2007 7,821 1,500 224 4,271 13,816–––––––– –––––––– –––––––– –––––––– ––––––––

Net book value at 31 December 2006 7,511 56 504 4,307 12,378–––––––– –––––––– –––––––– –––––––– ––––––––

Freehold land and buildings

Included within freehold land and buildings is an amount of £1,690,000 (2006: £1,690,000) in respect of

land which is not depreciated.

Assets held under finance leases

The net book value of equipment includes an amount of £28,000 (2006: £47,000) in respect of assets held

under finance leases and hire purchase contracts, the depreciation charge on which was £9,000 (2006:

£9,000).

Assets under construction

Included is an amount of £59,000 (2006: £nil) of capitalised interest.

85

14. INTANGIBLE ASSETS

FranchiseeGoodwill fees Software Total

£000 £000 £000 £000

Cost or valuation:At 1 January 2006 295 832 783 1,910

Additions 155 573 222 959

Disposals (20) (30) – (50)–––––––– –––––––– –––––––– ––––––––

At 31 December 2006 430 1,375 1,005 2,810

Additions – 117 93 210

Disposals (81) (53) – (134)

Transfers to non current assets held for sale (349) (390) – (739)–––––––– –––––––– –––––––– ––––––––

At 30 December 2007 – 1,049 1,098 2,147–––––––– –––––––– –––––––– ––––––––

Depreciation and impairment:At 1 January 2006 – 517 620 1,137

Provided during the year – 43 133 176–––––––– –––––––– –––––––– ––––––––

At 31 December 2006 – 560 753 1,313

Provided during the year – 49 72 121–––––––– –––––––– –––––––– ––––––––

At 30 December 2007 – 609 825 1,434–––––––– –––––––– –––––––– ––––––––

Net book value at 30 December 2007 – 440 273 713–––––––– –––––––– –––––––– ––––––––

Net book value at 31 December 2006 430 816 250 1,496–––––––– –––––––– –––––––– ––––––––

Franchisee fees consist of costs relating to the Master Franchise Agreement with Dominos Pizza Inc and are

written off over the term of the franchise agreement. The Master Franchise Agreement is renewable on a 10

year basis.

As from 1 January 2006, the date of transition to IFRS, goodwill was no longer amortised but is now subject

to annual impairment testing (see note 16).

15. IMPAIRMENT TESTING OF GOODWILL

Goodwill acquired through business combinations is allocated for impairment testing purposes to cash

generating units considered to be at an individual store level. This represents the lowest level within the

Group at which goodwill is monitored for internal management purposes.

The recoverable amount of the stores has been determined based on net realisable value, on the grounds that

this value exceeded the value in use calculation.

Net realisable value is based on the average weekly sales of the stores at a multiple range of 30 – 40 less

disposal costs. The multiple is based on the average multiple applicable to the latest 10 stores sold in the

franchise community. The multiple is calculated by dividing the sale price of the store by the 52-week

average weekly sales prior to the sale of the store.

86

16. PREPAID OPERATING LEASE CHARGES

At At31 December 30 December

2006 2007£000 £000

Balance at the beginning of the year 716 930

Additions 315 241

Disposals – (136)

Amortisation (101) (113)–––––––– ––––––––

Balance at the end of the year 930 922–––––––– ––––––––

Analysed as follows:

Non current assets 683 702

Current assets 247 220–––––––– ––––––––

930 922–––––––– ––––––––

17. FINANCIAL ASSETS

At At31 December 30 December

2006 2007£000 £000

Net investment in finance leases 2,612 2,780–––––––– ––––––––

Analysis of net investment in finance leases

Current 864 857

Non current 1,748 1,923–––––––– ––––––––

2,612 2,780–––––––– ––––––––

The finance leases consist of leases over store equipment granted to franchisees. The aggregate rentals

receivable in respect of finance leases was £1,392,000 (2006: £1,623,000), and the interest element of this is

included in turnover.

At At31 December 30 December

2006 2007£000 £000

Future minimum payments receivable:

Not later than one year 1,095 1,096

After one year but not more than five years 2,042 2,233–––––––– ––––––––

3,137 3,329

Less: finance income allocated to future periods (525) (549–––––––– ––––––––

2,612 2,780–––––––– ––––––––

The present value of minimum lease payments

receivable is analysed as follows:

Not later than one year 864 857

After one year but not more than five years 1,748 1,923–––––––– ––––––––

2,612 2,780–––––––– ––––––––

87

18. INVESTMENTS IN ASSOCIATES

At At31 December 30 December

2006 2007£000 £000

Investment in associates 589 685–––––––– ––––––––

The Group has a 41 per cent. interest in Full House Restaurants Limited and a 50 per cent. interest in

Dominoid Limited, private companies which manage pizza delivery stores in the United Kingdom.

The following table illustrates summarised financial information of the Group’s investment in Full House

Restaurants Limited:

At At31 December 30 December

2006 2007£000 £000

Share of the associate’s balance sheet:

Current assets 108 169

Non current assets 1,245 1,397

Current liabilities (352) (272)

Non current liabilities (587) (813)–––––––– ––––––––

Share of net assets 414 481–––––––– ––––––––

Share of associate’s revenue and profit:

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Revenue 2,663 3,417

Profit after tax for the year 104 128

–––––––– ––––––––

The following table illustrates summarised financial information of the Group’s investment in Dominoid

Limited:

At At31 December 30 December

2006 2007£000 £000

Share of the associate’s balance sheet:

Current assets 12 11

Non current assets 653 626

Current liabilities (113) (103)

Non current liabilities (377) (330)–––––––– ––––––––

Share of net assets 175 204–––––––– ––––––––

Share of associate’s revenue and profit:

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Revenue 1,309 1,652

Profit after tax for the year 5 30–––––––– ––––––––

88

19. BUSINESS COMBINATIONS AND ACQUISITION OF MINORITY INTERESTS

Acquisitions in 2007

There were no acquisitions of subsidiaries during the year ended 30 December 2007.

Acquisitions in 2006

Minority interest in DPGL Birmingham Limited

In October 2006, the Group acquired an additional 20 per cent. of the voting shares of DPGL Birmingham

Limited, taking its ownership to 100 per cent. Cash consideration of £85,000 was paid. The book value of

the net assets of DPGL Birmingham Limited at this date was £70,000, and the book value of the additional

interest acquired was £14,000. The difference of £71,000 between the consideration and the book value of

the interest acquired has been recognised as goodwill.

Minority interest in DP Newcastle & Sunderland Limited

In October 2006, the Group acquired an additional 20 per cent. of the voting shares of DP Newcastle &

Sunderland Limited, taking its ownership to 100 per cent. Cash consideration of £48,000 was paid. The book

value of the net liabilities of DP Newcastle & Sunderland Limited at this date was £180,000, and the book

value of the additional liability acquired was £36,000. The difference of £84,000 between the consideration

and the book value of the interest acquired has been recognised as goodwill.

20. INVENTORIES

At At31 December 30 December

2006 2007£000 £000

Raw materials 78 126

Finished goods and goods for sale 1,740 2,214–––––––– ––––––––

Total inventories at lower of cost or net realisable value 1,818 2,340–––––––– ––––––––

21. TRADE AND OTHER RECEIVABLES

At At31 December 30 December

2006 2007£000 £000

Trade receivables 2,865 4,001

Amounts owed by associates 432 364

Other debtors 2,795 2,277

Prepayments and accrued income 3,540 3,429–––––––– ––––––––

9,632 10,071–––––––– ––––––––

Trade receivables are non-interest bearing and are generally on 7 – 28 days terms.

As at 30 December 2007, trade receivables at nominal value of £nil (2006: £63,000) were impaired and fully

provided for.

89

21. TRADE AND OTHER RECEIVABLES (continued)

The ageing analysis of trade receivables is as follows:

Neitherpast due Past due but not impaired

Total nor impaired < 30 days > 30 days£000 £000 £000 £000

As at 31 December 2006 2,865 2,185 549 131

As at 30 December 2007 4,001 3,393 419 189

Included in other debtors is the following:

– Loans to franchisees of £205,000 (2006: £122,000), which are repayable within 1 – 5 years and bear

interest on a quarterly basis at an average of 3.0 per cent. above Barclays Bank plc base rate.

– NAF balance of £527,000 (2006: £1,258,000), due to the timing of the cash flows of the marketing

activities committed to by the fund and the contributions received from the franchisees. The

outstanding balance of the NAF bears interest at 2.5 per cent. above Barclays Bank plc base rate.

22. CASH AND SHORT-TERM DEPOSITS

At At31 December 30 December

2006 2007£000 £000

Cash at bank and in hand 4,523 2,204

Short-term deposits 5,739 12,425–––––––– ––––––––

10,262 14,629–––––––– ––––––––

Cash at bank earns interest at floating rates based on daily deposit rates. Short-term deposits are made for

varying periods of between one day and three months depending on the immediate cash requirements of the

Group, and earn interest at the respective short-term deposit rates depending on the balance on deposit. The

interest rates applicable to the short-term deposits during the financial period varied between 3.0 per cent.

and 5.75 per cent. The fair value of cash and cash equivalents is £14,629,000 (2006: £10,262,000).

At 30 December 2007, the Group had available £25,000,000 (2006: £nil) of undrawn committed borrowing

facilities in respect of which all conditions precedent had been met. The facilities are available until

December 2011.

23. NON CURRENT ASSETS HELD FOR SALE

At At31 December 30 December

2006 2007£000 £000

Balance at the beginning of the year 857 1,172

Additions:

– Transferred from property, plant and equipment and intangible

non current assets 768 1,662

– Inventories 15 18

– Acquired during the year 181 –

Impaired during the year – (145)

Disposals during the year (649) (935)–––––––– ––––––––

Balance at the end of the year 1,172 1,772–––––––– ––––––––

Non current assets held for sale represent stores and their associated assets, which are currently being

actively marketed for sale.

90

23. NON CURRENT ASSETS HELD FOR SALE (continued)

The disposals during the year consist of the assets and stock disposed of as part of the sale of DP Newcastle

& Sunderland Limited in June 2007.

The balance at the end of the year consists of the following:

Net book value ofnon-current assets Stock value Total

£000 £000 £000

DP Peterborough Limited 563 7 570

DPGL Birmingham Limited 1,005 11 1,016

Corporate stores 186 – 186–––––––– –––––––– ––––––––

1,754 18 1,772–––––––– –––––––– ––––––––

The above-mentioned assets held for sale are recorded in the United Kingdom geographical segment.

It is envisaged that DPGL Birmingham Limited will be disposed of by June 2008 and a sale agreed for the

disposal of DP Peterborough Limited by the end of 2008. The remaining corporate stores are actively being

marketed within the franchisee community and externally and expectations are that the stores will be

disposed of by the end of 2008.

24. TRADE AND OTHER PAYABLESAt At

31 December 30 December2006 2007£000 £000

Trade payables 4,059 6,010

Other taxes and social security costs 1,415 1,615

Other payables 1,808 1,828

Accruals and deferred income 6,151 8,734–––––––– ––––––––

13,433 18,187–––––––– ––––––––

Terms and conditions of the above financial liabilities:

• Trade payables are non-interest bearing and are normally settled on 7 – 30 day terms.

• Other payables are non-interest bearing and have an average term of six months.

25. FINANCIAL LIABILITIESAt At

31 December 30 December2006 2007£000 £000

CurrentBank overdraft 6,000 –

Bank revolving facility – 6,000

Current obligations under finance leases and hire purchase contracts 13 10

Current instalments due on other loans 822 807–––––––– ––––––––

6,835 6,817–––––––– ––––––––

Non currentNon current obligations under finance leases and hire purchase contracts 32 18

Non current instalments due on bank loans 7,500 7,721

Non current instalments due on other loans 1,477 1,641–––––––– ––––––––

9,009 9,380–––––––– ––––––––

91

25. FINANCIAL LIABILITIES (continued)

Bank overdraft

In 2006 the Group entered into an agreement to obtain a bank overdraft facility from Barclays Bank plc. The

limit for this facility was £6,000,000. The facility was repayable on demand and interest was charged at 1.0

per cent. above Barclays Bank plc base rate. The facility was secured by share pledges, constituting first

fixed charges over the shares of DPG Holdings Limited and Domino’s Pizza Group Limited as well as

negative pledges given by the Company, DPG Holdings Limited and Domino’s Pizza Group limited. This

overdraft facility was repaid during the 2007 financial year.

Bank revolving facility

The Group has entered into an agreement to obtain a revolving credit facility from Barclays Bank plc. The

limit for this facility is £6,000,000. The facility is repayable within 3 – 12 months and interest is charged at

0.50 per cent. per annum above LIBOR. The facility is secured by share pledges, constituting first fixed

charges over the shares of DPG Holdings Limited and Domino’s Pizza Group Limited as well as negative

pledges given by the Company, DPG Holdings Limited and Domino’s Pizza Group Limited.

Bank loans

The Group has entered into an agreement to obtain bank loans and mortgage facilities. These are secured by

a fixed and floating charge over the Group’s assets and an unlimited guarantee provided by the Company. At

30 December 2007 the balance due under these facilities was £ 7,721,000 (2006: £7,500,000) all of which

is in relation to the Employee Benefit Trust. During the financial year, the terms of this loan were

renegotiated and transferred from National Westminster Bank plc to Barclays Bank plc. The loan bears

interest at 0.50 per cent. (2006: 0.625 per cent. above National Westminster Bank plc base rate) above

LIBOR. The loan has a term of 7 years and matures on 31 January 2014.

Other loans

The remaining loans are repayable in equal instalments over a period of up to 5 years and these loans are

unsecured. The interest rate on these loans is fixed at an average of 8.5 per cent. (2006: 8.2 per cent.).

26. OBLIGATIONS UNDER LEASES AND HIRE PURCHASE CONTRACTS

Finance lease and hire purchase commitments

The Group uses finance leases and hire purchase contracts to acquire certain plant, machinery and

equipment. These leases have terms of renewal but no purchase options or escalation clauses. Renewals are

at the option of the lessee. Future minimum lease payments under finance leases and hire purchase contracts

are as follows:

At At31 December 30 December

2006 2007£000 £000

Future minimum payments due:

Not later than one year 18 13

After one year but not more than five years 36 20–––––––– ––––––––

54 33

Less: finance charges allocated to future periods (9) (5)–––––––– ––––––––

45 28–––––––– ––––––––

The present value of minimum lease payments is analysed as follows:

Not later than one year 13 10

After one year but not more than five years 32 18–––––––– ––––––––

45 28–––––––– ––––––––

92

26. OBLIGATIONS UNDER LEASES AND HIRE PURCHASE CONTRACTS (continued)

Operating lease commitments where the Group is lessee

For the stores in the franchisee system, the Group has entered into commercial leases, taking the head lease,

and then subletting the properties to the franchisees. These leases have an average duration of between 10

and 25 years. Under the terms of the franchise agreement the franchisee is granted an initial period of 10

years to operate a Domino’s Pizza delivery store under the Domino’s system. Under the agreement the

franchisee also has the option to renew for a further 10 years at the end of the initial period, provided at the

time of the renewal the franchisee is not in default of any material provision of the franchise agreement. In

addition the Group has entered into commercial leases on motor vehicles and items of plant, machinery and

equipment. These leases have an average duration of between 3 and 5 years. Only the property lease

agreements contain an option for renewal, with such options being exercisable three months before the

expiry of the lease term at rentals based on market prices at the time of exercise. There are no restrictions

placed upon the lessee by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases are as follows:

At At31 December 30 December

2006 2007£000 £000

Not later than one year 9,233 10,070

After one year but not more than five years 32,454 34,504

After five years 68,992 71,904–––––––– ––––––––

110,679 116,478–––––––– ––––––––

Operating lease commitments where the Group is lessor

For the stores in the franchisee system, the Group has entered into commercial leases, taking the head lease,

and then subletting the properties to the franchisees. These non-cancellable leases have remaining terms of

between 5 and 10 years. All leases include a provision for five-yearly rent reviews according to prevailing

market conditions.

Future minimum rentals receivable under non-cancellable operating leases are as follows:

At At31 December 30 December

2006 2007£000 £000

Not later than one year 7,247 8,330

After one year but not more than five years 25,052 28,647

After five years 17,785 19,392–––––––– ––––––––

50,084 56,369–––––––– ––––––––

27. PROVISIONS

Legal Propertyprovisions provisions Total

£000 £000 £000

At 31 December 2006 51 182 233

Utilised during the period (15) (5) (20)

Reversal of unused amounts – (58) (58)–––––––– –––––––– ––––––––

At 30 December 2007 36 119 155–––––––– –––––––– ––––––––

93

27. PROVISIONS (continued)

Legal provisions

The legal provisions relate to fees charged in relation to the disposal of subsidiary undertakings as well as

outstanding litigation matters arising on the sale of stores. The outcome of the litigation is at present

uncertain, and a final decision is not imminently expected. No estimate of the likely outcome of the litigation

can yet be made by the directors, but full provision for the potential costs likely to be incurred has been made.

Property provisions

The property provisions relate to outstanding rent reviews, rates, service charges and dilapidation costs for

stores sold as part of the sale of subsidiary undertakings during prior years. The completion of the

outstanding rent and rates reviews vary depending on the lease and on average are resolved within 1 – 3 years

following the review dates stipulated in the leases. The dilapidation costs are determined at the end of the

lease. During the year resolution was reached on various of the outstanding items relating to the property

provisions, resulting in the release of provisions held at the beginning of the year.

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s financial risk management objectives consist of identifying and monitoring those risks, which

have an adverse impact on the value of the Group’s financial assets and liabilities or on reported profitability

and on the cash flows of the Group.

The Group’s principal financial liabilities comprise bank loans, bank overdrafts, other loans and finance

leases. The Group has various financial assets such as trade receivables and cash and short-term deposits,

which arise directly from its operations.

The Group has not entered into any derivative transactions such as interest rate swaps or financial foreign

currency contracts.

It is, and has been throughout 2007 and 2006 the Group’s policy that no trading in derivatives shall be

undertaken.

The main risks arising from the Group’s financial instruments are credit risk, price risk, liquidity risk and

cash flow interest rate risk.

The Board reviews and agrees policies for managing each of these risks, which are summarised below. In

view of the low level of foreign currency transactions the Board does not consider there to be any significant

foreign currency risks.

Credit risk

Due to the nature of customers who trade on credit terms, being predominantly franchisees, the franchisee

selection process is sufficiently robust to ensure an appropriate credit verification procedure.

In addition, trade debtor balances are monitored on an ongoing basis with the result that the Group’s

exposure to bad debts is not significant. Since the Group trades only with franchisees that have been subject

to the franchisee selection process and provide personal guarantees as required under the franchisee

agreements, there is no requirement for collateral.

Price risk

The Board considers that the Group’s exposure to changing market prices on the values of financial

instruments does not have a significant impact on the carrying value of financial assets and liabilities. As

such no specific policies are applied currently, although the Board will continue to monitor the level of price

risk and its exposure should the need occur.

94

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

Liquidity risk

The Group aims to mitigate liquidity risk by managing cash generation by its operations with cash collection

targets set throughout the Group. All major investment decisions are considered by the Board as part of the

project appraisal and approval process. In this way the Group aims to maintain a good credit rating to

facilitate fund raising.

The table below summarises the maturity profile of the Group’s financial liabilities at 30 December 2007

based on contractual undiscounted payments.

LessOn than 3 3 to 12 1 to 5 > 5

demand months months years years Total£000 £000 £000 £000 £000 £000

Year ended 31 December 2006

Bank loan – – – – 7,500 7,500

Other loans – 245 739 1,665 – 2,649

Bank overdraft 6,000 – – – – 6,000

Trade and other payables – 13,433 – – – 13,433

Other financial liabilities – 5 8 32 – 45–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

6,000 13,683 747 1,697 7,500 29,627–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

Year ended 30 December 2007

Bank loan – – – – 7,721 7,721

Other loans – 245 737 1,861 – 2,843

Bank revolving facility – – 6,000 – – 6,000

Trade and other payables – 18,187 – – – 18,187

Other financial liabilities – 3 7 18 – 28–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

– 18,435 6,744 1,879 7,721 34,779–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

Interest rate risk

The Board has a policy of ensuring a mix of fixed and floating rate borrowings. Whilst fixed rate interest

bearing debt is not exposed to cash flow interest rate risk, there is no opportunity for the Group to benefit

from a reduction in borrowing costs when market rates are declining. Conversely, whilst floating rate

borrowings are not exposed to changes in fair value, the Group is exposed to cash flow interest rate risk as

costs increase if market rates rise.

95

28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

Interest rate risk table

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, which all

other variables held constant, of the Group’s profit before tax (through the impact on floating rate

borrowings). There is no impact on the Group’s equity.

Increase/ Effect ondecrease in profitbasis points before tax

£000

2006Sterling +20 (10)

Sterling –15 8

Euro +20 5

Euro –15 (3)

2007Sterling +20 (2)

Sterling –15 2

Euro +20 5

Euro –15 (3)

Capital management

The primary objective of the Group’s capital management is to ensure that it remains a strong credit rating

and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in 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 years ended 30 December 2007 and 31 December 2006.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The

Group includes within net debt, interest bearing loans and borrowings, bank revolving facilities, less cash

and cash equivalents. Capital consists of the equity attributable to the equity holders of the parent less the

treasury share reserve.

At At31 December 30 December

2006 2007£000 £000

Bank loan 7,500 7,721

Other loans 2,299 2,448

Finance leases 45 28

Bank revolving facility 6,000 6,000

Less: cash and cash equivalents (10,262) (14,629)–––––––– ––––––––

Net debt 5,582 1,568–––––––– ––––––––

Equity attributable to equity holders of the parent 13,154 14,261

Treasury share reserve (4,216) (4,403)–––––––– ––––––––

Total capital 8,938 9,858–––––––– ––––––––

Gearing ratio 62.45% 15.91%–––––––– ––––––––

96

29. FINANCIAL INSTRUMENTS

Fair values

Set out below is a comparison by category of carry amounts and fair values of all the Group’s financial

instruments that are carried in the financial statements:

Carrying value Fair value2006 2007 2006 2007£000 £000 £000 £000

Financial assetsCash and cash equivalents 10,262 14,629 10,262 14,629

Net investment in finance leases 2,612 2,780 2,612 2,780

Trade receivables 2,865 4,001 2,865 4,001

Financial liabilitiesBank revolving facility – 6,000 – 6,000

Bank overdraft 6,000 – 6,000 –

Interest bearing loans and borrowings:

Obligations under finance leases and hire

purchase contracts 45 28 45 28

Floating rate borrowings 7,500 7,721 7,500 7,721

Fixed rate borrowings 2,299 2,448 2,299 2,448

Trade and other payables 13,433 18,187 13,433 18,187

The fair values of the financial assets are not considered materially different from carrying value.

The fair values of the financial liabilities are not considered materially different from the carrying value.

30. AUTHORISED AND ISSUED SHARE CAPITAL

Authorised

At At31 December 30 December

2006 2007

Ordinary shares of 1.56p each

– Number 256,000,000 256,000,000–––––––––– ––––––––––

– Value – £ 4,000,000 4,000,000–––––––––– ––––––––––

Allotted, called up and fully paid

At At31 December 30 December

2006 2007Number £ Number £

At 31 December 2006 169,326,435 2,645,726 164,758,762 2,574,356

Issued on exercise of share options 1,192,154 18,627 1,402,298 21,911

Share buybacks (5,759,827) (89,997) (3,725,000) (58,203)––––––––––– ––––––––––– ––––––––––– –––––––––––

At 30 December 2007 164,758,762 2,574,356 162,436,060 2,538,064––––––––––– ––––––––––– ––––––––––– –––––––––––

At the Annual General Meeting held on 26 April 2007, a resolution was tabled and passed to subdivide the

80,000,000 ordinary shares of 5p each, both issued and unissued, into 256,000,000 ordinary shares of 1.56p

each.

97

30. AUTHORISED AND ISSUED SHARE CAPITAL (continued)

During the year 1,402,298 (2006: 1,192,154) ordinary shares of 1.56p each with a nominal value of £21,911

(2006: £18,627) were issued at between 13.16p (2006: 13.16p) and 210.00p (2006: 107.03p) for total cash

consideration received of £700,000 (2006: £403,000) to satisfy share options that were exercised.

During the year the Company bought back a total of 3,725,000 (2006: 5,759,827) ordinary shares of 1.56p

each for a total value of £8,346,000 (including costs of £136,000) (2006: £10,161,000 (including costs of

£172,000)). The average price for which these shares were purchased was 220.39p (2006: 173.44p) per

share.

As at 31 December 2006, the following share options were outstanding:

OutstandingOutstanding Granted Exercised Forfeited at 31

1 January during during during DecemberExercise 2006 the year the year the year 2006

price No. No. No. No. No.

Date of grantDomino’s Pizza

(unapproved) Scheme24 November 1999 13.16p 781,757 – (419,203) – 362,554

24 November 1999 15.63p 685,024 – (82,938) (6,400) 595,686

4 August 2000 16.56p 393,920 – (170,560) (6,400) 216,960

25 October 2001 17.19p 406,403 – (109,066) (19,197) 278,140

23 March 2004 64.53p 32,000 – (32,000) – –

15 December 2005 107.03p 2,458,019 – (30,672) (284,701) 2,142,646–––––––– –––––––– –––––––– –––––––– ––––––––4,757,123 – (844,439) (316,698) 3,595,986

EMI Scheme23 March 2004 64.53p 1,208,003 – (347,715) (62,688) 797,600

Sharesave Scheme – – (115,808)

29 December 2005 75.88p 735,008 619,200–––––––– –––––––– –––––––– –––––––– ––––––––6,700,134 – (1,192,154) (495,194) 5,012,786–––––––– –––––––– –––––––– –––––––– ––––––––

Weighted average

exercise price 64.69p – 32.97p 70.78p 69.88p

As at 30 December 2007, the following share options were outstanding:

OutstandingOutstanding Granted Exercised Forfeited at 30

31 December during during during DecemberExercise 2006 the year the year the year 2007

price No. No. No. No. No.

Date of grantDomino’s Pizza (unapproved) Scheme24 November 1999 13.16p 362,554 – (296,904) – 65,650

24 November 1999 15.63p 595,686 – (253,608) – 342,078

4 August 2000 16.56p 216,960 – (70,400) – 146,560

25 October 2001 17.19p 278,140 – (90,371) (1,599) 186,170

15 December 2005 107.03p 2,142,646 – (338,346) (73,661) 1,730,639

30 March 2007 210.00p – 1,090,536 (5,939) (34,151) 1,050,446–––––––– –––––––– –––––––– –––––––– ––––––––3,595,986 1,090,536 (1,055,568) (109,411) 3,521,543

EMI Scheme23 March 2004 64.53p 797,600 – (346,138) (19,200) 432,262

Sharesave Scheme29 December 2005 75.88p 619,200 – (592) – 618,608

–––––––– –––––––– –––––––– –––––––– ––––––––5,012,786 1,090,536 (1,402,298) (128,611) 4,572,413–––––––– –––––––– –––––––– –––––––– ––––––––

Weighted average

exercise price 69.88p 210.00p 50.19p 126.91p 107.71p

98

30. AUTHORISED AND ISSUED SHARE CAPITAL (continued)

The weighted average remaining contractual life of the options outstanding at 30 December 2007 is 6.4 years

(2006: 6.3 years). The weighted average share price for options exercised during 2007 was 165.30p (2006:

143.44p).

The following share options were exercisable at year end:

At At31 December 30 December

2006 2007No. No.

Domino’s Pizza (unapproved) Scheme24 November 1999 362,554 65,650

24 November 1999 595,686 342,078

4 August 2000 216,960 146,560

25 October 2001 278,141 186,170

15 December 2005 503,968 302,209–––––––––– ––––––––––

1,957,309 1,042,667

EMI Scheme23 March 2004 284,534 432,262

–––––––––– ––––––––––2,241,843 1,474,929

–––––––––– ––––––––––

Weighted average exercise price 42.28p 48.87p

On 24 November 1999 participants in the Domino’s Pizza Group Limited (Unapproved) Share Option

Scheme (which had been in place since 31 March 1999) had the option of exchanging options over shares in

Domino’s Pizza Group Limited in return for equivalent options over ordinary shares in the Company under

the Domino’s Pizza Share Option (Unapproved) Scheme.

On 23 March 2004, the Company established the Domino’s Pizza UK & IRL plc Enterprise Management

Incentive Scheme (EMI Scheme). Under the scheme 1,539,200 options were granted at 64.53p, the market

price on the date of the grant. The options are only exercisable if the growth in the Company’s EPS during

a performance year exceeds the growth in RPI during that performance year by at least 5 per cent. The EMI

options lapse after 10 years or in certain other circumstances connected with leaving the Company.

In respect of all outstanding options under these schemes, options may be exercised as follows:

One year after date of grant – maximum 1/3 of options held

Two years after date of grant – maximum 2/3 of options held

Three years after date of grant – in full

The options expire 10 years after the date granted.

Domino’s Pizza UK & IRL plc Employee Benefit Trust is established for the benefit of employees. The trust

holds and deals in the Company’s shares under two share incentive schemes. These are the Domino’s Pizza

UK & IRL plc 2003 Enterprise Management Incentive Scheme and the Domino’s Pizza Share Option

(Unapproved) Scheme, under which the Company may grant options over ordinary shares to eligible full

time employees.

In addition the Group has a Sharesave scheme giving employees the option to acquire shares in the Company.

Employees have the option to save an amount per month up to a maximum of £250 and at the end of three

years they have the option to purchase shares in the Company or to take their savings in cash.

99

30. AUTHORISED AND ISSUED SHARE CAPITAL (continued)

The Employee Benefit Trust also operates a long-term incentive plan under which senior executives may be

incentivised by the grant to them of reversionary interests over a portion of the assets of the trust. During the

year further reversionary interests were granted over 5,200,000 (2006: 3,520,000) shares. At 30 December

2007, the Trust held 6,609,878 (2006: 6,609,878) shares, which had a historic cost of £4,402,810 (2006:

£4,215,810). These shares had a market value at 30 December 2007 of £11,352,465 (2006: £12,310,900).

At 30 December 2007 reversionary interests over 11,632,000 (2006: 6,640,000) shares in Domino’s Pizza

UK & IRL plc have been granted. Further details are contained in the Report on Director’s Remuneration.

31. SHARE-BASED PAYMENTS

The expense recognised for share-based payments in respect of employee services received during the year

to 30 December 2007 is £880,000 (2006: £344,000). This all arises on equity settled share-based payment

transactions.

Long Term Senior Executive Incentive Plan

Reversionary interests over assets held in the Domino’s Pizza UK & IRL plc employee benefit trust are

approved and granted, at the discretion of the trustees, to senior executives. The interests are capable of

vesting within a five year period should certain performance targets be achieved by the Group.

The following table lists the performance criteria attached to the reversionary interests granted and not

vested:

Interest represented

Diluted by such Grant price earnings Net profit number of

Grant date per interest per share before tax Shares

16 December 2004 62.50p 7.50p £17,000,000 1,712,000

31 October 2005 92.19p 8.44p £20,000,000 1,200,000

27 February 2006 130.16p 9.66p £22,300,000 480,000

27 April 2006 151.56p 9.66p £22,300,000 2,720,000

16 May 2006 146.97p 9.66p £22,300,000 320,000

6 March 2007 210.00p 12.50p £28,600,000 5,200,000–––––––––11,632,000–––––––––

The contractual life of each interest is 5 years.

The trustees have undertaken to ensure that where possible the fair value of reversionary interests, which may

be equity-settled, is estimated as at the date of granting using a Black Scholes model, taking into account the

terms and conditions upon which they were granted. The following table lists the inputs to the model used

for the valuations in 2006 and 2007:

2006 2007

Dividend yield (%) 3.8 3.8

Expected volatility (%) 17.0 15.0 – 20.0

Historical volatility – 250 day (%) 27.3 18.8 – 24.1

Risk-free interest rate (%) 4.4 – 4.8 5.3 – 5.8

Expected life of reversionary interests (years) 3.9 – 4.1 4.0

Weighted average exercise price (pence) 130.16 – 151.56 210.00p

Weighted average share price (pence) 130.16 – 151.56 210.00p

100

31. SHARE-BASED PAYMENTS (continued)

The expected life of the reversionary interests is based on historical data and is not necessarily indicative of

exercise patterns that may occur.

The expected volatility reflects the assumption that the historical volatility is indicative of future trends,

which may also not necessarily be the actual outcome. No other features of options were incorporated into

the measurement of fair value, and non-market conditions have not been included in calculating the fair

value.

The weighted average fair value of each reversionary interest granted during the year was 32.0p (2006:

20.0p).

For further details regarding the reversionary interests granted and outstanding, see the Report on Directors’

Remuneration.

Employee Share-option

All other employees are eligible for grants of options, which are approved by the Board.

The options vest over a 3 year period and are exercisable subject to the condition that the growth in basic

earnings per share in any financial year between grant and vesting exceeds the growth in the Retail Price

Index in the previous financial year by at least 5 per cent. (see note 30 for further details).

The contractual life of each option granted is 10 years. There are no cash settlement alternatives and all

awards are equity settled.

The fair value of equity-settled share options granted, for the EMI and Domino’s Pizza (unapproved)

schemes, is estimated as at the date of granting using a Black Scholes model, taking into account the terms

and conditions upon which the options were granted. The following table lists the inputs to the model used

for the valuations for the Domino’s Pizza (unapproved) schemes in 2007:

2007

Dividend yield (%) 3.8

Expected volatility (%) 20.0

Historical volatility – 250 day (%) 26.7

Risk-free interest rate (%) 5.3

Expected life of reversionary interests (years) 4.0

Weighted average exercise price (pence) 210.00p

Weighted average share price (pence) 210.00p

The expected life of the options is based on historical data and is not necessarily indicative of exercise

patterns that may occur.

The expected volatility reflects the assumption that the historical volatility is indicative of future trends,

which may also not necessarily be the actual outcome. No other features of options were incorporated into

the measurement of fair value, and non-market conditions have not been included in calculating the fair

value.

There were 1,090,536 options granted on 30 March 2007. The weighted average fair value of each option

granted in 2007 was 28.1p.

101

31. SHARE-BASED PAYMENTS (continued)

Sharesave scheme

During 2005 the Group introduced a Sharesave scheme giving employees the option to acquire shares in the

Company. Employees have the option to save an amount per month up to a maximum of £250 and at the end

of three years they have the option to purchase shares in the Company or to take their savings in cash.

The contractual life of the scheme is 3 years. The fair value of equity-settled options granted, is estimated as

at the date of granting using a Binomial model, taking into account the terms and conditions upon which the

options were granted. The following table lists the inputs to the model used for the valuations for the

Sharesave scheme in 2005:

2005

Dividend yield (%) 3.75

Expected volatility (%) 17.0

Historical volatility – 250 day (%) 28.1

Risk-free interest rate (%) 4.2

Expected life of reversionary interests (years) 3.3

Weighted average exercise price (pence) 75.88

Weighted average share price (pence) 75.88

The expected life of the options is based on an average of exercise period, which is between 3 – 3.5 years.

The expected volatility reflects the assumption that the historical volatility is indicative of future trends,

which may also not necessarily be the actual outcome. No other features of options were incorporated into

the measurement of fair value, and non-market conditions have not been included in calculating the fair

value.

There were no options granted in the year. The weighted average fair value of each option granted in 2005

was 20.6p.

32. ADDITIONAL CASH FLOW INFORMATION

Analysis of Group net debt

At At 3031 December Cash Exchange Non-cash December

2006 flow differences movements 2007£000 £000 £000 £000 £000

Cash and cash equivalents 10,262 4,226 141 – 14,629

Bank revolving facility – (6,000) – – (6,000)

Bank overdraft (6,000) 6,000 – – –

Loans (9,799) (149) – (221) (10,169)

Finance leases (45) 17 – – (28)–––––––– –––––––– –––––––– –––––––– ––––––––

(5,582) 4,094 141 (221) (1,568)–––––––– –––––––– –––––––– –––––––– ––––––––

Analysis of Group net debt

At At 31 1 January Cash Exchange Non-cash December

2006 flow differences movements 2006£000 £000 £000 £000 £000

Cash and cash equivalents 5,885 4,377 – – 10,262

Bank overdraft – (6,000) – – (6,000)

Loans (10,000) 201 – – (9,799)

Finance leases (26) 12 – (31) (45)–––––––– –––––––– –––––––– –––––––– ––––––––

(4,141) (1,410) – (31) (5,582)–––––––– –––––––– –––––––– –––––––– ––––––––

102

33. CAPITAL COMMITMENTS

At 30 December 2007, amounts contracted for but not provided in the financial statements for the acquisition

of property, plant and equipment amounted to £4,950,000 (2006: £nil) for the Group.

34. CONTIGENT LIABILITIES

Pursuant to the relevant regulation of the European Communities (Companies: Group Accounts)

Regulations, 1992 the Company has guaranteed the liabilities of the Irish subsidiary, DP Pizza Ltd and as a

result the Irish company has been exempted from the filing provisions section 7, Companies (Amendment)

Act 1986 of the Republic of Ireland.

35. RELATED PARTY TRANSACTIONS

The financial statements include the financial statements of Domino’s Pizza UK & IRL plc and the

subsidiary undertakings listed below.

Proportionof voting

Country of rights and Nature ofName of company incorporation shares held business

Directly held subsidiary undertakingsDPG Holdings Limited England 100% ordinary Investment

DP Realty Limited England 100% ordinary Property management

DP Group Developments Limited England 100% ordinary Property development

DP Capital Limited England 100% ordinary Leasing of equipment

DP Newcastle Limited England 100% ordinary

American Pizza Company Limited England 100% ordinary

DPGL Birmingham Limited England 100% ordinary

DP Peterborough Limited England 80% ordinary

DP Milton Keynes Limited England 80% ordinary

Indirectly held subsidiary undertakingsDomino’s Pizza Group Limited England 100% ordinary

Livebait Limited England 100% ordinary Property management

DP Pizza Limited 100% ordinary

Associate undertakingsFull House Restaurants Limited England 41% ordinary

Dominoid Limited England 50% ordinary Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Republic

of Ireland

Operation and

management of

franchise business

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

103

35. RELATED PARTY TRANSACTIONS (continued)

During the year the Group entered into transactions, in the ordinary course of business, with related parties.

Transactions entered into, and trading balances outstanding at 30 December with related parties, are as

follows:

AmountsSales to owed byrelated related

party party£000 £000

Related partyAssociates

2006 4,087 100

2007 3,781 202

Minority interests

2006 907 315

2007 1,148 86

Other*

2006 2,593 44

2007 2,454 43

* During the year, the Group traded with DPGS Limited and Triple A Limited, subsidiaries of Dough Trading Limited. Dough

Trading Limited is controlled by Marc Halpern, the son of Colin Halpern (Non-executive Vice Chairman).

Terms and conditions of transactions with related parties

Sales and purchases between related parties are made at normal market prices. Outstanding balances with

entities are unsecured, interest free and cash settlement is expected within 7 days of invoice. The Group has

not provided for or benefited from any guarantees for any related party receivables or payables. During the

financial year ended 30 December 2007, the Group has not made any provision for doubtful debts relating

to amounts owed by related parties (2006: Nil).

Compensation of key management personnel (including directors)

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Short-term employee benefits 2,186 2,656

Post-employment benefits 71 119

Share-based payment (including accelerated portion) 183 635–––––––– ––––––––

2,440 3,410–––––––– ––––––––

The table above includes the remuneration costs of the directors of the Company and the directors of

Domino’s Pizza Group Limited.

104

35. RELATED PARTY TRANSACTIONS (continued)

Other related parties

During the period, the Group traded with International Franchise Systems Inc., in the normal course of

business and at normal market prices. Colin Halpern is a director of International Franchise Systems Inc.

Transactions between the Group and International Franchise Systems Inc., are set out below:

52 weeks 52 weeksended ended

31 December 30 December2006 2007£000 £000

Current account:

Costs incurred by Domino’s Pizza Group Limited on behalf of

International Franchise Systems Inc. 331 355

Transfer of funds (from) International Franchise Systems Inc. (91) (115)

Management charges from International Franchise Systems Inc. (440) (340)–––––––– ––––––––

Closing debt due to International Franchise Systems Inc. (200) (100)–––––––– ––––––––

36. REPORTING UNDER INTERNATIONAL FINANCIAL REPORTING STANDARDS

These financial statements for the year ended 30 December 2007 are the first to be prepared by the Company

using policies in accordance with IFRS as adopted by the European Union. The comparative figures have

been prepared on the same basis and have therefore been restated from those previously prepared under UK

GAAP. The commentary below details the key changes that have arisen due to the transition to reporting

under IFRS. The Group’s date of transition is 1 January 2006, which is the beginning of the comparative

period for the 2007 financial year. Therefore the opening balance sheet for IFRS purposes is that reported at

1 January 2006, as amended for changes due to IFRS.

To explain the impact of the transition, reconciliations have been included in this note that show the changes

made to the statements previously reported under UK GAAP. The following reconciliations are included in

this note:

1. Reconciliation of Group balance sheet at 1 January 2006 from UK GAAP to IFRS.

2. Reconciliation of Group balance sheet at 31 December 2006 from UK GAAP to IFRS.

3. Reconciliation of Group income statement for the 52 weeks ended 31 December 2006 from UK

GAAP to IFRS.

The transition from UK GAAP to IFRS does not affect the cash flows generated by the Group. The IFRS

cash flow statement is presented in a different format than that required under UK GAAP. The reconciling

items between the UK GAAP format and the IFRS format have no net impact on the cash flows generated

and accordingly reconciliations have not been presented.

The accounting policies used for IFRS are set out in note 1 of this financial information.

First time adoption

The Group has applied the provisions of IFRS 1 – First Time Adoption of International Financial Reporting

Standards which, generally, requires that IFRS accounting policies be applied retrospectively in determining

the opening balance sheet at the date of transition. IFRS 1 contains both mandatory and optional exemptions

to the principle of retrospective application. Where the Group has made use of an exemption it is noted

below.

105

36. REPORTING UNDER INTERNATIONAL FINANCIAL REPORTING STANDARDS(continued)

The Group has taken the following exemptions:

• Share based payments

The Group operates a number of executive and employee share schemes. For all grants of share

options and awards the fair value at the date of grant is calculated using an appropriate pricing model

and the corresponding expense is recognised over the vesting period. The Group has elected to take

advantage of the transitional provisions of IFRS 2 and has applied the fair value model to all grants

of equity instruments after 7 November 2002 that had not vested as at 3 January 2005.

• Goodwill and business combinations

The Group has taken the exemption not to apply IFRS 3 retrospectively to business combinations

occurring prior to the date of transition to IFRS. Goodwill arising on acquisitions prior to this date has

been retained at its carrying value as at 1 January 2006. The Group under the provisions of IAS 36,

only recognises impairment. This results in the reversal of the goodwill amortisation previously

charged to the income statement in the 52 weeks to 31 December 2006.

• Cumulative translation differences

Under IAS 21, exchange differences arising on consolidation of overseas subsidiaries are required to

be recognised as a separate equity reserve. The Group has utilised the exemption available in IFRS 1

whereby cumulative translation differences are deemed to be zero at the date of transition to IFRS.

• Use of fair value or revaluation as deemed cost of property, plant and equipment, investmentproperties and certain intangible assets

The standard permits a first-time adopter to measure an item in its opening balance sheet using an

amount based on its deemed costs. The Group has taken advantage of this exemption and has adopted

the historical cost as its deemed cost.

Descriptions of the reconciling items between UK GAAP and IFRS are listed below. The amounts of the

reconciling items are detailed in tables set out beneath each of the reconciliations.

• Assets held for sale

As at date of transition and the comparative periods the Group owned various corporate stores, which

met the criteria of assets, held for sale under IFRS 5. These have been reclassified to a separate line

within total assets on the Group balance sheet.

• Intangible assets

On transition, the Group following the provisions of IAS 36 has reclassified separately identifiable

computer software assets from tangible assets to intangible assets.

• Prepaid operating lease costs

The Group incurs costs in acquiring property leases. The Group previously treated these costs as

additions to tangible fixed assets, however under IAS 17 they are more correctly described as prepaid

operating lease charges. Accordingly on transition these expenses are reclassified from tangible fixed

assets to prepaid lease charges. The charges are amortised over the lives of the operating leases on

which they were incurred.

106

36. REPORTING UNDER INTERNATIONAL FINANCIAL REPORTING STANDARDS(continued)

• Lease inducements

The Group under UK GAAP recognised rent-free periods over the period to the commencement of

the first market rent review. According to provisions in SIC 15 lease incentives are spread over the full

term of the lease. As at the date of transition, deferred income reflecting the amount of lease

inducements to be taken to the income statement in future periods has been recognised on the balance

sheet.

• Employee benefits

Under IAS 19 the Group is required to recognise untaken holiday pay entitlements. The Group’s

holiday year runs from January to December and therefore this provision will only impact on the

Group’s interim accounts. At the year-end, the Group does not have an obligation to carry over to the

next holiday year or to pay employees for untaken holiday.

• Deferred taxation

On transition, the Group following the provisions of IAS 12 has recalculated the deferred tax balances

based on the temporary method. The most significant impact has been the recognition of deferred tax

assets relating to share based payments and roll over relief.

• Goodwill

The Group has reclassified goodwill previously recognised under UK GAAP on the acquisition of a

store as an intangible asset. This relates to the right that it had previously granted to the acquiree to

use the Group’s trade name under a franchise agreement

107

Reconciliation of the Group Balance Sheet at 1 January 2006

UK GAAP IFRSAs at Effect of As at

1 January Transition 1 January2006 to IFRS 2006£000 £000 £000

Non current assetsGoodwill and intangible assets 1,326 (553) 773

Property, plant and equipment 13,593 (1,009) 12,584

Prepaid operating lease charges – 656 656

Net investment in finance leases 1,939 – 1,939

Investments in associates 451 – 451

Deferred tax asset – 751 751–––––––– –––––––– ––––––––

17,309 (155) 17,154

Current assetsInventories 2,186 (10) 2,176

Trade and other receivables 9,985 – 9,985

Net investment in finance leases 997 – 997

Prepaid operating lease charges – 59 59

Cash and cash equivalents 5,885 – 5,885–––––––– –––––––– ––––––––

19,053 49 19,102

Non current assets held for sale – 857 857–––––––– –––––––– ––––––––

Total assets 36,362 751 37,113–––––––– –––––––– ––––––––

Current liabilitiesTrade and other payables (10,607) – (10,607)

Deferred income – (53) (53)

Financial liabilities (941) – (941)

Current tax liabilities (2,194) – (2,194)–––––––– –––––––– ––––––––

(13,742) (53) (13,795)

Non current liabilitiesProvisions (880) – (880)

Financial liabilities (9,085) – (9,085)

Deferred income – (847) (847)

Deferred tax liabilities (567) 79 (488)–––––––– –––––––– ––––––––

Total liabilities (24,274) (821) (25,095)–––––––– –––––––– ––––––––

Net assets 12,088 (70) 12,018–––––––– –––––––– ––––––––

Shareholder’s equityCalled up share capital 2,645 – 2,645

Share premium account 4,677 – 4,677

Capital redemption reserve 171 – 171

Treasury share reserve (7,500) – (7,500)

Retained earnings 12,013 (70) 11,943–––––––– –––––––– ––––––––

Equity shareholder’s funds 12,006 (70) 11,936

Minority interest 82 – 82–––––––– –––––––– ––––––––

Total equity 12,088 (70) 12,018–––––––– –––––––– ––––––––

108

Reconciliation of the Group Balance Sheet at 1 January 2006Non Non current Non

Current Current Assets held Current Current Shareholder’sAssets Assets For sale Liabilities Liabilities Funds£000 £000 £000 £000 £000 £000

IAS38 – reclassification of software from

tangible to intangible fixed assets (162) – – – – –

IAS38 – reclassification of software from

tangible to intangible fixed assets 162 – – – – –

IAS17 – reclassification of prepaid operating

lease charges from intangible fixed

assets (lease premiums) (715) – – – – –

IAS17 – reclassification of prepaid operating

lease charges from intangible fixed

assets (lease premiums) 656 59 – – – –

SIC15 – lease inducements spread over

the full lease term (rent frees) – – – (53) (847) (900)

IFRS5 – reclassification of corporate stores

as assets held for sale (847) (10) 857 – – –

IAS12 – recognition of deferred tax asset for

share based payments 751 – – – – 751

IAS12 – recognition of deferred tax

liabilities for roll over relief – – – – (191) (191)

IAS12 – tax effects of conversion – – – – 270 270––––––– ––––––– ––––––– ––––––– ––––––– –––––––

Net movement (155) 49 857 (53) (768) (70)––––––– ––––––– ––––––– ––––––– ––––––– –––––––

109

Reconciliation of the Group Balance Sheet at 31 December 2006

UK GAAP IFRSAs at Effect of As at

31 December Transition 31 December2006 to IFRS 2006£000 £000 £000

Non current assetsGoodwill and intangible assets 2,159 (663) 1,496

Property, plant and equipment 13,780 (1,402) 12,378

Prepaid operating lease charges – 683 683

Net investment in finance leases 1,748 – 1,748

Investments in associates 589 – 589

Deferred tax asset – 1,209 1,209–––––––– –––––––– ––––––––

18,276 (173) 18,103

Current assetsInventories 1,838 (20) 1,818

Trade and other receivables 9,632 – 9,632

Net investment in finance leases 864 – 864

Prepaid operating lease charges – 247 247

Cash and cash equivalents 10,262 – 10,262–––––––– –––––––– ––––––––

22,596 227 22,823

Non current assets held for sale – 1,172 1,172–––––––– –––––––– ––––––––

Total assets 40,872 1,226 42,098–––––––– –––––––– ––––––––

Current liabilitiesTrade and other payables (13,433) – (13,433)

Deferred income – (31) (31)

Financial liabilities (6,835) – (6,835)

Current tax liabilities (2,339) – (2,339)–––––––– –––––––– ––––––––

(22,607) (31) (22,638)

Non current liabilitiesProvisions (233) – (233)

Financial liabilities (9,009) – (9,009)

Deferred income – (989) (989)

Deferred tax liabilities (419) 176 (243)–––––––– –––––––– ––––––––

Total liabilities (32,268) (844) (33,112)–––––––– –––––––– ––––––––

Net assets 8,604 382 8,986–––––––– –––––––– ––––––––

Shareholder’s equityCalled up share capital 2,574 – 2,574

Share premium account 4,765 – 4,765

Capital redemption reserve 261 – 261

Treasury share reserve (4,216) – (4,216)

Currency translation reserve (21) – (21)

Retained earnings 5,193 382 5,575–––––––– –––––––– ––––––––

Equity shareholder’s funds 8,556 382 8,938

Minority interest 48 – 48–––––––– –––––––– ––––––––

Total equity 8,604 382 8,986–––––––– –––––––– ––––––––

110

Reconciliation of the Group Balance Sheet at 31 December 2006Non Non current Non

Current Current Assets held Current Current Shareholder’sAssets Assets For sale Liabilities Liabilities Funds£000 £000 £000 £000 £000 £000

IAS38 – reclassification of software from

tangible to intangible fixed assets (250) – – – – –

IAS38 – reclassification of software from

tangible to intangible fixed assets 250 – – – – –

IAS38 – goodwill no longer amortised 17 – – – – 17

IAS38 – reclassification of goodwill to

intangible fixed assets – purchase of

Edgbaston store (360) – – – – –

IAS38 – reclassification of goodwill to

intangible fixed assets – purchase of

Edgbaston store 360 – – – – –

IAS17 – reclassification of prepaid operating

lease charges from intangible fixed

assets (lease premiums) (930) – – – – –

IAS17 – reclassification of prepaid operating

lease charges from intangible fixed

assets (lease premiums) 683 247 – – – –

SIC15 – lease inducements spread over

the full lease term (rent frees) – – – (31) (989) (1,020)

IFRS5 – reclassification of corporate stores

as assets held for sale (1,152) (20) 1,172 – – –

IAS12 – recognition of deferred tax asset

for share based payments 1,209 – – – – 1,209

IAS12 – recognition of deferred tax

liabilities for roll over relief – – – – (191) (191)

IAS12 – tax effects of conversion – – – – 367 367

IAS12 – tax effects of share options

exercised – – – – – (400)

IAS12 – tax effects of share options

exercised – – – – – 400–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

Net movement (173) 227 1,172 (31) (813) 382–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

111

Reconciliation of the Group Income Statement for the 52 weeks ended 31 December 2006

UK GAAP IFRS52 weeks 52 weeks

ended Effect of As at31 December Transition 31 December

2006 to IFRS 2006£000 £000 £000

Revenue from continuing operations 94,965 – 94,965

Cost of sales (57,811) – (57,811)–––––––– –––––––– ––––––––

Gross Profit 37,154 – 37,154

Distribution costs (8,177) – (8,177)

Administrative costs (including operating exceptionals) (15,359) (103) (15,462)–––––––– –––––––– ––––––––

13,618 (103) 13,515

Share of post tax profits of associates 171 – 171–––––––– –––––––– ––––––––

Operating profit from continuing operations 13,789 (103) 13,686

Operating exceptionals (499) – (499)

Operating profit from continuing operationsbefore exceptional items 14,288 (103) 14,185

Profit on the sale of non current assets and assets held for sale 159 – 159

Profit on the sale of subsidiaries 454 – 454–––––––– –––––––– ––––––––

Profit before interest 14,402 (103) 14,299

Finance income 397 – 397

Finance expense (507) – (507)–––––––– –––––––– ––––––––

Profit before taxation 14,292 (103) 14,189

Taxation (3,865) (328) (4,193)–––––––– –––––––– ––––––––

Profit for the year 10,427 (431) 9,996–––––––– –––––––– ––––––––

Profit for the year attributable to:

Equity holders of the parent 10,515 (431) 10,084

Minority interest (88) – (88)–––––––– –––––––– ––––––––

10,427 (431) 9,996–––––––– –––––––– ––––––––

Earnings per share– Basic (pence) 6.49 (0.26) 6.23

– Diluted (pence) 6.38 (0.26) 6.12

Basic£000 EPS (p)

Conversion effects comprise:SIC15 – lease inducements spread over

the full lease term (rent frees) (120) (0.07)

IAS38 – goodwill no longer amortised annually 17 0.01–––––––– ––––––––

Profit before taxation (103) (0.06)

IAS12 – tax effects of conversion 31 0.02

IAS12 – tax effects of share based payments (359) (0.22)–––––––– ––––––––

Profit for the period (431) (0.26)–––––––– ––––––––

112

113

PART VII

FINANCIAL INFORMATION ON THE GROUP

SECTION B: GAAP HISTORICAL FINANCIAL INFORMATION RELATING TODOMINO’S PIZZA UK & IRL PLC FOR THE YEAR ENDED 31 DECEMBER 2006

Independent auditor’s reportto the members of Domino’s Pizza UK & IRL plc

We have audited the Group and parent Company financial statements (the “financial statements”) of

Domino’s Pizza UK & IRL plc for the 52 weeks ended 31 December 2006, which comprise the Group profit

and loss account, the Group statement of total recognised gains and losses, the Group and Company balance

sheets, the Group statement of cash flows and the related notes 1 to 29. These financial statements have been

prepared under the accounting policies set out therein.

This report is made solely to the Company's members, as a body, in accordance with Section 235 of the

Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's members

those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest

extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and

the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

The directors are responsible for preparing the Annual Report and the financial statements in accordance

with applicable United Kingdom law and Accounting Standards (United Kingdom Generally Accepted

Accounting Practice) as set out in the statement of directors' responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory

requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly

prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the

information given in the Directors’ report is consistent with the financial statements. In addition we report

to you if, in our opinion the company has not kept proper accounting records, if we have not received all the

information and explanations we require for our audit, of if information specified by law regarding directors’

remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report, and consider whether it is consistent with the

audited financial statements. This other information comprises the Chairman's Statement, the Chief

Executive’s Statement, Report on Director’s Remuneration, the Directors' Report and Five Year Financial

Summary. We consider the implications for our report if we become aware of any apparent misstatements or

material inconsistencies with the financial statements. Our responsibilities do not extend to any other

information.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by

the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the

amounts and disclosures in the financial statements. It also includes an assessment of the significant

estimates and judgments made by the directors in the preparation of the financial statements, and of whether

the accounting policies are appropriate to the Group’s and Company's circumstances, consistently applied

and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we

considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the

financial statements are free from material misstatement, whether caused by fraud or other irregularity or

error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in

the financial statements.

Opinion

In our opinion:

• the financial statements give a true and fair view, in accordance with United Kingdom Generally

Accepted Accounting Practice, of the state of the Group’s and the parent Company's affairs as at 31

December 2006 and of the Group’s profit for the 52 weeks then ended;

• the financial statements have been properly prepared in accordance with the Companies Act 1985; and

• the information given in the directors’ report is consistent with the financial statements.

Ernst & Young LLP

Registered auditorLuton

20 February 2007

114

Group profit and loss account

52 weeks 52 weeksended ended

31 December 1 January2006 2006

Notes £000 £000

Turnover from continuing operationsTurnover: group and share of

joint ventures’ turnover 98,937 85,004

Less: share of joint ventures’ turnover (3,972) (3,344)–––––––– ––––––––

Group turnover from continuing operations 2 94,965 81,660

Cost of sales (57,811) (48,778)–––––––– ––––––––

Gross profit 37,154 32,882

Distribution costs (8,177) (8,538)

Administrative expenses – pre accelerated LTIP charge (14,860) (13,504)

Accelerated LTIP charge 3 – (626)

–––––––– ––––––––Administrative expenses (14,860) (14,130)

–––––––– ––––––––

Group operating profit pre exceptionals and share of joint ventures 3 14,117 10,214

Share of operating profit in joint ventures 184 179

Amortisation of goodwill on joint ventures (13) (15)

171 164–––––––– ––––––––

Total operating profit pre exceptionals 14,288 10,378

Operating exceptionals 3 (499) ––––––––– ––––––––

Total group operating profit from continuing operations 13,789 10,378

Profit on sale of fixed assets 3 159 206

Profit on sale of subsidiary undertakings 3 454 670–––––––– ––––––––

Profit on ordinary activities before interest and taxation 14,402 11,254

Interest receivable 6 397 273

Interest payable and similar charges 7 (507) (358)–––––––– ––––––––

Profit on ordinary activities before taxation 14,292 11,169

Tax on profit on ordinary activities 8 (3,865) (2,922)–––––––– ––––––––

Profit on ordinary activities after taxation 10,427 8,247

Minority interests 88 8–––––––– ––––––––

Profit for the financial year attributable tomembers of the parent company 10,515 8,255

–––––––– ––––––––Earnings per share – basic – continuing operations 10 20.78p 16.25p

– diluted – continuing operations 10 20.40p 15.47p

115

Group statement of total recognised gains and losses

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Profit for the financial year attributable to members

of the parent company 10,515 8,255

Exchange difference on translation of

net assets of subsidiary undertaking (21) ––––––––– ––––––––

Total gains and losses recognised since the last annual report 10,494 8,255

–––––––– ––––––––

116

Group balance sheet

At At31 December 1 January

2006 2006Notes £000 £000

Fixed assets

Intangible assets 11 2,159 1,326

Tangible assets 12 13,780 13,593

Investment in joint ventures: 13

Share of gross assets 2,018 1,477

Share of gross liabilities (1,429) (1,026)–––––––– ––––––––

589 451–––––––– ––––––––

Total fixed assets 16,528 15,370–––––––– ––––––––

Current assetsStocks 14 1,838 2,186

Debtors: 15

Amounts falling due within one year 10,304 10,753

Amounts falling due after more than one year 1,940 2,168–––––––– ––––––––

12,244 12,921

Cash at bank and in hand 10,262 5,885–––––––– ––––––––

Total current assets 24,344 20,992–––––––– ––––––––

Creditors: amounts falling due within one year 16 (22,607) (13,742)–––––––– ––––––––

Net current assets 1,737 7,250–––––––– ––––––––

Total assets less current liabilities 18,265 22,620–––––––– ––––––––

Creditors: amounts falling due after more than one year 17 (9,009) (9,085)

Provision for liabilities 18 (652) (1,447)–––––––– ––––––––

8,604 12,088

–––––––– ––––––––Capital and reservesCalled up share capital 22 2,574 2,645

Share premium account 24 4,765 4,677

Capital redemption reserve 24 261 171

Treasury shares held by Employee Benefit Trust 24 (4,216) (7,500)

Profit and loss account 24 5,172 12,013–––––––– ––––––––

Equity shareholders’ funds 8,556 12,006

Minority interest 48 82–––––––– ––––––––

8,604 12,088

–––––––– ––––––––

Director

20 February 2007

117

Company balance sheet

At At31 December 1 January

2006 2006Notes £000 £000

Fixed assetsInvestment in subsidiary undertakings 13 3,506 3,253

Investment in joint ventures 13 255 205–––––––– ––––––––

3,761 3,458–––––––– ––––––––

Current assetsAmounts owed by group undertakings 13,453 15,382

Bank 132 ––––––––– ––––––––

13,585 15,382

Creditors: amounts falling due within one year 16 (191) (10)–––––––– ––––––––

Net current assets 13,394 15,372–––––––– ––––––––

Total assets less current liabilities 17,155 18,830–––––––– ––––––––

Creditors: amounts falling due after more than one year 17 (7,500) (7,500)

Provision for liabilities 18 (220) (880)–––––––– ––––––––

9,435 10,450

–––––––– ––––––––Capital and reservesCalled up share capital 22 2,574 2,645

Share premium account 24 4,765 4,677

Capital redemption reserve 24 261 171

Treasury shares held by Employee Benefit Trust 24 (4,216) (7,500)

Profit and loss account 24 6,051 10,457–––––––– ––––––––

Equity shareholders’ funds 9,435 10,450

–––––––– ––––––––

Director

20 February 2007

118

Group statement of cash flows

52 weeks 52 weeksended ended

31 December 1 January2006 2006

Notes £000 £000

Net cash inflow from operating activities 26(a) 18,989 12,674–––––––– ––––––––

Returns on investments and servicing of financeInterest received 389 273

Interest paid (455) (307)

Interest element of finance lease payments (4) (4)

Dividends received from joint ventures 21 –

–––––––– ––––––––(49) (38)

–––––––– ––––––––

TaxationCorporation tax paid (3,755) (1,549)

–––––––– ––––––––

Capital expenditure and financial investmentPayments to acquire intangible fixed assets (898) (395)

Payments to acquire tangible fixed assets (2,262) (2,246)

Receipts from sales of tangible and intangible fixed assets 453 576

Receipts from repayment of joint venture loan 105 60

Payments to acquire finance lease assets and advance of

franchisee loans (1,026) (1,166)

Receipts from repayment of finance leases and franchisee loans 1,349 1,172–––––––– ––––––––

(2,279) (1,999)–––––––– ––––––––

Acquisitions and disposalsSale of subsidiary undertakings – net of costs – 3,354

Utilisation of provisions relating to the disposal of

subsidiary undertakings (221) (309)

Cash balances disposed of with subsidiary undertakings – (5)

Sale of minority interest 30 90

Purchase of minority interests (133) (82)–––––––– ––––––––

26(b) (324) 3,048–––––––– ––––––––

Equity dividends paid (4,234) (3,169)–––––––– ––––––––

Net cash inflow before financing 8,348 8,967–––––––– ––––––––

FinancingIssue of ordinary share capital 403 472

New long-term loans 1,244 2,146

Repayments of long term loans (1,445) (1,146)

Repayment of capital element of finance leases

and hire purchase contracts (12) (16)

Purchase of shares by Employee Benefit Trust – (1,140)

Purchase of own shares (10,161) (8,222)–––––––– ––––––––

(9,971) (7,906)

–––––––– ––––––––(Decrease)/Increase in cash 26 (d) (1,623) 1,061

–––––––– ––––––––

119

Notes to the financial statementsAt 31 December 2006

1. Accounting Policies

Basis of preparation

The accounts are prepared under the historical cost convention and in accordance with United Kingdom

Generally Accepted Accounting Practice.

Basis of consolidation

The Group accounts consolidate the accounts of Domino’s Pizza UK & IRL plc and all its subsidiary

undertakings drawn up to the nearest Sunday to 31 December each year. No profit and loss account is

presented for Domino’s Pizza UK & IRL plc as permitted by Section 230 of the Companies Act 1985.

Entities in which the Group holds an interest on a long-term basis and are jointly controlled by one or more

ventures under a contractual agreement are treated as joint ventures in the Group accounts. Joint ventures are

accounted for using the gross equity method. The Group accounts include the appropriate share of assets and

liabilities and earnings, based on management accounts for the period to 31 December 2006.

Goodwill

Positive goodwill arising on acquisitions of a subsidiary or business is capitalised, classified as an asset on

the balance sheet and amortised on a straight-line basis over its estimated useful economic life of 20 years.

It is reviewed for impairment at the end of the first full financial year following the acquisition and in other

periods if events or changes in circumstances indicate that the carrying value may not be recoverable.

If a subsidiary or business is subsequently sold or closed, any goodwill arising on acquisition that has not

been amortised through the profit and loss account is taken into account in determining the profit or loss on

sale or closure.

Goodwill arising on the acquisition of a joint venture is capitalised as part of the investment in the joint

venture and is amortised on a straight-line basis over its estimated useful economic life of 20 years.

Intangible assets

Intangible assets acquired separately from a business are capitalised at cost. Intangible assets acquired as part

of an acquisition of a business are capitalised separately from goodwill if the fair value can be measured

reliably on initial recognition, subject to the constraint that, unless the asset has a readily ascertainable

market value, the fair value is limited to an amount that does not create or increase any negative goodwill

arising on the acquisition. Intangible assets created within the business are not capitalised and expenditure

is charged against profits in the year in which it is incurred.

Intangible assets are amortised on a straight-line basis over their estimated useful lives as follows:

Franchise fees – over 20 years

Interest in leases – over the life of the lease

The carrying value of intangible assets is reviewed for impairment at the end of the first full year following

acquisition and in other periods if events or changes in circumstances indicate the carrying value may not be

recoverable.

Significant property developments

Interest incurred on finance provided for significant property development is capitalised up to the date of

completion of the project. These costs are then depreciated in accordance with the Group’s policy for the

relevant class of tangible fixed assets.

120

1. Accounting Policies (continued)

Depreciation

Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost less residual

value of each asset evenly over its expected useful life as follows:

Freehold buildings – over 50 years

Equipment – over 2 to 10 years

Leasehold building improvements – over the life of the lease

Motor vehicles – over 18 months to 3 years

The carrying values of tangible fixed assets are reviewed for impairment in periods if events or changes in

circumstances indicate that the carrying value may not be recoverable.

Stocks

Stocks comprise raw materials, consumables and goods for resale (being equipment for resale to franchisees)

and are stated at the lower of cost and net realisable value. Cost of stock is determined on the weighted

average cost basis or, for computer and food stock, the first-in, first-out basis.

Deferred taxation

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the

balance sheet date where transactions or events have occurred at that date that will result in an obligation to

pay more, or right to pay less or to receive more, tax, with the following exceptions:

• Provision is made for tax on gains from the revaluation (and similar fair value adjustments) of fixed

assets, or gains on disposal of fixed assets that have been rolled over into replacement assets, only to

the extent that, at the balance sheet date, there is a binding agreement to dispose of the assets

concerned. However, no provision is made where, on the basis of all available evidence at the balance

sheet date, it is more likely than not that the taxable gain will be rolled over into replacement assets

and charged to tax only where the replacement assets are sold.

• Deferred tax assets are recognised only to the extent that the directors consider that it is more likely

than not that there will be suitable taxable profits from which the underlying timing differences can

be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods

in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the

balance sheet date.

Leasing and hire purchase commitments

As lessee

Assets held under finance leases, which are leases where substantially all the risks and rewards of ownership

of the asset have passed to the Group, and hire purchase contracts, are capitalised in the balance sheet and

depreciated over their useful lives. The capital elements of future obligations under leases and hire purchase

contracts are included as liabilities in the balance sheet. The interest elements of the rental obligations are

charged in the profit and loss account over the periods of the leases and hire purchase contracts and represent

a constant proportion of the balance of capital repayments outstanding.

Rentals payable under operating leases are charged in the profit and loss account on a straight-line basis over

the lease term.

121

1. Accounting Policies (continued)

As lessor

Amounts receivable under finance leases are included under debtors and represent the total amount

outstanding under lease agreements less unearned income. Finance lease income, having been allocated to

accounting periods to give a constant periodic rate of return on the net cash investment is included in

turnover. Income and expenditure from the rental of leasehold properties and equipment have been included

in the gross income in turnover and the related expenditure within cost of sales.

Treasury shares

Treasury shares held by the Employee Benefit Trust are classified in capital and reserves, as ‘Treasury shares

held by Employee Benefit Trust’ and recognised at cost. Consideration received for the sale of such shares

is also recognised in equity, with any difference between the proceeds from sale and the original cost taken

to revenue reserves except that where the proceeds exceed the consideration paid then the excess is

transferred to the share premium account. No gain or loss is recognised on the purchase, sale issue or

cancellation of equity shares.

The Employee Benefit Trust has waived its entitlement to dividends. The Group will meet the expenses of

the trust as and when they fall due.

Pensions

The Group makes contributions to certain individuals’ personal pension plans. Contributions are charged in

the profit and loss account as they accrue.

Share-based payment transactions

Employees (including directors) of the Group receive an element of remuneration in the form of share based

payment transactions, whereby employees render services as consideration for equity instruments.

The awards vest when certain performance and/or service conditions are met, see note 23 for the individual

vesting conditions for the various schemes.

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date

at which they are granted and is recognised as an expense over the vesting period, which ends on the date on

which the relevant employees become fully entitled to the award. Fair value is determined by an external

valuer using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any

vesting conditions, other than conditions linked to the price of the shares of the Company (market

conditions).

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is

conditional upon a market condition, which are treated as vesting irrespective of whether or not the market

condition is satisfied, provided that all other performance conditions are satisfied.

At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to

which the vesting period has expired, management’s best estimate of the achievement or otherwise of non-

market conditions and the number of equity instruments that will ultimately vest or in the case of an

instrument subject to a market condition, be treated as vesting as described above. The movement in the

cumulative expense since the previous balance sheet date is recognised in the income statement, with a

corresponding entry in equity.

Where the terms of an equity-settled award are modified or a new award is designated as replacing a

cancelled or settled award, the cost based on the original award terms continues to be recognised over the

original vesting period. In addition, an expense is recognised over the remainder of the new vesting period

for the incremental fair value of any modification, based on the difference between the fair value of the

original award and the fair value of the modified award, both as measured on the date of the modification.

No reduction is recognised if this difference is negative.

122

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and

any cost not yet recognised in the income statement for the award is expensed immediately. Any

compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from

equity, with any excess over fair value being treated as an expense in the income statement.

The Group has taken advantage of the transitional provisions in respect of equity settled awards and has

applied FRS 20 only to awards granted after 7 November 2002 that had not vested at 3 January 2005.

Revenue recognition

Revenue is recognised as follows:

Pizza delivery – on delivery of pizzas to franchisee customers

Commissary and equipment sales – on delivery to franchisees

Royalties (based on system sales) – on delivery of pizzas by franchisees to customers

Franchise sales – on commencement of franchisee trading

Finance lease interest income – as per leasing and hire purchase commitments (lessor)

Rental income on leasehold properties – on a straight line basis in accordance with the lease terms

Trade and Other Debtors

Trade debtors, which generally have 7 – 28 days terms are recognised and carried at original invoice amount

less an allowance for any uncollectible amounts when there is objective evidence that the Group will not be

able to collect the debts. Bad debts are written off when identified.

Interest-bearing loans and borrowings

All interest-bearing loans and borrowings are initially recognised at net proceeds. After initial recognition

debt is increased by the finance cost in respect of the reporting period and reduced by payments made in

respect of the debts of the period.

Finance costs of debt are allocated over the term of the debt at a constant rate on the carrying amount.

2. Turnover and segmental analysis

The principal components of turnover are royalties received, commissary and equipment sales, sale of

franchises, pizza delivery sales, rental income on leasehold and freehold properties and finance lease interest

income, stated net of value added tax. All of the turnover is in one continuing business segment being the

development of the Domino’s Pizza Franchise System and originates in the United Kingdom and the

Republic of Ireland. The directors believe that full compliance with the requirements of SSAP 25 ‘Segmental

Reporting’ would be seriously prejudicial to the interests of the Group as it would require disclosure of

commercially sensitive information. The requirements of SSAP 25 with which the Group do not comply are

the disclosure of profit before interest and tax and net operating assets by segment. All the turnover of the

Joint Ventures relates to the United Kingdom.

123

Geographical analysis

Turnover Turnover Turnover by Turnover byby origin by origin destination destination52 weeks 52 weeks 52 weeks 52 weeks

ended ended ended ended31 December 1 January 31 December 1 January

2006 2006 2006 2006£000 £000 £000 £000

Group turnover

United Kingdom

– Royalties and sales to franchisees 80,296 69,327 77,759 68,253

– Rental income on leasehold and

freehold property 7,048 6,003 7,048 6,003

– Finance lease income 290 280 290 280–––––––– –––––––– –––––––– ––––––––

Total United Kingdom 87,634 75,610 85,097 74,536

Republic of Ireland

– Royalties and sales to franchisees 6,973 5,688 9,510 6,762

– Rental income on leasehold and

freehold property 358 362 358 362–––––––– –––––––– –––––––– ––––––––

Total Republic of Ireland 7,331 6,050 9,868 7,124–––––––– –––––––– –––––––– ––––––––

Total Group 94,965 81,660 94,965 81,660

–––––––– –––––––– –––––––– ––––––––3. Operating profit

This is stated after charging/(crediting):

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Auditors’ remuneration* 121 151

Depreciation of owned assets 1,662 1,498

Depreciation of assets held under finance leases and hire

purchase contracts 9 10

Amortisation of intangible fixed assets 161 131

Operating lease rentals

– land and buildings 7,337 6,281

– plant, machinery and vehicles 1,480 1,461

Foreign exchange (gain)/loss (16) 122

–––––––– ––––––––

124

3. Operating Profit (continued)

The remuneration of the auditors is further analysed as follows:

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Audit of the financial statements 75 72

Other fees to auditors

– local statutory audit for subsidiaries 44 28

– other services 2 51–––––––– ––––––––

121 151

–––––––– ––––––––* Of which £2,000 (2005: £2,000) relates to the Company

Accelerated LTIP charge

During the 2005 financial year the Company accelerated the charge relating to reversionary interests in

ordinary shares granted in 2003, as the performance targets set were achieved earlier than expected (further

details included in the Report on Directors’ Remuneration). This resulted in an additional charge of £626,000

during 2005. This charge was not deductible for corporation taxation purposes (see note 8). This charge had

no impact on the cash flow of the Group during the prior year.

Exceptional items

Recognised as part of operating profit

Following the sale of DPGS Limited and Triple A Pizza Limited in 2005 (noted below), the Group has taken

the decision not to invest in or trade in corporately owned stores. During the year three corporately owned

stores were sold and one closed. A further store, owned and operated by a franchisee, was also closed during

the year.

The Group incurred the following exceptional charges relating to the store closures and stores sold during

the year:

52 weeksended

31 December

2006£000

Onerous lease and dilapidation provisions 76

Restructuring and reorganisation costs 252

Assets written off 52

Lease finance and other bad debts provided for 119

––––––––499

––––––––Except for the assets written off, for stores closed, the charges should be deductible for corporation taxation

purposes. Except for the restructuring and reorganisation costs, these charges had no impact on the cash flow

of the Group during the year (see note 26(a)).

125

3. Operating Profit (continued)

Recognised below operating profit

During the 2005 financial year the Group sold two subsidiary undertakings, DPGS Limited and Triple A

Pizza Limited (which included 12 corporate stores at the date of the transaction). The main elements of the

transaction were as follows:

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Cash consideration received – 3,650

Net assets disposed of – (1,495)

Disposal costs – (296)

Provisions (note 18) 454 (1,189)–––––––– ––––––––

Profit on disposal of subsidiary undertakings 454 670

–––––––– ––––––––These subsidiary undertakings were sold to Dough Trading Limited a company controlled by Marc Halpern

(see related party transactions – note 29). In addition to the sale of DPGS Limited and Triple A Pizza

Limited, the Group sold one corporate store to Dough Trading Limited for a cash consideration of £350,000

resulting in a profit on sale of £144,000.

During the year partial resolution relating to the conditions for the property provisions made in relation to

the sale of the subsidiary undertakings in the prior year, was reached and as a result £454,000 of the

provisions created in the prior year have been released. These provisions were treated as timing differences

in 2005 hence the reversal will not be chargeable to corporation tax in 2006.

In addition the Group sold three corporate stores resulting in a profit of £115,000 (2005: £62,000). The gain

in respect of these disposals will be chargeable to corporation tax at the statutory rate of 30 per cent.

During the year the Group’s share of profit realised on the disposal of a joint venture store was £44,000.

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Profit on sale of fixed assets

Sale of three (2005: two) corporate stores resulting in a profit of 115 206

Group’s share of profit on disposal of joint venture stores 44 ––––––––– ––––––––

159 206

–––––––– ––––––––4. Directors’ emoluments

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Emoluments 1,631 1,185

Pension contributions 59 156–––––––– ––––––––

1,690 1,341

–––––––– ––––––––Further information concerning directors’ emoluments is disclosed within the Report on Directors’

Remuneration.

126

5. Staff costs

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Wages and salaries 12,061 12,088

Social security costs 1,136 1,008

Other pension costs 227 288–––––––– ––––––––

13,424 13,384

–––––––– ––––––––Included in wages and salaries is a total expense of share-based payments of £344,000 (2005: £963,000),

which arises from transactions, accounted for as equity-settled share-based payment transactions.

The average monthly number of employees (including directors) during the year was made up as follows:

52 weeks 52 weeksended ended

31 December 1 January2006 2006

No. No.

Administration 130 120

Production and distribution 157 146

Corporate stores 306 408–––––––– ––––––––

593 674

–––––––– ––––––––6. Interest receivable

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Bank interest 307 177

Franchisee loans 71 83

Other interest receivable 19 13–––––––– ––––––––

397 273

–––––––– ––––––––7. Interest payable and similar charges

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Bank loan in relation to the EBT 398 305

Overdraft interest payable 51 –

Other interest payable 6 2

Finance charges payable under finance leases and hire purchase contracts 4 4–––––––– ––––––––

459 311

Joint venture interest payable 48 47–––––––– ––––––––

507 358

–––––––– ––––––––

127

8. Tax on profit on ordinary activities

(a) Analysis of tax charge in the year.

The charge based on the profit for the year comprises:

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

UK Corporation tax:

Current year 4,219 3,082

Adjustment in respect of prior periods (418) (213)–––––––– ––––––––

3,801 2,869

Republic of Ireland corporation tax – 12.5% 154 60–––––––– ––––––––

3,955 2,929

Joint venture taxation charge 58 49–––––––– ––––––––

Total corporation tax 4,013 2,978–––––––– ––––––––

UK Deferred tax:

Origination and reversal of timing differences in respect of:

Credit to profit and loss account (148) (56)–––––––– ––––––––

Total deferred tax (148) (56)–––––––– ––––––––

Tax on profit on ordinary activities 3,865 2,922

–––––––– ––––––––(b) Factors affecting tax charge for the period

52 weeks 52 weeksended ended

31 December 1 January2006 2006

% %

Corporation tax at the statutory rate 30.0 30.0

Effects of:

Expenses not deductible for tax purposes * 2.8 4.1

Profit on disposal of subsidiary undertakings – not taxable (1.9) (4.7)

Accounting depreciation not eligible for tax purposes 1.3 1.0

Goodwill amortised – 0.3

Adjustments relating to prior years corporation tax (2.9) (1.9)

Other timing differences 1.0 1.5

Decelerated capital allowances 0.5 0.1

Tax rate differences – (0.1)

Share option exercise deduction (2.8) (3.6)–––––––– ––––––––

Total current tax rate 28.0 26.7

Deferred tax (1.0) (0.5)–––––––– ––––––––

Effective tax rate 27.0 26.2

–––––––– ––––––––* Includes impact of accelerated LTIP charge in 2005 (see note 3).

128

8. Tax on profit on ordinary activities (continued)

(c) Deferred taxation – Group

Deferred tax provided in the accounts is as follows:

At At31 December 1 January

2006 2006£000 £000

Accelerated capital allowances 432 725

Other timing differences (13) (158)–––––––– ––––––––

419 567

–––––––– ––––––––£000

Deferred tax provided at 1 January 2006 567

Credit to profit and loss account (148)––––––––

Deferred tax provided at 31 December 2006 419

––––––––(d) Factors that may affect future tax charges

No provision has been made for deferred tax where potentially taxable gains have been rolled over

into replacement assets. Such gains would become taxable only if the assets were sold without it being

possible to claim rollover relief. The amount not provided is £191,000 (2005: £191,000) in respect of

this. At present, it is not envisaged that any tax will become payable in the foreseeable future.

The Company is able to receive a tax deduction when new shares are issued to satisfy the exercise of

share options. The timing of the exercise and hence resultant tax deduction is at the discretion of the

option holder.

9. Dividends paid and proposed

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Declared and paid during the year:

Final dividend for 2005 4.15p (2004: 3.05p) 2,115 1,531

Interim dividend for 2006 4.15p (2005: 3.10p) 2,119 1,638–––––––– ––––––––

4,234 3,169

–––––––– ––––––––52 weeks 52 weeks

ended ended31 December 1 January

2006 2006£000 £000

Proposed for approval at AGM (not recognised as a liability

as at 31December 2006 and 1 January 2006)

Final dividend for 2006 5.65p (2005: 4.15p) 2,792 2,031

–––––––– ––––––––10. Earnings per ordinary share

The calculation of basic earnings per ordinary share is based on earnings of £10,515,000 (2005: £8,255,000)

and on 50,614,710 (2005: 50,810,785) ordinary shares.

129

10. Earnings per ordinary share (continued)

The diluted earnings per share is based on earnings of £10,515,000 (2005: £8,255,000) and on 51,556,922

(2005: 53,368,778) ordinary shares. The difference relates to the dilutive effect of share options and the

impact of reversionary interests where the performance conditions have been met.

Reconciliation of basic and diluted earnings per share

52 weeks 52 weeksended ended

31 December 1 January2006 2006

No. No.

Ordinary shares – basic earnings per share 50,614,710 50,810,785

Dilutive share options 732,027 832,056

Reversionary interests 210,185 1,725,937–––––––––– ––––––––––

Ordinary shares – diluted earnings per share 51,556,922 53,368,778

–––––––––– ––––––––––Reversionary interests granted over 2,075,000 shares and share options granted over 785,972 shares have not

yet vested at 31 December 2006. The performance conditions for these reversionary interests and share

options have not been met in the current year and therefore the dilutive effect of the number of shares which

would have vested at the year end have not been included in the diluted earnings per share calculation (for

further details see Report on Directors’ Remuneration).

11. Intangible fixed assets

Group

Franchise InterestGoodwill fees in leases Total

£000 £000 £000 £000

Cost:

At 1 January 2006 363 832 941 2,136

Additions 524 213 315 1,052

Disposals (60) (30) – (90)–––––––– –––––––– –––––––– ––––––––

At 31 December 2006 827 1,015 1,256 3,098–––––––– –––––––– –––––––– ––––––––

Amortisation:

At 1 January 2006 68 517 225 810

Provided during the year 17 43 101 161

Disposals (31) (1) – (32)–––––––– –––––––– –––––––– ––––––––

At 31 December 2006 54 559 326 939–––––––– –––––––– –––––––– ––––––––

Net book value:

At 31 December 2006 773 456 930 2,159

–––––––– –––––––– –––––––– ––––––––At 1 January 2006 295 315 716 1,326

–––––––– –––––––– –––––––– ––––––––

130

12. Tangible fixed assets

Group

Freehold land Leaseholdand buildings improvements Equipment Total

£000 £000 £000 £000

Cost:

At 1 January 2006 8,245 1,315 9,655 19,215

Additions 38 311 1,945 2,294

Disposals – (206) (317) (523)–––––––– –––––––– –––––––– ––––––––

At 31 December 2006 8,283 1,420 11,283 20,986–––––––– –––––––– –––––––– ––––––––

Depreciation:

At 1 January 2006 648 116 4,858 5,622

Provided during the year 124 170 1,377 1,671

Disposals – (5) (82) (87)–––––––– –––––––– –––––––– ––––––––

At 31 December 2006 772 281 6,153 7,206–––––––– –––––––– –––––––– ––––––––

Net book value:

At 31 December 2006 7,511 1,139 5,130 13,780

–––––––– –––––––– –––––––– ––––––––At 1 January 2006 7,597 1,199 4,797 13,593

–––––––– –––––––– –––––––– ––––––––The net book value of equipment includes an amount of £47,000 (2005: £26,000) in respect of assets held

under finance leases and hire purchase contracts, the depreciation charge on which was £9,000 (2005:

£10,000).

Included within freehold land and buildings is an amount of £1,690,000 (2005: £1,690,000) in respect of

land which is not depreciated. Also included is an amount of £154,000 (2005: £154,000) of capitalised

interest. No interest was capitalised during the year.

13. Investments

Group

At At31 December 1 January

2006 2006£000 £000

Investments:

Joint ventures 589 451

–––––––– ––––––––£000

At 1 January 2006 451

Share of profit retained by joint ventures 109

Dividends received (21)

Reclassification of investment cost 50––––––––

At 31 December 2006 589

––––––––Included within the investment in joint ventures is an amount of £189,000 (2005: £202,000) of goodwill

arising on acquisition.

131

13. Investments (continued)

Company

Subsidiary JointUndertakings ventures Total

£000 £000 £000

Fixed asset investment

Cost:

At 1 January 2006 3,253 205 3,458

Reclassification of investment cost – 50 50

Investments acquired:

DP Milton Keynes Limited 120 – 120

DPGL Birmingham Limited* 85 – 85

DP Newcastle & Sunderland Limited* 48 – 48

DPG Holdings Limited 2,200 – 2,200

Investments disposed of:

Domino’s Pizza Group Limited (2,200) – (2,200)–––––––– –––––––– ––––––––

At 31 December 2006 3,506 255 3,761

–––––––– –––––––– ––––––––* purchase of minority interest

At 31 December 2006 the Company held directly more than 20 per cent. of the nominal value of the share

capital of the following:

Country ofName of company in corporation Proportion held Nature of business

Directly held subsidiary undertakingsDPG Holdings Limited England 100% ordinary

DP Realty Limited England 100% ordinary Property management

DP Group Developments Limited England 100% ordinary Property development

DP Capital Limited England 100% ordinary Leasing of equipment

DP Newcastle Limited England 100% ordinary

American Pizza Company Limited England 100% ordinary

DPGL Birmingham Limited England 100% ordinary

DP Newcastle & Sunderland Limited England 100% ordinary

DP Peterborough Limited England 80% ordinary

DP Milton Keynes Limited England 80% ordinary

Joint venturesFull House Restaurants Limited England 41% ordinary

Dominoid Limited Scotland 50% ordinary

Indirectly held subsidiariesDomino’s Pizza Group Limited England 100% ordinary

Livebait Limited England 100% ordinary Property management

DP Pizza Limited 100% ordinary Food service businessRepublic

of Ireland

Operation and management

of franchise business

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Investment of

franchise business

132

13. Investments (continued)

On 24 October 1998, a 41 per cent. interest in Full House Restaurants Limited was acquired for £205,000.

Sales of £2,843,000 (2005: £1,898,000) were made to Full House Restaurants Limited during the year.

At 31 December 2006, there was a receivable of £82,000 (2005: £62,000) from Full House Restaurants

Limited, which has arisen through normal trading activities.

On 11 November 2002, a 50 per cent. interest in Dominoid Limited was acquired. Two stores were sold to

Dominoid Limited and the consideration for the sale was satisfied by the issue of a Loan Note by Dominoid

Limited of £436,000, which is repayable on demand at least one year after date of the agreement. The loan

bears interest at a rate of 2.5 per cent. above Royal Bank of Scotland base rate. At 31 December 2006 the

balance outstanding on the loan was £332,000 (2005: £436,000).

Sales of £1,244,000 (2005: £1,057,000) were made to Dominoid Limited during the year. The Company

received interest of £25,000 (2005: £31,000) in respect of the loan. At 31 December 2006 there was a

receivable of £18,000 (2005: £19,000) from Dominoid Limited, which has arisen through normal trading

activities.

In October 2006 the Company purchased the remaining 20 per cent. shareholding of DPGL Birmingham

Limited for £85,000 and DP Newcastle & Sunderland Limited for £48,000. The goodwill arising on the

acquisitions of the minority shareholdings was £70,000 and £84,000 respectively. The purchase

considerations were calculated taking into consideration the market value of the assets and liabilities of the

respective companies. No fair value adjustments were made in respect of these acquisitions.

In December 2006, DPGL Birmingham Limited acquired a store, previously operated by an existing

franchisee, for £430,000, giving rise to goodwill of £370,000, when compared with fixed assets of £60,000

that were acquired. The purchase consideration was calculated taking into consideration the market value of

the store. No fair value adjustments were made in respect of this acquisition.

In June 2006 a new company was formed, DP Milton Keynes Limited. Domino’s Pizza UK & IRL plc

acquired 80 per cent. of the shareholding of the new company. DP Milton Keynes Limited is consolidated

within the financial statements of the Group.

Sales of £628,000 (2005: £349,000) were made to DP Peterborough Limited during the year. Sales of

£279,000 (2005: £nil) were made to DP Milton Keynes Limited during the year. At 31 December 2006 there

was a receivable due from DP Milton Keynes Limited of £138,470 (2005: £Nil) and a receivable due from

DP Peterborough Limited £176,935 (2005: £Nil), which have arisen through normal trading activities.

On 16 August 2006 the Company sold its investment in Domino’s Pizza Group limited for £2,200,000 in

exchange for shares in DPG Holdings Limited. There was no profit or loss arising on the disposal.

14. Stocks

Group at Group at31 December 1 January

2006 2006£000 £000

Raw materials and goods for resale 1,838 2,186

–––––––– ––––––––

133

15. Debtors

Group at Group at31 December 1 January

2006 2006£000 £000

Trade debtors 2,865 3,668

Amounts owed by joint ventures 432 517

Other debtors 2,795 3,166

Prepayments and accrued income 3,540 2,634

Net investment in finance leases 2,612 2,936–––––––– ––––––––

12,244 12,921

–––––––– ––––––––Amounts falling due after more than one year included above are:

Group at Group at31 December 1 January

2006 2006£000 £000

Trade debtors 75 156

Other debtors 117 73

Net investment in finance leases 1,748 1,939–––––––– ––––––––

1,940 2,168

–––––––– ––––––––The aggregate rentals receivable in respect of finance leases was £1,623,000 (2005: £1,456,000), and the

interest element of this is included in turnover.

The cost of assets acquired for the purpose of letting under finance leases was £4,803,000 (2005:

£5,227,000).

16. Creditors: amounts falling due within one year

Group at Group at Company at Company at31 December 1 January 31 December 1 January

2006 2006 2006 2006£000 £000 £000 £000

Other loans (note 19) 822 923 – –

Bank overdraft 6,000 – – –

Finance lease creditors (note 20) 13 18 – –

Trade creditors 4,059 3,930 – –

Corporation tax 2,339 2,194 – –

Other taxes and social security costs 1,415 1,230 – –

Other creditors 1,808 1,388 – –

Accruals and deferred income 6,151 4,059 191 10–––––––– –––––––– –––––––– ––––––––

22,607 13,742 191 10

–––––––– –––––––– –––––––– ––––––––Bank overdraft

The Group has entered into an agreement to obtain a bank overdraft facility from Barclays Bank plc. The

limit for this facility is £6,000,000. The facility is repayable on demand and interest is charged at 1.0 per

cent. per annum above Barclays Bank plc base rate. The facility is secured by share pledges, constituting first

fixed charges over the shares of DPG Holdings Limited and Domino’s Pizza Group Limited as well as

negative pledges given by the Company, DPG Holdings Limited and Domino’s Pizza Group Limited.

134

17. Creditors: amounts falling after more than one year

Group at Group at Company at Company at31 December 1 January 31 December 1 January

2006 2006 2006 2006£000 £000 £000 £000

Bank loans (note 19) 7,500 7,500 7,500 7,500

Finance lease creditors (note 20) 32 8 – –

Other loans (note 19) 1,477 1,577 – ––––––––– –––––––– –––––––– ––––––––

9,009 9,085 7,500 7,500

–––––––– –––––––– –––––––– ––––––––Bank loans

The Group has entered into an agreement to obtain bank loans and mortgage facilities. These are secured by

a fixed and floating charge over the Group’s assets and an unlimited guarantee provided by the Company. At

31 December 2006 the balance due under these facilities was £7,500,000 all of which is in relation to the

EBT (2005: £7,500,000). The loans bear interest at 0.625 per cent. (2005: 0.625 per cent.) above National

Westminster Bank plc base rate.

Other loans

The remaining loans are repayable in equal instalments over a period of up to five years, these are unsecured.

The interest rate on these loans is fixed at an average rate of 8.2 per cent. (2005: 7.0 per cent.).

18. Provisions for liabilities

Group at Group at Company at Company at31 December 1 January 31 December 1 January

2006 2006 2006 2006£000 £000 £000 £000

2006 2005 2006 2005£000 £000 £000 £000

Deferred tax (see note 8) 419 567 (13) –

Legal provisions 51 148 51 148

Property provisions 182 732 182 732–––––––– –––––––– –––––––– ––––––––

652 1,447 220 880

–––––––– –––––––– –––––––– ––––––––At 1 January Arising Releases Utilised At 31 December

2006 in the year in the year in the year 2006£000 £000 £000 £000 £000

Deferred tax 567 – – (148) 419

Legal provisions 148 28 – (125) 51

Property provisions 732 – (454) (96) 182–––––––– –––––––– –––––––– –––––––– ––––––––

Total provisions 1,447 28 (454) (369) 652

–––––––– –––––––– –––––––– –––––––– ––––––––The legal provisions relate to fees charged in relation to the disposal of subsidiary undertakings as well as

outstanding litigation matters arising on the sale of stores. The outcome of the litigation is at present

uncertain, and a final decision is not imminently expected. No estimate of the likely outcome of the litigation

can yet be made by the directors, but full provision for the potential costs likely to be incurred has been made.

The property provisions relate to outstanding rent reviews, rates, service charges and dilapidation costs for

stores sold as part of the sale of subsidiary undertakings during the prior year. The completion of the

outstanding rent and rates reviews vary depending on the lease and on average are resolved within 1 - 3 years

following the review dates stipulated in the leases. The dilapidation costs are determined at the end of the

lease. During the year resolution was reached on various of the outstanding items relating to the property

provisions, resulting in the release of provisions held at the beginning of the year (see note 3).

135

19. Loans

Group at Group at Company at Company at31 December 1 January 31 December 1 January

2006 2006 2006 2006£000 £000 £000 £000

Amounts falling due:

In one year or less or on demand 6,822 923 – –

Due between one and two years 664 717 – –

In more than two years but not more

than five 813 860 – –

In more than five years 7,500 7,500 7,500 7,500–––––––– –––––––– –––––––– ––––––––

15,799 10,000 7,500 7,500

–––––––– –––––––– –––––––– ––––––––20. Obligations under leases and hire purchase contracts

Group

At At31 December 1 January

2006 2006£000 £000

Amount payable:

Within one year 23 16

In two to five years 31 15–––––– ––––––

54 31

Less: Finance charges allocated to future periods (9) (5)–––––– ––––––

45 26

–––––– ––––––Annual commitments under non-cancellable operating leases are as follows:

Land and Land andbuildings at buildings at Other at Other at

31 December 1 January 31 December 1 January2006 2006 2006 2006£000 £000 £000 £000

Operating leases that expire:

Within one year 201 100 213 60

In two to five years 912 651 868 1,005

In over five years 6,570 6,068 209 209––––––– ––––––– ––––––– –––––––

7,683 6,819 1,290 1,274

––––––– ––––––– ––––––– –––––––21. Derivatives and other financial instruments

The Group’s financial risk management objectives consist of identifying and monitoring those risks which

have an adverse impact on the value of the Group’s financial assets and liabilities or on reported profitability

and on the cash flows of the Group.

The Group’s principal financial instruments are bank loans, bank overdrafts, other loans, finance leases and

cash.

The financial instruments are principally in place to finance the head office facility and associated

equipment, provide finance to franchisees and to provide finance for the EBT loan. The Group has other

financial instruments such as trade debtors and trade creditors that arise directly from its operations. As

permitted by FRS 13 short-term debtors and creditors have been excluded from the disclosure of financial

liabilities and assets.

136

21. Derivates and other financial instruments (continued)

The Group has not entered into any derivative transactions such as interest rate swaps or financial foreign

currency contracts. The main risks arising from the Group’s financial instruments are set out below. In view

of the low level of foreign currency transactions the Board does not consider there to be any significant

foreign currency risks.

Credit Risk

Due to the nature of customers who trade on credit terms, being predominantly franchisees, the franchisee

selection process is sufficiently robust to ensure an appropriate credit verification procedure.

In addition, trade debtors balances are monitored on an ongoing basis with the result that the Group’s

exposure to bad debts is not significant. Since the Group trades only with franchisees that have been subject

to the franchisee selection process and provide personal guarantees as required under the franchise

agreements, there is no requirement for collateral.

Price risk

The Board considers that the Group’s exposure to changing market prices on the values of financial

instruments does not have a significant impact on the carrying value of financial assets and liabilities. As

such no specific policies are applied currently, although the Board will continue to monitor the level of price

risk and manage its exposure should the need occur.

Liquidity risk

The Group aims to mitigate liquidity risk by managing cash generation by its operations with cash collection

targets set throughout the Group. All major investment decisions are considered by the Board as part of the

project appraisal process. In this way the Group aims to maintain a good credit rating to facilitate fund

raising.

Interest rate risk

The Board has a policy of ensuring a mix of fixed and floating rate borrowings. Whilst fixed rate interest

bearing debt is not exposed to cash flow interest rate risk, there is no opportunity for the Group to enjoy a

reduction in borrowing costs when market rates are falling. Conversely, whilst floating rate borrowings are

not exposed to changes in fair value, the Group is exposed to cash flow risk as costs increase if market rates

rise.

Interest rate risk profile of financial assets

The interest rate profile of the financial assets of the Group was as follows:

FinancialFloating asset

Fixed rate rate on which Averagefinancial financial no interest period

Total asset asset is paid to maturity£000 £000 £000 £000

At 31 December2006

Trade debtors 75 – 75 –

Other debtors 117 – – 117 92 months

Joint venture loan 332 – 332 –

Finance lease receivable 2,612 2,612 – – 26 months

Cash 10,262 – 10,262 –––––––– ––––––– ––––––– –––––––

13,398 2,612 10,669 117

––––––– ––––––– ––––––– –––––––The floating rate financial assets are based on the Group’s bank base rate plus a fixed percentage of 2 per

cent. (2005: 2 per cent.).

The average interest on the fixed rate financial asset is 10.2 per cent. (2005: 11 per cent.).

137

21. Derivates and other financial instruments (continued)

FinancialFloating asset

Fixed rate rate on which Averagefinancial financial no interest period

Total asset asset is paid to maturity£000 £000 £000 £000

At 1 January 2006Trade debtors 156 – 156 –

Other debtors 73 – – 73 84 months

Joint venture loan 436 – 436 –

Finance lease receivable 2,936 2,936 – – 27 months

Cash 5,885 – 5,885 –––––––– ––––––– ––––––– –––––––

9,486 2,936 6,477 73

––––––– ––––––– ––––––– –––––––The fair value of the financial assets is not considered materially different from book value except for the

fixed rate financial asset where the fair value is £2,299,000 (2005: £2,500,000). The fair value has been

determined by discounting the cash flows of the fixed rate financial assets at prevailing market rates.

Interest rate risk profile of financial liabilities

The interest rate profile of the financial liabilities of the Group was as follows:

FinancialFloating asset

Fixed rate rate on whichfinancial financial no interest

Total asset asset is paid£000 £000 £000 £000

At 31 December 2006Bank loan 7,500 – 7,500 –

Other loan 2,299 2,299 – –

Finance leases 45 45 – –

Bank overdraft 6,000 – 6,000 –––––––– ––––––– ––––––– –––––––

15,844 2,344 13,500 –

––––––– ––––––– ––––––– –––––––Financial

Floating assetFixed rate rate on which

financial financial no interestTotal asset asset is paid£000 £000 £000 £000

At 1 January 2005Bank loan 7,500 – 7,500 –

Other loan 2,500 2,500 – –

Finance leases 26 26 – –––––––– ––––––– ––––––– –––––––

10,026 2,526 7,500 –

––––––– ––––––– ––––––– –––––––The average interest on the fixed rate financial liability is 8.2 per cent. (2005: 7.0 per cent.). This is fixed

over a weighted average period of 27 months (2005: 26 months). The bank loan relates to a revolving facility

granted to the EBT for the purpose of acquiring shares in the Company for the benefit of the Company’s

employees. The loan attracts interest at a rate of 0.625 per cent. (2005: 0.625 per cent.) above National

Westminster Bank plc base rate and expires on 11 September 2013. The bank overdraft relates to a facility

granted to a subsidiary of the Company by Barclays Bank plc. Interest is charged at a rate of 1.0 per cent.

above Barclays Bank plc base rate and the facility is repayable upon demand.

138

21. Derivates and other financial instruments (continued)

The maturity profile of the Group’s financial liabilities is set out in notes 17 and 19. The fair value of the

financial liabilities is not considered materially different from book value.

Other loan facilities at 31 December 2006 amounted to £5,000,000 (2005: £5,000,000) in respect of other

loans relating to a limited recourse loan facility. Of the other loan facilities, £5,000,000 expires on 31

December 2007 (2005: £5,000,000 expired on 31 December 2006).

22. Share capital

Authorised AuthorisedAt 31 December At 1 January

2006 2006No. £ No. £

Ordinary shares of 5p 80,000,000 4,000,000 80,000,000 4,000,000

–––––––––– –––––––––– –––––––––– ––––––––––Issued allotted and fully paid Issued allotted and fully paid

At 31 December At 1 January2006 2006

No. £ No. £

At 1 January 2006 52,914,511 2,645,726 54,808,550 2,740,428

Additions in the year 372,548 18,627 720,897 36,045

Share buybacks (1,799,946) (89,997) (2,614,936) (130,747)–––––––––– –––––––––– –––––––––– ––––––––––

At 31 December 2006 51,487,113 2,574,356 52,914,511 2,645,726

–––––––––– –––––––––– –––––––––– ––––––––––During the year 372,548 (2005: 720,897) shares of 5p each with a nominal value of £18,627 (2005: £36,045)

were issued at between 42.1p and 342.5p for total cash consideration received of £403,000 (2005: £472,000)

to satisfy options that were exercised. During December 2006 the Company bought back a total of 1,799,946

(2005: 2,614,936) ordinary shares of 5p each for a total value of £10,161,000 (including costs of £172,000)

(2005: £8,222,000). The price for which these shares were purchased was 555p per share.

As at 31 December 2006, the following share options were outstanding:

Outstanding at Granted Exercised Forfeited Outstanding atExercise 1 January during during during 31 December

Date of grant price 2006 the year the year the year 2006No. No. No. No. No.

Domino’s Pizza(unapproved) Scheme24 November 1999 42.1p 244,299 – (131,001) – 113,298

24 November 1999 50.0p 214,070 – (25,918) (2,000) 186,152

4 August 2000 53.0p 123,100 – (53,300) (2,000) 67,800

25 October 2001 55.0p 127,001 – (34,083) (5,999) 86,919

23 March 2004 206.5p 10,000 – (10,000) – –

15 December 2005 342.5p 768,131 – (9,585) (88,969) 669,577–––––––– –––––––– –––––––– –––––––– ––––––––1,486,601 – (263,887) (98,968) 1,123,746

EMI Scheme23 March 2004 206.5p 377,501 – (108,661) (19,590) 249,250

Sharesave Scheme29 December 2005 242.8p 229,690 – – (36,190) 193,500

–––––––– –––––––– –––––––– –––––––– ––––––––2,093,792 – (372,548) (154,748) 1,566,496

–––––––– –––––––– –––––––– –––––––– ––––––––Weighted average

exercise price 207.0p – 105.5p 226.5p 223.6p

The weighted average remaining contractual life of the options outstanding at 31 December 2006 is 6.3 years

(2005: 7.0 years). The weighted average share price for options exercised during 2006 was 459.0p (2005:

273.0p).

139

22. Share capital (continued)

As at 1 January 2006 the following share options were outstanding:

Outstanding at Granted Exercised Forfeited OutstandingExercise 2 January during during during at 1 January

Date of grant price 2005 the year the year the year 2006No. No. No. No. No.

Domino’s Pizza(unapproved) Scheme24 November 1999 42.1p 555,316 – (300,198) (10,819) 244,299

24 November 1999 50.0p 332,605 – (116,535) (2,000) 214,070

4 August 2000 53.0p 183,601 – (50,700) (9,801) 123,100

25 October 2001 55.0p 242,882 – (88,132) (27,749) 127,001

11 March 2002 74.5p 100,000 – (100,000) – –

23 March 2004 206.5p – 10,000 – – 10,000

15 December 2005 342.5p – 768,131 – – 768,131–––––––– –––––––– –––––––– –––––––– ––––––––

1,414,404 778,131 (655,565) (50,369) 1,486,601

EMI Scheme23 March 2004 206.5p 473,750– – (65,332) (30,917) 377,501

Sharesave Scheme29 December 2005 242.8p – 229,690 – – 229,690

–––––––– –––––––– –––––––– –––––––– ––––––––1,888,154 1,007,821 (720,897) (81,286) 2,093,792

–––––––– –––––––– –––––––– –––––––– ––––––––Weighted average

exercise price: 89.2p 318.4p 65.1p 110.5p 207.0p

The following share options were exercisable at the year end:

Exercisable Exercisableat 31 December at 1 January

2006 2006

Domino’s Pizza(unapproved) Scheme24 November 1999 113,298 244,299

24 November 1999 186,152 214,070

4 August 2000 67,800 123,100

25 October 2001 86,919 127,001

23 March 2004 – 3,333

15 December 2005 157,490 ––––––––– ––––––––

611,659 711,803

Exercisable Exercisableat 31 December at 1 January

2006 2006EMI Scheme23 March 2004 88,917 56,834

–––––––– ––––––––700,576 768,637

–––––––– ––––––––Weighted average exercise price 135.3p 61.1p

On 24 November 1999 participants in the Domino’s Pizza Group Limited (Unapproved) Share Option

Scheme (which had been in place since 31 March 1999) had the option of exchanging options over shares in

Domino’s Pizza Group Limited in return for equivalent options over ordinary shares in the Company under

the Domino’s Pizza Share Option (Unapproved) Scheme.

On 23 March 2004, the Company established the Domino’s Pizza UK & IRL plc Enterprise Management

Incentive Scheme (EMI Scheme). Under the scheme 481,000 options were granted at 206.5p, the market

price on the date of the grant. The options are only exercisable if the growth in the Company’s EPS during

a performance year exceeds the growth in RPI during that performance year by at least 5 per cent. The EMI

options lapse after 10 years or in certain other circumstances connected with leaving the Company.

140

22. Share capital (continued)

In respect of all outstanding options under these schemes, options may be exercised as follows:

One year after date of grant – maximum 1/3 of options held

Two years after date of grant – maximum 2/3 of options held

Three years after date of grant – in full

The options expire 10 years after the date granted.

Domino’s Pizza UK & IRL plc Employee Benefit Trust is established for the benefit of employees. The trust

holds and deals in the Company’s shares under two share incentive schemes. These are the Domino’s Pizza

UK & IRL plc 2003 Enterprise Management Incentive Scheme and the Domino’s Pizza Share Option

(Unapproved) Scheme, under which the Company may grant options over ordinary shares to eligible full

time employees.

In addition the Group has a Sharesave scheme giving employees the option to acquire shares in the Company.

Employees have the option to save an amount per month up to a maximum of £250 and at the end of three

years they have the option to purchase shares in the Company or to take their savings in cash.

The Employee Benefit Trust also operates a long-term incentive plan under which senior executives may be

incentivised by the grant to them of reversionary interests over a portion of the assets of the trust. During the

year further reversionary interests were granted over 1,100,000 shares. At 31 December 2006, the Trust held

2,065,587 shares, which had a historic cost of £4,215,810. These shares had a market value at 31 December

2006 of £12,310,900.

At 31 December 2006 reversionary interests over 2,075,000 shares in Domino’s Pizza UK & IRL plc have

been granted. Further details are contained in the Report on Directors’ Remuneration.

23. Share-based payment plans

The expense recognised for share-based payments in respect of employee services received during the year

to 31 December 2006 is £344,000 (2005: £963,000). This all arises on equity settled share-based payment

transactions.

Long Term Senior Executive Incentive Plan

Reversionary interests over assets held in the Domino’s Pizza UK & IRL plc employee benefit trust are

approved and granted, at the discretion of the trustees, to senior executives. The interests are capable of

vesting within a five year period should certain performance targets be achieved by the Group.

The following table lists the performance criteria attached to the reversionary interests granted and not

vested:

Interestrepresented

Grant price Diluted earnings Net profit by such numberGrant date per interest per share before tax of shares

16 December 2004 200.0p 24.0p £17,000,000 600,000

31 October 2005 295.0p 27.0p £20,000,000 375,000

27 February 2006 416.5p 30.9p £22,300,000 150,000

27 April 2006 485.0p 30.9p £22,300,000 850,000

16 May 2006 470.3p 30.9p £22,300,000 100,000––––––––2,075,000

––––––––The contractual life of each interest is 5 years and all awards are equity settled.

141

The fair value of reversionary interests, which will be equity-settled, is estimated as at the date of granting

using a Black Scholes model, taking into account the terms and conditions upon which they were granted.

The following table lists the inputs to the model used for the valuations in 2005 and 2006:

23. Share-based payment plans (continued)

2006 2005

Dividend yield (%) 3.8 3.3

Expected volatility (%) 17.0 17.0

Historical volatility – 250 day (%) 27.3 28.7

Risk-free interest rate (%) 4.4 – 4.8 4.3

Expected life of reversionary interests (years) 3.9 – 4.1 4.4

Weighted average exercise price (pence) 416.5 – 485.0 295.0

Weighted average share price (pence) 416.5 – 485.0 295.0

The expected life of the reversionary interests is based on historical data and is not necessarily indicative of

exercise patterns that may occur.

The expected volatility reflects the assumption that the historical volatility is indicative of future trends,

which may also not necessarily be the actual outcome. No other features of options were incorporated into

the measurement of fair value, and non-market conditions have not been included in calculating the fair

value.

The weighted average fair value of each reversionary interest granted during the year was 64.0p (2005:

43.0p).

For further details regarding the reversionary interests granted and outstanding, see the Report on Directors’

Remuneration.

Employee Share-option

All other employees are eligible for grants of options, which are approved by the Board.

The options vest over a 3 year period and are exercisable subject to the condition that the growth in basic

earnings per share in any financial year between grant and vesting exceeds the growth in the Retail Price

Index in the previous financial year by at least 5 per cent. (see note 22 for further details).

The contractual life of each option granted is 10 years. There are no cash settlement alternatives and all

awards are equity settled.

The fair value of equity-settled share options granted, for the EMI and Domino’s Pizza (unapproved)

schemes, is estimated as at the date of granting using a Black Scholes model, taking into account the terms

and conditions upon which the options were granted. The following table lists the inputs to the model used

for the valuations for the EMI and Domino’s Pizza (unapproved) schemes in 2005:

2005

Dividend yield (%) 3.75

Expected volatility (%) 17.0

Historical volatility – 250 day (%) 28.1

Risk-free interest rate (%) 4.3

Expected life of options (years) 4.0

Weighted average exercise price (pence) 340.8

Weighted average share price (pence) 340.8

The expected life of the options is based on historical data and is not necessarily indicative of exercise

patterns that may occur.

The expected volatility reflects the assumption that the historical volatility is indicative of future trends,

which may also not necessarily be the actual outcome. No other features of options were incorporated into

142

the measurement of fair value, and non-market conditions have not been included in calculating the fair

value.

There were no options granted in the year. The weighted average fair value of each option granted in 2005

was 44.0p.

23. Share-based payment plans (continued)

Sharesave scheme

During 2005 the Group introduced a Sharesave scheme giving employees the option to acquire shares in the

Company. Employees have the option to save an amount per month up to a maximum of £250 and at the end

of three years they have the option to purchase shares in the Company or to take their savings in cash.

The contractual life of the scheme is 3 years. The fair value of equity-settled options granted, is estimated as

at the date of granting using a Binomial model, taking into account the terms and conditions upon which the

options were granted. The following table lists the inputs to the model used for the valuations for the

Sharesave scheme in 2005:

2005

Dividend yield (%) 3.75

Expected volatility (%) 17.0

Historical volatility – 250 day (%) 28.1

Risk-free interest rate (%) 4.2

Expected life of options (years) 3.3

Weighted average exercise price (pence) 242.8

Weighted average share price (pence) 242.8

The expected life of the options is based on an average of exercise period, which is between 3 – 3.5 years.

The expected volatility reflects the assumption that the historical volatility is indicative of future trends,

which may also not necessarily be the actual outcome. No other features of options were incorporated into

the measurement of fair value, and non-market conditions have not been included in calculating the fair

value.

There were no options granted in the year. The weighted average fair value of each option granted in 2005

was 66.0p.

143

24. Reconciliation of shareholders’ funds and movement on reserves

Group

TreasuryShare Capital Shares Profit & Total

Share Premium Redemption held by Loss Shareholders’Capital Account Reserve EBT Account Funds

£000 £000 £000 £000 £000 £000

At 2 January 2005 2,740 4,241 40 (6,360) 14,186 14,847

Proceeds from share issue 36 436 – – – 472

Share buybacks (131) – 131 – (8,222) (8,222)

Treasury shares held

by EBT – – – (1,140) – (1,140)

Profit for the year – – – – 8,255 8,255

Share option and

LTIP charge – – – – 963 963

Dividends – – – – (3,169) (3,169)––––––– ––––––– ––––––– ––––––– ––––––– –––––––

At 1 January 2006 2,645 4,677 171 (7,500) 12,013 12,006

Proceeds from share issue 19 384 – – – 403

Share buybacks (90) (296) 90 – (10,161) (10,457)

Treasury shares

held by EBT – – – 3,284 (3,284) –

Profit for the year – – – – 10,515 10,515

Exchange difference on

translation of net assets

of subsidiary undertaking – – – – (21) (21)

Share option and

LTIP charge – – – – 344 344

Dividends – – – – (4,234) (4,234)––––––– ––––––– ––––––– ––––––– ––––––– –––––––

At 31 December 2006 2,574 4,765 261 (4,216) 5,172 8,556

––––––– ––––––– ––––––– ––––––– ––––––– –––––––

144

24. Reconciliation of shareholders’ funds and movement on reserves (continued)

Company

Share Share Capital Treasury Profit & TotalCapital Premium Redemption Shares Loss Shareholders’

Account Reserve held by EBT Account Funds£000 £000 £000 £000 £000 £000

At 2 January 2005 2,740 4,241 40 (6,360) 7,891 8,552

Proceeds from share

issue 36 436 – – – 472

Share buybacks (131) – 131 – (8,222) (8,222)

Profit for the year – – – – 12,994 12,994

Share option and

LTIP charge – – – – 963 963

Dividends – – – – (3,169) (3,169)

Treasury shares held

by EBT – – – (1,140) – (1,140)–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

At 1 January 2006 2,645 4,677 171 (7,500) 10,457 10,450

Proceeds from share

issue 19 384 – – – 403

Share buybacks (90) (296) 90 – (10,161) (10,457)

Treasury shares held

by EBT – – – 3,284 (3,284) –

Profit for the year – – – – 13,119 13,119

Share option and

LTIP charge – – – – 154 154

Dividends – – – – (4,234) (4,234)–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

At 31December 2006 2,574 4,765 261 (4,216) 6,051 9,435

–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––During December 2006 the Company bought back a total of 1,799,946 (2005: 2,614,936) ordinary shares of

5p each. The price for which these shares were purchased was 555p per share.

25. Profit and loss account

Profit after taxation amounting to £13,119,000 (2005: £12,994,000) has been dealt with in the accounts of

the Company.

145

26. Notes to the statement of cash flows

(a) Reconciliation of operating profit to net cash inflow from operating activities

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Operating profit after exceptionals (see note 3) 13,618 10,214

Depreciation charge 1,671 1,508

Amortisation charge 161 131

Share option and accelerated LTIP charge (see note 3) 344 963

Decrease in stocks 349 489

Decrease in debtors 82 337

Increase/(Decrease) in creditors 2,764 (968)

–––––––– ––––––––18,989 12,674

–––––––– ––––––––Operating exceptionals

– non cash flow items (see note 3) 247 –

– cash flow items (see note 3) 252 –

–––––––– ––––––––499 –

–––––––– ––––––––(b) Acquisitions and disposals

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Cash receipts on disposal of subsidiary undertakings – net of costs – 3,354

Cash balances disposed of with subsidiary undertakings – (5)

Utilisation of provisions relating to subsidiary undertakings (221) (309)

Purchase of shares previously held by minority shareholders (133) (82)

Receipts from – minority interests in new subsidiary undertakings 30 90

–––––––– ––––––––(324) 3,048

–––––––– ––––––––

146

26. Notes to the statement of cash flows (continued)

(c) Analysis of net debt

At Other At1 January non-cash 31December

2006 Cash flow movements 2006£000 £000 £000 £000

Cash at bank and in hand 5,885 4,377 – 10,262

Bank overdraft – (6,000) – (6,000)–––––––– –––––––– –––––––– ––––––––

5,885 (1,623) – 4,262

EBT loans (7,500) – – (7,500)

Other loans (within one year) (923) 1,445 (1,344) (822)

Other loans (due after one year) (1,577) (1,244) 1,344 (1,477)

Finance leases (26) 12 (31) (45)–––––––– –––––––– –––––––– ––––––––

Net debt (4,141) (1,410) (31) (5,582)

–––––––– –––––––– –––––––– ––––––––(d) Reconciliation of net cash flow to movement in net debt

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Decrease in cash before sale of subsidiary undertakings (1,623) (2,589)

Proceeds from the sale of subsidiary undertakings – 3,650–––––––– ––––––––

(Decrease)/Increase in cash including saleof subsidiary undertakings (1,623) 1,061

Cash outflow from increase in loans (1,244) (2,146)

Repayment of long-term loans 1,445 1,146

Repayments of capital element of finance leases and

hire purchase contracts 12 16

–––––––– ––––––––Change in net debt resulting from cash flows (1,410) 77

Other (31) –

–––––––– ––––––––Movement in net debt (1,441) 77

Net debt at 1 January 2006 (4,141) (4,218)–––––––– ––––––––

Net debt at 31 December 2006 (5,582) (4,141)

–––––––– ––––––––27. Capital commitments

Amounts contracted for but not provided in the accounts amounted to £ nil for the Group and £ nil for the

Company (2005: £nil and £nil respectively).

28. Contingent liabilities

Pursuant to the relevant regulation of the European Communities (Companies: Group Accounts)

Regulations, 1992 the Company has guaranteed the liabilities of the Irish subsidiary, DP Pizza Ltd and as a

result the Irish company has been exempted from the filing provisions section 7, Companies (Amendment)

Act 1986 of the Republic of Ireland.

147

29. Related parties

During the period, the Group traded with International Franchise Systems Inc. and Englewood Consulting

Inc., in the normal course of business and at normal market prices. Colin Halpern is a director of

International Franchise Systems Inc and Englewood Consulting Group Inc.

Transactions between the Group and International Franchise Systems Inc. and Englewood Consulting Group

Inc., are set out below:

52 weeks 52 weeksended ended

31 December 1 January2006 2006£000 £000

Current account:

Costs incurred by Domino’s Pizza Group Limited on behalf of

International Franchise Systems Inc. 331 365

Transfer of funds (from) International Franchise Systems Inc. (91) (125)

Management charges from International Franchise Systems Inc. (430) (240)

Management charges from Englewood Consulting Group Inc. (10) ––––––––– ––––––––

Closing debt due to International Franchise Systems Inc. (200) –

–––––––– ––––––––During the year, the Group traded with DPGS Limited and Triple A Limited, subsidiaries of Dough Trading

Limited. Dough Trading Limited is controlled by Marc Halpern, the son of Colin Halpern.

At the year end there is a balance owing from DPGS Ltd of £44,000 (2005: £65,000), which has arisen

during the course of normal trading. Sales of £2,593,000 (2005: £1,686,000 – June 2005 to December 2005)

have been made to DPGS Ltd at normal market prices during the year.

Transactions between the Group and its joint ventures are set out in note 13.

148

149

PART VII

FINANCIAL INFORMATION ON THE GROUP

SECTION C: GAAP HISTORICAL FINANCIAL INFORMATION RELATING TODOMINO’S PIZZA UK & IRL PLC FOR THE YEAR ENDED 1 JANUARY 2006

Independent auditor’s reportto the members of Domino’s Pizza UK & IRL plc

We have audited the Group and parent Company financial statements (the “financial statements”) of

Domino’s Pizza UK & IRL plc for the 52 weeks ended 1 January 2006, which comprise the Group profit and

loss Account, the Group statement of total recognised gains and losses, the Group and Company balance

sheets, the Group statement of cash flows and the related notes 1 to 29. These financial statements have been

prepared under the accounting policies set out therein.

This report is made solely to the Company's members, as a body, in accordance with Section 235 of the

Companies Act 1985. Our audit work has been undertaken so that we might state to the Company's members

those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest

extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and

the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

The directors are responsible for preparing the Annual Report and the financial statements in accordance

with applicable United Kingdom law and Accounting Standards (United Kingdom Generally Accepted

Accounting Practice) as set out in the statement of directors' responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory

requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly

prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors'

Report is not consistent with the financial statements, if the Company has not kept proper accounting

records, if we have not received all the information and explanations we require for our audit, or if

information specified by law regarding directors' remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report, and consider whether it is consistent with the

audited financial statements. This other information comprises the Directors' Report, the Chairman's

Statement, the Chief Executive’s Statement, Report on Director’s Remuneration and Five Year Financial

Summary. We consider the implications for our report if we become aware of any apparent misstatements or

material inconsistencies with the financial statements. Our responsibilities do not extend to any other

information.

Basis of audit opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by

the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the

amounts and disclosures in the financial statements. It also includes an assessment of the significant

estimates and judgments made by the directors in the preparation of the financial statements, and of whether

the accounting policies are appropriate to the Group’s and Company's circumstances, consistently applied

and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we

considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the

financial statements are free from material misstatement, whether caused by fraud or other irregularity or

error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in

the financial statements.

Opinion

In our opinion the financial statements give a true and fair view, in accordance with United Kingdom

Generally Accepted Accounting Practice, of the state of the Group’s and the parent Company's affairs as at

1 January 2006 and of the Group’s profit for the 52 weeks then ended and the financial statements have been

properly prepared in accordance with the Companies Act 1985.

Ernst & Young LLP

Registered auditorLuton

27 February 2006

150

Group profit and loss accountfor the 52 weeks ended 1 January 2006

2005 2004Notes £000 £000

TurnoverTurnover: group and share of joint ventures’ turnover 85,004 77,254

Less: share of joint ventures’ turnover (3,344) (3,039)–––––––– ––––––––

Group turnover 2 81,660 74,215

Cost of sales (48,778) (43,815)–––––––– ––––––––

Gross profit 32,882 30,400

Distribution costs (8,538) (8,404)

Administrative expenses – pre accelerated LTIP charge (13,504) (12,963)

Accelerated LTIP charge 3 (626) –

–––––––– ––––––––Administrative expenses (14,130) (12,963)

–––––––– ––––––––

Group operating profit 3 10,214 9,033

Share of operating profit in joint ventures 179 120

Amortisation of goodwill on joint ventures (15) (15)

164 105–––––––– ––––––––

Total operating profit: group and share of joint ventures 10,378 9,138

Profit/(loss) on sale of fixed assets 3 206 (47)

Profit on sale of subsidiary undertakings 3 670 ––––––––– ––––––––

Profit on ordinary activities before interest and taxation 11,254 9,091

Interest receivable 6 273 100

Interest payable and similar charges 7 (358) (370)–––––––– ––––––––

Profit on ordinary activities before taxation 11,169 8,821

Tax on profit on ordinary activities 8 (2,922) (2,058)–––––––– ––––––––

Profit on ordinary activities after taxation 8,247 6,763

Minority interests 8 (32)–––––––– ––––––––

Profit for the financial year attributable tomembers of the parent company 8,255 6,731

–––––––– ––––––––Earnings per share – basic 10 16.25p 13.23p

– diluted 10 15.47p 12.67p

151

Group statement of total recognised gains and lossesfor the 52 weeks ended 1 January 2006

2005 2004£000 £000

Profit attributable to the financial period 8,255 6,731–––––––– ––––––––

Total gains and losses recognised since the last annual report 8,255 6,731

–––––––– ––––––––The Company has adopted FRS 21 in 2005 (further details see note 1). This requires dividends, which are

proposed after the balance sheet date to be disclosed and not recognised as a liability. Although this has not

impacted on the recognised gains or losses in 2005 or the prior year, the net assets for the prior year have

increased by £1,531,000.

152

Group balance sheetat 1 January 2006

2005 2004Notes £000 £000

(Restated)

Fixed assetsIntangible assets 11 1,326 1,520

Tangible assets 12 13,593 14,595

Investments in joint ventures: 13

Share of gross assets 1,477 1,449

Share of gross liabilities (1,026) (1,066)–––––––– ––––––––

451 383–––––––– ––––––––

Total fixed assets 15,370 16,498–––––––– ––––––––

Current assetsStocks 14 2,186 2,700

Debtors: 15

amounts falling due within one year 10,753 10,735

amounts falling due after more than one year 2,168 2,721–––––––– ––––––––

12,921 13,456

Cash at bank and in hand 5,885 4,824–––––––– ––––––––

Total current assets 20,992 20,980–––––––– ––––––––

Creditors: amounts falling due within one year 16 (13,742) (13,590)–––––––– ––––––––

Net current assets 7,250 7,390–––––––– ––––––––

Total assets less current liabilities 22,620 23,888–––––––– ––––––––

Creditors: amounts falling due after more than one year 17 (9,085) (8,102)

Provision for liabilities 18 (1,447) (857)–––––––– ––––––––

12,088 14,929

–––––––– ––––––––Capital and reservesCalled up share capital 22 2,645 2,740

Share premium account 24 4,677 4,241

Capital redemption reserve 24 171 40

Treasury shares held by Employee Benefit Trust 24 (7,500) (6,360)

Profit and loss account 24 12,013 14,186–––––––– ––––––––

Equity shareholders’ funds 12,006 14,847

Minority interest 82 82–––––––– ––––––––

12,088 14,929

–––––––– ––––––––Director

153

Company balance sheetat 1 January 2006

2005 2004Notes £000 £000

(Restated)

Fixed assetsInvestments in subsidiary undertakings 13 3,253 2,595

Investment in joint ventures 13 205 205–––––––– ––––––––

3,458 2,800–––––––– ––––––––

Current assetsAmounts owed by group undertakings 15,382 12,118

–––––––– ––––––––15,382 12,118

Creditors: amounts falling due within one year 16 (10) (6)–––––––– ––––––––

Net current assets 15,372 12,112–––––––– ––––––––

Total assets less current liabilities 18,830 14,912–––––––– ––––––––

Creditors: amounts falling due more than one year 17 (7,500) (6,360)

Provision for liabilities 18 (880) ––––––––– ––––––––

10,450 8,552

–––––––– ––––––––Capital and reservesCalled up share capital 22 2,645 2,740

Share premium account 24 4,677 4,241

Capital redemption reserve 24 171 40

Treasury shares held by Employee Benefit Trust 24 (7,500) (6,360)

Profit and loss account 24 10,457 7,891–––––––– ––––––––

Equity shareholders’ funds 10,450 8,552

–––––––– ––––––––Director

27 February 2006

154

Group statement of cash flowsfor the 52 weeks ended 1 January 2006

2005 2004Notes £000 £000

Net cash inflow from operating activities 26(a) 12,674 9,943–––––––– ––––––––

Returns on investments and servicing of financeInterest received 273 100

Interest paid (307) (307)

Interest element of finance lease payments (4) (7)–––––––– ––––––––

(38) (214)–––––––– ––––––––

TaxationCorporation tax paid (1,549) (2,021)

–––––––– ––––––––

Capital expenditure and financial investmentPayments to acquire intangible fixed assets (395) (200)

Payments to acquire tangible fixed assets (2,246) (3,905)

Receipts from sales of tangible and intangible fixed assets 576 421

Receipts from repayment of joint venture loan 60 108

Payments to acquire finance lease assets and advance of

franchisee loans (1,166) (946)

Receipts from repayment of finance leases and franchisee loans 1,172 1,098–––––––– ––––––––

(1,999) (3,424)–––––––– ––––––––

Acquisitions and disposalsSale of subsidiary undertakings – net of costs 3,354 –

Utilisation of provisions relating to the disposal of subsidiary

undertakings (309) –

Cash balances disposed of with subsidiary undertakings (5) –

Purchase of subsidiary undertaking and minority share interest 8 (280)–––––––– ––––––––

26(b) 3,048 (280)–––––––– ––––––––

Equity dividends paid (3,169) (2,240)–––––––– ––––––––

Net cash inflow before financing 8,967 1,764–––––––– ––––––––

FinancingIssue of ordinary share capital 472 1,071

New long-term loans 2,146 3,299

Repayments of long-term loans (1,146) (2,198)

Repayment of capital element of finance leases

and hire purchase contracts (16) (23)

Purchase of shares by Employee Benefit Trust (1,140) (1,200)

Purchase of own shares (8,222) (1,610)–––––––– ––––––––

(7,906) (661)–––––––– ––––––––

Increase in cash 26(d) 1,061 1,103

–––––––– ––––––––

155

Notes to the financial statements at 1 January 2006

1. Accounting Policies

Basis of preparation

The accounts are prepared under the historical cost convention and in accordance with United Kingdom

Generally Accepted Accounting Practice.

Changes in Accounting Policy

The accounting policies adopted are the same as the previous financial year except that the Group has

adopted the following standards which are applicable to the Group:–

FRS 20 - Share based payment

FRS 21 - Events after the balance sheet date

FRS 22 - Earnings per share

FRS 25* - Financial instruments disclosure and presentation

FRS 28 - Corresponding amounts

FRS 20 – Share based payment

The revised accounting policy for share based payment transactions is described below. The effect of the

revised accounting policy has an insignificant impact on the charge in the current year (except for the

accelerated LTIP charge in note 3), and it also has an insignificant impact on retained earnings. This standard

has been adopted in advance of the effective date.

FRS 21 – Events after the balance sheet date

This requires dividends, which are proposed after the balance sheet date to be disclosed and not recognised

as a liability. As a result of adopting this accounting standard, retained earnings have been increased by

£1,083,000 as at 28 December 2003, and increased by £1,531,000 as at 2 January 2005. Liabilities have been

decreased by £1,531,000 as at 2 January 2005. There has been no effect on current or previous year results

from adopting this standard.

FRS 22, FRS 25 and FRS 28 have not resulted in a restatement of retained earnings and have had no impact

on the results or net assets for the current or prior year.

* The Group has only adopted the presentation requirements of this standard, as it does not have to comply with the disclosure

requirements in this year.

Basis of consolidation

The Group accounts consolidate the accounts of Domino’s Pizza UK & IRL plc and all its subsidiary

undertakings drawn up to the nearest Sunday to 31 December each year. No profit and loss account is

presented for Domino’s Pizza UK & IRL plc as permitted by Section 230 of the Companies Act 1985.

Entities in which the Group holds an interest on a long-term basis and are jointly controlled by one or more

ventures under a contractual agreement are treated as joint ventures in the Group accounts. Joint ventures are

accounted for using the gross equity method. The Group accounts include the appropriate share of assets and

liabilities and earnings, based on management accounts for the period to 1 January 2006.

Goodwill

Positive goodwill arising on acquisitions of a subsidiary or business is capitalised, classified as an asset on

the balance sheet and amortised on a straight-line basis over its estimated useful economic life of 20 years.

It is reviewed for impairment at the end of the first full financial year following the acquisition and in other

periods if events or changes in circumstances indicate that the carrying value may not be recoverable.

156

1. Accounting Policies (continued)

If a subsidiary or business is subsequently sold or closed, any goodwill arising on acquisition that has not

been amortised through the profit and loss account is taken into account in determining the profit or loss on

sale or closure.

Goodwill arising on the acquisition of a joint venture is capitalised as part of the investment in the joint

venture and is amortised on a straight-line basis over its estimated useful economic life of 20 years.

Intangible assets

Intangible assets acquired separately from a business are capitalised at cost. Intangible assets acquired as part

of an acquisition of a business are capitalised separately from goodwill if the fair value can be measured

reliably on initial recognition, subject to the constraint that, unless the asset has a readily ascertainable

market value, the fair value is limited to an amount that does not create or increase any negative goodwill

arising on the acquisition. Intangible assets created within the business are not capitalised and expenditure

is charged against profits in the year in which it is incurred.

Intangible assets are amortised on a straight-line basis over their estimated useful lives as follows:

Franchise fees – over 20 years

Interest in leases – over the life of the lease

The carrying value of intangible assets is reviewed for impairment at the end of the first full year following

acquisition and in other periods if events or changes in circumstances indicate the carrying value may not be

recoverable.

Significant property developments

Interest incurred on finance provided for significant property development is capitalised up to the date of

completion of the project. These costs are then depreciated in accordance with the Group’s policy for the

relevant class of tangible fixed assets.

Depreciation

Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost less residual

value of each asset evenly over its expected useful life as follows:

Freehold buildings – over 50 years

Equipment – over 2 to 10 years

Leasehold building improvements – over the life of the lease

Motor vehicles – over 18 months to 3 years

The carrying values of tangible fixed assets are reviewed for impairment in periods if events or changes in

circumstances indicate that the carrying value may not be recoverable.

Stocks

Stocks comprise raw materials, consumables and goods for resale (being equipment for resale to franchisees)

and are stated at the lower of cost and net realisable value. Cost of stock is determined on the average cost

basis or, for computer and food stock, the first-in, first-out basis.

157

1. Accounting Policies (continued)

Deferred taxation

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the

balance sheet date where transactions or events have occurred at that date that will result in an obligation to

pay more, or right to pay less or to receive more, tax, with the following exceptions:

• Provision is made for tax on gains from the revaluation (and similar fair value adjustments) of fixed

assets, or gains on disposal of fixed assets that have been rolled over into replacement assets, only to

the extent that, at the balance sheet date, there is a binding agreement to dispose of the assets

concerned. However, no provision is made where, on the basis of all available evidence at the balance

sheet date, it is more likely than not that the taxable gain will be rolled over into replacement assets

and charged to tax only where the replacement assets are sold.

• Deferred tax assets are recognised only to the extent that the directors consider that it is more likely

than not that there will be suitable taxable profits from which the underlying timing differences can

be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods

in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the

balance sheet date.

Foreign currencies

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the

contracted rate if the transaction is covered by a forward foreign currency contract. Monetary assets and

liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance

sheet date or if appropriate at the forward contract rate. All differences are taken to the profit and loss

account. Non-monetary items that are measured in terms of the historical cost are translated using the

historical exchange rates.

Income and expenses relating to foreign operations are converted at the monthly average rates throughout

the year. The assets and liabilities of foreign operations are translated using the year end rate. Exchange

differences arising on retranslation of foreign operations are recognised in reserves.

Leasing and hire purchase commitments

As lessee

Assets held under finance leases, which are leases where substantially all the risks and rewards of ownership

of the asset have passed to the Group, and hire purchase contracts, are capitalised in the balance sheet and

depreciated over their useful lives. The capital elements of future obligations under leases and hire purchase

contracts are included as liabilities in the balance sheet. The interest elements of the rental obligations are

charged in the profit and loss account over the periods of the leases and hire purchase contracts and represent

a constant proportion of the balance of capital repayments outstanding.

Rentals payable under operating leases are charged in the profit and loss account on a straight-line basis over

the lease term.

As lessor

Amounts receivable under finance leases are included under debtors and represent the total amount

outstanding under lease agreements less unearned income. Finance lease income, having been allocated to

accounting periods to give a constant periodic rate of return on the net cash investment is included in

turnover. Income and expenditure from the rental of leasehold properties and equipment have been included

in the gross income in turnover and the related expenditure within cost of sales.

158

1. Accounting Policies (continued)

Employee Benefit Trusts

The Company has adopted UITF 38 Accounting for ESOP Trusts. Shares in the Company held by the

trustees of the Employee Benefit Trust are stated at cost and included as a deduction to shareholders’ funds.

The trust has waived its entitlement to dividends. The Group will meet the expenses of the trust as and when

they fall due.

Pensions

The Company makes contributions to certain individuals’ personal pension plans. Contributions are charged

in the profit and loss account as they accrue.

Share based payment transactions

Employees (including directors) of the Group receive an element of remuneration in the form of share based

payment transactions, whereby employees render services as consideration for equity instruments.

The awards vest when certain performance and/or service conditions are met, see note 23 for the individual

vesting conditions for the various schemes.

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date

at which they are granted and is recognised as an expense over the vesting period, which ends on the date on

which the relevant employees become fully entitled to the award. Fair value is determined by an external

valuer using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any

vesting conditions, other than conditions linked to the price of the shares of the company (market

conditions).

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is

conditional upon a market condition, which are treated as vesting irrespective of whether or not the market

condition is satisfied, provided that all other performance conditions are satisfied.

At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to

which the vesting period has expired and management’s best estimate of the achievement or otherwise of

non-market conditions number of equity instruments that will ultimately vest or in the case of an instrument

subject to a market condition, be treated as vesting as described above. The movement in cumulative expense

since the previous balance sheet date is recognised in the income statement, with a corresponding entry in

equity.

Where the terms of an equity-settled award are modified or a new award is designated as replacing a

cancelled or settled award, the cost based on the original award terms continues to be recognised over the

original vesting period. In addition, an expense is recognised over the remainder of the new vesting period

for the incremental fair value of any modification, based on the difference between the fair value of the

original award and the fair value of the modified award, both as measured on the date of the modification.

No reduction is recognised if this difference is negative.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and

any cost not yet recognised in the income statement for the award is expensed immediately. Any

compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from

equity, with any excess over fair value being treated as an expense in the income statement.

The Group has taken advantage of the transitional provisions in respect of equity settled awards and has

applied FRS 20 only to awards granted after 7 November 2002 that had not vested at 3 January 2005.

159

1. Accounting Policies (continued)

Revenue recognition

Revenue is recognised as follows:

Pizza delivery – on delivery of pizzas to franchisee customers

Commissary and equipment sales – on delivery

Royalties (based on system sales) – on delivery

Franchise sales – on commencement of franchisee trading

Finance lease interest income – as per leasing and hire purchase commitments (lessor) above

Rental income on leasehold properties – on a straight line basis in accordance with the lease terms

Trade and Other Debtors

Trade debtors, which generally have 7 - 28 days terms are recognised and carried at original invoice amount

less an allowance for any uncollectible amounts when there is objective evidence that the Group will not be

able to collect the debts. Bad debts are written off when identified.

Bank and other loans

All loans and borrowings are initially recognised at the fair value of the consideration received less directly

attributable transaction costs. Interest expenses are recognised in the profit and loss account at a constant rate

based on the carrying amount.

2. Turnover and segmental analysis

The principal components of turnover are royalties received, commissary and equipment sales, sale of

franchises, pizza delivery sales, rental income on leasehold and freehold properties and finance lease interest

income, stated net of value added tax. All of the turnover is in one continuing business segment being the

development of the Domino’s Pizza Franchise System and originates in the United Kingdom and the

Republic of Ireland. The directors believe that full compliance with the requirements of SSAP 25 ‘Segmental

Reporting’ would be seriously prejudicial to the interests of the Group as it would require disclosure of

commercially sensitive information. The requirements of SSAP 25 with which the Group do not comply are

the disclosure of profit before interest and tax and net operating assets by segment. All the turnover of the

Joint Ventures relates to the United Kingdom.

Geographical analysis

Turnover by origin Turnover by destination2005 2004 2005 2004£000 £000 £000 £000

Group turnoverUnited Kingdom

– Royalties and sales to franchisees 69,327 63,495 68,253 62,623

– Rental income on leasehold and

freehold property 6,003 5,162 6,003 5,162

– Finance lease income 280 256 280 256–––––––– –––––––– –––––––– ––––––––

Total United Kingdom 75,610 68,913 74,536 68,041

Republic of Ireland

– Royalties and sales to franchisees 5,688 5,002 6,762 5,874

– Rental income on leasehold and

freehold property 362 300 362 300–––––––– –––––––– –––––––– ––––––––

Total Republic of Ireland 6,050 5,302 7,124 6,174–––––––– –––––––– –––––––– ––––––––

Total Group 81,660 74,215 81,660 74,215

–––––––– –––––––– –––––––– ––––––––

160

3. Operating profit

This is stated after charging/(crediting):

2005 2004£000 £000

Auditors’ remuneration – audit services* 100 94

– non-audit services 51 154

Depreciation of owned assets 1,498 1,329

Depreciation of assets held under finance leases and hire

purchase contracts 10 57

Amortisation of intangible fixed assets 131 133

Operating lease rentals – land and buildings 6,281 5,536

– plant, machinery and vehicles 1,461 1,329

Foreign exchange loss/(gain) 122 (25)

–––––––– ––––––––* Of which £2,000 (2004: £2,000) relates to the Company

Accelerated LTIP charge

During the year the Company has accelerated the charge relating to reversionary interests in ordinary shares

granted in 2003, as the performance targets set will be achieved earlier than expected (further details

included in the Report on Directors’ Remuneration). This resulted in an additional charge of £626,000 during

2005. This charge is not deductible for corporation taxation purposes (see note 8). This charge had no impact

on the cash flow of the Group during the year.

Exceptional item

Recognised below operating profit

During the year the Group sold two subsidiary undertakings, DPGS Limited and Triple A Pizza Limited

(which included 12 corporate stores at the date of the transaction). The main elements of the transaction were

as follows:

£000Cash consideration received 3,650

Net assets disposed of (1,495)

Disposal costs (296)

Provisions (note 18) (1,189)––––––––

Profit on disposal of subsidiary undertakings 670

––––––––These subsidiary undertakings were sold to Dough Trading Limited a company controlled by Marc Halpern

(see related party transactions - note 29). In addition to the sale of DPGS Limited and Triple A Pizza Limited,

the Group sold one corporate store to Dough Trading Limited for a cash consideration of £350,000 resulting

in a profit on sale of £144,000 (see related party transaction - note 29). The principal component of the net

assets disposed of in the subsidiary undertakings was fixed assets of £1,828,000.

Due to the relief available under the substantial shareholding exemption, the profit arising in the Company

on the sale of the subsidiary undertakings is not taxable. The Group accounting profit in respect of the

disposal is £670,000. At the statutory corporation tax rate of 30 per cent., this would lead to an expected

reduction in the tax charge of £210,000 (1.9 per cent.). However, the provisions included within the

accounting profit are expected to be largely allowable for corporation tax purposes. Therefore the profit to

be excluded from corporation tax in respect of the disposal is increased to £1,770,000 (a reduction in the tax

charge of £531,000 at 30 per cent.). This has reduced the effective tax rate for 2005 by 4.7 per cent. (see note

8) (2004: nil).

161

3. Operating profit (continued)

In addition the Group sold one corporate store resulting in a profit of £62,000 (2004: loss £56,000). This

profit has been included in the corporation tax for the period at the statutory rate. In 2004 the Group’s share

of profit realised on the disposal of a joint venture store was £9,000.

4. Directors’ emoluments

2005 2004£000 £000

Emoluments 1,185 966

Pension contributions 156 233–––––––– ––––––––

1,341 1,199

–––––––– ––––––––Further information concerning directors’ emoluments are disclosed within the Report on Directors’

Remuneration.

5. Staff costs

2005 2004£000 £000

(Restated)

Wages and salaries 12,088 10,735

Social security costs 1,008 942

Other pension costs 288 330–––––––– ––––––––

13,384 12,007

–––––––– ––––––––Included in wages and salaries is a total expense of share-based payments of £963,000 (2004: £332,000),

which arises from transactions, accounted for as equity-settled share-based payment transactions.

The average monthly number of employees (including directors) during the year was made up as follows:

2005 2004No. No.

Administration 120 112

Production and distribution 146 133

Corporate stores 408 471–––––––– ––––––––

674 716

–––––––– ––––––––6. Interest receivable

2005 2004£000 £000

Bank interest 177 8

Franchisee loans 83 81

Other interest receivable 13 11–––––––– ––––––––

273 100

–––––––– ––––––––

162

7. Interest payable and similar charges

2005 2004£000 £000

Bank loan in relation to the EBT 305 298

Other interest payable 2 9

Finance charges payable under finance leases and hire purchase contracts 4 7–––––––– ––––––––

311 314

Joint venture interest payable 47 56–––––––– ––––––––

358 370

–––––––– ––––––––8. Tax on profit on ordinary activities

(a) Analysis of tax charge in the year.

The charge based on the profit for the year comprises:

2005 2004£000 £000

UK Corporation tax:

Current year 3,082 2,162

Adjustment in respect of the previous period (213) (345)–––––––– ––––––––

2,869 1,817

Republic of Ireland corporation tax - 12.5% 60 ––––––––– ––––––––

2,929 1,817

Joint venture taxation charge 49 14–––––––– ––––––––

Total corporation tax 2,978 1,831–––––––– ––––––––

UK Deferred tax:

Origination and reversal of timing differences in respect of:

Profit in the period (56) 227–––––––– ––––––––

Total deferred tax (56) 227–––––––– ––––––––

Tax on profit on ordinary activities 2,922 2,058

–––––––– ––––––––(b) Factors affecting tax charge for the period.

2005 2004% %

Corporation tax at the statutory rate 30.0 30.0

Effects of:

Expenses not deductible for tax purposes* 4.1 4.8

Profit on disposal of subsidiary undertakings - not taxable (4.7) –

Accounting depreciation not eligible for tax purposes 1.0 1.6

Goodwill amortised 0.3 0.3

Adjustments relating to prior years corporation tax (1.9) (3.9)

Other timing differences 1.5 –

Decelerated capital allowances 0.1 0.1

Tax rate differences (0.1) –

Share option exercise deduction (3.6) (12.1)–––––––– ––––––––

Total current tax rate 26.7 20.8

–––––––– ––––––––* Includes impact of accelerated LTIP charge (see note 3).

163

8. Tax on profit on ordinary activities (continued)

(c) Deferred taxation - Group

Deferred tax provided in the accounts is as follows:

2005 2004£000 £000

Accelerated capital allowances 725 857

Other timing differences (158) ––––––––– ––––––––

567 857

–––––––– ––––––––£000

Deferred tax provided at 2 January 2005 857

Charge to profit and loss account (56)

Deferred tax released on sale of subsidiary undertakings (234)––––––––

Deferred tax provided at 1 January 2006 567

––––––––(d) Factors that may affect future tax charges

No provision has been made for deferred tax where potentially taxable gains have been rolled over

into replacement assets. Such gains would become taxable only if the assets were sold without it being

possible to claim rollover relief. The amount not provided is £191,000 (2004: £191,000) in respect of

this. At present, it is not envisaged that any tax will become payable in the foreseeable future.

The company is able to receive a tax deduction when new shares are issued to satisfy the exercise of

share options. The timing of the exercise and hence resultant tax deduction is at the discretion of the

option holder.

9. Dividends paid and proposed

2005 2004£000 £000

Declared and paid during the year:

Final dividend for 2004 3.05p (2003: 2.18p) 1,531 1,083

Interim dividend for 2005 3.10p (2004: 2.20p) 1,638 1,157–––––––– ––––––––

3,169 2,240

–––––––– ––––––––2005 2004£000 £000

Proposed for approval at AGM (not recognised as a liabilityas at 1 January 2006 and 2 January 2005)Final dividend for 2005 4.15p (2004: 3.05p) 2,031 1,531

–––––––– ––––––––10. Earnings per ordinary share

The calculation of basic earnings per ordinary share is based on earnings of £8,255,000 (2004: £6,731,000)

and on 50,810,785 (2004: 50,883,095) ordinary shares.

The diluted earnings per share is based on earnings of £8,255,000 (2004: £6,731,000) and on 53,368,778

(2004: 53,108,892) ordinary shares. The difference related to the dilutive effect of share options and the

impact of reversionary interests where the performance conditions have been met.

164

10. Earnings per ordinary share (continued)

Reconciliation of basic and diluted earnings per share

2005 2004No. No.

Ordinary shares - basic earnings per share 50,810,785 50,883,095

Dilutive share options 832,056 2,225,797

Reversionary interests 1,725,937 –––––––––– –––––––––

Ordinary shares - diluted earnings per share 53,368,778 53,108,892

––––––––– –––––––––Reversionary interests have been granted over 3,800,000 shares, which have not yet vested at 1 January 2006.

The dilutive effect of the number of shares which would have vested at the year end based on the share price

at the year end of 347p, have been included in the diluted earnings per share calculation as the performance

conditions have been met (for further details see Report on Directors’ Remuneration).

11. Intangible fixed assets

Group

Franchise InterestGoodwill fees in leases Total

£000 £000 £000 £000

Cost:

At 2 January 2005 812 853 679 2,344

Additions – 50 345 395

Disposals

– subsidiary undertakings (257) (43) (60) (360)

– other (192) (28) (23) (243)–––––––– –––––––– –––––––– ––––––––

At 1 January 2006 363 832 941 2,136–––––––– –––––––– –––––––– ––––––––

Amortisation:

At 2 January 2005 175 487 162 824

Provided during the year 20 45 66 131

Disposals

– subsidiary undertakings (32) (10) (3) (45)

– other (95) (5) – (100)–––––––– –––––––– –––––––– ––––––––

At 1 January 2006 68 517 225 810–––––––– –––––––– –––––––– ––––––––

Net book value:

At 1 January 2006 295 315 716 1,326

–––––––– –––––––– –––––––– ––––––––At 2 January 2005 637 366 517 1,520

–––––––– –––––––– –––––––– ––––––––

165

12. Tangible fixed assets

Group

Freehold land Leasehold Motorand buildings improvements vehicles Equipment Total

£000 £000 £000 £000 £000

Cost:

At 2 January 2005 8,271 1,843 14 9,129 19,257

Additions 6 454 – 1,786 2,246

Disposals

– subsidiary undertakings – (889) (7) (1,050) (1,946)

– other (32) (93) – (217) (342)–––––––– –––––––– –––––––– –––––––– ––––––––

At 1 January 2006 8,245 1,315 7 9,648 19,215–––––––– –––––––– –––––––– –––––––– ––––––––

Depreciation:

At 2 January 2005 523 74 8 4,057 4,662

Provided during the year 125 92 2 1,289 1,508

Disposals

– subsidiary undertakings – (41) (7) (385) (433)

– other – (9) – (106) (115)–––––––– –––––––– –––––––– –––––––– ––––––––

At 1 January 2006 648 116 3 4,855 5,622–––––––– –––––––– –––––––– –––––––– ––––––––

Net book value:

At 1 January 2006 7,597 1,199 4 4,793 13,593

–––––––– –––––––– –––––––– –––––––– ––––––––At 2 January 2005 7,748 1,769 6 5,072 14,595

–––––––– –––––––– –––––––– –––––––– ––––––––The net book value of equipment includes an amount of £26,000 (2004: £168,000) in respect of assets held

under finance leases and hire purchase contracts, the depreciation charge on which was £10,000 (2004:

£57,000).

Included within freehold land and buildings is an amount of £1,690,000 (2004: £1,690,000) in respect of

land which is not depreciated. Also included is an amount of £154,000 (2004: £154,000) of capitalised

interest. No interest was capitalised during the year.

13. Investments

Group

Investments: 2005 2004£000 £000

Joint ventures 451 383

–––––––– ––––––––£000

At 2 January 2005 383

Share of profit retained by joint ventures 68––––––––

At 1 January 2006 451

––––––––Included within the investment in joint ventures is an amount of £202,000 (2004: £217,000) of goodwill

arising on acquisition.

166

13. Investments (continued)

Subsidiary Jointundertakings ventures Total

Company £000 £000 £000

Fixed asset investment

Cost:

At 2 January 2005 2,595 205 2,800

Investments sold:

DPGS Limited (75) – (75)

Investments Acquired:

American Pizza Company Limited* 291 291

DP Peterborough Limited 120 120

DPGL Birmingham Limited 120 120

DP Newcastle & Sunderland Limited 120 120

DP Newcastle Limited** 82 82–––––––– –––––––– ––––––––

At 1 January 2006 3,253 205 3,458

–––––––– –––––––– ––––––––* previously held by subsidiary undertaking

** purchase of minority interest

At 1 January 2006 the Company held directly more than 20 per cent. of the nominal value of the share capital

of the following:

Country ofName of company incorporation Proportion held Nature of business

Directly held subsidiary undertakingsDomino’s Pizza Group Limited England 100% ordinary

DP Realty Limited England 100% ordinary Property management

DP Group Developments Limited England 100% ordinary Property development

DP Capital Limited England 100% ordinary Leasing of equipment

DP Newcastle Limited England 100% ordinary

American Pizza Company Limited England 100% ordinary

DP Peterborough Limited England 80% ordinary

DPGL Birmingham Limited England 80% ordinary

DP Newcastle & Sunderland Limited England 80% ordinary

Joint ventures

Full House Restaurants Limited England 41% ordinary

Dominoid Limited Scotland 50% ordinary

Indirectly held subsidiariesLivebait Limited England 100% ordinary Property management

DP Pizza Limited 100% ordinary Food service businessRepublic of

Ireland

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Management of pizza

delivery stores

Operation and management

of franchise business

167

13. Investments (continued)

On 24 October 1998, a 41 per cent. interest in Full House Restaurants Limited was acquired for £205,000.

Additionally, a loan of £345,000 was advanced to Full House Restaurants Limited, which was repayable by

equal quarterly instalments of £12,000, which commenced on 30 June 2001. Interest at a rate of 2 per cent.

above National Westminster Bank plc base rate was charged on the loan. At 1 January 2006 the balance

outstanding on the loan was £nil (2004: £60,000).

Sales of £1,898,000 (2004: £1,777,000) were made to Full House Restaurants Limited during the year. The

Company received interest of £2,000 (2004: £9,000) in respect of the loan.

At 1 January 2006, there was a receivable of £62,000 (2004: £76,000) from Full House Restaurants Limited,

which has arisen through normal trading activities.

On 11 November 2002, a 50 per cent. interest in Dominoid Limited was acquired. Two stores were sold to

Dominoid Limited and the consideration for the sale was satisfied by the issue of a Loan Note by Dominoid

Limited of £436,000, which is repayable on demand at least one year after date of the agreement. The loan

bears interest at a rate of 2.5 per cent. above Royal Bank of Scotland base rate. At 1 January 2006 the balance

outstanding on the loan was £436,000 (2004: £436,000).

Sales of £1,057,000 (2004: £852,000) were made to Dominoid Limited during the year. The Company

received interest of £31,000 (2004: £31,000) in respect of the loan.

At 1 January 2006 there was a receivable of £19,000 (2004: £36,000) from Dominoid Limited, which has

arisen through normal trading activities.

During the year three new companies were formed, DP Peterborough Ltd, DPGL Birmingham Ltd and DP

Newcastle & Sunderland Ltd. These companies started trading on 26 August 2005. Domino’s Pizza UK &

IRL plc acquired 80 per cent. of the shareholding in each of these companies. These companies are

consolidated within the financial statements of the Group.

DPGS Limited and Triple A Pizza Limited were sold in June 2005 for a cash consideration of £3,650,000

(see related party transactions - note 29).

14. Stocks

Group2005 2004£000 £000

Raw materials and goods for resale 2,186 2,700

–––––––– ––––––––15. Debtors

Group2005 2004£000 £000

Trade debtors 3,668 3,109

Amounts owed by joint ventures 517 496

Other debtors 3,166 4,557

Prepayments and accrued income 2,634 2,354

Net investment in finance leases 2,936 2,940–––––––– ––––––––

12,921 13,456

–––––––– ––––––––

168

15. Debtors (continued)

Amounts falling due after more than one year included above are:

Group2005 2004£000 £000

Trade debtors 156 238

Amounts owed by joint ventures – 436

Other debtors 73 74

Net investment in finance leases 1,939 1,973–––––––– ––––––––

2,168 2,721

–––––––– ––––––––The aggregate rentals receivable in respect of finance leases was £1,456,000 (2004: £1,354,000), and the

interest element of this is included in turnover.

The cost of assets acquired for the purpose of letting under finance leases was £5,227,000 (2004:

£4,948,000).

16. Creditors: amounts falling due within one year

Group Company2004 2004

2005 £000 2005 £000£000 (Restated) £000 (Restated)

Other loans (note 19) 923 916 – –

Finance lease creditors (note 20) 18 24 – –

Trade creditors 3,930 4,318 – –

Corporation tax 2,194 814 – –

Other taxes and social security costs 1,230 1,217 – –

Other creditors 1,388 1,909 – –

Accruals and deferred income 4,059 4,392 10 6–––––––– –––––––– –––––––– ––––––––

13,742 13,590 10 6

–––––––– –––––––– –––––––– ––––––––17. Creditors: amounts falling due after more than one year

Group Company2005 2004 2005 2004£000 £000 £000 £000

Bank loans (note 19) 7,500 6,360 7,500 6,360

Finance lease creditors (note 20) 8 18 – –

Other loans (note 19) 1,577 1,724 – ––––––––– –––––––– –––––––– ––––––––

9,085 8,102 7,500 6,360

–––––––– –––––––– –––––––– ––––––––Bank loans

The Group has entered into an agreement to obtain bank loans and mortgage facilities. These are secured by

a fixed and floating charge over the Group’s assets and an unlimited guarantee provided by the Company. At

1 January 2006 the balance due under these facilities was £7,500,000 all of which is in relation to the EBT

(2004: £6,360,000). The loans bear interest at 0.625 per cent. (2004: 0.625 per cent.) above National

Westminster Bank plc base rate.

Other loans

The remaining loans are repayable in equal instalments over a period of up to five years, these are unsecured.

The average interest on the loans is 7.0 per cent. (2004: 7.1 per cent.).

169

18. Provisions for liabilities

Group Company2005 2004 2005 2004£000 £000 £000 £000

Deferred tax (see note 8) 567 857 – –

Legal provisions 148 – 148 –

Property provisions 732 – 732 ––––––––– –––––––– –––––––– ––––––––

1,447 857 880 –

–––––––– –––––––– –––––––– ––––––––At 2 January Arising Utilised At 1 January

2005 in the year in the year 2006£000 £000 £000 £000

Deferred tax 857 – (290) 567

Legal provisions – 284 (136) 148

Property provisions – 905 (173) 732–––––––– –––––––– –––––––– ––––––––

Total provisions 857 1,189 (599) 1,447

–––––––– –––––––– –––––––– ––––––––The legal provisions relate to fees charged in relation to the disposal of subsidiary undertakings as well as

outstanding litigation matters arising on the sale of stores. The outcome of the litigation is at present

uncertain, and a final decision is not imminently expected. No estimate of the likely outcome of the litigation

can yet be made by the directors, but full provision for the potential costs likely to be incurred has been made.

The property provisions relate to outstanding rent reviews, rates, service charges and dilapidation costs for

stores sold as part of the sale of subsidiary undertakings during the year (see note 29). The completion of the

outstanding rent and rates reviews vary depending on the lease and on average are resolved within 1 - 3 years

following the review dates stipulated in the leases. The dilapidation costs are determined at the end of the

lease.

19. Loans

Group Company2005 2004 2005 2004£000 £000 £000 £000

Amounts falling due:

In one year or less or on demand 923 916 – –

Due between one and two years 717 775 – –

In more than two years but not more

than five years 8,360 7,309 7,500 6,360–––––––– –––––––– –––––––– ––––––––

10,000 9,000 7,500 6,360

–––––––– –––––––– –––––––– ––––––––20. Obligations under leases and hire purchase contracts

Amounts due under finance leases and hire purchase contracts:

2005 2004Group £000 £000

Amount payable:

Within one year 16 32

In two to five years 15 20–––––––– ––––––––

31 52

Less: finance charges allocated to future periods (5) (10)–––––––– ––––––––

26 42

–––––––– ––––––––

170

20. Obligations under leases and hire purchase contracts (continued)

Annual commitments under non-cancellable operating leases are as follows:

Land and buildings Other2005 2004 2005 2004£000 £000 £000 £000

Operating leases that expire:

Within one year 100 84 60 155

In two to five years 651 550 1,005 1,007

In over five years 6,068 5,205 209 ––––––––– –––––––– –––––––– ––––––––

6,819 5,839 1,274 1,162

–––––––– –––––––– –––––––– ––––––––21. Derivatives and other financial instruments

The Group’s financial risk management objectives consist of identifying and monitoring those risks which

have an adverse impact on the value of the Group’s financial assets and liabilities or on reported profitability

and on the cash flows of the Group.

The Group’s principal financial instruments are bank loans, other loans, finance leases and cash.

The financial instruments are principally in place to finance the head office facility and associated

equipment, provide finance to franchisees and to provide finance for the EBT loan. The Group has other

financial instruments such as trade debtors and trade creditors that arise directly from its operations. As

permitted by FRS 13 short-term debtors and creditors have been excluded from the disclosure of financial

liabilities and assets.

The Group has not entered into any derivative transactions such as interest rate swaps or financial foreign

currency contracts. The main risks arising from the Group’s financial instruments are set out below. In view

of the low level of foreign currency transactions the Board does not consider there to be any significant

foreign currency risks.

Credit Risk

Due to the nature of customers who trade on credit terms, being predominantly franchisees, the franchisee

selection process is sufficiently robust to ensure an appropriate credit verification procedure. In addition,

trade debtors balances are monitored on an ongoing basis with the result that the Group’s exposure to bad

debts is not significant. Since the Group trades only with franchisees that have been subject to the franchisee

selection process and provide personal guarantees as required under he franchise agreements, there is no

requirement for collateral.

Price risk

The Board considers that the Group’s exposure to changing market prices on the values of financial

instruments does not have a significant impact on the carrying value of financial assets and liabilities. As

such no specific policies are applied currently, although the Board will continue to monitor the level of price

risk and manage its exposure should the need occur.

Liquidity risk

The Group aims to mitigate liquidity risk by managing cash generation by its operations with cash collection

targets set throughout the Group. All major investment decisions are considered by the Board as part of the

project appraisal process. In this way the Group aims to maintain a good credit rating to facilitate fund

raising.

171

21. Derivatives and other financial instruments (continued)

Interest rate risk

The Board has a policy of ensuring a mix of fixed and floating rate borrowings. Whilst fixed rate interest

bearing debt is not exposed to cash flow interest rate risk, there is no opportunity for the Group to enjoy a

reduction in borrowing costs when market rates are falling. Conversely, whilst floating rate borrowings are

not exposed to changes in fair value, the Group is exposed to cash flow risk as costs increase if market rates

rise.

Interest rate risk profile of financial assets

The interest rate profile of the financial assets of the Group as at 1 January was as follows:

FinancialFloating asset

Fixed rate rate on which Averagefinancial financial no interest period

Total asset asset is paid to maturity2005 £000 £000 £000 £000

Trade debtors 156 – 156 –

Other debtors 73 – – 73 84 months

Joint venture loan 436 – 436 –

Finance lease receivable 2,936 2,936 – – 27 months

Cash 5,885 – 5,885 ––––––––– –––––––– –––––––– ––––––––

9,486 2,936 6,477 73

–––––––– –––––––– –––––––– ––––––––The floating rate financial assets are based on the Group’s bank base rate plus a fixed percentage of 2 per

cent. (2004: 2 per cent.).

The average interest on the fixed rate financial asset is 11 per cent. (2004: 11 per cent.).

FinancialFloating asset

Fixed rate rate on which Averagefinancial financial no interest period

Total asset asset is paid to maturity2004 £000 £000 £000 £000

Trade debtors 238 – 238 –

Other debtors 73 – – 73 85 months

Joint venture loan 496 – 496 –

Finance lease receivable 2,940 2,940 – – 28 months

Cash 4,824 – 4,824 ––––––––– –––––––– –––––––– ––––––––

8,571 2,940 5,558 73

–––––––– –––––––– –––––––– ––––––––The fair value of the financial assets is not considered materially different from book value except for the

fixed rate financial asset where the fair value is £2,500,000 (2004: £2,640,000). The fair value has been

determined by discounting the cash flows of the fixed rate financial assets at prevailing market rates.

172

21. Derivatives and other financial instruments (continued)

Interest rate risk profile of financial liabilities

The interest rate profile of the financial liabilities of the Group as at 1 January was as follows:

FinancialFloating liability

Fixed rate rate on whichfinancial financial no interest

Total liability liability is paid2005 £000 £000 £000 £000

Bank loan 7,500 – 7,500 –

Other loan 2,500 2,500 – –

Finance leases 26 26 – –

Provisions 1,447 – – 1,447–––––––– –––––––– –––––––– ––––––––

11,473 2,526 7,500 1,447

–––––––– –––––––– –––––––– ––––––––Financial

Floating liabilityFixed rate rate on which

financial financial no interestTotal liability liability is paid£000 £000 £000 £000

2004 (Restated) (Restated)

Bank loan 6,360 – 6,360 –

Other loan 2,640 2,640 – –

Finance leases 42 42 – –

Provisions 857 – – 857–––––––– –––––––– –––––––– ––––––––

9,899 2,682 6,360 857

–––––––– –––––––– –––––––– ––––––––The average interest on the fixed rate financial liability is 7.0 per cent. (2004: 7.1 per cent.). This is fixed

over a weighted average period of 26 months (2004: 29 months). The bank loan relates to a revolving facility

granted to the EBT for the purpose of acquiring shares in the Company for the benefit of the Company’s

employees. The loan attracts interest at a rate of 0.625 per cent. (2004: 0.625 per cent.) above National

Westminster Bank plc base rate and expires on 11 September 2013.

The maturity profile of the Group’s financial liabilities is set out in notes 17 and 19.The fair value of the

financial liabilities is not considered materially different from book value.

Other loan facilities at 1 January 2006 amounted to £5,000,000 (2004: £4,500,000) in respect of other loans

relating to a limited recourse loan facility. Of the other loan facilities, £5,000,000 expires on 31 December

2006 (2004: £3,000,000 expired on 05 March 2005 and £1,500,000 expired on 30 November 2005).

22. Share capital

AuthorisedNumber £

At 2 January 2005 & 28 December 2003 80,000,000 4,000,000

Additions in the year – ––––––––––– ––––––––––

At 1 January 2006 & 2 January 2005 80,000,000 4,000,000

–––––––––– ––––––––––

173

22. Share capital (continued)

Issued allotted and fully paid2005 2004

Number £ Number £

At 2 January 2005 54,808,550 2,740,428 53,199,008 2,659,967

Additions in the year 720,897 36,045 2,409,542 120,461

Share buybacks (2,614,936) (130,747) (800,000) (40,000)–––––––––– –––––––––– –––––––––– ––––––––––

At 1 January 2006 52,914,511 2,645,726 54,808,550 2,740,428

–––––––––– –––––––––– –––––––––– ––––––––––During the year 720,897 (2004: 2,409,542) shares of 5p each with a nominal value of £36,045 (2004:

£120,461) were issued at between 42.1p and 206.5p for total cash consideration received of £472,000 (2004:

£1,071,000) to satisfy options that were exercised. During the period May 2005 to December 2005 the

Company bought back a total of 2,614,936 (2004: 800,000) ordinary shares of 5p each for a total value of

£8,222,000 (including costs of £138,000) (2004: £1,610,000). The price for which these shares were

purchased ranged between 270.5p and 316p per share.

As at 1 January 2006, the following share options were outstanding:

Outstanding at Granted Exercised Forfeited Outstanding

Exercise 2 January during during during at 1 January

Date of grant price 2005 the year the year the year 2006

£

Domino’s Pizza

(unapproved) Scheme

24 November 1999 42.1p 555,316 – (300,198) (10,819) 244,299

24 November 1999 50.0p 332,605 – (116,535) (2,000) 214,070

4 August 2000 53.0p 183,601 – (50,700) (9,801) 123,100

25 October 2001 55.0p 242,882 – (88,132) (27,749) 127,001

11 March 2002 74.5p 100,000 – (100,000) – –

23 March 2004 206.5p – 10,000 – – 10,000

15 December 2005 342.5p – 768,131 – – 768,131–––––––– –––––––– –––––––– –––––––– ––––––––

1,414,404 778,131 (655,565) (50,369) 1,486,601

EMI Scheme

23 March 2004 206.5p 473,750 – (65,332) (30,917) 377,501

Sharesave Scheme

29 December 2005 242.8p – 229,690 – – 229,690–––––––– –––––––– –––––––– –––––––– ––––––––

1,888,154 1,007,821 (720,897) (81,286) 2,093,792

–––––––– –––––––– –––––––– –––––––– ––––––––Weighted average

exercise price 89.2p 318.4p 65.1p 110.5p 207.0p

The weighted average remaining contractual life of the options outstanding at 1 January 2006 is 7.0 years

(2004: 6.4 years). The weighted average share price for options exercised during 2005 was 273p (2004:

199p).

174

22. Share capital (continued)

As at 2 January 2005 the following share options were outstanding:

Outstanding at Granted Exercised Forfeited Outstanding

Exercise 2 January during during during at 1 January

Date of grant price 2005 the year the year the year 2006

£

Domino’s Pizza

(unapproved) Scheme

24 November 1999 42.1p 1,943,786 – (1,388,470) – 555,316

24 November 1999 50.0p 746,240 – (407,905) (5,730) 332,605

4 August 2000 53.0p 344,867 – (161,266) – 183,601

1 January 2001 33.5p 278,794 – (278,794) – –

25 October 2001 55.0p 365,758 – (115,209) (7,667) 242,882

11 March 2002 74.5p 100,000 – – – 100,000

2 April 2002 76.0p 75,000 – (50,000) (25,000) ––––––––– –––––––– –––––––– –––––––– ––––––––

3,854,445 – (2,401,644) (38,397) 1,414,404

EMI Scheme

23 March 2004 206.5p – 481,000 – (7,250) 473,750–––––––– –––––––– –––––––– –––––––– ––––––––

3,854,445 481,000 (2,401,644) (45,647) 1,888,154

–––––––– –––––––– –––––––– –––––––– ––––––––Weighted average

exercise price 46.7p 206.5p 44.5p 89.9p 89.2p

The following share options were exercisable at the year end:

Exercisable ExercisableDomino’s Pizza at 1 January at 2 January(unapproved) Scheme 2006 2005

24 November 1999 244,299 555,316

24 November 1999 214,070 332,605

4 August 2000 123,100 183,601

25 October 2001 127,001 242,882

11 March 2002 – 66,667

23 March 2004 3,333 –––––––––– –––––––––

711,803 1,381,071

Exercisable Exercisableat 1 January at 2 January

2006 2005

EMI Scheme23 March 2004 56,834 –

––––––––– –––––––––768,637 1,381,071

––––––––– –––––––––Weighted average exercise price 61.1p 49.3p

On 24 November 1999 participants in the Domino’s Pizza Group Limited (Unapproved) Share Option

Scheme (which had been in place since 31 March 1999) had the option of exchanging options over shares in

Domino’s Pizza Group Limited in return for equivalent options over ordinary shares in the Company under

the Domino’s Pizza Share Option (Unapproved) Scheme.

175

22. Share capital (continued)

On 23 March 2004, the Company established the Domino’s Pizza UK & IRL plc Enterprise Management

Incentive Scheme (EMI Scheme). Under the scheme 481,000 options were granted at 206.5p, the market

price on the date of the grant. The options are only exercisable if the growth in the Company’s EPS during

a performance year exceeds the growth in RPI during that performance year by at least 5 per cent. The EMI

options lapse after 10 years or in certain other circumstances connected with leaving the Company.

In respect of all outstanding options under these schemes, options may be exercised as follows:

One year after date of grant - maximum 1/3 of options held

Two years after date of grant - maximum 2/3 of options held

Three years after date of grant - in full

The options expire 10 years after the date granted.

In 2003 the Domino’s Pizza UK & IRL plc Employee Benefit Trust was established for the benefit of

employees. The trust was established to hold and deal in the Company’s shares under two new share

incentive schemes. These are the Domino’s Pizza UK & IRL plc 2003 Enterprise Management Incentive

Scheme, under which the Company may grant options over ordinary shares to eligible full time employees.

During the year the Group introduced a Sharesave scheme giving employees the option to acquire shares in

the Company. Employees have the option to save an amount per month up to a maximum of £250 and at the

end of three years they have the option to purchase shares in the Company or to take their savings in cash.

The Employee Benefit Trust also operates a long-term incentive plan under which senior executives may be

incentivised by the grant to them of reversionary interests over a portion of the assets of the trust. During the

year further reversionary interests were granted over 375,000 shares. At 1 January 2006, the Trust held

3,974,921 shares, which had a historic cost of £7,499,864. These shares had a market value at 1 January 2006

of £13,792,976.

At 1 January 2006 reversionary interests over 3,800,000 shares in Domino’s Pizza UK & IRL plc have been

granted. Further details are contained in the Report on Directors’ Remuneration.

23. Share-based payment plans

Long Term Senior Executive Incentive Plan

Reversionary interests over assets held in the Domino’s Pizza UK & IRL plc employee benefit trust are

approved and granted, at the discretion of the Board, to senior executives. The interests vest within a five

year period when certain performance targets have been achieved by the Group.

For the interests granted in 2003 to vest, the diluted earnings per share must have reached 14p per share, the

profit before tax must be greater than £11,000,000 and the 2005 financial statements must have been

approved by the Board. The interests granted in 2004 vest when the diluted earnings per share reaches 24p

and the profit before tax exceeds £17,000,000. The interests granted in 2005 vest when the diluted earnings

per share reach 27p and the profit before tax is more than £20,000,000.

The contractual life of each interest is 5 years and all awards are equity settled.

The fair value of reversionary interests, which will be equity-settled, is estimated as at the date of granting

using a Black Scholes model, taking into account the terms and conditions upon which they were granted.

The following table lists the inputs to the model used for the valuations in 2004 and 2005:

2005 2004

Dividend yield (%) 3.3 3.3

Expected volatility (%) 17.0 20.0

Historical volatility – 250 day (%) 28.7 28.8

Risk-free interest rate (%) 4.3 4.5

Expected life of reversionary interests (years) 4.4 5.3

Weighted average exercise price (pence) 295.0 200.0

Weighted average share price (pence) 295.0 200.0

176

23. Share-based payment plans (continued)

The expected life of the reversionary interests is based on historical data and is not necessarily indicative of

exercise patterns that may occur.

The expected volatility reflects the assumption that the historical volatility is indicative of future trends,

which may also not necessarily be the actual outcome. No other features of options were incorporated into

the measurement of fair value, and non-market conditions have not been included in calculating the fair

value.

Employee Share-option

All other employees are eligible for grants of options, which are approved by the Board.

The options vest over a 3 year period and are exercisable subject to the condition that the growth in basic

earnings per share in any financial year between grant and vesting exceeds the growth in the Retail Price

Index in the previous financial year by at least 5 per cent. (see note 22 for further details).

The contractual life of each option granted is 10 years. There are no cash settlement alternatives and all

awards are equity settled.

The fair value of equity-settled share options granted, for the EMI and Domino’s Pizza (unapproved)

schemes, is estimated as at the date of granting using a Binomial model, taking into account the terms and

conditions upon which the options were granted. The following table lists the inputs to the model used for

the valuations for the EMI and Domino’s Pizza (unapproved) schemes in 2004 and 2005:

2005 2004

Dividend yield (%) 3.3 2.9

Expected volatility (%) 19.0 23.0

Historical volatility – 250 day (%) 28.1 27.7

Risk-free interest rate (%) 4.3 4.6

Expected life of options (years) 3.5 7.0

Weighted average exercise price (pence) 340.8 206.5

Weighted average share price (pence) 340.8 206.5

The expected life of the options is based on historical data and is not necessarily indicative of exercise

patterns that may occur.

The expected volatility reflects the assumption that the historical volatility is indicative of future trends,

which may also not necessarily be the actual outcome. No other features of options were incorporated into

the measurement of fair value, and non-market conditions have not been included in calculating the fair

value.

Sharesave scheme

During the year the Group introduced a Sharesave scheme giving employees the option to acquire shares in

the Company. Employees have the option to save an amount per month up to a maximum of £250 and at the

end of three years they have the option to purchase shares in the Company or to take their savings in cash.

The contractual life of the scheme is 3 years. The fair value of equity-settled options granted, is estimated as

at the date of granting using a Black Scholes model, taking into account the terms and conditions upon which

the options were granted. The following table lists the inputs to the model used for the valuations for the

Sharesave scheme in 2005:

2005

Dividend yield (%) 3.0

Expected volatility (%) 23.0

Historical volatility – 250 day (%) 28.1

Risk-free interest rate (%) 4.2

Expected life of options (years) 3.3

Weighted average exercise price (pence) 242.8

Weighted average share price (pence) 242.8

177

23. Share-based payment plans (continued)

The expected life of the options is based on an average of exercise period, which is between 3 – 3.5 years.

The expected volatility reflects the assumption that the historical volatility is indicative of future trends,

which may also not necessarily be the actual outcome. No other features of options were incorporated into

the measurement of fair value, and non-market conditions have not been included in calculating the fair

value.

24. Reconciliation of shareholders’ funds and movement on reserves

Group

TreasuryShare Capital Shares Profit & Total

Share Premium Redemption held by Loss Shareholders’Capital Account Reserve EBT Account Funds

£000 £000 £000 £000 £000 £000

At 28 December

2003 – previously

reported 2,660 3,290 – (5,160) 9,890 10,680

2003 Final

Dividend – prior

year adjustment – – – – 1,083 1,083–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

At 28 December

2003 – restated 2,660 3,290 – (5,160) 10,973 11,763

Proceeds from

share issue 120 951 – – – 1,071

Share buybacks (40) – 40 – (1,610) (1,610)

Treasury shares

held by EBT – – – (1,200) – (1,200)

Profit for the year – – – – 6,731 6,731

Share option and

LTIP charge – – – – 332 332

Dividends – – – – (2,240) (2,240)–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

At 2 January 2005 2,740 4,241 40 (6,360) 14,186 14,847

Proceeds from

share issue 36 436 – – – 472

Share buybacks (131) – 131 – (8,222) (8,222)

Treasury shares

held by EBT – – – (1,140) – (1,140)

Profit for the year – – – – 8,255 8,255

Share option and

LTIP charge – – – – 963 963

Dividends – – – – (3,169) (3,169)–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

At 1 January 2006 2,645 4,677 171 (7,500) 12,013 12,006

–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

178

24. Reconciliation of shareholders’ funds and movement on reserves (continued)

Company

TreasuryShare Capital Shares Profit & Total

Share Premium Redemption held by Loss Shareholders’Capital Account Reserve EBT Account Funds

£000 £000 £000 £000 £000 £000

At 28 December

2003 - previously

reported 2,660 3,290 – (5,160) 5,160 5,950

2003 Final

Dividend - prior

year adjustment – – – – 1,083 1,083–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

At 28 December

2003 - restated 2,660 3,290 – (5,160) 6,243 7,033

Proceeds from

share issue 120 951 – – – 1,071

Share buybacks (40) – 40 – (1,610) (1,610)

Profit for the year – – – – 5,166 5,166

Share option and

LTIP charge – – – – 332 332

Dividends – – – – (2,240) (2,240)

Treasury shares

held by EBT – – – (1,200) – (1,200)–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

At 2 January 2005 2,740 4,241 40 (6,360) 7,891 8,552

Proceeds from

share issue 36 436 – – – 472

Share buybacks (131) – 131 – (8,222) (8,222)

Profit for the year – – – – 12,994 12,994

Share Option and

LTIP Charge – – – – 963 963

Dividends – – – – (3,169) (3,169)

Treasury shares

held by EBT – – – (1,140) – (1,140)–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––

At 1 January 2006 2,645 4,677 171 (7,500) 10,457 10,450

–––––––– –––––––– –––––––– –––––––– –––––––– ––––––––During the period May 2005 to December 2005 the Company bought back a total of 2,614,936 (2004:

800,000) ordinary shares of 5p each. The price for which these shares were purchased ranged between

270.5p and 316p per share.

25. Profit and Loss Account

Profit after taxation amounting to £12,994,000 (2004: £5,166,000) has been dealt with in the accounts of the

Company.

179

26. Notes to the statement of cash flows

(a) Reconciliation of operating profit to net cash inflow from operating activities

2005 2004£000 £000

Operating profit 10,214 9,033

Depreciation charge 1,508 1,386

Amortisation charge 131 133

Share option and accelerated LTIP charge 963 333

Decrease/(increase) in stocks 489 (857)

Decrease/(increase) in debtors 337 (1,505)

(Decrease)/increase in creditors (968) 1,420–––––––– ––––––––

12,674 9,943

–––––––– ––––––––(b) Acquisitions and disposals

2005 2004£’000 £’000

Cash receipts on disposal of subsidiary undertakings - net of costs 3,354 –

Cash balances disposed of with subsidiary undertakings (5) –

Utilisation of provisions relating to subsidiary undertakings (309) –

Purchase of shares previously held by minority shareholders (82) (280)

Receipts from - minority interests in new subsidiary undertakings 90 ––––––––– ––––––––

3,048 (280)

–––––––– ––––––––(c) Analysis of net debt

At Other At2 January non-cash 1 January

2005 Cash flow movements 2006£000 £000 £000 £000

Cash at bank and in hand 4,824 (2,589) – 2,235

Cash receipts on disposal of subsidiary

undertakings – 3,650 – 3,650

–––––––– –––––––– –––––––– ––––––––

Cash at bank and in hand 4,824 1,061 – 5,885

EBT Loans (6,360) (1,140) – (7,500)

Other loans (within one year) (916) 1,146 (1,153) (923)

Other loans (due after one year) (1,724) (1006) 1,153 (1,577)

Finance leases (42) 16 – (26)

–––––––– –––––––– –––––––– ––––––––

Net debt (4,218) 77 – (4,141)

–––––––– –––––––– –––––––– ––––––––

180

26. Notes to the statement of cash flows (continued)

(d) Reconciliation of net cash flow to movement in net debt

2005 2004£000 £000

(Decrease)/increase in cash before sale of subsidiary undertakings (2,589) 1,103

Proceeds from the sale of subsidiary undertakings 3,650 ––––––––– ––––––––

Increase in cash including sale of subsidiary undertakings 1,061 1,103

Cash outflow from increase in loans (2,146) (3,278)

Repayment of long-term loans 1,146 2,177

Repayments of capital element of finance leases and hire purchase

contracts 16 23–––––––– ––––––––

Movement in net debt 77 25

Net debt at 2 January 2005 (4,218) (4,243)–––––––– ––––––––

Net debt at 1 January 2006 (4,141) (4,218)

–––––––– ––––––––27. Capital commitments

Amounts contracted for but not provided in the accounts amounted to £ nil for the Group and £ nil for the

Company (2004: £nil and £nil respectively).

28. Contingent liabilities

Additional consideration up to a maximum of £500,000 in cash, may become payable for the acquisition of

American Pizza Company Limited, dependent upon certain conditions being met. Due to the remote

probability of these conditions being met, the directors consider a provision of these amounts to be

inappropriate.

Pursuant to the relevant regulation of the European Communities (Companies: Group Accounts)

Regulations, 1992 the Company has guaranteed the liabilities of the Irish subsidiary, DP Pizza Ltd and as a

result the Irish company has been exempted from the filing provisions section 7, Companies (Amendment)

Act 1986 of the Republic of Ireland.

29. Related parties

During the period, the Group traded with International Franchise Systems Inc., in the normal course of

business and at normal market prices. Colin Halpern is a director of International Franchise Systems Inc.

Transactions between the Group and International Franchise Systems Inc, are set out below:

2005 2004£000 £000

Current account:

Costs incurred by Domino’s Pizza Group Limited on behalf of

International Franchise Systems Inc. 365 424

Costs incurred by International Franchise Systems Inc., on behalf of

Domino’s Pizza Group Limited – (8)

Transfer of funds (from)/to International Franchise Systems Inc. (125) 16

Management charges from International Franchise Systems Inc. (240) (432)–––––––– ––––––––

Closing debt due to International Franchise Systems Inc. – –

–––––––– ––––––––

181

182

29. Related parties (continued)

In June 2005 the Company sold its subsidiary undertakings, DPGS Limited and Triple A Pizza Limited for

a cash consideration of £3,650,000 to Dough Trading Limited. Dough Trading Limited is controlled by Marc

Halpern, the son of Colin Halpern. HS Real Company is guaranteeing part of the debt funding that Dough

Trading Limited has used for the acquisition. HS Real Company is owned by a discretionary trust, the

beneficiaries of which are the adult children of Colin and Gail Halpern. By virtue of Colin Halpern’s position

in the Company and his relationship with HS Real Company, he took no part in the voting at the Company’s

board meeting on the approval of the transaction.

The consideration for the sale of the companies was calculated taking into account market rates and the full

consideration was received prior to the year end. A further corporate store was sold for a cash consideration

of £350,000 to Dough Trading Limited during the year. The transactions resulted in a profit on sale of

£814,000 in total (see note 3).

At the year end there is a balance owing from DPGS Ltd of £65,000, which has arisen during the course of

normal trading. Since June 2005 sales of £1,686,000 have been made to DPGS Ltd at normal market prices.

Transactions between the Group and its joint ventures are set out in note 13.

PART VIII

ADDITIONAL INFORMATION

1. RESPONSIBILITY

1.1 The Company and its Directors (whose names, business addresses and functions are set out at Part III

of this document) accept responsibility for the information contained in this document. To the best of

the knowledge of the Company and the Directors (who have taken all reasonable care to ensure that

such is the case), the information contained in this document is in accordance with the facts and

contains no omission likely to affect its import.

1.2 Ernst & Young LLP whose registered address is at One More London Place, London SE1 2AF, accepts

responsibility for its letter set out in Part VII of this document. To the best of the knowledge of Ernst

& Young LLP (who have taken all reasonable care to ensure that such is the case) the information

contained therein is in accordance with the facts and contains no omissions likely to affect its import.

2. THE COMPANY

2.1 The Company was incorporated and registered in England and Wales on 5 October 1999 as a public

limited company under the 1985 Act with the registered number 03853545 and the name

Doublemeasure plc. The Company changed its name to Domino’s Pizza Plc on 15 October 1999 and

to Domino’s Pizza UK & IRL plc on 1 November 1999. The Company was issued with a certificate

under section 117 of the 1985 Act entitling it to do business on 15 November 1999.

2.2 The registered office of the Company and the Company’s principal place of business is at

Domino’s House, Lasborough Road, Kingston, Milton Keynes MK10 0AB (telephone number

+44 1908 580000). The registrars of the Company are Capita.

2.3 The principal legislation under which the Company operates is the Companies Acts.

2.4 The entire issued share capital of the Company was admitted to trading on AIM on 24 November

1999.

3. SHARE CAPITAL

3.1 The following table shows the authorised and issued share capital of the Company as at 13 May 2008

(the latest practicable date prior to the printing of this document), and as it will be immediately

following Admission:

Authorised share capital Issued and fully paid share capitalNominal Value Number Nominal Value Number

£4,000,000.00 256,000,000 £2,543,845.16 162,806,090

Ordinary Shares Ordinary Shares

3.2 No additional shares are being issued pursuant to the Admission. The issued share capital of the

Company following Admission will therefore be £2,543,845.16.

3.3 None of the capital of the Company was paid for with assets other than cash within the period

beginning on 1 January 2005 and ending on 30 December 2007.

3.4 The authorised but unissued share capital of the Company immediately following Admission will be

£1,456,154.84, consisting of 93,193,910 Ordinary Shares, representing approximately 36.40 per cent.

of the authorised share capital of the Company. Of this amount, up to £295,781.31 is reserved for the

issue of Ordinary Shares in respect of options granted under the share option schemes described in

paragraph 15 (Share Option Schemes) of this Part VIII, representing 11.63 per cent. of the issued share

capital of the Company.

AI 21.2.2

AI 21.1.1

AIII 4.2

AI 5.1.2

AI 5.1.4

AI 5.1.2

AI 5.1.3

AI 5.1.4

AI 1.2

AIII 1.2

183

3.5 As at the date of this document, 7,377,696 Ordinary Shares (which for the purposes of the Annual

Reports are held as treasury shares) by the EBT.

3.6 As at the date of this document, 66,886,218 Ordinary Shares, representing approximately 41.08 per

cent. of the issued share capital of the Company are considered to be held other than in the hands of

the public.

4. SHARE CAPITAL HISTORY

4.1 The Company was incorporated on 5 October 1999 with an authorised share capital of £100,000,

divided into 100,000 ordinary shares of £1.00 each.

4.2 By a written resolution of the Company dated 15 November 1999, the authorised share capital of the

Company was increased to £4,000,000, divided into 4,000,000 ordinary shares of £1.00, by the

creation of 3,900,000 ordinary shares of £1.00. Each share of £1.00 each was then subdivided into 20

ordinary shares of 5p each, thereby altering the share capital of the Company to 80,000,000 ordinary

shares of 5p each. The Directors were generally and unconditionally authorised pursuant to and in

accordance with section 80 of the 1985 Act to allot relevant securities (as defined in section 80(2) of

the 1985 Act) up to an aggregate nominal value of £3,950,000. By special resolution and pursuant to

section 95 of the 1985 Act, the Directors were authorised to allot shares for cash pursuant to the

section 80 authority as if section 89(1) of the 1985 Act did not apply to such allotment, limited to:

(a) the allotment of shares in connection with a rights issue in favour of the holders of the Ordinary

Shares on the register of members at such record dates as the Directors may determine where

the equity securities respectively attributable to the interest of the ordinary shareholders are

proportionate (as nearly as may be) to the respective numbers of Ordinary Shares held by them;

(b) the allotment wholly for cash in connection with the placing and offer of subscription to AIM

of 6,000,000 ordinary shares up to an aggregate nominal amount of £300,000; and

(c) the allotment wholly for cash of equity securities up to an aggregate nominal amount of

£250,000, being 10 per cent. of the issued ordinary share capital of the Company following the

Placing.

4.3 The entire issued share capital of the Company was admitted to trading on AIM on 24 November

1999, pursuant to a placing and offer for subscription of 8,000,000 ordinary shares of 5p each in the

Company at a price to investors of 50p per ordinary share.

4.4 Since the Placing, the Company has issued new shares in the Company and has made several

applications for the admission of those shares to trading on AIM, pursuant to the exercise of options

under the Unapproved Scheme. Further details of the shares in the Company that have been issued in

the period covered by the historical financial information set out in Parts VI and VII are set out in

paragraph 4.8 below.

4.5 On 31 December 2006, being the last day of the financial year ended 31 December 2006, the

Company had an issued share capital of 164,758,762 Ordinary Shares (as if the resolution passed on

26 April 2007 to subdivide the 80,000,000 ordinary shares of 5p each into 256,000,000 Ordinary

Shares had been passed as at 31 December 2006) with a nominal value of £2,574,356. During the

financial year ended 30 December 2007, the Company issued a total of 1,402,298 Ordinary Shares

with a nominal value of £21,911. These shares were issued at between 13.16p and 210.00p for a total

cash consideration received of £700,000 in order to satisfy share options that were exercised during

the year. As at 30 December 2007, the Company’s authorised share capital was 256,000,000 Ordinary

Shares with a nominal value of £4,000,000 and the Company had an issued share capital of

162,436,060 Ordinary Shares with a nominal value of £2,538,064.

4.6 Since the Placing, the Company has also entered into a number of share buy-back programmes, the

objective of which, together with a progressive dividend policy, has been to return surplus funds to the

shareholders of the Company. During the financial year ended 30 December 2007, a total of 3,725,000

Ordinary Shares were purchased at a total cost of £8,210,000 before expenses of £136,000. This

AI 21.1.7

AIII 4.4

AIII 4.6

AI 21.1.5

AI 21.1.3

184

represented approximately 2.3 per cent. of the Company’s issued share capital as at 30 December

2007. These shares have been cancelled and are no longer part of the Company’s issued share capital.

4.7 In addition to the share buy-back programmes described in paragraph 4.6 above, the Company also

underwent a capital reorganisation during 2007 as a means of returning surplus funds to shareholders.

By an ordinary resolution of the Company dated 26 April 2007, 80,000,000 ordinary shares of 5p each

in the capital of the Company were sub-divided into 256,000,000 ordinary shares of 1.5625p each.

4.8 In addition to the changes otherwise described in this paragraph 4, the following changes to the share

capital of Company have occurred in the period covered by the historical financial information set out

in Parts VI and VII:

(a) On 10 March 2005, the Company applied for 300,380 ordinary shares of 5p each to be admitted

to trading on AIM.

(b) Pursuant to a special resolution passed by the Shareholders at the annual general meeting of the

Company held on 21 April 2005:

(i) on 29 April 2005, the Company repurchased 150,000 ordinary shares of 5p each at a

price of 272.50p per share;

(ii) on 9 May 2005, the Company repurchased 150,000 ordinary shares of 5p each at a price

of 270.50p per share;

(iii) on 11 May 2005, the Company repurchased 100,000 ordinary shares of 5p each at a

price of 270.50p per share; and

(iv) on 7 October 2005, the Company repurchased 2,214,936 ordinary shares of 5p each at a

price of 316p per share.

(c) During the financial year ended 1 January 2006, 720,897 ordinary shares of 5p were issued

pursuant to the exercise of options by certain employees of the Company under the Unapproved

Scheme. These shares were issued at between 42.1p and 206.5p for total cash consideration

received of £472,000 in order to satisfy share options that were exercised during the year.

(d) On 21 March 2006, the Company applied for 86,405 ordinary shares of 5p each to be admitted

to trading on AIM.

(e) On 18 May 2006, the Company applied for 65,833 ordinary shares of 5p each to be admitted

to trading on AIM.

(f) On 23 June 2006, the Company applied for 67,145 ordinary shares of 5p each to be admitted

to trading on AIM.

(g) On 18 August 2006, the Company applied for 27,566 ordinary shares of 5p each to be admitted

to trading on AIM.

(h) On 21 August 2006, the Company applied for 1,624,421 ordinary shares of 5p each to be

admitted to trading on AIM.

(i) On 5 September 2006, the Company applied for 30,000 ordinary shares of 5p each to be

admitted to trading on AIM.

(j) On 2 October 2006, the Company applied for 4,000 ordinary shares of 5p each to be admitted

to trading on AIM.

(k) On 18 October 2006, the Company applied for 9,500 ordinary shares of 5p each to be admitted

to trading on AIM.

(l) On 26 October 2006, the Company applied for 66,957 ordinary shares of 5p each to be

admitted to trading on AIM.

185

(m) Pursuant to a special resolution passed by the Shareholders at the annual general meeting of the

Company held on 27 April 2006, on 5 December 2006, the Company repurchased 1,799,946

ordinary shares of 5p each at a price of 5.55p per share.

(n) On 20 December 2006, the Company applied for 20,081 ordinary shares of 5p each to be

admitted to trading on AIM.

(o) During the financial year ended 31 December 2006, 372,548 ordinary shares of 5p were issued

pursuant to the exercise of options by certain employees of the Company under the Unapproved

Scheme. These shares were issued at between 42.1p and 342.5p for total cash consideration

received of £403,000 in order to satisfy share options that were exercised during the year.

(p) On 9 January 2007, the Company applied for 700 ordinary shares of 5p each to be admitted to

trading on AIM.

(q) On 18 January 2007, the Company applied for 63,186 ordinary shares of 5p each to be admitted

to trading on AIM.

(r) On 21 February 2007, the Company applied for 34,722 ordinary shares of 5p each to be

admitted to trading on AIM.

(s) On 5 March 2007, the Company applied for 17,563 ordinary shares of 5p each to be admitted

to trading on AIM.

(t) Pursuant to a special resolution passed by the Shareholders at the annual general meeting of the

Company held on 27 April 2006, on 14 March 2007, the Company repurchased 125,000

ordinary shares of 5p each at a price of 646p per share.

(u) On 30 March 2007, the Company applied for 1,850 ordinary shares of 5p each to be admitted

to trading on AIM.

(v) On 3 April 2007, the Company applied for 1,000 ordinary shares of 5p each to be admitted to

trading on AIM.

(w) On 19 April 2007, the Company applied for 99,250 ordinary shares of 5p each to be admitted

to trading on AIM.

(x) On 3 May 2007, the Company applied for 162,523 Ordinary Shares to be admitted to trading

on AIM.

(y) On 23 May 2007, the Company applied for 205,586 Ordinary Shares to be admitted to trading

on AIM.

(z) On 4 June 2007, the Company applied for 149,612 Ordinary Shares to be admitted to trading

on AIM.

(aa) On 13 July 2007, the Company applied for 151,289 Ordinary Shares to be admitted to trading

on AIM.

(bb) Pursuant to a special resolution passed by the Shareholders at the annual general meeting of the

Company held on 26 April 2007:

(i) on 2 August 2007, the Company repurchased 200,000 Ordinary Shares at a price of

259.50p per share;

(ii) on 3 August 2007, the Company repurchased 200,000 Ordinary Shares at a price of 258p

per share;

(iii) on 15 August 2007, the Company repurchased 350,000 Ordinary Shares at a price of

250p per share;

(iv) on 17 August 2007, the Company repurchased 100,000 Ordinary Shares at a price of

244.50p per share;

186

(v) on 22 August 2007, the Company repurchased 150,000 Ordinary Shares at a price of

248p per share;

(vi) on 23 August 2007, the Company repurchased 250,000 Ordinary Shares at a price of

250p per share;

(vii) on 29 August 2007, the Company repurchased 100,000 Ordinary Shares at a price of

246.50p per share;

(viii) on 31 August 2007, the Company repurchased 150,000 Ordinary Shares at a price of

250p per share;

(ix) on 25 September 2007, the Company repurchased 250,000 Ordinary Shares at a price of

225p per share; and

(x) on 1 October 2007, the Company repurchased 400,000 Ordinary Shares at a price of

226p per share.

(cc) On 18 October 2007, the Company applied for 2,176 Ordinary Shares to be admitted to trading

on AIM.

(dd) On 25 October 2007, the Company applied for 2,683 Ordinary Shares to be admitted to trading

on AIM.

(ee) On 9 November 2007, the Company applied for 25,052 Ordinary Shares to be admitted to

trading on AIM.

(ff) Pursuant to a special resolution passed by the Shareholders at the annual general meeting of the

Company held on 26 April 2007, on 20 November 2007, the Company repurchased 250,000

Ordinary Shares each at a price of 204p per share.

(gg) On 17 December 2007, the Company applied for 4,910 Ordinary Shares each to be admitted to

trading on AIM.

(hh) Pursuant to a special resolution passed by the Shareholders at the annual general meeting of the

Company held on 26 April 2007, on 27 December 2007, the Company repurchased 250,000

Ordinary Shares each at a price of 170p per share.

(ii) Pursuant to a special resolution passed by the Shareholders at the annual general meeting of the

Company held on 26 April 2007, on 28 December 2007, the Company repurchased 575,000

Ordinary Shares each at a price of 170p per share.

(jj) During the financial year ended 30 December 2007, 1,402,298 Ordinary Shares were issued

pursuant to the exercise of options by certain employees of the Company under the Domino’s

Pizza Share Option (Unapproved) Scheme. These shares were issued at between 13.16p and

210.00p for a total cash consideration received of £700,000 in order to satisfy share options that

were exercised during the year.

(kk) On 8 April, 2008 6,000 Ordinary Shares were issued pursuant to the exercise of options by a

certain employee of the Company under the EMI Scheme.

(ll) On 17 April 2008, 104,291 Ordinary Shares were issued pursuant to the exercise of options by

certain employees of the Company under the Unapproved Scheme.

(mm) On 29 April 2008, 40,210 Ordinary Shares were issued pursuant to the exercise of options by

certain employees of the Company under the Unapproved Scheme.

4.9 The Company applied:

(i) on 11 January 2008, for 6,400 Ordinary Shares to be admitted to trading on AIM;

(ii) on 28 January 2008, for 3,200 Ordinary Shares to be admitted to trading on AIM;

(iii) on 30 January 2008, for 9,044 Ordinary Shares to be admitted to trading on AIM;

(iv) on 15 April 2008, for 6,000 Ordinary Shares to be admitted to trading on AIM;

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(v) on 23 April 2008, for 104,291 Ordinary Shares to be admitted to trading on AIM; and

(vi) on 7 May 2008, for 40,210 Ordinary Shares to be admitted to trading on AIM.

4.10 At the annual general meeting of the Company held on 24 April 2008, the Company resolved

(amongst other things) to:

(a) authorise generally and unconditionally the directors of the Company, for the purposes of section

80 of the 1985 Act to exercise all powers of the Company to allot relevant securities (as defined

in the 1985 Act), up to an aggregate nominal amount of £846,317 such authority to expire on the

earlier of 15 months after the passing of this resolution or the date of the next following AGM;

(b) empower the directors of the Company pursuant to section 95 of the 1985 Act to allot Ordinary

Shares without first offering those Ordinary Shares to existing shareholders, for cash pursuant to

the section 80 authority (referred to in paragraph (a) above), limited to:

(i) the allotment of shares in connection with a rights issue; and

(ii) the allotment of equity securities up to an aggregate nominal value of £127,075 which

is equal to but not more than 5 per cent. of the issued Ordinary Share capital.

(c) authorise generally and unconditionally, the Company to purchase its own Ordinary Shares in

the capital of the Company provided that:

(i) the maximum aggregate number of Ordinary Shares authorised to be purchased is

16,265,558 (representing 10 per cent. of the current issued Ordinary Share capital as at

28 March 2008);

(ii) the minimum price to be paid for an Ordinary Share is 1.5625p; and

(iii) the maximum price which may be paid for an Ordinary Share is the higher of (i) an

amount equal to 105 per cent. of the average of the market value for an Ordinary Share

as derived from the Daily Official List for the five business days immediately preceding

the day on which that Ordinary Share is purchased and (ii) the higher of the price of the

last independent trade and the highest current bid on the London Stock Exchange at the

time the purchase is carried out, both the maximum and minimum prices being exclusive

of any advance corporation tax and any expenses.

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5. SHARE OPTIONS

5.1 As at 13 May 2008 (the latest practicable date prior to the printing of this document), the following

options in the share capital of the Company were outstanding:

No. outstanding

at 13 May

Date of grant Exercise price 2008

Domino’s Pizza (Unapproved) Scheme24 November 1999 13.16p 65,649

24 November 1999 15.63p 338,878

4 August 2000 16.56p 137,600

25 October 2001 17.19p 177,103

15 December 2005 107.03p 1,527,260

30 March 2007 210.00p 1,024,888

4 April 2008 209.00p 1,017,620––––––––4,288,998

EMI Scheme23 March 2004 64.53p 312,397

Sharesave Scheme29 December 2005 75.88p 618,608

––––––––Totals 5,220,003

––––––––Weighted average exercise price 128.34

5.2 The weighted average remaining contractual life of the options outstanding at 30 December 2007 is

6.4 years. The weighted average share price for options exercised during 2007 was 165.30p.

5.3 At 30 December 2007, the expense recognised for share based payments in respect of employee

services during the year was £880,000. This amount arose on equity settled share-based payment

transactions.

5.4 Save as disclosed at paragraph 5.1 above, paragraph 15 (Share Option Schemes) and paragraph 6 (TheCompany and its Subsidiaries) of this Part VIII, no share or loan capital of the Company or any of its

Subsidiaries is under option or agreed conditionally or unconditionally to be put under option.

5.5 Other than pursuant to the exercise of options duly granted under the share option schemes as

highlighted at paragraph 5.1 above and described at paragraph 15 (Share Option Schemes) of this

Part VIII, there is no present intention to issue any of the authorised but unissued share capital of the

Company.

5.6 As at the date of this document there are no outstanding convertible debt securities, exchangeable debt

securities, or debt securities with warrants in relation to the Company.

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6. THE COMPANY AND ITS SUBSIDIARIES

6.1 The Company is the holding company within the Group and is ultimate parent to 12 Subsidiaries

(direct and indirect). The Company also has interest in two associate undertakings. Details of the

Subsidiaries and Associates are as follows:

Proportion ofCountry of voting rights

Name of company incorporation and shares held Nature of business

Directly held SubsidiariesDPG Holdings Limited England 100% ordinary Investment

DP Realty Limited England 100% ordinary Property management

DP Capital Limited England 100% ordinary Leasing of equipment

DP Newcastle & Sunderland England 100% ordinary Management of

Limited pizza delivery stores

The American Pizza Company England 100% ordinary Management of pizza

Limited delivery stores

DP Peterborough Limited England 80% ordinary Management of

pizza delivery stores

DP Milton Keynes Limited England 100% ordinary Management of

pizza delivery stores

Indirectly held SubsidiariesDomino’s Pizza Group England 100% ordinary Operation and

Limited management of

franchise business

Live Bait Limited England 100% ordinary Property management

DP Pizza Limited Republic of 100% ordinary Management of

Ireland pizza delivery stores

DP Group Developments England 100% ordinary Property

Limited development

DP Newcastle Limited England 100% ordinary Management of

pizza delivery stores

AssociatesFull House Restaurants England 41% ordinary Management of

Limited pizza delivery stores

Dominoid Limited England 50% ordinary Management of

pizza delivery stores

6.2 Prior to the Placing, DPG was the parent company of the Group. However, pursuant to the Placing

and as a result of certain intra-group share-for-share arrangements implemented by written resolution

of the Company dated 24 November 1999, the Company acquired the entire issued share capital of

DPG.

6.3 On 26 December 1999, the Company acquired a 41 per cent. interest in Full House Restaurants

Limited for £205,000.

6.4 On 11 November 2002, the Company acquired a 50 per cent. interest in Dominoid Limited. Two stores

were sold to Dominiod Limited and the consideration for the sale was satisfied by the issue of a loan

note between Dominoid Limited and DPG of £441,636, which is repayable on demand at least one

year after the date of the agreement. The loan note bears interest at a rate of 2.5 per cent. above the

Royal Bank of Scotland base rate. At 30 December 2007 the balance outstanding on the loan note was

£161,041.71. The Company received interest of £18,274.73 during the financial year ended

30 December 2007 in respect of the loan note.

6.5 In June 2006, DP Milton Keynes Limited was formed and the Company acquired an 80 per cent.

shareholding in the company.

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6.6 On 16 August 2006, the Company sold its investment in DPG for £2,200,000 in exchange for shares

in DPG Holdings Limited the holding company of DPG, thereby becoming the ultimate parent of the

Group.

6.7 In November 2006, the Company purchased the remaining 20 per cent. shareholding of DPGL

Birmingham Ltd for £85,000 and the entire issued share capital of DP Newcastle & Sunderland

Limited for £48,000.

6.8 On 16 April 2008, the Company sold DPGL Birmingham Limited for £1,000,000. The Company

proposes during the course of 2008 to dispose of its 41 per cent. interest in Full House Restaurants

Limited.

6.9 No acquisitions of any Subsidiaries were made during the financial year ended 30 December 2007.

6.10 It is envisaged that a sale will be agreed for the disposal of DP Peterborough Limited by the end of

2008. The remaining corporate stores which the Company has interests in are actively being marketed

within the franchisee community and externally and expectations are that the stores will be disposed

of by the end of 2008.

7. RELATED PARTY TRANSACTIONS

7.1 Save as disclosed in this paragraph 7, paragraph 6 above (The Company and its Subsidiaries), and

elsewhere in this Part VIII, the Company has not been a party to any related party transaction for the

three year period up to 13 May 2008 (being the latest practicable date before publication of this

document).

7.2 In June 2005, the Company sold its subsidiary undertakings, DPGS Limited and Triple A Pizza

Limited for a cash consideration of £3,650,000 to Dough Trading Limited (“DTL”). DTL is controlled

by Marc Halpern, the son of Colin Halpern. HS Real guaranteed part of the debt funding used by DTL

for the transaction. HS Real holds 13,007,328 Ordinary Shares in the Company and is owned by a

discretionary trust, the beneficiaries of which are the adult children of Colin and Gail Halpern. By

virtue of Colin Halpern’s position within the Company and his relationship with HS Real, he took no

part in the voting at the Company’s board meeting to approve the transaction. During the financial

year ended 31 December 2006 and 30 December 2007, the Group traded with DPGS Limited and

Triple A Pizza Limited in the ordinary course of business at normal prices.

7.3 During the financial year ended 1 January 2006, 31 December 2006 and 30 December 2007, the

Group traded with International Franchise Systems Inc., in the normal course of business on arm’s

length terms and at normal market prices. Colin Halpern is a director of IFS.

8. MEMORANDUM OF ASSOCIATION

The Company’s principal objects are set out in Clause 4 of its Memorandum of Association and include the

carrying on of the business of a holding and management company. The Memorandum of Association of the

Company is available for inspection at the address specified at paragraph 23 (Documents available forinspection) of this Part VIII.

9. ARTICLES OF ASSOCIATION

The following is a summary of certain provisions of the amended Articles that were adopted pursuant to a

special resolution of the Company passed at an AGM of the Company held on 24 April 2008. This Summary

does not purport to be complete and is qualified in its entirety by the full terms of the Articles. The Articles

are available for inspection at the address specified at paragraph 23 (Documents available for inspection) of

this Part VIII.

9.1 Voting rights

(a) Subject to any specials terms as to voting upon which any shares may be issued, or may for the

time being be held and any restriction on voting referred to below, every shareholder present in

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person or by one or more proxies or (in the case of a corporation), by one or more duly

authorised representatives, at a general meeting of the Company shall have one vote on a show

of hands and, on a poll, every shareholder present in person or by one or more proxies or (in

the case of a corporation) by one or more duly authorised representatives, shall have one vote

for every share of which he is the holder.

(b) The duly authorised representative of a corporate shareholder may exercise the same powers

on behalf of that corporation as it could exercise if it were an individual shareholder.

(c) A shareholder is not entitled to vote unless all calls due from him in respect of his shares have

been paid.

(d) A shareholder is also not entitled to attend or vote at meetings of the Company in respect of

any shares held by him in relation to which he or any other person appearing to be interested

in such shares has been duly served with a notice under section 793 of the 2006 Act (a

“Disclosure Notice”) and, having failed to comply with such notice within the period specified

in such notice or, in purported compliance with such notice, has made a statement which is

false or inadequate in a material particular if subsequently served with a direction notice

(“Direction Notice”). Such disentitlement will apply until seven days (or such shorter period

as the Board may resolve) after the default in respect of which the Direction Notice was issued

has been reached or until notification has been received by the Company that the relevant

shares have been transferred to a third party by means of an approved transfer.

9.2 General meetings

(a) The Company must hold an AGM each year in addition to any other general meetings held in

the year. The Board can call a general meeting at its own discretion and must call a general

meeting if the members of the Company requires it to do so.

(b) At least 21 clear days’ written notice must be given for every AGM. For all other general

meetings, not less than 14 clear days’ written notice must be given. The notice for any general

meeting must state: (i) the date, time and place of the meeting, (ii) in the case of special

business, the general nature of that business of the meeting and (iii) any intention to propose a

resolution as a special resolution and should contain the text of the resolution. The notice

should also contain a statement that a member entitled to attend and vote is entitled to appoint

one proxy to exercise all or any of the member’s rights to speak and vote at the meeting and

more than one proxy may be appointed if each proxy is appointed to exercise rights attached

to a different share or shares held by the member. All members who are entitled to receive

notice under the Articles must be given notice.

(c) Before any business can be transacted at a general meeting, there must be a quorum present,

being two qualifying persons (as defined in the Articles) entitled to vote at the meeting, each

being a member or a proxy for a member or a duly authorised corporate representative unless

each is only a qualifying person because (i) he is authorised to act as a representative of a

corporation in relation to the meeting and they are representatives of the same corporation or

(ii) he is appointed as a proxy of a member in relation to the meeting, and they are proxies of

the same member.

9.3 Dividends

(a) Subject to the Companies Acts, the Company may, by ordinary resolution, declare dividends to

be paid to members of the Company according to their rights and interests in the profits of the

Company available for distribution, but no dividend shall be declared in excess of the amount

recommended by the Board. No dividend shall be payable to the Company itself in respect of

shares held by it as treasury shares (except to the extent permitted by the Companies Acts).

(b) Except insofar as the rights attaching to, or the terms of issue of, any share otherwise provide,

all dividends shall be apportioned and paid pro rata according to the amounts paid on the

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shares (including any amount credited as paid on the shares) during any portion or portions of

the period in respect of which the dividend is paid. Any dividend unclaimed after a period of

12 years from the date of declaration shall be forfeited and shall revert to the Company.

(c) The Board may, if authorised by an ordinary resolution, offer shareholders the right to elect to

receive shares, credited as fully paid, instead of cash in respect of any dividend or any part of

any dividend, subject to the procedural requirements as set out in the Articles.

(d) The Company may, on recommendation of the Board, by ordinary resolution direct payment of

a dividend in whole or in part by the distribution of specific assets.

(e) The Board may retain, without liability to pay interest thereon, any dividend payable on shares

held by a member representing not less than 0.25 per cent. by number of the issued shares of

any class after there has been a failure by that member to comply with a Disclosure Notice

served on that member pursuant to section 793 of the 2006 Act requiring the disclosure of

information relating to interests in the shares concerned as referred to in paragraph 9.9

(Disclosure of interests in shares) below.

(f) If the Company is to be wound up the liquidator may, with the authority of special resolution

and subject to any provision of law, divide among the members in specie or kind the whole or

any part of the assets of the Company whether or not the assets consist of property of one kind

or properties of different kinds, and may for such purpose set such value as he/she deems fair

upon any one of more class or classes or property and may determine how such division is to

be carried out between the members or different classes of members.

9.4 Return of capital

On a voluntary winding-up of the Company, the liquidator may, with the sanction of a special

resolution of the Company and subject to the Companies Acts and the Insolvency Act 1986 (as

amended), divide amongst the shareholders of the Company in specie the whole or any part of the

assets of the Company and may for this purpose set such a value as he deems fair upon each kind of

property and may determine how such division shall be carried out as between members or different

classes of members, but no member shall be compelled to accept any asset in respect of which there

is a liability. The liquidator may also vest the whole or any part of the assets in trustees upon such

trusts for the benefit of the members as the liquidator, with the like sanction, shall determine.

9.5 Transfer of Shares

(a) All transfers of Certificated Shares (as defined in the Articles) in the Company may be effected

by a transfer in writing in any usual or common form or in any form acceptable to the Board

and all transfers of Uncertificated Shares (as defined in the Articles) need not be in writing and

should comply with such rules as the Board may adopt as permitted by the Companies Acts,

the 2001 Regulations, the UK Listing Authority or the London Stock Exchange. The instrument

of transfer of a Certificated Share shall be signed by or on behalf of the transferor and (except

in the case of fully paid shares) by or on behalf of the transferee. The transferor shall remain

the holder of the shares concerned until the name of the transferee is entered in the register of

members in respect thereof.

(b) The Board may in its absolute discretion refuse to register any transfer of shares that is not fully

paid up or on which the Company has a lien provided that in the case of a class of shares which

are listed on the London Stock Exchange such discretion shall not be exercised so as to prevent

dealings in those shares from taking place on an open and proper basis. The Directors of the

Company may also refuse to register a transfer of shares (whether fully paid or not) in favour

of more than four persons jointly.

(c) The Board may decline to register (in the case of a Certificated Share) any instrument of

transfer unless:

(i) it is a duly stamped instrument of transfer;

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(ii) it is in respect of only one class of share;

(iii) it is lodged with the Company; and

(iv) it is accompanied by the relevant share certificate(s) and such other evidence as the

Board may reasonably require to show the right of the transferor to make the transfer.

(d) The Board may decline to register an Uncertificated Share if the 2001 Regulations allow it to

do so and must do so where the 2001 Regulations so require.

(e) Shares may not be transferred to a bankrupt person or a person who is mentally disordered or

a patient for the purposes of any statute relating to mental health.

(f) If the Board refuses to register a transfer it shall send, in the case of Certificated Shares, to the

transferee notice of the refusal with reasons for the refusal by such time as is the earlier of: (i)

the expiration of 2 months after the date upon which the instrument or transfer was lodged; or

(ii) the time required by the rules of the London Stock Exchange in the case of a Uncertificated

Share, within 2 months of receipt of instructions to update the register of members to show the

transferee as holder thereof.

(g) Where a holder of shares which represent 0.25 per cent. or more of the class of shares concerned

has been served with a Direction Notice after there has been a failure to provide the Company

with information required by a Disclosure Notice (as defined below), no transfer of any shares

held by the holder shall be registered unless the exception contained in the Articles applies.

9.6 Variation of rights

(a) Subject to the Companies Acts, all or any of the rights attached to any class of share may

(unless otherwise provided by the terms of issue of shares of that class) be varied (whether or

not the Company is being wound up) either with the written consent of the holders of not less

than three-quarters in nominal value of the issued shares of that class or with the sanction of

special resolution passed at a separate general meeting of such holders. The quorum at any such

general meeting is two persons holding or representing by proxy at least one-third in nominal

value of the issued shares of that class excluding any shares of that class held as treasury shares

and at an adjourned meeting the quorum is one holder present in person or by proxy, whatever

the amount of his shareholding. Any holder of shares of the class in question present in person

or by proxy may demand a poll. Any holder of the Shares of the class present in person or by

proxy may demand a poll. Every holder of shares of the class shall be entitled, on a poll, to one

vote for every share of the class held by him. Except as mentioned above, such rights shall not

be varied.

(b) The rights conferred upon the holders of any shares or class of shares shall not, unless

otherwise expressly provided in the Articles or the conditions of issue of such shares, be

deemed to be varied by the creation or issue of new shares ranking pari passu therewith or

subsequent thereto or the purchase by the Company of any of its own shares.

9.7 Share capital and changes in capital

(a) Subject to and in accordance with the provisions of the Companies Acts, the Company may by

ordinary resolution increase its capital by such a sum to be divided into shares of such amounts

as the resolution shall prescribe.

(b) Subject to the provisions of the Articles and the Companies Act, the power of the Company to

offer, allot and issue any unissued shares shall be exercised by the Board at such time and for

such consideration and upon such terms and conditions as the Board shall determine.

(c) The Company may by ordinary resolution:

(i) consolidate and divide all or any of its share capital into shares of larger nominal value

than its existing shares;

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(ii) cancel any shares which, at the date of passing of the resolution, have not been taken, or

agreed to be taken, by any person and diminish the amount of its capital by the amount

of the shares so cancelled; and

(iii) subdivide its shares, or any of them, into shares of smaller nominal value than is fixed

by the memorandum of association (subject to the provisions of the 1985 Act).

(d) Subject to the Companies Acts, the Company may by special resolution reduce its share capital,

any capital redemption reserve or any share premium account in any way.

(e) Subject to the Companies Acts, the Articles and any confirmation or consent required by law,

the Company may purchase all or any of its own shares of any class and any shares to be

purchased may be selected in any manner by the Company.

(f) The Board is generally and unconditionally authorised pursuant to section 80 of the 1985 Act

to exercise for each prescribed period (as defined in the Articles) all the powers of the Company

to allot relevant securities up to an aggregate nominal amount equal to the Section 80 Amount

(as defined in the Articles), as if section 89(1) of the 1985 Act did not apply to such an

allotment.

(g) Subject to the Companies Acts and the 2001 Regulations, the UK Listing Authority and the

London Stock Exchange, the directors may determine that any class of shares may be held in

uncertificated form and that title to such shares may be transferred by means of a Relevant

System (as defined in the Articles). The provisions of the Articles shall not apply to shares of

any class which are in uncertificated form to the extent that such Articles are inconsistent with

the holding of shares of that class in uncertificated form, the transfer of title to shares of that

class by means of a Relevant System, or any provision of the 2001 Regulations.

9.8 Company lien on shares

(a) If a member fails to pay in full any call or instalment of a call on the due date for payment, the

Board may at any time serve a notice on him/her requiring payment and stating that in the event

of non-payment in accordance with such notice the shares on which the call was made will be

liable to be forfeited.

(b) The Company shall have a first and paramount lien on every share (not being a fully paid share)

for all monies (whether presently payable or not) called or payable at a fixed time in respect of

such share.

(c) The Company may sell in such manner as the Board thinks fit any share on which the Company

has a lien 14 days after a notice in writing is served on the member stating and demanding

payment of the sum presently payable and giving notice of intention to sell if payment is not

received on or before the due date.

9.9 Disclosure of interests in shares

(a) Section 793 of the 2006 Act provides a public company with the statutory means to ascertain

the persons who are, or have within the last three years been, interested in its relevant share

capital and the nature of such interests. When a shareholder receives a Disclosure Notice

pursuant to Section 793 he or she has 28 days (or 14 days where the shares represent at least

0.25 per cent. of their class) to comply with it, failing which the Company may decide to

restrict the rights relating to the relevant shares and send out a Direction Notice to the holder.

The Direction Notice will state that the identified shares (“Relevant Shares”) no longer give the

owner of the Relevant Shares any right to vote at a shareholders’ meeting or to exercise any

other right in relation to the Relevant Shares.

(b) Once the Direction Notice has been given if the Board is satisfied that all the information

required has been supplied or if the Relevant Shares subject to the Direction Notice are

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transferred pursuant to an approved transfer (as defined in the Articles), the Company shall

withdraw the Direction Notice.

9.10 Non-UK shareholders

Shareholders with addresses outside the United Kingdom are not entitled to receive notices from the

Company unless they have given the Company an address within the United Kingdom at which such

notices shall be served.

9.11 Untraced shareholders

Subject to various notice requirements, the Company may sell any of a shareholder’s shares in the

Company if, during a period of 12 years, at least three dividends on such shares have become payable

and no dividend has been claimed during that period in respect of such shares and the Company has

received no communication from such shareholder.

9.12 Borrowing powers

The Board may exercise all the powers of the Company to borrow money and to mortgage or charge

all or any of its undertaking, property and assets (present and future) and uncalled capital and, subject

to any relevant statutes, to issue debentures and other securities, whether outright or as collateral

security for any debt, liability or obligations of the Company or any third party provided that the

Board shall restrict the borrowings of the Company and exercise all powers of control exercisable by

the Company in relation to its Subsidiary, so as to secure (in relation to its Subsidiaries so far as the

Board is able) that the aggregate principle amount from time to time of all borrowings by the Group

(excluding any money owed between members of the Group) subject to the Articles shall not at any

time without the previous sanction of an ordinary resolution of the Company exceed an amount equal

to five times the Adjusted Capital and Reserves (as defined in the Articles).

9.13 Directors

(a) The provisions in the Articles governing directors’ interests are divided into the position before

1 October 2008 and after 1 October 2008. Before 1 October 2008, save as mentioned below in

sub-paragraph (f), a director shall not vote in respect of any matter in which he has a material

interest (otherwise than by virtue of his interests in shares or debentures or other securities of,

or otherwise in or through, the Company). A director shall not be counted in the quorum at a

meeting in relation to any resolution on which he is debarred from voting. After 1 October 2008

a director must avoid a situation where he has, or can have a direct or indirect interest that

conflicts or may conflict with the Company’s interest.

(b) The relevant provisions of the Articles in relation to directors’ interests were amended on 24

April 2008 so as to provide that on 1 October 2008 or such later date on which section 175 of

the 2006 Act comes into effect the Board may, in accordance with the Articles, authorise a

matter proposed to it which would, if not authorised, involve a breach by the director of his

duty under the Companies Acts to avoid a situation in which he has, or can have, a direct or

indirect interest that conflicts, or possibly may conflict, with the Company’s interests.

(c) Provided that the director has disclosed to the Board or, if such interest arises post 1 October

2008 the Board has approved, the nature and extent of his interest as required by the Company

Acts, the directors may despite his office:

(i) hold any other office or place of profit with the Company (except that of Auditor) in

conjunction with his office of Director for such period, subject to the provisions of the

Companies Acts, upon such terms as the Board may determine and may be paid such

extra remuneration therefore (whether by way of salary, commission, participation in

profits or otherwise) as the Board may determine and such extra remuneration shall be

in addition to any remuneration provided for by or pursuant to any other Article;

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(ii) act by himself or his firm in a professional capacity for the Company (otherwise than as

Auditor) and he or his firm shall be entitled to remuneration for professional services as

if he were not a director; or

(iii) be or become a director or other officer of, or otherwise interested in, any company

promoted by the Company or in which the Company may be interested or as regards

which it has any power of appointment.

(d) A director shall not be required, by reason of being a director (or by reason of the fiduciary

relationship established though being a director), to account to the Company for any

remuneration or other benefit which he derives from or in connection with any matter which

has been authorised by the Board pursuant to the Articles or by ordinary resolution of the

Company (subject to any terms, limits or conditions attaching to that authorisation) arising

from any office or employment, transaction or assignment or interest in any body corporate

which the Director is permitted to hold or enter into. No transaction or arrangement authorised

in accordance with the Articles shall be avoided on the grounds of any such remuneration,

benefit or interest.

(e) A director is not under any duty to the Company in respect of any information which he obtains

or possess through any position other than as a director of the Company and in respect of which

he owes a duty of confidentiality to another person, and is not in breach of any duties owed to

the Company pursuant to the Companies Acts if he fails to disclose such confidential

information to the Board or to the Company or if he fails to use or apply that information in

performing his duties as a director.

(f) A director shall (in the absence of material interests other than those indicated below) be

entitled to vote (and be counted in the quorum) in respect of any resolution concerning any of

the following matters:

(i) the giving of any guarantee, security or indemnity in respect of money lent by him or

obligations undertaken by him for the benefit of the Company or any of its subsidiary

undertakings;

(ii) the giving by the Company or any of its Subsidiaries of any guarantee, security or

indemnity to a third party in respect of a debt or obligation of the Company or any of its

Subsidiaries in respect of which such director has himself given an indemnity or that he

has guaranteed or secured in whole or in part;

(iii) any transaction for the subscription for shares, debentures or other securities of the

Company or any of its Subsidiaries issued or to be issued pursuant to any offer or

invitation to members or debenture holders of the Company or any class thereof or to

the public or any section thereof, or to underwrite or sub-underwrite any such shares,

debentures or other securities;

(iv) any transaction in which such director is interested by virtue of his interest in shares or

debentures or other securities of the Company or by reason of any other interest in or

through the Company;

(v) any transaction concerning any other company in which he is interested directly or

indirectly whether as an officer, shareholder, creditor or otherwise howsoever provided

that he does not hold an interest in more than one per cent. of the shares in that company;

(vi) any transaction concerning the adoption, modification or operation of a superannuation

fund or retirement, death or disability benefits scheme that relates both to directors and

employees of the Company or of any of its subsidiaries and that does not accord to any

director as such any privilege or advantage not generally accorded to the employees to

whom such scheme or fund relates;

197

(vii) any transaction concerning any insurance (or after 1 October 2008 the granting of any

indemnities) which the Company is empowered to purchase and/or maintain for or for

the benefit of any directors of the Company;

(viii) any transaction involving the adoption of an arrangement for the benefit of employees

of the Company or of any of its subsidiaries under which the director benefits in a

similar manner to the employees and that does not accord to any director as such any

privilege or advantage not generally accorded to the employees to whom such

arrangement relates;

(ix) before 1 October 2008, (save in relation to any matter concerning or directly affecting

his own participation therein), any transaction involving the adoption or modification of

any executive share option scheme operated by the Company and approved by the Inland

Revenue under the Income and Corporation Taxes Act 1988; and

(x) after 1 October 2008, any proposal under which he may benefit concerning the provision

to directors of funds to meet expenditure incurred or to be incurred by them in defending

proceedings or in connection with any application under any of the provisions

mentioned in the Companies Acts or otherwise enabling any such person to avoid

incurring that expenditure.

(g) The non-executive directors shall be paid such remuneration by way of fees for their services

as may be determined by the Board subject to any maximum limit imposed by ordinary

resolution of the Company. The directors shall also be entitled to be repaid by the Company all

reasonable hotel expenses and other expenses of travelling to and from board meetings,

committee meetings, general meetings or otherwise incurred while engaged in the business of

the Company.

(h) Any director of the Company who holds any executive office or who serves any committee, or

who other performs services which in the opinion of the directors are outside the scope of the

ordinary duties of a director, may be paid such extra remuneration by way of salary,

commission or otherwise as the directors may determine.

(i) The directors and officers of the Company may be indemnified against all costs, charges,

expenses, losses and liabilities which they may incur in the execution of the duties of their

office and the directors may exercise all the power of the Company to grant those indemnities

including monies incurred by any director in defending himself in any proceedings, civil or

criminal which relate to anything done or omitted to be done by him as officer or employee of

the Company, including any investigations by a regulatory authority.

(j) One-third of the directors are obliged to retire by rotation at every AGM. The directors are eligible

for re-election at the third AGM after the AGM at which they were elected. Any director

appointed by the Board holds office only until the next AGM, when he is eligible for re-election.

(k) Unless and until otherwise determined by ordinary resolution of the Company, the directors

(other than alternate directors) shall not be less than three or more than ten in number.

9.14 Capitalisation of profits

The Company may, upon the recommendation of the Board, pass an ordinary resolution to the effect

that it is desirable to capitalise all or any part of the amount for the time being standing to the credit

of any reserve or fund (whether or not available for distribution) or to the credit of any share premium

account or any capital redemption reserve and accordingly that such amount be set free for

distribution among the members of any class of members who would be entitled thereto if distributed

by way of dividend and in the same proportions, on the footing that the same be not paid in cash but

applied either in or towards paying up the amounts for the time being unpaid on any shares in the

Company held by such members respectively or in payment up in full of unissued shares, debentures

or other obligations of the Company, to be allotted and distributed credited as fully paid among such

198

members, or partly in one way and partly in the other, and the board shall give effect to such resolution

provided that, for the purposes of this Article, a share premium account and a capital redemption

reserve may be applied only in the paying up of unissued shares to be allotted to such members

credited as fully paid.

9.15 Electronic communications

The Company may communicate electronically with its members in accordance with the provisions

of the Companies Acts.

9.16 CREST and Uncertificated Securities

(a) The Articles are consistent with membership and allow for the holding and transfer of shares

in uncertificated form.

(b) The Company shall also conform with the terms of the 2001 Regulations, in maintaining

Uncertificated Shares in the capital of the Company.

10. DIRECTORS INTERESTS

10.1 Board of Directors

The Directors, their functions within the Company and brief biographies are set out in paragraph 7 of

Part V of this document.

10.2 Other directorships

In addition to the Company, the Directors hold or have held in the past 5 years the following

directorships:

Director Current directorships Past directorships

Domino’s Pizza Group Ltd

DP Realty Ltd

DP Capital Ltd

The American Pizza Company Ltd

Live Bait Ltd

DP Group Developments Ltd

DP Pizza Ltd

DP Newcastle Ltd

DPGS Ltd

Realprojects Limited

Christopher

Moore

Domino’s Pizza Group Ltd

DP Realty Ltd

DP Capital Ltd

Live Bait Ltd

DP Group Developments Ltd

DP Peterborough Ltd

DP Newcastle Ltd

DP Milton Keynes Ltd

DPG Holdings Ltd

Dominoid Ltd

Full House Restaurants Ltd

DP Pizza Ltd

The American Pizza Company Ltd

Triple ‘A’ Pizza (Norwich) Ltd

DPGS Ltd

DP Newcastle and Sunderland Ltd

DPGL Birmingham Ltd

Stephen Hemsley

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Director Current directorships Past directorships

DP Realty Ltd

DP Capital Ltd

Domino’s Pizza Group Ltd

International Franchise Systems, Inc.

DP Pizza Ltd

The Celebrated Group plc

(in liquidation)

DPGS Ltd

UCM Group plc

Hamilton Private Capital (UK)

Limited (dissolved)

Colin Halpern

Domino’s Pizza Group Ltd

DP Realty Ltd

DP Newcastle Ltd

DP Capital Ltd

Live Bait Ltd

DP Group Developments Ltd

DP Peterborough Ltd

DP Pizza Ltd

DP Milton Keynes Ltd

DPG Holdings Ltd

The Bulb Man (UK) Ltd

The American Pizza Company Ltd

DPGL Birmingham Ltd

Health Club Holding Ltd

Holmes Place Holdings Ltd

Triple ‘A’ Pizza (Norwich) Limited

Realprojects Ltd

DPGS Ltd

DP Newcastle and Sunderland Ltd

Health Club Group Plc

Holmes Place International Holdings

Ltd

Holmes Place Health Clubs Ltd

Holmes Place Bodycare Ltd

Holmes Place Equipment Procurement

Ltd

Holmes Place Management Ltd

HPH Finance Holdco UK Ltd

Holmes Place Leisure Ltd

Holmes Place Leisure 2 Ltd

Future Fitness Ltd

Holmes Place (Ealing) Ltd

Holmes Place (Hammersmith) Ltd

Holmes Place (Kingston) Ltd

Holmes Place (Putney) Ltd

Rhodes-Cooke Healthcare Ltd

Holmes Place (Education) Ltd

Holmes Place Leisure 3 Ltd

Cardpoint Ltd

Holmes Place (Dorset) Ltd

(now dissolved)

Holmes Place (Oxford Street) Ltd

(now dissolved)

Holmes Place Family Fitness Ltd

(now dissolved)

Holmes Place (Bromley) Ltd

(now dissolved)

Holmes Place (Hampstead) Ltd

(now dissolved)

Holmes Place City Ltd

(now dissolved)

Holmes Place Concept Training Ltd

(now dissolved)

Holmes Place Ltd

(now dissolved)

Onyxfield Ltd

(now dissolved)

Lee Ginsberg

200

Director Current directorships Past directorships

Prestbury Investment Holdings Ltd

Seymour Pierce Holdings Ltd

Play Holdings Ltd

Sonoma Ltd

Saracens Ltd

Syncbeam Ltd

English Wines Group Plc

Brendon Street Securities Ltd

Brendon Street Investments Ltd

Moneypitch Company Ltd

RT Marketing Ltd

PIHL Property Holdings Ltd

Premier Team Promotions Ltd

Premier Team Holdings Ltd

Networkers International Plc

PIHL Equity Holdings Ltd

British Seafood Distribution Group

Holdings Ltd

British Seafood Group Holdings Ltd

PIHL Equity Holdings Ltd

PIHL Property Administration Ltd

The Lord’s Taverners Ltd

Networkers International plc

PIHL Equity Assessments Ltd

Networkers International (UK) plc

PIHL Equity Administration Ltd

Current partnershipsPIHL Property LLP

PIHL Equity LLP

Saracens Property Investments LLP

Prestbury Two LLP

Prestbury (Scotland) Limited

Partnership

Prestbury 1 Limited Partnership

The Greenhouse Fund Ltd

Healthcare Enterprise Group plc

Electric Word plc

WILink plc

Invox plc

Oak Bay Ltd

Extreme Group Ltd

Investment Management Holdings plc

Urbium plc

Premier Rugby Ltd

Spaces Personal Storages Ltd

The Mill Hill School Foundation

Harvey Thorneycroft Ltd

Columbus Group plc

English Rugby Partnership Ltd

Maybeat Limited

Nigel Wray

HS Real LLC

Cheval Commercial Finance Ltd

Cheval Specialist Bridging Ltd

Cheval Bridging Finance Ltd

Cheval Property Developments Ltd

Cheval Finance Ltd

Cheval Property Finance plc

Credit Investment Limited

Ambition Capital Limited

Red Hot Concepts Inc.

Garden State Fresh LLC

Universal Services Group Inc

NPS Technology Group Inc

Medtrx Holdings LLC

Medtrx Capital LLC

Dayenn Ltd

Restaurant House LtdColin Halpern

(continued)

201

Director Current directorships Past directorships

Britvic plc

Spice plc

Old Buckenham Hall (Brettenham)

Educational Trust Ltd

Old Cannon Holdings Ltd

Old Cannon Brewery Ltd

Greene King Plc

The Belhaven Group Ltd

Beards Of Sussex Ltd

Country Style Inns Ltd

Greene King Acquisitions No.2 Ltd

Greene King Neighbourhood Estate

Pubs Ltd

Greene King Neighbourhood Pub

Holdings Ltd

Greene King Retailing Parent Ltd

Greene King Retailing Ltd

Greene King Services Ltd

Greene King Pension Scheme Ltd

Pubco plc

Canndhu Ltd

Countryside Inns & Hotels Ltd

Greene King Brewing and Retailing

Ltd

Greene King Retail Services Ltd

Beards of Sussex Group Ltd

Greene King Leasing No. 1 Ltd

Greene King Leasing No. 2 Ltd

Old English Inns Trustees Company

Ltd

Michael Shallow

The Prestbury Group

Cenkos Channel Islands Ltd

Cenkos Securities plc

Cenkos Fund Management Ltd

Cenkos Fund Managers Ltd

SEC Investment Trust

Fishers International (UK)

I Value plc

Prestbury Residual Limited

UBC Media Group plc

Strategic Equity Capital plc

UBC Media Group plc

UBC Media Group Trustees Ltd

John Hodson Ltd

Cooper Gay (Holdings) Ltd

Kaupthing Singer & Friedlander

Group plc

Clarke London Ltd

PC&W Properties Ltd

Sinjul Investments Ltd

Ancomass Ltd

Kaupthing Singer & Friedlander Ltd

Singer & Friedlander Holdings Ltd

Singer & Friedlander Investment

Management Ltd

Singer & Friedlander Investment

Properties Ltd

Hillgrove Developments (North West)

Ltd

Haxted Investment Management Ltd

53 Fulham Park Gardens Ltd

Singer & Friedlander Investment

Management Holdings Ltd

Boddington Hill Management

Company Ltd

Coventbrook Limited

Gilbert Estate Ltd

Bread Street (Singer & Friedlander

Life & Pension Trust) Ltd

Bread Street Pension Trust Ltd

Sharepart Ltd

Singer & Friedlander Securities Ltd

Inter$link Limited

John Hodson

202

Director Current directorships Past directorships

Camelot Group plc

Camelot Global Services Ltd

National Lottery Enterprises Ltd

CISL Ltd

Camelot Lotteries Ltd

Blue Sonic Ltd

The Press Complaints Commission

Ltd

The Born Free Foundation Ltd

Mulberry’s of Beaconsfield Ltd

RAC plc

Wyevale Garden Centres Ltd

Incorporated Society of British

Advertisers Ltd

The Camelot Foundation

The Advertising Standards Authority

Ltd

WACL Forum Ltd

WACL Ltd

Dianne

Thompson

The Sun Hotel Hitchin Ltd

Morrells of Oxford Ltd

Greene King Leisure Holdings Ltd

Greene King Leisure Pub Holdings

Ltd

Musicmeadow Ltd

Repairdesign Ltd

Sapphire Food North East No. 1 Ltd

Sapphire Food North West No. 3 Ltd

Sapphire Food South East No. 4 Ltd

Sapphire Food South West No. 2 Ltd

Sapphire Rural Destination No. 5 Ltd

Shopgoal Ltd

Greene King Retailing (No. 2) Ltd

Rushmere Sports Club Ltd

Belhaven Brewery Company Ltd

Greene King E Ltd

Greene King D Ltd

Greene King C Ltd

Greene King B Ltd

Greene King A Ltd

The Big Pub Company Ltd

Dalgety Taverns Ltd

Wireland Ltd

Unicorn Inns Ltd

Patcham 1995 Ltd

Greene King (Leasing) Ltd

Greene King (Thos Peatling) Ltd

Rayment & Company Ltd

Greene King Employment Services

Ltd

Greene King (Biggleswade) Ltd

Belhaven Finance Ltd

Hartford End Limited

T. D. Ridley & Sons Limited

T. D. Ridley & Sons (Brewers)

Limited

The Magic Pub Company Ltd

Old English Pubs Ltd

Old English Inns Ltd

Michael Shallow

(continued)

203

10.3 (a) Save as disclosed in paragraph 10.3(b) below, none of the Directors:

(i) has any convictions in relation to fraudulent offences for at least the previous 5 years; or

(ii) has been declared bankrupt or been a director or member of the administrative,

management or supervisory body of a company or a senior manager of a company at the

time of any receivership, compulsory liquidation or creditors’ voluntary liquidation for

at least the previous 5 years; or

(iii) has been subject to any official public incrimination and/or sanctions by any statutory or

regulatory authority (including designated professional bodies) or has ever been

disqualified by a court from acting as a director of a company or from acting as a

member of the administrative, management or supervisory bodies of a company or from

acting in the management or conduct of the affairs of any company for at least the

previous 5 years.

(b) John Hodson was a director of Ancomass Limited, he was appointed pre-5 June 1992 and

resigned on 31 December 2004. This company is now in liquidation.

John Hodson was a director of Singer & Friedlander Holdings Limited, he was appointed pre-

5 June 1992 and resigned on 31 December 2004. This company is now in liquidation.

Michael Shallow was a director of Pubco plc, he was appointed on 16 February 1995 and

resigned on 9 January 2006. This company is now in liquidation.

Colin Halpern was a director of The Celebrated Group plc, he was appointed on 15 December

1997. This company is now in liquidation.

Colin Halpern was a director of Restaurant House Limited (a subsidiary of The Celebrated

Group plc), he was appointed on 24 June 1994. This company is now in liquidation.

10.4 Director’s interests in the Company’s issued share capital

(a) The interests (all of which are or will be beneficial unless otherwise stated and other than with

respect to the reversionary interests held over Ordinary Shares) of the Directors, their

immediate families and persons connected with the Directors (within the meaning of section

252 of the 2006 Act) in the share capital of the Company, other than with respect to

reversionary interests held over Ordinary Shares (as detailed at paragraph 10.5(c) below)

which:

(i) have been notified to the Company pursuant to the provisions of the Companies Acts; or

(ii) are required to be entered in the register of directors’ interests maintained under the

provisions of the Companies Acts; or

(iii) are interests of a Connected Person which would, if the Connected Person were a

Director,

be required to be disclosed under (i) or (ii) above and the existence of which is known to or

could with reasonable diligence be ascertained by that Director as at 13 May 2008 (the latest

practicable date prior to publication of this document) are as follows:

Number of PercentageOrdinary Shares of issued

at date of OrdinaryDirector this document Share capital

Colin Halpern(i) 13,007,328 7.99%

Stephen Hemsley(ii) 7,030,000 4.32%

Christopher Moore 2,880,076 1.77%

Nigel Wray(iii) 36,495,118 22.42%

Michael Shallow(iv) 48,000 0.03%

John Hodson(v) 48,000 0.03%

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(i) 13,007,328 Ordinary Shares are held by HS Real. HS Real is owned by a discretionary trust, the beneficiaries

of which are the adult children of Colin and Gail Halpern.

(ii) 3,200,000 Ordinary Shares are held by CTG Investment Limited, a discretionary trust of which Stephen Hemsley

and his family are potential beneficiaries. 3,590,000 Ordinary Shares in total are held by The Stephen Hemsley

Trust Nos. 1 to 5, a discretionary trust of which Stephen Hemsley and his family are potential beneficiaries.

240,000 Ordinary Shares are held in Stephen’s self invested pension plan.

(iii) 15,961,129 Ordinary Shares are held by RBC Trustees (CI) Limited (previously held by Abacus (CI) Limited

which merged with RBC Trustees (CI) Limited), 828,585 Ordinary Shares are held by Damor Investments

Limited, 177,600 Ordinary Shares are held by Abacus (Nominees) Limited and 137,600 Ordinary Shares are

held by S & F Nominees Limited, all of which are beneficially owned by the family trusts of Nigel Wray,

principal beneficiaries of which are Nigel Wray’s children. 19,377,404 shares are held by Syncbeam Limited, a

company wholly owned by Nigel Wray. 12,800 Ordinary Shares are held by Lucy and Joe Wray.

(iv) 48,000 Ordinary Shares are held by Brewin Dolphin Securities Limited on behalf of Michael Shallow.

(v) 48,000 Ordinary Shares are held in John Hodson’s self invested pension plan.

10.5 Reversionary interests and share options

(a) The Company has set up the EBT which operates a long-term incentive plan under which

senior executives of the Company may be incentivised by the grant to them of reversionary

interests over a portion of the assets of the trust.

(b) Reversionary interests over assets held in the EBT are capable of vesting within a five year

period should certain performance criteria be met, based on earnings per share and net profit

of the Company before tax (as further described in paragraph 15 (Share Option Schemes)

below).

(c) The following is a summary of the reversionary interests in the following number of Ordinary

Shares held by each of the executive Directors as at 13 May 2008 (the latest practicable date

prior to publication of this document):

No of ordinary shareswith reversionary interests

Director as at 13 May 2008

Stephen HemsleyGrant date27 April 2006 1,600,000

6 March 2007 1,600,000––––––––3,200,000

Christopher MooreGrant date27 April 2006 1,120,000

8 March 2007 1,120,000

22 February 2008 1,260,000––––––––3,500,000

Lee GinsbergGrant date31 October 2005 1,200,000

6 March 2007 400,000

22 February 2008 750,000––––––––2,350,000––––––––

Total 9,050,000

–––––––––(d) Save as disclosed in paragraphs 10.4 and this paragraph 10.5, immediately following

Admission, no Director nor any Connected Person will have any interest, whether beneficial or

non-beneficial, in the share or loan capital of the Company or any of its Subsidiaries. For the

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purposes of the Companies Acts, the Directors are considered to have an interest in Ordinary

Shares acquired by the EBT from time to time, as they are potential beneficiaries of the EBT.

10.6 Directors interests in transactions

(a) Save as disclosed in 10.6(b) and Paragraph 7 (Related Party Transactions) of this Part VIII, no

Director has or has had any interest in any transaction which is of an unusual nature, contains

unusual terms or is significant in relation to the business of the Group and which was effected

during the current or immediately preceding financial year or during any earlier financial year

and remains in any respect outstanding or unperformed.

(b) There are no potential conflicts of interest between any duties owed by the Directors to the

Company and their private interests and/or other duties.

(c) There are no loans or guarantees granted or provided by any member of the Group to or for the

benefit of any Director.

11. DIRECTORS’ SERVICE AGREEMENTS, REMUNERATION AND BENEFITS

11. 1 Directors’ service agreements

Agreements (or in the case of the Non-Executive Directors (except Colin Halpern), letters of

appointment) have been entered into between the Company and the Directors, the principal terms of

which are summarised below:

(a) Lee Ginsberg is employed by the Company in the post of Chief Financial Officer. He has

entered into a service agreement with the Company which is subject to termination by the

Company giving 12 months’ notice to Lee or Lee giving the Company 6 months’ notice.

During the financial year ended 30 December 2007, Lee received a salary of £180,000, was

provided with additional benefits to the total amount of £31,000, and the Company made

contributions in the total amount of £18,000 to his pension plan. The Company is obliged to

provide Lee with private medical insurance, permanent health insurance, life assurance and

travel insurance. In the financial year ended 30 December 2007, Lee received a bonus of

£180,000.

(b) Stephen Hemsley is employed by the Company in the post of Executive Chairman. He has

entered into a service agreement with the Company which is subject to termination by the

Company giving 12 months’ notice to Stephen or Stephen giving the Company 6 months’

notice. During the financial year ended 30 December 2007, Stephen received a salary of

£240,000, benefits to the total amount of £35,000, and the Company made contributions in the

total amount of £24,000 to his pension plan. The Company is obliged to provide Stephen with

private medical insurance, permanent health insurance, life assurance and travel insurance. In

the financial year ended 30 December 2007, Stephen received a bonus of £240,000.

(c) Christopher Moore is employed by the Company in the post of Chief Executive Officer. He has

entered into a service agreement with the Company which is subject to termination by the

Company giving 12 months’ notice to Christopher or Christopher giving the Company

6 months’ notice. During the financial year ended 30 December 2007, Christopher received a

salary of £200,000 was provided with benefits in the total amount of £24,000, and the

Company made contributions in the total amount of £19,000 to his pension plan. The Company

is obliged to provide Christopher with private medical insurance, permanent health insurance,

life assurance and travel insurance. In the financial year ended 30 December 2007, Christopher

received a bonus of £200,000. Christopher’s appointment was renewed at the AGM of the

Company held on 24 April 2008.

(d) Each of the service agreements referred to above imposes on the relevant Director an obligation

to retain the confidential nature of the Company’s confidential information and trade secrets.

Each service agreement contains post termination restrictive covenants which provide that the

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relevant Director may not, for a period of six months after the termination of his employment,

less any period spent on garden leave, be involved in any capacity in any business which

competes with that of the Company or for a period of 12 months solicit customers or employees

for the benefit of a business which competes with that of the Company or solicit or interfere

with the supply of goods from any suppliers to the Company for the benefit of a business which

competes with the Company.

(e) The Non-Executive Directors (other than Colin Halpern) are appointed on 3 year letters of

appointment with the Company terminable at one months notice by the Board.

(f) Nigel Wray has entered into a letter of appointment with the Company as a Non-Executive

Director, he was originally appointed on 15 November 1999. Nigel Wray is not directly

remunerated by the Company and instead a management fee is paid to Brendon Street

Investments Limited, a company of which Nigel is director, in respect of his services. During

the financial year ended 30 December 2007, Nigel received fees in the total amount of £28,000.

Nigel’s appointment was renewed at the AGM of the Company held on 24 April 2008.

(g) John Hodson has entered into a letter of appointment with the Company for his role as a Non-

Executive Director. He was originally appointed on 14 February 2005, however this initial term

expired on 14 February 2008 and was renewed at the AGM of the Company held on 26 April

2007. During the financial year ended 30 December 2007, John received fees in the total

amount of £30,000.

(h) Michael Shallow has entered into a letter of appointment with the Company dated 7 May 2008

for his role as a Non-Executive Director. During the financial year ended 30 December 2007,

Michael received fees in the total amount of £30,000.

(i) Dianne Thompson has entered into a letter of appointment with the Company dated 7 May

2008 for her role as a Non-Executive Director. During the financial year ended 30 December

2007, Dianne received fees in the total amount of £28,000.

(j) Pursuant to a management agreement dated 15 November 1999, Colin Halpern is seconded to

the Company from IFS. This agreement was subsequently novated to HS Real on 30 December

2007. The management fees are subject to annual review. During the financial year ended 30

December 2007, the Company paid a management fee of £240,000 (including expenses) in

respect of Colin’s services and Colin received a bonus of £100,000. Colin was appointed as

Non-Executive Vice Chairman of the Company at the beginning of 2008. Colin’s appointment

as a Non-Executive Director was renewed at the AGM of the Company held on 24 April 2008.

(k) There are no provisions in the agreements referred to in this paragraph 11.1 for compensation

payable upon early termination of any of the relevant Directors’ contracts or engagements. The

relevant Director may be entitled to submit a claim for damages for breach of contract should

his service contract or engagement be terminated early by the Company, in breach of contract.

(l) There are no service agreements existing or proposed between the Directors and the Company

or any of its subsidiaries which are not terminable within one year by the relevant party without

payment of compensation (other than statutory compensation).

(m) There is no arrangement under which any Director has agreed to waive future emoluments and

there has been no waiver of emoluments during the financial year immediately preceding the

date of this document.

(n) The aggregate remuneration and benefits in kind of the Directors of the Company in respect of

the financial year ended 30 December 2007 was £1,890,000. The aggregate remuneration and

benefits in kind of the Directors of the Group in respect of the financial year ending

31 December 2008 under the arrangements in force at the date hereof is expected to be

approximately £1,876,000. These figures include pension contributions made by the Company,

which totalled £61,000 during the financial year ended 2007.

207

12. SIGNIFICANT SHAREHOLDERS

12.1 In addition to the interests of Directors disclosed in paragraph 10.4 (Director’s interests in theCompany’s issued share capital) above, as at 13 May 2008 (being the latest practicable date prior to

the publication of this document) the Company is aware of the following existing shareholders of the

Company who will be interested, directly or indirectly, in 3 per cent. or more of the issued share

capital of the Company immediately following Admission:

Percentageof issuedOrdinary

Number of Share capitalOrdinary at date of this

Shareholder Shares document

William Blair & Company 7,925,120 4.86%

Domino’s Pizza UK & IRL plc Employee Benefit Trust(i) 7,337,696 4.51%

Moonpal Singh Grewal 7,124,516 4.38%

Standard Life Investments Limited 7,893,627 4.85%

(i) Ogier Employee Benefit Trustee Limited hold the shares as trustee of the Domino’s Pizza UK & IRL plc Employee

Benefit Trust.

12.2 Save as disclosed in paragraph 10.4 (Director’s interests in the Company’s issued share capital) and

paragraph 12.1 above, the Company is not aware of any person who will, immediately following

Admission, be interested directly or indirectly in 3 per cent. or more of the issued share capital of the

Company. The Company is not aware of any arrangements the operation of which may at a subsequent

date result in a change of control of the Company.

12.3 Those interested, directly or indirectly, in 3 per cent. or more of the issued share capital of the

Company will not have different voting rights from other holders of shares.

13. EMPLOYEES

13.1 The number of employees of the Group (excluding franchisees) analysed by category of activity

during each of the last three financial years ended 2007 was as follows:

2007 2006 2005Category of employee Number Number Number

Administration 145 130 120

Production and distribution 171 157 146

Store employees 317 306 408

TOTAL 633 593 674

13.2 Between 30 December 2007 and 13 May 2008 (the latest practicable date prior to the publication of

this document) the number of employees, their categories of activity and geographical location has

not changed materially.

13.3 The Group’s business is almost entirely franchised which means that the Group has a small central

team and a much larger group of franchisees. As at 30 December 2007, the number of franchisees and

team members in the franchisees’ stores was approximately 12,000.

14. CORPORATE GOVERNANCE

14.1 Board of Directors

The Board comprises eight members, five of whom are Non-Executive Directors and meets regularly

throughout the year. All necessary information is supplied to the Directors on a timely basis to enable

them to discharge their duties effectively. Additionally, special meetings take place or other

arrangements are made when Board decisions are required in advance of regular meetings. Certain

matters are reserved for consideration by the Board (with other matters delegated to Board

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committees). The Board is responsible for leading and controlling the Company and in particular for

formulating, reviewing and approving the Company’s strategy, budget, major terms of capital

expenditure, acquisitions and disposals and senior personnel appointments. The Directors hold regular

Board meetings at which operating and financial reports are considered.

The Company adheres to principles embodied in the Combined Code to the extent appropriate for a

company of its size and nature of business. Details of non-compliance within that code are set out at

paragraph 8 (Corporate Governance) of Part V of this document. At present, the Board delegates

specific responsibilities to the committees as described below.

14.2 The Audit Committee

The Audit Committee is responsible for ensuring that the financial performance of the Group is

properly reported on and monitored through, amongst other things, the planning and review of the

Group’s annual and interim financial statements and the supervision of its Auditors in the review of

such financial statements. The committee meets not less than four times a year and the Company’s

Auditors, the Chairman, the Chief Executive, and the Chief Financial Officer may attend and speak at

meetings of the Audit Committee. The Audit Committee focuses particularly on the Group’s

compliance with legal requirements, accounting standards and the Listing Rules and on ensuring that

effective systems for internal financial control and for reporting non-financial operating data are

maintained. The ultimate responsibility for reviewing and approving the annual report and accounts

and interim statements will remain with the Board.

The Combined Code recommends that the Audit Committee should comprise at least three or in the

case of smaller companies, two members, who should all be independent non-executive directors, and

that at least one member should have recent and relevant financial experience. As the Company moves

from a smaller company into a size that will take it into the FTSE 350 the Board will consider the

requirement to appoint an additional non-executive director to the Audit Committe. The Audit

Committee is currently chaired by Michael Shallow and its other member is John Hodson.

14.3 The Remuneration Committee

The Remuneration Committee is primarily responsible for reviewing the performance of the

Executive Directors and senior employees of the Company and setting the scale and structure of their

remuneration. This committee meets not less than twice a year and has responsibility for determining,

within agreed terms of reference, the Company’s policy on the remuneration of senior executives and

specific remuneration packages for Executive Directors, including pension rights and compensation

payments. It is also responsible for making recommendations for grants of options under the Share

Schemes.

The Combined Code provides that the Remuneration Committee should comprise at least three or in

the case of smaller companies, two members, all of whom are independent non-executive directors.

The Remuneration Committee is currently chaired by John Hodson and its other members are Dianne

Thompson and Michael Shallow.

14.4 Nomination Committee

The Nomination Committee assists the Board in discharging its duties in relation to the composition

of the Board. The Nomination Committee is responsible for evaluating the balance of skills,

knowledge and experience on the Board, the size, structure and composition of the Board, retirements

and appointments of additional and replacement Directors and must make appropriate

recommendations to the Board on such matters. The Committee meets not less than twice a year and

otherwise as required.

The Combined Code provides that a majority of the members of the Nomination Committee should

be independent non-executive directors. The Nomination Committee is chaired by Dianne Thompson

and its other members are Michael Shallow and Colin Halpern.

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14.5 Internal financial controls

The Directors have overall responsibility for ensuring that the Group maintains internal controls to

provide reasonable assurance on the reliability of the financial information used within the business

and for safeguarding the assets. There are limitations in any system of internal controls and

accordingly, even the most effective system can only provide reasonable and not absolute assurance

with respect to preparation of the financial information and the safeguarding of the assets.

The key elements of internal and financial controls are as follows:

(a) Control Environment – the presence of a clear organisational structure and well-defined lines

of responsibility and delegation of appropriate levels of authority.

(b) Risk Management – business strategy and plans are reviewed by the Board.

(c) Financial Reporting – a comprehensive system of budgets and forecasts with monthly reporting

of actual results against targets.

(d) Control and Monitoring Procedures – ensuring authorisation levels and procedures and other

systems of internal financial controls are documented, applied and regularly reviewed.

14.6 Going concern

The Directors are satisfied that the Group has adequate resources to continue in existence for the

foreseeable future and for this reason, they continue to adopt the going concern basis of preparing the

financial statements.

14.7 Charitable donations

During 2006, the Special Olympics replaced the successful two-year association with Make-A-Wish

Foundation® UK as the Group’s new charity of choice. The Special Olympics is a voluntary

organisation, which specialises in year-round, local-level sports training for people with learning

disabilities as well as local, national and international competition.

The Group is involved with two separate charities, Special Olympics GB and Special Olympics

Ireland, in order to create opportunities for involvement by team members, right across the system.

During 2007 the Group donated a lump sum of £21,000 to Special Olympics GB and £10,000 to

Special Olympics Ireland.

15. SHARE OPTION SCHEMES

15.1 Domino’s Pizza Group Limited (Unapproved) Share Option Scheme

On 31 March 1999, the Group introduced the Domino’s Pizza Group Limited (Unapproved) Share

Option Scheme (the “Old Scheme”) in order to provide employee share incentives in the future and

to motivate, retain and reward Directors, employees and consultants who by their efforts are able to

influence the performance and success of the Company’s business. Options were granted to eligible

employees (being employees and Directors of the Company and its Subsidiaries who were not within

2 years of their contractual retirement age and who were not otherwise excluded by the relevant

legislation) over the shares in DPG. Such options were exercisable only on the condition that certain

performance levels were achieved by the Company. Only a certain percentage of options granted

could be exercised in a given year and a single employee was only entitled to hold a certain aggregate

number of options in relation to their total earnings per year.

The Old Scheme has now been superseded by the Unapproved Scheme which was introduced

pursuant to the admission of the Company to trading on AIM on 24 November 1999. The terms of the

Unapproved Scheme are set out in paragraph 15.2 below and, except as otherwise set out in paragraph

15.2(b) (Rollover Options) are identical to that of the Old Scheme.

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A total of 13,240,465 options over the shares in DPG were granted under the Old Scheme. Following

the introduction of the Unapproved Scheme on 24 November 1999 (as described in paragraph 15.2

below) no further options were granted.

15.2 Domino’s Pizza Employee Share Option (Unapproved) Scheme and Domino’s Pizza EmployeeShare Option (Approved) Scheme (the “1999 Schemes”)

(a) General

Pursuant to the Placing and in accordance with resolutions of the Board passed on

15 November 1999, the Company introduced the Domino’s Pizza Employee Share Option

(Unapproved) Scheme (the “Unapproved Scheme”) and the Domino’s Pizza Employee Share

Option (Approved) Scheme (the “Approved Scheme”) (together with the Unapproved Scheme,

the “1999 Schemes”).

The terms of the Approved Scheme are identical in all material respects to the Unapproved

Scheme, unless stated herein otherwise. The Approved Scheme is approved by the Inland

Revenue under the Income and Corporation Taxes Act 1988 (which confers certain tax relief’s

on participants). As at 13 May 2008 (the latest practicable date prior to publication of this

document), no options have been granted under the Approved Scheme.

Benefits under the Approved Scheme and Unapproved Scheme are not pensionable.

(b) Rollover options

Pursuant to the Placing and the introduction of the 1999 Schemes, all participants in the Old

Scheme were offered the opportunity to release their options over shares in DPG (the “Old

options”) in return for equivalent shares in the Company under the Unapproved Scheme (the

“Rollover options”). Rollover options would be exercisable within the same timeframes as the

Old options, and were given the same values, exercise price and performance targets.

This offer was made in accordance with the Group re-organisation, pursuant to which the

Company acquired the entire issued share capital of DPG. The Old options became exercisable

on the acquisition by the Company of DPG, but only to the extent that the performance target

was satisfied. In addition, six months from the acquisition occurring, the Old options were to

lapse to the extent that they had not been exercised. The participants in the Old Scheme were

therefore offered options over shares in the Company in exchange for their Old options to avoid

the situation in which benefits attaching to the Old options would be lost.

Participants in the Old Scheme were asked to agree to waive all rights they may have had under

the Old options in return for DPG procuring the grant to them by the Company of the same

number of Rollover options to acquire Ordinary Shares in the Company. Every participant in

the Old Scheme accepted this offer and agreed to hold. Rollover options under the Unapproved

Scheme on identical terms to the Old options surrendered.

(c) Eligibility under the 1999 Schemes

The 1999 Schemes are open to employees or full-time Directors of the Company and its

Subsidiaries (i.e. those who are obliged to work at least 25 hours a week in one or more Group

companies) and who are not otherwise excluded by the relevant legislation.

(d) Options under the 1999 Schemes

Options (which may relate to new or existing shares) can only be granted under the 1999

Schemes within the 6 weeks of the announcement by the Company of its final and/or interim

results for any period, or at any other times which the Directors consider to be sufficiently

exceptional. Options were also granted prior to the Placing and in the 6 week period following

the Placing.

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No payment is required for the grant of an option. Options are not transferable other than

where, by virtue of a participant’s death, they may be exercised by his personal representatives.

No options may be granted under the 1999 Schemes in any year which would cause the number

of shares in the Company issued or issuable under all share options granted in the previous 10

years, or issued in that period otherwise than pursuant to options, under the 1999 Schemes or

any other employees’ share scheme adopted by the Company, to exceed 10 per cent. of the

Company’s issued ordinary share capital at that time. Options granted on or prior to the

Placing, or options granted in return for the release of those held under the Old Scheme, are

not counted for these purposes.

(e) Limit on Individual Participation in the 1999 Schemes

Save where the Remuneration Committee determines otherwise, no option may be granted to

an individual if, at the time it is granted, it would cause the aggregate market value (as at the

date of grant) of the shares which he may acquire pursuant to options granted in the preceding

10 years, under the 1999 Schemes or any other share option scheme adopted by the Company,

to exceed 4 times his annual earnings. Options which have been released continue to count

against the individual’s entitlement, but options that have been exercised and options granted

on or prior to the Placing or options granted in return for the release of those held under the

Old Scheme, are excluded.

The aggregate market value (as at the date of grant) of shares under option to an individual at

any given moment pursuant to the Approved Scheme or any other approved executive share

option scheme established by the Company or an associated company shall not exceed

£30,000.

(f) Exercise Price of options

The price per Ordinary Share payable on the exercise of an option will not be less than the

higher of:

(i) Under the Approved Scheme:

(A) the market value of a share in the Company, as agreed with the Inland Revenue;

or

(B) should the Company become fully listed on the London Stock Exchange, the

middle market quotation of a share in the Company,

in either case on the day before the option is granted or such other day as may be agreed

with the Inland Revenue.

(ii) Under the Unapproved Scheme:

(A) the middle-market quotation for an Ordinary Share as derived from the Daily

Official List of the London Stock Exchange; or

(B) should the Company’s shares not appear in the Daily Official List, the value of a

share as reasonably determined by the Directors,

in either case on the day before the option was granted or some other day within the

30 days beforehand determined by the Directors.

In any event the price may not be less than the nominal value of an Ordinary Share if the

option is expressed to relate solely to new Ordinary Shares.

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(g) Exercise of options

The exercise of options granted under the 1999 Schemes depends on certain performance

conditions being reached by the Company. The remuneration committee is responsible for

management of the 1999 Schemes and has resolved that the exercise of options granted under

the 1999 Schemes will be subject to the condition that the growth in basic earnings per share

(“EPS”) in any financial year between the grant and exercise of the options exceeds the growth

in the Retail Price Index (“RPI”) in the previous financial year by at least 5 per cent.

For these purposes:

(i) On the date of grant, the Company’s EPS shall be based on the audited accounts for the

period ended immediately prior to the date of grant and the RPI shall be the figure for

the month to which those audited accounts are made up;

(ii) For each subsequent year, the Company’s EPS shall be based on the Company’s audited

accounts for that year and the RPI shall be the figure for the month to which those

audited accounts are made up; and

(iii) The RPI is the general index of retail prices (for all items) published by the Department

of Employment or, if that index is not published for the month in question, any

substituted index or index figures published by the Department of Employment.

The Directors may make adjustments to the method of calculating EPS to take account of any

factors considered by the Directors to be relevant.

An option may only be exercised in respect of:

(i) The first 331/3 per cent. of the Ordinary Shares comprised in that option if the

performance condition is satisfied for the first of the 3 years comprising the 3 year

period;

(ii) The next 331/3 per cent. of the Ordinary Shares comprised in that option if the

performance condition is satisfied in respect of the second of the 3 years comprising the

3 year period; and

(iii) The final 331/3 per cent. of the Ordinary Shares comprised in that option if the

performance condition is satisfied in respect of the last of the 3 years comprising the

3 year period.

Options normally lapse on cessation of employment. However, exercise is permitted:

(i) following cessation of employment in certain compassionate circumstances; otherwise

only at the Directors’ discretion; and

(ii) on a reconstruction, takeover or winding-up of the Company.

In such cases the performance conditions cease to apply, except that they continue to apply in

the case of normal retirement and the Directors have discretion as to whether they shall

continue to apply in the case of a reconstruction, takeover or winding-up.

(h) Rights attaching to shares

All Ordinary Shares allotted under the 1999 Schemes will rank equally with all other Ordinary

Shares of the Company for the time being in issue (except for any rights arising by reference

to a record date before the date of allotment).

(i) Variation of capital

In the event of any increase or variation of share capital, or (except in the case of the Approved

Scheme) of the payment of a capital dividend or of any other circumstances similarly affecting

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options, the Directors may make such adjustments as they consider appropriate to the number

of shares subject to options and the price payable on their exercise.

(j) Alterations to the 1999 Schemes

The Directors may at any time alter or add to the 1999 Schemes in any respect, provided that

the prior approval of the Company in general meeting is obtained for alterations or additions to

the advantage of participants to the rules governing eligibility, limits on participation, terms of

exercise, non-assignability of options and adjustment of options. Such prior approval is not

required for minor amendments for administrative advantage, to take account of a change in

legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for

participants or Group companies. Also, the above does not restrict the ability of the Directors

to adjust performance conditions to take account of supervening events (e.g. a variation of

share capital).

(k) Options granted

As at 13 May 2008, a total of 33,979,756 options have been granted pursuant to the

Unapproved Scheme. No options have ever been granted pursuant to the Approved Scheme.

During the financial year ended 30 December 2007, 1,090,536 options were granted. The

weighted average fair value of each option granted was 28.1p.

15.3 The EMI Scheme

(a) General

The Company established the Domino’s Pizza UK & IRL plc 2003 Enterprise Management

Incentive Scheme (the “EMI Scheme”) on 4 September 2004.

Benefits under the EMI Scheme are not transferable (except on death, to personal

representatives) and are not pensionable.

(b) Grants of options

Options may be granted during a 42-day period following shareholders’ approval and any

announcement of the Company’s interim and final results, and outside these periods if the

Remuneration Committee resolves that exceptional circumstances exist. Options may also be

granted during the period of 14 days from an individual first becoming an employee.

No options may be granted when there is a restriction on dealing pursuant to the Model Code

on directors’ dealings in securities as set out in the Listing Rules.

No options may be granted more than 10 years after the approval of the EMI Scheme by

shareholders.

The Board may grant options to subscribe for or purchase Ordinary Shares and the Trustee of

the Company’s employee share trust (with the agreement of the Board) may grant options to

purchase Ordinary Shares to eligible employees.

Eligible employees are all employees and executive directors of the Group who are required to

devote at least 25 hours per week or, if less, 75 per cent. of their working time to the Group.

(c) Option Exercise Price

The price per Ordinary Share at which options to subscribe may be exercised may not be less

than the nominal value of an Ordinary Share.

(d) Plan limits

The total number of unissued Ordinary Shares over which options may be granted when

aggregated with the total number of Ordinary Shares issued pursuant to share awards or made

issuable pursuant to options granted under any employees’ share scheme in the ten years

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immediately preceding the date upon which an option is granted, shall not exceed ten per cent

of the Company’s issued Ordinary Shares at the date of grant.

No options may be granted if the gross assets of the Company are more than £30 million.

(e) Limits on participation by employees

The maximum value of Ordinary Shares (as at the relevant dates of grant) over which an

individual may be granted options under the EMI Scheme when aggregated with any other

options granted under the EMI Scheme in the preceding three years shall not exceed £100,000

(or such other limit as appears from time to time in the relevant legislation).

(f) Performance Conditions

The Board may impose objective conditions on the exercise of options and these performance

conditions are specified at the date of grant. Existing options may be exercised if the

Company’s growth in EPS exceeds the growth in RPI by 5 per cent. per year.

(g) Exercise of options

Options may be exercised in whole or in part on or after the date specified by the Board at the

date of grant if the performance targets have been met. For the existing options, the Board

specified that they may, under normal circumstances, be exercised as follows:

• in respect of one-third of the shares following the first anniversary of the date of grant;

and

• in respect of a further one-third of the shares following the second anniversary of the

date of grant; and

• in respect of the final one-third of the shares following the third anniversary of the date

of grant

provided that the performance conditions have been met.

Options may be exercised earlier:

• if an option holder dies; or

• if an option holder ceases to be employed by a Group company due to injury, ill health,

disability, redundancy or retirement (approved options only); or

• if the option holder’s employing company or business is transferred outside the Group

(approved options only); or

• if the option holder ceases employment for any other reason and the Board agrees to the

exercise of his options; or

• if the Company is taken over, or there is a scheme of arrangement or a voluntary winding

up.

(h) Lapse

Options lapse on the earliest of the following events:

• the tenth anniversary of the date of grant; or

• the first anniversary of the option holder’s death; or

• six months after the date on which the option becomes exercisable for one of the reasons

detailed in (g) above; or

• the end of the specified period following a take over; or

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• an option holder being declared bankrupt; or

• the surrender of the option.

(i) Issue of shares

Options may be granted over new or existing Ordinary Shares. Ordinary Shares will be allotted

or transferred to a participant no later than 30 days following the exercise of an option.

Ordinary Shares allotted upon the exercise of an option will, upon the holder’s name being

entered on the Company’s register of members, rank equally with the then issued Ordinary

Shares (save for any entitlements accruing to shares by reference to a record date preceding the

date of entry on the register of members).

(j) Change of control

If there is a change of control of the Company, option holders may, with the consent of the

acquiring company, exchange options over Ordinary Shares for new options of an equivalent

value over shares in the acquiring company.

(k) Variation of share capital

Subsisting options granted under the EMI Scheme may be adjusted to reflect variations in the

Company’s share capital.

(l) Amendments

The Board may amend the rules of the EMI Scheme provided that provisions relating to

eligible employees, the limits on the number of Ordinary Shares which may be utilised under

the EMI Scheme, the maximum entitlement of any participant and the basis on which options

may be adjusted to the advantage of option holders may not be altered without the prior

approval of shareholders of the Company in a general meeting (except for minor amendments

which benefit the administration of the EMI Scheme, or to take account of changes in

legislation or to maintain favourable tax, regulatory or exchange control treatment).

(m) Other

Participants in the EMI Scheme are not entitled to compensation for loss of options due to

termination of their office or employment and their rights and obligations are not affected by

participation in the EMI Scheme.

15.4 The Sharesave Plan

(a) General

The Company established the Domino’s Pizza UK & IRL plc Savings Related Share Option

Plan (the “Sharesave Plan”) on 30 November 2005.

The Directors supervise the operation of the Sharesave Plan.

Benefits under the Sharesave Plan are not transferable (except on death) and are not

pensionable.

(b) Eligibility

All employees, including full-time executive directors, of the Company and its UK subsidiaries

are eligible to participate in the Sharesave Plan following a qualifying period of employment.

The Directors have the discretion to invite other employees (who are not automatically eligible)

to join.

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(c) Grant of options

Invitations to apply for options may be distributed within six weeks following the preliminary

announcement of the Company’s final or the announcement of the Company’s interim results;

following the announcement of changes to relevant legislation; following the date on which a

new savings contract prospectus is announced or takes effect; and at other times under

exceptional circumstances.

No options may be granted more than 10 years after the approval of the Sharesave Plan by

shareholders.

(d) Option price

The price at which a participant may subscribe for shares on the exercise of an option shall not

be less than the greater of

• the nominal value of a share; and

• 80 per cent. of the market value of a share on the dealing day preceding the date of

invitation.

The price is subject to adjustment as specified in paragraph (i) below.

(e) Limits on the grant of options

The total number of unissued Ordinary Shares over which options may be granted when

aggregated with the total number of Ordinary Shares issued pursuant to share awards or made

issuable pursuant to options granted under any employees’ share scheme in the ten years

immediately preceding the date upon which an option is granted, shall not exceed ten per cent

of the Company’s issued Ordinary Shares at the date of grant.

(f) Limits on participation by employees

An option holder must take out a savings contract under which regular savings contributions

will be made over three years, which are (together with any bonus or interest) sufficient to

acquire the Ordinary Shares under the option. The monthly savings amount, when aggregated

with the amount which an employee is saving at any time under any other contracts, may not

be more than the statutory maximum, currently £250, nor less than the statutory minimum,

currently £5.

(g) Exercise of options

An option may usually be exercised in the six months after the end of the three-year savings

period.

Options may be exercised early in the event of injury, disability, retirement or redundancy.

Options may also be exercised in the event of a takeover, scheme of arrangement or voluntary

winding up of the Company. Alternatively, on a takeover, if the acquiring company agrees,

participants may exchange their options for options of a similar value over shares in the

acquiring company or its parent.

Where options are exercised early, they may only be exercised using the proceeds of the

savings contract at the time.

(h) Issue of shares

Options may be granted over new or existing Ordinary Shares. Ordinary Shares will be allotted

or transferred to a participant no later than 30 days following the exercise of an option.

Ordinary Shares allotted upon the exercise of an option will, upon the holder’s name being

entered on the Company’s register of members, rank equally with the then issued Ordinary

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Shares (save for any entitlements accruing to shares by reference to a record date preceding the

date of entry on the register of members).

(i) Capital re-organisation

If the issued share capital of the Company is varied on a capitalisation issue, rights issue or sub-

division, consolidation or reduction of capital, the directors may, on the advice of the

Company’s auditors, adjust the number of Ordinary Shares comprised in each option and/or the

relevant option price. No such adjustment may be made without the prior approval of HMRC.

(j) Amendments

The Directors may amend the Sharesave Plan provided that:

• no amendments may adversely affect a participant as regards options granted before the

date of amendment without his consent;

• no amendment to a key feature shall take effect without the prior approval of HMRC.

(k) Other

Participants in the Sharesave Plan are not entitled to compensation for loss of options due to

termination of their office or employment and their rights and obligations are not affected by

participation in the Sharesave Plan.

2005

Dividend yield (%) 3.75

Expected volatility (%) 17.0

Historical volatility – 250 day (%) 28.1

Risk-free interest rate (%) 4.2

Expected life of reversionary interests (years) 3.3

Weighted average exercise price (pence) 75.88

Weighted average share price (pence) 75.88

The expected life of the options is based on an average of exercise period, which is between

three to three and a half years.

The expected volatility reflects the assumption that the historical volatility is indicative of

future trends, which may also not necessarily be the actual outcome. No other features of

options were incorporated into the measurement of fair value, and non-market conditions have

not been included in calculating the fair value.

There were no options granted in the financial year ended 30 December 2007. The weighted

average fair value of each option granted in 2005 was 20.6p.

All of the Executive Directors are saving the maximum amount (£250 per month) which will

entitle them to 12,320 shares after the three year term.

15.5 The Employee Benefit Trust

(a) The Company has established Domino’s Pizza UK & IRL plc Employee Benefit Trust (“EBT”)

for the benefit of employees.

(b) The Employee Benefit Trust operates a long-term incentive plan under which senior executives

may be incentivised by the grant to them of reversionary interests over a portion of the assets

of the trust.

(c) Awards have previously been made to senior executives of the Company under the terms of the

current LTIP arrangement, at the discretion of the trustees upon the recommendation of the

Remuneration Committee. Future Awards may be considered by the trustees, again at the

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recommendation of the Company, to senior executives of the Company, however, these will be

made under the terms of the new LTIP arrangement, revised to take account of guidelines laid

down by the Association of British Insurers with regard to the remuneration of senior

employees and executives.

Current LTIP arrangements

General

(a) The EBT operates a long term incentive plan (“LTIP”) under which senior executives may be

incentivised by the grant to them of reversionary interest over a portion of the assets of the trust.

These interests are capable of vesting within a five year period, only if a strict and objective

performance criteria as recommended by the Remuneration Committee to the trustees of the

EBT (see below), is achieved.

(b) Upon the vesting of an LTIP award the senior executives are only entitled to the increase in

value as represented by the LTIP award, above the market value of the respective portion of the

assets of the EBT, from the original date of the LTIP award. If within the specified Employment

Period the senior executive ceases to hold any office or employment within the Group for any

reason other than retirement, ill health or disability, redundancy or the transfer of the

employment outside of the Group, the LTIP award will lapse. Should the senior executive cease

employment for any of the aforementioned reasons, he/she will be deemed a Good Leaver

under the terms of the LTIP and will be entitled to a proportionate vesting of their LTIP award,

provided that the overall performance criteria is met.

Vesting of an LTIP Award

(c) If at the date of vesting the EBT fund consists of Ordinary Shares in the Company, the trustees

of the EBT shall endeavour to satisfy the LTIP awards via the delivery of Ordinary Shares to

the senior executives in satisfaction of their respective LTIP awards.

Performance Condition

(d) The Remuneration Committee currently proposes to the trustees of the EBT a Performance

Condition based on earnings per share (“EPS”) and the Company’s profit before tax (“PBT”),

for their consideration. The Company’s EPS is compared by the Board at the end of each

Financial Year (“FY”) throughout the Performance Period with the Performance Condition,

until the earlier of the end of the Performance Period or such time as the Performance

Condition is met.

(e) If at any time during the Performance Period the EPS and PBT targets set are achieved, then

the Performance Condition is deemed to be met. As such, the LTIP award will no longer be

subject to the Performance Condition and will vest.

(f) If at any time during the Performance Period the senior executive becomes a Good Leaver,

or a Relevant Transaction should occur, a proportion of the LTIP award will vest, provided

that during the period commencing on the date on which the holder of an LTIP award

becomes a Good Leaver or the occurrence of a Relevant Transaction and ending on the

publication of the results of the Company for the fifth FY following the date of grant, the

Performance Condition is satisfied in full. For the avoidance of doubt an LTIP award or a

proportion thereof will not vest, until such time as the last of the Conditions is met and the

results of the Group for the fifth FY following the date of grant of the LTIP award have been

published.

(g) Should a senior executive become a Good Leaver and/or a Relevant Transaction take place

during the first half of the FY, the growth in the Company’s EPS is measured by reference to

the latest available audited financial statements. Alternatively, should a senior exective become

a Good Leaver and/or a Relevant Transaction take place during the second half of the FY, the

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growth in the Company’s EPS is measured by reference to the next available audited financial

statements.

Limits

(h) There are currently no overall or individual limits under the LTIP with regard to the awards.

(i) During the financial year ended 30 December 2007, further reversionary interests were granted

over 5,200,000 shares in the Company. As at 30 December 2007, the Trust held 6,609,878

shares, which had a historic cost of £4,402,810 on a market value of £11,352,465.

(j) As at 30 December 2007, reversionary interests in the over 11,632,000 shares in the Company

had been granted. Details of the reversionary interests held by the Executive Directors of the

Company are set out at paragraph 10.5 (Reversionary interests and share options) of this

document.

(k) The reversionary interests are capable of vesting provided that certain performance criteria

have been reached in respect of diluted EPS. Detailed below are the performance criteria to be

satisfied before reversionary interests currently held by the Executive Directors may vest:

Interestrepresented

Target by suchGrant price Target Net profit number

Grant date per interest Diluted EPS before tax of shares

31 October 2005 92.19p 8.44p £20,000,000 1,200,000

27 February 2006 130.16p 9.66p £22,300,000 480,000

27 April 2006 151.56p 9.66p £22,300,000 2,720,000

16 May 2006 146.97p 9.66p £22,300,000 320,000

6 March 2007 210.00p 12.50p £28,600,000 5,200,000

22 February 2008 212.0p 16.40p £37,000,000 3,790,000–––––––––

Totals 13,710,000

–––––––––15.6 The New Long Term Incentive Plan (“the New LTIP”)

(a) Operation

The Domino’s Pizza UK & IRL plc new Reversionary Interest Arrangement is also referred to

as the new long-term incentive plan, (“the New LTIP”).

Awards under the New LTIP may be granted by the trustee (the “Trustee”) of the Domino’s UK

& IRL plc Employee Benefit Trust (the “Trust”), following a recommendation from the

Remuneration Committee of the Board (the “Committee”). However, the Trustee shall not be

bound to follow any such recommendation.

The adoption of the Trust was approved by shareholders of the Company on 4 September 2003.

The New LTIP has been approved by the Trustee in its revised form.

(b) Eligibility

Any employee (including an executive director) of the Company and its subsidiaries will be

eligible to participate in the New LTIP, at the discretion of the Trustee.

(c) Awards under the New LTIP

The Trustee may make a New LTIP award over a proportion of the assets held by the Trust. The

participant will be entitled to the future growth in value of the assets comprised in such an

award, subject to the requirement for continued employment and the satisfaction of challenging

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performance conditions. Each award will be represented by a pre-determined number of

Ordinary Shares.

The assets representing each award will be allocated within the Trust for the purposes of the

award. The number of Ordinary Shares representing an award may be adjusted in the event of

a variation of capital or a similar event which affects Ordinary Shares generally.

Each award will be governed by a single deed of appointment made by the Trustee in favour of

the participant.

New LTIP awards may be granted within the period of six-weeks following the Company’s

announcement of its results for any period or at any other time when the Trustee (following

consultation with the Committee) determines there are exceptional circumstances which justify

the granting of awards.

A New LTIP award may not be granted more than 10 years after the Trust, in conjunction with

which the New LTIP operates, was initially approved by shareholders (in 2003).

No payment is required for the grant of an award. Awards are not transferable except on death

or to a permitted transferee (broadly, an immediate relative or family trust of the participant).

Awards are not pensionable.

(d) Individual limit

In any financial year, an employee may not receive an award representing assets having a value

in excess of 300 per cent. of his annual base salary in that financial year. In exceptional

circumstances, such as recruitment or retention, this limit is increased to 600 per cent. of an

employee’s annual base salary.

The current intention is that, in a financial year, awards will not normally be granted to an

eligible employee in respect of assets with a value exceeding 100 per cent. of annual base

salary and 100 per cent. of bonus paid for the previous financial year.

(e) Performance conditions

The vesting of the New LTIP awards will be subject to performance conditions.

The current intention is that the first grant of New LTIP awards to be made after Admission will

be subject to a performance condition based on average annual compound growth in the

Company’s adjusted earnings per share (“EPS”) over a three-year performance period.

This first grant of New LTIP awards will vest as follows:

Average annualcompound EPS growth Level of vesting

Less than RPI + 9% 0%

RPI + 9% 25%

RPI + 12% (or better) 100%

Between RPI + 9% and RPI + 12% Straight-line vesting between 25% and 100%

The Trustee may, following consultation with the Committee, set different performance targets

from those described above for future awards provided that, in the reasonable opinion of the

Committee, the new targets are not materially less challenging in the circumstances than those

described above.

The Trustee may, with the consent of the Committee and the participant, vary the performance

conditions applying to an existing award, without prior shareholder approval, if an event has

occurred which causes the Trustee to consider that it would be appropriate to amend the

performance conditions, provided the Trustee considers the varied conditions are fair and

reasonable and not materially less challenging than the original conditions would have been but

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for the event in question. However, the Trustee, with the consent of the Committee and the

participant, shall be required to amend the performance condition (to the extent necessary) in

the event of any variation in share capital so as to ensure that the participant is not adversely

affected in any way.

(f) Vesting of the New LTIP awards

The New LTIP Awards normally vest three years after grant to the extent that the applicable

performance conditions (see above) have been satisfied and provided the participant is still

employed in the Company’s group.

(g) Leaving employment

As a general rule, an award will lapse upon a participant ceasing to hold employment or be a

director within the Company’s group.

However, if a participant ceases to be an employee or a director because of his death, ill-health,

disability, redundancy, retirement or his employing company or the business for which he

works being sold out of the Company’s group then his award will vest on the date when it

would have vested if he had not ceased such employment or office, subject to the performance

conditions measured at that time.

(h) Corporate events

In the event of (i) a takeover or winding up of the Company (not being an internal corporate

reorganisation) or (ii) a demerger, special dividend or other similar event which the Board

determines would substantially affect the current or future value of awards, all awards will vest

early subject to the extent that the performance conditions have been satisfied at that time (or,

in the reasonable opinion of the Trustee (following consultation with the Committee), would

have been likely to have been met had the performance period run its full course).

(i) Overall New LTIP limits

The assets over which awards may be awarded may include new issue Ordinary Shares,

treasury shares or Ordinary Shares purchased in the market.

In any ten calendar year period, the Company may not issue (or grant rights to issue) more than

10 per cent of the issued ordinary share capital of the Company under the New LTIP and any

employee share plan adopted by the Company.

Treasury shares will count as new issue Ordinary Shares for the purposes of this limit unless

institutional investors decide that they need not count. For the avoidance of doubt, Ordinary

Shares purchased in the market (other than treasury shares) will not count towards this limit.

Ordinary Shares issued or to be issued under awards or options granted before the Company

was admitted to trading on the Alternative Investment Market will not count towards this limit.

The Trust will not hold more than 5 per cent. of the issued ordinary share capital of the

Company without (i) prior shareholder approval or (ii) agreeing in writing to waive the voting

rights in respect of Ordinary Shares held in excess of 5 per cent. of the issued ordinary share

capital of the Company.

(j) Alterations to the New LTIP

The Trustee may, with the consent of the Committee, at any time, amend the New LTIP in any

respect, provided that the prior approval of shareholders is obtained for any amendments that

are to the advantage of participants in respect of the rules governing eligibility, limits on

participation, the overall limits on the issue of Ordinary Shares or the transfer of treasury shares

and the basis for determining a participant’s entitlement to, and the terms of, the Ordinary

Shares or cash to be acquired.

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The requirement to obtain the prior approval of shareholders will not, however, apply to any

minor alteration made to benefit the administration of the New LTIP, to take account of a

change in legislation or to obtain or maintain favourable tax, exchange control or regulatory

treatment for participants or for any company in the Group.

15.7 Pensionability

No benefits received under any of the share option schemes described at paragraphs 15.1 to 15.6

above are pensionable.

16. PROPERTY, PLANT AND EQUIPMENT

16.1 The principal property of the Group is at Lasborough Road, Kingston, Milton Keynes MK10 0AB and

is a freehold office block and commissary. The freehold of this property is held by DP Group

Developments Limited, a Subsidiary of the Company.

16.2 As at 13 May 2008 (being the latest practicable date before publication of this document), the Group

has a total of 515 stores in operation, the vast majority of which are leased by franchisees.

16.3 During 2008, the Group will acquire freehold land for a new commissary and headquarters in Milton

Keynes and construction of this new site is expected to be completed towards the end of 2009. Project

costs of £25,000,000 are expected to be incurred. The Group has obtained a credit facility from

Barclays Bank plc in order to fund this project, details of which are provided at paragraph 18.3(d)

(New financing arrangements) of this Part VIII.

16.4 The Group intend to expand their existing commissary at Penrith during 2008 at an expected cost of

£4,000,000, which will double the capacity of that facility.

16.5 The Group operate a commissary in Naas, in the Republic of Ireland. The Group are looking to

expand this commissary in the future in order to meet increasing demand for the Group’s products in

Ireland.

16.6 The Group are also looking to establish a fourth commissary in the UK within the next 5 to 7 years,

thereby completed the structure anticipated as required for the desired eventual expansion of the

Group to 1,000 stores.

17. UNITED KINGDOM TAXATION

The following statements are intended only as a general guide to current UK tax legislation and to the current

practice of HM Revenue & Customs (“HMRC”) and may not apply to certain shareholders in the Company,

such as dealers in securities, insurance companies and collective investment schemes. They relate (except

where stated otherwise) to persons who are resident and ordinarily resident in the UK for UK tax purposes,

who are beneficial owners of Ordinary Shares and who hold their Ordinary Shares as an investment. Any

person who is in any doubt as to his or her tax position, or who is subject to taxation in any jurisdiction other

than that of the UK, should consult his or her own professional advisers immediately.

17.1 Dividends

(a) Under UK tax legislation, the Company is not required to withhold tax at source from dividend

payments it makes.

(b) Individual shareholders resident for tax purposes in the UK should generally be entitled to a

tax credit in respect of any dividend received equal to one-ninth of the amount of the dividend.

(c) An individual shareholder’s liability to income tax will be calculated on the sum of the dividend

and the tax credit (the “gross dividend”). This will be regarded as the top slice of the

individual’s income and will be subject to UK income tax at the rates described below.

(d) The tax credit equals 10 per cent. of the gross dividend. The tax credit will be available to set

against a shareholder’s liability (if any) to income tax on the gross dividend.

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(e) Individual shareholders liable to income tax at the starting, lower or basic rate will be liable to

income tax on dividend income received at the rate of 10 per cent. of the gross dividend. This

means that the tax credit will satisfy the income tax liability of a UK resident individual

shareholder liable to pay income tax at the starting, lower or basic rate.

(f) The rate of income tax applied to dividends received by a UK resident individual liable to

income tax at the higher rate will be 32.5 per cent. After taking into account the 10 per cent.

tax credit, a higher rate taxpayer will be liable to additional income tax of 22.5 per cent. of the

gross dividend, equal to 25 per cent. of the net dividend.

(g) Trustees who are liable to income tax at the rate applicable to trusts (currently 40 per cent.) will

pay tax on the gross dividend at the dividend trust rate of 32.5 per cent. against which they can

set the tax credit. To the extent that the tax credit exceeds the trustees’ liability to account for

income tax the trustees will have no right to claim repayment of the tax credit.

(h) A corporate shareholder resident for tax purposes in the UK will not normally be liable to

corporation tax on any dividends received, but cannot claim payment of the tax credit from

HMRC.

(i) United Kingdom pension funds and charities are generally exempt from tax on dividends which

they receive but they are not entitled to claim repayment of the tax credit.

(j) Individual shareholders who are resident for tax purposes in countries other than the UK but

who are Commonwealth citizens, nationals of states which are part of the European Economic

Area, residents of the Isle of Man or the Channel Islands or certain other persons are entitled

to a tax credit as if they were resident for tax purposes in the UK which they may set off against

their total UK income tax liability. Such shareholders will generally not be able to claim

payment of the tax credit from HMRC.

Other shareholders who are not resident in the UK for tax purposes should consult their own

advisers concerning their tax liabilities on dividends received. They should note that they will

not generally be entitled to claim payment of any part of their tax credit from HMRC under any

double taxation treaty or otherwise or such claim may be negligible.

17.2 Chargeable gains

A subsequent disposal of shares may result in a liability to taxation of chargeable gains, depending

upon individual circumstances.

17.3 Stamp duty and stamp duty reserve tax (“SDRT”)

(a) The statements below are intended as a general guide to the current position. They do not apply

to certain intermediaries who are not liable to stamp duty or SDRT, and special rates may apply

to persons connected with depository arrangements or clearance services.

(b) In relation to stamp duty and SDRT.

(i) The issue of Ordinary Shares will not give rise to a liability to stamp duty or SDRT.

(ii) Any subsequent conveyance or transfer on sale of Ordinary Shares will usually be

subject to stamp duty on the instrument of transfer at a rate of 0.5 per cent. of the amount

or value of the consideration (rounded up, if necessary, to the nearest £5). A charge to

SDRT at the rate of 0.5 per cent. will arise in relation to an unconditional agreement to

transfer such shares. However, where within six years of the date of the agreement (or,

if the agreement was conditional, the date the agreement became unconditional) an

instrument of transfer is executed pursuant to the agreement and stamp duty is paid on

that instrument, any liability to SDRT will be cancelled or repaid.

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(iii) A transfer of Ordinary Shares effected on a paperless basis through CREST (where there

is a change in the beneficial ownership of the Ordinary Shares) will generally be subject

to SDRT at the rate of 0.5 per cent. of the value of the consideration given.

(c) Where Ordinary Shares are issued or transferred to (a) a person, or a nominee for a person,

whose business is or includes the provision of clearance services or (b) a person, or a nominee

for a person, whose business is or includes issuing depository receipts, stamp duty or SDRT

will generally be payable at a higher rate of 1.5 per cent. of the amount or value of the

consideration payable, or in some circumstances, 1.5 per cent. of the value of the Ordinary

Shares. This liability for stamp duty or SDRT will strictly be payable by the depositary or

clearance service operator or their nominee, as the case may be, but will, in practice, generally

be reimbursed by participants in the clearance service or depositary receipt service. Subsequent

dealings in Ordinary Shares which are in the form of depository receipts or held in a clearance

service and on which the 1.5 per cent. charge has been paid are generally free of stamp duty

and SDRT.

(d) The above statements are intended as a general guide to the current position. Certain categories

of person are not liable to stamp duty or SDRT, and others may be liable at a higher rate or may,

although not primarily liable for the tax, be required to notify and account for it under the

Stamp Duty Reserve Tax Regulations 1986, as amended. Special rules apply to agreements

made by market intermediaries and to certain sale and repurchase arrangements and stock

borrowing arrangements.

18. MATERIAL CONTRACTS

Save as disclosed below, no member of the Group has entered into any material contract, not being a contract

entered into in the ordinary course of business, since its incorporation nor has any member of the Group

entered into any other contract, not being a contract entered into in the ordinary course of business, which

contains any provision under which any member of the Group has any obligation or entitlement which is

material to the Group as at the date of document:

18.1 UK Master Franchise Agreement

(a) Pursuant to the Master Franchise Agreement, DPG has exclusive rights to develop, operate and

sub-licence Domino’s Pizza Stores, and to use and sub-licence the use of the “Domino System”

(as per the operating manual) and the associated trademarks in the operation of the stores in the

UK, Northern Ireland and the Republic of Ireland (the “Territory”) for the development term.

The current development term lasts until 31 December 2016 (the “Development Term”). This

term was originally due to expire on 31 December 2003, however was extended by the sixth

amendment agreement entered into by the parties on 21 July 2003 and again by the seventh

amendment agreement entered into by the parties on 20 September 2006 (the “Seventh

Amendment Agreement”). The Development Term may be renewed provided that DPG is in

compliance with all the material terms of that agreement. Under the renewal process, DPG has

the option to request a right to grant franchises for an additional Development Term of ten

years.

The Master Franchise Agreement was assigned by DPII to DPIF on 16 April 2007.

If the Development Term or a renewed Development Term expires or is terminated by DPIF in

the event that DPG fails to meet the minimum development quotas (being the sole termination

event of the Development Term), DPG continues to have Operation Rights (as defined below)

and has the right to continue to act as franchisor with respect to the franchise agreements

entered into prior to expiration of the Development Term or termination of the Development

Term as aforesaid. However, DPG has no further rights to grant any franchises or enter into any

franchise agreements (other than upon an assignment or renewal of an existing franchise

agreement).

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(b) Pursuant to the Master Franchise Agreement, DPG is given the operating rights to maintain its

entire right, title and interest and all liabilities and obligations in respect of each area

development agreement and franchise agreement entered by DPG as master franchisor

pursuant to the Master Franchise Agreement and is entitled to use and sub-licence the use of

the Domino System and the associated trademarks in operation of Domino’s stores in the

Territory (the “Operation Rights”). The Operation Rights continue indefinitely until all of the

franchise agreements that DPG has with its franchisees (and itself for corporate stores) have

expired or otherwise been terminated. Therefore, so long as any franchise agreements with

DPG remain in force, the Master Franchise Agreement shall remain in force as well, subject to

DPIF’s right to require the sale or assignment to it of any franchise agreements or stores as set

out in paragraph 18.1(z) below. Franchise agreements have an initial term of ten years and can

be renewed at the franchisee’s option. The renewed franchise agreement also contains a

renewal clause, thus the franchise agreement continues for as long as the franchisee exercises

their option to renew. If all franchisees and DPG (in respect of its corporate stores), do not

renew their franchise agreements and DPG cannot find suitable replacement franchisees, there

would eventually come a time when there are no franchise agreements in effect and therefore

the Operation Rights would end.

(c) DPG has the exclusive right to establish a commissary on the terms and conditions of the

Know-How Agreement, as described in further detail at paragraph 18.2 below), pursuant to

which DPIF grants the right to use its technical knowledge and know-how to DPG and agrees

not to establish a competing commissary and to provide ongoing support and assistance to the

commissary.

(d) DPIF agrees during the Development Term not to operate or grant to any person any right

relating to the operation of a Domino’s Pizza Store (as defined in the Master Franchise

Agreement) or use of the marks within the Territory other than in accordance with the Master

Franchise Agreement.

(e) DPG is required to open and maintain a certain number of stores per year, referred to as the

“minimum development quota”. Details of the minimum development quota are set out in

schedule 2 to the Master Franchise Agreement. This schedule was amended pursuant to the

Seventh Amendment Agreement. This schedule stipulates the total minimum number of stores

to be in operation each year. Should there be a shortfall in these quotas, DPIF has the right to

undertake such development itself or through another party subject to any prior rights granted

to franchisees.

(f) Prior written approval from DPIF is required before DPG grants any sub-franchises. DPIF must

not unreasonably withhold or delay giving its consent to any sub-franchisee. Without such

approval, DPG must, on receipt of DPIF’s written request to do so, terminate the relevant sub-

franchise agreement. In addition, if DPG is in breach of the Master Franchise Agreement, and

has received a notice of default, DPG is not able to enter into any further sub-franchise

agreements. DPIF may provide its consent to such further sub-franchises conditionally on the

correction by DPG of the relevant breach.

(g) On the signing of each new franchise agreement for the first twelve stores per calendar year,

DPG must pay to DPIF a non-refundable store opening fee of £3,000 less applicable

withholding taxes paid by DPG; the next twelve stores opened in that calendar year carry a fee

of £1,500; no fees are payable for that same calendar year following the signing of these 24

franchises.

(h) DPG is prevented from charging any franchisee a combined development and franchisee fee in

excess of £15,000 per store without the consent of DPIF. DPG must supply to DPIF all relevant

information regarding development fees or consideration in kind received pursuant to a

franchise or area agreement.

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(i) A continuing royalty fee (“Royalty Fee”) is paid by DPG to DPIF in US Dollars (or at DPIF’s

option in local currency). Pursuant to the Seventh Amendment Agreement, DPG has agreed to

pay a Royalty Fee equal to 3 per cent. of the sales of the stores in the Territory. DPIF has agreed

to waive 0.30 per cent. of this royalty fee provided that DPG is in compliance with the

minimum development quota.

(j) In the event that royalty charges paid by any sub-franchisee exceeds 5.5 per cent. DPG shall

pay to DPIF 20 per cent. of such excess as an additional component of the Royalty Fee but

DPG may retain the remaining 80 per cent. of the excess.

(k) DPG must collect 5 per cent. of monthly sales from each UK franchisee and 4 per cent. of

franchisees in the Republic of Ireland and set it aside in a separate advertising fund. Advertising

is monitored by DPIF and if DPG’s advertising practices fall short of its standards, and the

inconsistency is not corrected in a reasonable period of time, DPIF has the right to direct and

administer the advertising fund. DPG has reasonable access to advertising materials developed

by DPIF for use elsewhere in the world.

(l) If DPG does not meet its minimum development quotas, then DPIF is required to contribute to

the advertising fund the lesser of one quarter of 1 per cent. of the store sales or £100,000, which

amount increases in line with the general index of retail prices in the previous year.

(m) DPG must appoint an individual devoted to development, management and the supervision of

the stores in the Territory.

(n) DPG has to use its best endeavours to ensure that all franchisees comply with their franchise

agreements entered into pursuant to the Master Franchise Agreement, including taking all steps

to correct any breach of such agreements. DPIF has the right to inspect all the stores in the

Territory and all the books and records of DPG and all the franchisees and to take an inventory

of the assets of all the stores. DPIF also has the right to audit the advertising fund and all sales

reports, financial statements and tax returns which DPG is required to submit under this

agreement. Any understatement shall result in an increase of fees to be paid to DPIF in

correlation with the understatement given.

(o) DPG must establish a book keeping and record keeping system conforming to requirements

prescribed by DPIF and submit monthly reports on the sales and products sold by all stores

franchised, quarterly unaudited statements (within 30 days of the end of each fiscal quarter),

annual unaudited statements (within 90 days of each end of fiscal year), tax returns should

DPIF so request and any other information that DPIF may reasonably request. DPIF may

require DPG to obtain and submit within 90 days an audited statement of profit and loss and

financial condition for any financial year if DPIF reasonably believes that DPG has submitted

reports which contain material inaccuracies.

(p) DPG may not use or approve for use by franchisees any ingredients, supplies or materials to be

used in preparation, packaging and delivery of pizza unless they or their supplier have been

previously approved in writing by DPIF (not to be unreasonably withheld or delayed). DPIF

have the right to inspect without notice the facilities of any approved supplier to test whether

DPIF’s quality standards are met.

(q) Any modifications by DPG to Domino’s operating manual shall be submitted to DPIF, which

should only be those reasonably required to comply with legal requirements or for commercial

success in the Territory. Otherwise, DPIF has the right from time to time to modify in any way

the operating manual which it will then communicate to DPG. DPG must abide by any change

provided that it will not place DPG in contravention of applicable law or have materially

adverse commercial effect within the territory or adversely affect DPG’s fundamental status

and rights.

(r) DPG acknowledges DPIF’s ownership of all trademarks licensed to DPG in the Master

Franchise Agreement and is specifically granted the right to use the name DPG. On termination

227

or expiration of the Master Franchise Agreement, DPG is to take all action to cancel or transfer

(at DPIF’s option) all business names and other registrations relating to the use of the specified

Domino’s names and marks and to notify listing agencies of the termination of DPG’s right to

use the same in connection with its telephone number. DPG may use and register a business

name approved by DPIF as the sole name to identify the business carried on by DPG, subject

to consent from DPIF not to be unreasonably withheld.

(s) DPG is obliged to notify DPIF of any infringement or challenge to DPG’s use of any of the

marks or any claim in any right of the marks. DPIF has sole discretion as to whether to take

action and to take such action as it deems appropriate.

(t) During the term of the Master Franchise Agreement, DPG must not have any direct or indirect

interest (other than 5 per cent. of an entity listed on a recognised investment exchange) without

the prior written approval of DPIF in any business primarily engaged in sit down, delivery or

carry out pizza or an entity which may franchise or licence such activities located in the

Territory. For a period of one year from the termination of the Master Franchise Agreement,

DPG are prohibited from holding such an interest without the written consent of DPIF.

(u) DPG and the franchisees have the sole right to determine the prices to be charged by their

stores.

(v) DPG has the right to terminate if DPIF breaches the Master Franchise Agreement and fails to

cure the breach within 30 days of receiving written notice from DPG (or other reasonable

amount of time) and termination shall be effective 90 days after delivery to DPIF of notice of

termination. DPG may also terminate if DPIF ceases or takes steps towards ceasing to carry on

business, or any insolvency proceeding are taken against DPIF. DPG also has the right to

terminate if the Know-How Agreement (as detailed at paragraph 18.2 below) is terminated for

any reason by DPG.

(w) DPIF may terminate the Master Franchise Agreement, effective on delivery of a notice of

termination, in the following circumstances:

(i) DPG enters into any insolvency arrangements;

(ii) DPG, on three or more occasions in a one year period, fails to submit when due sales

reports or financial statements or to pay the Royalty Fee, advertising fee or other

payments;

(iii) DPG is convicted of any offence or crime affecting (or conduct which could

substantially impair) the goodwill associated with the Domino’s name or marks;

(iv) DPG makes a material misrepresentation to DPIF in respect of its application for the

franchise;

(v) DPG intentionally under-reports sales or if an audit by DPIF discloses such

understatement and DPG fails to pay the applicable fees with interest within five days

of receipt of the final audit report;

(vi) DPG misuses the trademarks, breaches confidentiality, breaches the in-term restrictive

covenant or assigns any of its rights in contravention to the Master Franchise Agreement

or fails to properly execute any documents which are reasonably necessary to give effect

to the provisions of the Master Franchise Agreement and fails to correct such breach

within 30 days of written notice.

(x) In addition, DPIF may terminate the agreement effective on delivery of a notice of termination

if DPG fails to comply with any other provision of the Master Franchise Agreement and fails

to correct that relevant failure within:

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(i) 7 days of notice if it relates to the use of any trademarks or the quality of pizza or

beverage or cleanliness or sanitation of any store owned by DPG; or

(ii) 30 days if such failure is to pay any money due and payable under the Master Franchise

Agreement or other related agreements between DPG or DPIF or its affiliates or

Subsidiaries.

(y) If DPG breaches (not being a breach listed in paragraphs 18.1(w) or (x) above) the Master

Franchise Agreement and fails to cure the breach within 30 days after receipt of written notice

(or such other period as may be reasonable given the nature of the breach) then DPIF may

terminate the agreement effective 90 days after delivery to DPG of notice of breach.

(z) DPG’s right to enter franchise agreements is suspended from receipt of notice of termination.

DPIF has the option to purchase the franchise agreements from DPG at fair market value. If

DPIF purchases the franchise agreements it shall also have the option to purchase the assets of

each store owned or controlled by DPG and DPG’s interests as UK Master Franchisees and

such franchise agreements shall terminate. Unless the franchise agreements terminate in this

manner, they will continue in force and effect in accordance with their provisions.

(aa) On termination, DPG must immediately cease to use or display confidential information, trade

secrets and anything to do with the Domino System and the trademarks and if it does not do

so, DPIF has the right to enter the premises to remove the items containing such trademarks.

(bb) The Master Franchise Agreement is governed by Michigan law and all claims are to be referred

(on the demand of either party) to arbitration at the American Arbitration Association.

18.2 Know-How Agreement

(a) The Know-How Agreement dated 29 December 1993 between (1) DPII and (2) DPG as

subsequently assigned by DPII to DPIF on 16 April 2007 grants the right to use the technical

knowledge and know-how of DPIF to DPG in relation to the establishment and operation of

commissaries by DPG and the distribution of products in the territory.

(b) The consideration for entering into this agreement was one quarter of 1 per cent. of the royalty

sales which is included in the Royalty Fee payable under the Master Franchise Agreement and

a continuing and non-refundable royalty fee of 1 per cent. of the gross sales of all other

products.

(c) The term of the Know-How Agreement is co-terminous with the Master Franchise Agreement

and shall terminate upon the date of termination of the Master Franchise Agreement.

(d) In the event that the Master Franchise Agreement terminates, DPIF has the option of

purchasing any commissary from DPG or the proportion of such commissary in relation to the

operation of Domino’s stores. The purchase price for such commissary is to be at fair market

value. In the event the commissary is located on premises which were leased by DPG, DPG

shall provide a sub-lease to DPIF for the duration of the lease term.

(e) The usual commercial termination clauses (insolvency and failure to pay) are included.

(f) Governing law is that of the state of Michigan, USA and any claim is initially to be referred to

the American Arbitration Association.

18.3 Banking arrangements

(a) Bank revolving facility

The Group has entered into an agreement dated 28 February 2007 to obtain a revolving credit

facility from Barclays Bank plc (“Barclays”). The limit for this facility is £6,000,000. The

facility is repayable within 3 to 12 months and interest is charged at 0.50 per cent. per annum

above LIBOR. The facility is secured by share pledges, constituting first fixed charges over the

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shares of DPG Holdings Limited (“DPGHL”) and DPG as well as negative pledges given by

the Company, DPGHL and DPG. The amount drawn down under this facility as at 30

December 2007 stood at £6,000,000.

(b) Bank loans

The Group has entered into an agreement to obtain bank loans and mortgage facilities. These

are secured by a fixed and floating charge over the Group’s assets and an unlimited guarantee

provided by the Company. At 30 December 2007, the balance due under these facilities was

£7,721,000, all of which is in relation to the EBT. During the financial year ended 30 December

2007, the terms of this loan were renegotiated and transferred from National Westminster Bank

plc (“NatWest”) to Barclays. The loan bears interest at 0.50 per cent. above LIBOR. The loan

has a term of 7 years and matures on 31 January 2014.

(c) Other loans

The remaining loans are repayable in equal instalments over a period of up to 5 years and these

loans are unsecured. The interest rate on these loans is fixed at an average of 8.5 per cent.

(d) New financing arrangement

On 20 December 2007 the Group entered into a revolving credit facility with Barclays in order

to fund the development of a new commissary site at Milton Keynes and an extension of the

Group’s existing commissary at Penrith. Interest is charged at 0.50 per cent. above LIBOR. As

at 30 December 2007, the Group has available £25,000,000 undrawn committed borrowing

facilities in respect of which all conditions precedent have been met. These facilities are

available to the Group until December 2012 and are secured by loss guarantees, negative

pledges and charges over Company credit balances.

18.4 Leasing support offered by DP Capital

In order to assist the franchisees of the Group in developing and maintaining the franchisees’ stores,

DP Capital a subsidiary of the Group provides leasing support to franchisees for the fit out of new

stores and the refit of existing stores. New advances of £1,300,000 were made during 2007. After

repayments, the balance outstanding and owed to DP Capital on these leases as at 30 December 2007

was £2,800,000. These facilities are financed by the limited recourse loan facility provided by

Barclays (as detailed at paragraph 18.3(a) above).

18.5 Finance leases

(a) The Group uses finance leases and hire purchase contracts to acquire certain plant, machinery

and equipment. These leases have terms of renewal but no purchase options or escalation

clauses. Renewals are at the option of the lessee. The present value of future minimum lease

payments under finance leases and hire purchase contracts are as follows:

(i) future minimum payments due not later than one year: £10,000; and

(ii) future minimum payments due after one year but not more than 5 years: £18,000.

18.6 Property leased to franchisees

(a) For 472 stores in the franchisee system, the Group has entered into commercial leases, taking

the head lease, and then subletting the properties to the franchisees. These leases have an

average duration of between 10 and 25 years. As at 30 December 2007, future minimum rentals

payable under the headleases are as follows:

(i) future minimum payments due not later than one year: £10,070;

(ii) future minimum payments due after one year but not more than 5 years: £34,504; and

(iii) future minimum payments due after 5 years: £71,904.

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(b) The sub-leases have a fixed term of 10 years which may be renewed and have no break clause.

Future minimum rentals receivable these sub-leases are as follows:

(i) future minimum payments due not later than one year: £8,330;

(ii) future minimum payments due after one year but not more than 5 years: £28,647; and

(iii) future minimum payments due after 5 years: £19,392.

(c) In addition the Group has entered into commercial leases on motor vehicles and items of plant,

machinery and equipment. These leases have an average duration of between 3 and 5 years.

18.7 Sponsor’s Agreement

The Company has entered into a sponsor’s agreement with Numis (the “Sponsor’s Agreement”)

pursuant to which Numis have agreed to act as Sponsor for the Company in accordance with the

requirements of the Listing Rules and the Prospectus Rules.

Under the Sponsor’s Agreement:

(a) The Company has agreed to pay Numis a corporate finance fee of £200,000, and all proper and

reasonable costs, charges and expenses incidental to the London Stock Exchange and Official

List applications as payment for their services as Sponsor to the Company.

(b) Numis have agreed to use all reasonable endeavours to make the London Stock Exchange and

Official List applications, obtain approval of the FSA for the Prospectus and the approval of the

London Stock Exchange for the Ordinary Shares to be admitted to trading on the London Stock

Exchange:

(c) The Sponsor’s Agreement may be terminated by Numis in the event of a breach of a material

obligation or a breach of warrant or in the event that the FSA or London Stock Exchange reject

the Company’s application. The agreement may also be terminated by the Company on notice.

The Sponsor’s Agreement contains certain indemnities, undertakings and warranties given by the

Company to Numis.

19. WORKING CAPITAL

The Company is of the opinion that, taking into account available banking facilities, the Group has sufficient

working capital for its present requirements, that is for at least the next 12 months from the date of this

document.

20. SIGNIFICANT CHANGE

There has been no significant change in the financial or trading position of the Group since 30 December

2007, being the date to which the last audited consolidated accounts of the Group were drawn up.

21. LITIGATION

There have been no governmental, legal or arbitration proceedings (including any such proceedings which

are pending or threatened of which the Company is aware) during the 12 month period prior to the date of

this document against, or being brought by, the Company or any member of the Group which may have or

have had in the recent past significant effects on the Company’s and/or the Group’s financial position or

profitability.

22. GENERAL

22.1 No proceeds are being raised on behalf of the Company in connection with Admission.

22.2 The total costs (including fees and commissions) (exclusive of recoverable VAT) payable by the

Company in connection with the Admission are estimated to amount to be approximately £900,000.

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22.3 Ernst & Young LLP, which is authorised and regulated in the UK by the Financial Services Authority,

have given and have not withdrawn their written consent to the inclusion in this document of their

report as set out in Part VII of this document and the references to such report and to their name in

the form and context in which they are included, and they have authorised the contents of their report

for the purposes of the Prospectus Rules.

22.4 Numis, which is authorised and regulated in the UK by the Financial Services Authority is acting in

the capacity as Sponsor to the Company. Numis has given and not withdrawn its written consent to

the inclusion in this document of references to its name in the form and context in which they appear.

22.5 CREST, the computerised paperless system for settlement of sales and purchases of shares in the

London securities markets, commenced operation in July 1996.

The CREST Regulations provide for the transfer of shares in the UK without stock transfer forms, and

the evidencing of title to shares without share certificates, through a computer-based system and

procedures, defined in the CREST Regulations as a Relevant System, which is operated by Euroclear

UK and Ireland Limited.

The Articles contain specific provisions to enable the Ordinary Shares to be dematerialised into a

Relevant System, including CREST. Shareholders will continue to be able to hold the Ordinary Shares

to which they become entitled in electronic form in an account on the CREST system or in the

physical form of certificates. Each shareholder will be able to choose whether or not to convert his

Ordinary Shares into uncertificated form and the Registrars will continue to register written

instructions of transfer and issue share certificates in respect of the Ordinary Shares held in

certificated form.

A copy of the Articles is available for inspection as set out in paragraph 23 (Documents available forinspection) below.

22.6 Ernst & Young LLP, of 400 Capability Green, Luton, LUI 3LU, Chartered Accountants, regulated by

the Institute of Chartered Accountants in England and Wales, have been the Company’s auditors since

1999. No auditors resigned, were removed, or were not re-appointed during the period 1 January 2005

to 30 December 2007.

22.7 The ISIN number for the Ordinary Shares is GBOOB1S49Q91. The SEDOL number of the Company

is B1S49Q9.

22.8 The financial information in this document relating to the Company and the Group and in particular

the financial information contained in Part VII of this document, does not constitute statutory accounts

within the meaning of section 240 of the 1985 Act. Ernst & Young LLP have audited the statutory

accounts of the Company and have given unqualified audit reports on the statutory accounts of the

Company for the 52 weeks ended 30 December 2007, 31 December 2006 and 1 January 2006. None

of those Company reports contained any statement under section 237(2) or (3) of the 1985 Act. The

statutory accounts of the Company for the 3 financial years ended 30 December 2007 have been

delivered to the Registrar of Companies in England and Wales.

22.9 Application has been made to the UK Listing Authority for all the shares in the Company (issued and

to be issued) to be admitted to the Official List and to the London Stock Exchange and to be admitted

to trading on the market for listed securities of the London Stock Exchange. It is expected that

Admission will become effective and that dealings in the Ordinary Shares will commence on 19 May

2008.

22.10 There are no arrangements in place under which future dividends are to be waived or agreed to be

waived.

22.11 During the current year and the 3 financial years ended 30 December 2007, the main investments of

the Group other than those described in paragraph 6 (The Company and its Subsidiaries), paragraph

7 (Related Party Transactions), or paragraph 18 (Material Contracts), have comprised capital

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expenditure and have seen expenditure of approximately £11,711,000 as at 30 March 2008,

principally in the UK and financed primarily from internal sources.

22.12 Save as disclosed in paragraph 18 (Material Contracts), there is no other contract (not being a contract

entered into in the ordinary course of business) entered into by the Company which contains any

provision under which the Company has any obligation or entitlement which is material to the

Company as at the date of this Prospectus.

22.13 Where information contained in this Prospectus has been sourced from third parties the Company

confirms that such information has been accurately reproduced and, so far as the Company is aware

and is able to ascertain from the information published by those third parties, no facts have been

omitted which would render the reproduced information inaccurate or misleading.

23. DOCUMENTS AVAILABLE FOR INSPECTION

23.1 Availability of Prospectus

Copies of this document can be obtained during normal business hours until the close of Admission

from either of the following:

Numis Securities Limited The registered office of the Company

Domino’s House

Lasborough Road

10 Paternoster Square Kingston,

London, EC4M 7LT Milton Keynes MK10 0AB

23.2 Documents available for inspection

Copies of the following documents will be available for inspection at the registered office of the

Company and at the offices of Mayer Brown International LLP, 11 Pilgrim Street, London, EC4V

6RW during normal business hours on any weekday (Saturdays, Sundays and public holidays

excepted) from the date of this document for a period of at least 14 days:

(a) the Memorandum of Association of the Company and the Articles as amended by special

resolution passed at the AGM held on 24 April 2008;

(b) the audited consolidated accounts of the Company for the 3 financial years ended 30 December

2007;

(c) the audited consolidated statements of the Group for the 3 financial years ended 30 December

2007;

(d) the financial information set out in Part VII of this document;

(e) the service agreements and letters of appointment referred to in paragraph 11.1 (Directors’service agreements) of this Part VIII;

(f) the letters of consent referred to in paragraphs 22.3 and 22.4 above; and

(g) the rules of the 1999 Schemes, the Old Scheme, the EMI Scheme and the Sharesave Scheme

and the Employee Benefit Trust as referred to in paragraph 15 (Share Option Schemes).

In addition, copies of this document are available, for inspection only, from the Document Viewing

Facility, UK Listing Authority, The Financial Services Authority, 25 The North colonnade, Canary

Wharf, London E14 5HS.

Dated: 14 May 2008

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sterling greenaways 99939

Admission to the Official List

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