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ANNUAL REPORT 2008
CONTENTS
Corporate Profile 1 Financial Highlights 2 Chairmans Statement 4 Brand Accolades 7 Group Structure 8 Bakery 10 Food Atrium 14 Restaurant 18 Board of Directors 22 Senior Management 24 Corporate Information 25 Corporate Governance 26 Financial Statement 38 Statistics of Shareholdings 108 Notice of Annual General Meeting 110 Proxy Form 119
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CREATIvE RATIONALE
Lets Talk. For at BreadTalk Group Limited (BreadTalk), it is a word that bears deep significance. The BreadTalk Annual Report 2008 Talk Around The Clock, represents the Groups growing success and highlights our diverse portfolio in the food and beverage industry. Be it quiet breakfast meals to lively dinner gatherings, the message alludes to BreadTalks various business operations that continue to enhance our customers lives, any time, any day. Beyond a reference to the Groups brand name, it serves as a reminder that communication is central to the success of our organisation. Establishing an open channel of communication allows us to facilitate an effective flow of ideas and information that contribute to our growth. As an extension of the trusted partnerships we share with our staff, shareholders and customers, BreadTalk will continue to encourage Talk Around The Clock. This will enhance value creation, whether via internal feedback that fosters cohesion or consumer suggestions that result in the development of innovative products and services.
Founded in 2000 and listed on the SGX in 2003, our business is about innovating and creating distinctive flavours to satisfy your palate literally! This has earned us numerous awards and growing popularity with customers here and in international markets. In just over 9 years, we have spread our wings across 12 countries and territories, leaving our mark with more than 241 bakery outlets, 29 food courts and 8 restaurants, supported by a global staff strength in excess of 2,000 employees. For 2008, we have yet again registered another year of strong revenue growth following improvements across all business and geographical segments. Our earnings have improved and we have continued to introduce our unique products and dining experiences in new areas, and refreshed our brand in our existing markets. We have a shared vision to be an international, trend-setting, lifestyle brand. To this end, we have taken bold strides in introducing new food cultures with revolutionary changes and ingenious differentiation. Our products are also crafted with passion and vibrancy to the highest quality. We are confident that our strategies will lend us a distinct competitive advantage and the platform for continued growth.
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FINANCIAL HIGHLIGHTS
REVEnuE ($ miLLion)
250 212.2 200 156.6 150 123.6 100 50.2 95.3 10 8 14
pRofiT BEfoRE TAX ($ miLLion)
BREADTALK GRoup LimiTED & iTs suBsiDiARiEs GRoup finAnciAL hiGhLiGhTs

financial Results ($'000) fY2004 50,186 1,182 900 (31) fY2005 95,297 3,582 2,666 164 fY2006 123,569 7,394 6,466 3,476 fY2007 156,610 12,150 11,228 7,319 fY2008 212,249 13,227 12,001 7,770
12.0 12 11.2
Revenue Operating profit Profit before tax
6.5 6 4 2.7 2 0 0.9
Profit attributable to equity holders of the Company
50
financial positions ($'000) Property, plant and equipment
fY2004 12,151 582 751 15,293 (12,791) (2,123) (1,262) 12,601
fY2005 24,571 2,644 8,881 38 28,492 (35,097) (4,793) (1,938) 22,798
fY2006 34,141 2,877 8,427 625 36,833 (47,488) (6,417) (3,058) 25,940
fY2007 44,893 1,333 9,665 710 59,089 (62,996) (5,428) (3,170) 44,096
fY2008 58,156 422 9,205 2,026 77,348 (82,866) (8,158) (3,623) 52,510
2004
2005
2006
2007
2008
2004
2005
2006
2007
2008
Investment in associate / joint ventures Intangible assets Other non-current assets Current assets Current liabilities
REVEnuE miX BY BusinEss sEGmEnT fY2008

nt 15.2% ura sta Re
REVEnuE miX BY GEoGRAphicAL sEGmEnT fY2008

8.9% ong
ap o ng Si
Non-current liabilities Minority interests Shareholders' equity
g on
Ba
ry ke
Ratios Earnings per share (cents) - Basic & Diluted(1) Net asset per share (cents) Gearing (times)
(3) (4) (2) (2)
fY2004 (0.02) 7.73 7.27 0.29 (0.2)
fY2005 0.09 11.35 6.93 0.39 0.9
fY2006 1.73 12.91 8.72 0.46 14.3
fY2007 3.23 18.77 14.66 0.25 20.9
fY2008 3.31 22.35 18.43 0.30 16.1
% 44.7
re 49%
32.6% ium
tr dA oo
% 35.5
C PR
Net tangible asset per share (cents)

Oth
BREADTALK ANNUAL REPORT 2008
ers 6
.6 %
ch an Fr
ise 7.5%
Return on shareholders' fund (%)
(1) (2) (3) (4)
The earnings per ordinary share for FY2008 is computed based on the weighted average of 234,911,034 ordinary shares for the year. Net assets per share and net tangible assets per share as at end of financial year 2008 are computed based on the share capital of 234,911,034 ordinary shares, representing shares issued and fully paid as at end of the year. Gearing is computed based on total borrowings divided by total equity. Return on shareholders funds is the profit after taxation and minority interests expressed as a percentage of the average shareholders funds.
CHAIRMANS STATEMENT
our Group revenue increased by 35.5% from fY2007s high of $156.6 million to a new record-breaking $212.2 million in fY2008, driven by broad-based double-digit growth across all business segments and geographical markets. Group operating profit, likewise, surpassed previous records, reaching a new high of $13.2 million in fY2008.
Dear Shareholders I am happy to report that the BreadTalk Group has turned in a steady set of results for financial year ended 31 December 2008 (FY2008), bettering our 2007 financial performance. We have achieved this by pursuing a resilient business strategy comprising a diversified product range of strong and innovative brands coupled with an extensive and growing market reach. Our Group revenue increased by 35.5% from FY2007s high of $156.6 million to a new record-breaking $212.2 million in FY2008, driven by broad-based double-digit growth across all business segments and geographical markets. Group operating profit, likewise, surpassed previous records, reaching a new high of $13.2 million in FY2008. This is a 8.9% improvement over the previous years operating profit. The improvement was spurred by solid performances by our bakery and food court operations, tempered by impairment charge and startup expenses of our new businesses. But for these items, operating profit would have been $15.7 million, representing a growth of 29.3% over FY2007. On the back of the strong topline performance, net profit attributable to shareholders grew by 6.2% to $7.8 million. In 2008, we continued the preceding years focus on fortifying and refreshing our brands with new products and retail concepts. Hence, for our bakery business, which turned eight years old in July, this meant giving our stores a total design overhaul and ushering in a new bakery boutique store concept. While maintaining our signature clean lines and bright atmosphere, our new store concept exudes a warmer, cosier feel. This is our ongoing effort to nurture our signature brand by updating our retail concepts so as to boost same store sales and to raise consumer recognition of our brands. As a trendsetter in food and dining concepts, our efforts are part and parcel of ensuring that we remain ahead of the competition in bringing fresh ideas to our products and stores. Our market diversification strategy saw us seizing growth opportunities in the region where these presented themselves. We thus increased the number of newlyowned bakeries and franchise outlets, adding a total of
27 new owned bakeries and an additional 44 franchised outlets across our existing markets as well as new markets in Asia. We added 5 new food courts to our regional stable, 3 more in Hong Kong and 2 in the PRC. We also took steps towards building new revenue streams both in Singapore and in the PRC by laying the groundwork for the introduction of a premium burger chain, Carls Jr., to be rolled out in the PRC later this year. In view of the financial turmoil that plunged the global economy into a downward spiral from the second half of 2008, we were also judicious in our spending. We thus kept a tight rein on expenses, improving operational efficiencies, diversifying our sources of raw material and rationalising our businesses to focus on profitable stores while re-thinking our existing strategies for under-performing ones. In March 2009, we disposed off our stake in the J Co. Donuts business to better focus on our other brands with multiple market access. Our efforts through the year have seen our earning per share on a diluted basis rise 2.5% to 3.31 cents while net asset value per share improved 18.6% to 22.3 cents as of 31 December 2008.
During the course of the year, we added new franchisees in Korea, Bahrain, Saudi Arabia and Vietnam and 7 cities in the PRC. Correspondingly, our franchise revenue grew 45.6% to $16.0 million in FY2008 following higher master franchise fees, growth in royalty fees and raw materials sales to these franchised outlets. Overall, the bakery business registered an 11.3% rise in operating profit to $4.3 million in FY2008, mainly driven by higher profits from the PRC and Singapore bakery operations. Our strong showing was offset by start-up loss of $0.9 million incurred by J Co. Donuts and by an operating loss of $1.1 million from our Hong Kong bakery business. Our reach has grown substantially during the year and as at 31 December 2008, we have 100 owner-operated bakeries compared to 73 the previous year. These consist of 69 BreadTalk stores and 29 Toast Box outlets spanning Singapore, the PRC, Hong Kong, Malaysia and Thailand. Our network of franchised outlets stood, as at year end 2008, at 141, compared with 97 in 2007 48 in Indonesia, 15 in the Philippines, 7 in Kuwait, 4 in UAE, 1 in Oman, 7 in India, 1 in Korea and 58 in the PRC.
1 in the PRC. Following the upgrade, sales increased significantly as we benefited from the full-year revenue contribution from the recently upgraded Shanghai Metro City food atrium. Hong Kong operations recorded higher revenue from the addition of 3 food atria. We are pleased to report that our foray into Malaysia at the end of 2007, with the first Food Republic food atrium at the upmarket Pavilion Shopping Centre in Kuala Lumpur, has proved to be a resounding success with a fast growing following from food enthusiasts. Food atrium operating profit grew 74.3% to $6.1 million in FY2008, driven mainly by expansion and higher revenue from both the PRC and Singapore. This was offset by operating loss of $1.3 million incurred by our Hong Kong operations. They were, unfortunately, impacted by project cost overrun and delay in the opening of new outlets where operating leases had already commenced. As at 31 December 2008, the Group owns 29 food atria, an increase of 5 from 31 December 2007, comprising 20 in the PRC, 5 in Hong Kong, 3 in Singapore and 1 in Malaysia.
sEGmEnTAL REViEw Bakery Business

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

Our food atrium business has performed well contributing 32.6% or $69.2 million of Group revenue, from higher revenue contribution from Singapore, the PRC and Hong Kong. This was a 42.9% increase over FY2007 with Singapore food atrium revenue surging 68.0% to $21.0 million in FY2008 mainly due to consolidation of revenue from MWA Pte Ltd, (MWA) as well as the maiden full-year revenue contribution from our Suntec City outlet, which commenced operations in May 2007. MWA was previously a 50% joint venture for the food court at Wisma Atria in Singapore which became a wholly-owned subsidiary after we acquired the remaining 50% equity stake in December 2007. The PRC and Hong Kong registered higher revenues of $32.5 million and $15.4 million, representing a 16.9% and 87.8% revenue increase respectively over FY2007 levels. We opened 4 additional food atria, closed 2 and renovated
Restaurant Business
The Restaurant segment, made up of our chain of 6 Din Tai Fung restaurants, 1 Station Kitchen and 1 Cosmopolitan Cafe in Singapore, contributed 15.2% or $32.2 million, representing a 13.5% increase over FY2007. The revenue growth was from higher same store sales from our famed Din Tai Fung restaurants and revenue consolidation from Cosmopolitan Cafe at Wisma Atria, Singapore, after it became a subsidiary of the Group in December 2007. The restaurant business operating profit declined by 34.8% to $3.0 million in
CHAIRMANS STATEMENT
our sound business strategy, strong brands and diversified markets coupled with prudent cash management and a cautious investment approach, has lent resilience to the Group.
BRAND ACCOLADES
FY2008 due to higher operating loss from Cosmopolitan Cafe and the Station Kitchen which suffered an impairment loss on fixed assets of $0.4 million, as well as start-up costs relating to Carls Jr. restaurant business. On the other hand, Din Tai Fung enjoyed a 2.0% improvement in its operation profit following higher revenues, despite facing higher personnel and food cost.
DiViDEnD
The Board is pleased to propose a first and final exempt (one-tier) dividend of 1.00 cent per ordinary share for FY2008 in appreciation for the loyalty and strong support shown by our shareholders. This represents approximately 30% of the Groups net profits for the year. While we have a healthy cash balance of $47.9 million as at 31 December 2008, we are conscious of the need to manage our resources to ensure our ability to ride through this climate, and to make the necessary investments at the opportune time.
Food Republic Overall Winner, Promising Brands category Singapore Prestige Brand Award 2008 Association of Small and Medium Enterprises (ASME) and Lianhe Zaobao
Finalist in Franchisor of the Year Award 2005 Franchising and Licensing Association of Singapore (FLA)
BusinEss ouTLooK
Our sound business strategy, strong brands and diversified markets coupled with prudent cash management and a cautious investment approach, has lent resilience to the Group. Thus, despite the tough economic conditions anticipated for 2009, we are confident of being well-positioned to ride through the short-term economic challenges. We are also in a good position to take advantage of opportunities that still abound in this climate. We believe that Singapore and the PRC, which are our key markets, will continue to provide a steady income stream. Our differentiated dining concepts which offer top quality fare at very affordable prices are less likely to be impacted than more expensive alternatives by any expected decrease in consumer spending. In ensuring continued growth, we will invest part of our profits in the construction of new platforms and infrastructure for future revenue growth, such as the introduction of Carls Jr. restaurants into the PRC. As far as operational improvements are concerned, we will also continue to invest substantially in training our people across all levels of the organisation. This will ensure that our standards of service excellence are maintained. Such skills training and development will enable our personnel to progress within the organisation and ensure staff retention. We will also upgrade our IT systems and improve our operational efficiencies. These measures will strengthen our position in our existing markets and sustain our ability to extend our reach to new ones.
Davey Awards Silver Winner Best Annual Report 2007 International Academy of the Visual Arts
Most Promising Brand 2002 to 2005 Most Popular Brand 2002, 2005 Most Distinctive Brand 2003 to 2005 Silver Award 2004 Gold Award 2005 Singapore Promising Brand Award ASME and Lianhe Zaobao
AccoLADEs
At BreadTalk, our pursuit for creative excellence extends beyond the culinary arts. In 2008, Food Republic was the overall winner in the Promising Brands category of the Singapore Prestige Brand Award 2008. On the corporate governance front, we received the Most Transparent Company Award (Sesdaq category) for 2004, 2005, 2007 and 2008. In addition, we had the honour of receiving the 2008 Davey Award (Silver) for Best Annual Report design for our 2007 Annual Report entitled, Adding Flavour To Your Life presented by the International Academy of the Visual Arts.
Most Transparent Company Award (SIAS) 2004 and 2005 Sesdaq Category Runner-Up 2007 Sesdaq Category Winner 2008 Catalist Category Runner-Up
Design for Asia Award 2004 Hong Kong Design Centre
Superbrand Status Singapore version 2002/2003 Singapore Superbrands Council
George Quek Emerging Entrepreneur Category Entrepreneur of the Year 2006 Ernst & Young
George Quek Entrepreneur of the Year 2002 ASME and The Rotary Club
AppREciATion
The success of the BreadTalk Group is owed to a collective set of individuals our loyal shareholders, our faithful customers, our supportive business partners and last but certainly not least, our dedicated and tireless staff. On behalf of the Board, I would like to convey to each of them our sincerest thanks. With their continued support and patronage, we believe we have the necessary fortitude to brave the challenges ahead.
Five Star Diamond Brand Award 2006 Five Star Diamond Brand Ranked Number 1 Enterprise 50 Start Up Award 2002 Accenture and The Business Times Regional Brand Award 2006 Singapore Promising Brand Award Association of Small and Medium Enterprises (ASME) and Lianhe Zaobao
GEORGE QUEK Chairman
GROUP STRUCTURE AS AT 31 DECEMBER 2008
BREADTALK GROUP LIMITED
100%
BreadTalk pte Ltd
100%
BreadTalk international pte Ltd
100%
Topwin investment holding pte Ltd
60%
star food pte Ltd
100%
shanghai star food f&B management co., Ltd Beijing star food f&B management co., Ltd
100% 100%
chongqing food Republic food & Beverage co., Ltd shanghai hong Bu Rang food & Beverage management co., Ltd
70%
Taster food pte Ltd
25%
hong Kong BreadTalk Ltd
100%
shanghai BreadTalk co., Ltd
100%
food Republic (shanghai) co., Ltd (formerly known as Shanghai Xin Jia Fang Food & Beverage Co., Ltd)
50%
75%
100%
charcoal pte Ltd
shanghai BreadTalk Gourmet co., Ltd
100%
Beijing Da shi Dai food & Beverage co., Ltd
70%
100%
Twin peaks Venture singapore pte Ltd
Beijing BreadTalk Restaurant management co., Ltd
85%
megabite hong Kong Limited
100%
BreadTalk concept hong Kong Limited
100%
BreadTalk (Thailand) company Limited
100%
food Republic pte Ltd
90%
mL Breadworks sdn. Bhd
100%
megabite (s) pte Ltd
100%
mwA pte Ltd
100% 100% 8 50%

megabite Eateries (m) sdn Bhd food Art pte Ltd
Investment Holding
Apex Excellent sdn Bhd
Bakery Food Court
30%
Restaurant
out of The Box pte Ltd
Others
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In just over 8 years, BreadTalk and Toast Box have travelled far and wide, leaving footprints in 12 countries and territories with more than 241 stores worldwide. As of end 2008, we owned and operated 100 bakery outlets across Asia with 69 BreadTalk and 29 Toast Box outlets spanning Singapore, Malaysia, Thailand, Hong Kong and the Peoples Republic of China (PRC).
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Our franchise network has since expanded to 141 stores in Asia

and the Middle East with new franchises in Korea, Vietnam, Bahrain and Saudi Arabia.
on a more homely feel and recreates the atmosphere of a friends kitchen. Equipped with new state-of-the-art bakery equipment specially imported from Germany, Spain and
with never-before-seen queues forming outside the bakery. We expanded our footprint in Philippines, opening stores in Cebu as part of our strategy to extend the brand reach from the mainland into the provinces and islands. Our efforts to create global brand cohesiveness saw us hosting the first ever International Franchisee Conference at the Meritus Mandarin Singapore. The conference was attended by over 50 BreadTalk brand owners, marketing and operational personnel from our franchise network. Through the conference, we were able to exchange ideas on brand development to ensure the BreadTalk brand leaves an indelible mark across the globe. As a fast growing international brand, BreadTalk has pursued a more active Corporate Social Responsibility programme, seeking to give back to society, making a difference to the lives of people in need. Thus, witnessing one of the worlds most horrifying disasters the Sichuan earthquake on 12th May 2008 galvanised us into action. To show our solidarity with the people of Sichuan and to play a part in relief efforts, BreadTalk created Ping Chuan Xiong (Peace Panda) Panda bear shaped bun with four different expressions symbolising the terror of the 7.8 magnitude earthquake. The proceeds raised went to the Chinese Embassy and Red Cross Societys China Earthquake Appeal Fund.
heart. The store, exuding girlish charm in hues of pink is targeted at young ladies between the ages of 14-35 with a creative slant towards baking and craft. A growing clientele consists of mothers with young children who find the activity a great way to spend an afternoon together.
BREADTALK
Distinctive, stylish and so delicious, every one of our baked creations has garnered a loyal following, turning BreadTalk into an award-winning boutique with over 1000 different breads, buns and cakes created, each endowed with its own unique name, personality and flavour. The brand turned eight in 2008 and to celebrate our milestone, we unveiled our new bakery boutique concept at Singapores City Link Mall. BreadTalk revolutionised the concept of bakeries with our distinctive sleek and clean lines and signature see-through kitchens showcasing the expertise of our bakers. Nevertheless, having come of age and now exuding a familiarity with our consumers, we wanted to subtly introduce the warmth of close friendships into our stores. Clean-cut, sleek and bright, the new store concept exudes an understated artistic flair with fascinating wall
Japan, the taste, aroma, quality and texture consistency of our breads are further enhanced. New staff uniforms with French and Japanese influences and biodegradable and environmentally-friendly packaging for all our products complete the entire new look. The new concept stores will be rolled out gradually in Singapore and overseas to further reinforce a cohesive branding effort. As part of this revamp, over 100 new breads were created by our Research and Development (R&D) Team in consultation with top chefs and food consultants from France, Japan, Spain and Taiwan. We have continued to retain our top selling products such as Flosss, together with a new product range to keep the brand fresh and surprising. In fact, as an innovator and creative force in the bakery business, our R&D team, works hard to create new products every six months, always injecting an element of fun and humour into our products. Characteristic of our ability to remain in sync with current trends and the latest happenings around the world, we created Flosss 1 and Ferraberri, in commemoration of the first ever 2008 FORMULA 1 SingTel Singapore Grand Prix race held in Singapore and OBUNMA, an allusion to the biggest political event of 2008, the US Presidential Elections.
ToAsT BoX
Toast Box was developed in October 2005 to recreate the warm atmosphere of local Nanyang coffee shops of the 60s and 70s. It seeks to bring an old-world charm to the current vibrancy of life as we know it now. Toast Box harks back to the simplicity of a bygone era, with its pleasurable comforts of coffee and toast. It serves up traditional favourites like peanut toast thick, mee siam, kaya toast and soft-boiled eggs. South-east Asian coffee, the mainstay of the concept, is made the traditional way where it is pulled to bring out the flavour. Toast Box stores are fashioned in a wood-panelled, old-world setting complete with gramophones, Rediffusion sets and other memorabilia in a colonial setting. Since its beginnings as a food court stall in Food Republic, the Toast Box brand has grown to become an immensely popular chain with outlets at prominent, high traffic locations such as Vivo City, Plaza Singapura, Suntec City and Centrepoint. In addition to being well-situated at shopping malls, Toast Box has also made its way into airport retail space with its 2 outlets at Terminals 1 and 3 of the Singapore Changi Airport. This welcomed nostalgia is now enjoyed further afield in other Asian countries aside from 18 in Singapore 5 in Malaysia, 1 in Shanghai, 2 in Beijing, 1 in Thailand, 1 in the Philippines and 2 in Hong Kong.
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murals featuring BreadTalks new inspirational Happy Chefs characters portrayed in different nationalities. These serve as a tribute to our chefs the world over for
their dedication, creativity and hard work in kneading out wonderful pieces of artwork. The centrepieces of the stores are the bread display cases. These are designed with display bases, cut out like facets of a diamond, bringing out our freshness and splendour of their jewels the freshly baked aromatic breads. The new stores, while maintaining our trademark open-concept kitchen takes
ThE icinG Room

Closer to home, we expanded our bakery concept, by opening
Our franchise network continued to grow, especially in the the PRC and Indonesia where the most number of new franchises were opened. We also established a store in Seoul, South Korea which was met with great enthusiasm
our latest store, The Icing Room, at Jurong Point. The store sells a delectable range of cakes, pastries and cookies and brings with it a unique proposition of allowing patrons to decorate their own cakes, a meaningful gesture to show love and affection for those close at
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FOOD ATRIUM
The Group began its foray into the food atrium business with its acquisition of an award-winning (dashidai) chain comprising 13 food atria in the Peoples Republic of China (PRC) back in 2005. Since then, we have reinvented the brand and spread the Food Republic culture from the PRC to other Asian countries. With great food at affordable prices, a casual dining ambience and strong cultural concepts, Food Republic
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adds another dimension to the dining experience.
The Food Republic mantra is to bring the best of local hawker and street food under one roof. It encourages an appreciation of the indigenous culture of the country through the distinctive flavours of its food and the craftsmanship of its hawkers. Food Republic invites and entices customers using unique thematic dining concepts, such as the recreation of bygone eras of the charming retrospective styles of 60s and 70s in the case of Singapore or the use of contemporary dcor in the case of Hong Kong and Malaysia. Each of our food atria in these countries stays true to its motto of uniting citizens of good taste. During the year, Food Republic concentrated on creative marketing efforts in order to further build up brand awareness internationally, instill brand loyalty and increase sales for our tenants. It also sought to spread the appreciation of local culinary delights among tourists to the region. In Singapore, our culinary offerings reflecting Singaporean and Asian flavours put us in the pages of the Singapore Tourism Boards (STBs) Uniquely Passport 08. The passport was a new marketing initiative aimed at tourists consisting of a Do-It-Yourself kit containing interesting activities to be indulged in while in Singapore. We were also the only food atrium to be included in STBs food sampling promotion, one of the programmes in its celebrated annual Singapore Food Festival.
We were part of the history-making 2008 FORMULA 1 SingTel Singapore Grand Prix race last year, being the only Asian food brand invited to provide our Asian hawker specialities as part of food and beverage offerings within the FORMULA 1 circuit. The international appeal of the brand was also evident when we were invited by the Prime Ministers office to take part in Singapore Day in Melbourne serving up our trademark local fare to overseas Singaporeans. Our concerted branding efforts garnered us the accolade as the Overall Category Winner , Promising Brands in the Singapore Prestige Brand Award 2008. The award, jointly organised by the Association of Small and Medium Enterprises and Lianhe Zaobao, recognises and honours Singapore brands that have developed and managed their brands effectively through concrete Brand Architecture and branding initiatives. This achievement clearly demonstrates the popularity of the Food Republic brand and gives the brand further leverage as it internationalises and moves into new geographical territories. As of end 2008, we own and operate 29 food atria in Asia 10 in Shanghai, 6 in Beijing, 1 in Tianjin, 3 in Chongqing, 5 in Hong Kong, 3 in Singapore, and 1 in Malaysia.
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RESTAURANT
Celebrating a time-honoured tradition of exquisite culinary indulgence, the Groups restaurants, which include the famed Din Tai Fung chain, have delighted food aficionados since its inception. The numerous accolades and loyal following of our
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restaurants are testament to our exquisite fare that never fail to tantalise and satisfy the most discerning taste buds.
Din TAi funG

Famous for its delicious and healthy house specialties - especially its renowned xiao long bao (steamed pork dumplings) - Din Tai Fung originated in Taiwan over 30 years ago and was rated by The New York Times as One of the Worlds Top TEN Best Restaurants in 1993. In 2003, the Group won the franchise rights to operate the Din Tai Fung brand of restaurants in Singapore. In 2008, Din Tai Fung in Taiwan was recognised as one of the Taiwans best restaurants by food critics in the 2008 Taipei Top Restaurant Guide. The award bears testimony to the fact that the Din Tai Fung brand name is synonymous with consistency in serving quality and authentic fare and instills further confidence in how the band is managed internationally. With an emphasis on fresh quality ingredients and superior cooking techniques, Din Tai Fungs food preparation and cooking methods have been standardised worldwide with a view to strict quality standards. In Singapore, customers can relax amid our restaurants elegant dcor and oriental facade, and relish mouth-watering dishes such as steamed chicken soup, pork chop, fried rice and noodles and our famous hearty and flavourful dumplings.
soup), a famed Taiwanese delicacy requiring tremendous skill and effort to create. The introduction of this specialty has been long awaited in Singapore. In fact, so popular and highly regarded is this dish that it has been said to be worth flying across the globe for! Over the course of the past year, Din Tai Fung held exciting customer programmes to further enhance the experience of our culinary delights. In addition to special promotions to mark annual calendar highlights such as Chinese New Year and Christmas, we held a culinary workshop as part of our Mothers Day 2008 celebrations to fantastic response. Doing our bit to promote Asian contemporary theatre and intercultural work, Din Tai Fung was one of the food sponsors for the inaugural Asian Intercultural Conference AIC 2008 organised by the Theatre Training & Research Programme held in Singapore. The programme allowed participants, among whom were renowned director Stan Lai, playwrights and the literary set, to experience Din Tai Fungs exceptional cuisine. Din Tai Fung was also a sponsor of The Esplanades Huayi Chinese Festival of Arts which celebrates traditional and contemporary Chinese arts by outstanding Chinese artistes the world over. The Festival has grown over the years, to become a focus of Singapores Lunar New Year celebrations for the community. Currently, the Group operates 6 Din Tai Fung restaurants in Singapore, all at convenient, high-traffic locations Paragon, Junction 8, Tampines Mall, Wisma Atria, Raffles City and Jurong Point. Our award of the Din Tai Fung franchise right in Thailand, will see this exquisite food culture finding its way to the land of smiles soon.
cARLs JR.
An exciting development for the Group is the impending launch of Carls Jr. in the Peoples Republic of China (PRC). Carls Jr. has long been reputed as the place to go for juicy, premium quality charbroiled burgers in Western United States. Exuding a hip, vibrant attitude, the chain is well known for bringing innovative ideas to the Quick Service Restaurant industry such as being the first to charboil over an open flame, which sears the juices and flavour into the great tasting burgers and chicken sandwiches. During the year the Group had partnered with Aspac F&B International Pte Ltd (Aspac), to form a joint venture company, Star Food Pte. Ltd. (Star Food), to develop the Carls Jr. brand in the PRC. At least 100 Carls Jr. restaurants will be opened in the PRC by 2016 in the municipalities of Beijing, Shanghai and Tianjin and the provinces of Zhejiang and Jiangsu. The first of these is planned for Shanghai in 2009 at popular high traffic shopping malls.
ThE sTATion KiTchEn

The Station Kitchen (TSK) is the Groups integrated F&B concept for diners at the 70,000 sq ft St James Power Station, one of Singapores latest clubbing hotspots. Established in December 2006, the 250-seat restaurant offers 2 cuisine concepts in its 6,500 sq ft dining space Charcoal and Ah Wok. Charcoal is an offshoot of Yakiniku House, the popular Taiwanese charcoal grill restaurant chain that has 5 branches in Taipei. With traditional tatami seatings, diners can enjoy handson grilling over burning charcoal of the freshest meats, seafood and vegetables. Ah Wok serves up a host of local favourites such as bak kut teh and fish head curry in traditional goodness and flavour. TSK features open concept kitchens that allow our chefs and guests to interact, and also houses brick walls, wooden benches and cast-iron lamps to create an inviting, congenial atmosphere. Its strategic location residing within an entertainment complex, opposite Sentosa Island and adjacent to Singapores largest retail mall, Vivo City, makes it a popular hangout for clubbers, tourists, shoppers, and working professionals.
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In December 2008, Din Tai Fung opened its sixth outlet in Singapore at Jurong Point, bringing the unmistakeable flavours of the restaurant chain closer to our customers in the west of the island. Styled in the same style of oriental chic dcor, it offers shoppers a respite from the hustle and bustle of the busy shopping mall and a chance to indulge in over 70 favourite menu items. One of the exciting dishes introduced at the latest Din Tai Fung restaurant is xiao long tang pao (steamed mini pork dumplings with
BOARD OF DIRECTORS
23
GEoRGE QuEK mEnG TonG

Chairman George, founder of the Group, was appointed to the Board on 6 March 2003 and re-elected on 28 April 2008. Having led and grown the Company to its outfit today, George continues to drive our strategic direction and development. With more than 30 years of industry experience, he has been instrumental in setting new standards in food trends in Asia and the Middle East. George started his food and beverage business in Taiwan in 1982, successfully growing it into a chain of 21 Southeast Asia food outlets within a decade. Returning to Singapore in 1992, he founded Topwin Singapore and subsequently Megabite China in 1996, establishing the food court businesses. In 2000, he started the bakery business with BreadTalk Pte Ltd and eventually brought it to list on the SGX in 2003. To facilitate expansion plans, the bakery and food court businesses were strategically merged in 2005. George holds a Doctorate in Business Administration (Honorary) from Wisconsin International University, USA. Amongst other awards, he won the Ernst & Young Entrepreneur of the Year 2006 (Emerging Entrepreneur Category) and Entrepreneur of the Year 2002 organised by the Association of Small and Medium Enterprises and The Rotary Club of Singapore.
so as to sustain product quality. In addition, Katherine spearheads product costing, which is an integral part of strategic pricing. Katherine has more than 15 years of experience in the industry. She was previously the Finance Director of Topwin Singapore prior to which she was in charge of the human resource and operations of more than 20 food and beverage outlets in Taiwan.
a leading Singapore law firm, he is a senior adviser of Alpha Advisory Pte. Ltd. (a financial and corporate advisory firm) and an executive director of Katana Asset Management Pte. Ltd. He also serves as an independent director and chairs most of the audit committees of several other SGX-ST listed companies. Kian Min was awarded the Presidents Scholarship and Police Force Scholarship in 1979. He holds a Bachelor of Laws (Honours) external degree from the University of London and a Bachelor of Science (Honours) Degree from the Imperial College of Science and Technology in England. He has been a Member of Parliament of Singapore since January 1997, and serves as Deputy Chairman of the Government Parliamentary Committee (GPC) for Transport.
chEn Kuo huA

Non-Executive Director Kuo Hua was appointed to the Board on 30 April 2003 and last re-elected on 27 April 2006. He sits in the Audit Committee, Nominating Committee and Remuneration Committee of the Company and is also the President of the Groups China operations. Kuo Hua has more than 20 years of industry experience in providing consultation and strategic planning in various countries such as the PRC, Hong Kong, Taiwan and Singapore. He has held various senior positions in Topwin Singapore and Megabite China prior to joining the Group, whereby the food court businesses were merged into the Group. Kuo Hua holds a degree in Drama and Mass Communication from the Chinese Culture University, Taipei, Taiwan.
chAn soo sEn

Independent Director Soo Sen was appointed to the Board on 14 August 2006. He is the Chairman of the Remuneration Committee, as well as member of the Audit Committee and Nominating Committee of the Company. Soo Sen is currently the Director, Chairmans Office of Keppel Corporation Limited. He also holds directorships for a few listed companies in Singapore. Soo Sen is a Member of Parliament for Joo Chiat Constituency. He was previously a Minister of State and had served in several ministries including the Ministry of Community Development, Youth and Sports, Ministry of Education, and Ministry of Trade and Industry. Before entering the political scene, he was involved in the starting up of the China-Singapore Suzhou Industrial Park as its founding chief executive officer in 1994, laying the foundation and framework for infrastructure and utilities development for the industrial park. He holds a Master in Management Science from the University of Stanford, USA.
KAThERinE LEE Lih LEnG

Deputy Chairman Katherine was appointed to the Board on 6 March 2003 and last re-elected on 30 April 2007. She oversees the Groups research and development, as well as pioneers new ideas and concepts. Responsible for product development and enhancement for our various brands both locally and globally, Katherine also formulates product training and technical skill upgrade programmes to ensure proper transfer of knowledge and skills to our franchisees in line with our local operations
From left: ONG KIAN MIN, KATHERINE LEE LIH LENG, GEORGE QUEK MENG TONG, CHAN SOO SEN AND CHEN KUO HUA
onG KiAn min

Independent Director
22
Kian Min was appointed to the Board on 30 April 2003 and last re-elected on 30 April 2007. He is the Lead Independent Director, Chairman of the Audit Committee and Nominating Committee, and member of the Remuneration Committee of the Company. He was called to the Bar of England and Wales in 1988 and to the Singapore Bar the following year. In addition to practising as a consultant with Drew & Napier LLC,
SENIOR MANAGEMENT
CORPORATE INFORMATION
25
Goh TonG pAK

Chief Executive Officer Tong Pak joined the Company on 1 January 2008. As Group CEO, Tong Pak oversees the Groups global operations, focusing on strategic planning and business development. One of his main roles is to strategise on systems and talent development. Prior to joining the Company, Tong Pak was a well known veteran in the education sector, having spent 37 years with the Ministry of Education (MOE). He started out as a teacher and was promoted through the ranks to the position of deputy director for MOEs school appraisal branch. With his years of professional and management experience, Tong Pak helps to spearhead the Groups expansion globally. His background and expertise in administrating monitoring systems stands him in good stead as he works towards improvement of the Groups quality control procedures and enhancement of the business operation systems. Tong Pak who holds an honours degree in arts from the former Nanyang University and a post graduate diploma in education from the National Institute of Education (NIE) also lectures parttime for the Masters degree course in Education Administration at NIE, Singapore.
fRAnKiE QuEK swEE hEnG

Chief Operating Officer Frankie assists our Chairman in overseeing the development and growth of the Group, focusing on the Groups expansion into the PRC. Frankie has been based in Shanghai since January 2005 where he oversees the growing bakery operations in Shanghai and Beijing. His expertise has further led to the successful export of the BreadTalk brand name to more than 16 cities through a franchise model system run by the in-house franchise team. Prior to joining the Group in 2001, Frankie was an Associate Manager in the residential properties division of the Dennis Wee Group. From 1993 to 1999, Frankie held various positions in Topwin Singapore where he helped set up the Raffles City food court and managed the operations of several food courts. Frankie holds a Master of Business Administration (Honorary) from the American University of Hawaii, USA.
cAThERinE LEE KhiA YEE

Chief Financial Officer Catherine oversees the Groups financial function, including financial reporting, compliance, internal controls, tax, financial planning and treasury operations. She is also in charge of investments and investor relations. A non-practicing Certified Public Accountant by training with more than 15 years of financial management experience in various industries, Catherine is an experienced banker and investment professional with a strong corporate finance and private equity background. Prior to joining the Group in 2004, Catherine worked for Transpac Capital where she managed an investment portfolio of public-listed companies and private companies in the USA, Singapore, Malaysia, Indonesia and Australia. She was concurrently financial controller and business development manager to companies from a spectrum of industries. She also sat on the board of several companies to assist in implementing good corporate governance practices and participated in strategic planning. Catherine holds a Bachelor of Accountancy (Honours) degree from the Nanyang Technological University, Singapore.
BoARD of DiREcToRs
George Quek Meng Tong Chairman Katherine Lee Lih Leng Deputy Chairman Chen Kuo Hua Non-Executive Director Ong Kian Min Independent Director Chan Soo Sen Independent Director
compAnY sEcRETARY
Tan Cher Liang
pRincipAL BAnKERs
DBS Bank Limited Malayan Banking Berhad
REGisTERED officE
171 Kampong Ampat #05-05 KA FoodLink Singapore 368330 Tel : (65) 6285 6116 Fax: (65) 6285 1661
Oversea-Chinese Banking Corporation Limited Standard Chartered Bank United Overseas Bank Limited
shARE REGisTRAR
Boardroom Corporate & Advisory Services Private Limited 3 Church Street #08-01 Samsung Hub Singapore 049483
inVEsToR RELATions
Spin Capital Asia 158 Cecil Street #05-06B Dapenso Building Singapore 069545 Tel : (65) 6227 7790 Michael Tan Email : michael@spin.com.sg Dawn Soo Email : dawn@spin.com.sg
AuDiToRs
Ernst & Young LLP Public Accountants and Certified Public Accountants One Raffles Quay North Tower Level 18 Singapore 048583 Partner-in-charge : Philip Ling (appointed since financial year ended 31 December 2006)
24
Corporate GovernanCe
27
This report sets out BreadTalk Group Limiteds corporate governance processes and structures that were in place throughout the financial year ended 31 December 2008, with specific reference made to the principles and guidelines of the Code and the Best Practice Guide issued by the Singapore Exchange Securities Trading Limited (the SGX-ST). The Board of Directors (the Board) is pleased to confirm that for the financial year ended 31 December 2008, the Company has generally adhered to the framework as outlined in the Singapore Code of Corporate Governance 2005 (the Code) and where there are deviations from the Code, the reasons for which deviation are explained accordingly.
ATTENDANCE AT BOARD AND BOARD COMMITTEE MEETINGS

Name of Director Board Audit Committee Nominating Committee Remuneration Committee
Number of Meetings Held
4
ATTENDANCE
George Quek Meng Tong Katherine Lee Lih Leng
5 4 4 5 5
NA NA 4 4 4
NA NA 1 1 1
NA NA 1 2 2
Guideline 1.5 of the Code: Matters requiring Board approval
A. BOARD MATTERS
Boards Conduct of its Affairs Principle 1: Every company should be headed by an effective board to lead and control the company. The board is collectively responsible for the success of the company. The board works with management to achieve this and the management remains accountable to the board. The primary function of the Board is to protect and enhance long-term value and returns for its Shareholders. Besides carrying out its statutory responsibilities, the Boards roles include:1. 2. 3. 4. 5. 6. 7. Providing entrepreneurial leadership, set strategic directions and overall corporate policies of the Group; Supervising and monitoring the performance of the management team; Ensuring the adequacy of internal controls, risk management and periodic reviews of the Groups financial performance and compliance; Setting the Companys values and standards, ensuring that the necessary human resources are in place; Approving annual budget, major investments and divestment proposals; Assuming responsibility for good corporate governance practices; and Approving corporate or financial restructuring, share issuance, dividends and other returns to Shareholders, Interested Person Transactions of a material nature and release of the Groups half year and full year results.
Guideline 1.3 of the Code: Disclosure on delegation of authority by Board to Board Committees Guideline 1.4 of the Code: Board to meet regularly Guideline 1.1 of the Code: The Boards role
Chen Kuo Hua Ong Kian Min Chan Soo Sen
Matters that are specifically reserved to the Board for approval are: (a) (b) (c) (d) (e) (f) matters involving a conflict of interest for a substantial Shareholder or Director; material acquisitions and disposal of assets; corporate or financial restructuring; share issuances, dividends and other returns to Shareholders; matters which require Board approval as specified in the Companys Interested Person Transactions policy; and substantial expenditures exceeding a prescribed limit.
All Directors are appointed to the Board by way of a formal letter of appointment indicating the amount of time commitment required and scope of duties. The Company provides a comprehensive orientation programme to familiarise new Directors with the Companys businesses and governance practices, as well as the Groups history, core values, strategic direction and industry-specific knowledge so as to assimilate them into their new roles. Directors also have the opportunity of visiting the Groups operational facilities and meet with the management team to gain a better understanding of the Groups business operations. Each Director is provided with an annually updated manual containing Board and Company policies relating to the disclosure of interests in securities and conflicts of interests in transactions involving the Company, prohibition on dealings in the Companys securities, as well as restrictions on the disclosure of price sensitive information. Board members are encouraged to attend seminars and receive training to improve themselves in the discharge of their duties as Directors. In addition, the Company works closely with professionals to provide Directors with updates on risk management and key changes to relevant regulatory requirements and accounting standards.
Guideline 1.7 of the Code: Formal appointment letter Guidelines 1.6 and 1.8 of the Code: Directors to receive appropriate training
To assist in the execution of its responsibilities, the Board has established three (3) Board committees, namely the Audit Committee (AC), Nominating Committee (NC) and Remuneration Committee (RC), to which the Board has delegated decisions on certain Board matters to the specialised Board committees. The Board met five (5) times during the financial year to discuss the key activities and business strategies of the Group. All Directors were furnished with relevant information beforehand in order to enable them to obtain further explanation where necessary, and be adequately briefed prior to the respective meetings. Minutes of the meetings are also available to the respective Board members. Ad-hoc and non-scheduled meetings are convened by Board members to deliberate on urgent and substantive matters. The Companys Articles of Association has been amended to provide for telephone, videoconferencing, audio-visual or other electronic means of communication to facilitate meetings of the board. Details of Directors attendance at Board and Board Committee meetings held during the financial year ended 31 December 2008 is summarised as follows:
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Board Composition and Guidance Principle 2: There should be a strong and independent element on the board, which is able to exercise objective judgement on corporate affairs independently, in particular, from management. No individual or small group of individuals should be allowed to dominate the boards decision-making. The Board comprises five (5) members with more than one third majority of independent directors: (2) independent and non-executive Directors, one (1) non-executive Director and two (2) executive Directors. They are as follows:
Guideline 2.1 of the Code: Independence of Board
29
Dr George Quek Meng Tong (Chairman) Ms Katherine Lee Lih Leng (Deputy Chairman) Mr Chen Kuo Hua (Non-executive Director) Mr Ong Kian Min (Independent Director) Mr Chan Soo Sen (Independent Director) The Board has two (2) Independent Directors whose independence is reviewed by the NC annually. The NC considers an independent Director as one who has no relationship with the Company, its related companies or its officers that could interfere or be reasonably perceived to interfere, with the exercise of the Directors independent judgement of the conduct of the Groups affairs, and is not a substantial Shareholder, or a partner (with 5% or more stake) or executive officer of any for profit business organisation to which the Company has made or received significant payments (aggregated in excess of S$200,000 per year) in the current or immediate past financial year. Moreover, the Chairman of the NC is not associated, directly or indirectly, with a substantial Shareholder to enhance an independent view to the best interests of the Company. As a result of the NCs review for financial year 2008, the NC is of the view that the Independent Directors are independent of the Companys management as contemplated by the Code. The Board, in view of the nature and scope of business operations, considers that though small, the present Board size and composition facilitate efficient and effective decision-making with a strong independent element. Each Director has been appointed on the strength of his calibre, experience, grasp of corporate strategy and potential to contribute to the Company and its businesses. As each of the Directors brings valuable insights from different perspectives vital to the strategic interests of the Company, the Board considers that the Directors possess the necessary competencies to provide Management with a diverse and objective perspective on issues so as to lead and govern the Company effectively. Once a year, a formal session is arranged for the non-executive Directors (NEDs) to meet without the presence of Management or executive Directors to review any matters that must be raised privately. The session is chaired by the Lead Independent Director, Mr Ong Kian Min, who is also the chairman of the NC.
Guideline 2.2 of the Code: Independent Directors
Board Membership and Board Performance Principle 4: There should be a formal and transparent process for the appointment of new directors to the board. As a principle of good corporate governance, all directors should be required to submit themselves for re-nomination and re-election at regular intervals. Principle 5: There should be a formal assessment of the effectiveness of the board as a whole and the contribution by each director to the effectiveness of the board. The NC comprises the two (2) Independent Directors and the Non-executive Director who have been tasked with the authority and responsibility to devise an appropriate process to review and evaluate the performance of the Board as a whole as well as each individual Director on the Board. The chairman of the NC is an independent and non-executive Director, and is not a substantial Shareholder or directly associated with a substantial Shareholder: Mr Ong Kian Min chairman Mr Chen Kuo Hua member Mr Chan Soo Sen member At least one-third (1/3) of the Board of Directors shall retire from office by rotation and be subject to reelection at every Company annual general meeting, and the primary responsibilities of the NC are:
Guideline 2.4 of the Code: Board to comprise Directors with core competencies
Guideline 4.1 of the Code: NC composition
Guideline 2.3 of the Code: Appropriate Board size
Guidelines 4.2 to 4.6 of the Code: Duties of the NC
1.
To make recommendations to the Board on the appointment of new executive and non-executive Directors, including making recommendations on the composition of the Board generally and the balance between executive and non-executive Directors appointed to the Board, as well as ensuring there are procedures in place for the selection and appointment of NEDs. To regularly review the Board structure, size and composition and make recommendations to the Board with regards to any adjustments that are deemed necessary. To be responsible for assessing nominees or candidates for appointment or election to the Board, determining whether or not such nominees have the requisite qualifications and whether or not they are independent. To make plans for succession, in particular for the Chairman and key executives. To determine, on an annual basis, if a Director is independent. If the NC determines that a Director, who has one or more of the relationships mentioned under the Code is in fact independent, the NC would disclose in full, the nature of the Directors relationship and bear responsibility for explaining why he should be considered independent. To recommend Directors who are retiring by rotation to be put forward for re-election. To decide whether or not a Director is able to and has been adequately carrying out his duties as a Director of the Company, particularly when he has multiple board representations. To be responsible for assessing the effectiveness of the Board as a whole and for assessing the contribution of each individual Director to the effectiveness of the Board and disclosing annually, this assessment process.
Guidelines 5.1 to 5.4 of the Code: Assessing the Boards effectiveness
Guidelines 2.5 and 2.6 of the Code: Role of NEDs and regular meetings of NEDs
2.
3.
Chairman and Chief Executive Officer Principle 3: There should be a clear division of responsibilities at the top of the company the working of the board and the executive responsibility of the companys business which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power. The Company adopts a dual leadership structure whereby the positions of chairman and chief executive officer are separated. There is a clear division of responsibilities between the Companys executive Chairman and Group Chief Executive Officer, which provides a balance of power and authority.
Guideline 3.1 of the Code: Chairman and chief executive officer should be separate persons
4. 5.
6. 7.
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As Chairman, Dr George Quek is responsible for ensuring Board effectiveness and conduct, as well as strategic development of the Group in addition to which, he shall assume duties and responsibilities as may be required from time to time. The Group Chief Executive Officer, Mr Goh Tong Pak, has overall responsibility of the Groups operations, organisational effectiveness and implementation of Board policies and decisions. Notwithstanding the above, the Non-executive and Independent Directors fulfill a pivotal role in corporate accountability. Their presence is particularly important as they provide unbiased and independent views, advice and judgement to take care of the interests, not only of the Company but also of Shareholders, employees, customers, suppliers and the many communities in which the Company conducts business. The Board had on 14 August 2006 appointed Mr Ong Kian Min as the Lead Independent Director to act as an additional channel available to Shareholders.
Guideline 3.2 of the Code: Chairmans role
8.
Guideline 3.3 of the Code: Appointment of Lead Independent Director
For the year under review, with the Boards approval, the NC has decided on how the Boards performance is to be evaluated as a whole and proposed objective performance criteria including Board composition, size and expertise, Board information and timeliness, as well as Board commitment and accountability. In assessing each individual Directors contribution and performance to the effectiveness of the Board, the NC takes into consideration factors such as attendance, preparedness, participation and candour.
31
The NC has met once during the financial year under review on 28 February 2008. Each member of the NC shall abstain from voting on any resolution in respect of the assessment of his performance or renomination as a Director. Details of Board members qualifications and experience including the year of initial appointment are presented in this Annual Report under the heading Board of Directors.
2.
To review and recommend to the Board in consultation with the Chairman of the Board, any long term incentive schemes which may be set up from time to time and to do all acts necessary in connection therewith. To administer the Groups Employees Share Option Scheme (the Scheme) and shall have all the powers as set out in the Rules of the Scheme. To administer the BreadTalk Restricted Share Grant Plan (the RSG Plan) and shall have all the powers as set out in the Rules of the RSG Plan. To carry out its duties in the manner that it deems expedient, subject always to any regulations or restrictions that may be imposed upon the RC by the Board of Directors from time to time. As part of its review, the RC shall ensure that: (i) all aspects of remuneration including but not limited to Directors fees, salaries, allowances, bonuses, options and benefits-in-kind should be covered. the remuneration packages should be comparable within the industry and comparable companies and shall include a performance-related element coupled with appropriate and meaningful measures of assessing individual executive Directors and senior executives or divisional Directors performance. the remuneration package of employees related to executive Directors and controlling Shareholders are in line with the Groups staff remuneration guidelines and commensurate with their respective job scopes and levels of responsibility.
3. Access to Information 4. Principle 6: In order to fulfill their responsibilities, board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis. 5. The Board receives complete and adequate information on an on-going basis. The Management provides the Chairman and Deputy Chairman with monthly management accounts and the rest of the Board members with quarterly management accounts. The agenda for Board meetings is prepared in consultation with the Chairman and it will be circulated at least one (1) week in advance to Board members of each meeting. Furthermore, the Board has separate and independent access to the Company Secretary and senior executives, and there is no restriction of access to the senior Management team of the Company or Group at all times in carrying out its duties. The Company Secretary attends all formal Board meetings to respond to the queries of any Director and ensures that Board procedures are followed and that all applicable rules and regulations are complied with. Where decisions to be taken by the Board require specialised knowledge or expert opinion, the Board takes independent professional advice as and when necessary to enable it or the Independent Directors to discharge the responsibilities effectively.
Guideline 6.5 of the Code: Access to independent professional advice Guidelines 6.1 and 6.2 of the Code: Information to the Board
6.
Guideline 6.3 of the Code: Access to and role of the Company Secretary
(ii)
(iii)
Level and Mix of Remuneration
B. REMUNERATION MATTERS
Procedures for Developing Remuneration Policies Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration. The RC, established for the purpose of ensuring that there is a formal and transparent procedure for fixing the remuneration packages of individual Directors, comprises the two (2) Independent Directors and the Non-executive Director. The chairman of the RC is an independent and non-executive Director: Mr Chan Soo Sen chairman Mr Chen Kuo Hua member Mr Ong Kian Min member
Guideline 7.1 of the Code: RC to consist entirely of NEDs and majority, including RC chairman, must be independent
Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of remuneration, especially that of executive directors, should be structured so as to link rewards to corporate and individual performance. The Company advocates a performance based remuneration system for executive Directors and key executives that is flexible and responsive to the market, comprising a base salary and other fixed allowances, as well as variable performance bonus and participation in an employee share award or Scheme based on the Companys performance and linking it to the individuals performance. In determining such remuneration packages, the RC will ensure that they are adequate by considering, in consultation with the Chairman or Group Chief Executive Officer amongst other things, the respective individuals responsibilities, skills, expertise and contribution to the Companys performance, and whether they are competitive and sufficient to ensure that the Company is able to attract and retain the best available executive talent, meanwhile keeping tabs that they are not excessive. At an Extraordinary General Meeting held on 28 April 2008, the shareholders of the Company had approved the adoption of the RSG Plan. Under the RSG Plan, the aggregate number of shares to be issued shall not exceed fifteen per cent. (15%) of the total issued share capital excluding treasury shares of the Company and will be in force for a maximum period of 10 years commencing from 28 April 2008. The award of shares under RSG Plan is performance based. The entitled participant will be allotted fully paid shares upon satisfactory achievement of pre-determined performance targets.
Guidelines 8.1 to 8.5 of the Code: RC to recommend remuneration of Directors and review remuneration of key executives
30
The overriding principle is that no Director should be involved in deciding his own remuneration. The RC has adopted a written term of reference that defines its membership, roles, functions and administration. During the financial year under review, the RC had held two (2) meetings. The primary responsibilities of the RC are as follows: 1. To review and recommend to the Board in consultation with the Chairman of the Board, a framework of remuneration and to determine the specific remuneration packages and terms of employment for each of the executive Directors and senior executives or divisional Directors (those reporting directly to the Chairman or Group Chief Executive Officer) and those employees related to the executive Directors and controlling Shareholders of the Group.
Guideline 7.2 of the Code: RCs responsibilities
33
The adoption of RSG Plan is consistent with the continuing efforts of the existing Scheme in rewarding, retaining and motivating employees to achieve superior performance standards and afford the Company greater flexibility to align the interests of employees with those of the shareholders. To date, the Company has not issued any shares under its RSG Plan. The RC has adopted a framework which consists of a base fee to remunerate non-executive Directors based on their appointments and roles in the respective Committees, as well as the fees paid in comparable companies. Fees for the non-executive Directors will be tabled at the forthcoming Annual General Meeting to be held on 27 April 2009 (the AGM) for Shareholders approval. The Company has entered into a service agreement with the Chairman, Dr George Quek, for an initial period of three (3) years commencing 2003 and renewable thereafter unless otherwise terminated by either party by giving six (6) months notice in writing. The RC has reviewed the existing terms and conditions of all service agreements and recommended to the Board any changes to such terms and conditions at the expiry of such service agreements. All recommendations by the RC are submitted for endorsement by the entire Board. The Company confirms that there is no onerous removal clause in any of the service contracts.
Guideline 8.6 of the Code: Notice periods in service contracts to be six (6) months or less
Name of Key Executives (who are not Directors)
Designation
Salary(1)
Bonus / Profit-Sharing
Benefits-InKind
Total
S$250,000 to below S$500,000

Goh Tong Pak Frankie Quek Swee Heng (3) Catherine Lee Khia Yee Chen Poh On Jenson Ong Chin Hock Chief Executive Officer Chief Operating Officer Chief Financial Officer Chief Executive Officer, Megabite China Managing Director, Megabite Hong Kong
% 59 66 69 78 78
% 41 34 31 22 17 0 0 0 0 5
% 100 100 100 100 100
Below S$250,000
Lee Henry (4) Notes: (1) (2) (3) (4) Salary is inclusive of fixed allowance and CPF contribution. Directors fees are only payable after approval by Shareholders at the AGM. Frankie Quek is the brother of George Quek. Henry Lee is the brother of Katherine Lee. Henry had resigned from BreadTalk Pte Ltd with effect 1 December 2008. EVP, BTPL 87 13 0 100
Disclosure on Remuneration Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedures for setting remuneration in the companys annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance. A breakdown showing the level and mix of each Directors remuneration for the year ended 31 December 2008 is set out below:
Guidelines 9.1 to 9.3 of the Code: Directors, key executives and related employees remuneration
No other employee whose remuneration exceeded S$150,000 during the year is the immediate family of any of the members of the Board.
C. ACCOUNTABILITY AND AUDIT

Accountability
REMUNERATION OF DIRECTORS AND KEY EXECUTIVES

Name of Director Salary(1) Bonus / Profit-Sharing Benefits-In-Kind Directors Fees(2) Total
Principle 10: The board is accountable to the shareholders while the management is accountable to the board. The board should present a balanced and understandable assessment of the companys performance, position and prospects. For all announcements (including financial performance reporting) made to the public via SGXNET and the annual report to Shareholders, as required by the Singapore Exchange Securities Trading Limited (the SGX-ST), the Board has a responsibility to present a fair assessment of the Groups position, including the prospects of the Group. To enable effective monitoring and decision-making by the Board, Management provides the Board with a continual flow of relevant information on a timely basis as well as quarterly management accounts of the Group. Particularly, prior to the release of half year and full year results to the public, Management will present the Groups financial performance together with explanatory details of its operations to the AC, which will review and recommend the same to the Board for approval and authorisation for the release of the results.
Guideline 10.1 of the Code: Boards responsibility to the public
S$500,000 to below S$600,000 George Quek Meng Tong Chen Kuo Hua S$300,000 to below S$400,000
% 54 67
% 39 33
% 7 0
% 0 0
% 100 100
32
Katherine Lee Lih Leng Below S$100,000
65
35
100
Guideline 10.2 of the Code: Managements responsibility to the Board
Ong Kian Min Chan Soo Sen
0 0
0 0
0 0
100 100
100 100
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Audit Committee Principle 11: The board should establish an audit committee with written terms of reference, which clearly set out its authority and duties. The role of the AC is to assist the Board in the execution of its corporate governance responsibilities within the established Boards references and requirements. The financial statements, accounting policies and system of internal accounting controls are responsibilities that fall under the ambit of the AC. The AC has its set of written terms of reference defining its scope of authority and further details of its major functions are set out below and also in the Report of the Directors. The AC comprises three (3) members who are all non-executive Directors, two (2) of whom are also independent. The chairman of the AC is an independent and non-executive Director: Mr Ong Kian Min chairman Mr Chen Kuo Hua member Mr Chan Soo Sen member The members of the AC collectively have expertise or experience in financial management, and are qualified to discharge the ACs responsibilities. In performing its functions, the AC confirms that it has explicit authority to investigate any matter within its terms of reference, full access to and co-operation from the Management, and has been given full discretion to invite any Director or executive officer to attend its meetings, as well as reasonable resources to enable it to discharge its functions properly. The main functions of the AC are as follows: 1. 2. 3. Review the audit plan of the Companys external auditors and adequacy of the system of internal accounting control; Discuss and review external auditors reports; Review significant financial reporting issues and judgements so as to ensure the integrity of the financial statements and any formal announcements relating to the Companys or Groups financial performance; Review and recommend the nomination of the external auditors for appointment or reappointment; Review the Interested Person Transactions; Review the scope and result of the internal audit procedures; and Review the remuneration packages of the employees who are related to the Directors or substantial Shareholders.
Guidelines 11.5 and 11.6 of the Code: Meeting with auditors and review of their independence Guideline 11.3 of the Code: ACs authority Guidelines 11.1, 11.2 and 11.8 of the Code: Board to establish AC and composition of AC
Internal Control Principle 12: The board should ensure that the management maintains a sound system of internal controls to safeguard the shareholders investments and the companys assets. The Internal Auditors carried out internal audit on the system of internal controls and report the findings to the AC. The Groups External Auditors, Ernst & Young LLP have also carried out, in the course of their statutory audit, a review of the effectiveness of the Groups material internal controls. Material non-compliance and internal control weaknesses and recommendations for improvements noted during their audit are reported to the AC. The AC has reviewed the effectiveness of the actions taken by the management on the recommendations made by the Internal and External Auditors in this respect. For the financial year ended 31 December 2008, the Board believes that in the absence of any evidence to the contrary, the system of internal controls maintained by the Groups management that was in place throughout the financial period up to the date of this report, provides reasonable, but not absolute assurance against material financial misstatements or loss. The Board notes that no system of internal control could provide absolute assurance against the occurrence of material errors, poor judgement in decision-making, human errors, losses, fraud or other irregularities.
Guideline 12.1 of the Code: AC to review adequacy of the financial, operational and compliance controls and risk management policies.
Guideline 12.2 of the Code: AC to comment on the adequacy of internal controls
Internal Audit Principle 13: The company should establish an internal audit function that is independent of the activities it audits.
Guideline 11.4 of the Code: Duties of AC
The Group outsourced its internal audit function to Stone Forest Consulting since 2006. The Internal Auditor adopted the Standards for Professional Practice of Internal Auditing set by the Institute of Internal Auditors. The Internal Auditors report directly to the Chairman of the AC. The AC has reviewed and approved the internal audit plan for FY2009. Communication with Shareholders Principle 14: A company should engage in regular, effective and fair communication with its shareholders. Principle 15: A company should encourage greater shareholder participation at annual general meetings and allow its shareholders the opportunity to communicate their views on various matters affecting the company. The Board has adopted a policy of openness and transparency in the conduct of the Companys affairs while preserving the commercial interests of the Company. Financial results and other price sensitive information are disseminated to Shareholders via SGXNET, press releases, the Companys website, and through media and analyst briefings. The Board strives to ensure that all material information is disclosed to the shareholders on an adequate and timely basis. The Board informs and communicates with shareholders through annual reports, announcement released through SGXNET, press releases, advertisements of notice of meeting and general meetings in local newspapers. Notices of general meetings are despatched to shareholders, together with the annual report or circulars within the time notice period as prescribed by the regulations. At general meetings, shareholders are given opportunities to voice their views and direct their questions to directors or management regarding the Company. The chairman of the Audit Committee, Nominating Committee and/or Remuneration Committee are present and available to address questions at general meetings. The External Auditors are also present to assist the Board.
Guidelines 13.1 to 13.4 of the Code: IA to report to AC chairman
4. 5. 6. 7.
Guidelines 14.1 to 14.2 of the Code: Regular, effective and fair communications with shareholders Guideline 15.3 of the Code: Chairman and external auditors present at general meetings
34
The AC held four (4) meetings during the financial year under review. It has reviewed the financial statements of the Group for the purpose of the half-yearly and annual results release before they were submitted to the Board for approval. It has also met with the Companys internal and external auditors to review their audit plans and results, and has separate and independent access to the auditors. Upon reviewing the non-audit services provided by the external auditors which comprise tax services, the AC is satisfied that the independence of the external auditors is not impaired. Where there is any suspected fraud or irregularity, or failure of internal controls, or infringement of any Singapore law, rule or regulation which has a material impact on the Companys operating results, the AC will commission and review the findings of internal investigations into the matters. Endorsed by the AC, the Company has in place a whistle-blowing framework which provides an avenue for staff of the Company to access the AC chairman to raise concerns about improprieties and independent investigation of such matters by the AC. Contact details of AC have been made available to all staff.
Guideline 11.7 of the Code: Whistle-blowing arrangements
37
The Company has in place an investor relations programme to keep investors informed of material developments in the Companys business and affairs beyond that which is prescribed, but without prejudicing the business interests of the Company. The Companys Articles of Association do not restrict the number of proxy a shareholder can appoint to attend and vote on his/her behalf at all general meetings. . There are separate resolutions at the general meetings for each distinct issue. The Board and Management are on hand at general meetings to address questions by shareholders.
Guideline 15.1-15.2 and 15.4 of the Code: Shareholders should be allowed to vote in absentia, avoid bundling of resolutions and limit on proxy. Guideline 15.5 of the Code: Minutes of general meetings
Material Contracts Except as disclosed in Interested Person Transactions, there is no material contract or loan entered between the Company and any of its subsidiaries involving interests of any Director or controlling shareholder during the financial year ended 31 December 2008.
Risk Management The Group regularly reviews and improves its business and operational activities to identify areas of significant business risks as well as taking appropriate measures to control and mitigate these risks. The Group reviews all significant control policies and procedures and highlights all significant matters to the AC and the Board. The financial risk management objectives and policies are outlined in the financial statements.
Minutes of general meetings are prepared and made available to shareholders upon their requests by the Company Secretary.
Use of Proceeds from Share Placement The Company refers to the net proceeds raised in April 2007 from the share placement of 34,000,000 new ordinary shares in the capital of the Company at an issue price of S$0.36 per share. As at 31 December 2008, the Company has utilised the net proceeds as follows:
Intended Use Amount allocated S$000 Amount utilised S$000 Balance S$000
Accolade The Company was awarded Most Transparent Company Bronze award under the SESDAQ category by Securities Investors Association of Singapore (SIAS) at the SIAS Investor Choice Awards 2008 in October 2008. The award is based on key criteria such as timelines, substantiality and clarity of news releases, degree of media access, frequency of corporate results, availability of segmental information, as well as communication channels. Winners are selected from nominations received from investment analysts, head of research, fund managers and members of the mass media.
(a) Dealing in Securities The Company has adopted and implemented the Singapore Exchanges best practices guide in relation to the dealing in shares of the Company. It has been highlighted that directors and officers who are in possession of unpublished material price sensitive information and use such information for their own material gain in relation to those securities is an offence. The Company, while having provided the window periods for dealing in the Companys securities, has its own internal compliance code in providing guidance to its officers with regards to dealing in the Companys securities including reminders that the law on insider trading is applicable at all the times. (b) (c) (d) (e) Total
Food and beverage outlet expansion New market development Repayment of bank loans Working capital Upgrading of factory
5,000 2,000 500 1,290 3,000 11,790
4,600 2,071 500 1,198 500 8,869
400 (71) 92 2,500 2,921
Interested Person Transactions When a potential conflict arises, the directors concerned do not participate in discussions and refrains from exercising any influence over other members of the Board. The AC has reviewed the IPT entered into during the financial year by the Group and the aggregate value of interested person transactions entered during the financial year ended 31 December 2008 is as follows:
36
Aggregate value (S$000) of all IPTs during the financial year under review (excluding transactions less than S$100,000 and transactions conducted under shareholders mandate pursuant to Rule 920) Aggregate value of all IPTs conducted during the financial year under review under shareholders mandate pursuant to Rule 920 (excluding transactions less than S$100,000)
Name of Interested Person
Ah Koong Foods Pte Ltd - food court rental income / miscellaneous charges
283 (ceased to be interested with effect from Oct 2008)
Not applicable - the Company does not have a shareholders mandate under Rule 920
FINANCIAL STATEMENTS Directors Report 39 Statement By Directors 43 Independent Auditors Report 44 Consolidated Income Statement 45
Balance Sheets 46 Statements of Changes in Equity 48 Consolidated Cash Flow Statement 50 Notes to the Financial Statements 55
DireCtors report
39
The directors are pleased to present their report to the members together with the audited financial statements of BreadTalk Group Limited (the Company) and its subsidiaries (collectively, the Group) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2008.
DIRECTORS
The directors of the Company in office at the date of this report are: George Quek Meng Tong Katherine Lee Lih Leng Chen Kuo Hua Ong Kian Min Chan Soo Sen (Chairman) (Deputy Chairman) (Non-Executive Director) (Independent Director) (Independent Director)
ARRANGEMENTS TO ENABLE DIRECTORS TO ACqUIRE SHARES AND DEBENTURES

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

The following directors, who held office at the end of the financial year, had, according to the register of directors shareholdings required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest in shares of the Company as stated below:
Direct interest As at 31 December 2008 Deemed interest As at 31 December 2008
Name of director
As at 1 January 2008
The Company (Ordinary shares) George Quek Meng Tong Katherine Lee Lih Leng Chen Kuo Hua Ong Kian Min 79,440,384 43,550,850 12,443,100 100,000 79,590,384 43,550,850 11,443,100 100,000 79,590,384 43,550,850 11,443,100 100,000 43,550,850 79,440,384 43,550,850 79,590,384 43,550,850 79,590,384
By virtue of Section 7 of the Companies Act, Cap 50, George Quek Meng Tong and Katherine Lee Lih Leng are deemed to be interested in the shares held by the Company in its subsidiaries. Except as disclosed in this report, no other director who held office at the end of the financial year had interest in shares or debentures of the Company, or of related corporations, either at the beginning or the end of the financial year or on 21 January 2009.
DIRECTORS CONTRACTUAL BENEFITS

Except as disclosed in the financial statements, since the end of previous financial year, no director of the Company has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest.
DireCtors report
DireCtors report
41
SHARE OPTION AND SHARE PLANS

The Company has a Share Option Scheme and a Restricted Share Grant Plan which are administered by the Remuneration Committee comprising three Directors namely Messrs Chan Soo Sen (Chairman), Ong Kian Min (Member) and Chen Kuo Hua (Member). Details of the Share Option Scheme and the Restricted Share Grant Plan are as follows: (a) The BreadTalk Group Limited Employees Share Option Scheme The BreadTalk Group Limited Employees Share Option Scheme (ESOS) was approved at an Extraordinary General Meeting held on 30 April 2003. The following persons are eligible to participate in the ESOS at the absolute discretion of the Remuneration Committee:
SHARE OPTION AND SHARE PLANS (CONTD)

(b) The BreadTalk Restricted Share Grant Plan The BreadTalk Restricted Share Grant Plan (RSG Plan) was approved at an Extraordinary General Meeting held on 28 April 2008. The RSG Plan is centred on the accomplishment of specific pre-determined performance objectives and service conditions, which is the prerequisite for the contingent award of fully paid Shares (Award). The reward structure allows the Company to target specific performance objectives and incentivise the Participants to put in their best efforts to achieve these targets. The following persons shall be eligible to participate in the RSG Plan subject to the absolute discretion of the Remuneration Committee:
(i)
Employees and Directors

Employees, executive directors and non-executive directors of the Group who are not on probation and have attained the age of 21 years on or before the Offering Date.
(i)
Employees
Employees who are confirmed in their employment with the Company or employees of Associated Companies who hold such rank as may be designated by the Committee from time to time and who, in the opinion of the Committee, have contributed or will contribute to the success of the Group; and
(ii)
Controlling shareholders and their associates

Controlling shareholders or their associates whose participation and actual number of shares issued to them must be approved by independent shareholders in general meeting.
(ii)
Directors
Executive and non-executive Directors of the Company and its subsidiaries, provided always that any of the aforesaid persons: have attained the age of twenty-one (21) years on or before the Award Date; and not undischarged bankrupts.
Size of ESOS
The total number of new shares over which options may be granted pursuant to the ESOS shall not exceed fifteen per cent (15%) of the issued share capital of the Company on the date preceding the grant of an option. The aggregate number of Shares available to eligible Controlling Shareholders and their Associates under the ESOS shall not exceed twenty five per cent (25%) of the Shares available under the ESOS. In addition, the number of Shares available to each Controlling Shareholder or his Associate shall not exceed ten per cent (10%) of the Shares available under the ESOS.
Grant of ESOS
Options may be granted from time to time during the year when the ESOS is in force, except that options shall be granted on or after the second market day on which an announcement of any matter involving unpublished price sensitive information is released.
Controlling Shareholders and their Associates within the above categories are eligible to participate in the RSG Plan. Participation in the RSG Plan by Controlling Shareholders or their Associates must be approved by the independent Shareholders. A separate resolution shall be passed for each such Participation and to approve the number of Shares to be awarded to the Participant and the terms of such Award. There shall be no restriction on the eligibility of any Participant to participate in any other share option or share incentive schemes implemented or to be implemented by the Company or another company within the Group.
Acceptance of ESOS
The grant of an option shall be accepted not more than 30 days from the offering date of that option and accompanied by payment to the Company of a nominal consideration of $1 or such other amount as required by the Remuneration Committee. During the commencement of the ESOS up to the end of the financial year, there were:
Size of RSG Plan

The aggregate number of Shares available to eligible Controlling Shareholders and their Associates under the RSG Plan shall not exceed twenty five per cent (25%) of the Shares available under the RSG Plan. In addition, the number of Shares available to each Controlling Shareholder or his Associate shall not exceed ten per cent (10%) of the Shares available under the RSG Plan. The aggregate number of Shares to be awarded pursuant to the RSG Plan when added to the number of Shares issued and issuable in respect of such other Shares issued and/or issuable under such other share-based incentive schemes of the Company, including but not limited to the ESOS, shall not exceed fifteen per cent (15%) of the total issued share capital excluding treasury shares of the Company on the day preceding the relevant Award Date.
40
(i)
no options granted by the Company or its subsidiaries to any person to take up unissued shares of the Company and its subsidiaries; no shares issued by virtue of any exercise of option to take up unissued shares of the Company or its subsidiaries; and no unissued shares of the Company or its subsidiaries under option.
(ii)
Grant of RSG Plan

The grant of Awards under the RSG Plan may be made from time to time during the year when the RSG Plan is in force, except that it shall be granted on or after the second market day on which an announcement of any matter involving unpublished price sensitive information is released. While Awards may be granted at any time in the year, it is anticipated that Awards under the RSG Plan would be made once a year, after the Companys annual general meeting. It will be administered by the Remuneration Committee.
(iii)
DireCtors report
statement by DireCtors
43
SHARE OPTION AND SHARE PLANS (CONTD)

(b) The BreadTalk Restricted Share Grant Plan (Contd)
We, George Quek Meng Tong and Katherine Lee Lih Leng, being two of the directors of BreadTalk Group Limited, do hereby state that, in the opinion of the directors, (i) the accompanying balance sheets, consolidated income statement, statements of changes in equity, and consolidated cash flow statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008 and the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date, and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.
Acceptance of RSG Plan

During the commencement of the RSG Plan up to the end of the financial year: (i) no shares were granted by the Company or its subsidiaries to any person to take up unissued shares of the Company and its subsidiaries under the RSG Plan; no shares were issued by virtue of any Award under the RSG Plan to take up unissued shares of the Company or its subsidiaries; and (ii)
(ii)
On behalf of the board of directors: (iii) there were no unissued shares of the Company or its subsidiaries under the RSG Plan.
AUDIT COMMITTEE
The Audit Committee performed the functions specified in the Companies Act. The functions performed are detailed in the Report on Corporate Governance. George Quek Meng Tong Director
AUDITORS
Ernst & Young LLP have expressed their willingness to accept re-appointment as auditors.
On behalf of the board of directors:
Katherine Lee Lih Leng Director
Singapore 18 March 2009 George Quek Meng Tong Director
42
Katherine Lee Lih Leng Director
Singapore 18 March 2009
inDepenDent auDitors report

To the members of BreadTalk Group Limited
ConsoliDateD inCome statement

For the year ended 31 December 2008
45
We have audited the accompanying financial statements of BreadTalk Group Limited (the Company) and its subsidiaries (the Group) set out on pages 45 to 107, which comprise the balance sheets of the Group and the Company as at 31 December 2008, the statements of changes in equity of the Group and the Company, the income statement and cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Notes
2008 $000
2007 $000
Revenue Cost of sales Gross profit Other operating income Distribution and selling expenses Administrative expenses Profit from operations Interest income Interest expense Financial expenses, net Profit before taxation and share of results of associates and joint ventures Share of results of associates Share of results of joint ventures Profit before taxation Taxation Profit for the year Attributable to:
212,249 (96,803) 115,446
156,610 (69,863) 86,747 6,319 (55,632) (25,284) 12,150 173 (908) (735)
MANAGEMENTS RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act) and Singapore Financial Reporting Standards. This responsibility includes devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss account and balance sheet and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
7,784 (77,942) (32,061) 13,227 167 (851) (684)
5 7 7
AUDITORS RESPONSIBILITY
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
12,543 (496) (46) 12,001 8 (3,643) 8,358
11,415 (454) 267 11,228 (2,791) 8,437
OPINION
In our opinion, (i) the consolidated financial statements of the Group, and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
Equity holders of the Company Minority interests
7,770 588 8,358
7,319 1,118 8,437
Earnings per share (cents) Basic and diluted 9 3.31 3.23
44
(ii)
Ernst & Young LLP Public Accountants and Certified Public Accountants Singapore 18 March 2009
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
balanCe sheets
As at 31 December 2008
balanCe sheets
As at 31 December 2008
47
Notes 2008 $000
Group 2007 $000 2008 $000
Company 2007 $000
Notes 2008 $000
Group 2007 $000 2008 $000
Company 2007 $000
Non-current assets Property, plant and equipment Intangible assets Investment securities Investment in subsidiaries Investment in associates Investment in joint ventures Deferred tax assets
Non-current liabilities 10 11 12 13 14 15 8 58,156 9,205 1,494 200 222 532 69,809 44,893 9,665 316 1,051 282 394 56,601 2,506 3,027 13,105 1,798 7 64 237 2,814 35,531 59,089 8,861 25,074 17,048 1,487 5 11 190 244 125 3,283 3,701 2,967 62,996 (3,907) 69 23,739 23,808 9 24 7,853 2,550 3,909 14,345 149 1,475 8 45 1,677 12,668 15 23,139 23,154 11 11 8,761 2,509 2,586 13,878 159 1,304 4 43 1,510 12,368 Long-term loans, secured Finance lease obligations, secured Amount due to landlord (nontrade) Deferred tax liabilities 26 24 27 8 6,407 430 197 1,124 8,158 Net assets Equity attributable to equity holders of the Company Share capital Accumulated profits Statutory reserve fund Translation reserve Fair value adjustment reserve Minority interests Total Equity 28 29 30 31 33,303 16,408 1,076 545 1,178 52,510 3,623 56,133 33,303 10,394 612 (213) 44,096 3,170 47,266 33,303 3,173 36,476 36,476 33,303 2,219 35,522 35,522 56,133 3,977 366 240 845 5,428 47,266 36,476 35,522
Current assets Inventories Trade receivables Other receivables and deposits Prepayments Due from subsidiaries (non-trade) Amount due from associates (non-trade) Amount due from joint ventures (trade) Amount due from joint ventures (nontrade) Fixed deposits Cash on hand and at bank Current liabilities Trade payables Other payables Other liabilities Provision for reinstatement costs Amount due to subsidiaries (non-trade) Amount due to associates (trade) Amount due to joint ventures (non-trade) Amount due to landlord (non-trade) Finance lease obligations, secured Loans from minority shareholders of subsidiaries Short-term loans, secured Long-term loans, secured Tax payable Net current (liabilities) assets
16 17 18 19 19 19 19 20
3,925 4,761 17,884 2,558 343 3,187 44,690 77,348 11,630 34,898 21,072 1,809 99 90 191 276 4,855 4,844 3,102 82,866 (5,518)
21 22 22 19 19 19 27 24 23 25 26
46
statements of ChanGes in equity

statements of ChanGes in equity

49
Attributable to equity holders of the Company 2007 Group Statutory Fair value Share Accumulated reserve Translation adjustment capital profits fund reserve reserve $000 $000 $000 $000 $000 (Note 28) (Note 29) (Note 30) (Note 31) Minority interests $000 Total equity $000
Share capital $000 (Note 28)
Accumulated (losses) profits $000
Total equity $000
Total $000
2007 25,940 37 37 7,319 7,356 (987) 12,240 (453) 44,096 3,058 1,118 1,118 (1,148) 58 84 3,170 28,998 37 37 8,437 8,474 (2,135) 12,240 (453) 58 84 47,266 Company 1 January 2007 Net profit for the year Total recognised net income for the year Dividends paid (Note 38) Issuance of new shares Share issue expense At 31 December 2007 2008 Company 1 January 2008 Net profit for the year Total recognised net income for the year Dividends paid (Note 38) At 31 December 2008 33,303 33,303 2,219 2,246 2,246 (1,292) 3,173 35,522 2,246 2,246 (1,292) 36,476 21,516 12,240 (453) 33,303 (263) 3,469 3,469 (987) 2,219 21,253 3,469 3,469 (987) 12,240 (453) 35,522
At 1 January 2007 Net effect of currency translation differences Net income recognised directly in equity Net profit for the year Total recognised income for the year Dividends paid (Note 38) Transfer to statutory reserve Issuance of new shares Share issue expense Issuance of new shares to minority shareholders (1) Acquisition of a subsidiary At 31 December 2007
(1)
21,516 12,240 (453) 33,303
4,551 7,319 7,319 (987) (489) 10,394
123 489 612
(250) 37 37 37 (213)
Issuance of new shares to minority shareholders in 2007 relates to capitalisation of shareholders loan.
Attributable to equity holders of the Company 2008 Group Statutory Fair value Share Accumulated reserve Translation adjustment capital profits fund reserve reserve $000 $000 $000 $000 $000 (Note 28) (Note 29) (Note 30) (Note 31) Minority interests $000 Total equity $000
Total $000
At 1 January 2008 Net effect of currency translation differences Net income recognised directly in equity Net profit for the year Total recognised income for the year Dividends paid (Note 38) Transfer to statutory reserve Fair value adjustment Issuance of new shares to minority shareholders At 31 December 2008
33,303 33,303
10,394 7,770 7,770 (1,292) (464) 16,408
612 464 1,076
(213) 758 758 758 545
1,178 1,178
44,096 758 758 7,770 8,528 (1,292) 1,178 52,510
3,170 588 588 (985) 850 3,623
47,266 758 758 8,358 9,116 (2,277) 1,178 850 56,133
48
ConsoliDateD Cash flow statement


51
Notes
2008 $000
2007 $000
Notes
2008 $000
2007 $000
Cash flows from operating activities Profit before taxation Adjustments for: Depreciation expense Amortisation of intangible assets Impairment of plant and equipment Intangible assets written off Loss on disposal of plant and equipment Plant and equipment written off Share of results of associates Share of results of joint ventures Interest expense Interest income (Write back of) impairment of trade receivables Impairment of other receivables (Write back of) impairment of amount due from associates (non-trade) Impairment of investment in associate Bad debts written off Dividend income from investment securities Gain on disposal of associate Loss on liquidation of an associate Unrealised foreign exchange gain Translation difference Operating profit before working capital changes (Increase) decrease in: Inventories Trade receivables Other receivables and deposits Prepayments Amount due from related parties Amount due from associates (trade) Amount due from associates (non-trade) Amount due from joint ventures (trade) Amount due from joint ventures (non-trade) Amount due from minority shareholders (non-trade) Increase (decrease) in: Trade payables Other payables and other liabilities Amount due to associates (trade) Amount due to associates (non-trade) Amount due to joint ventures (non-trade) Cash flows generated from operations Tax paid Net cash flows from operating activities
12,001 10 11 10 13,147 582 465 7 19 799 496 46 851 (167) (10) 13 (107) 385 32 (57) (426) 28,076 (1,419) (1,724) (4,831) (760) 114 64 (106) 2,769 13,849 (5) 88 36,115 (3,372) 32,743
11,228 9,793 555 130 593 454 (267) 908 (173) 10 275 8 (55) (83) 17 23,393 (354) (180) (2,298) (1,192) 78 897 (140) 50 (258) 150 464 10,456 5 (360) 25 30,736 (2,040) 28,696
Cash flows from investing activities Interest income received Dividend income received Purchase of property, plant and equipment Acquisition of intangible assets Investment in associates Investment in joint ventures Proceeds from sale of plant and equipment Proceeds from disposal of associate Net cash inflow on acquisition of subsidiaries Net cash flows used in investing activities Cash flows from financing activities Interest paid Dividends paid to shareholders of the Company Dividends paid to minority shareholders Proceeds from issuance of shares Share issue expense Proceeds from long-term loans Repayment of long-term loans Proceeds from short-term loans Repayment of short-term loans Capital injection from minority shareholders of subsidiaries Repayment of finance lease obligations Loans from minority shareholders of subsidiaries Decrease in fixed deposits pledged Repayment of amount due to landlord Net cash flows from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year
167 (25,603) (129) 135 (25,430)
173 235 (17,987) (157) (1,200) (334) 367 178 1,874 (16,851)
(826) (1,292) (985) 7,531 (4,214) 6,994 (5,527) 850 (266) 150 107 (196) 2,326 9,639 38,238 A 47,877
(884) (987) (1,148) 12,240 (453) 4,062 (4,219) 585 (2,242) (146) 130 1,000 7,938 19,783 18,455 38,238
50


53
NOTE A. CASH AND CASH EqUIVALENTS

Cash and cash equivalents consist of cash on hand and at bank and unpledged fixed deposits. Fixed deposits pledged to banks for banking facilities granted to the Group are excluded from cash and cash equivalents. For the purpose of the consolidated cashflow statement, cash and cash equivalents comprise the following as at 31 December:
2008 $000 2007 $000
NOTE C. ACqUISITION OF SUBSIDIARIES (CONTD)

(i) Acquisition of subsidiary, ML Breadworks Sdn Bhd (Contd) The fair values of the identifiable assets and liabilities of MLB as at the date of acquisition were as follows:
Carrying amount before combination $000
Recognised on acquisition $000
Cash on hand and at bank Fixed deposits Less: Fixed deposits pledged Cash and cash equivalents at the end of year
44,690 3,187 47,877 47,877
35,531 2,814 38,345 (107) 38,238
NOTE B. PLANT AND EqUIPMENT HELD UNDER FINANCE LEASES

During the year, the Group acquired property, plant and equipment with an aggregate cost of approximately $25,879,000 (2007: $18,179,000) of which $276,000 (2007: $192,000) was financed via finance lease. Cash payments of $25,603,000 (2007: $17,987,000) were made to acquire property, plant and equipment.
Plant and equipment Trademark Inventories Other receivables and deposits Prepayments Cash on hand and at bank Trade payables Other payables and accrued expenses Amount due to related companies Finance lease obligations, secured Net identifiable (liabilities) assets Add: Additional capital injection by BTI Net assets after additional capital injection Less: Carrying value of investment in associate Less: Minority interest Net assets acquired Goodwill arising from acquisition Total purchase consideration Less: Cash and cash equivalents acquired Net cash inflow
682 130 394 30 70 (324) (259) (604) (154) (35) 873 838 (199) (84) 555 327 882 (943) 61
682 364 130 394 30 70 (324) (259) (604) (154) 329
NOTE C. ACqUISITION OF SUBSIDIARIES

(i) Acquisition of subsidiary, ML Breadworks Sdn Bhd On 20 September 2007, BreadTalk International Pte Ltd (BTI) entered into an Investment and Shareholders Agreement with Memory Lane Sdn Bhd (ML) and ML Breadworks Sdn Bhd (MLB), a 49% owned associate. Pursuant to the Investment Agreement, BTI would invest an additional RM2,000,000 ($873,000) in MLB in the form of an allotment of 2,000,000 new ordinary shares of RM1 each (the Ordinary Shares). In consideration of BTIs investment, ML agreed to transfer a total of 1,030,000 ordinary shares owned by it in MLB upon the allotment of the Ordinary Shares to BTI, at nil consideration. As a result of the above transactions, MLB has a paid up and issued share capital of RM5,000,000 represented by 5,000,000 ordinary shares of RM1 each, with BTI holding 90% equity interest and ML, the remaining 10%. Accordingly, MLB became a subsidiary of BTI.
52

notes to the finanCial statements

31 December 2008
55
NOTE C. ACqUISITION OF SUBSIDIARIES (CONTD)

(ii) Acquisition of subsidiary, MWA Pte Ltd On 10 December 2007, Megabite (S) Pte Ltd, a wholly-owned subsidiary, acquired the remaining 50% equity interest in its joint venture, MWA Pte Ltd (MWA) and its subsidiary, Food Art Pte Ltd (FAPL) for a cash consideration of $3,800,000. Upon the acquisition, MWA and FAPL became subsidiaries of the Group. The fair values of the identifiable assets and liabilities of MWA and its subsidiary as at the date of acquisition were as follows:
Carrying amount before combination $000
1.
1.1
GENERAL
Corporate information
BreadTalk Group Limited (the Company) is a limited liability company, which is incorporated in the Republic of Singapore and listed on the Singapore Exchange Securities Trading Ltd. The registered office and principal place of business of the Company is located at 171 Kampong Ampat, #05-05 KA Foodlink, Singapore 368330. The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are shown in Note 13 to the financial statements.
Recognised on acquisition $000
1.2
Fundamental accounting assumption

The financial statements of the Group have been prepared on a going concern basis. The Groups net current liabilities position as at 31 December 2008 of $5,518,000 (2007: $3,907,000) arose mainly from the use of cash and short-term bank borrowings to finance the purchase of plant and equipment for the bakery, food court and restaurant businesses during the year. Included in other payables and other liabilities are food court tenant and stored value card deposits of $7,141,000 (2007: $5,195,000) and deferred revenue of $3,589,000 (2007: $3,703,000) respectively. Deferred revenue relates to unearned franchise fees received, unredeemed cash vouchers sold and the unutilised value on the food court stored value cards. These current liabilities, because of their nature, are not expected to result in significant cash outflow from the Group within the next 12 months. In addition, the Group has unutilised banking facilities available for future use. The directors are confident that the Group will be able to pay its debts as and when they fall due.
Plant and equipment Location premium Trademark Deferred tax assets Inventories Trade receivables Other receivables and deposits Prepayments Amount due from related companies Cash on hand and at bank Trade payables Other payables and accrued expenses Provision for reinstatement cost Provision for income tax Amount due to shareholders Amount due to related companies (non-trade) Net identifiable assets Less: Carrying value of investment in joint ventures Net assets acquired Goodwill arising from acquisition Total purchase consideration Net cash inflow from acquisition: Total purchase consideration Less: Cash balances acquired Net cash inflow
2,278 31 10 43 19 11 666 69 42 5,613 (151) (2,588) (280) (683) (6) (191) 4,883 (2,351) 2,532 1,268 3,800
2,278 31 10 43 19 11 666 69 42 5,613 (151) (2,588) (280) (683) (6) (191) 4,883
2.
2.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation
The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (FRS). The financial statements have been prepared on a historical cost basis, except as disclosed in the accounting policies below. The financial statements are presented in Singapore Dollars (SGD or $) and all values are rounded to the nearest thousand ($000) except when otherwise indicated.
54
3,800 (5,613) 1,813
2.2
Future changes in accounting policies

The Group has not adopted the following FRS and INT FRS that have been issued but not yet effective:
Effective for annual periods beginning on or after
As at 31 December 2007, the fair values of the assets and liabilities of MWA and FAPL were based on provisional amounts. As at 31 December 2008, these fair values had been ascertained to approximate the provisional amounts as at 31 December 2007 and hence there were no adjustments to the goodwill arising from this acquisition.
Reference
Description
FRS 1
Presentation of Financial Statements Revised presentation Presentation of Financial Statements Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation
1 January 2009 1 January 2009

31 December 2008

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57
2.
2.2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)

Future changes in accounting policies (contd)
Effective for annual periods beginning on or after
2.
2.3

Significant accounting estimates and judgements (contd) Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (i) Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill are allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of the Groups goodwill at 31 December 2008 was $6,173,000 (2007: $6,173,000). More details are given in Note 11. (ii) Valuation and estimated useful life of brand value arising from acquisition of a subsidiary, Topwin Investment Holding Pte Ltd (Topwin) Brand value arising from the acquisition of Topwin was separately identified and recognised by management using the relief from royalty method. The premise of this valuation method is the assumption that the Group would be compelled to pay the rightful owner of the brand name if the Group did not have the legal right to utilise the brand name. The ownership of the brand therefore relieves the Group from making such royalty payments. This requires an estimation of the royalty payments including initial fees and continuing royalty payments based on a percentage of projected revenue. The basis used to determine the revenue projections is the revenue for each food court of Topwin achieved in the financial year ended 31 December 2004 projected into the future. The useful life of the brand value is estimated by the directors to be 15 years as this is the length of time that they expect the benefits of the brand to flow to the Group. Amortisation of the brand amounted to $213,000 (2007: $213,000) for the financial year ended 31 December 2008 and the carrying amount of the brand value at 31 December 2008 was $2,345,000 (2007: $2,558,000). More details are given in Note 11. (iii) Income taxes The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Groups tax payable and deferred tax liabilities at 31 December 2008 were approximately $3,102,000 (2007: $2,967,000) and $1,124,000 (2007:$845,000) respectively. The carrying amount of the Groups deferred tax assets at 31 December 2008 was $532,000 (2007:$394,000). A subsidiary, BreadTalk Pte Ltd (BTPL) obtained the Development and Expansion Incentive (DEI) which entitles the qualifying income of the company earned during the financial years ended 31 December 2003 to 2007 to be subject to the concessionary tax rate of 10%, subject to certain conditions to be met by year 2007. On 15 August 2006, the company was granted approval by the Economic Development Board (EDB) on the amendment of certain conditions laid down in its DEI award letter dated 19 February 2004. In view of the amendments, the company has met all qualifying conditions laid down by the EDB for the DEI incentive by 2007. Accordingly, income from the qualifying DEI activities has been brought to tax at the concessionary tax rate of 10%. On 24 January 2008, BTPL was granted an extension of the DEI for a period of another 5 years commencing 1 January 2008.
Reference
Description
FRS 23 FRS 27
Borrowing Costs Consolidated and Separate Financial Statements Amendments relating to Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate Financial Instruments: Presentation Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation Financial Instruments: Recognition and Measurement Amendments relating to eligible hedged items First-Time Adoption of Financial Reporting Standards Amendments relating to Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate Share-based payment Vesting conditions and cancellations Operating Segments Customer Loyalty Programmes Hedges of a Net Investment in a Foreign Operation Distribution of Non-cash Assets to Owners
1 January 2009 1 January 2009
FRS 32
1 January 2009
FRS 39
1 July 2009
FRS 101
1 January 2009
FRS 102 FRS 108 INT FRS 113 INT FRS 116 INT FRS 117
1 January 2009 1 January 2009 1 July 2008 1 October 2008 1 July 2009
The directors expect that the adoption of the above pronouncements will have no material impact to the financial statements in the period of initial application, except for FRS 1 and FRS 108 as indicated below.
FRS 1 Presentation of Financial Statements Revised Presentation

The revised FRS 1 requires owner and non-owner changes in equity to be presented separately. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line item. In addition, the revised standard introduces the statement of comprehensive income: it presents all items of income and expense recognised in profit or loss, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Group is currently evaluating the format to adopt.
56
FRS 108 Operating Segments

FRS 108 requires entities to disclose segment information based on the information reviewed by the entitys chief operating decision maker. The impact of this standard on the other segment disclosures is still to be determined. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group when implemented in 2009. 2.3
Significant accounting estimates and judgements

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

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59
2.
2.3

Significant accounting estimates and judgements (contd)
(iv) Depreciation of property, plant and equipment Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these assets to be within 2 to 20 years. The carrying amount of the Groups property, plant and equipment as at 31 December 2008 was $58,156,000 (2007: $44,893,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. In particular, renovation costs incurred and capitalised for bakery outlets, food courts and restaurants may be subject to immediate impairment upon their unforeseen closure due to unfavourable operations.
2.
2.5

Related party
An entity or individual is considered a related party of the Group for the purposes of the financial statements if: i) it possesses the ability (directly or indirectly) to control or exercise significant influence over the operating and financial decisions of the Group or vice versa; or ii) it is subject to common control or common significant influence.
2.6
Subsidiaries, minority interests and principles of consolidation

(a)
Subsidiaries
A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors. In the Companys separate financial statements, investments in subsidiaries are accounted for at cost less any impairment losses.
2.4
Functional and foreign currency

(a)
Functional currency
The management has determined the currency of the primary economic environment in which the Company operates i.e. functional currency, to be SGD. Sales prices and major costs of providing goods and services including major operating expenses are primarily influenced by fluctuations in SGD.
(b)
Principles of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Acquisitions of subsidiaries are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity. Any excess of the cost of the business combination over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. The goodwill is accounted for in accordance with the accounting policy for goodwill stated in Note 2.10 below. Any excess of the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised in the income statement on the date of acquisition.
(b)
Foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the income statement except for exchange differences arising on monetary items that form part of the Groups net investment in foreign subsidiaries, which are recognised initially in a separate component of equity as foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidated income statement on disposal of the subsidiary. In the Companys separate financial statements, such exchange differences are recognised in the income statement.
(c)
Foreign currency translation

The results and financial position of foreign operations are translated into SGD using the following procedures: Assets and liabilities for each balance sheet presented are translated at the closing exchange rate ruling at that balance sheet date; and Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions. (c)
58
All resulting exchange differences are recognised in a separate component of equity as foreign currency translation reserve. On disposal of a foreign operation, the cumulative amount of exchange differences deferred in equity relating to that foreign operation is recognised in the income statement as a component of the gain or loss on disposal.
Transactions with minority interests

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. They are presented in the consolidated balance sheet within equity, separately from the parent shareholders equity, and are separately disclosed in the consolidated income statement. On acquisition of minority interests, the difference between the consideration and the book value of the share of the net assets acquired is recognised in goodwill. Gain or loss on disposal to minority interests is recognised in the income statement.

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61
2.
2.7

Associates
An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. This generally coincides with the Group having 20% or more of the voting power, or has representation on the board of directors. The Groups investment in associates is accounted for using the equity method. Under the equity method, the investment in associate is carried in the balance sheet at cost plus post-acquisition changes in the Groups share of net assets of the associate. The Groups share of the profit or loss of the associate is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Groups net investment in the associate. The associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate. Goodwill relating to an associate is included in the carrying amount of the investment. Any excess of the Groups share of the net fair value of the associates identifiable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is, instead included as income in the determination of the Groups share of the associates profit or loss in the period in which the investment is acquired. When the Groups share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The financial statements of the associate are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies into line with those of the Group.
2.
2.9

Property, plant and equipment (contd)
Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful life of the asset as follows: Leasehold property Machinery and equipment Electrical works Furniture and fittings Office equipment Renovation Motor vehicles 20 years 5 - 6 years 5 - 6 years 5 - 6 years 3 - 6 years 2 - 6 years 5 - 6 years
Construction-in-progress is stated at cost. No depreciation is provided for construction-in-progress as these assets are not available for use. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the asset is derecognised. 2.10
2.8
Joint ventures
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest. The Groups investment in joint ventures is accounted for using the equity method. Under the equity method, the investment in joint ventures is carried in the balance sheet at cost plus post-acquisition changes in the Groups share of net assets of the joint venture. The Groups share of the profit or loss of the joint venture is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Groups net investment in the joint venture. The joint venture is equity accounted for from the date the Group obtains joint control until the date the Group ceases to have joint control over the joint venture. The financial statements of the joint venture are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies into line with those of the Group.
Intangible assets
(a)
Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Groups cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination. A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised in the income statement. Impairment losses recognised for goodwill are not reversed in subsequent periods. Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cashgenerating unit retained.
60
2.9
Property, plant and equipment

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

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63
2.
2.10

Intangible assets (contd)
(a)
2.
2.11

Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e. an intangible asset with an indefinite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in the income statement except for assets that are previously revalued where the revaluation was taken to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the assets recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the income statement unless the asset is measured at revaluated amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
Goodwill (contd)
Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.4. Goodwill and fair value adjustments which arose on acquisitions of foreign operations before 1 January 2005 are deemed to be assets and liabilities of the Company and are recorded in SGD at the rates prevailing at the date of acquisition.
(b)
Other intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. The amortisation expense on intangible assets with finite lives is recognised in the income statement. Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether the useful life assessment continues to be supportable. Gain or loss arising from derecognition of an intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised. (i) Trade mark Costs relating to trade mark are capitalised and amortised on a straight-line basis over its estimated finite useful life of 5 years. (ii) Franchise rights Costs relating to master franchise fees paid are capitalised and amortised on a straight-line basis over the lease/franchise period ranging from 4 to 9 years.
2.12
Financial assets
Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. (a)
Loans and receivables

Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
62
(b) (iii) Location premium
Available-for-sale financial assets

The Group classifies its investment securities as available-for-sale financial assets.
Consideration paid to previous tenants to vacate premises in order to secure the lease arrangement are amortised on a straight-line basis over the new lease agreement period of 4 years. (iv) Brand value Brand value was acquired through a business combinations. The useful life of the brand is assessed to be finite and estimated to be 15 years because this is the length of time that the management expects the economic benefits of the brand to flow to the Group. Brand value is amortised on a straight-line basis over its estimated economic useful life.
Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of the other categories. After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised directly in the fair value adjustment accrued in equity, except that impairment losses are recognised in the income statement. The cumulative gain or loss previously recognised in equity is recognised in the income statement when the financial asset is derecognised. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment losses.

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2.
2.13

Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and at bank, unpledged fixed deposits and short-term highly liquid investments which are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.
2.
2.15

Inventories
Inventories comprise raw materials, consumables, semi-finished goods and base inventory. Inventories are valued at the lower of cost and net realisable value. Costs comprise purchase costs accounted for on a weighted average cost basis. In the case of semi-finished goods, costs also include an appropriate share of production overheads based on normal operating capacity. Base inventory, comprising mainly cutlery and dining utensils, are written down to 50% of the original cost and all further replacement costs incurred in maintaining the base inventory is expensed. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale. Provision is made for deteriorated, damaged, obsolete and slow-moving inventories.
2.14
Impairment of financial assets

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

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial assets original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the income statement. When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset. To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. 2.17
2.16
Financial liabilities
Financial liabilities include trade payables, which are normally settled on 30-90 day terms, other amounts payable, payables to related parties and interest-bearing loans and borrowings. Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. Financial liabilities are initially recognised at fair value of consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the liabilities are derecognised or impaired as well as through the amortisation process. The liabilities are derecognised when the obligation under the liability is discharged or cancelled or expired.
Borrowing costs
Borrowing costs are generally expensed as incurred.
2.18 (b)
Derecognition of financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where: The contractual rights to receive cash flows from the asset have expired; The Group retains the contractual rights to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a pass-through arrangement; or The Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Assets carried at cost

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

Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired. If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from equity to the income statement. Reversals of impairment losses in respect of equity instruments are not recognised in the income statement. Reversals of impairment losses on debt instruments are recognised in the income statement if the increase in fair value of the debt instrument can be objectively related to an event occurring after the impairment loss was recognised in the income statement.
64
On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of (a) the consideration received (including any new asset obtained less any new liability assumed) and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the income statement.

31 December 2008

31 December 2008
67
2.
2.19

Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
2.
2.21

Employee benefits (contd)
(b)
Employee leave entitlement

Employee entitlements to annual leave are recognised when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.
2.22
Income recognition
Income is recognised to the extent that it is probable that the economic benefits will flow to the Group and the income can be reliably measured. The following specific recognition criteria must also be met before income is recognised: (a)
2.20
Leases
Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the income statement. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.
Bakery sales, restaurant sales and sales to franchisee

Revenue from the sale of goods is recognised net of goods and services tax and discounts upon the passing of title to the customer which generally coincides with delivery and acceptance of the goods sold.
(b)
Franchise income
Initial franchise income is recognised upon the grant of rights, completion of the designated phases of the franchise setup and transfer of know-how to the franchisee in accordance with the terms stated in the franchise agreement. Recurring franchise income is recognised on a periodic basis as a percentage of the franchisees revenue in accordance with terms as stated in the franchise agreement.
(c)
Food court revenue

Revenue from operation of food court is recognised when rental is charged to the food court tenants based on a percentage of their gross sales. Revenue from sales of food and beverage is recognised upon delivery and acceptance by customers, net of sales discounts.
2.21
Employee benefits
(a)
Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. Singapore The Group makes contributions to the Central Provident Fund (CPF) scheme in Singapore, a defined contribution pension scheme. The Group makes monthly contributions based on stipulated contribution rates. Peoples Republic of China (PRC) Subsidiaries incorporated and operating in the PRC are required to provide certain staff pension benefits to their employees under existing PRC regulations. Contributions are provided at rates stipulated by PRC regulations and are contributed to a pension fund managed by government agencies, which are responsible for administering these amounts for the subsidiaries PRC employees. Hong Kong (f) (d)
Management fee
Management fee is recognised on an accrual basis.
(e)
Interest income
Interest income is recognised as interest accrues (using the effective interest method) unless collectibility is in doubt.
Dividend income
Dividend income is recognised when the Groups right to receive payment is established.
66
2.23
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised in the income statement over the period necessary to match them on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is recognised as deferred capital grant on the balance sheet and is amortised to the income statement over the expected useful life of the relevant asset by equal annual instalments.
Subsidiaries incorporated and operating in Hong Kong pay contributions to publicly or privately administered pension insurance plans on a mandatory basis. The subsidiaries have no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due and are not reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. Contributions to national pension schemes are recognised as an expense in the period in which the related services are performed.

31 December 2008

31 December 2008
69
2.
2.24

Income taxes
(a)
2.
2.25

Segment reporting
A business segment is a distinguishable component of the Group that is engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group that is engaged in providing products or services within a particular economic environment and that is subject to risks and returns that are different from those of components operating in other economic environments.
Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Current taxes are recognised in the income statement. 2.26
Share capital and share issue expenses

Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.
(b)
Deferred tax
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. 2.27 Deferred tax liabilities are recognised for all taxable temporary differences, except: Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and In respect of deductible temporary differences and carry-forward of unused tax credits and unused tax losses, if it is not probable that taxable profit will be available against which the deductible temporary differences and carry-forward of unused tax credits and unused tax losses can be utilised. A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group. Contingent liabilities and assets are not recognised on the balance sheet of the Group.
Contingencies
3.
REVENUE
Group 2008 $000 2007 $000
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred taxes are recognised in the income statement except that deferred tax relating to items recognised directly in equity is recognised directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. (c)
Bakery sales Restaurant sales Sales to franchisee Franchise income Food court income
94,872 32,173 8,106 7,886 69,212 212,249
68,841 28,345 5,951 5,031 48,442 156,610
4.
OTHER OPERATING INCOME

Group 2008 $000 2007 $000
68
Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax except: Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables that are stated with the amount of sales tax included.
Management fee income - Food court management - Others Dividend income from investment securities Government grant (1) Gain on disposal of associate Income from expired food court stored value cards Sponsorship income Sundry sales Compensation from landlord Miscellaneous income
4,779 190 775 197 227 596 326 694 7,784
2,306 406 55 1,153 83 938 241 627 510 6,319
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
(1)
Government grant in relation to business expansion activities undertaken by certain subsidiaries in the PRC

31 December 2008

31 December 2008
71
5.
PROFIT FROM OPERATIONS

This is determined after charging/ (crediting) the following:
Group 2008 $000 2007 $000
7.
INTEREST INCOME AND INTEREST EXPENSE

Group 2008 $000 2007 $000
Interest income from loans and receivables - Bank deposits Interest expense - Term loans - Finance lease obligations - Others
167
173
Non-audit fees to auditors of the Company Amortisation of intangible assets (Note 11) Bad trade debts written off (Write back of) impairment of loans and receivables - trade receivables - other receivables - amount due from associates (non-trade) Directors fees Depreciation expense (Note 10) Employee benefits (Note 6) Foreign exchange loss, net Loss on disposal of plant and equipment Loss on liquidation of an associate Operating lease expenses - fixed portion (1) - variable portion Plant and equipment written off Intangible assets written off Impairment of investment in associate Impairment of plant and equipment Pre-operating expenses
(1)
139 582 (10) 13 (107) 105 13,147 57,277 26 19 32 41,460 4,618 799 7 385 465 395
126 555 8 10 275 96 9,793 42,001 89 130 27,230 4,817 593 1
(792) (35) (24) (851)
(859) (25) (24) (908)
8.
TAXATION
Major components of income tax expense were:
Group 2008 $000 2007 $000
Current tax - Current year - Over provision in prior year Deferred tax - Origination and reversal of temporary differences - Under/(over) provision in prior year Withholding tax
3,669 (354)
2,595 (55)
Net of sublease rental income received from a related party amounting to $Nil (2007: $2,400)
84 85 159 3,643
187 (251) 315 2,791
6.
EMPLOYEE BENEFITS
Group 2008 $000 2007 $000
Taxation expense
70
Staff costs (including directors) Salaries and bonuses Central Provident Fund and other pension contributions Sales incentives and commission Other personnel benefits
44,049 4,180 2,334 6,714 57,277
32,201 2,859 2,143 4,798 42,001

31 December 2008

31 December 2008
73
8.
TAXATION (CONTD)
A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax rate for the year ended 31 December is as follows:
Group 2008 $000 2007 $000
8.
TAXATION (CONTD)
Deferred income tax as at 31 December relates to the following:
Group Balance sheet 2008 $000 2007 $000 Income statement 2008 2007 $000 $000
Profit before taxation Tax at the domestic rates applicable to profits in the countries where the Group operates(1) Tax effect of: Expenses not deductible for tax purposes Income not subject to taxation Effect of reduction in tax rate Share of associates and joint ventures tax Tax savings arising from development and expansion incentive (2) (Over)/Under provision in prior years - Current tax - Deferred tax Withholding tax expense Effect of partial tax exemption and tax relief Deferred tax assets not recognised Benefits from previously unrecognised deferred tax assets Others Taxation expense
(1)
12,001
11,228
2,746
2,832
Deferred tax liabilities: Differences in depreciation for tax purposes Provisions Dividend income
(1,086) 17 (55) (1,124)
(950) 105 (845) 389 5 394
136 88 55
21
1,161 (4) 2 33 (176) (354) 85 159 (514) 724 (201) (18) 3,643
584 (60) (49) (189) (124) (55) (251) 315 (587) 369 (22) 28 2,791
Deferred tax assets: Provisions Excess of net book value over tax written down value of fixed assets Unutilised tax losses
315 (20) 237 532
97 20 (227)
(80) (5)
Deferred income tax
169
(64)
In accordance with the Income Tax Law of the PRC for Enterprises with Foreign Investment and Foreign Enterprises, Shanghai BreadTalk Co., Ltd (SHBT), a wholly-owned subsidiary registered in the PRC, is entitled to full exemption from Enterprise Income Tax (EIT) for the first two years and a 50% reduction in EIT for the next three years, commencing from the first profitable year after offsetting all tax losses carried forward from the previous five years. SHBT achieved its fourth profitable year in the current financial year end.
Unrecognised tax losses and capital allowances

This is prepared by aggregating separate reconciliations for each national jurisdiction. In February 2004, the Economic Development Board granted the Development and Expansion Incentive under the International Headquarters (IHQ-DEI) Award to a subsidiary. Subject to certain conditions, the subsidiary enjoys a concessionary tax rate of 10% on its qualifying income for a period of 5 years commencing 1 January 2003. On 24 January 2008, the subsidiary was granted an extension of the DEI for another 5 years commencing 1 January 2008. As at 31 December 2008, the Group has tax losses of approximately $5,495,000 (2007: $3,226,000) and unutilised capital allowances of approximately $823,000 (2007: $1,787,000) that are available for offset against future taxable profits, for which no deferred tax assets are recognised on these amounts due to uncertainty of their utilisation. The utilisation of the tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.
(2)
Tax consequences of proposed dividends

There are no income tax consequences attached to the dividends to the shareholders proposed by the Company but not recognised as a liability in the financial statements (Note 38).
The corporate income tax rate applicable to PRC companies of the Group was reduced to 25% for the year of assessment 2009 onwards from 33% for the year of assessment 2008. The corporate income tax rate applicable to Malaysian companies of the Group was reduced to 26% for the year of assessment 2008 onwards from 27% for the year of assessment 2007.
72 9.
EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the Groups profit for the year attributable to ordinary equity holders of the Company of $7,770,000 (2007: $7,319,000) by the weighted average number of ordinary shares of 234,911,034 (2007: 226,411,034) in issue during the year. The basic and diluted earnings per share are the same as there are no potential dilutive shares.

31 December 2008

31 December 2008
75
10.
PROPERTY, PLANT AND EqUIPMENT

Leasehold property $000 Machinery and equipment $000 Electrical works $000 Furniture and fittings $000 Office equipment $000
10.
PROPERTY, PLANT AND EqUIPMENT (CONTD)

Renovation $000 Motor vehicles $000 Construction -in-progress $000 Total $000
Group Cost As at 1.1. 2007 Additions Reclassifications Write offs Disposals Acquisition of subsidiaries Translation difference As at 31.12.2007 and 1.1.2008 Additions Reclassifications Write offs Disposals Translation difference As at 31.12.2008 Accumulated depreciation and impairment losses As at 1.1. 2007 Charge for the year Reclassifications Write offs Disposals Translation difference As at 31.12.2007 and 1.1.2008 Charge for the year Reclassifications Write offs Disposals Impairment loss for the year Translation difference As at 31.12.2008
8,268 63 8,331 (269) 549 8,611
10,189 2,503 (247) (164) 400 10 12,691 4,679 93 (221) (124) 188 17,306
5,607 3,059 12 (297) (22) 341 (109) 8,591 4,341 (38) (337) 82 12,639
6,259 3,636 (290) (83) 267 (195) 9,594 7,501 (671) (212) (13) 216 16,415
2,491 631 (49) (11) 43 12 3,117 930 (97) (77) (17) 74 3,930
Group Cost As at 1.1.2007 Additions Reclassifications Write offs Disposals Acquisition of subsidiaries Translation difference As at 31.12.2007 and 1.1.2008 Additions Reclassifications Write offs Disposals Translation difference As at 31.12.2008 Accumulated depreciation and impairment losses As at 1.1.2007 Charge for the year Reclassifications Write offs Disposals Translation difference As at 31.12.2007 and 1.1.2008 Charge for the year Reclassifications Write offs Disposals Impairment loss for the year Translation difference As at 31.12.2008 Net book value As at 31.12.2007 As at 31.12.2008
(1)
18,750 4,854 (1) (12) (1,514) (603) 1,909 164 23,548 7,478 (1) 1,351 (1,781) (257) 904 31,243
1,022 541 (212) 5 1,356 321 (38) (51) 26 1,614
394 3,514 6 3,914 951 (369) 283 4,779
52,980 18,738 (2,397) (1,095) 2,960 (44) 71,142 26,201 (2,666) (462) 2,322 96,537
451 369 3 823 379 (9) 69 1,262 7,508 7,349
5,159 1,828 (179) (49) (85) 6,674 2,195 (39) (159) (93) 57 55 8,690 6,017 8,616
2,424 1,217 1 (271) (6) (26) 3,339 1,884 (24) (315) 131 22 5,037 5,252 7,602
1,882 1,555 (212) (26) 67 3,266 2,307 (266) (153) (3) 38 47 5,236 6,328 11,179
1,057 513 (37) (4) (3) 1,526 658 (31) (61) (11) 17 28 2,126 1,591 1,804
7,555 4,085 (1) (1,105) (322) 63 10,275 5,426 353 (1,145) (171) 222 465 15,425 13,273 15,818
311 226 (191) 346 298 16 (34) (30) 9 605 1,010 1,009
3,914 4,779
18,839 9,793 (1,804) (598) 19 26,249 13,147 (1,867) (308) 465 695 38,381 44,893 58,156
74
Net book value As at 31.12.2007 As at 31.12.2008
Amount includes provision for reinstatement costs of $322,000 (2007: $559,000).

31 December 2008

31 December 2008
77
10.

Assets held under finance leases
As at 31 December 2008, the net book values of property, plant and equipment acquired under finance leases are as follows:
Group 2008 $000 2007 $000
10.

Furniture and fittings $000 Office equipment $000 Total $000
Company Cost As at 1.1.2007 Additions
6 13
6 14
Machinery and equipment Renovation Motor vehicles
236 357
172 106 545
As at 31.12.2007 and 1.1.2008 Additions As at 31.12.2008 Accumulated depreciation As at 1.1.2007 Charge for the year As at 31.12.2007 and 1.1.2008 Charge for the year As at 31.12.2008 Net book value As at 31.12.2007 As at 31.12.2008
1 1
19 75 94
20 75 95
Assets written off

Property, plant and equipment written off during the year arose mainly due to the refurbishment/closure of certain bakery outlets and food courts. The amount written off represents the total carrying value of the plant and equipment attributable to the bakery outlets and food courts at the date of refurbishment/closure. The residual value of these assets has been assessed as nil.
1 4 5 21 26
1 4 5 21 26
Assets pledged as security

In addition to assets held under finance leases, the Groups leasehold property with a carrying amount of $4,508,000 (2007: $4,443,000) is pledged to secure the Groups bank loans (Note 26).
Impairment of assets
During the financial year, the subsidiaries, BreadTalk Pte Ltd and Charcoal Pte Ltd carried out a review of the recoverable amount of the assets of bakery outlets/restaurant that were making losses. A total impairment loss of $465,000, representing the write-down to amounts based on fair value less costs to sell, was recognised for the financial year.
1 1
14 68
15 69
76

31 December 2008

31 December 2008
79
11.
INTANGIBLE ASSETS
Group Franchise Brand value Trade Mark rights $000 $000 $000
11.
INTANGIBLE ASSETS (CONTD)

Impairment testing of goodwill
Goodwill $000
Location Premium $000
Total $000
Cost As at 1.1.2007 Additions Acquisition of subsidiaries As at 31.12.2007 and 1.1.2008 Additions Write offs As at 31.12.2008 Accumulated amortisation As at 1.1.2007 Amortisation As at 31.12.2007 and 1.1.2008 Amortisation Write offs As at 31.12.2008 Net book value As at 31.12.2007 As at 31.12.2008 * Less than $1,000
Goodwill arising from the acquisition of Topwin Investment Holding Pte Ltd and its subsidiaries in 2005 was allocated to 2 cash-generating units (CGU), which represent the 2 geographical segments (i.e. Shanghai and Beijing segments) in which the acquired food courts are located. The food courts located in the same geographical segment are managed by the same management team. Goodwill arising from the acquisition of ML Breadworks Sdn Bhd in 2007 was allocated to the legal entity acquired which represents the CGU. Meanwhile, goodwill on the acquisition of MWA Pte Ltd in December 2007 was primarily attributable to the food court operations at Wisma Atria, Singapore. Allocated goodwill based on the CGUs is as follows:
Basis on which recoverable values are determined
4,578 1,595 6,173 6,173
3,209 3,209 3,209
583 99 10 692 72 764
693 58 751 57 (7) 801
474 31 505 505
9,537 157 1,636 11,330 129 (7) 11,452
Carrying amount as at 31 December $000
Pre-tax discount rate
438 213 651 213 864
280 127 407 125 532
244 95 339 108 * 447
148 120 268 136 404
1,110 555 1,665 582 2,247
Shanghai segment Beijing segment ML Breadworks Sdn Bhd Food court operation at Wisma Atria, Singapore
3,569 1,009 327 1,268 6,173
Value in use Value in use Value in use Value in use
10% 10% 8% 8%
6,173 6,173
2,558 2,345
285 232
412 354
237 101
9,665 9,205
The recoverable amount is determined based on a value in use calculation using the cash flow projections based on financial budgets approved by management covering a five-year period. The discount rates applied to the cash flow projections are derived from cost of capital plus a reasonable risk premium at the date of assessment of the respective cash generating units. No impairment loss on goodwill was required for the financial year ended 31 December 2008 as the recoverable amount was in excess of the carrying value.
Brand value, trade mark, franchise rights and location premium are determined to have finite useful lives and are amortised on a straight-line basis over their respective estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible assets may be impaired. Brand value, trade mark, franchise rights and location premium have remaining useful lives of 11 years, 1 to 5 years, 1 to 5 years and 1 year as at 31 December 2008 respectively.
12.
INVESTMENT SECURITIES
Group 2008 $000 2007 $000
78
Available-for-sale financial assets - Equity instruments (quoted) - Equity instruments (unquoted)
1,494 1,494
316 316

31 December 2008

31 December 2008
81
13.
INVESTMENT IN SUBSIDIARIES
Company 2008 $000 2007 $000
13.
INVESTMENT IN SUBSIDIARIES (CONTD)

Name Country of incorporation Principal activities Proportion of ownership interest 2008 2007 % % Cost of investment by the Company 2008 2007 $000 $000
Unquoted equity shares at cost Details of the subsidiaries are as follows:

Country of incorporation
23,739
23,139
Name
Principal activities
Proportion of ownership interest 2008 2007 % %
Cost of investment by the Company 2008 2007 $000 $000
Food Republic (Shanghai) Co., Ltd (formerly known as Shanghai Xin Jia Fang Food & Beverage Co., Ltd) (2)
Peoples Republic Food court operator of China
100
100
Held by the Company BreadTalk Pte Ltd (1) Singapore Bakers and manufacturers of 100 and dealers in bread, flour and biscuits Investment holding 100 100 6,739 6,739
Beijing Da Shi Dai Food Peoples Republic Food court operator and Beverage Co., Ltd (2) of China Chongqing Food Republic Food & Beverage Co., Ltd (3) Megabite Hong Kong Limited (4) Megabite (S) Pte Ltd (1) Peoples Republic Food court operator of China
100
100
100
100
BreadTalk International Pte Ltd (1) Topwin Investment Holding Pte Ltd (1) Star Food Pte Ltd (1) (Note (a)) Held through subsidiaries Taster Food Pte Ltd (1)
Singapore
100
6,158
6,158
Hong Kong
Food court operator
85
85
Singapore
Investment holding
100
100
10,242
10,242
Singapore
Investment holding and operator of food and beverage outlets Food court operator Management of food and beverage, manufacture and retail of bakery, confectionery products
100
100
Singapore
Investment holding
60
600
Food Republic Pte Ltd (1) BreadTalk (Thailand) Company Limited (5)
Singapore Thailand
100 100
100 100
Singapore
Operators of food and drinks outlets, eating houses and restaurants Operators of food and drinks outlets, eating houses and restaurants
70
70
Megabite Eatery (M) Sdn Bhd (6) Malaysia
Operator of food and beverage 100 outlets
100
Charcoal Pte Ltd (1)
Singapore
75
75
BreadTalk Concept Hong Kong Limited (4) Hong Kong Management of food and beverage, manufacture and retail of bakery, confectionery products Bakers and manufacturers of and dealers in bread, flour and biscuits Food court operator Operators of food and beverage outlets Retail of bakery and confectionery products 85 85
Shanghai BreadTalk Co., Ltd (2)
80
Shanghai BreadTalk Gourmet Co., Ltd (2)
Peoples Republic Bakers and manufacturers of 100 of China and dealers in bread, flour and biscuits Peoples Republic Management of food and of China beverage, manufacture and retail of bakery, confectionery products 100
100
ML Breadworks Sdn Bhd (2) Malaysia
90
90
100
MWA Pte Ltd (1) 100 100 Food Art Pte Ltd (1)
Singapore Singapore
100 100
100 100
Beijing BreadTalk Peoples Republic Management of food and Restaurant Management of China beverage, manufacture and Co., Ltd (2) retail of bakery, confectionery products
Twin Peaks Venture Singapore Pte Ltd (1)
Singapore
70
70

31 December 2008

31 December 2008
83
13.
INVESTMENT IN SUBSIDIARIES (CONTD)

Name Country of incorporation Principal activities Proportion of ownership interest 2008 2007 % % Cost of investment by the Company 2008 2007 $000 $000
14.
INVESTMENT IN ASSOCIATES (CONTD)

Details of the associates are as follows:
Country of incorporation Proportion of ownership interest 2008 2007 % %
Name
Shanghai Star Food F&B Peoples Republic Operators of restaurants Management Co., Ltd (2) of China (Note (a)) Beijing Star Food F&B Peoples Republic Operators of restaurants of China Management Co., Ltd (2) (Note (a))
60
Held through subsidiaries

60 Hong Kong BreadTalk Ltd (1),(3) Hong Kong Bakers and manufacturers of and dealers in bread, flour and biscuits Bakers and manufacturers of and dealers in bread, flour and biscuits Marketing and distribution of canned drinks 25 25
23,739
(1) (2) (3) (4) (5) (6)
23,139
Taiwan BreadTalk Co., Ltd (2)
Taiwan
30
Audited by Ernst & Young LLP, Singapore Audited by member firms of Ernst & Young Global in the respective countries Audited by Shanghai Xin Gao Xin Certified Public Accountants Co., Ltd, Peoples Republic of China Audited by S.F. Kwok & Co. Certified Public Accountants, Hong Kong Audited by CNN & S Co., Ltd Audited by RSM Robert Teo, Kuan & Co., Malaysia New subsidiaries During the year, the Company subscribed for 600,000 new shares in Star Food Pte Ltd (Star Food) for a cash consideration of $600,000. Consequently, Star Food became a 60% owned subsidiary of the Company. Star Food Pte Ltd subsequently incorporated two subsidiaries, namely Shanghai Star Food F&B Management Co., Ltd and Beijing Star Food F&B Management Co., Ltd, in the Peoples Republic of China, in August and September 2008 respectively.
Out of The Box Pte Ltd (OOTB) (1)
Singapore
30
33.33
(1)
(2)
(a)
(3)
Not a significant associate and unaudited financial statements have been used for the preparation of the consolidated financial statements of the Group Taiwan BreadTalk Co., Ltd ceased operations in April 2008 and was liquidated in September 2008, with the Group recognising a loss on liquidation of $32,000. Hong Kong BreadTalk Ltd had effectively ceased operations since September 2007.
The Group has not recognised losses relating to Hong Kong BreadTalk Ltd where its share of losses exceeds the Groups interest in this associate. The Groups cumulative share of unrecognised losses as at 31 December 2008 was $292,000 (2007: $332,000). The Group has no obligation in respect of these losses. During the financial year, the Group carried out a review of the recoverable amount of investments in associates which had continuously been making losses. An impairment loss of $385,000 was recognised for the investment in OOTB. The recoverable amount was based on its value in use and the pre-tax discount rate used was 8%. On 4 June 2008, OOTB increased its issued and paid up capital from $2.73 million to $3.03 million by an allotment of 333,334 ordinary shares to a new shareholder for a cash consideration of $300,000. Consequently, Topwin Investment Holding Pte Ltds shareholding in OOTB decreased from 33.33% to 30%.
14.
INVESTMENT IN ASSOCIATES
Group 2008 $000 2007 $000
The summarised financial information of the associates, not adjusted for the proportion of ownership interest held by the Group, is as follows:
Group 2008 $000 2007 $000
82
Investment in shares, unquoted Shares, at cost Impairment loss Loan to an associate Share of post-acquisition results of associates Unrealised profit on transaction with an associate Exchange difference At end of year
1,252 (385) 614 (1,281) 200
1,439 614 (977) (40) 15 1,051
Assets and liabilities Total assets Total liabilities Results Revenue Net loss for the year 495 (1,466) 3,775 (1,982) 909 3,581 2,345 3,708
Loan to an associate is quasi-capital in nature, non-interest bearing and has no fixed terms of repayment.

31 December 2008

31 December 2008
85
15.
INVESTMENT IN JOINT VENTURES

Group 2008 $000 2007 $000
16.
INVENTORIES
Group 2008 $000 2007 $000 2008 $000 Company 2007 $000
Investment in shares, unquoted Shares, at cost Share of post-acquisition results of joint ventures Exchange difference 334 (98) (14) 222 Details of the joint ventures are as follows: 334 (52) 282
Balance sheet: Raw materials and consumables, at cost Semi-finished goods Base inventories (1) Total inventories at lower of cost and net realisable value
(1)
3,350 459 116 3,925
2,152 299 55 2,506
This is stated after writing down 50% of the original cost of base inventories
Group 2008 $000 2007 $000 2008 $000 Company 2007 $000
Name
Country of incorporation
Proportion of ownership interest 2008 2007 % %
Held through subsidiaries

Shanghai Hong Bu Rang Food & Peoples Republic of Operator of food and beverage outlets Beverage Management Co., Ltd (1) China Apex Excellent Sdn Bhd (2)
(1)
Income statement: 50 50 Inventories recognised as an expense in cost of sales
55,599
42,821
Malaysia
Food court operator
50
50
Audited by Shanghai Xin Gao Xin Certified Public Accountants Co., Ltd, Peoples Republic of China Audited by RSM Robert Teo, Kuan & Co., Malaysia
17.
TRADE RECEIVABLES
Group 2008 $000 2007 $000 2008 $000 Company 2007 $000
(2)
The aggregate amounts of each of the current assets, non-current assets, current liabilities, non-current liabilities, income and expenses related to the Groups interests in the joint ventures are as follows:
Group 2008 $000 2007 $000
Trade receivables
4,761
3,027
Trade receivables are non-interest bearing and are generally on 30 to 90 days terms. They are recognised at their original invoice amounts which represents their fair values on initial recognition.
Assets and liabilities Current assets Non-current assets
Receivables that are past due but not impaired

1,170 268 1,438 1,216 1,333 317 1,650 1,368 Trade receivables past due: Lesser than 30 days 30 to 60 days 61 to 90 days 91 to 120 days More than 120 days The Group has trade receivables amounting to $1,847,000 (2007: $554,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:
Group
84
Total assets Current and total liabilities
2008 $000
2007 $000
Results Revenue Other income Expenses (Loss)/profit for the year
3,150 462 (3,658) (46)
5,360 450 (5,543) 267
622 716 202 33 274 1,847
225 46 37 246 554

31 December 2008

31 December 2008
87
17.
TRADE RECEIVABLES (CONTD)

Receivables that are impaired
The Groups trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:
Group Individually impaired 2008 2007 $000 $000
18.
OTHER RECEIVABLES AND DEPOSITS (CONTD)

Other receivables that are past due
The Group has other receivables amounting to $762,000 (2007: $1,038,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:
Group 2008 $000 2007 $000
Trade receivables nominal amounts Less: Allowance for impairment
10 (10)
Other receivables past due: Lesser than 30 days 30 to 60 days 61 to 90 days 91 to 120 days More than 120 days
297 124 58 86 197 762
270 512 184 9 63 1,038
Movement in allowance accounts: At 1 January (Write back) Charge during the year At 31 December 10 (10) 10 10
19.
DUE FROM/TO SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

The amount due from/to associates and joint ventures are unsecured and non-interest bearing.
Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in financial difficulties. These receivables are not secured by any collateral or credit enhancements. During the year, the Group wrote back the allowance of impairment of $10,000 as the receivables nominal amount was recovered from the trade debtor.
The amount due from/to subsidiaries are unsecured and non-interest bearing except for an amount due from a subsidiary of $600,000 (2007: $1,200,000) which bears interest of 7.5% per annum (2007: 7.5% per annum). The trade and non-trade amounts due from subsidiaries, associates and joint ventures are generally on 30 to 60 days term.
18.
OTHER RECEIVABLES AND DEPOSITS

Group 2008 $000 2007 $000 2008 $000 Company 2007 $000
Group
Receivables that are past due but not impaired

2008 $000 2007 $000
Other receivables Less: Allowance for impairment Deposits
5,731 (13) 5,718 12,166 17,884
3,422 3,422 9,683 13,105
9 9 9
11 11 11
Amount due from joint venture (a) Trade 30 to 60 days (b) Non-trade 14
86
Movement in allowance accounts: At 1 January Charge during the year At 31 December
13 13
Lesser than 30 days 30 to 60 days Total as at 31 December
15 15 30
Other receivables are non-interest bearing and are generally on 30 to 180 days terms.

31 December 2008

31 December 2008
89
19.
DUE FROM/TO SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES (CONTD)

Receivables that are impaired
Amount due from associates that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:
21.
TRADE PAYABLES
Group 2008 $000 2007 $000 2008 $000 Company 2007 $000
Trade payables
2008 $000 2007 $000
11,630
8,861
Trade payables are non-interest bearing and are normally settled on 30 to 90 days terms.
Due from associates (non-trade) that are individually impaired - nominal amounts Less: Allowance for impairment
282 (275) 7
22.
OTHER PAYABLES AND OTHER LIABILITIES

Group Company 2007 $000 2008 $000 2007 $000
Movement in allowance accounts: At 1 January (Write back) Charge for the year Bad debt written off At 31 December Company
275 (107) (168)
275 275
2008 $000
Other payables Other liabilities Accrued operating expenses Deferred revenue
34,898
25,074
149
159
Receivables that are past due but not impaired Amount due from subsidiaries (non-trade)
2008 $000 2007 $000
17,483 3,589 21,072
13,345 3,703 17,048
1,475 1,475
1,304 1,304
Other payables are non-interest bearing and have an average of 30 to 90 days term, except for retention sums included therein which have repayment terms of up to 1 year. Included in other payables are food court tenant and stored value card deposits of $7,141,000 (2007: $5,195,000).
Lesser than 30 days 30 to 60 days 61 to 90 days 91 to 120 days More than 120 days Total
414 427 414 7 1 1,263
243 243 243 243 243 1,215
23.
LOANS FROM MINORITY SHAREHOLDERS OF SUBSIDIARIES

The loans from minority shareholders of subsidiaries are unsecured, non-interest bearing and have no fixed terms of repayment.
20.
FIXED DEPOSITS
As at 31 December 2008, fixed deposits amounting to $Nil (2007: $107,000) were pledged to banks for banking facilities granted to a subsidiary and letters of guarantees issued by banks to lessors of premises occupied by a subsidiary. Fixed deposits of the Group and the Company have maturity periods ranging from 3 months to 12 months (2007: 3 months to 12 months) with effective interest rates ranging from 0.93% to 4.14% (2007: 1.8% to 2.5%) per annum.
88

31 December 2008

31 December 2008
91
24.
FINANCE LEASE OBLIGATIONS, SECURED

The Group has finance leases for certain items of machinery and equipment, motor vehicles and renovation (Note 10). Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:
Group Present value of Total minimum payments lease payments 2008 2007 $000 $000
26.
LONG-TERM LOANS, SECURED

Group Term loans Maturity 2008 $000 2007 $000
Total minimum lease payments 2008 $000
Present value of payments 2007 $000
SGD loans HKD loans RMB loans RM loan
2008 - 2011 2009 - 2012 2008 - 2012 Note 1
2,703 6,934 1,547 67 11,251
3,971 1,414 2,293 7,678
Not later than one year Later than one year but not later than five years Total minimum lease payments Less: amounts representing finance charges Present value of minimum lease payments
216 458 674 (53) 621
191 430 621 621
268 396 664 (54) 610
244 Note 1 - the loan is repayable by 36 monthly instalments upon full draw down of the loan to a specified sum. 366 610 610 Other than a SGD loan of $889,000 (2007 : $1,556,000) which is a fixed rate loan bearing an interest rate of 4.25% per annum, all other term loans are floating rate loans with effective interest rates ranging from 2.08% to 7.94% (2007 : 4.25% to 7.56%) per annum. The interest rates of these floating rate loans are repriced from time to time at the discretion of the respective banks.
Securities
The leases have options to purchase at the end of the lease term. The effective interest rates of the leases range from 4.20% to 6.10% (2007: 4.82% to 6.10%) per annum. Lease terms do not contain restrictions concerning dividends, additional debt or further leasing. A term loan of $1,547,000 (2007 : $1,896,000) is secured by a charge over a leasehold property held by Shanghai BreadTalk Co., Ltd. A term loan of Nil (2007 : $397,000) was secured by continuing guarantees by the Company and Food Republic (Shanghai) Co., Ltd, a wholly owned subsidiary.
Group 2008 $000 2007 $000
25.
SHORT-TERM LOANS, SECURED
Term loans of $2,522,000 (2007 : $927,000) are secured by continuing guarantees by the Company and Topwin Investment Holding Pte Ltd, a wholly owned subsidiary. All other term loans are secured by continuing guarantees by the Company.
Bank loans USD HKD RMB SGD
868 2,141 846 1000 4,855
869 927 1,487 3,283
27.
AMOUNT DUE TO LANDLORD (NON-TRADE)

The balance is payable to a landlord, who paid renovation costs on behalf of a subsidiary. This amount is unsecured and non-interest bearing.
Group 2008 $000 2007 $000
The effective interests on these short-term loans range from 2.03% to 7.88% (2007 : 5.86% to 7.44%) per annum. The interest rates of these floating rate loans are repriced from time to time at the discretion of the respective banks.
90
The bank loans are revolving term loans of 3 to 6 months (2007 :3 to 6 months) and are secured by several continuing guarantees by the Company.
Current Non-current
90 197 287
190 240 430

31 December 2008

31 December 2008
93
28.
SHARE CAPITAL
Company 2008 Number of shares $000 Number of shares 2007 $000
32.
COMMITMENTS AND CONTINGENCIES

(a)
Commitments
Expenditure contracted for as at the balance sheet date but not recognised in the financial statements is as follows:
Group Company 2007 $000 2008 $000 2007 $000
Issued and fully paid At beginning of the year Issuance of shares Share issue expense At end of the year 234,911,034 234,911,034 33,303 33,303 200,911,034 34,000,000 234,911,034 21,516 12,240 (453) 33,303
2008 $000
Commitment in respect of plant and equipment Commitment for capital contribution in a subsidiary (b)
168
16
87 3,000
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction.
Contracted operating lease commitments

The Group has various operating lease agreements for equipment, office, central kitchen, food court and retail outlet premises. These non-cancellable leases have remaining non-cancellable lease terms of between less than 1 year and 9 years. Most leases contain renewable options. Some of the leases contain escalation clauses and provide for contingent rentals based on percentages of sales derived from assets held under operating leases. Lease terms do not contain restrictions on the Groups activities concerning dividends, additional debt or further leasing. Future minimum lease payments payable under non-cancellable operating leases as at 31 December are as follows:
Group Company 2007 $000 2008 $000 2007 $000
29.
STATUTORY RESERVE FUND

In accordance with the Foreign Enterprise Law applicable to subsidiaries in the Peoples Republic of China (PRC), the subsidiaries are required to make appropriation to a Statutory Reserve Fund (SRF). At least 10% of the statutory after tax profits as determined in accordance with the applicable PRC accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiaries registered capital. Subject to the approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase the registered capital of the subsidiaries. The SRF is not available for dividend distribution to shareholders.
30.
TRANSLATION RESERVE
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Groups presentation currency.
2008 $000
31.
FAIR VALUE ADJUSTMENT RESERVE

Fair value adjustment reserve represents the cumulative fair value changes, net of tax, of available-for-sale financial assets until they are disposed of or impaired.
Group 2008 $000 2007 $000 2008 $000 Company 2007 $000
Not later than one year Later than one year but not later than five years Later than five years
39,865 78,796 11,964 130,625
33,411 77,496 21,471 132,378
(c)
Operating lease income

The Group has entered into non-cancellable operating leases to sublease its food court and retail outlet premises. Sublease rental receivable as at 31 December is as follows:
Group 2008 $000 2007 $000 2008 $000 Company 2007 $000
92
Net gain on available-for-sale financial assets: - Net gain on fair value changes during the financial year
1,178
Not later than one year Later than one year but not later than five years
25,209 12,569 37,778
19,480 12,024 31,504

31 December 2008

31 December 2008
95
32.
COMMITMENTS AND CONTINGENCIES (CONTD)

(d)
33.
RELATED PARTY DISCLOSURES (CONTD)

(b)
Letters of guarantees, secured

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

Group 2008 $000 2007 $000
33.
RELATED PARTY DISCLOSURES

(a)
Sale and purchase of goods and services

In addition to those related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties took place during the year on terms agreed between the parties:
Group 2008 $000 2007 $000
Salaries and bonus Central Provident Fund contributions and other pension contributions Directors fees Other personnel expenses Total compensation paid to key management personnel Comprise amounts paid to: Directors of the Company Directors of subsidiaries Other key management personnel
4,940 166 105 627 5,838
4,536 165 96 566 5,363
1,539 1,051 3,248 5,838
1,561 1,260 2,542 5,363
Income Rental income earned from a company in which a director of the Company has an interest Rental income earned from an associate Sale of goods to associates Sale of goods to joint ventures Management fee income from joint ventures Franchise income from associates Dividend income from joint venture Rental and miscellaneous income from a party related to a director Expenses Rental expense to joint ventures Rental expense to a minority shareholder Royalty fees to minority shareholders Management fee to a minority shareholder Staff cost recharged by a minority shareholder Others Purchase of plant and equipment from an associate Franchise fee to minority shareholders
2 190 283
2 216 271 32 406 161 180 406
34.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group and the Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include interest rate risk, foreign currency risk, credit risk, liquidity risk and market price risk. The Audit Committee provides independent oversight to the effectiveness of the risk management process. The Groups and Companys principal financial instruments comprise bank loans, finance leases and cash and short term deposits. The main purpose of these financial instruments is to raise finance for the Groups and Companys operations. The Group and Company has various other financial assets and liabilities such as trade and other receivables, trade and other payables and related company balances, which arise directly from its operations. It is, and has been throughout the year under review, the Groups and Companys policy that no trading in derivative financial instruments shall be undertaken. The following sections provide details regarding the Groups and Companys exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. (a)
103 8 879 15 21
327 813
29
126 57
Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Groups and the Companys financial instruments will fluctuate because of changes in market interest rates. The Groups and the Companys exposure to market risk for changes in interest rates relates primarily to its investment portfolio in fixed deposits and its debt obligations. The Group does not use derivative financial instruments to hedge its investment portfolio. The Group obtains additional financing through bank borrowings and leasing arrangements. The Groups policy is to obtain the most favourable interest rates available without increasing its foreign exchange exposure. Surplus funds are placed with reputable banks.
94

31 December 2008

31 December 2008
97
34.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTD)

(a)
34.

(b)
Interest rate risk (contd)

Sensitivity analysis for interest rate risk
Group Effect on profit net of tax 100 basis points increase $000 100 basis points decrease $000
Foreign currency risk (contd)

Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity of the Groups profit net of tax to a reasonably possible change in the USD, HKD, RMB and SGD exchange rates against the respective functional currencies of the Group entities, with all other variables held constant.
Group Effect on profit net of tax 2008 2007 $000 $000
2008 Singapore dollar Renminbi Hong Kong dollar US dollar (2) (22) (91) (6) 2 22 91 6 Against SGD: USD - strengthened 6% (2007 : 6%) - weakened 6% (2007 : 6%) - strengthened 5% (2007 : 5%) - weakened 5% (2007 : 5%) - strengthened 5% (2007 : 5%) - weakened 5% (2007 : 5%)
141 (141) 64 (64) 84 (84)
40 (40) 35 (35) 13 (13)
2007 (b) Singapore dollar Renminbi Hong Kong dollar US dollar (1) (33) (23) (6) 1 33 23 6
HKD
RMB
Against RMB:
Foreign currency risk

The Group has transactional currency exposures arising from sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily SGD, Renminbi (RMB) and Hong Kong Dollar (HKD). The foreign currencies in which these transactions are denominated are mainly US dollars (USD), HKD, RMB and SGD. Currently, the Chinese government imposes control over foreign currency. RMB, the official currency in the Peoples Republic of China (PRC), is not freely convertible. Enterprises operating in the PRC can enter into exchange transactions through the Peoples Bank of China or other authorised financial institutions. Payments for imported materials or services and remittance of earnings outside of the PRC are subject to the availability of foreign currency which depends on the foreign currency denominated earnings of the enterprises, or exchanges of RMB for foreign currency must be arranged through the Peoples Bank of China or other authorised financial institutions. Approval for exchanges at the Peoples Bank of China or other authorised financial institutions is granted to enterprises in the PRC for valid reasons such as purchase of imported materials and remittance of earnings. While conversion of RMB into Singapore dollars or other currencies can generally be effected at the Peoples Bank of China or other authorised financial institutions, there is no guarantee that it can be effected at all times. The Group is also exposed to currency translation risk arising from its net investments in foreign operations, in Malaysia, the PRC, Hong Kong, Thailand and Taiwan. The Groups net investments in these countries are not hedged as currency positions in Ringgit Malaysia, RMB, Hong Kong dollar, Thai Baht and Taiwan dollar are considered to be long-term in nature.
USD
- strengthened 6% (2007 : 6%) - weakened 6% (2007 : 6%) - strengthened 5% (2007 : 5%) - weakened 5% (2007 : 5%)
(13) 13 (9) 9
(63) 63 (2) 2
SGD
Against HKD: SGD - strengthened 5% (2007 : 5%) - weakened 5% (2007 : 5%) (67) 67 (62) 62
(c)
Credit risk
Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Groups and the Companys exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including investment securities, cash and cash equivalents), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties. The Group trades only with recognised and creditworthy third parties. It is the Groups policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Groups exposure to bad debts is not significant.
96

31 December 2008

31 December 2008
99
34.

(c)
34.

(e)
Credit risk (contd)

Exposure to credit risk At the balance sheet date, the Groups and the Companys maximum exposure to credit risk is represented by: the carrying amount of each class of financial assets recognised in the balance sheets; and
Market price risk

Market price risk is the risk that the fair value or future cash flows of the Groups financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investment in quoted equity instrument. This instrument is quoted on the SGX-ST in Singapore and is classified as available-for-sale financial asset. The Group does not have exposure to commodity price risk. Sensitivity analysis for equity price risk
a nominal amount of $48,102,000 (2007: $27,128,000) relating to corporate guarantees provided by the Company to financial institutions on subsidiaries borrowings and other banking facilities.
Credit risk concentration profile The Group determines concentrations of credit risk by monitoring the country of its trade receivables on an on-going basis. The credit risk concentration profile of the Groups trade receivables at the balance sheet date is as follows:
Group 2008 $000 % of total $000 2007 % of total
At the balance sheet date, if the share price had been 15% (2007: Nil) higher/lower with all other variables held constant, the Groups Fair Value Adjustment Reserve account in equity would have been $224,000 (2007 : Nil) higher/lower, arising as a result of an increase/decrease in the fair value of equity instruments classified as available-for-sale. The table below summarises the maturity profile of the Groups and the Companys financial liabilities at the balance sheet date based on contractual undiscounted payments:
2008 1 to 5 years $000 2007 1 to 5 years $000
1 year or less $000
Total $000
1 year or less $000
Total $000
By country: Singapore Peoples Republic of China Indonesia The Philippines Thailand Kuwait Others
559 3,218 109 753 94 21 7 4,761
12% 68% 2% 16% 2% 100%
416 2,141 154 97 135 81 3 3,027
14% 71% 5% 3% 4% 3% 100%
Group Trade and other payables 46,528 Other liabilities (Note 22) 17,483 Amount due to associates, joint ventures and landlord 189 Loans and borrowings 10,166 74,366 Company Trade and other payables Other liabilities Amount due to subsidiaries 149 1,475 8 1,632 149 1,475 8 1,632 159 1,304 4 1,467 159 1,304 4 1,467 197 6,837 7,034 46,528 17,483 386 17,003 81,400 33,935 13,345 206 7,353 54,839 240 4,343 4,583 33,935 13,345 446 11,696 59,422
Financial assets that are neither past due nor impaired Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default. Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Notes 17, 18 and 19 to the financial statements. (d)
98
Liquidity risk
Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Groups and the Companys exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Groups and the Companys objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities. The Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the operations of the Group. Short-term funding may be obtained from short-term loans where necessary.

31 December 2008

31 December 2008
101
35.
FINANCIAL INSTRUMENTS
(a)
35.
FINANCIAL INSTRUMENTS (CONTD)

(b)
Financial assets and liabilities

The carrying amount by category of financial assets and liabilities are as follows:
Group 2008 $000 2007 $000
Fair values
The fair value of a financial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arms length transaction, other than in a forced or liquidation sale.
Financial instruments carried at fair value

The fair value of investment securities is determined by reference to the published market bid price at the balance sheet date.
Loans and receivables

Trade receivables Other receivables and deposits Amount due from associates (non-trade) Amount due from joint-ventures (trade) Amount due from joint-ventures (non-trade) Fixed deposits Cash on hand and at bank Total 4,761 17,884 343 3,187 44,690 70,865 3,027 13,105 7 64 237 2,814 35,531 54,785
The Group has no financial instruments that are classified as held for trading or derivative financial instruments, which would have been carried at their respective fair values as required by FRS 39.
Financial instruments whose carrying amount approximate fair value

Management has determined that the carrying amounts of cash and bank balances, fixed deposits, trade and other receivables, trade and other payables, related company balances, amount due to landlord and current bank loans, based on their notional amounts, reasonably approximate their fair values because these are mostly short term in nature or are repriced frequently. Fixed interest rate term loan of $889,000 (2007: $1,556,000) approximates fair value based on available market information on similar loans as at financial year end.

Investment securities 1,494 316
Financial instruments carried at other than fair value

Set out below is a comparison of the carrying amount and fair value of the financial instrument that is carried in the financial statements at other than fair value as at 31 December.
Financial liabilities carried at amortised cost

Trade payables Other payables Accrued operating expenses (Note 22) Amount due to associates (trade) Amount due to joint-ventures (non-trade) Amount due to landlord (non-trade) (Note 27) Finance lease obligations, secured (Note 24) Short term loans, secured Long term loans, secured (Note 26) Loans from minority shareholders of subsidiaries Total 11,630 34,898 17,483 99 287 621 4,855 11,251 276 81,400 8,861 25,074 13,345 5 11 430 610 3,283 7,678 125 59,422
Carrying amount 2008 2007 $000 $000
Fair value 2008 $000 2007 $000
Financial liabilities: Obligations under finance leases
621
610
606
603
Fair value has been determined using discounted estimated cash flows. The discount rates used are the current market incremental lending rates for similar types of leasing agreements. No disclosure of fair values are made for the quasi-capital loan to an associate, loans from minority shareholders of subsidiaries and long-term amount due to landlord as it is not practical to determine their fair values with sufficient reliability since the balances have no fixed terms of repayment. No amount has been recognised in the income statement in relation to the change in fair value of financial assets or financial liabilities estimated using a valuation technique for the financial year ended 31 December 2008 and 2007.
100

31 December 2008

31 December 2008
103
36.
CAPITAL MANAGEMENT
The primary objective of the Groups capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended 31 December 2008 and 2007. As disclosed in Note 29, subsidiaries of the Group operating in the PRC are required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied with by the respective subsidiaries for the financial year ended 31 December 2008 and 2007. The Group monitors capital using gearing ratio (which is total borrowings divided by total equity) and net gearing ratio (which is total borrowings less cash and cash equivalents divided by total equity).
Group 2008 $000 2007 $000
37.
SEGMENT INFORMATION
Reporting format
The primary segment reporting format is determined to be business segments as the Groups risks and rates of return are affected predominantly by differences in the products and services produced. Secondary information is reported geographically. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.
Business segments
The Groups primary format for reporting segment information is business segments, with each segment representing a strategic business activity. For management purposes, the Group is organised into three business segments, namely bakery operations, food courts operations and restaurant operations. Bakery operations: This relates to the manufacture and retail of all kinds of food, bakery and confectionery products including franchising. Food court operations: This relates to the management and operation of food courts and operation of food and drinks outlets within the food courts. Restaurant operations: This relates to the operation of food and drinks outlets, eating houses and restaurants.
Total borrowings (1) Less: Cash and cash equivalents (2) Net cash Total equity Gearing ratio Net gearing
(1) (2)
17,003 (47,877) (30,874) 56,133 0.30 Net cash
11,696 (38,345) (26,649) 47,266 0.25 Net cash
Geographical segments
The Groups main operations are in Singapore, the PRC and Hong Kong. Sales to external customers disclosed in geographical segments are based on geographical location of its customers.
Allocation basis
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly provision for taxation, borrowings, financial expenses and share of results of associates and joint ventures. Transfer prices between business segments are set on an arms length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.
including bank loans, finance lease obligations and loans from minority shareholders of subsidiaries including all fixed deposits
102

31 December 2008

31 December 2008
105
37.
SEGMENT INFORMATION (CONTD)

(a) Analysis of business segment
Revenue and cost of sales are directly attributable to the segments. Operating expenses/income are allocated to the segments.
Food court operations $000
37.

(a)
Analysis of business segment (contd)

Bakery Restaurant operations (1) operations $000 $000 Food court operations $000
2007
Others (2) $000
Elimination $000
Group $000
2008
Bakery Restaurant operations (1) operations $000 $000
Others (2) $000
Elimination $000
Group $000
Revenue External sales Inter-segment sales Total revenue Profit from operations Financial expenses, net Profit before tax and associates and joint ventures results Share of associates results Share of joint ventures results Profit before tax Tax Profit for the year Assets and liabilities Segment assets Investment in associates Investment in joint ventures Deferred tax assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other information Capital expenditure - Property, plant and equipment - Intangible assets Depreciation and amortisation Impairment of non-financial assets Plant and equipment written off
Revenue External sales Inter-segment sales Total revenue Profit from operations Financial expenses, net Profit before tax and associates and joint ventures results Share of associates results Share of joint ventures results Profit before tax Tax Profit for the year Assets and liabilities Segment assets Investment in associates Investment in joint ventures Deferred tax assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other information Capital expenditure - Property, plant and equipment - Intangible assets Depreciation and amortisation Plant and equipment written off
79,823 201 80,024 3,873
28,345 28,345 4,571
48,442 774 49,216 3,457
250
(975) (975) (1)
156,610 156,610 12,150 (735) 11,415 (454) 267 11,228 (2,791) 8,437
110,864 225 111,089 4,313
32,173 32,173 3,011
69,212 1,361 70,573 6,106
(201)
(1,586) (1,586) (2)
212,249 212,249 13,227 (684) 12,543 (496) (46) 12,001 (3,643) 8,358
39,814
17,374
60,110
13,165
(16,500)
54,590
19,544
72,448
14,324
(15,686)
145,220 200 222 532 146,174
113,963 1,051 282 394 115,690
22,182
6,629
38,700
1,475
(16,500)
52,486 15,938 68,424
31,593
8,731
42,249
1,638
(15,686)
68,525 21,516 90,041
104
13,607 67 4,966 47 295
1,629 29 2,115 418 10
10,890 33 6,627 494
75 21 385
26,201 129 13,729 850 799
4,312 49 4,291 138
1,588 57 1,763 4
12,823 51 4,290 451
15 4
18,738 157 10,348 593

31 December 2008

31 December 2008
107
37.

(b)
39.
EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

Disposal of Subsidiary, Twin Peaks Venture Singapore Pte Ltd On 18 March 2009, BreadTalk Pte Ltd (BTPL), a wholly owned subsidiary of the Company, entered into a Sale & Purchase Agreement with Spore Coffee & Donut Venture Pte Ltd for the disposal of BTPLs 70% shareholding interest in Twin Peaks Venture Singapore Pte Ltd (Twin Peaks) for a consideration of approximately $0.4 million. Twin Peaks holds the J.Co Donuts and Coffee franchise for the Singapore market.
Analysis by geographical segments

Segment revenue is based on location of customers regardless of where the business is conducted. Segment assets and capital expenditure are based on the geographical location of those assets.
Revenue 2008 $000 2007 $000 Segment Assets 2008 2007 $000 $000 Capital expenditure 2008 2007 $000 $000
40.
Singapore PRC Hong Kong Rest of the world Total
(1) (2)
AUTHORISATION OF FINANCIAL STATEMENTS

The financial statements for the year ended 31 December 2008 were authorised for issue in accordance with a resolution of the directors on 18 March 2009.
103,946 75,260 18,981 14,062 212,249
80,107 59,242 8,740 8,521 156,610
64,881 58,745 18,047 3,547 145,220
62,805 39,695 8,216 3,247 113,963
8,470 7,234 9,630 996 26,330
6,775 8,020 3,561 539 18,895
Bakery operations comprise operation of bakery retail outlets as well as that operated through franchising. The business segment Others pertains to investment holding activities.
38.
DIVIDENDS
Group and Company 2008 2007 $000 $000
Dividends paid during the year: First and final exempt (one-tier) dividend for 2007 of 0.55 cent per share (2006: 0.42 per share)
1,292
987
Proposed but not recognised as a liability as at 31 December: Dividends on ordinary shares, subject to shareholders approval at the Annual General Meeting: First and final exempt (one-tier) dividend for 2008 of 1.0 cent per share (2007: 0.55 cent per share)
2,349
1,292
106
statistiCs of shareholDinGs
As at 19 March 2009
statistiCs of shareholDinGs
As at 19 March 2009
109
Issued and fully Paid-up Capital Number of Ordinary Shares in Issue (excluding treasury shares) Number of Treasury Shares held Class of Shares Voting rights
: : : : :
S$33,302,916 234,911,034 Nil Ordinary Shares One vote per share
SUBSTANTIAL SHAREHOLDERS
(As recorded in the Register of Substantial Shareholders as at 19 March 2009)
Direct Interest Number of Shares Deemed Interest Number of Shares
Name of Substantial Shareholders
DISTRIBUTION OF SHAREHOLDINGS
Size of Shareholdings No. of Shareholders % No. of Shares %
1. 2. 3.
George Quek Meng Tong (1) Katherine Lee Lih Leng (1) Keywise Capital Management (HK) Ltd (holds in the name of (i) Keywise Greater China Master Fund; and (ii) Keywise Asia Master Fund) UBS AG (2)
79,590,384 43,550,850 25,903,000
33.88 18.54 11.03
43,550,850 79,590,384 -
18.54 33.88 -
4. 1 1,000 10,001 1,000,001 Total 999 10,000 1,000,000 and above 2 570 325 25 922 0.22 61.82 35.25 2.71 100.00 21 3,155,593 19,265,164 212,490,256 234,911,034 0.00 1.34 8.20 90.46 100.00
(1)
23,518,000
10.01
Katherine Lee Lih Leng is the spouse of George Quek Meng Tong. Saved as disclosed above, there are no family relationship among our Directors and Substantial Shareholders. Positions held on behalf of prime brokerage clients, which includes a portion of the 25,903,000 shares held by Keywise Capital Management (HK) Ltd.
(2)
TwENTY LARGEST SHAREHOLDERS

Name No. of Shares %
108
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
20
Citibank Nominees Singapore Pte Ltd United Overseas Bank Nominees Pte Ltd Hong Leong Finance Nominees Pte Ltd Mayban Nominees (S) Pte Ltd Katherine Lee Lih Leng SBS Nominees Pte Ltd Giant Winner Enterprise Ltd Citibank Consumer Nominees Pte Ltd Raffles Nominees Pte Ltd DBS Nominees Pte Ltd Oversea-Chinese Bank Nominees Private Limited HL Bank Nominees (S) Pte Ltd HSBC (Singapore) Nominees Pte Ltd Chen Kuo Hua Pineapples of Malaya Private Limited Tan Tiang Yong Phillip Securities Pte Ltd Kusdianto Soewarno George Quek Meng Tong DBS Vickers Securities (S) Pte Ltd Total
45,428,775 28,909,000 27,820,000 19,105,000 14,178,075 12,000,000 9,200,000 7,512,000 7,033,000 6,203,397 5,872,775 5,153,000 3,942,000 3,623,100 2,500,000 2,356,000 1,840,000 1,550,000 1,367,609 1,346,000 206,939,731
19.34
12.31
11.84 8.13 6.04 5.11 3.92 3.20 2.99 2.64 2.50 2.19 1.68 1.54 1.06 1.00 0.78 0.66
0.58 0.57 88.08
Based on information available to the Company as at 19 March 2009, approximately 27.53% of the Companys shares are held in the hands of public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of SGX-ST.
notiCe of annual General meetinG
111
NOTICE IS HEREBY GIVEN that the Annual General Meeting of BreadTalk Group Limited (the Company) will be held at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 on Monday, 27 April 2009 at 9.30 a.m. for the following purposes:
provided that: (1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed fifty per cent. (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares and Instruments to be issued other than on a pro rata basis to existing shareholders of the Company shall not exceed twenty per cent. (20%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with subparagraph (2) below); (subject to such calculation as may be prescribed by the Singapore Exchange Securities Trading Limited) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, after adjusting for: (a) (b) new shares arising from the conversion or exercise of any convertible securities; new shares arising from exercising share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and any subsequent bonus issue, consolidation or subdivision of shares;
AS ORDINARY BUSINESS
1. To receive and adopt the Directors Report and the Audited Financial Statements of the Company for the year ended 31 December 2008 together with the Auditors Report thereon. (Resolution 1) To declare a first and final exempt (one-tier) dividend of 1.0 cent per share for the financial year ended 31 December 2008 (2007: 0.55 cent). (Resolution 2) To re-elect the following Directors retiring pursuant to Article 104 of the Companys Articles of Association: Mr Chen Kuo Hua Ms Katherine Lee Lih Leng (Resolution 3) (Resolution 4)
2.
(2)
3.
Mr Chen Kuo Hua will, upon re-election as a Director of the Company, remain as a member of the Remuneration Committee, Audit Committee and Nominating Committee. Mr Chen will be considered non-independent. 4. To approve the payment of Directors fees of S$105,000 for the year ended 31 December 2008 (2007: S$96,250). (Resolution 5) (3) 5. To re-appoint Messrs Ernst & Young LLP as the Companys Auditors and to authorise the Directors to fix their remuneration. (Resolution 6) (4) 6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.
(c)
the 50% limit in sub-paragraph (1) above may be increased to 100% for the Company to undertake pro-rata renounceable rights issues; in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the Singapore Exchange Securities Trading Limited for the time being in force (unless such compliance has been waived by the Singapore Exchange Securities Trading Limited) and the Articles of Association of the Company; and unless revoked or varied by the Company in a general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. (Resolution 7)
AS SPECIAL BUSINESS
(5) To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications: 7. Authority to issue shares [See Explanatory Note (i)] That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Directors of the Company be authorised and empowered to: (a) (i) (ii) issue shares in the Company (shares) whether by way of rights, bonus or otherwise; and/or make or grant offers, agreements or options (collectively, Instruments) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares, That subject to and pursuant to the aforesaid share issue mandate being obtained, the Directors of the Company be hereby authorised and empowered to issue shares other than on a pro-rata basis at a discount not exceeding twenty per cent. (20%) to the weighted average price for trades done on the SGX-ST for the full market day on which the placement or subscription agreement in relation to such shares is executed (or if not available for a full market day, the weighted average price must be based on the trades done on the preceding market day up to the time the placement or subscription agreement is executed), provided that :(a) (b)
8.
Authority to issue shares other than on a pro-rata basis pursuant to the aforesaid share issue mandate at discounts not exceeding twenty per cent. (20%) of the weighted average price for trades done on the SGX-ST.
110
at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fit; and (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors of the Company while this Resolution was in force,
in exercising the authority conferred by this Resolution, the Company complies with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST); and unless revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. (Resolution 8)
(b)
[See Explanatory Note (ii)]
113
9.
Authority to issue shares under the BreadTalk Group Limited Employees Share Option Scheme That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and empowered to offer and grant options under the BreadTalk Group Limited Employees Share Option Scheme (the Scheme) and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted by the Company under the Scheme, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of new ordinary shares to be issued pursuant to the Scheme, the Plan (defined below) and any other share based schemes (if applicable) shall not exceed fifteen per cent. (15%) of the total number of issued shares excluding treasury shares in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. [See Explanatory Note (iii)] (Resolution 9)
12.
Renewal of Share Purchase Mandate That for the purposes of Sections 76C and 76E of the Companies Act, Cap. 50, the Directors of the Company be and are hereby authorised to make purchases or otherwise acquire issued shares in the capital of the Company from time to time (whether by way of market purchases or off-market purchases on an equal access scheme) of up to ten per cent. (10%) of the total issued shares (excluding treasury shares) in the capital of the Company (as ascertained as at the date of Annual General Meeting of the Company) at the price of up to but not exceeding the Maximum Price as defined in paragraph 3.4 of the Appendix to the Annual Report to Shareholder dated 10 April 2009, in accordance with the terms of the Share Purchase Mandate set out in the Appendix, and this mandate shall, unless revoked or varied by the Company in general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. [See Explanatory Note (vi)] (Resolution 14)
10.
Authority to issue shares under the BreadTalk Group Limited Restricted Share Grant Plan That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and empowered to offer and grant awards in accordance with the provisions of the BreadTalk Group Limited Restricted Share Grant Plan (the Plan) and to issue from time to time such number of fully-paid shares as may be required to be issued pursuant to the vesting of the awards under the Plan, provided always that the aggregate number of new ordinary shares to be issued pursuant to the Scheme, the Plan and any other share based schemes (if applicable), which the Company may have in place, shall not exceed fifteen per cent. (15%) of the total issued share capital excluding treasury shares in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. [See Explanatory Note (iv)] (Resolution 10)
By Order of the Board
Tan Cher Liang Company Secretary Singapore 10 April 2009
11.
Authority to grant awards to Participants pursuant to the Rules of, and issue shares under, the Plan That, contingent upon the passing of Resolution 10, in order to reward, retain and motivate employees who had met specific performance objectives set by the Company, the Directors of the Company be authorised and empowered to grant awards in accordance with the provisions of the Plan to the following participants of the Plan (the Participants) and to issue shares in the Company to the Participants of awards granted by the Company under the Plan, provided always that the aggregate number of shares available to Controlling Shareholders and their associates under the Plan shall not exceed twenty five per cent. (25%) of all the shares available under the Plan and that the number of shares available to each Controlling Shareholder or his associate shall not exceed ten per cent. (10%) of all the shares available under the Plan. Such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the Companys next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.
Name of Participants No. of shares to be awarded
112
Controlling Shareholders Mr. George Quek Meng Tong Ms. Katherine Lee Lih Leng Associates of Controlling Shareholders Mr. Frankie Quek Swee Heng [See Explanatory Note (v)] 55,000 (Resolution 13) 82,000 55,000 (Resolution 11) (Resolution 12)
115
Explanatory Notes: (i) Resolution 7 in item 7 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant instruments convertible into shares and to issue shares pursuant to such instruments, up to a number not exceeding, in total, 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to shareholders. The 50% limit referred to in the preceding sentence may be increased to 100% for the Company to undertake pro-rata renounceable rights issues. For determining the aggregate number of shares that may be issued, the total number of issued shares (excluding treasury shares) will be calculated based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time Resolution 7 is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time when Resolution 7 is passed and any subsequent bonus issue, consolidation or subdivision of shares. The 100% renounceable pro-rata rights issue limit is one of the new measures implemented by the SGX-ST as stated in a press release entitled SGX introduces further measures to facilitate fund raising dated 19 February 2009 and which became effective on 20 February 2009. It will provide the Directors with an opportunity to raise funds and avoid prolonged market exposure by reducing the time taken for shareholders approval, in the event the need arises. Minority shareholders interests are mitigated as all shareholders have equal opportunities to participate and can dispose their entitlements through trading of nil-paid rights if they do not wish to subscribe for their rights shares. It is subject to the condition that the Company makes periodic announcements on the use of the proceeds as and when the funds are materially disbursed and provides a status report on the use of proceeds in the annual report. (ii) Resolution 8 in item 8 above is pursuant to measures implemented by the SGX-ST as stated in a press release entitled SGX introduces further measures to facilitate fund raising dated 19 February 2009 and which became effective on 20 February 2009. Under the measures implemented by the SGX-ST, issuers will be allowed to undertake non pro-rata placements of new shares priced at discounts of up to 20% to the weighted average price for trades done on the SGX-ST for a full market day on which the placement or subscription agreement in relation to such shares is executed, subject to the conditions that (a) shareholders approval be obtained in a separate resolution at a general meeting to issue new shares on a non pro-rata basis at discount exceeding 10% but not more than 20%; and (b) that the resolution seeking a general mandate from shareholders for issuance of new shares on a non pro-rata basis is not conditional upon such resolution. It should be noted that under the Listing Manual of the SGX-ST, shareholders approval is not required for placements of new shares, on a non pro-rata basis pursuant to a general mandate, at a discount of up to 10% to the weighted average price for trades done on the SGX-ST for a full market day on which the placement or subscription agreement in relation to such shares is executed. (iii) Resolution 9 in item 9 above, if passed, will empower the Directors of the Company, from the date of this Meeting until the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the Company pursuant to the exercise of options granted or to be granted under the Scheme up to a number not exceeding in total (for the entire duration of the Scheme) 15% of the total number of issued shares excluding treasury shares in the capital of the Company from time to time, and the aggregate number of ordinary shares which may be issued pursuant to the Scheme, the Plan and any other share based schemes (if applicable) is limited to 15% of the total issued share capital of the Company excluding treasury shares from time to time. Resolution 9 is independent from Resolution 10 and the passing of Resolution 9 is not contingent on the passing of Resolution 10. Resolution 10 in item 10 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the next Annual General Meeting, to offer and grant awards under the BreadTalk Group Limited Restricted Share Grant Plan (the Plan) in accordance with the provisions of the Plan and to issue from time to time such number of fully-paid shares as may be required to be issued pursuant to the vesting of the awards under the Plan subject to the maximum number of shares prescribed under the terms and conditions of the Plan. The aggregate number of ordinary shares which may be issued pursuant to the Scheme, the Plan and any other share based schemes (if applicable) is limited to 15% of the total issued share capital of the Company excluding treasury shares from time to time. Resolution 10 is independent from Resolution 9 and the passing of Resolution 10 is not contingent on the passing of Resolution 9.
(v)
Resolutions 11, 12 and 13, in item 11 above, if passed, will empower the Directors of the Company to issue shares in the Company to the Controlling Shareholders and their associates, granted by the Company under the Plan. The resolutions in item 11 are independent from each other and the passing of each such resolution is not contingent on the passing of any of the other resolutions in item 11. Resolution 12 is contingent on the passing of Resolution 4. Shareholders who are eligible to participate in the Plan shall abstain from voting on Resolutions 11, 12 and 13.
The rationale for Resolution 11

Mr. George Quek Meng Tong (George quek) is the Chairman of the Group and he holds an aggregate of 52.42% of the shareholding (directly and indirectly). He is one of the co-founders of the Group and has been instrumental in the Groups development over the years. He is responsible for overseeing the overall management of the Group and is pivotal in charting the direction and growth of the Group. George Quek has been with the Company since the start in 2000 and has played a pivotal role in steering the growth of the Group in their operations locally and in this region and building up a good track record and reputation for the Group. His knowledge and contacts in the food and beverage industry, of which he has more than 3 decades of experience, are key factors to the success of the Group. His invaluable experience has not only been instrumental in establishing the BreadTalk brand name, but also in setting new F&B trends and redefining the Asian food scene. He also played a significant role in the Companys foray into the food court business in Shanghai and Beijing, Peoples Republic of China. George Quek continues to play an instrumental role in charting our Groups expansion and business development plans. As the Chairman of the Company, he has in-depth knowledge of the needs of the business as it evolved over the years. His ability to anticipate business trend and demand has enabled the Company to grow the business rapidly. The Company believes that George Quek will continue to play a key role in the growth and future development of the Group and there are further potential contributions that he can make. The Company intends to have the flexibility to structure his remuneration package to include such Awards in future if it is in the interest of the Company to do so. By extending the Plan to George Quek, the Company will have an additional tool to craft a more balanced and innovative remuneration package that will link his total remuneration to the performance of the Group. The Directors are of the view that the remuneration package of George Quek is fair given his contributions to the Group. The extension of the Plan to George Quek is consistent with the Companys objectives to motivate its employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company. Although George Quek already has a shareholding interest in the Company, the extension of the Plan to him will ensure that he is equally entitled, with the other employees who are not Controlling Shareholders, to take part in and benefit from this system of remuneration, thereby enhancing his long term commitment to the Group. During the year in review George Quek identified the new businesses to diversify the revenue base of the Group. It resulted in the announced expansion of the Groups business that will contribute to the growth in the Groups top and bottom line in future. The participation of and grant of the Awards to George Quek under the Plan has been approved in principle by shareholders when they approved the Plan at the Extraordinary General Meeting held on 28 April 2008. Resolution 11 seeks for the above stated reasons, shareholders approval for the Directors decision to grant 82,000 shares to George Quek in accordance with the Plan.
114
(iv)
117

Ms. Katherine Lee Lih Leng (Katherine Lee), if re-elected, will remain as Deputy Chairman of the Company and she holds an aggregate of 52.42% of the Companys shareholding (directly or indirectly). She is one of the co-founders of the Group and has been assisting the Chairman, George Quek in the Groups development since its inception. She oversees the Research and Development Department where she is responsible for product development for local and overseas markets. She is also responsible for steering the Groups new concept developments for the various brands, pioneering new ideas and concepts. She has therefore contributed greatly in the increase and development of the range and quality of the Groups products, which is one of its unique strengths and factors for its success. In the areas of training, Katherine Lee has actively organized product training and technical skill upgrades to ensure systematic transfers of knowledge and skills to the franchisees and their operations teams to maintain their competitive edge. The Company believes that Katherine Lee will continue to contribute to the success of the Group. The Company intends to have the flexibility to structure her remuneration package to include such Awards in future if it is in the interests of the Company to do so. By allowing her to participate in the Plan, the Company will have an additional tool to craft a more balanced and innovative remuneration package that will link her total remuneration to the performance of the Group. The extension of the Plan to Katherine Lee is consistent with the Companys objectives to motivate its employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company. Although Katherine Lee already has a shareholding interest in the Company, the extension of the Plan to her will ensure that she is equally entitled, with the other employees who are not Controlling Shareholders, to take part in and benefit from this system of remuneration, thereby enhancing her continued commitment to the Group. The participation of and grant of Awards to Katherine Lee under the Plan has been approved in principle by shareholders when they approved the Plan at the Extraordinary General Meeting held on 28 April 2008. Resolution 12 seeks for the above stated reasons, shareholders approval for the Directors decision to grant 55,000 shares to Katherine Lee in accordance with the Plan.
As the Plan serves as recognition of the past contributions of those eligible to participate in the Plan, as well as to secure future contributions for the Company and the Group from them, the Directors consider it important that Frankie Quek should be included in the Plan. The Directors consider it crucial for the Company to provide sufficient incentives which will instill a sense of commitment to the Group. The participation of and grant of Awards to Frankie Quek under the Plan has been approved in principle by shareholders when they approved the Plan at the Extraordinary General Meeting held on 28 April 2008. Resolution 13 seeks for the above stated reasons, shareholders approval for the Directors decision to grant 55,000 shares to Frankie Quek in accordance with the Plan. (vi) Resolution 14 proposed in item 12 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier, to repurchase ordinary shares of the Company by way of market purchases or off-market purchases of up to 10% of the total number of issued shares (excluding treasury shares) in the capital of the Company at the Maximum Price as defined in Paragraph 3.4 to the Appendix. The rationale for, the authority and limitation on, the sources of funds to be used for the purchase or acquisition including the amount of financing and the financial effects of the purchase or acquisition of ordinary shares by the Company pursuant to the Share Purchase Mandate on the audited consolidated financial accounts of the Group for the financial year ended 31 December 2008 are set out in greater detail in the Appendix.
Notes: 1. A Member entitled to attend and vote at the Annual General Meeting (the Meeting) is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a Member of the Company. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 171 Kampong Ampat #0505, KA FoodLink, Singapore 368330 not less than 48 hours before the time appointed for holding the Meeting.
2.

Mr. Frankie Quek Swee Heng (Frankie quek), the Groups Chief Operating Officer, holds an aggregate of 0.45% of the Companys shareholding (directly or indirectly). He is involved in the formulation and implementation of the expansion plans of the Group. With his business acumen and extensive knowledge of the local food and beverage industry, he is assisting the Chairman, George Quek, in overseeing the growth and expansion as well as daily operations of the Group, focusing on the Groups expansion into the Peoples Republic of China. Frankie Quek has been based in Shanghai since 2005 where he has been overseeing the growing bakery and food court operations in Shanghai and Beijing. His expertise has further led to the successful export of the BreadTalk brand name in eleven (11) cities through a franchise model system managed by the in house franchise team. The Company therefore believes that he has the potential and ability to contribute to the further success of the Group. By allowing him to participate in the Plan, the Company will have an additional tool to craft a more balanced and innovative remuneration package that will link his total remuneration to the performance of the Group. Frankie Quek will also be able to share in any future appreciation of the Companys share price that is commensurate with the Companys future growth through an increase in his shareholdings to a more significant level.
116
The Directors are of the view that the remuneration package of Frankie Quek is fair given his contributions to the Group. The extension of the Plan to Frankie Quek is consistent with the Companys objectives to motivate its employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company.
BREADTALK GROUP LIMITED
Company Registration No. 200302045G (Incorporated In Singapore)
IMPORTANT: 1. For investors who have used their CPF monies to buy BreadTalk Group Limiteds shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.
2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.
proXy form
I/We,
(Please see notes overleaf before completing this Form)
3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf.
of being a member/members of BREADTALK GROUP LIMITED (the Company), hereby appoint: Name
Address
NRIC/Passport No.
Proportion of Shareholdings No. of Shares %
and/or (delete as appropriate) Name

Address
NRIC/Passport No.
Proportion of Shareholdings No. of Shares %
or failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting (the Meeting) of the Company to be held on 27 April 2009 at 9.30 a.m. at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll. (Please indicate your vote For or Against with a tick [] within the box provided.) No. Resolutions relating to: 1 2 3 4 5 6 7 8 9 10 11 Directors Report and Audited Financial Statements for the year ended 31 December 2008. Payment of proposed first & final exempt (one-tier) dividend. Re-election of Mr Chen Kuo Hua as a Director. Re-election of Ms Katherine Lee Lih Leng as a Director. Approval of Directors fees amounting to S$105,000 for the year ended 31 December 2008. Re-appointment of Messrs Ernst & Young LLP as Auditors. Authority to issue new shares. Authority to issue new shares up to discount of 20%. Authority to issue shares under the BreadTalk Group Limited Employees Share Option Scheme. Authority to issue shares under the BreadTalk Group Limited Restricted Share Grant Plan. Share award under the Plan to George Quek Meng Tong. Share award under the Plan to Katherine Lee Lih Leng. Share award under the Plan to Frankie Quek Swee Heng. Renewal of Share Purchase Mandate. For Against
118
12 13 14
Dated this
day of
2009
Total number of Shares in: (a) CDP Register

This page has been intentionally left blank.
No. of Shares
Signature of Shareholder(s) or, Common Seal of Corporate Shareholder
(b) Register of Members
NOTES :
1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint such number of proxies as required to attend and vote in his/her stead. A proxy need not be a member of the Company. Where a member appoints more than one proxy, the appointments shall be invalid unless he/she specifies the proportion of his/her shareholding to be represented by each proxy. If no proportion or number of shares is specified, the first named proxy may be treated as representing 100% of the shareholding and any second named proxy as an alternate to the first named. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 not less than 48 hours before the time appointed for the Meeting. The instrument appointing a proxy or proxies must be executed under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised or in such manner as appropriate under applicable laws. Where the original instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the original power of attorney or other authority, if any, under which the instrument of proxy is signed or a duly certified copy of that power of attorney or other authority (failing previous registration with the Company) shall be attached to the original instrument of proxy and must be left at the Registered Office, not less than forty-eight hours before the time appointed for the holding of the Meeting or the adjourned Meeting at which it is to be used failing which the instrument may be treated as invalid. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore. The Company shall be entitled to treat an original certificate under the seal of the corporation as conclusive evidence of the appointment or revocation of appointment of a representative.
2.
3.
4.
5.
6.
GENERAL:
The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.
BREADTALK GROUP LIMITED 171 Kampong Ampat #05-01 to 06 KA FoodLink Singapore 368330 Tel : (65) 6285 6116 Fax : (65) 6285 1661 Website: www.breadtalk.com Email: enquiry@breadtalk.com

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ANNUAL REPORT 2008

IVES YOU M ALK G OR

pRofiT BEfoRE TAX ($ miLLion)

BREADTALK GRoup LimiTED & iTs suBsiDiARiEs GRoup finAnciAL hiGhLiGhTs

Revenue Operating profit Profit before tax

6.5 6 4 2.7 2 0 0.9

Profit attributable to equity holders of the Company

financial positions ($'000) Property, plant and equipment

fY2004 12,151 582 751 15,293 (12,791) (2,123) (1,262) 12,601

fY2005 24,571 2,644 8,881 38 28,492 (35,097) (4,793) (1,938) 22,798

REVEnuE miX BY BusinEss sEGmEnT fY2008

REVEnuE miX BY GEoGRAphicAL sEGmEnT fY2008

Non-current liabilities Minority interests Shareholders' equity

fY2004 (0.02) 7.73 7.27 0.29 (0.2)

fY2005 0.09 11.35 6.93 0.39 0.9

fY2006 1.73 12.91 8.72 0.46 14.3

fY2007 3.23 18.77 14.66 0.25 20.9

fY2008 3.31 22.35 18.43 0.30 16.1

Net tangible asset per share (cents)

BREADTALK ANNUAL REPORT 2008

Return on shareholders' fund (%)

(1) (2) (3) (4)

sEGmEnTAL REViEw Bakery Business

food Atrium Business

BREADTALK ANNUAL REPORT 2008

Design for Asia Award 2004 Hong Kong Design Centre

Superbrand Status Singapore version 2002/2003 Singapore Superbrands Council

BREADTALK ANNUAL REPORT 2008

GEORGE QUEK Chairman

GROUP STRUCTURE AS AT 31 DECEMBER 2008

BREADTALK GROUP LIMITED

Taster food pte Ltd

hong Kong BreadTalk Ltd

shanghai BreadTalk co., Ltd

shanghai BreadTalk Gourmet co., Ltd

Beijing Da shi Dai food & Beverage co., Ltd

Beijing BreadTalk Restaurant management co., Ltd

megabite hong Kong Limited

BreadTalk concept hong Kong Limited

BreadTalk (Thailand) company Limited

food Republic pte Ltd

mL Breadworks sdn. Bhd

megabite (s) pte Ltd

mwA pte Ltd

100% 100% 8 50%

BREADTALK ANNUAL REPORT 2008

Bakery Food Court

Our franchise network has since expanded to 141 stores in Asia

BREADTALK ANNUAL REPORT 2008

ThE icinG Room

adds another dimension to the dining experience.

BREADTALK ANNUAL REPORT 2008

BREADTALK ANNUAL REPORT 2008

BREADTALK ANNUAL REPORT 2008

Din TAi funG

ThE sTATion KiTchEn

BREADTALK ANNUAL REPORT 2008

GEoRGE QuEK mEnG TonG

chEn Kuo huA

chAn soo sEn

KAThERinE LEE Lih LEnG

onG KiAn min