ADDING FLAVOUR - listed companybreadtalk-cn.listedcompany.com/misc/ar2007.pdfBREADTALK ANNUAL REPORT...

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

A N N U A L R E P O R T 2 0 0 7

CONTENTS

Corporate Profi le 1

Financial Highlights 2

Talking to Shareholders 4

Group Structure 6

Brands that TALK - Bakery 9 - Food Atrium 13 - Restaurant 17

Board of Directors 20

Senior Management 22

Corporate Information 23

Corporate Governance 25

Financial Statements 38

Statistics of Shareholdings 113

Notice of Annual General Meeting 115

Proxy Form 119

A N N U A L R E P O R T 2 0 0 7

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BREADTALK ANNUAL REPORT 07 1

is what BreadTalk Group Limited sets out to achieve. Founded in 2000 and listed on the SGX in 2003, our business is about innovating and creating distinctive fl avours to satisfy your palate – literally! This has earned us numerous awards and growing popularity with customers here and in other markets.

In just over 7 years, we have fl apped our wings across 11 countries, leaving our mark with more than 170 bakery outlets, 24 food courts and 6 restaurants, supported by a global staff strength in excess of 2,000 employees. For 2007 particularly, we have delivered yet again a seventh straight year of unprecedented revenue growth on the back of broad-based improvements across all business and geographical segments, as well as record high earnings.

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 culture with revolutionary changes and ingenious differentiation. Our products are also crafted with passion and vibrancy to the highest quality. We are confi dent that our strategies will lend us a distinct competitive advantage and a platform for continued growth.

ADDINGFLAVOUR

TO YOUR LIFE

2 BREADTALK ANNUAL REPORT 07

FINANCIAL HIGHLIGHTS

REVENUE ($ million) PROFIT BEFORE TAX ($ million)

168

144

120

96

72

48

24

123.6

95.3

50.2

12

10

8

6

4

2

REVENUE MIX BY BUSINESS SEGMENT REVENUE MIX BY GEOGRAPHICAL SEGMENT

156.6

2004 2005 2006 2007 2004 2005 2006 2007

6.5

11.2

2.7

0.9

Restaurant18%

Bakery44%

Food Court31%

Franchise7%

Hong Kong6%

Singapore51%

PRC38%

Others5%

(1) The earnings per ordinary share for FY2007 is computed based on the weighted average of 226,411,034 ordinary shares for the year.

(2) Net asset per share and net tangible asset per share as at end of fi nancial year 2007 are computed based on the share capital of 234,911,034 ordinary shares, representing shares issued and fully paid as at end of the year.

(3) Gearing is computed based on total borrowings divided by total equity.(4) Return on shareholders’ fund is the profi t after taxation and minority interests expressed as a

percentage of the average shareholders’ fund.

Financial Results ($'000) FY2004 FY2005 FY2006 FY2007

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

Operating profi t 1,182 3,582 7,394 12,150

Profi t before tax 900 2,666 6,466 11,228

Profi t after tax and minority interests (31) 164 3,476 7,319

Financial Positions ($'000) FY2004 FY2005 FY2006 FY2007

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

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

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

Other non-current assets – 38 625 710

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

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

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

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

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

Ratios FY2004 FY2005 FY2006 FY2007

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

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

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

Gearing (times)(3) 0.29 0.39 0.46 0.25

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

FINANCIAL HIGHLIGHTS

BREADTALK GROUP LIMITED & ITS SUBSIDIARIES GROUP FINANCIAL HIGHLIGHTS



TALKING TO SHAREHOLDERS

Dear Shareholders,

The BreadTalk Group recorded a seventh consecutive year of unprecedented revenue growth in 2007 backed by broad-based double-digit increases across all business and geographical segments.

Group revenue rose 26.7% from $123.6 million to an all-time high of $156.6 million driven by higher contribution from our bakery, franchise, restaurant and food court businesses. Revenue from Singapore made up the lion’s share of 51.1% or $80.1 million, while our operations in the People’s Republic of China (PRC), Hong Kong and the rest of the world contributed $59.2 million, $8.7 million and $8.2 million respectively.

Operating profi ts surged 64.3% from $7.4 million to $12.2 million in FY2007 on the back of all-round improvements. Net profi t attributable to shareholders soared 110.6% to $7.3 million for the year in review, while net margins improved from 2.8% in FY2006 to 4.7% this fi nancial year.

We attribute the Group’s stellar performance to several strategic accomplishments in 2007, key of which is our continued focus on broadening and nurturing strong brands that represent unique concepts relevant to a modern lifestyle. This has accounted for the Group’s steady success and growing popularity across a broad spectrum of today’s affl uent consumers. The ongoing efforts to update and renew retail concepts have led to the launch of BreadTalk Silver and J.CO Donuts & Coffee in May and December respectively. These efforts introduce new revenue streams, boost same store sales and propel our brands towards higher levels of consumer recognition.

Another important driving force is our aggressive market expansion and diversifi cation strategy. The year saw the addition of 41 new bakeries including franchised outlets and introduction of 6 new food courts to our portfolio, bringing the Group’s presence in Singapore and the region to new heights. Our fl edging Toast Box outlets are multiplying rapidly in local shopping malls, while gaining successful beachheads into Malaysia, PRC and the Philippines. The sizeable contribution from our overseas operations continues to underscore the success of our market diversifi cation efforts, notably in PRC and Hong Kong.

Earnings per share rose 86.7% to 3.23 cents, while net asset value per share increased 45.7% to 18.8 cents.

SEGMENTAL REVIEW

Bakery Business

The Bakery segment remains our largest revenue contributor, accounting for 43.9% (FY2006: 45.0%) or $68.8 million of Group revenue in 2007. This refl ects a 23.9% increase over last year, due mainly to rapid expansion in Singapore and PRC. Sales from Singapore operations rose 24.5% to $39.1 million, attributable to 5 new outlets and higher same store sales. The premium BreadTalk Silver

at Paragon Shopping Centre and the new look outlet at City Link Mall attest to our ongoing commitment to revamp existing BreadTalk outlets, introduce new products and improve store appearance, packaging and service to boost the business. Revenue from PRC grew 28.1% to $29.3 million driven by the addition of 5 new outlets and improved same store sales.

Higher master franchise fees, increases in royalty fees and raw material sales due to the larger number of franchised outlets boosted our franchise revenue by 45.0% to $11.0 million. This represents 7.0% of the Group’s total revenue. During the year, we signed on a new master franchise in Korea, as well as added 5 new franchisees in the PRC covering Qingdao, Suzhou, Wuhan, Xiamen and Xian.

Overall, the Bakery segment recorded a 111.8% increase in operating profi t to $3.9 million on the back of stronger sales from Singapore, while PRC accounted for slightly over half of total profi ts driven by rapid franchise growth. At the same time, repossession and efforts to restructure our franchise operations in Malaysia and Hong Kong resulted in lower losses and improved brand perception in these markets.

As at 31 December 2007, the Group owned and operated 73 bakeries compared to 64 outlets in the previous year. These comprised 56 BreadTalk stores and 17 Toast Box outlets spread across Singapore, Malaysia, Hong Kong, Shanghai, Beijing, Tianjin and Thailand. Our fast-growing network of franchised outlets stood at 97, compared to 65 in 2006. These include 36 outlets each in Indonesia and PRC, 11 in the Philippines, 6 in Kuwait, 4 in India, 3 in Dubai and 1 in Taiwan.

Food Court Business

The Food Court segment accounted for 30.9% (FY2006: 31.1%) or $48.4 million of Group revenue in 2007, representing a 26.2% increase due mainly to full year contribution from our Singapore Vivo City food court, which commenced operation in late 2006, and the maiden contribution from our Suntec City operation, which started in May 2007. Higher revenues were also reported by our food courts in PRC despite the deconsolidation of revenue from restructuring our directly-owned steamboat stalls into a 50:50 joint venture with the operator, and a two-month closure to renovate our 34,000 sq ft premises at Metro City in Shanghai. The Metro City food court raked in record sales following its upgrading to introduce new dining concepts and an interesting tenant mix, helping to elevate the Food Republic label as a leading and innovative brand in the market. In Hong Kong, the second food atrium at the Citigate Mall which opened in September 2007 was another testimony to Food Republic’s popularity in the territory. In November 2007, we entered the


Malaysian market with its very fi rst Food Republic at the upmarket Pavilion Shopping Centre in Kuala Lumpur. The success of our food courts in these upcoming markets have positioned us strategically for fresh opportunities.

Operating profi t for the segment grew 62.2% from $2.1 million to $3.5 million spurred by expansion and rising sales from both PRC and Singapore. Start-up costs for 2 new food courts in Hong Kong accounted for the softer performance in that market, while operating profi t from PRC food courts included the one-off recognition of $0.7 million from expired food court stored value cards and a government grant of $0.9 million. Excluding income from these one-off items, operating profi t from PRC food courts increased 18.0% to $1.3 million in 2007.

In December 2007, the Group acquired the remaining 50% stake it holds in a joint venture for the Wisma Atria food atrium, turning it into a wholly-owned subsidiary. We are sanguine about its growth prospect in the heart of Singapore’s prime shopping belt.

As at end 2007, the Group owned and operated 24 food courts including 11 in Shanghai, 4 in Beijing, 1 in Tianjin, 2 in Chongqing, 2 in Hong Kong, 3 in Singapore and 1 in Malaysia.

Restaurant Business

The Restaurant segment included 5 Din Tai Fung restaurants and 1 Noodle Bar in Singapore and contributed 18.1% (FY2006: 17.8%) or $28.3 million of Group revenue in 2007. The 28.5% improvement in revenue over last year was driven by higher Din Tai Fung restaurant sales and maiden full-year contributions from the Raffl es City and St James Power Station outlets, which were opened in 2006. The restaurant operation at St James Power Station reported $1.7 million revenue in its fi rst year of business. Operating profi t for the segment grew 31.0% from $3.5 million in 2006 to $4.6 million, propelled by rising revenue contribution from the Din Tai Fung restaurants.

BUSINESS OUTLOOK

In the year ahead, we will continue to strengthen existing markets and enhance Group margins through tighter operational controls, business streamlining and new investments. We will also seek out new areas of growth, exemplifi ed by the rolling out of new concepts at our BreadTalk outlets, introduction of Toast Box outlets at airport terminals, and leverage our BreadTalk and Food Republic brand equity for regional expansion, particularly in PRC and Hong Kong. As we gain stronger footholds in the region and beyond, we believe there is vast potential for us to extend our geographical footprints through franchise outlet

expansion. With the success of Din Tai Fung model in Singapore, the Group is looking to expand the brand outside of Singapore. We have recently secured the Din Tai Fung franchise rights for Thailand in April 2008.

During the year, the Group acquired the franchise rights for J.CO Donuts & Coffee in Singapore. We launched the fi rst J.CO Donuts & Coffee (“J.CO”) outlet at Raffl es City in February 2008 and response has been overwhelming. We are planning to roll out more J.CO outlets as soon as suitable locations are identifi ed.

DIVIDEND

To reward our shareholders for their strong support, the Board is pleased to propose a fi rst and fi nal exempt (one-tier) dividend of 0.55 cent per ordinary share for FY2007 (FY2006: 0.42 cent per share). This represents 17.7% of the Group’s net profi ts for the year and a 31.0% increase from 2006. While the Group has a cash balance of $38.2 million as at 31 December 2007, we are committed to steady business expansions in our key markets in years to come. As such, it is necessary at this time of aggressive expansion to reinvest as much as possible into the business. We will revisit our dividend policy at an opportune time.

ACCOLADES

In recognition of our efforts in raising corporate governance and transparency levels, I am pleased to note that we clinched the “Most Transparent Company Award 2007”, Sesdaq Category, awarded by the Securities Investors’ Association of Singapore. We are encouraged and shall endeavour to keep our stakeholders and the investment communities abreast of our progress and plans.

APPRECIATION

We owe our success to you, our loyal customers, valued shareholders, committed business partners and above all, our dedicated staff. On behalf of the Board, I would like to convey our deepest gratitude for your continued support and patronage, which we will call upon as the journey towards excellence unfolds.

GEORGE QUEKChairman

PRC• Shanghai 15• Beijing 14 • Shenzhen 8• Chengdu 4• Chongqing 3• Hangzhou 3• Nanjing 3• Ningbo 3• Suzhou 3• Guangzhou 2• Wuhan 2• Xian 2• Changzhou 1• Qingdao 1• Xiamen 1

SINGAPORE 34INDONESIA 36PHILIPPINES 11KUWAIT 6MALAYSIA 5INDIA 4DUBAI 3THAILAND 3HONG KONG 2TAIWAN 1

SINGAPORE 3HONG KONG 2MALAYSIA 1

PRC• Shanghai 11• Beijing 4 • Chongqing 2• Tianjin 1

SINGAPORE 5

SINGAPORE 1


GROUP STRUCTURE AS AT 31 DECEMBER 2007

AWARDS

BreadTalk Pte Ltd

Taster Food Pte Ltd

Charcoal Pte Ltd

Twin Peaks VentureSingapore Pte Ltd

ML BreadWorks Sdn Bhd

Hong Kong BreadTalk Ltd

Taiwan BreadTalk Co. Ltd

BreadTalk International Pte Ltd

Shanghai BreadTalk Co. Ltd

Shanghai BreadTalk Gourmet Co. Ltd

Beijing BreadTalk Restaurant Mgmt Co. Ltd

BreadTalk (Thailand) Co. Ltd

70%

75%

70%

BREADTALK GROUP LIMITED

90%

25%

30%

100%

100% 100%

100%

100%

100%

Most Transparent Company Award 2007

Sesdaq Category Securities Investors’

Association of Singapore (SIAS)

Most Transparent Company Award

Runner-up: 2004 and 2005Sesdaq Category

SIAS

Enterprise 50 Start Up Award 2002

Ranked Number 1Accenture and The Business Times

Superbrand StatusSingapore version 2002/2003

Singapore Superbrands Council

Finalist in Franchisor of the Year Award 2005

Franchising and Licensing Association of Singapore (FLA)

Design for Asia Award 2004Hong Kong Design Centre


Investment Holding

Bakery

Food Court

Restaurant

Others

100%

100%

100%

Out of The Box Pte Ltd

Topwin Investment Holding Pte Ltd

Shanghai Xin Jia Fang Food & Beverage Co. Ltd

Beijing Da Shi Dai Food & Beverage Co. Ltd

50%

100%Chongqing Food Republic Food & Beverage Co. Ltd

Shanghai Hong Bu Rang Food & Beverage Mgmt Co. Ltd

Megabite Hong Kong Ltd BreadTalk Concept Hong Kong Ltd

Food Republic Pte Ltd

Megabite (S) Pte Ltd

Megabite Eatery (M) Sdn Bhd

Apex Excellent Sdn Bhd

100%100%

Food Art Pte Ltd

MWA Pte Ltd

100%

85%

100%

100%

100%

50%

33.33%

Regional Brand Award 2006Singapore Promising Brand Award

Association of Small and Medium Enterprises (ASME) and Singapore Press Holdings (SPH)

Most Promising Brand 2002 to 2005Most Popular Brand 2002, 2005

Most Distinctive Brand 2003 to 2005Silver Award 2004Gold Award 2005

Singapore Promising Brand Award - ASME and SPH

Entrepreneur of the Year 2006George Quek

Emerging Entrepreneur CategoryErnst & Young

Five Star Diamond Brand Award 2006 Five Star Diamond Brand

Entrepreneur of the Year 2002George Quek

ASME and The Rotary Club


NURTURINGGROWTH


In just over 7 years, BreadTalk and Toast Box have travelled far and wide, leaving footprints in 11 countries with more than 170 stores worldwide. As of end 2007, we owned and operated 73 bakery outlets across Asia – with 56 BreadTalk and 17 Toast Box outlets spanning Singapore, Malaysia, Thailand, Hong Kong and the PRC. Our franchise network has since expanded to 97 stores in Asia and the Middle East. J.CO Donuts & Coffee, a lifestyle cafe, is the latest addition to our bakery offerings.

BAKERY


BREADTALK

Distinctive, stylish and so delicious, every one of our baked creations has garnered a loyal following, turning BreadTalk into an award-winning boutique carrying over 500 different breads, buns and cakes, each endowed with its own unique name, personality and fl avour.

Drawing inspiration from Europe’s chic bakeries, our new 1,600 sq ft BreadTalk Silver boutique bakery at Paragon Shopping Mall in Singapore boasts Italian marble fl ooring, elegant fl oral arrangements, and staff uniform resembling French couture. The sleek concept store stocks an exclusive range of some 150 pastries and desserts specially prepared by BreadTalk’s renowned, overseas trained chefs using state-of-the-art baking equipment. BreadTalk’s signature “see-through” kitchens showcase the expertise of our bakers, who ensure that every lovingly handcrafted bun, sandwich and cake reaches our customers fresh from the oven. The new range at BreadTalk Silver continues to feature breads with

individual personalities, incorporating elements of European and Asian cuisine, including such delectable confections as Cures of the Golden Flower and DragonEye. BreadTalk Silver also serves up one of Singapore’s most luxurious cakes – the exquisite Katherina Tiramisu, a captivating premium dessert oozing with Italian mascarpone cheese, aromatic Kahlua and robust espresso.

In preparation for our milestone 8th Anniversary celebration this July, we unveiled our new bakery boutique concept at Singapore’s City Link Mall in November 2007 along with 12 sumptuous signature breads, new staff uniforms and packaging. As the blueprint for all BreadTalk outlets, the new store concept is part of our continual efforts to elevate BreadTalk as a pleasurable lifestyle bakery boutique.

The new concepts will be progressively rolled out to stores in other countries to further reinforce a cohesive branding effort that will leave an indelible mark in the hearts of consumers all across the globe.

TOAST BOX

Toast Box was developed in October 2005 to recreate the warm atmosphere of local coffee shops in the 60s and 70s. This welcomed nostalgia is now enjoyed in 17 Asian outlets – 12 in Singapore, 2 in Malaysia, and 1 each in Shanghai, Beijing and Thailand. Toast Box serves up traditional favourites like toast with sugar, mee siam, pork fl oss toast, soft-boiled eggs, and nasi lemak in a wood-panelled, old-world setting complete with gramophones, Rediffusion sets and other memorabilia. The food court stall in Food Republic has grown immensely since its humble beginnings, and is now a hugely popular chain with outlets at prominent, trendy locations such as Vivo City, Plaza Singapura, Suntec City and Centrepoint. In addition to being well poised at shopping malls, Toast Box has also made its way into airport retail space with its 2 newly opened outlets at Terminals 1 and 3 of the Singapore Changi Airport.

J.CO DONUTS & COFFEE

The Group secured the Master Franchise to operate J.CO Donuts & Coffee in Singapore for 10 years and on 9 February 2008, we opened our fi rst J.CO lifestyle café at Raffl es City’s newly renovated Basement One. With its luxe beverages and inventive “light-as-air” donuts, J.CO is a rapidly expanding chain with more than 35 outlets in Asia in just 2 1/2 years. The vibrant J.CO concept is both stylish and customer-friendly. J.CO offers 25 different varieties of donuts, each with its own quirky identity and name, as well as a selection of 30 beverages, many of which are unique to the brand. We aim to open more J.CO cafés in other busy, strategic locations. A second J.CO café is expected to open at Bugis Junction Basement One in the middle of 2008.



BUILDINGTRUST


The Group began its foray into the food atrium business with its acquisition of an award-winning chain comprising 13 food courts in the 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, affordable prices and strong cultural concepts, Food Republic adds another dimension to the dining experience through an exploration of diverse food cultures from different countries and eras, staying true to its motto of uniting citizens of good taste.

FOOD ATRIUM


During the year, Food Republic added 6 food atria and upgraded 1 across Singapore, Malaysia, Hong Kong and the PRC. The oldest and largest 34,000 sq ft food atrium at Metro City in Shanghai was upgraded to give it a truly Food Republic touch that captures the essence of charming nostalgia.

Conceptualised as a 19th century European library, the 600-seat atrium at Suntec City in Singapore combines old world glamour with modern elegance. Designer wallpaper featuring book-lined shelves make the perfect backdrop for our special displays of antique bookends, chandeliers and other historic curios, bringing old world charm to this unique dining

experience. With 13 stalls and 4 mini-restaurants carefully handpicked for their consistently mouth-watering fare, diners can enjoy culinary favourites such as Yong Heng Hokkien Mee’s King Kong Mee, Yong Soon You Tiao’s fried fritters, Hamoru Japanese Restaurant’s exotic Japanese cuisine, JB Ah Koong’s renowned fi shballs and handmade noodles, and Fortunate Restaurant’s traditional dim sum.

In September 2007, Hong Kong opened its second Food Republic at Citygate Mall in Tung Chung. The artfully crafted 770-seat atrium aims to marry city dwellers’ deep passion for food with an exceptional dining experience. Offering a diverse range of quality food to choose from

among 18 stalls and 4 mini-restaurants, Food Republic is set to excite the palate with a presentation of delectable Southeast Asian cuisines that include Hong Kong style noodles, Malaysia laksa and Singapore boneless Hainanese chicken rice.

In November 2007, Food Republic entered Malaysia with a sleek new 30,518 sq ft atrium on the fi rst fl oor of Kuala Lumpur’s glamourous Pavilion Shopping Centre. The clean, modern décor brings to mind metropolitan New York, recreating the ambience of a city celebrated for its melting pot of cultures. Here, you will fi nd rich heritage food. The 23 self-serve units and 4 mini-restaurants offer Malaysian, Singaporean, Chinese, Indian,

Taiwanese, Hong Kong, Japanese, Korean, Italian, Indonesian, Thai and Vietnamese cuisine. Vendors are selected for excellent and authentic taste, consistently high standards in preparation, fl avour and presentation, as well as superior service.

As of end 2007, we own and operate 24 food atria in Asia – 11 in Shanghai, 4 in Beijing, 1 in Tianjin, 2 each in Chongqing and Hong Kong, 3 in Singapore, and 1 in Malaysia.



EXTENDINGREACH


Celebrating a time-honoured tradition of exquisite culinary indulgence, the Group’s restaurant offerings have delighted the taste buds of all ages since their various inceptions. Be it winning international accolades to receiving local praise, our fi ne restaurants continue to uphold a testament of presenting unique dining experiences that will always tantalise and satisfy consumers.

RESTAURANT


DIN TAI FUNG

Famous for its delicious and healthy house specialties - especially its renowned xiao long bao meat dumplings - Din Tai Fung originated in Taiwan over 30 years ago and was rated by The New York Times as “One of the World’s Top TEN Best Restaurants” in 1993. In 2003, the Group won the franchise rights to operate the Din Tai Fung brand of restaurants in Singapore. In 2007, Din Tai Fung has been voted as “Taiwan’s Top Ten” restaurant by Reader’s Digest and following suit, we, in Singapore, clinched the honour of “Singapore’s Best Restaurant” by both the Singapore Tatler as well as Wine & Dine publications.

With an emphasis on fresh quality ingredients and superior cooking techniques, Din Tai Fung’s food preparation and cooking methods have been standardised worldwide with a view to quality preservation. In Singapore, customers can relax amid our restaurants’ elegant décor and oriental facade, and relish mouth-watering dishes such as Shanghainese drunken chicken, fried pork chop, steamed chicken soup, not forgetting our hearty and fl avourful dumplings.

Currently, the Group operates 5 Din Tai Fung restaurants in Singapore, all in convenient, high-traffi c locations – Paragon, Junction 8, Tampines Mall, Wisma Atria and Raffl es City. With our recent award of the Din Tai Fung franchise right in Thailand, this exquisite food culture will fi nd its way to the culturally rich land of smiles soon.

THE STATION KITCHEN

The Station Kitchen (TSK) is the Group’s integrated F&B concept for diners at the 70,000 sq ft St James Power Station, one of Singapore’s latest clubbing hotspots. Established in December 2006, the 250-seat restaurant offers 2 cuisine concepts in its 6,500 sq ft dining space – Charcoal and Ah Wok. TSK features BreadTalk’s signature open concept kitchens that allow our chefs and guests to interact, and also houses brick walls, wooden benches and cast-iron lamps to create an inviting, congenial atmosphere. Its strategic location – residing within an entertainment complex, opposite Sentosa Island and adjacent to Singapore’s largest retail mall, Vivo City, makes it a popular hangout for clubbers, tourists, shoppers, offi ce crowd and residents.

CHARCOAL

Charcoal is an offshoot of Yakiniku House, the popular Taiwanese charcoal grill restaurant chain that has 5 branches in Taipei. With traditional tatami seatings, diners can enjoy hands-on grilling over burning charcoal. Only the freshest meats, seafood and vegetables are offered.

AH WOK

As a restaurant that serves up a host of local favourites such as bak kut teh and fi sh head curry, Ah Wok is primed to strike a chord with food lovers boasting a penchant for comfort food rich in traditional goodness and fl avour.

At TSK, diners can enjoy the wide variety of choice offered by Charcoal and Ah Wok – all under one roof.



12

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5

1 GEORGE QUEK MENG TONG

2 KATHERINE LEE LIH LENG

3 CHEN KUO HUA

4 ONG KIAN MIN

5 CHAN SOO SEN

GEORGE QUEK MENG TONGChairman

George, founder of the Group, was appointed to the Board on 6 March 2003. Having led and grown the Company to its outfi t today, George continues to drive our strategic direction and development. With more than 30 years of industry experience, he has been instrumental in setting fresh trends in food culture as well as redefi ning the food stage for the Group to present to consumers both locally and abroad.

George started his food and beverage business in Taiwan in 1982, successfully growing it into a chain of 21 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 our 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.

George will be due for re-election at this forthcoming Annual General Meeting.

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

and plays a vital role in steering product enhancement for our various brands, as well as pioneering new ideas and concepts.

Responsible for product development of our overseas markets too, Katherine formulates product training and technical skill upgrade programmes to ensure proper transfer of knowledge and skills to our franchisees in line with our local operations so as to sustain product quality. In addition, Katherine spearheads product costing, which is an integral part of strategic pricing.

Katherine has more than 15 years of experience in the industry. She was previously the Finance Director of Topwin Singapore prior to which she was in charge of the human resource and operations of more than 20 food and beverage outlets in Taiwan.

CHEN KUO HUANon-Executive Director

Kuo Hua was appointed to the Board on 30 April 2003 and last re-elected on 26 April 2006. He sits in the Audit Committee, Nominating Committee and Remuneration Committee of the Company and is also the President of the Group’s China operations.

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

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

ONG KIAN MINIndependent Director

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

Kian Min is currently a consultant with Drew & Napier Llc and has been a practicing advocate and solicitor of the Supreme Court of Singapore since 1989. He serves as independent director and chairman of the audit committee of a number of listed companies in Singapore as well.

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

CHAN SOO SENIndependent Director

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

Soo Sen is currently the Director, Chairman’s Offi ce 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 offi cer 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.

Soo Sen will be due for re-election at this forthcoming Annual General Meeting.

BOARD OF DIRECTORS


overse s the Group’s research and development e


CATHERINE LEE KHIA YEE Chief Financial Offi cer

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

A non-practicing Certifi ed Public Accountant by training with more than 15 years of fi nancial management experience in various industries, Catherine is an experienced banker and investment professional with a strong corporate fi nance 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 fi nancial 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.

GOH TONG PAK Chief Executive Offi cer

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

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

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

SENIOR MANAGEMENT

FRANKIE QUEK SWEE HENGChief Operating Offi cer

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

Prior to joining the Group in 2001, Frankie was an Associate Manager in the residential properties division of the Dennis Wee Group. From 1993 to 1999, Frankie held various positions in Topwin Singapore where he helped set up the Raffl es 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.

CORPORATE INFORMATION

BOARD OF DIRECTORS

George Quek Meng Tong Chairman

Katherine Lee Lih Leng Deputy Chairman

Chen Kuo Hua Non-Executive Director

Ong Kian Min Independent Director

Chan Soo Sen Independent Director

COMPANY SECRETARY

Tan Cher Liang

REGISTERED OFFICE

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

SHARE REGISTRAR

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

AUDITORS

Ernst & YoungCertifi ed Public AccountantsOne Raffl es Quay North Tower Level 18Singapore 048583

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

PRINCIPAL BANKERS

DBS Bank Limited

Malayan Banking Berhad

Oversea-Chinese Banking Corporation Limited

Standard Chartered Bank

United Overseas Bank Limited

INVESTOR RELATIONS

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

Michael TanEmail : [email protected]

Dawn SooEmail : [email protected]


FINANCIAL CONTENTS


Financial Statements - Directors’ Report 38 - Statement by Directors 41 - Independent Auditors’ Report 42 - Consolidated Income Statement 43 - Balance Sheet 44 - Statements of Changes in Equity 46 - Consolidated Cash Flow Statement 49 - Notes to Financial Statements 52



Proxy Form 119


CORPORATE GOVERNANCE

The Board of Directors (the “Board”) and Management recognise the importance of corporate governance and continue to be committed to maintaining a high standard of corporate governance by complying with the benchmark set by the Singapore Code of Corporate Governance 2005 (the “Code”) issued by the Ministry of Finance on 14 July 2005.

This report sets out BreadTalk Group Limited’s corporate governance processes and structures that were in place throughout the fi nancial year, with specifi c 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 is pleased to confi rm that for the fi nancial year ended 31 December 2007, the Company has generally adhered to the framework as outlined in the Code and where there are deviations from the Code, the reasons for which deviation are explained accordingly.

A. BOARD MATTERS

Board’s Conduct of its Affairs

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

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

1. Providing entrepreneurial leadership and setting strategic directions and overall corporate policies of the Group.2. Supervising and monitoring the performance of the Management team.3. Ensuring the adequacy of internal controls, risk management and periodic reviews of the Group’s fi nancial performance

and compliance.4. Setting the Company’s values and standards, ensuring that the necessary human resources are in place.5. Approving annual budget, major investments and divestment proposals.6. Assuming responsibility for good corporate governance practices.7. Approving corporate or fi nancial restructuring, share issuance, dividends and other returns to Shareholders, Interested

Person Transactions (IPT) of a material nature and release of the Group’s half year and full year results.

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

Guideline 1.1 of the Code: The Board’s role

Guideline 1.3 of the Code: Disclosure on delegation of authority by Board to Board Committees

The Board met four (4) times during the fi nancial year to discuss key activities and business strategies, review the operations and performance, as well as address key policy matters 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. In addition, ad-hoc and non-scheduled meetings are convened by Board members to deliberate on urgent and substantive matters. The Company’s Articles of Association has been amended to provide for telephone, audio and video conferencing, or other electronic means of communication to facilitate meetings of the Board.

Guideline 1.4 of the Code: Board to meet regularly



Details of Directors’ attendance at Board and Board Committee meetings held during the fi nancial year ended 31 December 2007 is summarised as follows:

ATTENDANCE AT BOARD AND BOARD COMMITTEE MEETINGS

Name of Director Board Audit Committee Nominating Committee Remuneration CommitteeNumber of Meetings Held 4 4 1 1

ATTENDANCEGeorge Quek Meng Tong 4 NA NA NAKatherine Lee Lih Leng 3 NA NA NAChen Kuo Hua 4 4 1 1Ong Kian Min 4 4 1 1Chan Soo Sen 3 3 1 1

Matters that are specifi cally reserved to the Board for approval are:

(a) matters involving a confl ict of interest of a substantial Shareholder or Director;(b) material acquisitions and disposal of assets;(c) corporate or fi nancial restructuring;(d) share issuances, dividends and other returns to Shareholders;(e) matters which require Board approval as specifi ed in the Company’s IPT policy; and(f) 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 Company’s businesses and governance practices, as well as the Group’s history, core values, strategic direction and industry-specifi c knowledge so as to assimilate them into their new roles.

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

Board members are encouraged to attend seminars and receive training to improve themselves in the discharge of their duties as Directors. In addition, the Company works closely with professionals to apprise Directors with updates on risk management and key changes to relevant regulatory requirements and accounting standards. In keeping abreast with the provisions of the Companies (Amendment) Act 2005, the Company has amended its Articles of Association upon Shareholders’ approval at the Company’s extraordinary general meeting held on 30 April 2007.

Guideline 1.5 of the Code: Matters requiring Board approval

Guideline 1.7 of the Code: Formal appointment letter

Guidelines 1.6 and 1.8 of the Code: Directors to receive appropriate training



Board Composition and Guidance

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

The Board has fi ve (5) members with more than one-third (1/3) independent majority, comprising two (2) independent and non-executive Directors, one (1) non-executive Director and two (2) executive Directors:

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 independence of the two (2) Independent Directors 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 offi cers that could interfere or be reasonably perceived to interfere, with the exercise of the Director’s independent judgement of the conduct of the Group’s affairs, and is not a substantial Shareholder, or a partner (with 5% or more stake) or executive offi cer of any for profi t business organisation to which the Company has made or received signifi cant payments (aggregated in excess of S$200,000 per year) in the current or immediate past fi nancial year. Moreover, the Chairman of the NC is not associated, directly or indirectly, with a substantial Shareholder to enhance an independent view to the best interests of the Company. As a result of the NC’s review for fi nancial year 2007, the NC is of the view that the Independent Directors are independent of the Company’s 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 effi cient 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 its 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 2.1 of the Code: Independence of Board

Guideline 2.2 of the Code: Independent Directors

Guideline 2.3 of the Code: Appropriate Board size

Guideline 2.4 of the Code: Board to comprise Directors with core competencies

Guidelines 2.5 and 2.6 of the Code: Role of NEDs and regular meetings of NEDs

Chairman and Chief Executive Offi cer

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

With the appointment of Mr Goh Tong Pak as Group Chief Executive Offi cer (“CEO”) with effect from 1 January 2008, the Company currently adopts a dual leadership structure whereby the positions of chairman and chief executive offi cer are separated. There is a clear division of responsibilities between the Company’s executive Chairman and CEO, which provides a balance of power and authority.

Guideline 3.1 of the Code: Chairman and chief executive offi cer should be separate persons


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 CEO, Mr Goh Tong Pak, has overall responsibility of the Group’s operations, organisational effectiveness and implementation of Board policies and decisions.

Not withstanding the above, the non-executive and independent Directors fulfi ll 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 appointed Independent Director, Mr Ong Kian Min as the Lead Independent Director on 14 August 2006 as an additional channel available to Shareholders.

Guideline 3.2 of the Code: Chairman’s role

Guideline 3.3 of the Code: Appointment of Lead Independent Director

Board Membership and Board Performance

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

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

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

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

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

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

2. To regularly review the Board structure, size and composition and make recommendations to the Board with regards to any adjustments that are deemed necessary.

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

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

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

Guideline 4.1 of the Code: NC composition

Guidelines 4.2 to 4.6 of the Code: Duties of the NC



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

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

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

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

The NC has met once during the fi nancial year under review on 27 February 2007. Each member of the NC shall abstain from voting on any resolution in respect of the assessment of his performance or re-nomination as a Director. Details of Board members’ qualifi cations and experience including the year of initial appointment are presented in this Annual Report under the heading “Board of Directors”.

Guidelines 5.1 to 5.4 of the Code: Assessing the Board’s effectiveness

Access to Information

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

The Board receives complete and adequate information on an on-going basis. 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 one (1) week in advance to Board members of each meeting.

Managers who can provide additional insight into the matters at hand are invited to be present at the relevant time during a Board 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. NEDs have also been invited to various functions whereby they may be informally introduced to offi cers of the Group.

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

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

Guidelines 6.1 and 6.2 of the Code: Information to the Board

Guideline 6.3 of the Code: Access to and role of the Company Secretary

Guideline 6.5 of the Code: Access to independent professional advice



B. REMUNERATION MATTERS

Procedures for Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fi xing 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 fi xing the remuneration packages of individual Directors, comprises the two (2) Independent Directors and the Non-executive Director. The chairman of the RC is an independent and non-executive Director:

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

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

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 specifi c 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 CEO) and those employees related to the executive Directors and controlling Shareholders of the Group.

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

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

4. To 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.

5. 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 benefi ts-in-kind should be covered.

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

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

Guideline 7.1 of the Code: RC to consist entirely of NEDs and majority, including RC chairman, must be independent

Guideline 7.2 of the Code: RC’s responsibilities



Level and Mix of Remuneration

Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A signifi cant 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 fl exible and responsive to the market, comprising a base salary and other fi xed allowances, as well as variable performance bonus and participation in an employee share award or Scheme based on the Company’s performance and linking it to the individual’s performance.

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

In addition to the Scheme, the Company will be proposing a Restricted Share Grant Plan (the “Plan”) to reward and retain qualifi ed and experienced employees so as to optimise their performance standards and enhance corporate effi ciency in the strive for sustainable growth and prosperity for the Group. The Plan is subject to approval of Shareholders at the forthcoming Extraordinary General Meeting to be held on 28 April 2008 (the “EGM”).

The RC has adopted a framework which consists of a base fee to remunerate NEDs based on their appointments and roles in the respective Committees, as well as the fees paid in comparable companies. Fees for the NEDs will be tabled at the forthcoming Annual General Meeting to be held on 28 April 2008 (the “AGM”) for Shareholders’ approval.

Guidelines 8.1 to 8.5 of the Code: RC to recommend remuneration of Directors and review remuneration of key executives

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 confi rms 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



Disclosure on Remuneration

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

A breakdown showing the level and mix of each Director’s remuneration for the year ended 31 December 2007 is set out below:

REMUNERATION OF DIRECTORS AND KEY EXECUTIVES

Guidelines 9.1 to 9.3 of the Code: Directors’, key executives’and related employees’ remuneration

Name of Director Salary(1)

Bonus/Profi t-Sharing Benefi ts-In-Kind Director Fee(2) Total

Above S$500,000 % % % % %George Quek Meng Tong 45 49 6 - 100S$250,000 to below S$500,000Chen Kuo Hua 68 32 - - 100Katherine Lee Lih Leng 50 50 - - 100Below S$250,000Ong Kian Min - - - 100 100Chan Soo Sen - - - 100 100

Name of Key Executive (who is not a Director) Designation Salary(1)

Bonus /Profi t-Sharing Total

Above S$250,000 to below S$500,000 % % %Frankie Quek Swee Heng(3) Chief Operating Offi cer 61 39 100Catherine Lee Khia Yee Chief Financial Offi cer 63 37 100Chen Poh On Chief Executive Offi cer, Megabite China 71 29 100Jenson Ong Chin Hock Managing Director, Megabite Hong Kong 84 16 100Ricky Lim Chor Pah General Manager, BreadTalk Beijing 83 17 100S$250,000 and belowHenry Lee(4) Executive Vice President, BreadTalk Singapore 73 27 100

Notes:(1) Salary is inclusive of fi xed allowance and CPF contribution.(2) Directors’ fees only payable after approval by Shareholders at the AGM.(3) Frankie Quek is the brother of George Quek.(4) Henry Lee is the brother of Katherine Lee.

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



C. ACCOUNTABILITY AND AUDIT

Accountability

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

For all announcements (including fi nancial performance reporting) made to the public via SGXNET and the annual report or circulars to Shareholders, as required by the SGX-ST, the Board has a responsibility to present a fair assessment of the Group’s position, including the prospects of the Group.

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

Guideline 10.1 of the Code: Board’s responsibility to the public

Guideline 10.2 of the Code: Management’s responsibility to the Board

Audit Committee

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

The role of the AC is to assist the Board in the execution of its corporate governance responsibilities within the established Board’s references and requirements. The fi nancial 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 defi ning its scope of authority and some of its major functions are set out below.

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

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

The members of the AC collectively have expertise or experience in fi nancial management, and are qualifi ed to discharge the AC’s responsibilities.

Guidelines 11.1, 11.2 and 11.8 of the Code: Board to establish AC and composition of AC

In performing its functions, the AC confi rms 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 offi cer to attend its meetings, as well as reasonable resources to enable it to discharge its functions properly.

Guideline 11.3 of the Code: AC’s authority



The main functions of the AC are as follows:

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

2. Discuss and review external auditors’ reports.

3. Review signifi cant fi nancial reporting issues and judgements so as to ensure the integrity of the fi nancial statements and any formal announcements relating to the Company’s or Group’s fi nancial performance.

4. Review and recommend the nomination of the External Auditors for appointment or re-appointment.

5. Review the IPT.

6. Review the scope and result of the internal audit procedures.

7. Review the remuneration packages of the employees who are related to the Directors or substantial Shareholders.

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

Where there is any suspected fraud or irregularity, or failure of internal controls, or infringement of any Singapore law, rule or regulation which has a material impact on the Company’s operating results, the AC will commission and review the fi ndings of internal investigations into the matters. Endorsed by the AC, the Company has in place a whistle-blowing framework. This is to encourage and provide an avenue for employees to report in good faith and confi dence without fear of reprisals or concerns, about possible improprieties enabling independent investigation of such matters by the AC. Contact details of the AC members have been made available to all staff.

Guideline 11.4 of the Code: Duties of AC

Guidelines 11.5 and 11.6 of the Code: Meeting with auditors and review of their independence

Guideline 11.7 of the Code: Whistle-blowing arrangements

Internal Control

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

In recognising the importance of internal controls and so as to tap on the expertise of professionals with a view to harnessing industry best practices, the Group has appointed external fi rms which are qualifi ed and specialised in the area as Internal Auditors to carry out periodic checks on the Group’s system of internal controls. In the course of their statutory audit, the Group’s External Auditors also considered internal controls which are relevant to the Company’s preparation and fair presentation of its fi nancial statements in order to design audit procedures that are appropiate in the circumstances.

Guideline 12.1 of the Code: AC to review adequacy of internal controls



Any material non-compliance and internal control weaknesses, as well as recommendations for improvements are reported to the AC. Where areas of internal controls had been found to require further Management attention and improvement upon, Management had since taken action to enhance upon them, as well as implement more proactive, precautionary and preventive monitoring procedures to avoid error or abuse. The AC, on behalf of the Board, also reviews the effectiveness of the actions taken by Management in response to the fi ndings and recommendations made by the Internal and External Auditors in this respect.

In the absence of any evidence to the contrary, the system of internal controls maintained by Management that was in place throughout the fi nancial period provides reasonable, though not absolute assurance against material fi nancial misstatements or loss, and also confi dence in the safeguarding of assets, maintenance of proper accounting records, reliability of fi nancial information, compliance with appropriate legislation, regulation and best practice, and the identifi cation and management of business risk.

The Board notes that no system of internal control can provide absolute assurance against the occurrence of material error, poor judgement in decision-making, human error, loss, fraud or other irregularities. Based on the reports submitted by the Internal and External Auditors, as well as the various controls put in place by the Management, the AC is satisfi ed that there are adequate internal controls to meet the needs of the Group in its current business environment.

Internal Audit

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

As discussed above, the internal audit function of the Group is outsourced. The Company has appointed Stone Forest Consulting as its Internal Auditors since 2006 and the Internal Auditors report primarily to the chairman of the AC. The audit work carried out is guided by the Standards for Professional Practice of Internal Auditing set by the Institute of Internal Auditors, which has its headquarters in the United States of America.

The Internal Auditors plan their audit schedules in consultation with, but independent of the Management and the audit plan is submitted to the AC for approval prior to the commencement of the internal audit. The AC has reviewed and approved the internal audit plan proposed by the Internal Auditors for fi nancial year 2008. The AC also reviews the activities of the Internal Auditors on an annual basis, including overseeing and monitoring the implementation of the improvements required on internal control weaknesses identifi ed.

Guideline 12.2 of the Code: Board to comment on the adequacy of internal controls

Guidelines 13.1 to 13.4 of the Code: Internal Auditors to report to AC

Communication with Shareholders

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

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

The Board has adopted a policy of openness and transparency in the conduct of the Company’s affairs while preserving the commercial interests of the Company. The Company has been reporting its fi nancial results on a half-yearly basis and holding media or analyst meetings to coincide with the results announcements. Other than the routine announcements made in accordance with the requirements of the SGX-ST, the Company has issued additional announcements and press releases to update Shareholders on the activities of the Company and the Group during the year.

Guidelines 14.1 and 14.2 of the Code: Regular, effective and fair communication with Shareholders



Financial results and all other material or price-sensitive information are released to Shareholders and the general public via SGXNET in accordance with the requirements of the SGX-ST before being disseminated through press releases, the Company’s website, as well as media and analyst briefi ngs. The Board strives to ensure that pertinent information is made available to all Shareholders on an adequate and timely basis.

The Company has in place an investor relations programme to keep investors informed of material developments in the Company’s business and affairs beyond that which is prescribed, but without prejudicing the business interests of the Company. The Chief Financial Offi cer has lead responsibility for investor relations with the active involvement of the Chairman and CEO. They are supported in these efforts by external investor relations consultants engaged by the Company who schedule roadshows, arrange meetings and organise presentations for analysts and investors. The Company values strengthening Shareholder and investor relations through regular dialogues with the investing community.

In addition to being broadcasted on SGXNET, notices of general meetings are advertised in the local newspapers and despatched to Shareholders, together with the annual report or circulars within the timeframe prescribed by the SGX-ST. At general meetings, Shareholders are given opportunities to voice their views and direct their questions to Directors or Management regarding the Company. The chairpersons of the AC, NC and RC are present and available to address questions at general meetings. The External Auditors will also be present at the Company’s annual general meetings to assist the Board in addressing queries about the conduct of the statutory audit, and preparation and content of their Auditors’ Report.

The Company’s Articles of Association do not restrict the number of proxies Shareholders can appoint to attend and vote on their behalf at all general meetings. Shareholders are encouraged to attend and participate at the Company’s general meetings whereby resolutions are seperated for each distinct issue. Minutes of all general meetings are always prepared and kept, and will be made available to Shareholders upon their requests to the Company Secretary.

Guidelines 15.1 to 15,5 of the Code: Conduct of general meetings

Most Transparent Company

The Company won the “Most Transparent Company” under the “Sesdaq” category by the Securities Investors’ Association of Singapore (SIAS) at the SIAS Investors Choice Awards 2007 in October 2007. 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, heads of research, fund managers and members of the mass media.

Dealing in Securities

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



Interested Person Transactions

When a potential confl ict pertaining to IPT arises, the Directors concerned do not participate in discussions and refrains from exercising any infl uence over other members of the Board.

The AC has reviewed the IPT entered into during the fi nancial year by the Group and the aggregate value of IPT entered during the fi nancial year under review is as follows:

Name of Interested Person

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

Aggregate value of all IPT conducted during the fi nancial year under review under Shareholders’ mandate pursuant to Rule 920 (excluding transactions less than S$100,000)

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

405.6

Not applicable - the Company does not have a Shareholders’ mandate under Rule 920

Express Teppan-Yaki (S) Pte Ltd- food court rental income / miscellaneous income

43.7(ceased to be interested

with effect from February 2007)Sky One Art Investment Pte Ltd- offi ce rental income

2.4(rental ceased since April 2007)

Material Contracts

Except as disclosed in the Interested Person Transactions section above, 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 fi nancial year ended 31 December 2007.

Risk Management

The Group regularly reviews and improves its business and operational activities to identify areas of signifi cant business risks, and take appropriate measures to control and mitigate these risks. The Group reviews all signifi cant control policies and procedures, and highlights all signifi cant matters to the AC and the Board. The fi nancial risk management objectives and policies are outlined in the fi nancial statements section of this Annual Report.



DIRECTORS’ REPORT

The directors are pleased to present their report to the members together with the audited fi nancial 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 fi nancial year ended 31 December 2007.

DIRECTORS

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

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

ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES AND DEBENTURES

Neither at the end of nor at any time during the fi nancial 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 benefi ts 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 offi ce at the end of the fi nancial year, had, according to the register of directors’ shareholdings required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest in shares of the Company as stated below:

Direct interest Deemed interestName of director

The Company

As at 1January

2007

As at 31December

2007As at 21

January 2008

As at 1January

2007

As at 31December

2007As at 21

January 2008(Ordinary shares )

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

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

Except as disclosed in this report, no other director who held offi ce at the end of the fi nancial year had interest in shares or debentures of the Company, or of related corporations, either at the beginning or the end of the fi nancial year or on 21 January 2008.


DIRECTORS’ REPORT

DIRECTORS’ CONTRACTUAL BENEFITS

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

OPTIONS

The Company has an employee share incentive plan, BreadTalk Group Limited Employees’ Share Option Scheme. The Scheme was approved at an Extraordinary General Meeting held on 30 April 2003 to enable directors (including non-executive directors) and employees of the Group to participate in the equity of the Company so as to motivate them to greater dedication, loyalty and higher standards of performance, and to give recognition to those who have contributed signifi cantly to the growth and performance of the Company and/or the Group. The following persons are eligible to participate in the Scheme at the absolute discretion of the Remuneration Committee:

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

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

Size of plan

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

Grant of options

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

Acceptance of option

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 fi nancial year, there were:

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

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

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


AUDIT COMMITTEE

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

AUDITORS

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

On behalf of the board of directors:

George Quek Meng TongDirector

Katherine Lee Lih LengDirector

Singapore18 March 2008

DIRECTORS’ REPORT


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 fl ow 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 2007 and the results of the business, changes in equity and cash fl ows of the Group and the changes in equity of the Company for the year ended on that date, and

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

On behalf of the board of directors:

George Quek Meng TongDirector

Katherine Lee Lih LengDirector


STATEMENT BY DIRECTORS


We have audited the accompanying fi nancial statements of BreadTalk Group Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 43 to 112, which comprise the balance sheets of the Group and the Company as at 31 December 2007, the statements of changes in equity of the Group and the Company, the income statement and cash fl ow statement of the Group for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The Company’s directors are responsible for the preparation and fair presentation of these fi nancial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these fi nancial 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 fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by directors, as well as evaluating the overall presentation of the fi nancial statements.

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

OPINION

In our opinion,

(i) the consolidated fi nancial 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 2007 and the results, changes in equity and cash fl ows of the Group and the changes in equity of the Company for the year ended on that date; and

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

ERNST & YOUNGCertifi ed Public Accountants


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BREADTALK GROUP LIMITED


Notes 2007 2006Restated

$’000 $’000

Revenue 3 156,610 123,569

Cost of sales (69,863) (55,523)

Gross profi t 86,747 68,046

Other operating income 4 6,319 3,362Distribution and selling expenses (55,632) (44,367)Administrative expenses (25,284) (19,647)

Profi t from operations 5 12,150 7,394

Interest income 7 173 113Interest expense 7 (908) (858)Financial expenses, net (735) (745)

Profi t before taxation and share of results of associates and joint ventures 11,415 6,649

Share of results of associates (454) (517)Share of results of joint ventures 267 334

Profi t before taxation 11,228 6,466

Taxation 8 (2,791) (2,020)

Profi t for the year 8,437 4,446

Attributable to:

Equity holders of the Company 7,319 3,476Minority interests 1,118 970

8,437 4,446

Earnings per share (cents)

Basic and diluted 9 3.23 1.73

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

CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2007


Notes Group Company2007 2006

Restated2007 2006

$’000 $’000 $’000 $’000Non-current assetsProperty, plant and equipment 10 44,893 34,141 15 5Intangible assets 11 9,665 8,427 – – Investment securities 12 316 316 – – Investment in subsidiaries 13 – – 23,139 21,639Investment in associates 14 1,051 665 – – Investment in joint ventures 15 282 2,212 – – Deferred tax assets 8 394 309 – –

56,601 46,070 23,154 21,644

Current assetsInventories 16 2,506 2,003 – –Trade receivables 17 3,027 2,855 – –Other receivables and deposits 18 13,105 9,748 11 3Prepayments 1,798 507 11 10Due from subsidiaries (non-trade) 19 – – 8,761 210Amount due from related parties (non-trade) 19 – 78 – –Amount due from associates (trade) 19 – 1,425 – –Amount due from associates (non-trade) 19 7 216 – –Amount due from joint ventures (trade) 19 64 113 – –Amount due from joint ventures (non-trade) 19 237 176 – –Amount due from minority shareholders 19 – 150 – –Fixed deposits 20 2,814 1,107 2,509 –Cash on hand and at bank 35,531 18,455 2,586 603

59,089 36,833 13,878 826Current liabilitiesTrade payables 21 8,861 7,922 – –Other payables 22 25,074 15,677 159 96Other liabilities 22 17,048 13,217 1,304 640Provision for reinstatement costs 1,487 648 – –Amount due to subsidiaries (non-trade) 19 – – 4 443Amount due to associates (trade) 19 5 – – –Amount due to associates (non-trade) 19 – 360 – –Amount due to joint ventures (non-trade) 19 11 28 – –Amount due to landlord (non-trade) 27 190 – – –Finance lease obligations, secured 24 244 107 – –Loan from minority shareholder of a subsidiary 23 125 59 – –Short-term loans, secured 25 3,283 4,958 – –Long-term loans, secured 26 3,701 3,044 – –Tax payable 2,967 1,468 43 38

62,996 47,488 1,510 1,217Net current (liabilities) assets (3,907) (10,655) 12,368 (391)

BALANCE SHEETSAS AT 31 DECEMBER 2007


Notes Group Company2007 2006

Restated2007 2006

$’000 $’000 $’000 $’000

Non-current liabilities

Long-term loans, secured 26 3,977 4,843 – – Finance lease obligations, secured 24 366 303 – – Amount due to landlord (non- trade) 27 240 402 – – Deferred tax liabilities 8 845 869 – –

5,428 6,417 – –

Net assets 47,266 28,998 35,522 21,253

Equity attributable to equity holders of the Company

Share capital 28 33,303 21,516 33,303 21,516Accumulated profi ts (losses) 10,394 4,551 2,219 (263) Statutory reserve fund 29 612 123 – – Translation reserve 30 (213) (250) – –

44,096 25,940 35,522 21,253Minority interests 3,170 3,058 – –

Total Equity 47,266 28,998 35,522 21,253


BALANCE SHEETSAS AT 31 DECEMBER 2007


Attributable to equity holders of the Company

2006 Group

Share capital

Sharepremium

Accumulated profi ts

Statutory reserve

fundTranslation

reserve Total Minorityinterests

Total equity

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

At 1 January 2006- As previously stated 8,036 13,480 2,074 – 88 23,678 2,076 25,754- Effect of prior year adjustments (Note 38) – – (876) – (4) (880) (138) (1,018)

- As restated 8,036 13,480 1,198 – 84 22,798 1,938 24,736Net effect of currency translation differences – – – – (334) (334) – (334)

Net loss recognised directly in equity – – – – (334) (334) – (334)Net profi t for the year – – 3,476 – – 3,476 970 4,446

Total recognised income and expense for the year – – 3,476 – (334) 3,142 970 4,112

Transfer to statutory reserve – – (123) 123 – – – – Transfer of share premium reserve to share

capital 13,480 (13,480) – – – – – – Issuance of new shares to minority shareholders – – – – – – 150 150

At 31 December 2006 21,516 – 4,551 123 (250) 25,940 3,058 28,998

STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2007


Attributable to equity holders of the Company

2007Group

Share capital

Sharepremium

Accumulated profi ts

Statutory reserve

fundTranslation

reserve Total Minorityinterests

Total equity

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

At 1 January 2007- As previously stated 21,516 – 6,258 123 (303) 27,594 3,221 30,815- Effect of prior year adjustments (Note 38) – – (1,707) – 53 (1,654) (163) (1,817)

- As restated 21,516 – 4,551 123 (250) 25,940 3,058 28,998Net effect of currency translation differences – – – – 37 37 – 37

Net income recognised directly in equity – – – – 37 37 – 37Net profi t for the year – – 7,319 – – 7,319 1,118 8,437

Total recognised income for the year – – 7,319 – 37 7,356 1,118 8,474Dividends paid – – (987) – – (987) (1,148) (2,135)Transfer to statutory reserve – – (489) 489 – – – – Issuance of new shares 12,240 – – – – 12,240 – 12,240Share issue expense (453) – – – – (453) – (453)Issuance of new shares to minority shareholders (1) – – – – – – 58 58Acquisition of a subsidiary – – – – – – 84 84

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

(1) Issuance of new shares to minority shareholders via capitalisation of shareholders’ loan.



Share capital Share premium

Accumulated (losses) profi ts Total equity

$’000 $’000 $’000 $’000(Note 28)

2006

Company

1 January 2006 8,036 13,480 (217) 21,299Net loss for the year – – (46) (46)

Total recognised net expenses for the year – – (46) (46)Transfer of share premium reserve to share capital 13,480 (13,480) – –

At 31 December 2006 21,516 – (263) 21,253

2007

Company

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

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

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





$’000 $’000

Cash fl ows from operating activitiesProfi t before taxation 11,228 6,466Adjustments for:

Depreciation expense 10 9,793 7,976Amortisation of intangible assets 11 555 532Impairment of intangible asset 11 – 99Loss (gain) on disposal of plant and equipment 130 (51)Plant and equipment written off 593 289Share of results of associates 454 517Share of results of joint ventures (267) (334)Interest expense 908 858Interest income (173) (113)Impairment for trade receivables 10 – Impairment of amount due from associates (non-trade) 275 – Bad debts written off 8 – Dividend income from investment securities (55) – Gain on liquidation of subsidiary 13 – (98)Gain on disposal of associate (83) – Translation difference 17 530

Operating profi t before working capital changes 23,393 16,671(Increase) decrease in:

Inventories (354) (314)Trade receivables (180) (380)Other receivables and deposits (2,298) (3,613)Prepayments (1,192) 102Amount due from related parties 78 (78)Amount due from associates (trade) 897 (1,014)Amount due from associates (non-trade) (140) 1,038Amount due from joint ventures (trade) 50 (113)Amount due from joint ventures (non-trade) (258) 137Amount due from minority shareholders (non-trade) 150 (150)

Increase (decrease) in:Trade payables 464 162Other payables, other liabilities and provision for reinstatement costs 10,456 10,702Amount due to associates (trade) 5 (71)Amount due to associates (non-trade) (360) 99Amount due to joint ventures (non-trade) 25 22

Cash fl ows generated from operations 30,736 23,200Tax paid (2,040) (2,559)

Net cash fl ows from operating activities 28,696 20,641

CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2007



$’000 $’000

Cash fl ows from investing activitiesInterest income received 173 113Dividend income received 235 – Purchase of property, plant and equipment B (17,987) (18,637)Acquisition of intangible assets (157) (177)Investment securities – (316)Investment in associates (1,200) (261)Loan to an associate – (225)Investment in joint ventures (334) – Proceeds from sale of plant and equipment 367 286Proceeds from disposal of associate 178 – Net cash infl ow on acquisition of subsidiaries 13 1,874 – Net cash outfl ow on liquidation of subsidiary 13 – (31)

Net cash fl ows used in investing activities (16,851) (19,248)

Cash fl ows from fi nancing activitiesInterest paid (884) (833)Dividends paid to shareholders of the Company (987) – Dividends paid to minority shareholders (1,148) – Proceeds from issuance of shares 12,240 – Share issue expense (453) – Net (repayment) proceeds of long-term loans (157) 1,924Net (repayment) proceeds of short term loans (1,657) 1,665Capital injection from minority shareholders of a subsidiary – 150Net repayment of fi nance lease obligations (146) (327)Loan from minority shareholder of a subsidiary 130 (82)Decrease in fi xed deposits pledged 1,000 496

Net cash fl ows from fi nancing activities 7,938 2,993

Net increase in cash and cash equivalents 19,783 4,386Cash and cash equivalents at the beginning of the year 18,455 14,069

Cash and cash equivalents at the end of the year A 38,238 18,455



Note A. Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and at bank and unpledged fi xed 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 cashfl ow statement, cash and cash equivalents comprise the following as at 31 December:

2007 2006$’000 $’000

Cash on hand and at bank 35,531 18,455Fixed deposits 2,814 1,107

38,345 19,562Less: Fixed deposits pledged (107) (1,107)

Cash and cash equivalents at the end of year 38,238 18,455

Cash and cash equivalents include amounts denominated in foreign currencies as follows:

United States dollar 540 230Renminbi 9,618 7,169Hongkong dollar 865 570Thai Baht 52 12Ringgit Malaysia 728 –

Note B. Plant and equipment held under fi nance leases

During the year, the Group acquired property, plant and equipment with an aggregate cost of approximately $18,179,000 (2006: $19,072,000) of which $192,000 (2006: $435,000) was fi nanced via fi nance lease. Cash payments of $17,987,000 (2006: $18,637,000) were made to acquire property, plant and equipment.




NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2007

1. GENERAL

1.1 Corporate information

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

The registered offi ce 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 fi nancial statements.

1.2 Fundamental accounting assumption

The fi nancial statements of the Group have been prepared on a going concern basis. The Group’s net current liabilities position as at 31 December 2007 of $3,907,000 (2006 Restated: $10,655,000) arose mainly from the use of cash and short-term bank borrowings to fi nance 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 $5,195,000 (2006: $2,808,000) and deferred revenue of $3,703,000 (2006: $3,120,000) 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 signifi cant cash outfl ow from the Group within the next 12 months.

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation

The consolidated fi nancial 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 fi nancial statements have been prepared on a historical cost basis.

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



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

2.2 Future changes in accounting policies

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

Reference Description Effective for annual periods beginning on or after

FRS 23 Amendment to FRS 23, Borrowing Costs 1 January 2009FRS 108 Operating Segments 1 January 2009INT FRS 111 Group and Treasury Share Transactions 1 March 2007INT FRS 112 Service Concession Arrangements 1 January 2008

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

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

2.3 Signifi cant accounting estimates and judgements

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

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 signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial 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 fl ows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash fl ows. The carrying amount of the Group’s goodwill at 31 December 2007 was $6,173,000 (2006: $4,578,000). More details are given in Note 11.




2.3 Signifi cant accounting estimates and judgements (cont’d)

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

Brand value amounting to $3,308,000 arising from the acquisition of Topwin was separately identifi ed 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 fi nancial 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 benefi ts of the brand to fl ow to the Group. Amortisation of the brand amounted to $213,000 (2006: $217,000) for the fi nancial year ended 31 December 2007. More details are given in Note 11.

(iii) Income taxes

The Group has exposure to income taxes in numerous jurisdictions. Signifi cant 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 fi nal tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s tax payable at 31 December 2007 was approximately $2,967,000 (2006: $1,468,000).

A subsidiary, BreadTalk Pte Ltd (“BTPL”) obtained the Development and Expansion Incentive (“DEI”) which entitles the qualifying income of the company earned during the fi nancial 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.

(iv) Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these assets to be within 2 to 20 years. The carrying amount of the Group’s property, plant and equipment as at 31 December 2007 was $44,893,000 (2006: $34,141,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. In particular, renovation costs incurred and capitalised for bakery outlets, food courts and restaurants may be subject to immediate impairment upon their unforeseen closure due to unfavourable operations.




2.4 Functional and foreign currency

(a) Functional currency

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

(b) Foreign currency transactions

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

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

(c) Foreign currency translation

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

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

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

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

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

2.5 Related party

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




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 fi nancial and operating policies so as to obtain benefi ts from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.

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

(b) Principles of consolidation

The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiaries as at the balance sheet date. The fi nancial 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 profi ts 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. Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.

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

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

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

(c) Transactions with minority interests

Minority interests represent the portion of profi t 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.




2.7 Associates

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

The Group’s investment in associates is accounted for using the equity method. Under the equity method, the investment in associate is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of the profi t or loss of the associate is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associate. The associate is equity accounted for from the date the Group obtains signifi cant infl uence until the date the Group ceases to have signifi cant infl uence over the associate.

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

Any excess of the Group’s share of the net fair value of the associate’s identifi able assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is, instead included as income in the determination of the Group’s share of the associate’s profi t or loss in the period in which the investment is acquired.

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

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

2.8 Joint ventures

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

The Group’s investment in joint ventures is accounted for using the equity method. Under the equity method, the investment in joint ventures is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the joint venture. The Group’s share of the profi t or loss of the joint venture is recognised in the consolidated income statement. Where there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the joint venture. The joint venture is equity accounted for from the date the Group obtains joint control until the date the Group ceases to have joint control over the joint venture.

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




2.9 Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefi ts associated with the item will fl ow 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.

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

Leasehold property – 20 yearsMachinery and equipment – 5 - 6 yearsElectrical works – 5 - 6 yearsFurniture and fi ttings – 5 - 6 yearsOffi ce equipment – 3 - 6 yearsRenovation – 2 - 9 yearsMotor vehicles – 5 - 6 years

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

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

The residual values, useful life and depreciation method are reviewed at each fi nancial 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 benefi ts 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 benefi ts are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the asset is derecognised.

2.10 Intangible assets

(a) Goodwill

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

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefi t 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.




2.10 Intangible assets (cont’d)

(a) Goodwill (cont’d)

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

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

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 fi nite or indefi nite. Intangible assets with fi nite 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 fi nite useful life are reviewed at least at each fi nancial year-end. The amortisation expense on intangible assets with fi nite lives is recognised in the income statement.

Intangible assets with indefi nite 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 indefi nite 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 fi nite 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 10 years.




2.10 Intangible assets (cont’d)

(b) Other intangible assets (cont’d)

(iii) Location premium

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

(iv) Brand value

Brand value was acquired through a business combinations. The useful life of the brand is assessed to be fi nite and estimated to be 15 years because this is the length of time that the management expects the economic benefi ts of the brand to fl ow to the Group.

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

2.11 Impairment of non-fi nancial 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 indefi nite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash infl ows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in the income statement except for assets that are previously revalued where the revaluation was taken to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation.

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




2.12 Financial assets

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

When fi nancial assets are recognised initially, they are measured at fair value, plus, directly attributable transaction costs.

(a) Loans and receivables

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

(b) Available-for-sale fi nancial assets

The Group classifi es its investment securities as available-for-sale fi nancial assets.

Available-for-sale fi nancial assets are those non-derivative fi nancial assets that are designated as available-for-sale or are not classifi ed in any of the other categories.

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.

2.13 Cash and cash equivalents

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

2.14 Impairment of fi nancial assets

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

(a) Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows (excluding future credit losses that have not been incurred) discounted at the fi nancial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the income statement.

When the asset becomes uncollectible, the carrying amount of impaired fi nancial 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 fi nancial asset.

To determine whether there is objective evidence that an impairment loss on fi nancial assets has been incurred, the Group considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments.




2.14 Impairment of fi nancial assets (cont’d)

(a) Assets carried at amortised cost (cont’d)

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

(b) Assets carried at cost

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

2.15 Inventories

Inventories comprise raw materials, consumables, semi-fi nished 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-fi nished goods, costs also include an appropriate share of production overheads based on normal operating capacity.

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

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

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

2.16 Financial liabilities

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

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

2.17 Borrowing costs

Borrowing costs are generally expensed as incurred.




2.18 Derecognition of fi nancial assets

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

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

• The Group retains the contractual rights to receive cash fl ows 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 fl ows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

On derecognition of a fi nancial 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.

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 outfl ow of resources embodying economic benefi ts 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 refl ect the current best estimate. If it is no longer probable that an outfl ow of resources embodying economic benefi ts 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 refl ects, where appropriate, the risks specifi c to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a fi nance cost.

2.20 Leases

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the fi nance 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 benefi t of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.




2.21 Employee benefi ts

(a) Defi ned contribution plans

The Group participates in the national pension schemes as defi ned 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 defi ned contribution pension scheme. The Group makes monthly contributions based on stipulated contribution rates.

People’s Republic of China (“PRC”)

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

Hong Kong

Subsidiaries incorporated and operating in Hong Kong pay contributions to publicly or privately administered pension insurance plans on a mandatory basis. The subsidiaries have no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefi t 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.

(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 benefi ts will fl ow to the Group and the income can be reliably measured. The following specifi c recognition criteria must also be met before income is recognised:

(a) Bakery sales, restaurant sales and sales to franchisee

Revenue from the sale of goods is recognised net of goods and services tax and discounts upon the passing of title to the customer which generally coincides with delivery and acceptance of the goods sold.

(b) Franchise income

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




2.22 Income recognition (cont’d)

(c) Food court revenue

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

(d) Management fee

Management fee is recognised on an accrual basis.

(e) Interest income

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

(f) Dividend income

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

2.23 Government grants

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

2.24 Income taxes

(a) Current tax

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

(b) Deferred tax

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

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

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

• 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.




2.24 Income taxes (cont’d)

(b) Deferred tax (cont’d)

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

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi t 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 profi t will allow the deferred tax asset to be utilised.

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

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

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

(c) Sales tax

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

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

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

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

2.25 Segment reporting

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

2.26 Share capital and share issue expenses

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




2.27 Contingencies

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

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

3. REVENUE

Group2007 2006$’000 $’000

Bakery sales 68,841 55,552Restaurant sales 28,345 22,051Sales to franchisee 5,951 3,454Franchise income 5,031 4,120Food court income 48,442 38,392

156,610 123,569

4. OTHER OPERATING INCOMEGroup

2007 2006Restated

$’000 $’000Management fee income- Food court management 2,306 1,868- Others 406 481Dividend income from investment securities 55 – Government grant (1) 1,153 – Gain on disposal of plant and equipment – 51 Gain on liquidation of subsidiary (2) – 98 Gain on disposal of associate 83 – Income from expired food court stored value cards 938 – Sponsorship income 241 – Sundry sales 627 586Miscellaneous income 510 278

6,319 3,362

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

(2) This relates to gain on liquidation of Nanning Da Shi Dai Food and Beverage Co., Ltd



5. PROFIT FROM OPERATIONS

This is determined after charging the following:

Group2007 2006

Restated$’000 $’000

Non-audit fees to auditors of the Company 126 30Amortisation of intangible assets (Note 11) 555 532Bad trade debts written off 8 – Impairment of loans and receivables- trade receivables 10 – - amount due from associates (non-trade) 275 – Directors’ fees 96 96Depreciation expense (Note 10) 9,793 7,976Employee benefi ts (Note 6) (1) 42,001 32,679Foreign exchange loss, net 89 38Loss on disposal of plant and equipment 130 – Operating lease expenses- fi xed portion (2) 27,230 21,499- variable portion 4,817 4,134Plant and equipment written off 593 289Pre-operating expenses 1 199

(1) This includes directors’ remuneration (Note 6)

(2) Net of sublease rental income received from a related party amounting to approximately $2,400 (2006: $10,000)

6. EMPLOYEE BENEFITSGroup

2007 2006$’000 $’000

Staff costs (including directors)Salaries and bonuses 32,201 26,450Central Provident Fund and other pension contributions 2,859 2,237Sales incentives and commission 2,143 858Other personnel benefi ts 4,798 3,134

42,001 32,679

Included are directors’ remuneration of:-Directors of the Company 1,465 1,089-Directors of subsidiaries 1,260 1,102

2,725 2,191



7. INTEREST INCOME AND INTEREST EXPENSE

Group2007 2006$’000 $’000

Interest income from loans and receivables- Bank deposits 173 113

Interest expense- Term loans (859) (837)- Finance lease obligations (25) (21)- Others (24) –

(908) (858)

8. TAXATION

Major components of income tax expense were:

Group2007 2006


Current tax- Current year 2,595 1,848- (Over) Under-provision in prior year (55) 148

Deferred tax- Origination and reversal of temporary differences 187 (280)- (Over) Under-provision in prior year (251) 26

Withholding tax 315 278

Taxation expense 2,791 2,020



8. TAXATION (CONT’D)

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

Group2007 2006


Profi t before taxation 11,228 6,466

Tax at the domestic rates applicable to profi ts in the countries where the Group operates(1) 2,832 1,889

Tax effect of :Expenses not deductible for tax purposes 584 319Income not subject to taxation (60) – Effect of reduction in tax rate (49) – Share of associates’ and joint ventures’ tax (189) – Tax savings arising from development and expansion incentive (124) (83)(Over)/Underprovision in prior years- Current year (55) 148- Deferred tax (251) 26Withholding tax expense 315 278Effect of partial tax exemption and tax relief (587) (617)Deferred tax assets not recognised 369 430Benefi ts from previously unrecognised deferred tax assets (22) (258)Others 28 (112)

Taxation expense 2,791 2,020

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

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

The corporate income tax rate applicable to Singapore companies of the Group was reduced to 18% for the year of assessment 2008 onwards from 20% for year of assessment 2007. The corporate income tax rate applicable to Malaysian companies of the Group was reduced from 28% to 27% and 26% for the year of assessment 2007 and the year of assessment 2008 onwards respectively.



8. TAXATION (CONT’D)

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

GroupBalance sheet Income statement

2007 2006Restated

2007 2006Restated

$’000 $’000 $’000 $’000Deferred tax liabilities: Differences in depreciation for tax purposes (950) (961) 21 55Provisions 105 92 – –

(845) (869)

Deferred tax assets: Provisions 389 309 (80) (309)Unutilised tax losses 5 – (5) –

394 309

Deferred income tax (64) (254)

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 fi rst two years and a 50% reduction in EIT for the next three years, commencing from the fi rst profi table year after offsetting all tax losses carried forward from the previous fi ve years. SHBT achieved its third profi table year in the current fi nancial year end.

Unrecognised tax losses and capital allowances

As at 31 December 2007, the Group has tax losses of approximately $3,226,000 (2006: $2,123,000) and unutilised capital allowances of approximately $1,787,000 (2006: nil) that are available for offset against future taxable profi ts. No deferred tax assets are recognised on these amounts due to uncertainty of their utilisation. The utilisation of the tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.

Tax consequences of proposed dividends

There are no income tax consequences attached to the dividends to the shareholders proposed by the Company but not recognised as a liability in the fi nancial statements (Note 37).



9. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the Group’s profi t for the year attributable to ordinary equity holders of the Company of $7,319,000 (2006 Restated: profi t for the year of $3,476,000) by the weighted average number of ordinary shares of 226,411,034 (2006: 200,911,034) in issue during the year.

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

10. PROPERTY, PLANT AND EQUIPMENTLeasehold property

Machinery and equipment

Electrical works

Furniture and fi ttings

Offi ce equipment

$’000 $’000 $’000 $’000 $’000GroupCostAs at 1.1. 2006 3,172 8,771 3,998 4,901 2,037Additions 5,320 1,877 1,956 1,688 602Reclassifi cations – 35 6 (3) 4Write offs – (123) (237) (74) (15)Disposals – (186) (38) (12) (47)Liquidation of subsidiary – (19) – (3) (20)Translation difference (224) (166) (78) (238) (70)

As at 31.12.2006 and 1.1.2007 8,268 10,189 5,607 6,259 2,491Additions – 2,503 3,059 3,636 631Reclassifi cations – – 12 – –Write offs – (247) (297) (290) (49)Disposals – (164) (22) (83) (11)Acquisition of subsidiaries – 400 341 267 43Translation difference 63 10 (109) (195) 12

As at 31.12.2007 8,331 12,691 8,591 9,594 3,117

Accumulated depreciationAs at 1.1. 2006 116 3,820 1,804 1,078 664Charge for the year 345 1,653 851 941 460Write offs – (100) (195) (55) (12)Disposals – (149) (27) (7) (36)Liquidation of subsidiary – (5) – (1) (6)Translation difference (10) (60) (9) (74) (13)

As at 31.12.2006 and 1.1.2007 451 5,159 2,424 1,882 1,057Charge for the year 369 1,828 1,217 1,555 513Reclassifi cations – – 1 – –Write offs – (179) (271) (212) (37)Disposals – (49) (6) (26) (4)Translation difference 3 (85) (26) 67 (3)

As at 31.12.2007 823 6,674 3,339 3,266 1,526

Net book valueAs at 31.12.2006 7,817 5,030 3,183 4,377 1,434

As at 31.12.2007 7,508 6,017 5,252 6,328 1,591



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

Renovation Motor vehiclesConstruction-in-progress Total

$’000 $’000 $’000 $’000GroupCostAs at 1.1.2006 14,195 1,020 – 38,094Additions 6,838 (1) 507 515 19,303Reclassifi cations 76 – (118) –Write offs (1,273) – – (1,722)Disposals (149) (492) – (924)Liquidation of subsidiary (82) – – (124)Translation difference (855) (13) (3) (1,647)

As at 31.12.2006 and 1.1.2007 18,750 1,022 394 52,980Additions 4,854 (1) 541 3,514 18,738Reclassifi cations (12) – – –Write offs (1,514) – – (2,397)Disposals (603) (212) – (1,095)Acquisition of subsidiaries 1,909 – – 2,960Translation difference 164 5 6 (44)

As at 31.12.2007 23,548 1,356 3,914 71,142

Accumulated depreciationAs at 1.1.2006 5,570 471 – 13,523Charge for the year 3,498 228 – 7,976Write offs (835) – – (1,197)Disposals (85) (385) – (689)Liquidation of subsidiary (28) – – (40)Translation difference (565) (3) – (734)

As at 31.12.2006 and 1.1.2007 7,555 311 – 18,839Charge for the year 4,085 226 – 9,793Reclassifi cation (1) – – – Write offs (1,105) – – (1,804)Disposals (322) (191) – (598)Translation difference 63 – – 19

As at 31.12.2007 10,275 346 – 26,249

Net book valueAs at 31.12.2006 11,195 711 394 34,141

As at 31.12.2007 13,273 1,010 3,914 44,893

(1) Amount includes provision for reinstatement costs of $559,000 (2006: $231,000).



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

As at 31 December 2007, the net book values of property, plant and equipment acquired under fi nance lease are as follows:

Group2007 2006$’000 $’000

Machinery and equipment 172 72Renovation 106 – Motor vehicles 545 472

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.

Furnitureand fi ttings

Offi ceequipment Total

$’000 $’000 $’000CompanyCostAs at 1.1.2006 – – – Additions – 6 6

As at 31.12.2006 and 1.1.2007 – 6 6Additions 1 13 14

As at 31.12.2007 1 19 20

Accumulated depreciationAs at 1.1.2006 – – – Charge for the year – 1 1

As at 31.12.2006 and 1.1.2007 – 1 1Charge for the year – 4 4

As at 31.12.2007 – 5 5

Net book value

As at 31.12.2006 – 5 5

As at 31.12.2007 1 14 15



11. INTANGIBLE ASSETS

Group

Goodwill Brand value

Trade Mark

Franchise rights

Location Premium Total

$’000 $’000 $’000 $’000 $’000 $’000

CostAs at 1.1.2006 4,578 3,308 438 661 474 9,459Additions – – 145 32 – 177Impairment – (99) (1) – – – (99)

As at 31.12.2006 and 1.1.2007 4,578 3,209 583 693 474 9,537Additions – – 99 58 – 157Acquisition of subsidiaries 1,595 – 10 – 31 1,636

As at 31.12.2007 6,173 3,209 692 751 505 11,330

Accumulated amortisationAs at 1.1.2006 – 221 171 156 30 578Amortisation – 217 109 88 118 532

As at 31.12.2006 and 1.1.2007 – 438 280 244 148 1,110Amortisation – 213 127 95 120 555

As at 3.12.2007 – 651 407 339 268 1,665

Net book valueAs at 31.12.2006 4,578 2,771 303 449 326 8,427

As at 31.12.2007 6,173 2,558 285 412 237 9,665

(1) This relates to impairment loss of intangible asset - brand value associated with Nanning Da Shi Dai Food & Beverage Co., Ltd. which was liquidated in June 2006.

Brand value, trade mark, franchise rights and location premium are determined to have fi nite 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 12 years, 1 to 5 years, 4 to 9 years and 2 years as at 31 December 2007 respectively.



11. INTANGIBLE ASSETS (CONT’D)

Impairment testing of goodwill

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

Goodwill arising form the acquisition of ML Breadworks Sdn Bhd during the year has been allocated to the legal entity acquired which represents the CGU. Meanwhile, goodwill on the acquisition of MWA Pte Ltd in December 2007 is primarily attributable to the food court operation at Wisma Atria, Singapore.

Allocated goodwill based on the CGUs is as follows:

Carrying amountas at

31 December 2007

Basis on which recoverable values

are determined Pre-tax discount rate$’000

Shanghai segment 3,569 Value in use 10%

Beijing segment 1,009 Value in use 10%

ML Breadworks Sdn Bhd 327 Value in use 8%

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

6,173

The recoverable amount is determined based on a value in use calculation using the cash fl ow projections based on fi nancial budgets approved by management covering a fi ve-year period. The discount rates applied to the cash fl ow 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 fi nancial year ended 31 December 2007 as the recoverable amount was in excess of the carrying value.

12. INVESTMENT SECURITIES

Investment securities relate to unquoted shares. They are stated at cost as they have no market prices and their fair values cannot be reliably measured using valuation techniques.



13. INVESTMENT IN SUBSIDIARIES

Company2007 2006$’000 $’000

Unquoted equity shares at cost 23,139 21,639

Details of the subsidiaries are as follows:

NameCountry of

incorporation Principal activitiesProportion of

ownership interestCost of investment

by the Company2007 2006 2007 2006

% % $’000 $’000

Held by the CompanyBreadTalk Pte Ltd (1)

(Note (a))Singapore Bakers and manufacturers of and

dealers in bread, fl our and biscuits100 100 6,739 5,239

BreadTalk International Pte Ltd (1) Singapore Investment holding 100 100 6,158 6,158

Topwin Investment Holding Pte Ltd (1) Singapore Investment holding 100 100 10,242 10,242

Held through subsidiariesTaster Food Pte Ltd (1) Singapore Operators of food and drinks outlets,

eating houses and restaurants70 70 – –

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

75 75 – –

Shanghai BreadTalk Co., Ltd (2) People’s Republic of China

Bakers and manufacturers of and dealers in bread, fl our and biscuits

100 100 – –

Shanghai BreadTalk Gourmet Co., Ltd (2)

People’s Republic of China

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

100 100 – –

Beijing BreadTalk Restaurant Management Co., Ltd (2)


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

100 100 – –

Shanghai Xin Jia Fang Food & Beverage Co., Ltd (2)


Food court operator 100 100 – –

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



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





13. INVESTMENT IN SUBSIDIARIES (CONT’D)

Name Country of


ownership interestCost of investment

by the Company2007 2006 2007 2006

% % $’000 $’000

Held through subsidiaries (cont’d)Megabite Hong Kong Limited (4) Hong Kong Food court operator 85 85 – –

Megabite (S) Pte Ltd (1) Singapore Investment holding and operator of Food & Beverage outlets

100 100 – –

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

BreadTalk (Thailand) Company Limited (5)

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

100 100 – –

Megabite Eatery (M) Sdn Bhd (6)

(Note (b))Malaysia Operator of food and beverage

outlets100 – – –

BreadTalk Concept Hong Kong Limited (4)

(Note (c))

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

85 – – –

ML Breadworks Sdn Bhd (7)

(Note (d))Malaysia Bakers and manufacturers of and

dealers in bread, fl our and biscuits90 – – –

MWA Pte Ltd (1)

(Note (e))Singapore Food court operator 100 – – –

Food Art Pte Ltd (1)

(Note (e))Singapore Operators of food and beverage

outlets100 – – –

Twin Peaks Venture Singapore Pte Ltd (8) (Note (f))

Singapore Retail of bakery and confectionery products

70 – – –

23,139 21,639

(1) Audited by Ernst & Young, Singapore(2) Audited by Ernst & Young, People’s Republic of China(3) Audited by Shanghai Xin Gao Xin Certifi ed Public Accountants Co., Ltd, People’s Republic of China(4) Audited by S.F. Kwok & Co. Certifi ed Public Accountants, Hong Kong(5) Audited by CNN & S Co., Ltd(6) Audited by RSM Robert Teo, Kuan & Co., Malaysia(7) Audited by Ernst & Young, Malaysia(8) The subsidiary has not commenced operations as at 31 December 2007. Unaudited fi nancial statements have been used for the preparation

of the consolidated fi nancial statements of the Group.




(a) Increase in cost of investment of the Company

During the year, BreadTalk Pte Ltd increased its issued and paid up share capital by $1,500,000 with an allotment of 1,500,000 shares to the Company.

(b) Incorporation of subsidiary, Megabite Eatery (M) Sdn Bhd

Topwin Investment Holding Pte Ltd incorporated a wholly-owned subsidiary, Megabite Eatery (M) Sdn Bhd on 24th May 2007 with an issued and paid up share capital of RM100,000.

(c) Acquisition of subsidiary, BreadTalk Concept Hong Kong Limited

Megabite Hong Kong Limited, a 85% owned subsidiary of Topwin Investment Holding Pte Ltd, acquired 1 ordinary share of HKD1.00, representing 100% shareholding in BreadTalk Concept Hong Kong Limited on 9 August 2007. On the same date, a further 499,999 ordinary shares of HKD1.00 each were allotted at par to Megabite Hong Kong Limited.

(d) Acquisition of subsidiary, ML Breadworks Sdn Bhd

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

Pursuant to the Investment Agreement, BTI would invest an additional RM2,000,000 ($873,000) in MLB in the form of an allotment of 2,000,000 new ordinary shares of RM1 each (the “Ordinary Shares”). In consideration of BTI’s investment, ML agreed to transfer a total of 1,030,000 ordinary shares owned by it in MLB upon the allotment of the Ordinary Shares to BTI, at nil consideration. As a result of the above transactions, MLB has a paid up and issued share capital of RM5,000,000 represented by 5,000,000 ordinary shares of RM1 each, with BTI holding 90% equity interest and ML, the remaining 10%. Accordingly, MLB became a subsidiary of BTI.




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

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

Recognised on acquisition

Carrying amount before combination

$’000 $’000

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

Net identifi able (liabilities) assets (35) 329Add: Additional capital injection by BTI 873

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

Net assets acquired 555Goodwill arising from acquisition 327

Total purchase consideration 882

Less: Cash and cash equivalents acquired (943)

Net cash infl ow 61



13. INVESTMENT IN SUBSIDIARIES (CONT’D) (e) 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 identifi able assets and liabilities of MWA and its subsidiary as at the date of acquisition were as follows:

Recognised on acquisition

Carrying amount before combination

$’000 $’000

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

Net identifi able assets 4,883 4,883

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

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

Total purchase consideration 3,800

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

Net cash infl ow 1,813



13. INVESTMENT IN SUBSIDIARIES (CONT’D) (e) Acquisition of subsidiary, MWA Pte Ltd (cont’d)

As at 31 December 2007, the fair values of the assets and liabilities of MWA and FAPL were based on provisional amounts. Goodwill arising from this acquisition will be adjusted on a retrospective basis when the fair values are determined in 2008.

(f) Incorporation of subsidiary, Twin Peaks Venture Singapore Pte Ltd

BreadTalk Pte Ltd incorporated a 70% owned subsidiary, Twin Peaks Venture Singapore Pte Ltd with an issued and paid up capital of $10 consisting of 10 ordinary shares on 14 December 2007.

(g) Liquidation of Nanning Da Shi Dai Food and Beverage Co., Ltd in prior year

On 16 July 2004, Topwin incorporated a wholly-owned subsidiary, Nanning Da Shi Dai Food and Beverage Co., Ltd (“NNDSD”) with a registered and paid up capital of US$60,000. On 15 June 2006, NNDSD was liquidated.

The carrying values of assets and liabilities of NNDSD as at date of liquidation were as follows:

$’000

Property, plant and equipment 84Inventories 11Other receivables 24Cash at bank 4Trade payables (97)Other payables and accruals (364)Security deposits forfeited 107Compensation to tenants and workers 27 Compensation payable to landlord (included in other payables) 106

Gain on liquidation of subsidiary (98)

Net proceeds from liquidation of subsidiary – Cash compensation to tenants and workers (27)Cash of liquidated subsidiary (4)

Net cash outfl ow on liquidation of subsidiary (31)



14. INVESTMENT IN ASSOCIATES

Group2007 2006$’000 $’000

Investment in shares, unquotedShares, at cost 1,439 1,193Loan to an associate 614 582Share of post-acquisition results of associates (977) (1,070)Unrealised profi t on transaction with an associate (40) (40)Exchange difference 15 –

At end of year 1,051 665

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

Details of the associates are as follows:

NameCountry of


ownership interest2007 2006

% %

Held through subsidiaries

ML Breadworks Sdn Bhd (3)

Malaysia Bakers and manufacturers of and dealers in bread, fl our and biscuits

– 49

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

25 25

Taiwan BreadTalk Co., Ltd(1) Taiwan Bakers and manufacturers of and dealers in bread, fl our and biscuits

30 30

Shenzhen BreadTalk Restaurant Management Co., Ltd(2)


Bakers and manufacturers of and dealers in bread, fl our and biscuits

– 30

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

33.33 –

(1) Not a signifi cant associate and unaudited fi nancial statements have been used for the preparation of the consolidated fi nancial statements of the Group

(2) On 19 January 2007, the Group has divested its remaining 30% interest in Shenzhen BreadTalk Restaurant Management Co., Ltd.(3) The Company became a subsidiary during the year (Note 13)



14. INVESTMENT IN ASSOCIATES (CONT’D)

During the year, the subsidiary, Topwin Investment Holding Pte Ltd acquired a 33.33% equity interest in Out of The Box Pte Ltd for a cash consideration of $1,200,000. The acquisition resulted in a goodwill of $408,000.

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

Group2007 2006$’000 $’000

Assets and liabilities

Total assets 2,345 5,362

Total liabilities 3,708 6,203

Results

Revenue 3,775 11,054

Net loss for the year (1,982) (1,820)

15. INVESTMENT IN JOINT VENTURES

Group2007 2006


Investment in shares, unquoted

Shares, at cost 334 2,000Share of post-acquisition results of joint ventures (52) 212

282 2,212



15. INVESTMENT IN JOINT VENTURES (CONT’D)

Details of the joint ventures are as follows:

Name Country of

incorporation Principal activityProportion of

ownership interest2007 2006

% %

Held through subsidiariesMWA Pte Ltd (1) (4) Singapore Operators of food court – 50

Shanghai Hong Bu Rang Food & Beverage Management Co., Ltd(2)


Operators of food and beverage outlets 50 –

Apex Excellent Sdn Bhd(3) Malaysia Operators of food court 50 –

Held through a joint ventureFood Art Pte Ltd (1) (4) Singapore Operators of food and beverage outlets – 50

(1) Audited by Ernst and Young, Singapore(2) Audited by Shanghai Xin Gao Xin Certifi ed Public Accountants Co., Ltd, People’s Republic of China(3) Audited by RSM Robert Teo, Kuan & Co., Malaysia(4) These companies became subsidiaries during the year (Note 13)

During the year, the subsidiaries, Shanghai Xin Jia Fang Food & Beverage Co., Ltd and Topwin Investment Holding Sdn Bhd incorporated the new joint venture companies, Shanghai Hong Bu Rang Food & Beverage Management Co., Ltd and Apex Excellent Sdn Bhd respectively at a total cost of $334,000.

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

Group2007 2006


Assets and liabilitiesCurrent assets 1,333 2,465Non-current assets 317 1,863

Total assets 1,650 4,328

Current and total liabilities 1,368 2,116

ResultsRevenue 5,360 4,223Other income 450 318Expenses (5,543) (4,207)

Profi t for the year 267 334



16. INVENTORIES

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Raw materials and consumables, at cost 2,152 1,762 – – Semi-fi nished goods 299 200 – – Base inventories (1) 55 41 – –

Total inventories at lower of cost and net realisable value 2,506 2,003 – –

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

17. TRADE RECEIVABLES

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Trade receivables 3,027 2,855 – –

Trade receivables include amounts denominated in foreign currencies as follows:

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

United States dollar 44 132 – – Renminbi 2,099 1,732 – – Thai Baht 135 121 – –

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.



17. TRADE RECEIVABLES (CONT’D)

Receivables that are past due but not impaired

The Group has trade receivables amounting to $554,000 (2006: $507,000) 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:

Group2007 2006$’000 $’000

Trade receivables past due: Lesser than 30 days 225 158 30 to 60 days 46 32 61-90 days 37 77 91-120 days 246 240

554 507

Receivables that are impaired

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

GroupIndividually impaired2007 2006$’000 $’000

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

– –

Movement in allowance accounts:

At 1 January – –Charge for the year 10 –

At 31 December 10 –

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



18. OTHER RECEIVABLES AND DEPOSITS

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Other receivables 3,422 3,456 11 3Deposits 9,683 6,292 – –

13,105 9,748 11 3

Other receivables and deposits include amounts denominated in foreign currencies as follows:

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

United States dollar 353 24 – – Renminbi 3,962 4,022 – – Hong Kong dollar 2,550 1,120 – – Thai Baht 133 122 – – Ringgit Malaysia 381 – – –

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

Other receivables that are past due

The Group has other receivables amounting to $1,038,000 (2006: $101,000) 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:

Group2007 2006$’000 $’000

Other receivables past due: Lesser than 30 days 270 16 30 to 60 days 512 16 61-90 days 184 41 91-120 days 9 23 More than 120 days 63 5

1,038 101



19. DUE FROM/TO SUBSIDIARIES, RELATED PARTIES, ASSOCIATES, JOINT VENTURES AND MINORITY SHAREHOLDERS

The amount due from/to related parties, associates, joint ventures and minority shareholders are unsecured and non-interest bearing.

The amount due from/to subsidiaries are unsecured and non-interest bearing except for an amount due from a subsidiary of $1,200,000 (2006: Nil) which bears interest of 7.5% per annum.

The trade and non-trade amounts due from subsidiaries, associates and joint ventures are generally 30 to 60 days term while the amounts due from related parties and minority shareholders are repayable on demand.

The following amounts are denominated in foreign currencies:

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Amount due from associates (trade)United States dollar – 250 – –Renminbi – 877 – –

Amount due from associates (non-trade)United States dollar – 13 – –Renminbi – 24 – –

Amount due from joint ventures (trade)Ringgit Malaysia 64 – – –

Group


(a) Trade AssociatesJoint

Ventures$’000 $’000

2007Less than 30 days – –30 to 60 days – 1461 to 90 days – –91 to 120 days – –More than 120 days – –

Total as at 31 December 2007 – 14



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

Group (cont’d)

Receivables that are past due but not impaired (cont’d)

(a) Trade (cont’d) AssociatesJoint


2006Less than 30 days – 230 to 60 days – –61 to 90 days 12 –91 to 120 days 508 –More than 120 days – –

Total as at 31 December 2006 520 2

(b) Non-trade AssociatesJoint


2007Less than 30 days – –30 to 60 days – –61 to 90 days – –91 to 120 days – –More than 120 days – –

Total as at 31 December 2007 – –

AssociatesJoint

ventures$’000 $’000

2006Less than 30 days 29 230 to 60 days 8 –61 to 90 days 39 –91 to 120 days 107 –More than 120 days – –

Total as at 31 December 2006 183 2



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

Receivables that are impaired

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

2007 2006$’000 $’000

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

7 –

Movement in allowance accountsAt 1 January – –Charge for the year 275 –

At 31 December 275 –

Company


Amount due from subsidiaries (non-trade)

2007 2006$’000 $’000

Less than 30 days 243 –30 to 60 days 243 –61 to 90 days 243 –91 to 120 days 243 –More than 120 days 243 –

Total 1,215 –

20. FIXED DEPOSITS

As at 31 December 2007, fi xed deposits amounting to $107,000 (2006: $1,107,000) 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 as disclosed in Notes 25, 26 and 31 below.

Fixed deposits of the Group and the Company have maturity periods ranging from 3 months to 12 months (2006: 1 week to 12 months) with effective interest rates ranging from 1.8% to 2.5% (2006: 1.7% to 1.8%) per annum.



21. TRADE PAYABLES

Group Company2007 2006

Restated2007 2006

$’000 $’000 $’000 $’000

Trade payables 8,861 7,922 – –

Trade payables include amounts denominated in foreign currencies as follows:


Restated2007 2006

$’000 $’000 $’000 $’000

United States dollar 98 201 – – Renminbi 3,510 3,548 – – Hongkong dollar 322 113 – – Ringgit Malaysia 398 1 – – Thai Baht 110 40 – – New Taiwan dollar 1 – – –

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

22. OTHER PAYABLES AND OTHER LIABILITIES


Restated2007 2006

$’000 $’000 $’000 $’000

Other payables 25,074 15,677 159 96

Other liabilities

Accrued operating expense 13,345 10,097 1,304 640Deferred revenue 3,703 3,120 – –

17,048 13,217 1,304 640



22. OTHER PAYABLES AND OTHER LIABILITIES (CONT’D)

Other payables and accrued expenses include amounts denominated in foreign currencies as follows:


Restated2007 2006

$’000 $’000 $’000 $’000

Taiwan dollar – 4 – – United States dollar 785 131 – – Renminbi 19,426 14,141 – – Hongkong dollar 3,886 2,180 – – Ringgit Malaysia 397 – – – Thai Baht 124 97 – –

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 $5,195,000 (2006: $2,808,000).

23. LOAN FROM MINORITY SHAREHOLDER OF A SUBSIDIARY

The loan from minority shareholder of a subsidiary, Megabite Hong Kong Limited is unsecured, non-interest bearing and has no fi xed terms of repayment.

24. FINANCE LEASE OBLIGATIONS, SECURED

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

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

GroupTotal minimum

lease payments

Present value of payments

Total minimum lease

paymentsPresent value of payments

2007 2007 2006 2006$’000 $’000 $’000 $’000

Not later than one year 268 244 128 107Later than one year but not later than fi ve years 396 366 329 298Later than fi ve years – – 5 5

Total minimum lease payments 664 610 462 410Less: amounts representing fi nance charges (54) – (52) –

Present value of minimum lease payments 610 610 410 410



24. FINANCE LEASE OBLIGATIONS, SECURED (CONT’D)

The leases have options to purchase at the end of the lease term. The effective interest rates of the leases range from 4.82% to 6.10% (2006: 5.22% to 6.11%) per annum. Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.

25. SHORT-TERM LOANS, SECURED

Group2007 2006$’000 $’000

RMB Bank loan 1 – 1,968USD Bank loan 2 – 1,611USD Bank loan 3 869 – HKD Bank loan 4 556 592RMB Bank loan 5 793 787HKD Bank loan 6 371 – RMB Bank loan 7 694 –

3,283 4,958

The effective interests on these short-term loans range from 5.86% to 7.44% (2006: 5.86% to 6.43%) per annum. The interest rates of these fl oating rate loans are repriced from time to time at the discretion of the respective banks.

Security

Bank loan 1 is a 1-year term loan and secured by several continuing guarantees by the Company.

Bank loan 2 is secured by (i) a fi rst and/ or third party pledge of no less than USD 200,000 in fi xed deposit of a subsidiary placed with the bank together with interest accrued thereof and (ii) joint and several personal guarantees from directors of a subsidiary.

Bank loans 3, 6 and 7 are 6-month revolving term loans and secured by several continuing guarantees by the Company.

Bank loan 4 is a 6-month (2006: 1-month) revolving term loan and secured by several continuing guarantees by the Company.

Bank loan 5 is a revolving term loan and secured by guarantees by the Company.



26. LONG-TERM LOANS, SECURED

Group2007 2006$’000 $’000

Due within 1 year 3,701 3,044Due after 1 year but not more than 5 years 3,977 4,843

Total long-term loans 7,678 7,887

Details of the long term loans are:

GroupTerm loans Repayment terms 2007 2006

$’000 $’000

SGD Term loan 1 48 monthly instalments from April 2003 – 125SGD Term loan 2 24 monthly instalments from September 2005 – 357SGD Term loan 3 36 monthly instalments from December 2005 73 147 SGD Term loan 4 36 monthly instalments from June 2005 420 576SGD Term loan 5 48 monthly instalments from September 2005 657 1,039SGD Term loan 6 36 monthly instalments from July 2006 100 167SGD Term loan 7 36 monthly instalments from August 2006 950 1,550HKD Term loan 8 12 quarterly instalments from December 2005 487 814SGD Term loan 9 32 monthly instalments from April 2007 215 – SGD Term loan 10 36 monthly instalments from May 2007 1,556 – RMB Term loan 11 24 quarterly instalments from February 2006 1,896 2,325RMB Term loan 12 8 quarterly instalments from February 2006 397 787HKD Term loan 13 42 monthly instalments from February 2008 927 –

7,678 7,887



26. LONG-TERM LOANS, SECURED (CONT’D)

Except for term loan 10, which is a fi xed rate loan bearing an interest rate of 4.25% per annum, all other term loans are fl oating rate loans with effective interest rates ranging from 4.25% to 7.56% (2006: 3.96% to 6.86%) per annum. The interest rates of these fl oating rate loans are repriced from time to time at the discretion of the respective banks.

Securities

Term loans 1 and 2 were secured by:

(a) Fixed deposits of a subsidiary amounting to $nil (2006: $1,000,000); and(b) Several continuing guarantees by the Company.

Term loans 3 to 10 are secured by continuing guarantees by the Company.

Term loan 11 is secured by a charge over a leasehold property held by Shanghai BreadTalk Co., Ltd.

Term loan 12 is secured by continuing guarantees by the Company and Shanghai Xin Jia Fang Food & Beverage Co., Ltd, a wholly owned subsidiary.

Term loan 13 is secured by continuing guarantees by the Company and Topwin Investment Holding Pte Ltd, a wholly owned subsidiary.

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.

28. SHARE CAPITAL

Company2007 2006

Number ofshares $’000

Number ofshares $’000

Issued and fully paid

At beginning of year 200,911,034 21,516 200,911,034 8,036Issuance of shares 34,000,000 12,240 – – Share issue expense – (453) – – Transfer of share premium to share capital – – – 13,480

At end of the year 234,911,034 33,303 200,911,034 21,516



28. SHARE CAPITAL (CONT’D)

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.

On 30 January 2006, in accordance with the Companies (Amendment) Act 2005, the concepts of “par value” and “authorised capital” were abolished and on that date, the shares of the Company ceased to have a par value and the amount standing in the share premium reserve became part of the Company’s share capital.

29. STATUTORY RESERVE FUND

In accordance with the Foreign Enterprise Law applicable to subsidiaries in the People’s Republic of China (“PRC”), the subsidiaries are required to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the statutory after tax profi ts 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 fi nancial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency.

31. COMMITMENTS AND CONTINGENCIES

(a) Commitments

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

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Commitment in respect of plant and equipment 16 18 – –



31. COMMITMENTS AND CONTINGENCIES (CONT’D)

(b) Contracted operating lease commitments

The Group has various operating lease agreements for equipment, offi ce, central kitchen, food court and retail outlet premises. These non-cancellable leases have remaining non-cancellable lease terms of between 1 and 10 years. Most leases contain renewable options. Some of the leases contain escalation clauses and provide for contingent rentals based on percentages of sales derived from assets held under operating leases. Lease terms do not contain restrictions on the Group’s activities concerning dividends, additional debt or further leasing.

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

Group Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Not later than one year 33,411 22,438 – – Later than one year but not later than fi ve years 77,496 50,082 – – Later than fi ve years 21,471 6,916 – –

132,378 79,436 – –

(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 Company2007 2006 2007 2006$’000 $’000 $’000 $’000

Not later than one year 19,480 13,786 – – Later than one year but not later than fi ve years 12,024 9,319 – –

31,504 23,105 – –

(d) Letters of guarantees, secured

As at 31 December 2007, the banks issued letters of guarantees on behalf of the Group to lessors of premises amounting to approximately $2,938,000 (2006: $1,481,000). These letters of guarantees are secured by fi xed deposits of the Group amounting to approximately $107,000 (2006: $1,107,000), a part of which is also pledged for long term loans (Note 26).



32. RELATED PARTY DISCLOSURES

(a) Sale and purchase of goods and services

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

Group2007 2006$’000 $’000

Income Rental income earned from a company in which a director of the Company has an interest 2 10Rental income earned from an associate 216 321Sale of goods to associates 271 488Sale of goods to joint ventures 32 – Management fee income from joint ventures 406 438Management fee income from associates – 10Management fee income from a company in which a director of the Company has an interest – 376Franchise income from associates 161 264 Dividend income from joint venture 180 – Rental and miscellaneous income from a party related to a director 406 75

ExpensesPurchases from a party related to a director – 13Rental expense to joint ventures 327 312 Royalty fees to minority shareholders 813 661

OthersPurchase of plant and equipments from an associate 126 – Purchase of furniture and fi ttings from a company in which a director of the Company has an interest – 39Franchise fee to minority shareholders 57 32

(b) Compensation of key management personnel

Salaries and bonus 4,536 3,705Central Provident Fund contributions and other pension contributions 165 127Directors’ fee 96 96Other personnel expenses 566 264

Total compensation paid to key management personnel 5,363 4,192

Comprise amounts paid to: Directors of the Company 1,561 1,185Directors of subsidiaries 1,260 1,102Other key management personnel 2,542 1,905

5,363 4,192



33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

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

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

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

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

(a) Interest rate risk

Interest rate risk is the risk that the fair value or future cash fl ows of the Group’s and the Company’s fi nancial instruments will fl uctuate because of changes in market interest rates.

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

Surplus funds are placed with reputable banks.

Sensitivity analysis for interest rate risk

GroupEffect on profi t net of tax

100 basis points increase

100 basis points decrease

$’000 $’000

2007

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



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


100 basis points increase

100 basis points decrease

$’000 $’000

2006

- Singapore dollar (28) 28- Renminbi (57) 57- Hong Kong dollar (14) 14- US dollar (6) 6

(b) Foreign currency risk

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

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

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

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity to a reasonably possible change in the USD (against SGD) and USD (against RMB) exchange rates, with all other variables held constant, of the Group’s profi t net of tax.





2007 2006$’000 $’000

Against SGD:

USD - strengthened 6% (2006: 6%) 40 10

- weakened 6% (2006: 6%) (40) (10)

Against RMB:

USD - strengthened 6% (2006: 6%) (63) (37)

- weakened 6% (2006: 6%) 63 37

(c) Credit risk

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

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

Exposure to credit risk

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

- the carrying amount of each class of fi nancial assets recognised in the balance sheets; and

- a nominal amount of $27,128,000 (2006: $17,123,000) relating to corporate guarantees provided by the Company to fi nancial institutions on subsidiaries’ borrowings and other banking facilities.




Credit risk concentration profi le

The Group determines concentrations of credit risk by monitoring the country of its trade receivables (included related company and related party balances) on an on-going basis. The credit risk concentration profi le of the Group’s trade receivables at the balance sheet date is as follows:

Group2007 2006

$’000% oftotal $’000

% oftotal

By country:Singapore 416 14% 453 10%People’s Republic of China 2,141 69% 2,692 61%Indonesia 154 5% 394 9%The Philippines 97 3% 97 2%Thailand 135 4% 121 3%Kuwait 81 3% 126 3%Malaysia 64 2% 415 10%Others 3 - 95 2%

3,091 100% 4,393 100%

Financial assets that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents that are neither past due nor impaired are placed with or entered into with reputable fi nancial institutions or companies with high credit ratings and no history of default. Investment securities, which refer to unquoted shares, are not impaired based on the positive fi nancial position of the company invested.

Financial assets that are either past due or impaired

Information regarding fi nancial assets that are either past due or impaired is disclosed in Notes 17, 18 and 19 to the fi nancial statements.

(d) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter diffi culty in meeting fi nancial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of fi nancial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and fl exibility 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 fi nance the operations of the Group.

Short-term funding may be obtained from short-term loans where necessary.




The table below summarises the maturity profi le of the Group’s and the Company’s fi nancial liabilities at the balance sheet date based on contractual undiscounted payments.

2007 20061 year or

less 1 to 5 yearsOver 5 years Total

1 year or less 1 to 5 years

Over 5 years Total

Group $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Trade and other payables 33,935 – – 33,935 23,599 – – 23,599Other liabilities 13,345 – – 13,345 10,097 – – 10,097Amount due to associates, joint

ventures and landlord 206 240 – 446 388 402 – 790Loans and borrowings 7,353 4,343 – 11,696 8,168 5,031 115 13,314

54,839 4,583 – 59,422 42,252 5,433 115 47,800

Company

Trade and other payables 159 – – 159 96 – – 96Other liabilities 1,304 – – 1,304 640 – – 640Amount due to subsidiaries 4 – – 4 443 – – 443

1,467 – – 1,467 1,179 – – 1,179



34. FINANCIAL INSTRUMENTS

(a) Financial assets and liabilities The carrying amount by category of fi nancial assets and liabilities are as follows:

Group2007 2006$’000 $’000

Loans and receivables

Trade receivables 3,027 2,855Other receivables and deposits 13,105 9,748Amount due from related parties (non-trade) – 78Amount due from associates (trade) – 1,425Amount due from associates (non-trade) 7 216Amount due from joint-ventures (trade) 64 113Amount due from joint-ventures (non-trade) 237 176Amount due from minority shareholders (non-trade) – 150Fixed deposits 2,814 1,107Cash on hand and at bank 35,531 18,455

Total 54,785 34,323

Available-for-sale fi nancial assets

Investment securities 316 316

Financial liabilities carried at amortised cost

Trade payables 8,861 7,922Other payables 25,074 15,677Accrued operating expense (note 22) 13,345 10,097Amount due to associates (trade) 5 – Amount due to associates (non-trade) – 360Amount due to joint-ventures (non-trade) 11 28Amount due to landlord (non-trade) (note 27) 430 402Finance lease obligations, secured (note 24) 610 410Short term loans, secured 3,283 4,958Long term loans, secured (note 26) 7,678 7,887Loan from minority shareholder of a subsidiary 125 59

Total 59,422 47,800



34. FINANCIAL INSTRUMENTS (CONT’D)

(b) Fair values

The fair value of a fi nancial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willing parties in an arm’s length transaction, other than in a forced or liquidation sale.

Financial instruments carried at fair value

The Group has no fi nancial instruments that are classifi ed as held for trading, available-for-sale fi nancial assets, or derivative fi nancial 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, fi xed 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 $1,556,000 (2006: nil) approximates fair value based on available market information on similar loans as at fi nancial year end.

Financial instruments carried at other than fair value

Set out below is a comparison of the carrying amount and fair value of the fi nancial instrument that is carried in the fi nancial statements at other than fair value as at 31 December.

Carrying amount Fair value2007 2006 2007 2006$’000 $’000 $’000 $’000

Financial liabilities:Obligations under fi nance leases 610 410 603 412

Fair value has been determined using discounted estimated cash fl ows. 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, loan from minority shareholder of a subsidiary and long-term amount due to landlord as it is not practical to determine their fair values with suffi cient reliability since the balances have no fi xed terms of repayment. Investment securities are stated at cost as they have no market prices and their fair values cannot be reliably measured using valuation techniques.

No amount has been recognised in the income statement in relation to the change in fair value of fi nancial assets or fi nancial liabilities estimated using a valuation technique for the fi nancial years ended 31 December 2007 and 2006.



35. CAPITAL MANAGEMENT

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2007 and 2006.

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 fi nancial years ended 31 December 2007 and 2006.

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)

Group2007 2006$’000 $’000

Total borrowings(1) 11,696 13,314Less: Cash and cash equivalents(2) (38,345) (19,562)Net borrowings (26,649) (6,248)

Total Equity 47,266 28,998

Gearing ratio 0.25 0.46

Net gearing Net cash Net cash

(1) including bank loans, fi nance lease obligations and loan from minority shareholder of a subsidiary(2) including all fi xed deposits



36. SEGMENT INFORMATION

Reporting format

The primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affected predominantly by differences in the products and services produced. Secondary information is reported geographically. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

Business segments

The Group’s primary format for reporting segment information is business segments, with each segment representing a strategic business activity. For management purposes, the Group is organised into three business segments, namely bakery operations, food courts operations and restaurant operations.

Bakery operations: This relates to the manufacture and retail of all kinds of food, bakery and confectionery products including franchising.

Food court operations: This relates to the management and operation of food courts and operation of food and drinks outlets within the food courts.

Restaurant operations: This relates to the operation of food and drinks outlets, eating houses and restaurants.

Geographical segments

The Group’s main operations are in Singapore, the PRC and Hong Kong. Sales to external customers disclosed in geographical segments are based on geographical location of its customers.

Revenue and cost of sales are directly attributable to the segments. Operating expenses and income are allocated to the segments.

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, fi nancial expenses and share of results of associates and joint ventures.

Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.



36. SEGMENT INFORMATION (CONT’D)

(a) Analysis of business segment

Revenue and cost of sales are directly attributable to the segments. Operating expenses/income are allocated to the segments.

2007Bakery

operations (1)

Restaurant operations

Food court operations Others (2) Elimination Group

$’000 $’000 $’000 $’000 $’000 $’000

RevenueExternal sales 79,823 28,345 48,442 – – 156,610Inter-segment sales 201 – 774 – (975) –

Total revenue 80,024 28,345 49,216 – (975) 156,610

Profi t from operations 3,873 4,571 3,457 250 (1) 12,150Financial expenses, net (735)

Profi t before tax and associates and joint ventures’ results 11,415

Share of associates’ results (454)Share of joint ventures’ results 267

Profi t before tax 11,228Tax (2,791)

Profi t for the year 8,437

Assets and liabilitiesSegment assets 39,814 17,374 60,110 13,165 (16,500) 113,963Investment in associates 1,051Investment in joint ventures 282Deferred tax assets 394

Total assets 115,690

Segment liabilities 22,182 6,629 38,700 1,475 (16,500) 52,486Unallocated liabilities 15,938

Total liabilities 68,424

Other informationCapital expenditure - Property, plant and equipment 4,312 1,588 12,823 15 – 18,738 - Intangible assets 49 57 51 – – 157Depreciation and amortisation 4,291 1,763 4,290 4 – 10,348




(a) Analysis of business segment (cont’d)

2006 (Restated)Bakery

operations (1)

Restaurant operations

Food court operations Others (2) Elimination Group

$’000 $’000 $’000 $’000 $’000 $’000RevenueExternal sales 63,126 22,051 38,392 – – 123,569Inter-segment sales 345 – – – (345) –Total revenue 63,471 22,051 38,392 – (345) 123,569

Profi t from operations 1,829 3,487 2,185 (54) (53) 7,394Financial expenses, net (745)

Profi t before tax and associates and joint ventures’ results 6,649

Share of associates’ results (517)Share of joint ventures’ results 334

Profi t before tax 6,466Tax (2,020)

Profi t for the year 4,446

Assets and liabilitiesSegment assets 33,744 14,880 37,731 870 (7,508) 79,717Investment in associates 665Investment in joint ventures 2,212Deferred tax assets 309

Total assets 82,903

Segment liabilities 17,210 4,107 22,338 1,701 (7,504) 37,852Unallocated liabilities 16,053

Total liabilities 53,905

Other informationCapital expenditure - Property, plant and equipment 10,803 1,665 6,829 6 – 19,303 - Intangible assets 47 32 98 – – 177Depreciation and amortisation 3,914 1,433 3,160 1 – 8,508Impairment of intangible asset – – 99 – – 99




(a) Analysis by geographical segments

Segment revenue is based on location of customers regardless of where the business is conducted. Segment assets and capital expenditure are based on the geographical location of those assets.

Revenue Segment Assets Capital expenditure2007 2006 2007 2006

Restated2007 2006

$’000 $’000 $’000 $’000 $’000 $’000

Singapore 80,107 56,555 62,805 42,382 6,775 7,200PRC 59,242 52,324 39,695 34,528 8,020 11,092Hong Kong 8,740 7,625 8,216 4,580 3,561 1,035Rest of the world 8,521 7,065 3,247 852 539 153Elimination – – – (2,625) – –

Total 156,610 123,569 113,963 79,717 18,895 19,480

(1) Bakery operations comprise operation of bakery retail outlets as well as that operated through franchising.(2) The business segment “Others” pertains to investment holding activities and Out Of The Box Pte Ltd, a 33.33% owned associated

company which is engaged in the business of marketing and distribution of canned drinks under the “Anything” and “Whatever” trademarks.

37. DIVIDENDS

Proposed but not recognised as a liability as at 31 December :

Group and Company2007 2006$’000 $’000

Dividends on ordinary shares, subject to shareholders’ approval at the Annual General Meeting :

• First and fi nal exempt (one-tier) dividend for 2007 of 0.55 cent per share (2006 : 0.42 cent per share) 1,292 844(1)

(1) The proposed dividends for fi nancial year ended 31 December 2006 was based on total number of ordinary shares in issue of 200,911,034 then. The actual dividends paid out in May 2007 amounted to $987,000 based on shares in issue of 234,911,034 as at book closing date on 15 May 2007, after the placement of 34 million new shares in April 2007.




38. PRIOR YEAR ADJUSTMENTS AND COMPARATIVES

In prior years, the Group recognised lease expenses on an incurred basis. In compliance with FRS 17 ‘Leases’, the Group has in the current year, recognised operating lease expenses in the income statement on a straight line basis over the lease term.

The change in accounting for leases has been applied retrospectively.

In addition, certain comparative fi gures have been reclassifi ed to conform with the current year’s presentation.

The effects of the above on comparatives are as follows:

Previouslystated

Leaseadjustment

Reclassi-fi cation Restated

$’000 $’000 $’000 $’000

Group

Balance sheet at 31 December 2006Investment in joint ventures 2,272 (60) – 2,212Deferred tax assets – 309 – 309Trade payables 9,137 – (1,215) 7,922Other payables 14,462 – 1,215 15,677Other liabilities 11,059 2,158 – 13,217Deferred tax liabilities 961 (92) – 869Translation reserve (303) 53 – (250)Minority interests 3,221 (163) – 3,058Statutory reserve fund – – 123 123Accumulated profi ts brought forward 2,074 (876) – 1,198Accumulated profi ts carried forward 6,381 (1,707) (123) 4,551

Income statement for the year ended 31 December 2006Cost of sales 55,551 (28) – 55,523Other operating income 5,343 – (1,981) 3,362Distribution and selling expenses 45,209 1,139 (1,981) 44,367Share of results of joint ventures 382 (48) – 334Profi t before taxation 7,625 (1,159) – 6,466Taxation 2,323 (303) – 2,020Profi t for the year 5,302 (856) – 4,446

39. AUTHORISATION OF FINANCIAL STATEMENTS

The fi nancial statements for the year ended 31 December 2007 were authorised for issue in accordance with a resolution of the directors on 18 March 2008.

BREADTALK ANNUAL REPORT 07 113BREADTALK ANNUAL REPORT 07 113

STATISTICS OF SHAREHOLDINGSAS AT 19 MARCH 2008

Issued and fully Paid-up Capital : S$33,302,916Number of Ordinary Shares in Issue (excluding treasury shares) : 234,911,034 Number of Treasury Shares held : NilClass of Shares : Ordinary SharesVoting rights : One vote per share

DISTRIBUTION OF SHAREHOLDINGS

Size of Shareholdings No. of Shareholders % No. of Shares %

1 - 999 0 0.00 0 0.001,000 - 10,000 502 63.70 2,723,000 1.1610,001 - 1,000,000 266 33.76 22,930,075 9.761,000,001 and above 20 2.54 209,257,959 89.08Total 788 100.00 234,911,034 100.00

TWENTY LARGEST SHAREHOLDERS

Name No. of Shares %

1 Citibank Nominees Singapore Pte Ltd 31,591,000 13.452 Katherine Lee Lih Leng 30,550,850 13.013 Hong Leong Finance Nominees Pte Ltd 23,830,000 10.144 United Overseas Bank Nominees Pte Ltd 21,898,000 9.325 DBS Nominees Pte Ltd 18,034,000 7.686 HL Bank Nominees (S) Pte Ltd 13,000,000 5.537 Mayban Nominees (S) Pte Ltd 10,500,000 4.478 SBS Nominees Pte Ltd 10,000,000 4.269 HSBC (Singapore) Nominees Pte Ltd 8,948,000 3.81

10 Quek Meng Tong George 8,847,609 3.7711 Merrill Lynch (Singapore) Pte Ltd 6,935,100 2.9512 Oversea-Chinese Bank Nominees Private Limited 5,872,775 2.5013 Morgan Stanley Asia (S’pore) Securities Pte Ltd 4,127,000 1.7614 Chen Kuo Hua 3,223,100 1.3715 Kim Eng Securities Pte. Ltd. 2,760,000 1.1716 Pineapples of Malaya Private Limited 2,420,000 1.0317 DBS Vickers Securities (S) Pte Ltd 2,404,000 1.0218 Kusdianto Soewarno 1,930,000 0.8219 Quak Bee Guat 1,353,000 0.5820 Go Kun Heng 1,033,525 0.44

Total 209,257,959 89.08

Based on information available to the Company as at 19 March 2008, approximately 27.72% of the Company’s shares are held in the held in the hands of public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of SGX-ST.


STATISTICS OF SHAREHOLDINGSAS AT 19 MARCH 2008

SUBSTANTIAL SHAREHOLDERS(As recorded in the Register of Substantial Shareholders as at 19 March 2008)

Name of Substantial Shareholders Direct Interest Deemed InterestNumber of Shares % Number of Shares %

1. George Quek Meng Tong (1) 79,440,384 33.82 43,550,850 18.542. Katherine Lee Lih Leng (1) 43,550,850 18.54 79,440,384 33.823. Chen Kuo Hua 12,443,100 5.30 - -4. UBS AG (2) - - 21,279,000 9.055. Keywise Capital Management (HK) Ltd (holds in the name of

(i) Keywise Greater China Master Fund; and (ii) Keywise Asia Master Fund) (2)

21,133,000 9.00 - -

(1) Katherine Lee Lih Leng is the spouse of George Quek Meng Tong. Saved as disclosed above, there are no family relationship among our Directors and Substantial Shareholders.

(2) Positions held on behalf of prime brokerage clients which includes the 21,133,000 shares held by Keywise Capital Management (HK) Ltd.


NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of BreadTalk Group Limited (“the Company”) will be held at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 on Monday, 28 April 2008 at 10.00 a.m. for the following purposes:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and the Audited Financial Statements of the Company for the year ended 31 December 2007 together with the Auditors’ Report thereon.

(Resolution 1)

2. To declare a fi rst and fi nal exempt (one-tier) dividend of 0.55 cent per share for the fi nancial year ended 31 December 2007 (2006:0.42 cent)(Resolution 2)

3. To re-elect the following Directors retiring pursuant to Article 104 of the Company’s Articles of Association:

Mr George Quek Meng Tong (Resolution 3) Mr Chan Soo Sen (Resolution 4)

Mr Chan Soo Sen will, upon re-election as a Director of the Company, remain as the Chairman of the Remuneration Committee and a member of the Audit Committee and Nominating Committee. Mr Chan will be considered independent for the purposes of Rule 704(8) of Listing Manual of the Singapore Exchange Securities Trading Limited.

4. To approve the payment of Directors’ fees of S$96,250 for the year ended 31 December 2007 (2006: S$96,250). (Resolution 5)

5. To re-appoint Messrs Ernst & Young as the Company’s Auditors and to authorise the Directors to fi x their remuneration. (Resolution 6)

6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.



AS SPECIAL BUSINESS

To consider and if thought fi t, to pass the following resolutions as Ordinary Resolutions, with or without any modifi cations:

7. Authority to issue shares up to 50 per centum (50%) of the issued shares in the capital of the Company

That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Directors of the Company be authorised and empowered to:

(a) (i) issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise; and/or (ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not

limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fi t; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors of the Company while this Resolution was in force,

provided that:

(1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) and Instruments to be issued pursuant to this Resolution shall not exceed fi fty per centum (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 centum (20%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such calculation as may be prescribed by the Singapore Exchange Securities Trading Limited) for the purpose of determining the aggregate number of shares and Instruments that may be issued under sub-paragraph (1) above, the percentage of issued shares and Instruments shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, after adjusting for:

(a) new shares arising from the conversion or exercise of the Instruments or any convertible securities;(b) new shares arising from exercising share options or vesting of share awards outstanding and subsisting at the time of the passing of this Resolution;

and(c) any subsequent bonus issue, consolidation or subdivision of shares;

(3) 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

(4) unless revoked or varied by the Company in a general meeting, such authority shall continue in force (i) 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 or (ii) in the case of shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution, until the issuance of such shares in accordance with the terms of the Instruments.

[See Explanatory Note (i)] (Resolution 7)



8. 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 additional ordinary shares to be issued pursuant to the Scheme shall not exceed fi fteen per centum (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 (ii)] (Resolution 8)

9. 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 centum (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 defi ned in paragraph 3.4 of the Appendix to the Annual Report to Shareholder dated 12 April 2008, 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 (iii)] (Resolution 9)

By Order of the Board

Tan Cher LiangCompany SecretarySingapore12 April 2008


Explanatory Notes:

(i) The Ordinary Resolution 7 in item 7 above, if passed, will empower the Directors of the Company from the date of this Meeting until the date 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 existing shareholders of the Company.

For determining the aggregate number of shares that may be issued, the percentage of issued shares in the capital of the Company will be calculated based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time this Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of the Instruments or any convertible securities, the exercise of share options or the vesting of share awards outstanding or subsisting at the time when this Ordinary Resolution is passed and any subsequent bonus issue, consolidation or subdivision of shares.

(ii) The Ordinary Resolution 8 in item 8 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) fi fteen per centum (15%) of the total number of issued shares (excluding treasury shares) in the capital of the Company from time to time.

(iii) The Ordinary Resolution 9 proposed in item 9 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 ten per centum (10%) of the total number of issued shares (excluding treasury shares) in the capital of the Company at the Maximum Price as defi ned 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 fi nancing and the fi nancial effects of the purchase or acquisition of ordinary shares by the Company pursuant to the Share Purchase Mandate on the audited consolidated fi nancial accounts of the Group for the fi nancial year ended 31 December 2007 are set out in greater detail in Paragraph 2.1 to the Appendix.

Notes:

1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a Member of the Company.

2. The instrument appointing a proxy must be deposited at the Registered Offi ce of the Company at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 not less than 48 hours before the time appointed for holding the Meeting.



BREADTALK GROUP LIMITEDCompany Registration No. 200302045G(Incorporated in Singapore)

PROXY FORM(Please see notes overleaf before completing this Form)

I/We,

of being a member/members of BREADTALK GROUP LIMITED (the “Company”), hereby appoint:

Name NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

and/or (delete as appropriate)

Name NRIC/Passport No. Proportion of Shareholdings

No. of Shares %

Address

or failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held on 28 April 2008 at 10.00 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 specifi c direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

(Please indicate your vote “For” or “Against” with a tick [√ ] within the box provided.)

No. Resolutions relating to: For Against

1 Directors’ Report and Audited Financial Statements for the year ended 31 December 2007.

2 Payment of proposed fi rst & fi nal exempt (one-tier) dividend.

3 Re-election of Mr George Quek Meng Tong as a Director.

4 Re-election of Mr Chan Soo Sen as a Director.

5 Approval of Directors’ fees amounting to S$96,250 for the year ended 31 December 2007.

6 Re-appointment of Messrs Ernst & Young as Auditors.

7 Authority to issue new shares.

8Authority to allot and issue shares under the BreadTalk Group Limited Employees’ Share Option Scheme.

9 Renewal of Share Purchase Mandate

Dated this day of 2008

Signature of Shareholder(s)

or, Common Seal of Corporate Shareholder

IMPORTANT

1. For investors who have used their CPF monies to buy BreadTalk Group Limited’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specifi ed. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specifi ed to enable them to vote on their behalf.

Total number of Shares in: No. of Shares

(a) CDP Register

(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 defi ned in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint such number of proxies as required to attend and vote in his/her stead. A proxy need not be a member of the Company.

3. Where a member appoints more than one proxy, the appointments shall be invalid unless he/she specifi es the proportion of his/her shareholding to be represented by each proxy. If no proportion or number of shares is specifi ed, the fi rst named proxy may be treated as representing 100% of the shareholding and any second named proxy as an alternate to the fi rst named.

4. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 not less than 48 hours before the time appointed for the Meeting.

5. The instrument appointing a proxy or proxies must be executed under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an offi cer 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 certifi ed 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 Offi ce, not less than forty-eight hours before the time appointed for the holding of the Meeting or the adjourned Meeting at which it is to be used failing which the instrument may be treated as invalid.

6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fi t 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 certifi cate under the seal of the corporation as conclusive evidence of the appointment or revocation of appointment of a representative.

General:

The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specifi ed 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 certifi ed by The Central Depository (Pte) Limited to the Company.

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

A N N U A L R E P O R T 2 0 0 7

CONTENTS

Corporate Profi le 1

Financial Highlights 2

Talking to Shareholders 4

Group Structure 6

Brands that TALK - Bakery 9 - Food Atrium 13 - Restaurant 17

Board of Directors 20

Senior Management 22

Corporate Information 23


Financial Statements 38



Proxy Form 119

A N N U A L R E P O R T 2 0 0 7

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