Corporate - listed companybreadtalk-cn.listedcompany.com/misc/ar2012.pdf · Corporate Proﬁle Founded in 2000, and listed on the SGX since 2003, BreadTalk transformed the face of

Corporate Profile

Founded in 2000, and listed on the SGX since 2003, BreadTalk transformed the face of the humble bun with innovative flavours and a distinctive identity. Our endeavours to surprise and delight customers have earned us numerous awards and growing popularity among consumers.

Focused on our vision of becoming an international, trend-setting lifestyle company, BreadTalk Group Limited has become a distinctive F&B brand with acclaimed bakery, restaurant and food atrium footprints. Our proprietary brands are BreadTalk, Toast Box, Thye Moh Chan, Food Republic, RamenPlay and The Icing Room. We also manage franchises from Taiwan’s Michelin Star recipient Din Tai Fung and USA’s Carl’s Jr.

In just a decade, the Group has expanded into a network of 15 countries, including Singapore, Mainland China, Hong Kong and Indonesia. Supported by our global staff of 7,000, we manage some 700 F&B outlets.

2

Creative Rationale

The International Headquarters (IHQ) is the most eagerly anticipated milestone in the BreadTalk Group’s history, come mid 2013. It takes centrestage in the visual concept of this year’s annual report, with an eye-catching paper cutting design on the cover. The intricate symmetry of the lines simulates the architecture of the IHQ, which is inspired by the multi-layered textures of a Danish pastry.

The striking yet clean lines extend to the rest of the annual report, representing what the BreadTalk name has come to be synonymous with - innovation and the ability to stand out from the crowd.

3Annual Report 2012

CONTENTS

148 Notice of Annual General Meeting

146 Statistics of Shareholdings

47 Financial Statements

31 Corporate Governance

30 Corporate Information

28 Food Atrium

26 Restaurant

22 Bakery

22 Business Review

18 Group Structure

20 Geographical Reach

16 Brand Accolades

14 Key Management

12 Board of Directors

8 Chairman’s Statement

6 Financial Highlights

4 International Headquarters

1 Corporate Profile

2 Creative Rationale

4

INTERNATIONAL HEADQUARTERS

Retail outlets

5

International Headquarters – Platform for Growth

Having firmly established the BreadTalk Group as a household name in the F&B sector in the region, we are now ready to broaden and deepen our global footprint.

Covering almost 7,000 square metres of prime land at Paya Lebar iPark, the IHQ is set to be an iconic landmark in the upcoming Paya Lebar commercial hub. The architecture of the multi-storey building is inspired by the texture of a Danish pastry – layers carefully laid one on top of another. The building is eco-friendly, reflecting our love for the natural environment and our spirit of innovation.

The building will form a central repository to house all the resources we need to expand our production capacity, supporting out international expansion plan. It will bolster our office support and nurture the industry’s finest talents through the BreadTalk Training Academy.

The IHQ is one of the most significant investments in the BreadTalk Group history, signalling our confidence in the Group’s future growth. With the IHQ, we are firmly on track to capturing the global market.

BreadTalk International Headquarters

building at Paya Lebar iPark

(Artist Impression).

Automated production line for bakery business

2

3 & 4 Parking lots

Training Academy, R&D labs, central kitchens of Din Tai Fung and RamenPlay

6

5Annual Report 2012

Warehousing facilities

GROUND FLOORBreadTalk Group’s flagship stores, namely BreadTalk, Toast Box, Food Republic, Din Tai Fung and RamenPlay

ROOFTOP Garden with open spaces for staff activities and interaction

9 & 10Executive offices and creative

spaces with open concept offices and interactive workspaces

7 & 8

6

2012201120102009200820122011201020092008

FINANCIAL HIGHLIGHTS

0

100

500

400

300

200

Revenue ($ Million)

19.417.1

16.715.6

12.0

0

5

25

20

15

10

Profit Before Tax ($ Million)

Revenue Mix by Geographical Segment FY2012

Rest of World

7.6%

25.0%

Singapore

51.0% 52.1%

Hong Kong

Mainland China

Revenue Mix by Business Segment FY2012

Food Atrium

Restaurant

Bakery

447.3

365.9

302.9

246.5212.2

32.0%

22.9%

9.4%

7Annual Report 2012

FINANCIAL HIGHLIGHTSBreadTalk Group Limited & Its Subsidiaries - Group Financial Highlights

FINANCIAL RESULTS ($’000) FY2008 FY2009 FY2010 FY2011 FY2012

REVENUE 212,249 246,493 302,888 365,904 447,334

OPERATING PROFIT 13,227 16,253 16,564 16,995 18,624

PROFIT BEFORE TAX 12,001 15,615 16,688 17,127 19,376

PROFIT ATTRIBUTABLE TO EQUITYHOLDERS OF THE COMPANY 7,770 11,092 11,266 11,592 12,000

FINANCIAL POSITIONS ($’000) FY2008 FY2009 FY2010 FY2011 FY2012

PROPERTY, PLANT AND EQUIPMENT 58,156 64,352 73,306 88,898 157,408

INVESTMENT IN ASSOCIATES/JOINT VENTURES 422 284 446 422 4,025

INTANGIBLE ASSETS 9,205 9,097 9,142 9,214 8,531

OTHER NON-CURRENT ASSETS 2,026 3,890 14,424 15,178 60,326

CURRENT ASSETS 77,348 94,462 106,879 148,593 126,119

CURRENT LIABILITIES (82,866) (97,197) (118,254) (151,484) (206,066)

NON-CURRENT LIABILITIES (8,158) (8,722) (10,860) (25,353) (59,318)

NON-CONTROLLING INTERESTS (3,623) (5,504) (6,521) (7,498) (8,475)

SHAREHOLDERS’ EQUITY 52,510 60,662 68,562 77,970 82,550

RATIOS FY2008 FY2009 FY2010 FY2011 FY2012

EARNINGS PER SHARE (CENTS) - BASIC (1) 2.76 3.95 4.01 4.12 4.27

EARNINGS PER SHARE (CENTS) - DILUTED (1) 2.76 3.94 3.99 4.10 4.25

NET ASSET PER SHARE (CENTS) (2) 18.63 21.61 24.37 27.78 29.37

NET TANGIBLE ASSET PER SHARE (CENTS) (2) 15.36 18.37 21.12 24.50 26.34

GEARING (TIMES) (3) 0.30 0.24 0.26 0.47 1.06

RETURN ON SHAREHOLDERS’ FUND (%) (4) 16.1 19.6 18.0 15.8 15.0

(1) The basic and diluted earnings per ordinary share for FY2012 are computed based on the weighted average number of ordinary shares

(excluding treasury shares) in issue during the year 280,927,599 and 282,145,411 respectively. The comparative figures for FY2008 to

FY2009 have been restated taking into account the Company’s bonus share issue on 30 March 2010.

(2) Net assets per share and net tangible assets per share as at end of financial year 2012 are computed based on the share capital of

281,063,624 ordinary shares, representing shares issued and fully paid (excluding treasury shares) as at end of the year. The comparative

figures for FY2008 to FY2009 have been restated taking into account the Company’s bonus share issued on 30 March 2010.

(3) Gearing is computed based on total borrowings divided by total equity.

(4) Return on shareholders’ funds is the profit attributable to equity holders of the Company expressed as a percentage of the average shareholders’

funds.

8

CHAIRMAN’S STATEMENT

Dear Shareholders,

Performance for FY2012

In 2012, the Group focused on strengthening our core competencies. With 609 bakery outlets, 47 food atria and 30 restaurants in 15 countries, BreadTalk has become a premier lifestyle brand in the region, even a household name in Singapore.

The Group turned in a record performance for the year, with revenue surging by 22.3% from the previous financial year to S$447.3 million. This was driven by growth across all business divisions supported by same-store sales growth and contributions from new outlets opened during the year. On the back of higher revenue, operating profit increased by 9.6% over the same period to reach S$18.6 million while Group net profit attributable to shareholders rose by 3.5% to S$12.0 million, despite cost pressures on food, labour and rental expenses.

Bolstering the Business

The BreadTalk brand is synonymous with creativity and to maintain this competitive advantage, we have to continually innovate and reinvent ourselves. In 2012, our most significant brand positioning effort was the launch of the Generation 4 concept of the BreadTalk brand. The comprehensive concept included both a fresh new look and another original line-up of novel breads.

We chose to officially launch Generation 4 in Shanghai to signal the significance of the Mainland China market, its strategic value and its burgeoning middle class hungry for new brands and fresh concepts. The event introduced audiences to a 3D microfilm entitled “Get Talking” that brought our signature products to life – a first in the bakery industry. The Generation 4 concept clearly struck a chord with customers as the outlets that underwent the Generation 4 refurbishment saw a significant sales increase.

In Mainland China, we further penetrated into three new cities, namely Changchun, Lhasa and Hohhot. We also expanded our Toast Box presence in Mainland China with the first outlet opened in Shanghai.

million, despite cost pressures on food, labour and rentalexpenses.

9Annual Report 2012

The BreadTalk Generation 4 concept Global Launch took place at

Shanghai, Metro City, Kodak Cinema World on 25th Sept 2012.

More than 100 franchisee representatives attended the Brand

workshop for further insights.

In addition to Mainland China, expansion of our proprietary brands and franchises continued unabated. On home ground, we opened a record number of 11 new Toast Box outlets, 2 restaurants and 3 Food Republic outlets.

A new bakery brand was added to the Group in 2012 as we acquired Thye Moh Chan from a local family business which has been running the shop for three generations. Thye Moh Chan produces delicate, handcrafted Teochew confections from recipes that have stood the test of time. We have pledged to retain the authenticity of the flavours while injecting the brand with a fresh new look.

Optimising Effectiveness

One of the most highly anticipated initiatives of the Group is the upcoming move to our International Headquarters (IHQ) in 2013. Housing the Group’s main office, R&D, training, logistics, central kitchen facilities and our retail outlets, the IHQ will enable the centralisation of operations and supporting functions thereby, allowing a more comprehensive and consolidated support for the next phase of our expansion efforts.

The IHQ will allow us to position ourselves as a global company. Its large-scale manufacturing capabilities, automated and fully equipped, will supply our franchisees in Southeast Asia with flour mixes and frozen dough. A sophisticated R&D facility will act as a creative think tank in an environment conducive to the brainstorming and rolling out of novel ideas, while our BreadTalk Training Academy will help ensure service standards of staff.

In addition, we aim to mitigate the escalating costs of manpower and raw materials with the move to the IHQ. A common facility will allow for more efficient usage of resources as well as better cost management, thanks to central procurement.

The flagship Thye Moh Chan outlet was launched at

Chinatown Point in Nov 2012.

10

CHAIRMAN’S STATEMENT

Property Investments

Property is a relatively new area of investment for the Group, with 112 Katong being our maiden venture in 2011.

In 2012, we participated in two other property projects, namely Beijing’s Tongzhou Integrated Development and CHIJMES in Singapore. The Tongzhou Integrated Development is strategically located in Tongzhou city, which is less than 20 km from the Beijing city centre and being developed as an alternative business district to Beijing. An iconic project, the Tongzhou Integrated Development will comprise retail, office and residential spaces, with the BreadTalk Group being given a first right of refusal to prime retail space. We see this investment as a prime opportunity to partner industry veterans in integrating upstream along the retail supply chain.

On home ground, we were invited to participate in the transformation of iconic landmark CHIJMES into a trendy F&B tourist destination. As a gazetted national monument situated right in the heart of downtown Singapore, CHIJMES offers an attractive commercial locale for the Group. The Beijing TongZhou Integrated project is the new business hub of

Beijing - setting a new buzz in the Chinese capital.

Our investment at 112 Katong Mall showcased the presence of all our brands with strong street level prominence.

Dividend

The Board of Directors has proposed a final one-tier dividend of 0.8 cent per ordinary share, subject to shareholders’ approval at the AGM. During the year, an interim dividend of 0.5 cent per ordinary share was also paid.

11Annual Report 2012

Looking Ahead

In 2013, the Singapore economy is likely to experience slower growth, in line with the expected slowdown of the global economy. In addition, we anticipate that competition in the F&B industry will heat up, as Singapore becomes a more iconic Asian destination and attracts more global brands.

In the face of such challenges, building on our brand equity will be essential. This has been our winning formula, attested by the numerous awards we have won during the year, such as the Avant Garde award by the SME1 Asia Awards for our entrepreneurship and creative spirit, the Top 100 Singapore Brands by independent research consultancy Brand Finance which valued BreadTalk at US$61 million. In Greater China, we were conferred the prestigious World Brand Laboratory award which puts us in the same league as global F&B players like Starbucks and Haagen Dazs, and alongside other international brand giants such as Louis Vuitton and Prada. We will continue to create trend-setting products and talked-about concepts, maintaining the excitement that customers have come to expect. Only then can we successfully differentiate ourselves from our competitors and uphold our leadership position on the global stage.

Overseas, we will continue to steadily expand our regional footprint into Mainland China, Thailand and Hong Kong, while strengthening our operations in Malaysia. As previously mentioned, Mainland China will remain the core overseas market for the Group revenue with a contribution of over 32%

to the Group in 2012. Over the next few years, we aim to increase this contribution to more than 50%. This would mean multiplying the number of outlets in Mainland China, as well as working to increase sales from each individual store.

In the coming year, we expect rising labour costs to escalate in all the countries we operate. This, coupled with the Singapore government’s tightening of foreign labour supply, is expected to exacerbate manpower constraints. Taking a proactive stance, we will embark on a headcount rationalisation exercise to optimise the usage of our human resources and enhance productivity. Also in the pipeline is a review of our current business models to drive sustainable, long-term growth and deliver shareholder value.

With Gratitude

Today, we are a global company with a staff strength of more than 7,000. This credible achievement within a short period of time is made possible only with the dedication and conviction of our directors, management, staff, business partners and shareholders. I would like to thank each and every one of them for their hard work and support.

By working together with a common mission, I am confident we can continue to make the Group a market leader in the territories that we operate.

George QuekChairman

Today, we are a global company with a staff strength of more than 7,000. This credible achievement within a short period of time is made possible only with the dedication and conviction of our directors, management, staff, business partners and shareholders. I would like to thank each and every one of them for their hard work and support.

George QuekChairman

12

BOARD OF DIRECTORS

George Quek Meng TongChairman

George, founder of the Group, was appointed to the Board on 6 March 2003 and last re-elected on 25 April 2012. Having led and grown the Company to its current empire, George continues to drive our strategic direction and development into the future.

George started his food and beverage business in Taiwan in 1982, successfully growing it into a chain of 21 Southeast Asian food outlets within a mere decade. Returning to Singapore in 1992, he then founded Topwin Singapore and subsequently Megabite China in 1996, establishing the food court businesses.

In 2000, he started the bakery business with BreadTalk® Pte Ltd and eventually brought it to list on the SGX in 2003 while creating a household name. George is a Brand Champion

Katherine Lee Lih LengDeputy Chairman

Katherine was appointed to the Board on 6 March 2003 and last re-elected on 26 April 2011. She oversees the Group’s research and development, as well as pioneers new ideas and concepts.

Responsible for concept creation, product development and enhancement of our various brands both locally and globally, Katherine also formulates product training and technical skill upgrade programmes to ensure proper transfer of knowledge and skills to our franchisees in line with our local operations so as to sustain product quality. In addition, Katherine spearheads product costing, which is an integral part of our product strategy.

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.

who has positioned the company’s brand portfolio into innovative concepts now widely accepted in Asia and throughout the world. His keen interest in the arts, creative talent and acute sense of anticipating consumer demands have led the BreadTalk Group to always position itself as an inspiring company that delights consumers time and again.

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 the “Entrepreneur of the Year Award 2002” organised by the Assocation of Small and Medium Entreprises and The Rotary Club of Singapore.


Ong Kian MinIndependent Director

Kian Min was appointed to the Board on 30 April 2003 and last re-elected on 25 April 2012. He is the Lead Independent Director, Chairman of the Audit Committee and Nominating Committee, and member of the Remuneration Committee of the Company.

He was called to the Bar of England and Wales in 1988 and to the Singapore Bar the following year. In his more than 20 years of legal practice, he focused on corporate and commercial law, such as, mergers and acquisitions, joint ventures, and restructuring and corporate finance. In addition to practising as a consultant with Drew & Napier LLC, a leading Singapore law firm, he is a senior adviser of Alpha Advisory Pte. Ltd. (a corporate advisory firm) and CEO of Kanesaka Sushi Private Limited, which owns and operates Japanese fine-dining restaurants in the region. He is also non-executive chairman of Hupsteel Ltd and serves as independent non-executive director of several other Singapore-listed companies.

Kian Min was awarded the President’s Scholarship and Police Force Scholarship in 1979. He holds a Bachelor of Laws (Honours) external degree from the University of London and a Bachelor of Science (Honours) Degree from the Imperial College of Science and Technology in England. He was an elected Member of Parliament of Singapore from January 1997 to April 2011.

Dr Tan Khee GiapIndependent Director

Khee Giap was appointed to the Board on 1 October 2010 and last re-elected on 26 April 2011. He is a member of the Audit Committee, Nominating Committee and Remuneration Committee. Khee Giap is currently Co-Director of Asia Competitiveness Institute and an Associate Professor of Public Policy at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He is also the Chair of Singapore National Committee for Pacific Economic Cooperation. He holds directorships in a few listed companies in Singapore. Khee Giap graduated with a Ph.D from the University of East Anglia in 1987. He has consulted extensively with various government ministries, statutory boards and government-linked companies of the Singapore government. Khee Giap has served as a member of the Resource Panel of the Government Parliamentary Committee for Transport and Government Parliamentary Committee for Finance and Trade since 2007.

Chan Soo SenIndependent Director

Soo Sen was appointed to the Board on 14 August 2006 and last re-elected on 26 April 2011. He is the Chairman of the Remuneration Committee, as well as member of the Audit Committee and Nominating Committee of the Company.

Soo Sen was a Member of Parliament for Joo Chiat Constituency from 1997 to 2011. He was 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 politics, he was involved in the starting up of the China-Singapore Suzhou Industrial Park as its founding Chief Executive Officer in 1994, laying the foundation and framework for infrastructure and utilities development for the industrial park. He holds a Masters in Management Science from the University of Stanford, USA.

After leaving public service in 2006, Mr Chan joined Keppel Corporation Ltd as Director, Chairman’s Office. In 2009, he joined Singbridge International Singapore Pte Ltd, a company fully owned by Temasek Holdings to undertake major international projects, as Executive Vice President. Mr Chan is now advising a few investment companies on their China Projects. He is also an Independent Director in a few listed companies and an adjunct professor in Nanyang Technological University.

14

Oh Eng Lock | Group Chief Executive Officer

Eng Lock was appointed Group CEO on 1 January 2011. As Group CEO, he oversees the Group’s global operations, focusing on strategic planning and business development.

Eng Lock has a keen grasp on the Group’s business operations, since joining the company on 1 June 2010 as Group Managing Director.

Prior to his appointment as CEO, Eng Lock was Regional Managing Director with Merrill Lynch Asia Pacific Ltd. in Hong Kong, overseeing their North Asia businesses. He has also garnered vast senior executive and management experience at DBS Bank and United Overseas Bank growing their regional franchises in Taiwan, China and the USA.

Eng Lock holds a Bachelor of Arts degree from the University of Singapore.

Lawrence YeoGroup Chief Financial Officer

Lawrence was appointed Group Chief Financial Officer on 10 October 2011. He oversees the Group’s global financial matters including corporate finance, treasury, capital management, investments, risk management and investor relations. He has extensive experience in various roles and capacities including Group CFO of 2 other SGX-listed companies. Lawrence holds an MBA from the University of Strathclyde and a Bachelor of Accountancy degree from the National University of Singapore. He is also a FCPA of the Institute of Certified Public Accountants of Singapore and a member of the Singapore Institute of Directors

KEY MANAGEMENT

Goh Tong PakPresident

Chairman’s Office Special Projects

Frankie Quek Swee Heng

CEOAsean Region

James Quek Swee Hwa

CEOChina Region

Bakery Division

Jenson Ong Chin Hock

CEO Food Atrium Division

Cheng WilliamCEO

Restaurant Division


A World-Class Asian Brand

The BreadTalk Group of Companies has always placed a strong premium on brand building. The emphasis on brand differentiation and creativity have continuously positioned the F&B concepts under its stable to be well recognised by consumers and industry experts. In 2012, BreadTalk was awarded the World Brand Laboratory’s annual “Five Star Diamond Award” distinction held in Hong Kong. Ranked among 3000 leading brands in the world, BreadTalk’s brand influence and leadership stood out for their outstanding performance, among other leading brands such as Starbucks and luxury brands such as Louis Vuitton and Chanel. In Singapore, Brand Finance, an independent international Brand valuation company had also continuously ranked the BreadTalk Group as one of Singapore’s Top 100 Brands from 2010-2012, valuing it at US$61 million (April 2012). We will continue to enhance our brand equity and reputation in our quest to be a world class leading F&B company.

16

BRAND ACCOLADES

Our consistent and dedicated efforts to brand management have placed our brands on both local and international platforms.

BreadTalk

Singapore Promising Brand AwardAssociation of Small and Medium Enterprises (ASME) and Lianhe Zaobao2006

BreadTalk

Finalist, World Retail AwardsEmerging Market Retailer of the Year Category 2009

BreadTalk

Finalist, Franchisor of the Year AwardFranchising and Licensing Association of Singapore (FLA) 2005

BreadTalk

Five Star Diamond Brand AwardWorld Brand Laboratory Award 2006 & 2012

BreadTalk Group Limited

Sales/Turnover Growth Excellence(Hospitality/Food & Beverage) Award 2009/2010

BreadTalk

SME1 Asia AwardsAvant Garde AwardHonoured for outstanding creative innovation | APF Group, Singapore 2012

BreadTalk Group Limited (China)

Food Integrity and Quality Trust AwardChina Association for Quality Inspection 2012

BreadTalk (China)

Shanghai Premium Foods (Fire Flosss)Shanghai Sugar Association, China 2012

George Quek

Entrepreneur of the YearEmerging Entrepreneur Category Ernst & Young, Singapore 2006

BreadTalk

Listed by Brand Finance as one of Top 100 Brands in Singapore, 2010, 2011 and 2012


BreadTalk

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

BreadTalk

Design for Asia Award Hong Kong Design Centre 2004

BreadTalk

Overall Winner, Winner, Most Popular Brand, Regional Brands Category Singapore Prestige Brand Award 2011

BreadTalk

Most Transparent Company Award (SIAS)2004 and 2005 - Sesdaq Category Runner-Up2007 - Sesdaq Category Winner2998 - Catalist Category Runner-Up

Toast Box

Overall Winner, Promising Brands CategorySingapore Prestige Brand AwardAssociation of Small and Medium Enterprises (ASME) and Lianhe Zaobao 2009

Food Republic

Overall Winner, Promising Brands CategorySingapore Prestige Brand AwardAssociation of Small and Medium Enterprises (ASME) and Lianhe Zaobao 2008

BreadTalk

Enterprise 50 Start Up Award,Accenture and The Business Times 2002

George Quek

Entrepreneur of the Year ASME and The Rotary Club 2002

BreadTalk

Singapore versionSingapore Superbrands Council 2002/2003

18

BREADTALK GROUP LIMITED & SUBSIDIARIES Group Structure As At 31 December 2012

100% Imagine IHQ Pte. Ltd.

100%Imagine Properties Pte Ltd

29%Perennial (Chijmes) Pte Ltd

100%Together Inc. Pte Ltd

60%Ramen Play Pte Ltd

30%JBT (China) Pte Ltd

100%BreadTalk Pte Ltd

70%Taster Food Pte Ltd

49%Taster Food (Thailand) Co. Limited

75%Charcoal Pte Ltd

100%Thye Moh Chan Pte. Ltd.

90%Taster Food International Pte Ltd


BREADTALK GROUP LIMITED

100%Shanghai Star Food F&B Management Co., Ltd

100%Beijing Star Food F&B Management Co., Ltd

100%BreadTalk International Pte Ltd

100%Shanghai BreadTalk Co. Ltd

30%

50%Shanghai ABPan Co., Ltd

100%Shanghai BreadTalk Gourmet Co. Ltd

100%Beijing BreadTalk Rest. Mgmt Co. Ltd

100%Star Food Pte Ltd

100%Chongqing Food Republic Food & Beverage Co., Ltd

50% Shanghai Hong Bu Rang Food & Beverage Management Co. Ltd

100%Food Republic (Chengdu) Co., Ltd

100%Food Republic Hangzhou F&B Co., Ltd

100%BreadTalk Concept Hong Kong Limited

100%Topwin Investment Holding Pte Ltd

100%Food Republic (Shanghai) Co. Ltd

Shanghai Ramen Play Co., Ltd

100%Beijing Da Shi Dai Food & Beverage Co. Ltd

85%Megabite Hong Kong Limited

100%Beijing BreadTalk Co. Ltd

100% Food Republic Shenzhen F&B Management Co., Ltd

75% Food Republic Guangzhou F&B Management Co., Ltd

49%BreadTalk (Thailand) Company Limited

100%Food Republic Pte Ltd

90%ML BreadWorks Sdn. Bhd

100%Food Art Pte Ltd

50%Street Food Pte Ltd

25%Hong Kong BreadTalk Ltd

100%MWA Pte Ltd

100%Megabite (S) Pte Ltd

100%Megabite Eatery (M) Sdn Bhd

90%Food Republic Taiwan Co., Ltd

49%FR (Thailand) Co., Ltd

50%Apex Excellent Sdn Bhd

30%

20

GEOGRAPHICAL REACHSpread across 15 countries in Asia and the Middle East, the BreadTalk Group’s creative concepts engage and excite consumers.

Bakery297

9796 34

27 17

13 7

75 4

3 11

Cities in Mainland China

Beijing

Changchun

Changsha

Changzhou

Chengdu

Chongqing

Dalian

Dongguan

Foshan

Fuzhou

Guangzhou

Hangzhou

Harbin

Hefei

Hohhot

Huzhou

Jiaxin

Jinan

Jinhua

Kunming

Lhasa

Nanjing

Nantong

Ningbo

Qingdao

Quanzhou

Shanghai

Shaoxing

Shenyang

Shenzhen

Shijiazhuang

Suzhou

TaiYuan

Taizhou (台洲市)

Taizhou (泰洲市)

Tianjin

Urumuqi

Wenzhou

Wuhan

Wuxi

Xiamen

Xian

Xuzhou

Yancheng

Yangzhou

Zhengzhou

Zhenjiang

Zhuzhou

Food Atrium24

10 6

3 22

Restaurant19

10 1

Kuwait

Bahrain

Oman

Jordan

21Annual Report 2012 21Annual Report 2012

People’s Republicof China

India

Sri Lanka

Thailand

Hong Kong

Vietnam

Taiwan

Philippines

Malaysia

Singapore

Indonesia

T

22

BUSINESS REVIEW BAKERY

The new Gen4 BreadTalk concept showcases a brand new

interior style that invites with its natural rustic elements.

Operation Margin for FY12

4.0%

Contribution to FY12 revenue

52.1%

Outlets as of 31 Dec 2012

609

Financial Performance

In 2012, the Group opened 163 new outlets internationally, of which about 32% are direct owned and 68% are franchised. As at 31 December 2012, our total number of bakery outlets stands at 609.

The Bakery Division continued to be the largest contributor to the Group’s revenue and net profit, at 52.1% and 61.6% respectively in FY2012. It registered sales of S$233.1 million (including franchise income), which was largely attributable to the growing number of outlets as well as higher sales resulting from the launch of the Generation 4 concept. Revenue across the region grew, except for Malaysia due to the closure of some loss-making outlets during the year.

Strategies and Initiatives

The competitive edge of BreadTalk is our constant drive to innovate and set trends. During the year, we launched the Generation 4 concept which incorporated both outlet interior changes and a new line-up of products. New stores were designed with the Generation 4 décor which radiated the rustic environment of romantic European bakeries. Older stores will gradually be refreshed to reflect this new concept.


concept was created through various consumer touchpoints, including print, bus stop ads, digital and mobile applications. An online contest, inviting customers to suggest a possible ending for the film, was organised to encourage interaction.

Mainland China remains the primary overseas market for BreadTalk. We have already established a name for ourselves in many first and second tier cities, further evident in the awards we have received by the Chinese authorities for meeting stringent food safety and hygiene standards. During the year, BreadTalk was upheld as a model F&B company for food safety and chosen to showcase our rigorous processes as an example to others in the F&B sector. We were also conferred a food safety award for the Fire Flosss product by the Shanghai Sugar Association.

The year marked our entry into three new cities in Mainland China, namely Changchun, Lhasa and Hohhot. This brings our total presence in China cities to 48 cities.

In line with on the growing popularity of healthy lifestyles, we introduced 50 new bakery items as part of the Generation 4 concept, many of which were healthier choices. These include a series of breads, namely chia seed toast, soya toast and pumpkin toast, which have been awarded the Healthier Choice Symbol by Singapore’s Health Promotion Board. Staying true to our local roots, we infused our newly launched Euro bread series with Asian flavours, such as drunken longan, black sesame, spinach and sweet potato.

The Generation 4 concept was unveiled to much fanfare in September 2012 at the first BreadTalk outlet in Metro City, Shanghai. Accompanying the global launch was a tailor-made campaign entitled “Get Talking” – a campaign that aims to alter the way customers see, feel and taste the brand. A 3D microfilm was produced and screened at the event, wowing audiences with its unexpectedness and creativity. A 2D version of the film was circulated online and awareness of the new

BreadTalk produced the first ever

3D microfilm, unprecedented in

the bakery industry to showcase

the new Gen4 concept. Invited

guests were captivated truly by our

breads “coming alive”!

Presented creatively, fifty brand new bakery products were

created in tandem with the Gen4 concept, with a strong

focus on natural, healthy tastes.

24

BUSINESS REVIEW BAKERY

Toast Box, too, continued to strengthen its brand, opening a record 11 stores in Singapore in 2012 and its first outlet in Shanghai in December. A record number was also set in Thailand, with 13 new bakery stores opened during the year.

The Shanghai outlet follows a model that fuses local preferences with our trademark flavours. At the Raffles City Mall outlet, we introduced a wider variety of Asian dishes while retaining Toast Box’s signature Nanyang kopi, kaya toast and soft boiled eggs. We expect to roll out more Toast Box outlets in Mainland China over the next few years.

During the year, we added a new brand to our bakery fold. Thye Moh Chan is a 70-year-old business that produces traditional handcrafted Teochew confections, such as their signature tao sar piah (biscuits with mung bean paste). Under the BreadTalk Group, the legacy of Thye Moh Chan lives on with the assurance that the brand will remain intact. By keeping the original recipes and investing six months on skill transfer via the existing chefs whom were engaged as consultants, we ensure that the quality of the confections is preserved. At the same time, new flavours are constantly being introduced to infuse a modern touch into the heritage brand. The 25-product range is fashionably packaged in line with modern trends and is designed to serve as gift ideas for special occasions, such as baby first month celebrations and weddings. as baby first month celebrations and weddings.

Toast Box opens its first outlet at Raffles City, Shanghai – with

consumers eager to experience our handpulled Nanyang

kopi and our signature peanut thick toast.


Two Thye Moh Chan outlets were opened during the year – at Chinatown Point and Parkway Parade. The shops embody clean lines and a contemporary feel amidst a rich oriental design.

Bread Society is our only bakery boutique that encompasses an artisanal concept. Located at Ion Orchard, Bread Society offers an extensive selection of more than 50 European-inspired breads, featuring premium ingredients such as dark rye, wholemeal flour and wheatgrass.

The Icing Room is our unique patisserie that allows customers to unleash their creativity and decorate their own cakes, choosing from a dazzling array of accessories. We currently have 6 The Icing Room outlets in Singapore and our first overseas outlet was opened in Bangkok in 2012.

The Road Ahead

In the coming year, we will continue to broaden and deepen our expansion efforts into the region. In mid-2013, we will be opening a Bread Society outlet and The Icing Room outlet in Shanghai, the first foray into Mainland China for both brands.

To drive operational efficiencies, we will be ramping up productivity at our central kitchen and reducing wastage. In view of growing manpower constraints, a headcount rationalisation exercise is also in place to optimise the usage of our human resource.

With a 70-year history, Thye Moh

Chan’s traditional baking craftsmanship

is passed down to a new generation of

bakers who will continue to uphold its

excellent variety of Teochew confections.

Ms Katherine Lee, our Deputy Chairman and Mr Koh Hong Chuan,

former 3rd generation owner of Thye Moh Chan sharing an

appreciation of what makes good tau sar piah.

26

BUSINESS REVIEW RESTAURANT

Operation Margin for FY127.1%


22.9%


30

Continuing its culinary

heritage, Din Tai Fung

presents a premium take to

its signature chicken soup

with the exquisite taste of

truffles.

Din Tai Fung continues

to bring its Michelin-Star

quality xiao long baos to

more customers with a newly

opened outlet at Parkway

Parade’s new wing.


As at 31 December 2012, the Group maintains a total of 30 restaurants consisting of three brands.

During the year, the Restaurant Division recorded a 33.3% increase in revenue from S$77.0 million in 2011 to S$102.6 million in 2012, representing 22.9% of Group revenue. The increase was mainly attributable to positive revenue growth across all its two brands except for Ramen Play in Mainland China.


Din Tai Fung continued to be the pillar of the Restaurant business, with 13 outlets in Singapore and one in Bangkok. The brand has earned an illustrious string of accolades worldwide, including the coveted Michelin Star and Top Ten ranking of the world’s best restaurants by The New York Times. Our maiden restaurant in Bangkok, opened in 2011, performed well. This bears optimism for our franchise in the rest of the country.


RamenPlay is our Restaurant business’ Japanese arm. A collaboration with Japan’s Sanpou Co Ltd, it offers authentic Japanese cuisine in a modern and comtemporary setting. New flavours and concepts are regularly introduced to excite customers, while maintaining the freshest and top quality ingredients. We currently operate 9 RamenPlay restaurants in Singapore and Shanghai.

A new RamenPlay outlet was launched during the year in Holland Village with a Generation 2 style, designed to better project the rich heritage and culture associated with Sanpou - a brand dating back to 1967 in Nigata. In keeping with Sanpou’s emphasis on Japanese identity and authenticity, RamenPlay uses only premium ingredients, such as top grade Japanese Hoshihikari rice.

With a total of 7 outlets in the Mainland China market, Carl’s Jr is positioned as a premium fast food joint, known for its quality charbroiled burgers and vibrant attitude. Its target audience is the young, working professional seeking quality premium burgers and reasonable prices.

The Road Ahead

With Din Tai Fung having established a loyal following, we plan to continue expansion of the brand in the coming year. We will continue to source for opportunities for outlet openings, especially outside the city area.

In 2013, RamenPlay will see a change in menu and a refreshing of the interior décor, to better differentiate it from the competition. Likewise, the menu will be fine-tuned and streamlined to better showcase our signature products. The unique selling point of RamenPlay remains premium Japanese fare at affordable prices. A new business cost model will also be set up to improve productivity and drive sustainability.

RamenPlay’s new modern classic Japanese interiors at Holland

Village continue to serve up its signature Sanpou Tonkutsu Ramen.

RamenPlay’s

Signature Sanpou

Tonkutsu Ramen.

o improve productivity and drive sustainability.

anpou

men.

28

BUSINESS REVIEW FOOD ATRIUM


During the year, the Group opened 11 food atrium outlets, bringing the total number to 47.

The Food Atrium Division performed creditably during the year, recording a double digit increase of 18.1% in revenue to reach S$111.6 million. This represents 25.0% of the Group’s total revenue. This growth is commendable taking into account major disruptions to the Singapore operations due to renovation and upgrading works at two major malls where our food atria are located.


The Group currently operates 47 food atria in Singapore, Malaysia, Thailand, Mainland China, Hong Kong, and Taiwan. Having reinvented the concept of what food court dining is among Asian consumers, Food Republic continues to attract customers with its unique thematic dining proposition.

In Singapore, Suntec City and Wisma Atria Food Republic outlets underwent refurbishment and relocation. The former embraces a white garden theme while the latter continue to exude the retro chic of the 1960s. Two new outlets were opened - at Causeway Point in May 2012 and Parkway Parade in November 2012.

The new Food Republic

outlet at Suntec is relocated

to the Fountain of Wealth

with a refreshing hawker

line up amid a relaxing

theme of White Garden.


25.0%


47

Operation Margin for FY121.1%

Food Republic’s presence in key territories such

Singapore, China, Malaysia, Thailand, Hong Kong and

Taiwan unite the best network of Asia’s hawkers under the

Food Republic family.


iconic Taiwanese architecture intricately recreated within 20,000 square feet at street level. The outlet exudes an aura of nostalgia, bringing customers back in time to a warm and familiar setting.

In Mainland China, we opened our maiden outlet in Chengdu at the popular Raffles City mall – a new shopping centre by Capitaland that is centrally located within the heart of the city. As one of the anchor tenants, we were able to secure a highly visible space for our food atrium. The outlet is designed around a studio concept and carried through with open kitchens and simple clean lines.

The Road Ahead

Food Republic has grown from strength to strength, establishing its position as the premier food atrium. Even as we continue on our expansion path, we will boost the performance of existing outlets to ensure they deliver consistent quality and results. In the coming year, we will maintain strict control over capital spending for new stores as well as recovery of capital investments via improved processes and management of tenants.

Outside Singapore, we steadily expanded our fold of Food Republic outlets during the year, always targeting strategic and high traffic locations. Three have been launched in Thailand, at Central Plaza Grand Rama IX, Mega Bangna and Siam Center. The outlet at Siam Center is particularly notable as the mall is centrally sited in the heart of the Bangkok shopping district and we are one of the anchor tenants. The mall’s appeal was enhanced significantly following its recent transformation from a complete refurbishment. The Food Republic here embraces a New York loft theme with a frosted glass ceiling, metallic accessories and geometric patterns.

We also opened a new branch of Food Republic in Taiwan in Da Zhi, a strong tourist attraction. It features the theme of old Taiwanese streets and alleyways in the 1900s, with

Food Republic opens its

third outlet at Siam Centre,

Thailand with the theme of

a New York loft concept.

The one that started

it all. Food Republic

Wisma Atria takes

on a refreshed

1960s retro feel to

serve up delicious

hawker fare.

Food Republic operates

its first outlet in Chengdu

with the theme of a work

studio.

The third outlet in Taiwan, this Dazhi outlet showcases

the old streets of Taiwan with an exciting array of Asian

and Taiwanese ‘xiaochi’ 小吃.

s

du

rk

30

Directors

Company Secretary

Registered Office171 Kampong Ampat#05-05 KA FoodlinkSingapore 368330Tel: 6285 6116Fax: 6285 1661

Bankers

Share RegistrarBoardroom Corporate & Advisory Services Pte Ltd50 Raffles Place#32-01 Singapore Land TowerSingapore 048623

AuditorsErnst & Young LLPPublic Accountants and Certified Public AccountantsOne Raffles QuayNorth Tower Level 18Singapore 048583Partner in charge: Ang Chuen Beng (since financial year ended 31 December 2011)

CORPORATE INFORMATION


CORPORATE GOVERNANCE

This report sets out BreadTalk Group Limited’s corporate governance processes and structures that were in place throughout the financial year ended 31 December 2012, with specific reference made to the principles and guidelines of the Code and the Best Practice Guide issued by the Singapore Exchange Securities Trading Limited (the “SGX-ST”).

The Board of Directors (the “Board”) is pleased to confirm that for the financial year ended 31 December 2012, the Company has generally adhered to the framework as outlined in the Singapore Code of Corporate Governance 2005 (the “Code”) and the amendments to the listing manual which came into effect on 29 September 2011 as announced by SGX-ST to strengthen corporate governance practices and foster greater corporate governance disclosure, where it is applicable and practical to the Company. Where there are deviations from the Code, the reasons for which deviation are explained accordingly.

A. BOARD MATTERS

Board’s Conduct of its Affairs

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

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

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

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

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

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

Shareholders, Interested Person Transactions of a material nature and release of the Group’s results for the first 3 quarters 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 these 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

32


The Board met four (4) times during the financial year to discuss the key activities and business strategies of the Group. All Directors were furnished with relevant information beforehand in order to enable them to obtain further explanation where necessary, and be adequately briefed prior to the respective meetings. Minutes of the meetings are also available to the respective Board members. Ad-hoc and non-scheduled meetings are convened by Board members to deliberate on urgent and substantive matters.

The Company’s Articles of Association provides for telephone, videoconferencing, audio-visual or other electronic means of communication to facilitate meetings of the Board.

Details of Directors’ attendance at Board and Board Committee meetings held during the financial year ended 31 December 2012 is summarised as follows:

ATTENDANCE AT BOARD AND BOARD COMMITTEE MEETINGS

Name of Director Board AC NC RC

Number of Meetings Held 4 4 1 1

ATTENDANCE

George Quek Meng Tong 4 NA NA NA

Katherine Lee Lih Leng 4 NA NA NA

Ong Kian Min 4 4 1 1

Chan Soo Sen 4 4 1 1

Tan Khee Giap 4 4 1 1

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

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

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

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

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

Directors also have the opportunity of visiting the Group’s operational facilities and meet with the management team to gain a better understanding of the Group’s business operations. Each

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

Guideline 1.4 of the Code: Board to meet regularly


Director is provided with an annually updated manual containing Board and Company policies relating to the disclosure of interests in securities and conflicts of interests in transactions involving the Company, prohibition on dealings in the Company’s securities, as well as restrictions on the disclosure of price sensitive information.

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

Board Composition and Guidance

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

The Board comprises five (5) members with majority of independent Directors: three (3) Independent non-executive Directors and two (2) Executive Directors. They are as follows:

Dr George Quek Meng Tong (Chairman)Ms Katherine Lee Lih Leng (Deputy Chairman)Mr Ong Kian Min (Lead Independent Non-executive Director)Mr Chan Soo Sen (Independent Non-executive Director)Dr Tan Khee Giap (Independent Non-executive Director)

The Board has three (3) Independent Directors whose independence is reviewed by the NC annually. The NC considers an “independent” Director as one who has no relationship with the Company, its related companies or its officers that could interfere or be reasonably perceived to interfere, with the exercise of the Director’s independent judgement of the conduct of the Group’s affairs, and is not a substantial Shareholder, or a partner (with 5% or more stake) or an executive officer, or a director of any for profit business organisation to which the Company or any of its subsidiaries has made or received significant payments (aggregated in excess of S$200,000 per year) in the current or immediate past financial year. Moreover, the Chairman of the NC is not associated, directly or indirectly, with a substantial Shareholder to enhance an independent view to the best interests of the Company.

As a result of the NC’s review for financial year ended 31 December 2012, 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 efficient and effective decision-making with a strong independent element.

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

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

34


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 discuss any matters that must be raised privately. The session is chaired by Mr Ong Kian Min, the Lead Independent non-executive Director, who is also the chairman of the AC and NC.

Chairman and Chief Executive Officer

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

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

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

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

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 three (3) Independent non-executive Directors who have been tasked with the authority and responsibility to devise an appropriate process to review and evaluate the performance of the Board as a whole as well as each individual Director on the Board. The chairman of the NC is an Independent non-executive Director, and is not a substantial Shareholder or directly associated with a substantial Shareholder.

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

Guideline 3.2 of the Code: Chairman’s role

Guideline 3.3 of the Code: Appointment of Lead Independent Director

Guideline 4.1 of the Code: NC composition

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

NEDs


The composition of the NC is as follows:

Mr Ong Kian Min – ChairmanMr Chan Soo Sen – MemberDr Tan Khee Giap – Member

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

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

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

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

4. To make plans for succession, in particular for the Chairman, Group Chief Executive Officer and other key executives.

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

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

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

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

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

The NC has met once during the financial year under review on 24 February 2012. Each member of the NC shall abstain from voting on any resolution in respect of the assessment of his performance or re-nomination as a Director. Details of Board members’ qualifications and experience including the year of initial appointment are presented in this Annual Report under the heading “Board of Directors”.

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

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

36


Access to Information

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

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

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

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

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

B. REMUNERATION MATTERS

Procedures for Developing Remuneration Policies

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

The RC, established for the purpose of ensuring that there is a formal and transparent procedure for fixing the remuneration packages of individual Directors, comprises three (3) Independent non-executive Directors. The chairman of the RC is an Independent Non-executive Director.

The RC comprises the following:

Mr Chan Soo Sen – ChairmanDr Tan Khee Giap – MemberMr Ong Kian Min – Member

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

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

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


During the financial year under review, the RC had held one (1) meeting on 9 January 2012. The primary responsibilities of the RC are as follows:

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

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 BreadTalk Group Limited Employees’ Share Option Scheme (the “Scheme”) and shall have all the powers as set out in the Rules of the Scheme.

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

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

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

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

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

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

Level and Mix of Remuneration

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

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

Guideline 7.2 of the Code:

RC’s responsibilities

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

38


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

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

The award of shares under RSG Plan can be either performance based awards or time based awards. For performance based awards, entitled participant will be allotted fully paid shares upon satisfactory achievement of pre-determined performance targets. As for time-based awards, entitled participant will be allotted fully paid shares upon satisfactory completion of time based service conditions that is, after the participant has served the Company or as the case may be, the relevant associated company, for a specified duration, as may be determined by the RC.

The adoption of RSG Plan is consistent with the continuing efforts of the existing Scheme in rewarding, retaining and motivating employees to achieve superior performance standards and afford the Company greater flexibility to align the interests of employees with those of the shareholders. To date, the Company has issued 2,082,806 shares under its RSG Plan.

The RC has adopted a framework which consists of a base fee to remunerate Non-executive Directors based on their appointments and roles in the respective Committees, as well as the fees paid in comparable companies. Fees for the Non-executive Directors will be tabled at the forthcoming Annual General Meeting to be held on 23 April 2013 (the “AGM”) for Shareholders’ approval.

The notice periods in the service agreements of the Executive Directors and key executives of the Group are set at a period of not more than 6 months. The Company confirms that there is no onerous removal clause in any of the service agreements.

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 and key Executives remuneration for the year ended 31 December 2012 is set out below:

REMUNERATION OF DIRECTORS AND KEY EXECUTIVES

Name of Director Salary(1)

Bonus/Profit-

Sharing Share-based Compensation

Benefits-In-Kind

Directors’ Fees(2) Total

% % % % % %

S$700,000 to below S$850,000

George Quek Meng Tong 56 42 – 2 – 100

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

Katherine Lee Lih Leng 64 36 – – – 100

Below S$100,000

Ong Kian Min – – – – 100 100

Chan Soo Sen – – – – 100 100

Tan Khee Giap – – – – 100 100

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

40


Name of Key Executives (who are not Directors) Designation Salary(1)

Bonus/Profit-Sharing

Share-based Compensation Total

% % % %

S$500,000 to below S$750,000

Oh Eng Lock Group CEO 61 32 7 100

James Quek Seng Hwa(3) CEO, Bakery DivisionCEO, China Region 49 42 10 100

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

Goh Tong Pak President, Chairman’s Office 88 9 2 100

Frankie Quek Swee Heng(4) CEO, Asean Region 84 13 3 100

Jenson Ong Chin Hock CEO, Food Atrium Division 87 11 3 100

Cheng William CEO, Restaurant Division 68 26 6 100

Lawrence Yeo Group CFO 64 29 6 100

Notes:

(1) Salary is inclusive of fixed allowance and CPF contribution.(2) Directors’ fees will be paid after approval is obtained from Shareholders at the forthcoming

AGM to be held on 23 April 2013.(3) Mr James Quek Seng Hwa has been appointed as CEO, Bakery Division from 1 March

2012, subsequently appointed as CEO, China Region from 15 October 2012.(4) Mr Frankie Quek Swee Heng is the brother of Dr George Quek Meng Tong and has been

appointed as CEO, Asean Region from 15 October 2012.

Save as disclosed, no other employee whose remuneration exceeded S$150,000 during the year is an immediate family member of any of the members of the Board.

C. ACCOUNTABILITY AND AUDIT

Accountability

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

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

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


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

Audit Committee

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

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

The AC comprises three (3) members who are all Independent Non-executive Directors. The chairman of the AC is an Independent Non-executive Director.

The members of the AC are:

Mr Ong Kian Min – ChairmanMr Chan Soo Sen – MemberDr Tan Khee Giap – Member

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

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

The main functions of the AC are as follows:

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

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

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

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

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

substantial Shareholders.

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

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

Guideline 11.3 of the Code: AC’s authority

Guideline 11.4 of the Code: Duties of AC

42


The AC held four (4) meetings during the financial year under review. It has reviewed the financial statements of the Group for the purpose of the first 3 quarters 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. The AC had reviewed the non-audit services provided by the external auditors, Messrs Ernst & Young LLP and is of the opinion that the provision of such services does not affect their independence. The fees payable to auditors is set out on page 94 of this Annual Report.

The Group has complied with Rule 712 and Rules 715 or 716 of the Listing Manual issued by Singapore Exchange Securities Trading Limited in relation to its auditors. As required by Rule 716 of the Listing Manual, the Audit Committee and the Board of Directors of the Company has satisfied themselves that the appointment of different auditors for its subsidiaries would not compromise the standard and effectiveness of the audit of the Group.

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

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

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

Based on the internal controls established and maintained by the Group, work performed by the internal and external auditors and reviews performed by management, various Board committees and the Board, the AC and the Board are of the opinion that the Group’s internal controls, addressing financial, operational and compliance risks, were adequate for the financial year ended 31 December 2012.

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

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

Guideline 12.1 of the Code: AC to review adequacy of the financial, operational and compliance controls and risk management policies.


Internal Audit

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

Since 2006, the Group had outsourced its internal audit function to RSM Ethos Pte Ltd, a merged entity of Stone Forest Consulting Pte Ltd and Ethos Advisory Pte Ltd (formerly known as Stone Forest Consulting Pte Ltd).

In 2012, Grant Thornton Advisory Services Pte Ltd was appointed in place of RSM Ethos Pte Ltd as Internal Auditor of the Group. The Internal Auditor is guided by the Standards for Professional Practice of Internal Auditing set by the Institute of Internal Auditors. The Internal Auditors report directly to the Chairman of the AC. The AC reviews the scope of internal audit function, internal audit findings and the internal audit plan.

Communication with Shareholders

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

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

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

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

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

Guidelines 13.1 to 13.4 of the Code: IA to report to AC chairman

Guidelines 14.1 to 14.2 of the Code: Regular, effective and fair communications with shareholders

Guideline 15.3 of the Code: Chairman and external auditors present at general meetings

44


In preparation for the annual general meeting, shareholders are encouraged to refer to SGX’s investor guides, namely ‘An Investor’s Guide To Reading Annual Reports’ and ‘An Investor’s Guide To Preparing For Annual General Meetings’. The guides, in both English and Chinese versions are available at the SGX website via this link :http://www.sgx.com/wps/wcm/connect/sgx_en/home/individual_investor/investor_guide

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

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

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

Dealing in Securities

The Company has adopted and implemented an Insider Trading (Prevention) Policy (the “Policy”). The Policy is to ensure that the Company’s Directors, officers, employees of the Group as well as consultants or contractors to the Group (collectively the “Covered Persons”) and immediate family members of Covered Persons are aware of their legal obligations in relation to the dealing of securities in the Company. Covered Persons who are in possession of unpublished material price sensitive information and use such information for their own material gain in relation to those securities is an offence. The Company, while having provided the window periods for dealing in the Company’s securities, has its own internal compliance code in providing guidance to its officers with regards to dealing in the Company’s securities including reminders that the law on insider trading is applicable at all the times.

Before the close of each window period, every officer in the Company is reminded not to deal in the Company’s securities on short-term basis. Accordingly, the Company had complied with Rule 1207 (19) of the Listing Manual.

On 28 May 2009, a Disciplinary Committee (“DC”) was formed to conduct inquiry on a possible breach of the Policy. The role of the DC is to report its finding to the Board and make recommendation as to the penalty if applicable. The Board will decide based on the DC’s recommendation.

The DC comprises three (3) members, a majority of whom are Independent non-executive Directors. The chairman of the DC is an Independent Non-executive Director.

The DC consists of:

Mr Ong Kian Min – ChairmanDr George Quek Meng Tong – MemberMr Chan Soo Sen – Member

Guideline 15.1-15.2 and 15.4 of the Code: Shareholders should be allowed to vote in absentia, avoid bundling of resolutions and limit on proxy.

Guideline 15.5 of the Code: Minutes of general meetings


Interested Person Transactions

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

The AC has reviewed the Interested Person Transactions (“IPT”) entered into during the financial year by the Group and the aggregate value of IPT entered during the financial year ended 31 December 2012 is as follows:

Name of Interested Person

Aggregate value (S$’000) of all IPTs during the financial year under review (excluding

transactions less than S$100,000 and transactions conducted under shareholders’

mandate pursuant to Rule 920)

Aggregate value of all IPTs conducted during the financial year under review

under shareholders’ mandate pursuant to Rule 920 (excluding transactions less than

S$100,000)

(1) Monewell Enterprise - Purchase of Chinese New Year Cookies

(2) Xia Yi Tiao F&B- Food court rental income/ miscellaneous charges

(3) Kung Fu Kitchen- Food court rental income/ miscellaneous charges

(4) Sky One Art Investment Pte Ltd- Purchase of furniture and fittings

147.0

142.3

106.5

101.6

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

920

46


Material Contracts

Except as disclosed in Interested Person Transactions, there is no material contract or loan entered into by the Company or any of its subsidiaries involving interests of any Director or controlling shareholder during the financial year ended 31 December 2012.

Risk Management

The Group has established a risk identification and management framework. With the aforesaid framework, the Group identities key risks and undertakes appropriate measures to control and mitigate these risks. The ownership of these risks lie with the respective department and business unit heads with stewardship residing with the Board. Action plans to manage the risks are continually being monitored and refined by management and the Board.


Index

48 Directors’ Report

54 Statement by Directors

55 Independent Auditor’s Report

57 Consolidated Statement of Comprehensive Income

58 Balance Sheets

60 Statements of Changes in Equity

63 Consolidated Cash Flow Statement

66 Notes to the Financial Statements

FINANCIAL STATEMENTS

48

The directors are pleased to present their report to the members together with the audited consolidated financial statements of BreadTalk Group Limited (the “Company”) and its subsidiaries (collectively, the “Group”) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2012.

Directors

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

Arrangements to enable directors to acquire shares and debentures

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

Directors’ interests in shares and debentures

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

Direct interest Deemed interest

Name of director

As at 1 January

2012

As at 31 December

2012

As at 21 January

2013

As at 1 January

2012

As at 31 December

2012

As at 21 January

2013

The Company(Ordinary shares)

George Quek Meng Tong 95,583,952 95,644,430 95,644,430 – – –

Katherine Lee Lih Leng 52,319,880 52,371,790 52,371,790 – – –

Ong Kian Min 120,000 120,000 120,000 – – –

Tan Khee Giap – – – 20,000 20,000 20,000

(Conditional award of restricted shares)

George Quek Meng Tong 125,708 43,230 43,230 – – –

Katherine Lee Lih Leng 117,140 43,230 43,230 – – –

DIRECTORS’ REPORT


Directors’ interests in shares and debentures (cont’d)

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

Except as disclosed in this report, no other director who held office at the end of the financial year had interest in shares or debentures of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment or the end of the financial year or on 21 January 2013.

Directors’ contractual benefits

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

Share Option and Share Plans

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

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

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

(i) Employees and Directors

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

(ii) Controlling Shareholders and their Associates

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

Size of ESOS

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

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

Grant of ESOS

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

50

Share Option and Share Plans (cont’d)

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

Acceptance of ESOS

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

Since the commencement of the ESOS up to the end of the financial year, there were no options granted to any person. Any options granted under the ESOS do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any share issue of any other company.

(b) The BreadTalk Restricted Share Grant Plan

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

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

Eligibility

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

(i) Employees

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

(ii) Directors

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

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

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

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

DIRECTORS’ REPORT



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

Size of RSG Plan

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

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

The grant of Awards under the RSG Plan may be made from time to time during the year when the RSG Plan is in force.

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

Share Awards and Vesting

The final number of restricted shares awarded will depend on the achievement of pre-determined targets over a one year period. On meeting the performance conditions for the performance period, one-third of the restricted shares will vest. The balance will vest equally over the subsequent two years with fulfilment of service requirements.

The details of the restricted shares awarded under the RSG Plan since its commencement up to 31 December 2012 are as follows:

Name of Participant

Conditional restricted shares granted during

the year

Aggregate conditional

restricted shares awarded since

commencement of the Plan


restricted shares lapsed since



restricted shares vested and

released during the year



released since commencement

of the Plan


restricted shares outstanding at

end of the year

Directors of theCompany

George Quek MengTong (1) 59,000 238,200 59,000 60,478 135,970 43,230

Katherine Lee Lih Leng (1) 59,000 213,000 59,000 51,910 110,770 43,230

Associate of aControllingShareholder

Frankie Quek Swee Heng (2)

24,000 119,000 – 32,150 80,810 38,190

52


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

Share Awards and Vesting (cont’d)

Name of Participant

Conditional restricted

shares granted during the year


restricted shares awarded since



restricted shares lapsed since



restricted shares vested and released

during the year



released since commencement

of the Plan


restricted shares

outstanding at end of the year

Participants whoreceived 5% or more of the total grantsavailable

Oh Eng Lock (3) 139,000 1,047,666 – 42,690 841,016 206,650

Goh Tong Pak 21,000 313,200 – 98,488 251,280 61,920

Cheng William 54,000 274,200 – 74,258 167,070 107,130

James Quek 93,000 226,800 – 45,182 74,730 152,070

Jenson Ong Chin Hock 40,000 76,600 – 12,364 17,460 59,140

Lawrence Yeo Kia Yeow 87,000 87,000 – – – 87,000

Other participants 144,000 835,400 20,210 190,556 403,700 411,490

720,000 3,431,066 138,210 608,076 2,082,806 1,210,050

(1) Also a controlling shareholder of the Company(2) Associate of George Quek Meng Tong, a controlling shareholder of the Company(3) This includes a total of 781,666 shares that were released via the issuance of treasury shares in relation to a sign-on bonus

granted to Mr. Oh Eng Lock.

With the Remuneration Committee’s approval on the achievement of the performance targets for the performance period from FY2009 to FY2011, a total of 608,076 restricted shares were released via the issuance of treasury shares.

DIRECTORS’ REPORT


Audit Committee

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

Auditor

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

On behalf of the board of directors:

George Quek Meng TongDirector

Katherine Lee Lih LengDirector

Singapore27 March 2013

54

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 statement of comprehensive income, statements of changes in equity, and consolidated cash flow statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2012 and the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date, and

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

On behalf of the board of directors:

George Quek Meng TongDirector

Katherine Lee Lih LengDirector

Singapore27 March 2013

STATEMENT BY DIRECTORS


Report on the financial statements

We have audited the accompanying consolidated financial statements of BreadTalk Group Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 57 to 145, which comprise the balance sheets of the Group and the Company as at 31 December 2012, the statements of changes in equity of the Group and the Company, consolidated statement of comprehensive income and consolidated cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

INDEPENDENT AUDITOR’S REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012

56

Opinion

In our opinion, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2012 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date.

Report on other legal and regulatory requirements

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

Ernst & Young LLPPublic Accountants and Certified Public Accountants Singapore27 March 2013

INDEPENDENT AUDITOR’S REPORT FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2012

Notes 2012 2011$’000 $’000

Revenue 3 447,334 365,904

Cost of sales (205,908) (165,846)

Gross profit 241,426 200,058

Other operating income 4 10,484 7,495

Interest income 5 1,685 824

Distribution and selling expenses (180,500) (145,520)

Administrative expenses (52,786) (45,038)

Interest expense 5 (1,386) (785)

Profit before tax and share of results of joint ventures 18,923 17,034

Share of results of joint ventures 453 93

Profit before tax 6 19,376 17,127

Income tax expense 8 (5,818) (5,370)

Profit for the year 13,558 11,757

Profit attributable to:Equity holders of the Company 12,000 11,592

Non-controlling interests 1,558 165

13,558 11,757

Other comprehensive income:Net fair value loss on available-for-sale financial assets (390) –

Foreign currency translation (944) 911

Other comprehensive income for the year, net of tax (1,334) 911

Total comprehensive income for the year 12,224 12,668

Total comprehensive income attributable to:Equity holders of the Company 10,666 12,503

Non-controlling interests 1,558 165

12,224 12,668

Earnings per share (cents)Basic 9 4.27 4.12

Diluted 9 4.25 4.10

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

58

Notes Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Non-current assetsProperty, plant and equipment 10 157,408 88,898 44,286 7,222

Intangible assets 11 8,531 9,214 – –

Investment securities 12 45,883 11,669 – –

Investment in subsidiaries 13 – – 23,785 40,476

Investment in associates 14 900 – – –

Investment in joint ventures 15 3,125 422 – –

Other receivables 17 1,880 1,389 – –

Fixed deposit 19 9,988 – – –

Deferred tax assets 8 2,575 2,120 67 30

230,290 113,712 68,138 47,728

Current assets

Inventories 16 9,492 7,397 – –

Trade and other receivables 17 43,618 46,800 1,025 –

Prepayments 6,324 5,389 41 36

Tax recoverable 377 230 – –

Amounts due from subsidiaries (non-trade) 18 – – 31,261 15,335

Amounts due from joint ventures (trade) 18 283 – – –

Amounts due from joint ventures (non-trade) 18 1,369 1,297 – –

Amounts due from minority shareholders of subsidiaries (non-trade) 18 411 420 – –

Cash and cash equivalents 19 64,245 87,060 431 2,698

126,119 148,593 32,758 18,069

Current liabilities

Trade and other payables 20 90,957 74,074 4,445 250

Other liabilities 21 52,477 41,124 7,588 2,115

Provision 21 7,977 5,871 – –

Amounts due to subsidiaries (non-trade) 18 – – 16,695 7,394

Amounts due to joint ventures (trade) 18 1,847 – – –

Amounts due to joint ventures (non-trade) 18 364 395 – –

Finance lease obligations, secured 23 – 37 – –

Loan from a minority shareholder of a subsidiary

22 200 200 – –

Short-term loans 24 7,896 15,764 – 12,000

Current portion of long-term loans 25 37,910 8,396 25,863 –

Tax payable 6,438 5,623 – –

206,066 151,484 54,591 21,759

BALANCE SHEETS AS AT 31 DECEMBER 2012


Notes Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Net current liabilities (79,947) (2,891) (21,833) (3,690)

Non-current liabilitiesLong-term loans 25 50,613 15,156 18,000 3,989

Loans from minority shareholders of subsidiaries 22 – 882 – –

Other liabilities 21 6,191 7,039 – –

Deferred tax liabilities 8 2,514 2,276 – –

59,318 25,353 18,000 3,989

Net assets 91,025 85,468 28,305 40,049

Equity attributable to equity holders of the Company

Share capital 26 33,303 33,303 33,303 33,303

Treasury shares 26 (406) (609) (406) (609)

Accumulated profits 27 47,559 41,558 (5,127) 6,812

Other reserves 27 2,094 3,718 535 543

82,550 77,970 28,305 40,049

Non-controlling interests 8,475 7,498 – –

Total Equity 91,025 85,468 28,305 40,049


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90

2,0

71

(72

2)

60

42

47

16

86

8,5

62

6,5

21

75

,08

3

Profit

for

the

year

––

11

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––

––

–1

1,5

92

16

51

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57

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er c

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pre

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curr

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––

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91

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91

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––

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the

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––

11

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91

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––

12

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––

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81

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DEC

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59

1,0

25

62

Share capitalTreasury

sharesAccumulated

profits

Share based compensation

reserveCapital reserve Total equity

$’000 $’000 $’000 $’000 $’000 $’000(Note 26) (Note 26) (Note 27) (Note 27) (Note 27)

2011 Company

1 January 2011 33,303 (199) 5,064 247 168 38,583

Profit for the year – – 4,561 – – 4,561

Total comprehensive income for the year – – 4,561 – – 4,561

Contributions by anddistributions to owners

Share-based payments – – – 276 – 276

Treasury shares transferred on vesting of restricted share grant – 148 – (166) 18 –

Purchase of treasury shares – (558) – – – (558)

Dividends paid (Note 34) – – (2,813) – – (2,813)

Total contributions by and distributions to owners – (410) (2,813) 110 18 (3,095)

At 31 December 2011 33,303 (609) 6,812 357 186 40,049

2012 Company

1 January 2012 33,303 (609) 6,812 357 186 40,049

Loss for the year – – (6,315) – – (6,315)

Total comprehensive income for the year – – (6,315) – – (6,315)

Contributions by anddistributions to owners

Share-based payments – – – 291 – 291

Treasury shares transferred on vesting of restricted share grant – 299 – (269) (30) –

Purchase of treasury shares – (96) – – – (96)

Dividends paid (Note 34) – – (5,624) – – (5,624)

Total contributions by and distributions to owners – 203 (5,624) 22 (30) (5,429)

At 31 December 2012 33,303 (406) (5,127) 379 156 28,305


STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2012 (CONT’D)


Notes 2012 2011$’000 $’000

Cash flows from operating activitiesProfit before taxation 19,376 17,127

Adjustments for:

Amortisation of intangible assets 11 618 442

Depreciation of property, plant and equipment 10 30,379 23,920

Gain on disposal of an associate 14 (30) –

Impairment loss on intangible assets 11 215 125

Impairment loss on property, plant and equipment 10 167 289

Interest expense 1,386 785

Interest income (1,685) (824)

Loss/(gain) on disposal of property, plant and equipment 753 (20)

Property, plant and equipment written off 732 1,219

Share based payment expenses 291 277

Share of results of joint ventures (453) (93)

Translation difference 857 (358)

Waiver of loans by minority shareholders of subsidiaries (882) –

(Write back of impairment)/impairment of other receivables (41) 64

(Write back of impairment)/impairment of trade receivables (11) 253

Write-down of inventories 15 25

Write-off of inventories 22 31

Operating cash flows before working capital changes 51,709 43,262

Increase in:

Inventories (2,132) (1,416)

Trade and other receivables (9,620) (9,458)

Prepayments (935) (2,083)

Amount due from joint ventures (trade) (283) –

Increase in:

Trade and other payables 13,929 13,548

Other liabilities 4,585 9,946

Amount due to a joint venture (trade) 1,847 –

Cash flows generated from operations 59,100 53,799

Tax paid (5,415) (4,933)

Net cash flows from operating activities 53,685 48,866

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2012

64

Notes 2012 2011$’000 $’000

Cash flows from investing activitiesInterest income received 2,048 305

Purchase of property, plant and equipment A (92,893) (37,077)

Additions to intangible assets (196) (616)

Subscription of junior bonds (6,000) –

Cash paid for reinstatement expenses (157) (126)

Proceeds from disposal of property, plant and equipment 327 225

Deposit for subscription of junior bonds 17 – (12,000)

Amount due from joint ventures (non-trade) (72) (291)

Amount due to joint ventures (non-trade) (30) 255

Loan to a joint venture – (500)

Investment in a joint venture (2,310) (100)

Investment in associates (900) –

Proceeds from disposal of an associate 14 30 –

Purchase of investment securities (20,130) –

Placement of long-term fixed deposit (9,988) –

Partial redemption of junior bonds 12 3,526 –

Dividends received from a joint venture – 200

Net cash flows used in investing activities (126,745) (49,725)

Cash flows from financing activitiesInterest paid (1,386) (761)

Dividends paid to shareholders of the Company (5,624) (2,813)

Dividends paid to minority shareholders of a subsidiary (54) (820)

Purchase of treasury shares (96) (558)

Proceeds from long-term loans 59,933 15,764

Repayment of long-term loans (6,501) (6,625)

Proceeds from short-term loans 10,461 21,227

Repayment of short-term loans (6,181) (10,196)

Capital injection from minority shareholders of subsidiaries – 812

Repayment of finance lease obligations (37) (54)

Loans from minority shareholders of subsidiaries – 882

Acquisition of non-controlling interests (200) –

Repayment of amount due to landlord (70) (83)

Net cash flows from financing activities 50,245 16,775

Net (decrease)/increase in cash and cash equivalents (22,815) 15,916

Cash and cash equivalents at the beginning of the year 87,060 71,144

Cash and cash equivalents at the end of the year 19 64,245 87,060


CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2012


Note A. Purchase of property, plant and equipment

During the year, the Group acquired property, plant and equipment with an aggregate cost of approximately $103,206,000 (2011: $40,033,000). The additions were by way of cash payments of $88,455,000 (2011: $27,214,000), decrease in provision for reinstatement costs of $2,350,000 (2011: $2,461,000), amount payable to other creditors of $12,401,000 (2011: $10,358,000) and accruals of $5,920,000 (2011: $Nil)

Cash outflow for the year also include payments in respect of property, plant and equipment acquired in the previous years of $10,358,000 (2011: $9,863,000).


NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2012

66

1 General

1.1 Corporate information

BreadTalk Group Limited (the “Company”) is a limited liability company, which is incorporated and domiciled in the Republic of Singapore and is listed on the Singapore Exchange Securities Trading Limited (SGX-ST).

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

The principal activity of the Company is that of investment holding and provision of management services. The principal activities of the subsidiaries are disclosed in Note 13 to the financial statements.

1.2 Fundamental accounting assumption

As at 31 December 2012, the Group’s current liabilities exceeded its current assets by $79,947,000 (2011: $2,891,000). The ability of the Group to continue as a going concern is dependent on the Group’s ability to generate positive cash flows. In the opinion of the directors, the Group is able to continue as a going concern despite its net current liabilities position as the directors are of the view that the Group will be able to continue to generate net cash inflows from its operating activities for a period of 12 months from the date these financial statements were approved and to enable it to meet its financial obligations as and when they fall due. In addition, the Group has sufficient unutilised banking facilities available for future use should the need arise.

2 Summary of significant accounting policies

2.1 Basis of preparation

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

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

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

2.2 Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the Group has adopted all the new and revised standards and Interpretations of FRS (INT FRS) that are effective for annual periods beginning on or after 1 January 2012. The adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group and the Company.


2 Summary of significant accounting policies (cont’d)

2.3 Standards issued but not yet effective

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

DescriptionEffective for annual periods

beginning on or after

Amendments to FRS 1: Presentations of Items of Other Comprehensive Income 1 July 2012

Revised FRS 19 Employee Benefits 1 January 2013

FRS 113: Fair Value Measurement 1 January 2013

Amendments to FRS 107 Disclosures – Offsetting Financial Assets and Financial Liabilities 1 January 2013

Improvements to FRSs 2012 1 January 2013

– Amendment to FRS 1 Presentation of Financial Statements 1 January 2013

– Amendment to FRS 16 Property, Plant and Equipment 1 January 2013

– Amendment to FRS 32 Financial Instruments: Presentation 1 January 2013

Revised FRS 27 Separate Financial Statements 1 January 2014

Revised FRS 28 Investments in Associates and Joint Ventures 1 January 2014

FRS 110 Consolidated Financial Statements 1 January 2014

FRS 111 Joint Arrangements 1 January 2014

FRS 112 Disclosure of Interests in Other Entities 1 January 2014

Amendments to FRS 32 Offsetting Financial Assets and Financial Liabilities 1 January 2014

Amendment to the transition guidance of FRS 110 Consolidated Financial Statements, FRS 111 Joint Arrangments and FRS 112 Disclosure of Interests in Other Entities 1 January 2014

Amendmens to FRS 110, FRS 112 and FRS 27, Investment Entities 1 January 2014

Except for the Amendments to FRS 1, FRS 111, Revised FRS 28 and FRS 112, the directors expect that the adoption of the other standards and interpretations above will have no material impact on the financial statements in the period of initial application. The nature of the impending changes in accounting policy on adoption of the Amendments to FRS 1, FRS 111, Revised FRS 28 and FRS 112 are described below.

Amendments to FRS 1 Presentation of Items of Other Comprehensive Income

The Amendments to FRS 1 Presentation of Items of Other Comprehensive Income (OCI) is effective for financial periods beginning on or after 1 July 2012.

The Amendments to FRS 1 changes the grouping of items presented in OCI. Items that could be reclassified to profit or loss at a future point in time would be presented separately from items which will never be reclassified. As the Amendments only affect the presentations of items that are already recognised in OCI, the Group does not expect any impact on its financial position or performance upon the adoption of this standard.

FRS 111 Joint Arrangements and Revised FRS 28 Investments in Associates and Joint Ventures

FRS 111 Joint Arrangements and Revised FRS 28 Investments in Associates and Joint Ventures are effective for financial periods beginning on or after 1 January 2014.

FRS 111 classifies joint arrangements either as joint operations or joint ventures. Joint operation is a joint arrangement whereby the parties that have rights to the assets and obligations for the liabilities whereas joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.


68


2.3 Standards issued but not yet effective (cont’d)

FRS 111 Joint Arrangements and Revised FRS 28 Investments in Associates and Joint Ventures (cont’d)

FRS 111 requires the determination of joint arrangement’s classification to be based on the parties’ rights and obligations under the arrangement, with the existence of a separate legal vehicle no longer being the key factor. FRS 111 disallows proportionate consolidation and requires joint ventures to be accounted for using the equity method. The revised FRS 28 was amended to describe the application of equity method to investments in joint ventures in addition to associates.

The Group currently applies equity accounting to its joint ventures. Upon adoption of FRS 111, the Group does not expect any impact on the Group’s financial statement presentation.

FRS 112 Disclosure of Interests in Other Entities

FRS 112 Disclosure of Interests in Other Entities is effective for financial periods beginning on or after 1 January 2014.

FRS 112 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. FRS 112 requires an entity to disclose information that helps users of its financial statements to evaluate the nature and risks associated with its interests in other entities and the effects of those interests on its financial statements. As this is a disclosure standard, it will have no impact to the financial position and financial performance of the Group when implemented in 2014.

2.4 Significant accounting estimates and judgements

The preparation of th Group’s consolidated financial statements require management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities at the end of each reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future periods.

Judgments made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the consolidated financial statements:

(i) Impairment of available-for-sale investments and held-to-maturity investments

The Group records impairment charges on available-for-sale equity investments when there has been a significant or prolonged decline in the fair value below their cost. The determination of what is “significant” or “prolonged” requires judgment. In making this judgment, the Group evaluates, among other factors, historical share price movements and the duration and extent to which the fair value of an investment is less than its cost.

The Group assesses whether there is an indication that held-to-maturity investments may be impaired. In the assessment, the Group evaluates, among other factors, the cash flow projections and value of the related secured property.



2.4 Significant accounting estimates and judgements (cont’d)

Judgments made in applying accounting policies (cont’d)

(ii) Income taxes

The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s tax payable and deferred tax liabilities at 31 December 2012 were approximately $6,438,000 (2011: $5,623,000) and $2,514,000 (2011: $2,276,000) respectively. The carrying amount of the Group’s tax recoverable and deferred tax assets at 31 December 2012 was $377,000 (2011: $230,000) and $2,575,000 (2011: $2,120,000) respectively.

A subsidiary, BreadTalk Pte Ltd obtained the Development and Expansion Incentive (“DEI”) which entitles the qualifying income of the company earned up to the financial year ended 31 December 2012 to be subject to the concessionary tax rate of 10%. Judgment is involved when determining the amount of qualifying income for the year.

Key sources of estimation uncertainty

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

The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they accur.

(i) Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill are allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of the Group’s goodwill at 31 December 2012 was $5,846,000 (2011: $6,048,000). More details are given in Note 11.


70



Key sources of estimation uncertainty (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 arising from the acquisition of Topwin was separately identified and recognised by management using the “relief from royalty method”. The premise of this valuation method is the assumption that the Group would be compelled to pay the rightful owner of the brand name if the Group did not have the legal right to utilise the brand name. The ownership of the brand therefore relieves the Group from making such royalty payments. This requires an estimation of the royalty payments including initial fees and continuing royalty payments based on a percentage of projected revenue. The basis used to determine the revenue projections is the revenue for each food court of Topwin achieved in the financial year ended 31 December 2004 projected into the future. The useful life of the brand value is estimated by the directors to be 15 years as this is the length of time that they expect the benefits of the brand to flow to the Group. Amortisation of the brand amounted to $213,000 (2011: $213,000) for the financial year ended 31 December 2012 and the carrying amount of the brand value at 31 December 2012 was $1,493,000 (2011: $1,706,000). More details are given in Note 11.

(iii) Useful lives 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 2012 was $157,408,000 (2011: $88,898,000). 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.

During the year ended 31 December 2012, a subsidiary, BreadTalk Pte Ltd, standardized its useful life estimates applied to the outlets’ plant and equipment to be the shorter of 5 years or the lease period - where the lease period is defined to include any lease extension options. The change in estimated useful life is a change in accounting estimate that was applied prospectively from 1 January 2012. The impact of this change in accounting estimate in current and future periods are as follows:

2012 2013 2014 Later$’000 $’000 $’000 $’000

Increase/(decrease) in profit before tax 1,052 610 16 (1,288)




Key sources of estimation uncertainty (cont’d)

(iv) Impairment of loans and receivables

The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Company considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience of assets with similar credit risk characteristics. The carrying amount of the Company’s loans and receivables at balance sheet date is disclosed in Note 31 to the financial statements.

(v) Provision for reinstatement cost

The Group recognises provision for reinstatement cost when the Group entered into a lease agreement for the premises. In determining the amount of the provision for reinstatement cost, estimates are made in relation to the expected cost to reinstate the premises back to its original form after the expiration of the lease terms. The carrying amount of the provision for reinstatement cost as at 31 December 2012 was $7,977,000 (2011: $5,871,000).

2.5 Foreign currency

(a) Functional currency

The Group’s consolidated financial statements are presented in Singapore Dollars, which is also the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

(b) Transactions and balances

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 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 are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under translation reserve in equity. The reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.


72


2.5 Foreign currency

(c) Consolidated financial statements

For consolidation purpose, the assets and liabilities of foreign operations are translated into SGD at the rate of exchange ruling at balance sheet date and their profit or loss are translated at the exchange rates prevailing at the date of the transactions. The exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.

In the case of a partial disposal without loss of control of a subsidiary that includes a foreign operation, the proportionate share of the cumulative amount of the exchange differences are re-attributed to non-controlling interest and are not recognised in profit or loss. For partial disposals of associates or jointly controlled entities that are foreign operations, the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

2.6 Related parties

A related party is defined as follows:

(a) A person or a close member of that person’s family is related to the Group and Company if that person:

(i) Has control or joint control over the Company;(ii) Has significant influence over the Company; or(iii) Is a member of the key management personnel of the Group or Company or of a parent of the Company.

(b) An entity is related to the Group and the Company if any of the following conditions applies:

(i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third party.(v) The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity

related to the Company. If the Company is itself such a plan, the sponsoring employers are also related to the Company;

(vi) The entity is controlled or jointly controlled by a person identified in (a);(vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management

personnel of the entity (or of a parent of the entity).



2.7 Subsidiaries, basis of consolidation and non-controlling interests

(a) Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities.

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

(b) Basis of consolidation and business combinations

(A) Basis of consolidation

Basis of consolidation from 1 January 2010

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

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

Subsidiaries are 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.

Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

amounts at the date when control is lost;

income to profit or loss or retained earnings, as appropriate.


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2.7 Subsidiaries, basis of consolidation and non-controlling interests (cont’d)

(b) Basis of consolidation and business combinations (cont’d)

(A) Basis of consolidation (cont’d)

Basis of consolidation prior 1 January 2010

Certain of the above-mentioned requirements were applied on a prospective basis. The following differences, however, are carried forward in certain instances from the previous basis of consolidation:

parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired were recognised in goodwill.

reduced to nil. Any further losses were attributed to the Group, unless the non-controlling interest had a binding obligation to cover these. Losses prior to 1 January 2010 were not reallocated between non-controlling interest and the owners of the Company.

of net asset value at the date control was lost. The carrying value of such investments as at 1 January 2010 has not been restated.

(B) Business combinations

Business combinations from 1 January 2010

Business combinations are accounted by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with FRS 39 either in profit or loss or as change to other comprehensive income. If the contingent consideration is classified as equity, it is not to be remeasured until it is finally settled within equity.

In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.

The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree identifiable net assets.



2.7 Subsidiaries, basis of consolidation and non-controlling interests (cont’d)

(b) Basis of consolidation and business combinations (cont’d)

(B) Business combinations (cont’d)

Business combinations from 1 January 2010 (cont’d)

Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill. The accounting policy for goodwill is set out in Note 2.11(a). In instances where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the acquisition date.

Business combinations prior to 1 January 2010

In comparison to the above mentioned requirements, the following differences applied:

Business combinations are accounted for by applying the purchase method. Transaction costs directly attributable to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the proportionate share of the acquiree’s identifiable net assets.

Business combinations achieved in stages were accounted for as separate steps. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity. Any additional acquired share of interest did not affect previously recognised goodwill.

When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree were not reassessed on acquisition unless the business combination resulted in a change in the terms of the contract that significantly modified the cash flows that otherwise would have been required under the contract.

Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognised as part of goodwill.

(c) Transactions with non-controlling interests

Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated balance sheet, separately from equity attributable to owners of the Company.

Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributable to owners of the Company.


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2.8 Associates

An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.

The Group’s investment in associates is accounted for using the equity method. Under the equity method, the investment in associates is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to associates is included in the carrying amount of the investment and is neither amortised nor tested individually for impairment. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is included as income in the determination of the Group’s share of results of the associate in the period in which the investment is acquired.

The profit or loss reflects the share of the results of operations of the associates. Where there has been a change recognised in other comprehensive income by the associates, the Group recognises its share of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associates.

The Group’s share of the profit or loss of its associates is the profit attributable to equity holders of the associate and, therefore is the profit or loss after tax and non-controlling interests in the subsidiaries of associates.

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

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associates. The Group determines at the end of each reporting period whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profit or loss.

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

Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the aggregate of the retained investment and proceeds from disposal is recognised in profit or loss.



2.9 Joint ventures

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, where the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing 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 profit or loss of the joint venture is recognised in profit or loss. 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.

Adjustments are made in the Group’s consolidated financial statements to eliminate the Group’s share of intragroup balances, income and expenses and unrealised gains and losses on such transactions between the Group and its jointly controlled entity. Losses on transactions are recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets or an impairment loss.

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

Upon loss of joint control, the Group measures any retained investment at its fair value. Any difference between the carrying amount of the former jointly controlled entity upon loss of joint control and the aggregate of the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.


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2.10 Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying property, plant and equipment. The accounting policy for borrowing costs is set out in Note 2.18. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Subsequent to recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

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 years

Machinery and equipment – 5 - 6 years

Electrical works – 5 - 6 years

Furniture and fittings – 5 - 6 years

Office equipment – 3 - 6 years

Renovation – 2 - 6 years

Motor vehicles – 5 - 6 years

During the year, a subsidiary, BreadTalk Pte Ltd, changed the estimated useful life of outlets’ plant and equipment. The change is set out in Note 2.4 (iii).

Assets under construction included in plant and equipment are not depreciated as these assets are not yet available for use.

Leasehold land represents the lease of land from Jurong Town Corporation and is intended for the construction of office building and development of manufacturing facilities in Singapore.

Leasehold land will be depreciated over the remaining lease term upon completion of the construction of the building.

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

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

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



2.11 Intangible assets

(a) Goodwill

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in profit or loss.

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

Where goodwill forms part of a cash-generating unit 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 fair values of the operations 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 2.5.

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

(b) Other intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortised over the estimated 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 are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite useful lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.


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2.11 Intangible assets (cont’d)

(b) Other intangible assets (cont’d)

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

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 profit or loss when the asset is derecognised.

(i) Trade mark

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

(ii) Franchise rights

Costs relating to master franchise fees paid are capitalised and amortised on a straight-line basis over the lease/franchise period ranging from 4 to 20 years.

Costs relating to territory reservation fees are capitalised and amortised on a straight line basic over the useful life of 6 years.

(iii) Location premium

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

(iv) Brand value

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

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



2.12 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Group’s cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset, except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. 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 increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase.


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2.13 Financial assets

Initial recognition and measurement

Financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial assets at initial recognition.

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

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

(a) Loans and receivables

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

(b) Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in profit or loss when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.

(c) Available-for-sale financial assets

Available-for-sale financial assets include equity and debt securities. Equity investments classified as available-for-sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in market conditions.

After initial recognition, available-for-sale financial assets are subsequently measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.



2.13 Financial assets (cont’d)

Derecognition

A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Regular way purchase or sale of a financial asset

All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned.

2.14 Impairment of financial assets

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

(a) Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in profit or loss.

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

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

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


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2.14 Impairment of financial assets (cont’d)

(b) Financial assets carried at cost

If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on a financial asset carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

(c) Available-for-sale financial assets

In the case of equity instruments classified as available-for sale, objective evidence of impairment include (i) significant financial difficulty of the issuer or obligor, (ii) information about significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in equity instrument may not be recovered; and (iii) a significant or prolonged decline in the fair value of the investment below its costs. ‘Significant’ is to be evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its acquisition cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from other comprehensive income and recognised in profit or loss.

Reversals of impairment losses in respect of equity instruments are not recognised in profit or loss; increase in their fair value after impairment are recognised directly in other comprehensive income.

2.15 Cash and cash equivalents

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

2.16 Inventories

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

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

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

Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying value of inventories to the lower cost and net realisable value.

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.



2.17 Financial liabilities

Initial recognition and measurement

Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value plus in the case of financial liabilities not at fair value through profit or loss, directly attributable transaction costs.

Subsequent measurement

After initial recognition, financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss when the liabilities are derecognised and through the amortisation process.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

2.18 Borrowing costs

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset.

Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

2.19 Provisions

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

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


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2.20 Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the transitional requirements of INT FRS 104.

(a) As leasee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. 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 profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

(b) As lessor

Leases where the Group retains substaintially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred an negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.22(c). Contingent rents are recognised as revenue in the period in which they are earned.

2.21 Employee benefits

(a) Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. Contributions to national pension schemes are recognised as an expense in the period in which the related services are performed.

Singapore

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

People’s Republic of China (“PRC”)

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



2.21 Employee benefits (cont’d)

(a) Defined contribution plans (cont’d)

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 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.

(b) Employee leave entitlement

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

(c) The BreadTalk Restricted Share Grant Plan (“RSG Plan”)

Employees receive remuneration under the RSG Plan in the form of fully-paid shares (“Awards”) of the Company as consideration for services rendered. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the Awards at the date on which the Awards are granted. The cumulative expense recognized at each reporting date until the vesting date reflects the Company’s best estimate of the number of Awards that will ultimately vest. The charge or credit to profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

In the Company’s separate financial statements, the fair value of the Awards granted to employees of its subsidiaries is recognised as an increase in the cost of the Company’s investment in subsidiaries, with a corresponding increase in equity.

2.22 Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is made. Revenue is measured at the fair value of consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements to determine if it is acting as principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition criteria must also be met before revenue is recognised:

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

Revenue from the sale of goods is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer, usually on delivery of goods. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.


88


2.22 Revenue (cont’d)

(b) Franchise income

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

(c) Food court revenue

Fixed rental income from the sub-lease of food courts is recognised as income in profit or loss on a straight line basis over the lease term. The variable portion of the rental income which is computed based on a percentage of the food court tenants’ gross sales is recognised when such sales are earned.

Revenue from the sale of food and beverage is recognised upon delivery and acceptance by customers, net of sale 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 profit or loss 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 profit or loss over the expected useful life of the relevant asset by equal annual instalments.



2.24 Taxes

(a) Current income tax

Current income 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, in the countries where the Group operates and generates taxable income.

Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

(b) Deferred tax

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

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

liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; 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.

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:


90


2.24 Taxes (cont’d)

(b) Deferred tax (cont’d)

recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

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

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

Deferred income tax is recognised in profit or loss. Deferred income tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or 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 income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would be recognised subsequently if new information about the facts and circumstances changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if it incurred during the measurement period or in profit or loss.



2.24 Taxes (cont’d)

(c) Sales tax

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

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

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

For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 33, including the factors used to identify the reportable segments and the measurement basis of segment information.

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 Treasury shares

The Group’s own equity instruments, which are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount of treasury shares and the consideration received, if reissued, is recognised directly in equity. Voting rights related to treasury shares are nullified for the Group and no dividends are allocated to them respectively.


92


2.28 Contingencies

A contingent liability is:

(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or

(b) a present obligation that arises from past events but is not recognised because:

(i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

(ii) The amount of the obligation cannot be measured with sufficient reliability.

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

Contingent liabilities and assets are not recognised on the balance sheet of the Group, except for contingent liabilities assumed in a business combination that are present obligations and which the fair values can be reliably determined.

3 Revenue

Group2012 2011

$’000 $’000

Bakery sales 199,735 169,395

Restaurant sales 102,620 76,969

Sales to franchisee 21,595 15,231

Franchise income 11,806 9,807

Food court income 111,578 94,502

447,334 365,904


4 Other operating income

Group2012 2011

$’000 $’000

Management fee income 6,272 4,332

Government grant (1) 1,033 840

Income from expired food court stored value cards – 139

Sponsorship income 216 651

Sundry sales 250 67

Compensation from landlord 452 339

Waiver of loans by minority shareholders of subsidiaries (3) 882 –

Agency commission – 39

Grant income from Special Employment Credit (2) 36 –

Gain on disposal of an associate 30 –

Write back of impairment of loans and receivables

- trade receivables (Note 17) 11 –

- other receivables (Note 17) 41 –

Miscellaneous income 1,261 1,088

10,484 7,495

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

(2) The Special Employment Credit (Scheme) was introduced as a budget initiative in the financial year 2011 and was further enhanced in financial year 2012 to cover a wider range of employees and enabling more employers to benefit from the Scheme. The Enhanced Scheme is for 5 years and will expire on 31 December 2016.

Under the Scheme, for each Singaporean employee who is aged 50 and above and who earns up to $3,000 per month, the Company will receive an 8% Special Employment Credit based on that employee’s salary. The Scheme has 2 payouts in March and September. The Group received $36,000 (2011: $Nil) in September 2012.

(3) Comprises a waiver of loan payable by Star Food Pte Ltd of $800,000 (2011: $Nil) in conjunction with the minority shareholder’s disposal of its interest in the company and a waiver of loan payable by Charcoal Pte Ltd of $82,000 (2011: $Nil) to the minority shareholder due to plans to liquidate the company.

5 Interest income and interest expense

Group2012 2011

$’000 $’000

Interest income from:

- loans and receivables 460 304

- held-to-maturity financial assets 1,225 520

1,685 824

Interest expense on:

- Term loans (1,385) (754)

- Finance lease obligations (1) (3)

- Others – (28)

(1,386) (785)


94

6 Profit before taxation

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

Group2012 2011

$’000 $’000

Audit fees to:

- auditors of the Company 281 307

- other auditors 313 269

Non-audit fees to:

- auditors of the Company 23 17

- other auditors 18 62

Amortisation of intangible assets (Note 11) 618 442

Impairment of loans and receivables

- trade receivables (Note 17) – 253

- other receivables (Note 17) – 64

Directors’ fees 168 170

Depreciation of property, plant and equipment (Note 10) 30,379 23,920

Loss/(gain) on disposal of property, plant and equipment 753 (20)

Employee benefits (Note 7) 122,774 102,284

Foreign exchange loss/(gain),net 615 (58)

Operating lease expenses

- fixed portion 77,951 67,340

- variable portion 12,408 7,395

Property, plant and equipment written off 732 1,219

Impairment loss on intangible assets (Note 11) 215 125

Impairment loss on property, plant and equipment (Note 10) 167 289

Write-down of inventories (Note 16) 15 25

Write-off of inventories (Note 16) 22 31


7 Employee benefits

Group2012 2011

$’000 $’000

Staff costs (including directors)Salaries and bonuses 94,338 76,060

Central Provident Fund and other pension contributions 11,269 7,811

Sales incentives and commission 3,182 2,357

Share-based payment (RSG Plan) 280 279

Other personnel benefits 13,705 15,777

122,774 102,284

RSG Plan

Under the RSG Plan, directors and employees receive remuneration in the form of fully-paid shares of the Company as consideration for services rendered. Restricted shares are granted conditionally and the final number of restricted shares awarded will depend on the achievement of pre-determined targets over a one year period. On meeting the performance conditions for the performance period, one-third of the restricted shares will vest. The balance will vest equally over the subsequent two years with the fulfilment of service requirements.

The fair value of the restricted shares granted is estimated based on the market price of the shares on grant date less the present value of expected future dividends during the vesting period.

During the year, 720,000 (2011: 681,000) restricted shares were granted. The number of restricted shares outstanding at year end is 1,210,050 (2011: 1,233,336) shares.


96

8 Taxation

Major components of income tax expense were:

Group2012 2011

$’000 $’000

Current tax

- Current year 6,235 5,280

- Over provision in prior year (937) (129)

Deferred tax

- Origination and reversal of temporary differences (682) (269)

- Under/(over) provision in prior year 355 (156)

Withholding tax 847 644

Taxation expense 5,818 5,370

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

Group2012 2011

$’000 $’000

Profit before taxation 19,376 17,127

Tax at the domestic rates applicable to profits in the countries where the Group operates(1) 2,706 2,821

Tax effect of:

Expenses not deductible for tax purposes 2,303 1,592

Income not subject to taxation (955) (37)

Share of associates’ and joint ventures’ tax 169 68

Tax savings arising from Development and Expansion Incentive (2) (249) (222)

(Over)/under provision in prior years

- Current tax (937) (129)

- Deferred tax 355 (156)

Withholding tax expense 847 644

Effect of partial tax exemption and tax relief (298) (93)

Deferred tax assets not recognised 2,470 1,829

Benefits from previously unrecognised deferred tax assets – (434)

Tax savings from enhanced deductions (3) (586) (483)

Others (7) (30)

Taxation expense 5,818 5,370


8 Taxation (cont’d)

(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.

(3) In Budget 2010, the Minister for Finance of Singapore introduced a new broad-based tax scheme to encourage businesses to invest in productivity and innovation. The scheme enhances existing tax measures that encourage productivity and innovative activities and consolidates them into a single scheme, known as the Productivity and

Innovation scheme (“PIC”). The PIC is available for Year of Assessment (“YA”) 2011 to YA 2015.

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

Group CompanyBalance sheet Profit or loss Balance sheet2012 2011 2012 2011 2012 2011

$’000 $’000 $’000 $’000 $’000 $’000

Deferred tax liabilities: Differences in depreciation for tax purposes (1,746) (1,941) (189) (442) – –

Dividend income (168) (168) – (17) – –

Other items (600) (167) 433 89 – –

(2,514) (2,276) – –

Deferred tax assets: Provisions 1,280 1,426 76 (342) – –

Differences in depreciation for tax purposes 819 640 (219) 57 (15) (4)

Unutilised tax losses – – – 264 – –

Other items 476 54 (428) (34) 82 34

2,575 2,120 67 30

Deferred income tax (327) (425)


98

8 Taxation (cont’d)

Unrecognised tax losses, capital allowances and other temporary differences

As at 31 December 2012, the Group has tax losses of approximately $26,939,000 (2011: $18,275,000), unutilised capital allowances of approximately $251,000 (2011: $88,000) and other temporary differences of approximately $3,089,000 (2011: $1,973,000) that are available for offset against future taxable profits, for which no deferred tax assets are recognised on these amounts due to uncertainty of their utilisation. The utilisation of the tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate. As at 31 December 2012, $17,428,000 (2011: $13,872,000) of the unrecognised tax losses will expire between 1 and 10 years.

At the balance sheet date, no deferred tax liability (2011: $Nil) has been recognised for taxes that would be payable on the undistributed earnings of certain of the Group’s subsidiaries as the Group has determined that undistributed earnings of these subsidiaries will not be distributed in the forseeable future.

Such temporary differences for which no defered tax liability has been recognised aggregate to $14,473,000 (2011: $10,779,000). The deferred tax liability is estimated to be $724,000 (2011: $539,000).

Tax consequences of proposed dividends

There are no income tax consequences attached to the dividends to the shareholders proposed by the Company but not recognised as a liability in the financial statements (Note 34).

9 Earnings per share

Basic earnings per share is calculated by dividing the Group’s profit for the year attributable to ordinary equity holders of the Company of $12,000,000 (2011: $11,592,000) by the weighted average number of ordinary shares, excluding treasury shares, of 280,928,000 (2011: 281,198,000) in issue during the year.

Diluted earnings per share is calculated by dividing the Group’s profit for the year attributable to ordinary equity holders of the Company of $12,000,000 (2011: $11,592,000) by the weighted average number of ordinary shares, excluding treasury shares, in issue during the year plus the weighted average number of restricted shares granted conditionally under the “BreadTalk Restricted Share Grant Plan” of 282,236,000 (2011: 282,392,000).


10 Property, plant and equipment

Leasehold property

Leasehold land

Machinery and

equipmentElectrical

worksFurniture

and fittingsOffice

equipment$’000 $’000 $’000 $’000 $’000 $’000

GroupCostAs at 1.1.2011 3,188 5,147 27,511 20,753 23,529 6,056

Additions – – 5,210 4,960 4,732 1,431

Reclassifications(2) – – (87) 63 (63) 365

Write offs – – (830) (1,437) (2,334) (633)

Disposals – – (272) (73) (10) (26)

Translation difference 140 – 349 67 135 110

As at 31.12.2011 and 1.1.2012 3,328 5,147 31,881 24,333 25,989 7,303

Additions 338 2,404 6,480 9,548 9,530 2,104

Reclassifications(2) – – 794 708 670 (602)

Write offs – – (1,867) (1,545) (767) (304)

Disposals – – (501) (104) (84) (13)

Translation difference (173) (48) (617) (359) (686) (159)

As at 31.12.2012 3,493 7,503 36,170 32,581 34,652 8,329

Accumulated depreciation and impairment losses

As at 1.1.2011 856 – 13,507 9,900 11,639 3,604

Charge for the year 145 – 4,338 4,008 4,346 1,139

Reclassifications – – (4) 3 (8) 3

Write offs – – (703) (1,307) (2,130) (573)

Disposals – – (190) (9) (1) (16)

Impairment loss for the year – – 109 105 7 –

Translation difference 45 – 129 37 64 47

As at 31.12.2011 and 1.1.2012 1,046 – 17,186 12,737 13,917 4,204

Charge for the year 146 17 5,064 4,890 5,266 1,409

Reclassifications – – (9) 122 4 (117)

Write offs – – (1,515) (1,510) (591) (263)

Disposals – – (353) (19) (47) (8)

Impairment loss for the year – – 20 – 9 13

Translation difference (55) – (255) (203) (382) (85)

As at 31.12.2012 1,137 17 20,138 16,017 18,176 5,153

Net carrying amountAs at 31.12.2011 2,282 5,147 14,695 11,596 12,072 3,099

As at 31.12.2012 2,356 7,486 16,032 16,564 16,476 3,176


100

10 Property, plant and equipment (cont’d)

Renovation(1)

Motor vehicles

Construction-in-progress Total

$’000 $’000 $’000 $’000

GroupCostAs at 1.1.2011 46,899 1,286 1,953 136,322

Additions 13,431 125 10,144 40,033

Reclassifications(2) 134 – (497) (85)

Write offs (5,038) – (42) (10,314)

Disposals (79) (39) – (499)

Translation difference 1,192 25 160 2,178

As at 31.12.2011 and 1.1.2012 56,539 1,397 11,718 167,635

Additions 20,865 225 51,712 103,206

Reclassifications(2) 7,494 (1) (9,063) –

Write offs (1,794) – – (6,277)

Disposals (3,329) (139) – (4,170)

Translation difference (1,748) (36) (335) (4,161)

As at 31.12.2012 78,027 1,446 54,032 256,233

Accumulated depreciation and impairment lossesAs at 1.1.2011 22,935 575 – 63,016

Charge for the year 9,735 209 – 23,920

Reclassifications (3) – – (9)

Write offs (4,382) – – (9,095)

Disposals (44) (34) – (294)

Impairment loss for the year 68 – – 289

Translation difference 571 17 – 910

As at 31.12.2011 and 1.1.2012 28,880 767 – 78,737

Charge for the year 13,387 200 – 30,379

Reclassifications – – – –

Write offs (1,666) – – (5,545)

Disposals (2,538) (125) – (3,090)

Impairment loss for the year 125 – – 167

Translation difference (820) (23) – (1,823)

As at 31.12.2012 37,368 819 – 98,825

Net carrying amountAs at 31.12.2011 27,659 630 11,718 88,898

As at 31.12.2012 40,659 627 54,032 157,408

(1) Additions in renovation for the year include provision for reinstatement costs of $2,350,000 (2011: $2,461,000).

(2) Reclassifications relates to the reclassifications of construction in progress to the respective property, plant and equipment category upon in completion of construction.



Assets held under finance leases

As at 31 December 2012, the net carrying amount of property, plant and equipment acquired under finance leases are as follows:

Group2012 2011

$’000 $’000

Machinery and equipment 59 106

Leased assets are pledged as security for the related finance lease liabilities.

Assets written off

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

There is no residual value for the assets written off.

Assets pledged as security

In addition to assets held under finance leases, the Group has the following assets pledged to secure the Company’s bank loan (Note 25).

Group and Company2012 2011

$’000 $’000

Leasehold land 5,147 5,147

Construction-in-progress 39,004 –

44,151 5,147

Impairment of assets

The impairment loss of $167,000 (2011: $289,000) recognised in “Administrative expenses” in profit or loss during the year comprised impairment loss on property, plant and equipment of a restaurant and certain food stalls which have been persistently incurring losses.

Capitalisation of borrowing costs

The Group’s property, plant and equipment include borrowing costs arising from bank loans borrowed specifically for the purpose of the construction of property, plant and equipment. During the financial year, the borrowing costs capitalised as cost of property, plant and equipment amounted to $88,000 (2011: $Nil)


102


Furniture and fittings

Electrical works

Office equipment

Leasehold land

Construction-in-progress Total

$’000 $’000 $’000 $’000 $’000 $’000

CompanyCostAs at 1.1.2011 1 – 150 5,147 574 5,872

Additions 15 3 23 – 1,488 1,529

Write off – – – – (35) (35)

As at 31.12.2011 and 1.1.2012 16 3 173 5,147 2,027 7,366

Additions 4 19 140 – 36,997 37,140

As at 31.12.2012 20 22 313 5,147 39,004 44,506

Accumulated depreciation

As at 1.1.2011 1 – 105 – – 106

Charge for the year 6 1 31 – – 38

As at 31.12.2011 and 1.1.2012 7 1 136 – – 144

Charge for the year 10 21 45 – – 76

As at 31.12.2012 17 22 181 – – 220

Net carrying amountAs at 31.12.2011 9 2 37 5,147 2,027 7,222

As at 31.12.2012 3 – 132 5,147 39,004 44,286


11 Intangible assets

Group

Goodwill Brand value Trade markFranchise

rightsLocation premium Total

$’000 $’000 $’000 $’000 $’000 $’000CostAs at 1.1.2011 6,173 3,209 812 1,630 505 12,329

Additions – – 2 614 – 616

Write off – – – (71) – (71)

Translation difference – – – 28 – 28

As at 31.12.2011 and1.1.2012 6,173 3,209 814 2,201 505 12,902

Additions – – 118 78 – 196

Translation difference – – – (63) – (63)

As at 31.12.2012 6,173 3,209 932 2,216 505 13,035

Accumulated amortisation and impairment losses

As at 1.1.2011 – 1,290 706 686 505 3,187

Amortisation – 213 52 177 – 442

Impairment loss 125 – – – – 125

Write off – – – (71) – (71)

Translation difference – – – 5 – 5

As at 31.12.2011 and 1.1.2012 125 1,503 758 797 505 3,688

Amortisation – 213 34 371 – 618

Impairment loss 202 – – 13 – 215

Translation difference – – – (17) – (17)

As at 31.12.2012 327 1,716 792 1,164 505 4,504

Net carrying amount As at 31.12.2011 6,048 1,706 56 1,404 – 9,214

As at 31.12.2012 5,846 1,493 140 1,052 – 8,531

Brand value, trade mark, franchise rights and location premium are determined to have finite useful lives and are amortised on a straight-line basis over their respective estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible assets may be impaired. Brand value, trade mark and franchise rights have remaining useful lives of 7 years (2011: 8 years), 1 to 5 years (2011: 1 to 5 years) and 1 to 6 years (2011: 1 to 5 years) as at 31 December 2012 respectively.

Amortisation expense is included in “Administrative expenses” in profit of loss.


104

11 Intangible assets (cont’d)

Impairment testing of goodwill

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

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

The carrying amounts of goodwill allocated to each CGU are as follows:

Carrying amount as at 31

December 2012

Carrying amount as at 31

December 2011

Pre-tax discount rate

2012

Pre-tax discount rate

2011$’000 $’000

Shanghai segment 3,569 3,569 13.0% 11.5%

Beijing segment 1,009 1,009 13.0% 11.5%

ML Breadworks Sdn Bhd – 202 – 8.5%

Food court operation at Wisma Atria, Singapore 1,268 1,268 8.8% 8.5%

5,846 6,048

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

The calculations of value in use for the CGUs are most sensitive to the following assumptions:

Budgeted gross margins – Gross margins are based on budget approved by management.

Growth rate – The forecasted growth rates are based on published industry research and do not exceed the long-term average growth rate for the industries revelant to the CGUs.

Pre-tax discount rates – Discount rates represent the current market assessment of the risks specific to each CGU, regarding the time value of money and individual risks of the underlying assets which have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its cash-generating units and derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on the interest bearing borrowings the Group is obliged to service. Segment–specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based on publicly available market data.

Impairment loss on goodwill of $202,000 (2011: $125,000) on ML Breadworks Sdn Bhd and franchise rights of $13,000 (2011: $Nil) was recognised in “Administrative expenses” in profit or loss for the financial year ended 31 December 2012 as the recoverable amount was less than the carrying value.


12 Investment securities

Group2012 2011

$’000 $’000

Available-for-sale financial assets- Equity instruments (quoted), at fair value 529 919

- Equity instruments (unquoted), at cost 20,130 –

- Redeemable preference shares (unquoted), at cost * *

20,659 919

Held-to-maturity investments - 8% SGD junior bonds due on 29 January 2015 7,224 10,750

- 3% SGD junior bonds due on 31 December 2016 18,000 –

25,224 10,750

45,883 11,669

* less than $1,000

8% SGD junior bonds and redeemable preference shares

The junior bonds are secured by a mortgage over the property, assignment of rental proceeds of the property and debentures. The payments of the principal and interest on the junior bonds are subordinated to the payments of principal and interest on the bank borrowings obtained for the purchase of the Katong Mall.

The junior bonds mature in 2015 and will bear interest, payable semi-annually in arrears, at 8% per annum from 29 January 2012 to but excluding the maturity date of the junior bonds, subject to the extinguishment of unpaid interest.

On 27 February 2012, the subsidiary, Imagine Properties Pte Ltd (“IPPL”) received a partial redemption of $3,526,000 (2011: $Nil) on the junior bonds.

3% SGD junior bonds

On 10 February 2012, IPPL had completed the subscription of $18,000,000 in principal amount of junior bonds and was issued 72 ordinary shares of $1.00 per ordinary share in the share capital of Perennial (Chijmes) Pte Ltd (“Perennial Chijmes”). IPPL’s investment in ordinary shares of Perennial Chijmes is classified as an investment in associate (Note 14).

The junior bonds are expected to mature in 2016 and will bear interest semi-annually in arrears, at minimum 3% per annum from 1 January 2013.

Equity instruments (unquoted)

On 30 September 2012, IPPL together with a consortium of investors, entered into a joint venture agreement to invest in Perennial Tongzhou Development Pte Ltd (“PTD”) for the subscription of ordinary shares in the capital of PTD. IPPL’s subscription of 20,130 ordinary shares for a cash consideration of $20,130,000 represents a 5.72% equity interest in PTD.


106

13 Investment in subsidiaries

Company2012 2011

$’000 $’000

Unquoted equity shares at cost 28,489 28,289

Loans to subsidiaries 1,200 11,950

Share based compensation reserve 396 237

Impairment losses:

- Unquoted shares (5,100) –

- Loans to subsidiaries (1,200) –

23,785 40,476

Loans to subsidiaries are quasi-capital in nature, non-interest bearing and have no fixed terms of repayment.

Details of the subsidiaries are as follows:

Name Country of

incorporation Principal activitiesProportion of

ownership interest2012 2011

% %

Held by the Company

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

100 100

BreadTalk International Pte Ltd (3) Singapore Investment holding 100 100

Topwin Investment Holding Pte Ltd (3) Singapore Investment holding 100 100

Star Food Pte Ltd (1) (Note (a)) Singapore Investment holding 100 60

Imagine Properties Pte Ltd (1) Singapore Investment holding 100 100

Together Inc. Pte Ltd (3) Singapore Investment holding 100 100

Imagine IHQ Pte Ltd (14) (Note (c)) Singapore Investment holding 100 –

Held through subsidiaries

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

70 70

Charcoal Pte Ltd (15) Singapore Dormant 75 75

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

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

100 100


13 Investment in subsidiaries (cont’d)

Name Proportion of


% %

Held through subsidiaries (cont’d)

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,

confectioneryproducts

100 100

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

Manufacture and sale of bakery and confectionery products

100 100

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

Food court operator 100 100

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



Chongqing Food Republic Food & Beverage Co., Ltd (5)



Megabite Hong Kong Limited (6) Hong Kong Food court operator 85 85

Megabite (S) Pte Ltd (3) Singapore Investment holding 100 100

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

BreadTalk (Thailand) Company Limited (7)(13)

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


49 49

Megabite Eatery (M) Sdn Bhd (4) Malaysia Operator of food and beverage outlets 100 100

BreadTalk Concept Hong Kong Limited (6)

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


85 85

ML Breadworks Sdn Bhd (4) Malaysia Bakers and manufacturers of and dealers in bread, flour and biscuits

90 90


108


Name Country of



% %

Held through subsidiaries (cont’d)

MWA Pte Ltd (15) Singapore Dormant 100 100

Food Art Pte Ltd (3) Singapore Dormant 100 100

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


Operators of restaurants 100 60

Beijing Star Food F&B Management Co., Ltd (8) (Note (a))



Ramen Play Pte Ltd (3) Singapore Operators of restaurants 60 60

Shanghai Ramen Play Co., Ltd (5) People’s Republic of China


Taster Food International Pte Ltd (3) Singapore Investment holding 63 63

Taster Food (Thailand) Co. Limited (10)(13) Thailand Operators of restaurants 31 31

Food Republic Hangzhou F&B Co.,Ltd (6)



Food Republic Shenzhen F&B Management Co.,Ltd (9)



Food Republic Guangzhou F&B Management Co., Ltd (9)



Food Republic Taiwan Co., Ltd (11) Taiwan Food court operator 90 90

FR (Thailand) Co., Ltd (12) Thailand Food court operator 49 49

Food Republic (Chengdu) Co., Ltd (5)

(Note (c))People’s Republic

of ChinaFood court operator 100 –

Thye Moh Chan Pte. Ltd. (3) (Note (c)) Singapore Wholesale of confectionery and bakery products

100 –



(1) Audited by Ernst & Young LLP, Singapore(2) Audited by member firms of Ernst & Young Global in the respective countries(3) Audited by TY Teoh International, Singapore(4) Audited by TY Teoh International, Malaysia(5) Audited by Shanghai Xin Gao Xin Certified Public Accountants Co., Ltd, People’s Republic of China(6) Audited by S.F. Kwok & Co. Certified Public Accountants, Hong Kong(7) Audited by CNN & S Co., Ltd, Thailand(8) Audited by Beijing Daxing Certified Public Accountants Co., Ltd, People’s Republic of China(9) Audited by Guang Dong Zhihe Certified Public Accountants, People’s Republic of China(10) Audited by Phattarakit Aupliting Office Co.,Ltd, Thailand(11) Audited by KPMG, Taiwan(12) Audited by Tree Sun Co., Ltd, Thailand(13) Considered a subsidiary of the Company as the Company has voting control at general meetings and Board meetings(14) The subsidiary was incorporated in August 2012 and unaudited financial statements have been used for the preparation

of the consolidated financial statements of the Group as it is not significant to the Group.(15) The subsidiary is the process of liquidation and unaudited financial statements have been used for the preparation of

the consolidated financial statements of the Group as it is not significant to the Group.

(a) Impairment testing of investment in subsidiaries

During the financial year, management performed an impairment test for the investment in Star Food Pte Ltd and Together Inc. Pte Ltd as the subsidiaries have been making losses. An impairment loss of $3,600,000 (2011: $Nil) and $1,500,.000 (2011: $Nil) respectively was recognised for the year ended 31 December 2012. Accordingly, an impairment loss of $1,200,000 (2011: $Nil) was also recognised on the loan to the subsidiary, Star Food Pte Ltd.

(b) Acquisition of non-controlling interests

On 31 August 2012, the Company acquires an additional 40% equity interest in Star Food Pte Ltd and its subsidiaries (“Star Food Group”) from its non-controlling interests for a cash consideration of $200,000. As a result of this acquisition, Star Food Group became a wholly-owned subsidiary of the Company. The carrying value of net liabilities of Star Food Group as at 31 August 2012 was $1,143,000 and the deficit in carrying value of the additional interest acquired was $457,000. The cumulative amount of $657,000 of the consideration and deficit in the carrying value of the additional interest acquired has been recognised as “Premium paid on acquisition of non-controlling interests” within equity.

The following summarises the effect to the change in the Group’s ownership interest in Star Food Group on the equity attributable to owners of the Company:

$’000

Consideration paid for acquisition of non-controlling interests 200

Increase in equity attributable to non-controlling interests 457

Decrease in equity attributable to owners of the Company 657


110


(c) New subsidiaries

Thye Moh Chan Pte. Ltd. (“Thye Moh Chan”)

Thye Moh Chan was incorporated as a wholly-owned subsidiary of BreadTalk Pte Ltd in April 2012 with a share capital of $2.

Imagine IHQ Pte Ltd

The Company incorporated the wholly-owned subsidiary in August 2012 with a share capital of $2.

Food Republic (Chengdu) Co., Ltd (“Food Republic Chengdu”)

Food Republic Chengdu was incorporated as a wholly-owned subsidiary of Food Republic (Shanghai) Co., Ltd in October 2012 with a registered and paid up capital of RMB 500,000 ($97,000).

14 Investment in associates

Group2012 2011

$’000 $’000

Investment in shares, unquotedShares, at cost 952 1,252

Impairment loss – (385)

Loan to an associate 614 614

Share of post-acquisition results of associates (666) (1,481)

At end of year 900 –

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

Details of the associates are as follows:

NameCountry of



% %

Held through subsidiaries

Hong Kong BreadTalk Ltd (“HKBT”) (1) Hong Kong Dormant 25 25

Out of The Box Pte Ltd (1) Singapore Dormant – 30

Perennial (Chijmes) Pte Ltd (“Perennial Chijmes”) (1)

Singapore Investment holding 29 –

JBT (China) Pte Ltd (1) Singapore Investment holding 30 –


14 Investment in associates (cont’d)

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

The Group has not recognised losses relating to HKBT and Perennial Chijmes where its share of losses exceeds the Group’s interest in these associates. The Group’s cumulative share of unrecognised losses as at 31 December 2012 was $585,000 (2011: $292,000), of which $293,000 (2011: $Nil) relating to Perennial Chijmes was the share of the current year’s losses. The Group has no obligation in respect of these losses.

The Group has sold off its interest in an associate, Out of The Box Pte Ltd, during he year for a sales consideration of $30,000 and correspondingly recognised a gain on disposal of associate of $30,000. The Group’s cumulative share of unrecognised losses as at 31 December 2012 was $Nil (2011: $83,000)

New associates

Perennial Chjimes Pte Ltd

During the year, a wholly-owned subsidiary, Imagine Properties Pte Ltd, through its subscription of junior bonds (Note 12) was issued 72 ordinary shares of $1.00 per ordinary share in the share capital of Perennial Chijmes. This represented approximately 29.03% of the total share capital of Perennial Chijmes.

JBT (China) Pte Ltd (“JBT China”)

During the year, a wholly-owned subsidiary, Together Inc. Pte Ltd, entered into an agreement with Jumbo F&B Services Pte Ltd to incorporate a company, JBT (China) Pte Ltd, in Singapore which in turn register a wholly-owned subsidiary in Shanghai, People’s Republic of China. The Group’s interest in the associate, which was incorporated on 18 October 2012 is 30%.

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

Group2012 2011

$’000 $’000

Assets and liabilitiesTotal assets 192,774 188

Total liabilities 196,614 3,486

ResultsRevenue 10,468 –

Net (loss)/profit for the year (1,006) 88


112

15 Investment in joint ventures

Group2012 2011

$’000 $’000

Investment in shares, unquotedShares, at cost 2,688 434

Share of post-acquisition results of joint ventures 471 18

Exchange difference (34) (30)

3,125 422

Details of the joint ventures are as follows:

NameCountry of



% %

Held through subsidiariesShanghai Hong Bu Rang Food & Beverage Management Co., Ltd (1)

People’s Republic of

China

Dormant 50 50

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

Street Food Pte Ltd (3) Singapore Food court operator 50 50

Shanghai ABPan Co., Ltd (4) People’s Republic of

China

Manufacturing and sale of frozen dough

50 –

(1) Audited by Shanghai Xin Gao Xin Certified Public Accountants Co., Ltd, People’s Republic of China(2) Audited by TY Teoh International, Malaysia(3) Audited by TY Teoh International, Singapore(4) Audited by Ernst & Young Hua Ming LLP, People’s Republic of China


15 Investment in joint ventures (cont’d)

New joint venture

During the year, Shanghai BreadTalk Co., Ltd, a wholly-owned subsidiary of BreadTalk International Pte Ltd which in turn is a wholly-owned subsidiary of the Company entered into a 50:50 joint venture agreement with Ajinomoto Bakery Co., Ltd to incorporate Shanghai ABPan Co., Ltd in Shanghai, People’s Republic of China, with a registered and paid up capital RMB 23,200,000 ($4,508,000).

The aggregate amounts of each of the current assets, non-current assets, current liabilities, non-current liabilities, income and expenses, adjusted for the proportion of ownership interest held by the Group in the joint ventures, are as follows:

Group2012 2011

$’000 $’000

Assets and liabilitiesCurrent assets 4,186 2,000

Non-current assets 1,865 827

Total assets 6,051 2,827

Current liabilities 3,029 2,431

Non-current liabilities 2 2

Total liabilities 3,031 2,433

ResultsRevenue 6,363 2,579

Other income 438 459

Expenses (6,428) (2,945)

Profit for the year 373 93


114

16 Inventories

Group2012 2011

$’000 $’000

Balance sheet:Raw materials and consumables, at cost 8,454 6,252

Semi-finished goods 560 648

Finished goods 280 300

Base inventories (1) 198 197

Total inventories at lower of cost and net realisable value 9,492 7,397

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

Group2012 2011

$’000 $’000

Profit or loss: Inventories recognised as an expense in cost of sales 129,171 106,417

Inclusive of the following charge:

- Write-down of inventories 15 25

- Write-off of inventories 22 31

17 Trade and other receivables

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Trade and other receivables (current):Trade receivables 8,865 7,730 – –

Other receivables 9,534 7,369 846 –

Deposits 25,219 31,701 179 –

43,618 46,800 1,025 –

Other receivables (non-current):

Other receivables 1,880 1,389 – –

Trade receivables

Trade receivables are non-interest bearing and are generally on 15 to 60 days terms (2011: 15 to 60 days). They are recognised at their original invoice amounts which represents their fair values on initial recognition.


17 Trade and other receivables (cont’d)

Trade receivables denominated in foreign currencies at 31 December are as follows:

Group2012 2011

$’000 $’000

United States Dollar 610 638

Euro Dollar 12 17

622 655

Receivables that are past due but not impaired

The Group has trade receivables amounting to $2,143,000 (2011: $3,661,000) 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:

Group2012 2011

$’000 $’000

Trade receivables past due:

Lesser than 30 days 1,112 2,076

30 to 60 days 361 456

61 to 90 days 262 390

91 to 120 days 76 79

More than 120 days 332 660

2,143 3,661


116


Receivables that are impaired/partially impaired

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

GroupIndividually impaired

2012 2011$’000 $’000

Trade receivables – nominal amounts 152 361

Less: Allowance for impairment (152) (361)

– –

Movement in allowance accounts:

At 1 January 361 120

(Write back)/charge during the year (11) 253

Written off during the year (197) (13)

Translation difference (1) 1

At 31 December 152 361

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

Other receivables

Other receivables (current) are non-interest bearing and are generally on 0 to 60 days terms (2011: 0 to 60 days).

Other receivables that are past due but not impaired

The Group has other receivables amounting to $1,181,000 (2011: $2,307,000) 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:

Group2012 2011

$’000 $’000

Other receivables past due:

Lesser than 30 days 556 1,246

30 to 60 days 373 58

61 to 90 days 46 159

91 to 120 days 11 4


1,181 2,307



Other receivables that are impaired/partially impaired

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

Group2012 2011

$’000 $’000

Other receivables – nominal amounts 34 82

Less: Allowance for impairment (34) (82)

– –

Movement in allowance accounts:

At 1 January 82 275

(Write back)/charge during the year (41) 64

Written off during the year (5) (259)

Translation difference (2) 2


Deposits

Deposits include an amount of $Nil (2011: $12,000,000) for the subscription of junior bonds relating to the Group’s investment in a retail property trust in Singapore. The deposit of $12,000,000 has been reclassified to investment securities upon completion of the subscription of junior bonds in 2012 (Note 12).

18 Amounts due from/to subsidiaries, joint ventures and minority shareholders of subsidiaries (trade and non-trade)

The amounts due from/to subsidiaries and joint ventures are unsecured, non-interest bearing and generally on 30 to 60 days term except for:

(i) loans to subsidiaries of $12,514,000 (2011: $20,000) which are repayable on demand;

(ii) loans from subsidiaries of $16,673,000 (2011: $7,378,000) which are unsecured and repayable on demand; and

(iii) loan to a subsidiary of $18,000,000 (2011: $12,000,000) which bears an effective interest rate of 2.14% (2011: 2.06%) per annum and repayable on demand.

Amounts due from subsidiaries include dividend receivable of $Nil (2011: $2,200,000).

The amounts due from minority shareholders of subsidiaries are unsecured, non-interest bearing and repayable on demand.


118

18 Amounts due from/to subsidiaries, joint ventures and minority shareholders of subsidiaries (trade and non-trade) (cont’d)

Group


Amount due from joint ventures (non-trade)

Group2012 2011

$’000 $’000

Lesser than 30 days 76 125

30 to 60 days 1 38

61 to 90 days – 24

91 to 120 days 685 26

More than 120 days – 975

Total as at 31 December 762 1,188

Company


Amounts due from subsidiaries (non-trade)

Company2012 2011

$’000 $’000

Lesser than 30 days 5 8

30 to 60 days 53 4

61 to 90 days 9 –

91 to 120 days 4 –


Total as at 31 December 118 42


19 Cash and cash equivalents

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Cash and cash equivalents (current):Fixed deposits 5,011 7,295 – 2,000

Cash on hand and at bank 59,234 79,765 431 698

64,245 87,060 431 2,698

Fixed deposits of the Group and the Company have maturity period of 1 month (2011: 1 week to 1 month) with effective interest rates ranging from 0.05% to 0.4% (2011: 0.11% to 0.88%) per annum.

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Fixed deposit (non-current):Fixed deposit 9,988 – – –

The fixed deposit has a maturity period of 3 years with an effective interest rate of 4.46% per annum.

Cash and cash equivalents denominated in foreign currencies at 31 December are as follows:

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

United States Dollar 676 1,193 32 34


120

20 Trade and other payables

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Trade and other payables:Trade payables 25,411 22,896 – –

Other payables 18,926 15,475 79 250

Deposits 18,887 12,866 – –

Payable for purchase of property, plant and equipment 12,401 10,358 4,366 –

Dividend payable 984 – – –

Sales collection on behalf of tenants 14,334 12,392 – –

Amount due to landlord (non-trade) 14 87 – –

90,957 74,074 4,445 250

The deposits refer to deposits from food court tenants and franchisees and stored value card deposits. Dividend is payable to minority shareholders of a subsidiary.

Trade payables/other payables

These amounts are non-interest bearing. Trade payables are normally settled on 0 to 60 days terms (2011: 0 to 60 days terms) while other payables have an average term of 0 to 90 days term (2011: 0 to 90 days terms), except for retention sums which have repayment terms of up to 1 year.

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.

Trade payables denominated in foreign currencies as at 31 December are as follows:

Group2012 2011

$’000 $’000

United States Dollar 427 241

Others 75 17

502 258


21 Other liabilities and provision

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Other liabilities:Current

Accrued operating expenses 24,075 25,318 2,045 2,115

Accrued property, plant and equipment 5,992 – 5,543 –

Deferred revenue 19,368 14,496 – –

Deferred rent 3,042 1,310 – –

52,477 41,124 7,588 2,115

Non-current

Deferred rent 6,191 7,039 – –

Provision for reinstatement costs

Group2012 2011

$’000 $’000

At 1 January 5,871 3,536

Additions 2,350 2,461

Utilisation (244) (126)

Total as at 31 December 7,977 5,871

Provision for reinstatement costs is recognised when the Group entered into a lease agreement for the premises. It includes the estimated cost of demolishing and removing all the leasehold improvements made by the Group to the premises. The premises shall be reinstated to the condition set up in the lease arrangement upon the expiration of the lease agreements.

22 Loans from minority shareholders of subsidiaries

Long-term loans from minority shareholders of subsidiaries of $882,000 in the previous year were unsecured and non-interest bearing. In the current year, the minority shareholders waived payment of these loans and the amount of $882,000 has been recognised in “Other operating income” in profit or loss (Note 4).


122

23 Finance lease obligations, secured

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

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

GroupTotal

minimum lease

payments

Present value of

payments

Total minimum

lease payments

Present value of

payments2012 2012 2011 2011

$’000 $’000 $’000 $’000

Not later than one year – – 38 37

Later than one year but not later than five years – – – –

Total minimum lease payments – – 38 37

Less: amounts representing finance charges – – (1) –

Present value of minimum lease payments – – 37 37

The leases have options to purchase at the end of the lease term. The effective interest rates of the leases are Nil% (2011: 2.20%) per annum. Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.

24 Short-term loans

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Bank loans

- Singapore Dollar 2,640 12,000 – 12,000

- Hong Kong Dollar 474 1,505 – –

- Chinese Yuan 629 1,409 – –

- Malaysia Ringgit 204 203 – –

- New Taiwan Dollar 2,699 647 – –

- Thai Baht 1,250 – – –

7,896 15,764 – 12,000

The effective interests on these short-term loans range from 1.57% to 6.02% (2011: 1.13% to 6.71%) per annum. The interest rates of these floating rate loans are repriced from time to time at the discretion of the respective banks.

The bank loans are revolving term loans of 3 to 12 months (2011: 3 to 12 months).

Short term loans of $746,000 (2011: $1,320,000) are secured by continuing guarantees by the Company and certain subsidiaries of the Group. All other short term loans except for a loan of $Nil (2011: $12,000,000) are secured by continuing guarantees by the Company.


25 Long-term loans

Group CompanyTerm loans Maturity 2012 2011 2012 2011

$’000 $’000 $’000 $’000

Singapore Dollar 2013 - 2015 5,387 5,261 – –

Singapore Dollar Note 1 25,863 3,989 25,863 3,989

Singapore Dollar Note 2 30,000 – 18,000 –

Singapore Dollar Note 3 4,167 – –

Hong Kong Dollar 2015 499 738 – –

Hong Kong Dollar 2015 (Note 4) 592 1,403 – –

Hong Kong Dollar 2017 (Note 5) 2,326 – – –

Chinese Yuan 2015 (Note 4) 2,142 2,965 – –

Malaysia Ringgit 2013 - 2015 1,515 1,830 – –

Malaysia Ringgit Note 6 110 182 – –

Thai Baht 2015 - 2017 9,806 3,517 – –

New Taiwan Dollar 2016 (Note 5) 6,116 3,667 – –

88,253 23,552 43,863 3,989

Current 37,910 8,396 25,863 –

Non-current 50,613 15,156 18,000 3,989

88,523 23,552 43,863 3,989

Note 1 – the loan will be converted to a 15-year term loan within 3 months of the Temporary Occupation Permit (TOP) of the Group’s operations Headquarters or 30 June 2013, whichever is earlier and is secured by a charge over the Company’s leasehold land and property.

Note 2 – the loans are secured by certain investment securities and continuing guarantees by the Company. They include the following financial covenants which require the Group to maintain:

- a net worth exceeding the loan amounts granted;- a gearing ratio not exceeding 2.5; and- EBITDA exceeding the loan amounts granted;

The loans mature in 2017.

Note 3 – the loan is secured by certain investment securities and continuing guarantee by the Company. It includes a financial covenant which requires the Group to maintain a net worth exceeding the loan amount granted. The loan matures in 2014.

Note 4 – the loans are secured by continuing guarantees by the Company and certain subsidiaries of the Group.

Note 5 – the loan is secured by continuing guarantee by the Company and includes a financial covenant for the subsidiary to maintain a net worth exceeding the loan amount granted.

Note 6 – the loan is repayable by 36 monthly instalments upon full drawdown of the loan to a specified sum. The loan matures in 2015.

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

All the loans are floating rate loans with effective interest rates ranging from 1.25% to 7.37% (2011: 1.25% to 7.29%) per annum. The interest rates of these floating rate loans are repriced from time to time at the discretion of the respective banks.


124

26 Share capital and treasury shares

(a) Share capital


Number ofshares $’000


Issued and fully paid ordinary shares

At beginning and end of the year 281,893,238 33,303 281,893,238 33,303

The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions. The ordinary shares have no par value.

(b) Treasury shares




At beginning of the year 1,237,690 (609) 580,582 (199)

Acquired during the financial year 200,000 (96) 1,090,000 (558)

Treasury shares transferred on vesting of restricted share grant (608,076) 299 (432,892) 148

At end of the year 829,614 (406) 1,237,690 (609)

Treasury shares relate to ordinary shares of the Company that is held by the Company.

The Company acquired 200,000 (2011: 1,090,000) shares in the Company through purchases on the Singapore Exchange during the financial year. The total amount paid to acquire the shares was $96,000 (2011: $558,000) and this was presented as a component within shareholders’ equity.

The Company reissued 608,076 (2011: 432,892) treasury shares pursuant to its restricted share grant at a weighted average share price of approximately $0.49 (2011: $0.32) each.


27 Accumulated profits and other reserves

Accumulated profits

Included in the Group’s accumulated profits is an amount of $1,432,000 (2011: $1,432,000) which is not distributable by way of dividends. The amount arose from the waiver of inter-company debt in the subsidiary, Beijing BreadTalk Restaurant Management Co., Ltd, which was recognised as capital reserve in accordance with local accounting convention.

Other reserves

Group CompanyNote 2012 2011 2012 2011

$’000 $’000 $’000 $’000

Other reserves:Statutory reserve fund (a) 2,757 2,382 – –

Translation reserve (b) (755) 189 – –

Fair value adjustment reserve (c) 214 604 – –

Share-based compensation reserve 379 357 379 357

Capital reserve (d) 156 186 156 186

Premium on acquisition of non-controlling interests 13(b) (657) – – –

2,094 3,178 535 543

(a) Statutory reserve fund

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

(b) Translation reserve

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


126

27 Accumulated profits and other reserves (cont’d)

(c) Fair value adjustment reserve

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

Group2012 2011

$’000 $’000

Net loss on available-for-sale financial assets:- Net loss on fair value changes during the financial year 390 –

(d) Capital reserve

Capital reserve mainly arises from the gain or loss arising from purchase, sale, issue or cancellation of treasury shares. No dividend may be paid and no other distribution (whether in cash or otherwise) of the Company’s assets (including any distribution of assets to members on a winding up) may be made in respect of this reserve.

28 Commitments and contingencies

(a) Commitments

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

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Commitment in respect of property, plant and equipment 10,990 49,355 10,435 47,324

Commitment in respect of investment securities – 6,000 – –

Commitment for capital contribution in a joint venture – 2,372 – –

(b) Contracted operating lease commitments

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


28 Commitments and contingencies (cont’d)

(b) Contracted operating lease commitments (cont’d)

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

Group2012 2011

$’000 $’000

Not later than one year 87,203 73,524

Later than one year but not later than five years 217,097 170,789

Later than five years 33,890 17,231

338,190 261,544

(c) Operating lease

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:

Group2012 2011

$’000 $’000

Not later than one year 46,764 30,889

Later than one year but not later than five years 28,132 21,189

74,896 52,078

(d) Letters of guarantees, secured

As at 31 December 2012, the banks issued letters of guarantees on behalf of the Group to lessors of premises amounting to approximately $10,931,000 (2011: $9,352,000).

(e) Corporate guarantees

As at 31 December 2012, the Company has given corporate guarantees to financial institutions in connection with banking facilities provided to its subsidiaries of which $63,487,000 (2011: $32,716,000) of the banking facilities have been utilised as at year end.

(f) Undertakings

8% SGD junior bonds and redeemable preference shares

In conjunction with the investment in junior bonds by the subsidiary, Imagine Properties Pte Ltd (“LPPL”) (Note 12), the Company, together with the other investors of the junior bonds, had executed a Sponsors’ Undertaking on 29 January 2010 whereby the Company undertakes to pay IPPL’s proportion of all cost overruns in connection to the additions’ and alterations’ works to be undertaken on the Katong Mall. As at 31 December 2012, there were no contingent liabilities resulting from the aforesaid undertaking.


128

28 Commitments and contingencies (cont’d)

(f) Undertakings (cont’d)

3% SGD junior bonds

In conjunction with the investment in junior bonds by the subsidiary, IPPL (Note 12), together with the other investors of the junior bonds, had executed a Sponsors’ Undertaking on 30 January 2012 whereby IPPL undertakes to pay all cost overruns in connection to the additions’ and alterations’ works to be undertaken on Chijmes. At as 31 December 2012, there were no contingent liabilities resulting from the aforesaid undertaking.

(g) Leasehold land

In November 2009, the Company accepted an offer from Jurong Town Corporation (“JTC”) to acquire a leasehold land located at Paya Lebar iPark, Tai Seng Street, Singapore. The Company also signed a Building Agreement with JTC in October 2010.

Under the lease arrangement, the Company will construct a multi-storey building on the land. The building will serve as the Group’s manufacturing facility and operations Headquarters. Upon completion of the building and fulfilment of other terms and conditions in the Building Agreement, the land together with the building erected thereon will be leased to the Company for a term of 30 years from 1 February 2010.

29 Related party disclosures

(a) Sale and purchase of goods and services

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

Group2012 2011

$’000 $’000

Income Management fee income from a joint venture 185 327

Rental and miscellaneous income from a party related to a director of the Company 249 221

Dividend income from a joint venture – 200

ExpensesRental expense to a joint venture – 73

Royalty fees to minority shareholders 2,291 1,654

Purchase of goods from a party related to a director of the Company 147 97

OthersFranchise fee to non-controlling interests 24 52

Purchase of furniture and fittings from a company related to a director of the Company 102 194

Design fee to a company related to a director of a subsidiary 553 228

Purchase of lightings and fittings from a company related to a director of a subsidiary – 38


29 Related party disclosures (cont’d)

(a) Sale and purchase of goods and services (cont’d)

Company2012 2011

$’000 $’000

Income Management fee income from a subsidiary 8,222 7,247

Dividend income from subsidiaries – 4,672

Training fee income from subsidiaries 241 155

Expense Facilities fee to a subsidiary 11 22

(b) Compensation of key management personnel

Group2012 2011

$’000 $’000

Salaries and bonus 6,924 6,428

Central Provident Fund contributions and other pension contributions 298 259

Share-based payment (RSG Plan) 89 120

Directors’ fees 168 168

Other personnel expenses 898 622

Total compensation paid to key management personnel 8,377 7,597

Comprise amounts paid to: Directors of the Company 1,535 1,418

Directors of a subsidiary 502 344

Other key management personnel 6,340 5,835

8,377 7,597


130

30 Financial risk management objectives and policies

The Group and the Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include interest rate risk, foreign currency risk, credit risk, liquidity risk and market price risk. The Audit Committee provides independent oversight to the effectiveness of the risk management process. It is and has been throughout the current and previous financial year, the Group’s policy that no trading in derivatives for speculative purposes shall be undertaken.

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

There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures the risks.

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

(a) Interest rate risk

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

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

Surplus funds are placed with reputable banks.

Sensitivity analysis for interest rate risk

GroupEffect on profit before tax

100 basis points increase 100 basis points decrease$’000 $’000

2012- Singapore dollar (630) 630

- Chinese Yuan 72 (72)

- Hong Kong dollar (39) 39

- New Taiwan dollar (88) 88

- Malaysia Ringgit (18) 18

- Thai Baht (111) 111

2011- Singapore dollar (152) 152

- Chinese Yuan (44) 44

- Hong Kong dollar (36) 36

- New Taiwan dollar (30) 30

- Malaysia Ringgit (22) 22

- Thai Baht (35) 35


30 Financial risk management objectives and policies (cont’d)

(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, Chinese Yuan (CNY) and Hong Kong Dollar (HKD). The foreign currencies in which these transactions are denominated are mainly United States dollars (USD), HKD, CNY and SGD.

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

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

Sensitivity analysis for foreign currency risk

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


132


(b) Foreign currency risk (cont’d)

Group Effect on profit before tax2012 2011

$’000 $’000

Against SGD:

USD - strengthened 6% (2011: 6%) 58 76

- weakened 6% (2011: 6%) (58) (76)

CNY - strengthened 5% (2011: 5%) 285 204

- weakened 5% (2011: 5%) (285) (204)

Against CNY:

USD - strengthened 6% (2011: 6%) – (3)

- weakened 6% (2011: 6%) – 3

SGD - strengthened 5% (2011: 5%) (13) (3)

- weakened 5% (2011: 5%) 13 3

HKD - strengthened 5% (2011: 5%) (44) –

- weakened 5% (2011: 5%) 44 –

Against HKD


- weakened 5% (2011: 5%) 111 60

USD - strengthened 6% (2011: 6%) (2) (6)

- weakened 6% (2011: 6%) 2 6

CNY - strengthened 5% (2011: 5%) (2) (1)

- weakened 5% (2011: 5%) 2 1

Against Malaysia Ringgit


- weakened 5% (2011: 5%) 86 8

USD - strengthened 6% (2011: 6%) (9) –

- weakened 6% (2011: 6%) 9 –



(c) Credit risk

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

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

Exposure to credit risk

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

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

– an amount of $63,487,000 (2011: $32,716,000) relating to corporate guarantees provided by the Company to financial institutions on its subsidiaries’ borrowings and other banking facilities.

Credit risk concentration profile

The Group determines concentrations of credit risk by monitoring the country profile of its trade receivables on an on-going basis. The credit risk concentration profile of the Group’s trade receivables at the balance sheet date is as follows:

Group2012 2011

$’000 % of total $’000 % of total

By country:Singapore 76 1% 93 1%

People’s Republic of China 4,881 55% 3,949 51%

Indonesia 737 8% 1,153 15%

The Philippines 848 10% 1,114 15%

Thailand 327 4% 342 4%

Taiwan 1,541 17% 702 9%

Others 455 5% 377 5%

8,865 100% 7,730 100%


134


(c) Credit risk (cont’d)

Excessive risk concentration

Concentration arise when a number of counter parties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry.

In order to avoid excessive concentration of risk, the Group’s policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly.

Financial assets that are either past due nor impaired

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default.

Financial assets that are either past due or impaired

Information regarding financial assets that are either past due or impaired is disclosed in Notes 17 and 18 above.

(d) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.

The Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the operations of the Group.

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



(d) Liquidity risk (cont’d)

The table below summarises the maturity profile of the Group’s and the Company’s financial assets and financial liabilities at the balance sheet date based on contractual undiscounted payments:

2012 20111 year or

less1 to 5 years Total

1 year or less

1 to 5 years Total

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

Financial assets:Investment securities – 51,107 51,107 – 14,249 14,249

Trade and other receivables 43,618 1,880 45,498 46,800 1,389 48,189

Amounts due from joint ventures 1,652 – 1,652 1,297 – 1,297

Amounts due from minority shareholders of subsidiaries(non-trade) 411 – 411 420 – 420

Cash and fixed deposits 64,245 11,213 75,458 87,060 – 87,060

109,926 64,200 174,126 135,577 15,638 151,215

Financial liabilities:Trade and other payables 90,957 – 90,957 74,074 – 74,074

Accrued operating expenses (Note 21) 30,067 – 30,067 25,318 – 25,318

Amounts due to joint ventures 2,211 – 2,211 395 – 395

Loans and borrowings 52,982 60,531 113,513 25,022 16,911 41,933

176,217 60,531 236,748 124,809 16,911 141,720

CompanyFinancial assets:Other receivables 1,025 – 1,025 – – –

Amounts due from subsidiaries 31,261 – 31,261 15,335 – 15,335

Cash on hand and at bank 431 – 431 2,698 – 2,698

32,717 – 32,717 18,033 – 18,033

Financial liabilities:Other payables 4,445 – 4,445 250 – 250

Accrued operating expenses (Note 21) 7,588 – 7,588 2,115 – 2,115

Amounts due to subsidiaries 16,695 – 16,695 7,394 – 7,394

Loans and borrowings 32,345 19,156 51,501 12,301 4,042 16,343

61,073 19,156 80,229 22,060 4,042 26,102


136


(d) Liquidity risk (cont’d)

The table below shows the contractual expiry by maturity of the Company’s contingent liabilities. The maximum amount of the financial guarantee contracts are allocated to the earliest period in which the guarantee could be called.

2012 20111 year or

less1 to 5 years Total

1 year or less

1 to 5 years Total

Company $’000 $’000 $’000 $’000 $’000 $’000

Financial guarantees 60,639 35,586 96,225 34,375 16,029 50,404

(e) Market price risk

Market price risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investment in quoted equity instrument. This instrument is quoted on the SGX-ST in Singapore and is classified as available-for-sale financial asset. The Group does not have exposure to commodity price risk.

Sensitivity analysis for equity price risk

At the balance sheet date, if the share price had been 15% (2011: 15%) higher/lower with all other variables held constant, the Group’s Fair Value Adjustment Reserve in equity would have been $79,000 (2011: $138,000) higher/lower, arising as a result of an increase/decrease in the fair value of equity instruments classified as available-for-sale.


31 Financial instruments

(a) Financial assets and liabilities

The carrying amount by category of financial assets and liabilities are as follows:

Group2012 2011

$’000 $’000

Loans and receivables:Trade and other receivables 45,498 48,189

Amounts due from joint-ventures (trade) 283 –

Amounts due from joint-ventures (non-trade) 1,369 1,297

Amounts due from minority shareholders of subsidiaries (non-trade) 411 420

Cash and fixed deposits 74,233 87,060

Total 121,794 136,966

Available-for-sale financial assets:Investment securities 20,659 919

Held-to-maturity investments:Investment securities 25,224 10,750

Financial liabilities carried at amortised cost:Trade and other payables 90,957 74,074

Accrued operating expenses (Note 21) 30,067 25,318

Amounts due to joint-ventures (trade) 1,847 –

Amounts due to joint-ventures (non-trade) 364 395

Short term loans (Note 24) 7,896 15,764

Long term loans (Note 25) 88,523 23,552

Loans from minority shareholders of subsidiaries 200 200

Total 219,854 139,303


138

31 Financial instruments (cont’d)

(b) Fair value

(i) Fair value of financial instruments that are carried at fair value

The following table shows an analysis of financial instruments carried at fair value by level of fair value hierarchy:

Quoted prices

in active markets for

identical instruments

2012 (Level 1)

Financial assets:Available-for-sale financial assets (Note 12)

- Equity instruments (quoted) 529


Quoted prices

in active markets for

identical instruments

2011 (Level 1)

Financial assets:Available-for-sale financial assets (Note 12)

- Equity instruments (quoted) 919




(b) Fair value (cont’d)

(i) Fair value of financial instruments that are carried at fair value (cont’d)

Fair value hierarchy

The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Determination of fair value

Equity securities (quoted) (Note 12): Fair value is determined by direct reference to their bid price quotations in an active market at the end of the reporting period.

(ii) Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value

Unquoted investment securities, trade and other receivables and payables, cash and bank balances, fixed deposits, related company balances and floating rate bank loans.

The carrying amounts of these financial assests and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the end of the reporting period.


140


(b) Fair value (cont’d)

(iii) Financial instruments carried at other than fair value

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

Carrying amount Fair value2012 2011 2012 2011

$’000 $’000 $’000 $’000

Financial assets:Other receivables 1,880 1,389 1,325 1,019

Investment in junior bonds (Note 12) 25,224 10,750 30,448 11,315

Financial liabilities:Obligations under finance

leases – 37 – 37

Fair value is estimated by discounting expected future cash flows at market incremental lending rate for similar types of borrowing or leasing arrangement at the balance sheet date.

No disclosure of fair values are made for the Group’s quasi-capital loan to an associate and loans from minority shareholders of subsidiaries, and the Company’s quasi-capital loans to subsidiaries as it is not practical to determine their fair values with sufficient reliability since the balances have no fixed terms of repayment.

32 Capital management

Capital includes debt and equity items as disclosed in the table below.

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

The Group manages its capital structure and makes adjustments to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended 31 December 2012 and 2011.

As disclosed in Note 27, subsidiaries of the Group operating in the PRC are required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied with by the respective subsidiaries for the financial year ended 31 December 2012 and 2011.


32 Capital management (cont’d)

The Group monitors capital using gearing ratio (which is total borrowings divided by total equity) and net gearing (which is total borrowings less cash and cash equivalents). The Group’s policy is to keep the gearing ratio below 2.

Group2012 2011

$’000 $’000

Total borrowings (1) 96,619 40,435

Less: Cash and cash equivalents (74,233) (87,060)

Net borrowings/(cash) 22,386 (46,625)

Total equity 91,025 85,468

Gearing ratio (times) 1.06 0.47

Net gearing Net borrowings Net cash

(1) including bank loans, finance lease obligations and loans from minority shareholders of subsidiaries

33 Segment information

For management purposes, the Group is organised into business units based on their products and services, and has three reportable operating segments as follows:

(a) The bakery segment is in the business of manufacturing and retailing of all kinds of food, bakery and confectionary products including franchising.

(b) The food court segment is involved in the management and operation of food courts and food and drinks outlets.

(c) The restaurant segment is in the business of operating food and drinks outlets, eating houses and restaurants.

Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss.

Transactions between operating segments are generally based on terms determined on commercial basis.


142

33 Segment information (cont’d)

2012Bakery

operations (1)

Restaurant operations

Food court operations Investment Others (2) Elimination Group

$’000 $’000 $’000 $’000 $’000 $’000 $’000

RevenueExternal sales 233,136 102,620 111,578 – – – 447,334

Inter-segment sales (Note A) 355 – 1,432 – – (1,787) –

Total revenue 233,491 102,620 113,010 – – (1,787) 447,334

ResultsProfit from

operations 9,401 7,322 1,182 (117) 836 – 18,624

Interest income 337 40 75 1,226 7 – 1,685

Interest expense (413) (111) (442) (358) (62) – (1,386)

Share of joint ventures’ results 229 – 224 – – – 453

Segment profit 9,554 7,251 1,039 751 781 – 19,376

Tax expense (5,818)

Profit for the year 13,558

Assets and liabilities

Segment assets (Note A) 104,845 62,099 121,380 47,469 59,594 (41,553) 353,834

Deferred tax assets 2,575

Total assets 356,409

Segment liabilities (Note A) 70,486 31,144 109,571 45,821 42,586 (43,176) 256,432

Tax payable 6,438

Deferred tax liabilities 2,514

Total liabilities 265,384

Other informationInvestment in joint

ventures 2,479 – 646 – – – 3,125

Investment in associates – – – – 900 – 900

Additions to non-current assets (Note B) 18,456 8,411 40,126 – 36,409 – 103,402

Depreciation and amortisation 10,678 6,522 13,708 – 89 – 30,997

Other non-cash (income)/expenses (Note C) 350 266 1,166 – (621) – 1,161



2011Bakery

operations (1)

Restaurant operations

Food court operations Investment Others (2) Elimination Group

$’000 $’000 $’000 $’000 $’000 $’000 $’000

RevenueExternal sales 194,433 76,969 94,502 – – – 365,904

Inter-segment sales (Note A) 304 – 1,394 – – (1,698) –

Total revenue 194,737 76,969 95,896 – – (1,698) 365,904

ResultsProfit from

operations 8,562 3,871 4,712 (65) (85) – 16,995

Interest income 239 11 55 519 – – 824

Interest expense (476) (94) (159) – (56) – (785)

Share of joint ventures’ results – – 93 – – – 93

Segment profit 8,325 3,788 4,701 454 (141) – 17,127

Tax expense (5,370)

Profit for the year 11,757

Assets and liabilities

Segment assets (Note A) 90,899 55,590 104,673 23,731 24,024 (38,732) 260,185

Deferred tax assets 2,120

Total assets 262,305

Segment liabilities (Note A) 63,006 29,702 80,833 22,835 25,382 (52,820) 168,938

Tax payable 5,623

Deferred tax liabilities 2,276

Total liabilities 176,837

Other informationInvestment in joint

ventures – – 422 – – – 422

Additions to non-current assets (Note B) 11,542 9,885 17,693 – 1,529 – 40,649

Depreciation and amortisation 9,487 4,297 10,540 – 38 – 24,362

Other non-cash (income)/expenses (Note C) 1,231 186 536 – 311 – 2,264


144


Notes:

(A) Inter-segment sales, assets and liabilities are eliminated on consolidation.

(B) Additions to non-current assets consist of additions to property, plant and equipment and intangible assets.

(C) Other non-cash (income)/expenses consist of:

receivables, amount due from associates and inventories;

Geographical information

Revenue and non-current assets information based on the geographical location of customers and assets respectively are as follows:

External sales Non-current assets (3)

2012 2011 2012 2011$’000 $’000 $’000 $’000

Singapore 228,422 191,237 91,387 40,552

Mainland China 142,992 117,573 40,402 38,178

Hong Kong 41,902 35,204 9,569 6,785

Rest of the world 34,018 21,890 24,581 12,597

Total 447,334 365,904 165,939 98,112

(1) Bakery operations comprise operation of bakery retail outlets as well as that operated through franchising.(2) The business segment “Others” comprises the corporate services, treasury functions, investment holding activities and

dormant associated company(3) Non-current assets information presented above consist of property, plant and equipment and intangible assets.


34 Dividends


$’000 $’000

Dividends paid during the year:Dividends on ordinary shares

share (2010: 1.0 cent per share) 2,812 2,813

share (2010: Nil cent per share) 1,406 –

cent per share) 1,406 –

5,624 2,813

Proposed but not recognised as a liability as at 31 December: Dividends on ordinary shares, subject to shareholders’ approval at the

Annual General Meeting:

share (2011: 1.0 cent per share) 2,250 2,812

share (2011: 0.5 cent per share) – 1,406

2,250 4,218

35 Authorisation of financial statements

The financial statements for the year ended 31 December 2012 were authorised for issue in accordance with a resolution of the directors on 27 March 2013.

146

Issued and fully Paid-up Capital : S$33,302,916

Number of Ordinary Shares in Issue (excluding treasury shares) : 281,063,624

Number of Treasury Shares held : 829,614

Class of Shares : Ordinary Shares

Voting Rights : One vote per share

Distribution of Shareholdings

Size of ShareholdingsNo. of

Shareholders % No. of Shares %

1 -999 70 4.46 28,159 0.01

1,000 -10,000 929 59.13 4,596,053 1.63

10,001 -1,000,000 550 35.01 31,242,542 11.12

1,000,001 and above 22 1.40 245,196,870 87.24

Total 1,571 100.00 281,063,624 100.00

Twenty Largest Shareholders

No. Name No. of Shares %

1. Citibank Nominees Singapore Pte Ltd 33,598,754 11.95

2. Katherine Lee Lih Leng 32,499,015 11.56

3. United Overseas Bank Nominees Pte Ltd 31,481,747 11.20

4. Mayban Nominees (S) Pte Ltd 30,100,000 10.71

5. Hong Leong Finance Nominees Pte Ltd 20,432,000 7.27

6. DBS Vickers Securities (S) Pte Ltd 20,127,000 7.16

7. HL Bank Nominees (S) Pte Ltd 15,180,000 5.40

8. HSBC (Singapore) Nominees Pte Ltd 11,314,950 4.03

9. SBS Nominees Pte Ltd 11,000,000 3.91

10. DBS Nominees Pte Ltd 9,057,800 3.22

11. Citibank Consumer Nominees Pte Ltd 6,361,000 2.26

12. Phillip Securities Pte Ltd 5,014,100 1.78

13. BNP Paribas Securities Services Singapore Pte Ltd 4,359,000 1.55

14. DBSN Services Pte Ltd 2,432,627 0.87

15. George Quek Meng Tong 2,291,655 0.82

16. BNP Paribas Nominees Singapore Pte Ltd 2,049,000 0.73

17. UOB Kay Hian Pte Ltd 1,746,400 0.62

18. Liow Siew Pieng 1,399,200 0.50

19. Thian Min Yang 1,253,000 0.45

20. Bank of Singapore Nominees Pte Ltd 1,190,000 0.42

Total : 242,887,248 86.41

Based on information available to the Company as at 11 March 2013, approximately 40.41% of the Company’s shares are held in the hands of public. Accordingly, the Company has complied with the Rule 723 of the Listing Manual of SGX-ST.

STATISTICS OF SHAREHOLDINGS AS AT 11 MARCH 2013


Substantial Shareholders(as recorded in the Register of Substantial Shareholders as at 11 March 2013)

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

George Quek Meng Tong(1) 95,644,430 34.03% 52,371,790 18.63%

Katherine Lee Lih Leng(1) 52,371,790 18.63% 95,644,430 34.03%

Primacy Investment Limited 17,637,000 6.28% – –

(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.

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NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of BreadTalk Group Limited (“the Company”) will be held at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 on Tuesday, 23 April 2013 at 9.30 a.m. for the following purposes:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and the Audited Financial Statements of the Company for the year ended 31 December 2012 together with the Auditors’ Report thereon.

(Resolution 1) 2. To declare a final dividend of 0.8 cent per share tax exempt (one-tier) for the year ended 31 December 2012 (2011:

1.5 cents). (Resolution 2)

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

Ms Katherine Lee Lih Leng (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 and Nominating Committees. 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$168,000 for the year ended 31 December 2012 (2011: S$168,000).

(Resolution 5)

5. To re-appoint Messrs Ernst & Young LLP as the Auditors of the Company and to authorise the Directors of the Company to fix their remuneration. (Resolution 6)

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

AS SPECIAL BUSINESS

To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications:


7. Authority to issue shares

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

(a) (i) issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,

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

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

provided that:

(1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed fifty per 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 to be issued other than on a pro rata basis to 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 SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, after adjusting for:

(a) new shares arising from the conversion or exercise of any convertible securities;

(b) new shares arising from exercising share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and

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

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(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and 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 until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

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

8. Authority to issue shares 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 prevailing 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 fifteen 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. Authority to issue shares under the BreadTalk Group Limited Restricted Share Grant Plan

That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and empowered to offer and grant awards in accordance with the provisions of the BreadTalk Group Limited Restricted Share Grant Plan (“the Plan”) and to allot and/or issue from time to time such number of fully-paid shares as may be required to be allotted and/or issued pursuant to the vesting of the awards under the Plan, provided always that the aggregate number of new ordinary shares to be allotted and/or issued pursuant to the Plan, the Scheme and any other share based schemes (if applicable), which the Company may have in place, shall not exceed fifteen per centum (15%) of the total issued shares excluding treasury shares in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

[See Explanatory Note (iii)] (Resolution 9)



10. Authority to grant awards to Participants pursuant to the Rules of, and issue shares under, the Plan

That, contingent upon the passing of Resolution 9, in order to reward, retain and motivate employees who had met specific performance objectives set by the Company, the Directors of the Company be authorised and empowered to grant awards in accordance with the provisions of the Plan to the following participants of the Plan (“the Participants”) and to issue shares in the Company to the Participants of awards granted by the Company under the Plan, provided always that the aggregate number of shares available to Controlling Shareholders and their associates under the Plan shall not exceed twenty five per centum (25%) of all the shares available under the Plan and that the number of shares available to each Controlling Shareholder or his associate shall not exceed ten per centum (10%) of all the shares available under the Plan. Such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the Company’s next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

Name of Participant No. of shares to be awardedAssociate of Controlling Shareholder

Mr Frankie Quek Swee Heng 24,000 (Resolution 10)

[See Explanatory Note (iv)]

11. 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 number of issued shares (excluding treasury shares) in the capital of the Company (as ascertained as at the date of Annual General Meeting of the Company) at the price of up to but not exceeding the Maximum Price as defined in paragraph 3.4 of the Appendix to the Annual Report to Shareholder dated 8 April 2013, 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 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 (v)] (Resolution 11)

By Order of the Board

Tan Cher LiangCompany SecretarySingaporeDate: 8 April 2013

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Explanatory Notes:

(i) The Ordinary Resolution 7 in item 7 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant Instruments convertible into shares and to issue shares pursuant to such Instruments, up to a number not exceeding, in total, 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to shareholders.

For determining the aggregate number of shares that may be issued, the total number of issued shares (excluding treasury shares) will be calculated based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time this Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time when 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) 15% of the total number of issued shares excluding treasury shares in the capital of the Company from time to time, and the aggregate number of ordinary shares which may be issued pursuant to the Scheme, the Plan and any other share based schemes (if applicable) is limited to 15% of the total issued share capital of the Company excluding treasury shares from time to time. Resolution 8 is independent from Resolution 9 and the passing of Resolution 8 is not contingent on the passing of Resolution 9.

(iii) Resolution 9 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, to offer and grant awards under the BreadTalk Group Limited Restricted Share Grant Plan (“the Plan”) in accordance with the provisions of the Plan and to issue from time to time such number of fully-paid shares as may be required to be issued pursuant to the vesting of the awards under the Plan subject to the maximum number of shares prescribed under the terms and conditions of the Plan. The aggregate number of ordinary shares which may be issued pursuant to the Scheme, the Plan and any other share based schemes (if applicable) is limited to 15% of the total issued share capital of the Company excluding treasury shares from time to time. Resolution 9 is independent from Resolution 8 and the passing of Resolution 9 is not contingent on the passing of Resolution 8.

(iv) Resolution 10 in item 10 above, if passed, will empower the Directors of the Company to issue shares in the Company to the associate of Controlling Shareholders, granted by the Company under the Plan. Resolution 10 is contingent on the passing of Resolution 3. Shareholders who are eligible to participate in the Plan shall abstain from voting on Resolution 10.



As at the Latest Practicable Date prior to the printing of this Notice of Annual General Meeting (i.e 11 March 2013), the number of shares granted in respect of the Plan since its commencement date are as follows:

Name Aggregate Number of Restricted Shares Granted

Aggregate Number of Restricted Shares Vested

Frankie Quek Swee Heng 119,000 80,810

Other Participants* 3,312,066 2,001,996

TOTAL 3,431,066 2,082,806

* None of the Other Participants is either a controlling shareholder of the Company or an associate of a controlling shareholder of the Company.

The Directors confirm that, as at the Latest Practicable Date (i.e. 11 March 2013):

(a) the aggregate number of shares issued under the Plan do not exceed 15% of the total issued shares (excluding treasury shares) in the capital of the Company;

(b) the aggregate number of shares granted to controlling shareholders and their associates does not exceed 25% of the shares available under the Plan; and

(c) number of shares granted to each controlling shareholder or his or her associate respectively does not exceed 10% of the shares available under the Plan.

The rationale for Resolution 10

Mr. Frankie Quek Swee Heng (Frankie Quek), CEO, Asean Region, holds an aggregate of 0.15% of the Company’s shareholding (direct and deemed interests). He is involved in the formulation and implementation of the expansion plans of the Group in the Asean Region. With his business acumen and extensive knowledge of the local food and beverage industry, he is assisting the Chairman, Dr George Quek Meng Tong, in overseeing the growth and expansion as well as daily operations of the Group, focusing on the Group’s expansion into the Asean Region. The Company therefore believes that he has the potential and ability to contribute to the further success of the Group.

By allowing him to participate in the Plan, the Company will have an additional tool to craft a more balanced and innovative remuneration package that will link his total remuneration to the performance of the Group. Frankie Quek will also be able to share in any future appreciation of the Company’s share price that is commensurate with the Company’s future growth through an increase in his shareholdings to a more significant level.

154

The Directors are of the view that the remuneration package of Frankie Quek is fair given his contributions to the Group. The extension of the Plan to Frankie Quek is consistent with the Company’s objectives to motivate its employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company.

As the Plan serves as recognition of the past contributions of those eligible to participate in the Plan, as well as to secure future contributions for the Company and the Group from them, the Directors consider it important that Frankie Quek should be included in the Plan. The Directors consider it crucial for the Company to provide sufficient incentives which will instill a sense of commitment to the Group.

The participation of and grant of Awards to Frankie Quek under the Plan has been approved in principle by shareholders when they approved the Plan at the Extraordinary General Meeting held on 28 April 2008. Resolution 10 seeks for the above stated reasons, shareholders approval for the Directors decision to grant 24,000 shares to Frankie Quek in accordance with the Plan.

(v) The Ordinary Resolution 11 proposed in item 11 above, if passed, will empower the Directors of the Company effective until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier, to repurchase ordinary shares of the Company by way of market purchases or off-market purchases of up to 10% of the total number of issued shares (excluding treasury shares) in the capital of the Company at the Maximum Price as defined in Paragraph 3.4 to the Appendix. The rationale for, the authority and limitation on, the sources of funds to be used for the purchase or acquisition including the amount of financing and the financial effects of the purchase or acquisition of ordinary shares by the Company pursuant to the Share Purchase Mandate on the audited consolidated financial accounts of the Group for the financial year ended 31 December 2012 are set out in greater detail in the Appendix.

Notes

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

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



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

IMPORTANT:1. For investors who have used their CPF monies to buy BreadTalk Group

Limited’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf.

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 Tuesday, 23 April 2013 at 9.30 a.m. at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

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

No. Resolutions relating to: For Against1 Directors’ Report and Audited Financial Statements for the year ended 31 December 2012.

2 Payment of proposed final dividend.

3 Re-election of Ms Katherine Lee Lih Leng as a Director.

4 Re-election of Mr Chan Soo Sen as a Director.

5 Approval of Directors’ fees amounting to S$168,000 for the year ended 31 December 2012.

6 Re-appointment of Messrs Ernst & Young LLP as Auditors.

7 Authority to issue new shares.

8 Authority to issue shares under the BreadTalk Group Limited Employees’ Share Option Scheme.

9 Authority to issue shares under the BreadTalk Group Limited Restricted Share Grant Plan (the “Plan”).

10 Share award under the Plan to Mr Frankie Quek Swee Heng.

11 Renewal of Share Purchase Mandate.

Dated this _____________________ day of _____________________ 2013

________________________________________________________________

Signature of Shareholder(s)or, Commom Seal of Corporate Shareholder

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

Total number of Shares in: No. of Shares

(a) CDP Register

(b) Register of Members

156

Notes:

1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.

3. Where a member appoints more than one proxy, the appointments shall be invalid unless he/she specifies the proportion of his/her shareholding to be represented by each proxy. If no proportion or number of shares is specified, the first named proxy may be treated as representing 100% of the shareholding and any second named proxy as an alternate to the first named.

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

5. The instrument appointing a proxy or proxies must be executed under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised or in such manner as appropriate under applicable laws. Where the original instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the original power of attorney or other authority, if any, under which the instrument of proxy is signed or a duly certified copy of that power of attorney or other authority (failing previous registration with the Company) shall be attached to the original instrument of proxy and must be left at the Registered Office, not less than 48 hours before the time appointed for the holding of the Meeting or the adjourned Meeting at which it is to be used failing which the instrument may be treated as invalid.

6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore. The Company shall be entitled to treat an original certificate under the seal of the corporation as conclusive evidence of the appointment or revocation of appointment of a representative.

General:

The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company shall 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 of the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

Documents

Corporate - listed companybreadtalk-cn.listedcompany.com/misc/ar2012.pdf · Corporate Proﬁle Founded in 2000, and listed on the SGX since 2003, BreadTalk transformed the face of