IMPORTANT NOTICE
NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO U.S. PERSONS
IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the attached information memorandum. You are advised to read this disclaimer carefully before accessing, reading or making any other use of the attached information memorandum. In accessing the attached information memorandum, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from us as a result of such access.
Confirmation of Your Representation: In order to be eligible to view the attached information memorandum or make an investment decision with respect to the securities, investors must not be a U.S. person (within the meaning of Regulation S under the Securities Act (as defined below)). The attached information memorandum is being sent at your request and by accepting the e-mail and accessing the attached information memorandum, you shall be deemed to have represented to us (1) that you are not resident in the United States nor a U.S. person, as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act") nor are you acting on behalf of a U.S. person, the electronic mail address that you gave us and to which this e-mail has been delivered is not located in the U.S. and, to the extent you purchase the securities described in the attached information memorandum, you will be doing so pursuant to Regulation S under the Securities Act, and (2) that you consent to delivery of the attached information memorandum and any amendments or supplements thereto by electronic transmission. By accepting this document, if you are an investor in Singapore, you (A) represent and warrant that you are either an institutional investor as defined under Section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), a relevant person as defined under Section 275(2) of the SFA or persons to whom an offer is being made, as referred to in Section 275(1A) of the SFA, and (B) agree to be bound by the limitations and restrictions described herein.
The attached document has been made available to you in electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of transmission and consequently none of BreadTalk Group Limited (the "Issuer"), Australia and New Zealand Banking Group Limited, Oversea-Chinese Banking Corporation Limited or any person who controls any of them nor any of their respective directors, officers, employees, representatives or affiliates accepts any liability or responsibility whatsoever in respect of any discrepancies between the document distributed to you in electronic format and the hard copy version. We will provide a hard copy version to you upon request.
Restrictions: The attached document is being furnished in connection with an offering exempt from registration under the Securities Act solely for the purpose of enabling a prospective investor to consider the purchase of the securities described therein.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE U.S. OR OTHER JURISDICTION AND MAY NOT BE OFFERED OR SOLD WITHIN THE U.S. OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS.
Except with respect to eligible investors in jurisdictions where such offer is permitted by law, nothing in this electronic transmission constitutes an offer or an invitation by or on behalf of the Issuer, Australia and New Zealand Banking Group Limited or Oversea-Chinese Banking Corporation Limited to subscribe for or purchase any of the securities described therein, and access has been limited so that it shall not constitute in the United States or elsewhere a general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or directed selling efforts (within the meaning of Regulation S under the Securities Act).
You are reminded that you have accessed the attached information memorandum on the basis that you are a person into whose possession this information memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not nor are you authorised to deliver this NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO U.S. PERSONS document, electronically or otherwise, to any other person. If you have gained access to this transmission contrary to the foregoing restrictions, you will be unable to purchase any of the securities described therein.
Actions that You May Not Take: If you receive this document by e-mail, you should not reply by e- mail to this document, and you may not purchase any securities by doing so. Any reply e-mail communications, including those you generate by using the “Reply” function on your e-mail software, will be ignored or rejected.
YOU ARE NOT AUTHORISED AND YOU MAY NOT FORWARD OR DELIVER THE ATTACHED INFORMATION MEMORANDUM, ELECTRONICALLY OR OTHERWISE, TO ANY OTHER PERSON OR REPRODUCE SUCH INFORMATION MEMORANDUM IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT AND THE ATTACHED INFORMATION MEMORANDUM IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.
You are responsible for protecting against viruses and other destructive items. If you receive this document by e-mail, your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. BREADTALK GROUP LIMITED INFORMATION MEMORANDUM DATED 7 MAY 2014
BREADTALK GROUP LIMITED (Incorporated in the Republic of Singapore on 6 March 2003) (Unique Entity Number: 200302045G)
S$250,000,000 Multicurrency Medium Term Note Programme (the “MTN Programme”)
This Information Memorandum has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Information Memorandum and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of notes (the “Notes”) to be issued from time to time by BreadTalk Group Limited (the “Issuer”) pursuant to the MTN Programme may not be circulated or distributed, nor may the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six (6) months after that corporation or that trust has acquired the Notes pursuant to an offer made under Section 275 of the SFA except:
(1) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or (in the case of such corporation) where the transfer arises from an offer referred to in Section 276(3)(i)(B) of the SFA or (in the case of such trust) where the transfer arises from an offer referred to in Section 276(4)(i)(B) of the SFA;
(2) where no consideration is or will be given for the transfer;
(3) where the transfer is by operation of law;
(4) as specified in Section 276(7) of the SFA; or
(5) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.
Approval in-principle has been obtained from the Singapore Exchange Securities Trading Limited (the “SGX-ST”) for permission to deal in and the quotation for any Notes which are agreed at the time of issue thereof to be so listed on the SGX-ST. Such permission will be granted when such Notes have been admitted to the Official List of the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained herein. Admission to the Official List of the SGX-ST and quotation of any Notes on the SGX-ST is not to be taken as an indication of the merits of the Issuer, its subsidiaries, its associated companies (if any), the MTN Programme or such Notes.
Potential investors should pay attention to the risk factors and considerations set out in the section titled “Risk Factors”.
Arrangers TABLE OF CONTENTS
Page
NOTICE ...... 1 FORWARD-LOOKING STATEMENTS ...... 4 DEFINITIONS ...... 5 CORPORATE INFORMATION ...... 9 SUMMARY OF THE MTN PROGRAMME ...... 11 TERMS AND CONDITIONS OF THE NOTES ...... 17 SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM ...... 52 THE ISSUER ...... 58 SELECTED FINANCIAL INFORMATION OF THE GROUP ...... 76 RISK FACTORS ...... 82 PURPOSE OF THE MTN PROGRAMME AND USE OF PROCEEDS ...... 96 CLEARING AND SETTLEMENT ...... 97 SINGAPORE TAXATION ...... 99 SUBSCRIPTION, PURCHASE AND DISTRIBUTION ...... 104 FORM OF PRICING SUPPLEMENT ...... 106 APPENDIX I GENERAL AND OTHER INFORMATION ...... 114 APPENDIX II AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011 ...... 117 APPENDIX III AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 ...... 220 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 ...... 327 NOTICE
Australia and New Zealand Banking Group Limited and Oversea-Chinese Banking Corporation Limited (the “Arrangers”) have been authorised by BreadTalk Group Limited (the “Issuer”) to arrange the S$250,000,000 Multicurrency Medium Term Note Programme (the “MTN Programme”) described herein. Under the MTN Programme, the Issuer may, subject to compliance with all relevant laws, regulations and directives, from time to time issue notes (the “Notes”) denominated in Singapore dollars and/or any other currencies.
This Information Memorandum contains information with regard to the Issuer, its subsidiaries, its associated companies (if any), and the MTN Programme. The Issuer confirms that this Information Memorandum contains all information with regard to the Issuer and the Group (as defined herein) and to the Notes which is material in the context of the MTN Programme or the issue and offering of the Notes, that the information contained herein is true, accurate, complete and not misleading in all material respects, that the opinions, expectations and intentions of the Issuer expressed in this Information Memorandum have been carefully considered, are based on all relevant considerations and facts existing at the date of its issue and are fairly, reasonably and honestly held by the directors of the Issuer and that there are no other facts the omission of which in the context of the MTN Programme and the issue and offering of the Notes is likely to make any such information or expressions of opinion, expectation or intention misleading in any material respect.
The following documents published or issued from time to time after the date hereof shall be deemed to be incorporated by reference in, and to form part of, this Information Memorandum: (1) any annual reports or summary financial statements or audited consolidated accounts or unaudited interim results or financial statements of the Issuer, its subsidiaries and associated companies (if any) and (2) any supplement or amendment to this Information Memorandum issued by the Issuer. This Information Memorandum is to be read in conjunction with (a) all such documents which are incorporated by reference herein and (b) with respect to any series or tranche of Notes, any Pricing Supplement (as defined herein) in respect of such series or tranche. Any statement contained in this Information Memorandum or in a document deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Information Memorandum to the extent that a statement contained in this Information Memorandum or in such subsequent document that is also deemed to be incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Memorandum.
Copies of all documents deemed incorporated by reference herein are available for inspection at the specified office of the Principal Paying Agent (as defined herein).
Notes may be issued in series having one or more issue dates and the same maturity date, and on identical terms (including as to listing) except (in the case of Notes other than variable rate notes (as described under the section titled “Summary of the MTN Programme”)) for the issue dates, issue prices and/or the dates of the first payment of interest, or (in the case of variable rate notes) for the issue prices and rates of interest. Each series may be issued in one or more tranches on the same or different issue dates. The Notes will be issued in bearer form or registered form and may be listed on a stock exchange. Each series or tranche of Notes will initially be represented by a Temporary Global Note (as defined herein) in bearer form, a Permanent Global Note (as defined herein) in bearer form or a registered Global Certificate (as defined herein) which will be deposited on the relevant issue date with either CDP (as defined herein) or a common depositary on behalf of Euroclear (as defined herein) and Clearstream, Luxembourg (as defined herein) or otherwise delivered as agreed between the Issuer and the relevant Dealer(s) (as defined herein). Subject to compliance with all relevant laws, regulations and directives, the Notes may have maturities of such tenor as may be agreed between the Issuer and the relevant Dealer(s) and may be subject to redemption or purchase in whole or in part. The Notes will bear interest at a fixed, floating, variable or hybrid rate or may not bear interest or may be such other notes as may be agreed between the Issuer and the relevant Dealer(s). The Notes will be repayable at par, at a specified amount above or below par or at an amount determined by reference to a formula, in each case with terms as specified in the Pricing Supplement issued in relation to each series or tranche of Notes. Details applicable to each series or tranche of Notes will be specified in the applicable Pricing Supplement which is to be read in conjunction with this Information Memorandum.
1 The maximum aggregate principal amount of the Notes to be issued, when added to the aggregate principal amount of all Notes outstanding (as defined in the Trust Deed referred to herein) shall be S$250,000,000 (or its equivalent in any other currencies) or such higher amount as may be increased pursuant to the terms of the Programme Agreement (as defined herein).
No person has been authorised to give any information or to make any representation other than those contained in this Information Memorandum and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, the Arrangers or any of the Dealers. Save as expressly stated in this Information Memorandum, nothing contained herein is, or may be relied upon as, a promise or representation as to the future performance or policies of the Issuer or any of its subsidiaries or associated companies (if any). Neither this Information Memorandum nor any other document or information (or any part thereof) delivered or supplied under or in relation to the MTN Programme may be used for the purpose of, and does not constitute an offer of, or solicitation or invitation by or on behalf of the Issuer, the Arrangers or any of the Dealers to subscribe for or purchase, the Notes in any jurisdiction or under any circumstances in which such offer, solicitation or invitation is unlawful or not authorised, or to any person to whom it is unlawful to make such offer, solicitation or invitation. The distribution and publication of this Information Memorandum or any such other document or information and the offer of the Notes in certain jurisdictions may be restricted by law. Persons who distribute or publish this Information Memorandum or any such other document or information or into whose possession this Information Memorandum or any such other document or information comes are required to inform themselves about and to observe any such restrictions and all applicable laws, orders, rules and regulations.
The Notes have not been, and will not be, registered under the Securities Act (as defined herein) and are subject to U.S. tax law requirements and restrictions. Subject to certain exceptions, the Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons.
Neither this Information Memorandum nor any other document nor information (or any part thereof) delivered or supplied under or in relation to the MTN Programme shall be deemed to constitute an offer of, or an invitation by or on behalf of the Issuer, the Arrangers or any of the Dealers to subscribe for or purchase, any of the Notes.
This Information Memorandum and any other documents or materials in relation to the issue, offering or sale of the Notes have been prepared solely for the purpose of the initial sale by the relevant Dealer(s) of the Notes from time to time to be issued pursuant to the MTN Programme. This Information Memorandum and such other documents or materials are made available to the recipients thereof solely on the basis that they are persons falling within the ambit of Section 274 and/or Section 275 of the SFA (as defined herein) and may not be relied upon by any person other than persons to whom the Notes are sold or with whom they are placed by the relevant Dealer(s) as aforesaid or for any other purpose. Recipients of this Information Memorandum shall not reissue, circulate or distribute this Information Memorandum or any part thereof in any manner whatsoever.
Neither the delivery of this Information Memorandum (or any part thereof) or the issue, offering, purchase or sale of the Notes shall, under any circumstances, constitute a representation, or give rise to any implication, that there has been no change in the prospects, results of operations or general affairs of the Issuer or any of its subsidiaries or associated companies (if any) or in the information herein since the date hereof or the date on which this Information Memorandum has been most recently amended or supplemented.
The Arrangers and the Dealers have not separately verified the information contained in this Information Memorandum. None of the Issuer, the Arrangers, any of the Dealers or any of their respective officers or employees is making any representation or warranty expressed or implied as to the merits of the Notes or the subscription for, purchase or acquisition thereof, the creditworthiness or financial condition or otherwise of the Issuer or its subsidiaries or associated companies (if any). Further, neither the Arrangers nor the Dealers gives any representation or warranty as to the Issuer, its subsidiaries or associated companies (if any) or as to the accuracy, reliability or completeness of the information set out herein (including the legal and regulatory requirements pertaining to Sections 274, 275 and 276 or any other provisions of the SFA) and the documents which are incorporated by reference in, and form part of, this Information Memorandum.
2 Neither this Information Memorandum nor any other document or information (or any part thereof) delivered or supplied under or in relation to the MTN Programme or the issue of the Notes is intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by the Issuer, the Arrangers or any of the Dealers that any recipient of this Information Memorandum or such other document or information (or such part thereof) should subscribe for or purchase any of the Notes. A prospective purchaser shall make its own assessment of the foregoing and other relevant matters including the financial condition and affairs and the creditworthiness of the Issuer, its subsidiaries and associated companies (if any), and obtain its own independent legal or other advice thereon, and its investment shall be deemed to be based on its own independent investigation of the financial condition and affairs and its appraisal of the creditworthiness of the Issuer. Accordingly, notwithstanding anything herein, none of the Issuer, the Arrangers any of the Dealers or any of their respective officers, employees or agents shall be held responsible for any loss or damage suffered or incurred by the recipients of this Information Memorandum or such other document or information (or such part thereof) as a result of or arising from anything expressly or implicitly contained in or referred to in this Information Memorandum or such other document or information (or such part thereof) and the same shall not constitute a ground for rescission of any purchase or acquisition of any of the Notes by a recipient of this Information Memorandum or such other document or information (or such part thereof).
To the fullest extent permitted by law, neither the Arrangers nor any of the Dealers accepts any responsibility for the contents of this Information Memorandum or for any other statement made or purported to be made by the Arrangers or any of the Dealers or on its behalf in connection with the Issuer, or the issue and offering of the Notes. Each of the Arrangers and the Dealers accordingly disclaims all and any liability whether arising in tort or contract or otherwise (save as referred to above) which it might otherwise have in respect of this Information Memorandum or any such statement.
Any subscription for, purchase or acquisition of the Notes is in all respects conditional on the satisfaction of certain conditions set out in the Programme Agreement and the issue of the Notes by the Issuer pursuant to the Programme Agreement. Any offer, invitation to offer or agreement made in connection with the subscription for, purchase or acquisition of the Notes or pursuant to this Information Memorandum shall (without any liability or responsibility on the part of the Issuer, the Arrangers or any of the Dealers) lapse and cease to have any effect if (for any other reason whatsoever) the Notes are not issued by the Issuer pursuant to the Programme Agreement.
Any discrepancies (if any) in the tables included herein between the listed amounts and totals thereof are due to rounding.
The attention of recipients of this Information Memorandum is drawn to the restrictions on the resale of the Notes set out under the section titled “Subscription, Purchase and Distribution”.
Any person who is invited to purchase or subscribe for the Notes or to whom this Information Memorandum is sent shall not make any offer or sale, directly or indirectly, of any Notes or distribute or cause to be distributed any document or other material in connection therewith in any country or jurisdiction except in such manner and in such circumstances as will result in compliance with any applicable laws and regulations.
It is recommended that persons proposing to subscribe for, purchase or otherwise acquire any of the Notes consult their own legal and other advisers before subscribing for, purchasing or acquiring the Notes.
Prospective purchasers of Notes are advised to consult their own tax advisers concerning the tax consequences of the acquisition, ownership or disposal of Notes.
Prospective investors should pay attention to the risk factors set out in the section titled “Risk Factors”.
3 FORWARD-LOOKING STATEMENTS
All statements contained in this Information Memorandum that are not statements of historical fact constitute “forward-looking statements”. Some of these statements can be identified by forward- looking terms such as “expect”, “believe”, “plan”, “intend”, “estimate”, “anticipate”, “may”, “will”, “would” and “could” or similar words. However, these words are not the exclusive means of identifying forward- looking statements. All statements regarding the expected financial position, business strategy, plans and prospects of the Issuer and/or the Group, if any, are forward-looking statements and accordingly, are only predictions. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Issuer and/or the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others: z changes in general political, social and economic conditions; z changes in currency exchange and interest rates; z demographic changes; z changes in competitive conditions; and z other factors beyond the control of the Issuer and the Group.
Some of these factors are discussed in greater detail in this Information Memorandum, in particular, but not limited to, the discussion under the section titled “Risk Factors”.
Given the risks and uncertainties that may cause the actual future results, performance or achievements of the Issuer and/or the Group to be materially different from the results, performance or achievements expected, expressed or implied by the financial forecasts, profit projections and forward-looking statements in this Information Memorandum, undue reliance must not be placed on those forecasts, projections and statements. The Issuer, the Arrangers and the Dealers do not represent or warrant that the actual future results, performance or achievements of the Issuer and/or the Group will be as discussed in those statements.
Neither the delivery of this Information Memorandum (or any part thereof) nor the issue, offering, purchase or sale of the Notes by the Issuer shall, under any circumstances, constitute a continuing representation, or create any suggestion or implication, that there has been no change in the prospects, results of operations or general affairs of the Issuer or any of the subsidiaries or associated companies (if any) of the Issuer or any statement of fact or information contained in this Information Memorandum since the date of this Information Memorandum or the date on which this Information Memorandum has been most recently amended or supplemented.
Further, the Issuer, the Group, the Arrangers and the Dealers disclaim any responsibility, and undertake no obligation, to update or revise any forward-looking statements contained herein to reflect any changes in the expectations with respect thereto after the date of this Information Memorandum or to reflect any change in events, conditions or circumstances on which any such statements are based.
4 DEFINITIONS
“Agency Agreement” : The agency agreement dated 7 May 2014 between (1) the Issuer, as issuer, (2) Deutsche Bank AG, Singapore Branch, in respect of Notes cleared through CDP, as principal paying agent, registrar and transfer agent, (3) Deutsche Bank AG, Hong Kong Branch, in respect of Notes other than those cleared through CDP, as paying agent and transfer agent, (4) Deutsche Bank Luxembourg S.A., in respect of Registered Notes other than those cleared through CDP, as registrar, and (5) the Trustee, as trustee, as amended, varied or supplemented from time to time
“Arrangers” : Australia and New Zealand Banking Group Limited and Oversea- Chinese Banking Corporation Limited
“Bearer Note” : A Note that is in bearer form, and includes any replacement Bearer Note issued pursuant to the Conditions and any Temporary Global Note or Permanent Global Note
“Business Day” : (i) a day (other than a Saturday, Sunday or gazetted public holiday) on which Euroclear, Clearstream, Luxembourg and CDP, as applicable, are operating;
(ii) a day (other than a Saturday, Sunday or gazetted public holiday) on which banks and foreign exchange markets are open for general business in the country of the Principal Paying Agent’s specified office; and
(iii) (if a payment is to be made on that day) (1) (in the case of Notes denominated in Singapore dollars) a day (other than a Saturday, Sunday or gazetted public holiday) on which banks and foreign exchange markets are open for general business in Singapore, (2) (in the case of Notes denominated in euros) a day (other than a Saturday, Sunday or gazetted public holiday) on which the TARGET System is open for settlement in euros, and (3) (in the case of Notes denominated in a currency other than Singapore dollars and euros) a day (other than a Saturday, Sunday or gazetted public holiday) on which banks and foreign exchange markets are open for general business in Singapore and the principal financial centre for that currency
“CDP” : The Central Depository (Pte) Limited
“CDP Registrar” : Deutsche Bank AG, Singapore Branch
“CDP Transfer Agent” : Deutsche Bank AG, Singapore Branch
“Certificate” : A registered certificate representing one or more Registered Notes of the same Series and, save as provided in the Conditions, comprising the entire holding by a Noteholder of his Registered Notes of that Series
“Clearing Systems”:Euroclear, Clearstream, Luxembourg and CDP, and “Clearing System” means any of them
5 “Clearstream, Luxembourg” : Clearstream Banking, société anonyme
“Companies Act” or “Act” : The Companies Act (Chapter 50 of Singapore), as amended or modified from time to time
“Conditions” : The terms and conditions of the Notes
“Couponholders” : The holders of the Coupons
“Coupons” : The interest coupons appertaining to an interest bearing Definitive Note
“Dealers” : Persons appointed as dealers under the MTN Programme
“Definitive Note” : A definitive Note in bearer form and having, where appropriate, Coupons attached on issue
“Directors” : The directors (including alternate directors, if any) of the Issuer as at the date of this Information Memorandum
“euro” : The currency of the member states of the European Union that adopt the single currency in accordance with the Treaty establishing the European Community, as amended from the time to time
“Euroclear” : Euroclear Bank S.A./N.V.
“F&B” : Food and beverage
“FY” : Financial year ended 31 December
“Global Certificate” : A global Certificate representing Registered Notes of one or more Tranches of the same Series that are registered in the name of the CDP and/or any other clearing system or in the name of a nominee of (a) a common depositary for Euroclear and Clearstream, Luxembourg, (b) CDP and/or (c) any other clearing system
“Global Note” : A global Note representing Bearer Notes of one or more Tranches of the same Series, being a Temporary Global Note and/or, as the context may require, a Permanent Global Note, in each case without Coupons
“Group” : The Issuer and its subsidiaries
“IRAS” : Inland Revenue Authority of Singapore
“Issuer” : BreadTalk Group Limited
“ITA” : The Income Tax Act (Chapter 134 of Singapore), as amended or modified from time to time
“Latest Practicable Date” : 28 April 2014
“MAS” : The Monetary Authority of Singapore
6 “MTN Programme” : The S$250,000,000 Multicurrency Medium Term Note Programme of the Issuer as described in this Information Memorandum
“Non-CDP Paying Agent” : Deutsche Bank AG, Hong Kong Branch
“Non-CDP Registrar” : Deutsche Bank Luxembourg S.A.
“Non-CDP Transfer Agent” : Deutsche Bank AG, Hong Kong Branch
“Noteholders” : The holders of the Notes
“Notes” : The notes of the Issuer issued or to be issued under the MTN Programme and constituted by the Trust Deed (and shall, where the context so admits, include the Global Notes, the Global Certificates, the Definitive Notes and any related Coupons and the Certificates)
“Paying Agents” : The Principal Paying Agent and the Non-CDP Paying Agent
“Permanent Global Note” : A Global Note representing Bearer Notes of one or more Tranches of the same Series, either on issue or upon exchange of interests in a Temporary Global Note
“PRC” or “Mainland China” The People’s Republic of China, excluding Hong Kong Special Administrative Region and Macau Special Administrative Region for purposes of this Information Memorandum
“Pricing Supplement” : In relation to a Series or Tranche, a pricing supplement, to be read in conjunction with this Information Memorandum, issued specifying the relevant issue details in relation to such Series or, as the case may be, Tranche
“Principal Paying Agent” : Deutsche Bank AG, Singapore Branch
“Programme Agreement” : The programme agreement dated 7 May 2014 made between (1) the Issuer, as issuer and (2) Australia and New Zealand Banking Group Limited and Oversea-Chinese Banking Corporation Limited, as arrangers and dealers, as amended, varied or supplemented from time to time
“Registered Note” : A Note in registered form
“Securities Act” : Securities Act of 1933 of the United States, as amended or modified from time to time
“Series” : (in relation to Notes other than variable rate notes) a Tranche, together with any further Tranche or Tranches, which are (i) expressed to be consolidated and forming a single series and (ii) identical in all respects (including as to listing) except for their respective issue dates, issue prices and/or dates of the first payment of interest; and (in relation to variable rate notes) Notes which are identical in all respects (including as to listing) except for their respective issue prices and rates of interest
“SFA” : Securities and Futures Act (Chapter 289 of Singapore), as amended or modified from time to time
7 “SGX-ST” : Singapore Exchange Securities Trading Limited
“Shares” : Ordinary shares in the capital of the Issuer
“TARGET System” : The Trans-European Automated Real Time Gross settlement Express Transfer (known as TARGET2) System which was launched on 19 November 2007 or any successor thereto
“Temporary Global Note” : A Global Note representing Bearer Notes of one or more Tranches of the same Series on issue
“Tranche” : Notes which are identical in all respects (including listing)
“Trust Deed” : The trust deed dated 7 May 2014 made between (1) the Issuer, as issuer and (2) the Trustee, as trustee, as amended, varied or supplemented from time to time
“Trustee” : DB International Trust (Singapore) Limited
“United States” or “U.S.” : United States of America
“S$” : Singapore dollars
“%” : Per cent.
Words importing the singular shall, where applicable, include the plural and vice versa, and words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall, where applicable, include corporations. Any reference to a time of day in this Information Memorandum shall be a reference to Singapore time unless otherwise stated. Any reference in this Information Memorandum to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Companies Act or the SFA or any statutory modification thereof and used in this Information Memorandum shall, where applicable, have the meaning ascribed to it under the Companies Act, or as the case may be, the SFA.
8 CORPORATE INFORMATION
Board of Directors : Dr George Quek Meng Tong (Chairman) Ms Katherine Lee Lih Leng (Deputy Chairman) Mr Ong Kian Min (Independent Director) Dr Tan Khee Giap (Independent Director) Mr Chan Soo Sen (Independent Director)
Company Secretary : Mr Cho Form Po
Registered Office : 30 Tai Seng Street #09-01 BreadTalk IHQ Singapore 534013
Auditors to the Issuer : Ernst & Young LLP Public Accountants and Chartered Accountants One Raffles Quay North Tower Level 18 Singapore 048583
Arrangers of the MTN Programme : Australia and New Zealand Banking Group Limited 10 Collyer Quay #21-00 Ocean Financial Centre Singapore 049315
Oversea-Chinese Banking Corporation Limited 63 Chulia Street #03-05 OCBC Centre East Singapore 049514
Solicitors to the Arrangers : WongPartnership LLP 12 Marina Boulevard Level 28 Marina Bay Financial Centre Tower 3 Singapore 018982
Solicitors to the Issuer : WongPartnership LLP 12 Marina Boulevard Level 28 Marina Bay Financial Centre Tower 3 Singapore 018982
Solicitors to the Trustee, the Principal : Allen & Gledhill LLP Paying Agent, the CDP Registrar, the One Marina Boulevard #28-00 CDP Transfer Agent, the Non-CDP Singapore 018989 Paying Agent, the Non-CDP Registrar and the Non-CDP Transfer Agent
Principal Paying Agent, CDP Registrar : Deutsche Bank AG, Singapore Branch and CDP Transfer Agent One Raffles Quay #16-00 South Tower Singapore 048583
Non-CDP Paying Agent and Non-CDP : Deutsche Bank AG, Hong Kong Branch Transfer Agent Level 52, International Commerce Centre 1 Austin Road West, Kowloon Hong Kong
9 Non-CDP Registrar : Deutsche Bank Luxembourg S.A. 2, Boulevard Konrad Adenauer L-1115 Luxembourg Luxembourg
Trustee for the Noteholders : DB International Trust (Singapore) Limited One Raffles Quay #16-00 South Tower Singapore 048583
10 SUMMARY OF THE MTN PROGRAMME
The following summary is derived from, and should be read in conjunction with, the full text of this Information Memorandum (and any relevant supplement to this Information Memorandum), the Trust Deed, the Agency Agreement and the relevant Pricing Supplement.
Issuer : BreadTalk Group Limited.
Arrangers : Australia and New Zealand Banking Group Limited and Oversea- Chinese Banking Corporation Limited.
Dealers : Australia and New Zealand Banking Group Limited, Oversea- Chinese Banking Corporation Limited and/or such other Dealers as may be appointed by the Issuer in accordance with the Programme Agreement.
Principal Paying Agent, CDP : Deutsche Bank AG, Singapore Branch. Registrar and CDP Transfer Agent
Non-CDP Paying Agent and Non- : Deutsche Bank AG, Hong Kong Branch. CDP Transfer Agent
Non-CDP Registrar : Deutsche Bank Luxembourg S.A.
Trustee : DB International Trust (Singapore) Limited.
Description : Multicurrency Medium Term Note Programme.
Programme Size : The maximum aggregate principal amount of the Notes outstanding at any time shall be S$250,000,000 (or its equivalent in other currencies) or such higher amount as may be increased in accordance with the provisions of the Programme Agreement.
Currency : Subject to compliance with all relevant laws, regulations and directives, Notes may be issued in any currency agreed between the Issuer and the relevant Dealer(s).
Method of Issue : Notes may be issued from time to time under the MTN Programme on a syndicated or non-syndicated basis. Each Series may be issued in one or more Tranches, on the same or different issue dates. The specific terms of each Series or Tranche will be specified in the relevant Pricing Supplement.
Issue Price : Notes may be issued at par or at a discount, or premium, to par.
Tenor : Subject to compliance with all relevant laws, regulations and directives, Notes may have maturities of such tenor as may be agreed between the Issuer and the relevant Dealer(s).
Mandatory Redemption : Unless previously redeemed or purchased and cancelled, each Note will be redeemed at its redemption amount on the maturity date shown on its face.
Interest Basis : Notes may bear interest at fixed, floating, variable or hybrid rates or such other rates as may be agreed between the Issuer and the relevant Dealer(s) or may not bear interest.
11 Fixed Rate Notes : Fixed Rate Notes will bear a fixed rate of interest which will be payable in arrear on specified dates and at maturity.
Floating Rate Notes : Floating Rate Notes which are denominated in Singapore dollars will bear interest to be determined separately for each Series by reference to S$ SIBOR or S$ SWAP RATE (or in any other case such other benchmark as may be agreed between the Issuer and the relevant Dealer(s)), as adjusted for any applicable margin. Interest periods in relation to the Floating Rate Notes will be agreed between the Issuer and the relevant Dealer(s) prior to their issue.
Floating Rate Notes which are denominated in other currencies will bear interest to be determined separately for each Series by reference to such other benchmark as may be agreed between the Issuer and the relevant Dealer(s).
Variable Rate Notes : Variable Rate Notes will bear interest at a variable rate determined in accordance with the Conditions. Interest periods in relation to the Variable Rate Notes will be agreed between the Issuer and the relevant Dealer(s) prior to their issue.
Hybrid Notes : Hybrid Notes will bear interest, during the fixed rate period to be agreed between the Issuer and the relevant Dealer(s), at a fixed rate of interest which will be payable in arrear on specified dates and at maturity and, during the floating rate period to be agreed between the Issuer and the relevant Dealer(s) at the rate of interest to be determined by reference to S$ SIBOR or S$ SWAP RATE (or such other benchmark as may be agreed between the Issuer and the relevant Dealer(s)), as adjusted for any applicable margin (provided that if Hybrid Notes are denominated in a currency other than Singapore dollars, such Hybrid Notes will bear interest to be determined separately by reference to such benchmark as may be agreed between the Issuer and the relevant Dealer(s)), in each case payable at the end of each interest period to be agreed between the Issuer and the relevant Dealer(s).
Zero-Coupon Notes : Zero-Coupon Notes may be issued at their nominal amount or at a discount to it and will not bear interest other than in the case of late payment.
Form and Denomination of Notes : The Notes will be issued in bearer form or registered form and in such denominations as may be agreed between the Issuer and the relevant Dealer(s). Each Series or Tranche of Notes may initially be represented by a Temporary Global Note, a Permanent Global Note or a Global Certificate. Each Temporary Global Note may be deposited on the relevant issue date with CDP, a common depositary for Euroclear and Clearstream, Luxembourg and/ or any other agreed clearing system and will be exchangeable, upon request as described therein, either for a Permanent Global Note or Definitive Notes (as indicated in the applicable Pricing Supplement), provided that, in the case of any part of the Note submitted for exchange for a Permanent Global Note, there shall have been Certification (as defined below) with respect to such nominal amount submitted for such exchange dated no earlier than the Exchange Date (as defined below). Each Permanent Global Note may be exchanged, unless otherwise specified in the applicable Pricing Supplement, upon request as
12 described therein, in whole (but not in part) for Definitive Notes upon the terms therein. Registered Notes will be represented by Certificates, one Certificate being issued in respect of each Noteholder’s entire holding of Registered Notes of one Series. Certificates representing Registered Notes that are registered in the name of a nominee of CDP and/or any other agreed clearing system are referred to as “Global Certificates”.
For the purposes of the above paragraph:
“Certification” means the presentation to the relevant Paying Agent of a certificate or certificates with respect to one or more interests in the Temporary Global Note, signed by Euroclear, Clearstream, Luxembourg or CDP (as the case may be), substantially to the effect set out in Exhibit A of schedule 2 to the Trust Deed to the effect that it has received a certificate or certificates substantially to the effect set out in Exhibit B of schedule 2 to the Trust Deed with respect thereto and that no contrary advice as to the contents thereof has been received by Euroclear, Clearstream, Luxembourg or CDP, as the case may be; and
“Exchange Date” means such date falling on or after the first day following the expiry of 40 days after the date of issue of the Temporary Global Note.
Custody of the Notes : Notes which are to be listed on the SGX-ST may be cleared through CDP. Notes which are to be cleared through CDP are required to be kept with CDP as authorised depository. Notes which are cleared through Euroclear and/or Clearstream, Luxembourg are required to be kept with a common depositary on behalf of Euroclear and Clearstream, Luxembourg.
Status of the Notes : The Notes and Coupons of all Series will constitute direct, unconditional, unsubordinated and unsecured obligations of the Issuer and shall at all times rank pari passu, without any preference or priority among themselves, and pari passu with all other present and future unsecured obligations (other than subordinated obligations and priorities created by law) of the Issuer from time to time outstanding.
Redemption and Purchases : If so provided on the face of the Notes and the relevant Pricing Supplement, Notes may be redeemed (either in whole or in part) prior to their stated maturity at the option of the Issuer and/or the holders of the Notes. Further, if so provided on the face of the Notes and the relevant Pricing Supplement, Notes may be purchased by the Issuer (either in whole or in part) prior to their stated maturity at the option of the Issuer and/or the holders of the Notes.
Redemption at the Option of the : If on any date, (a) the Shares cease to be traded on the SGX-ST, Noteholder upon Cessation or or (b) trading in the Shares on the SGX-ST is suspended for Suspension of Trading of Shares more than seven (7) consecutive days on which normal trading of securities on the SGX-ST is carried out, the Issuer shall, at the option of the holder of any Note, redeem such Note at its Redemption Amount (as defined in the Conditions) (together with interest accrued to the date fixed for redemption) on the date (or, if such date is not a Business Day, on the immediately preceding
13 Business Day) falling 45 days after (in the case of (a)) the date of cessation of trading or (in the case of (b)) the day immediately following the expiry of the seven-day period.
Redemption at the Option of : If, for any reason, a Change of Shareholding Event (as defined the Noteholder upon Change of below) occurs, the Issuer will within seven (7) days of such Shareholding Event occurrence give notice to the Noteholders of the occurrence of such event (the “Notice”) and shall, at the option of the holder of any Note, redeem such Note at its Redemption Amount, together with interest accrued to the date fixed for redemption, on the date falling 60 days from the date of the Notice (or if such date is not a Business Day, on the next day which is a Business Day).
For the purposes of the above paragraph,
(a) a “Change of Shareholding Event” occurs when Dr George Quek and Ms Katherine Lee Lih Heng and their respective Immediate Family Members cease to own in aggregate (whether directly or indirectly) at least 25 per cent. of the issued share capital of the Issuer; and
(b) “Immediate Family Members” means, in respect of a person, the father, mother, siblings, son(s) and daughter(s) of such person.
Negative Pledge : The Issuer has covenanted with the Trustee in the Trust Deed that, so long as any of the Notes remains outstanding (as defined in the Trust Deed), the Issuer will not, and will ensure that none of its Principal Subsidiaries (as defined in the Conditions) will, create or have outstanding any security over the whole or any part of its undertakings, assets, property or revenues, present or future, save for:
(a) liens or rights of set-off arising solely by operation of law (or by an agreement evidencing the same), in either case, in respect of indebtedness which either (i) has been due for less than 21 days or (ii) is being contested in good faith and by appropriate means;
(b) any security existing over any of its assets and disclosed in writing to the Trustee on or prior to the date of the Trust Deed and any security to be created over such assets in connection with the refinancing of the indebtedness secured by such existing security, provided that, in each case, the principal amount secured by such security shall not be increased without the prior approval of the Noteholders by way of Extraordinary Resolution;
(c) any security over any of its assets acquired, developed or redeveloped, renovated or refurbished by it after the date of the Trust Deed for the sole purpose of financing the acquisition (including acquisition by way of acquisition of or subscription for the securities of the company or entity owning (whether directly or indirectly) the underlying asset), development or redevelopment, renovation or refurbishment of such assets or any refinancing (including by way of project financing) thereof and, in each case, securing a principal amount not exceeding the cost of that acquisition, development or redevelopment, renovation or refurbishment;
14 (d) pledges of goods, related documents of title and/or other related documents arising in the ordinary course of its business as security only for indebtedness to a bank or financial institution directly relating to the goods or documents on or over which that pledge exists;
(e) any security created prior to and subsisting at the time of the acquisition of any asset by it after the date of the Trust Deed securing credit facilities extended by banks and financial institutions to the Group (as defined in the Trust Deed), provided that the amount secured by any such security may not exceed the cost of acquisition of such asset;
(f) pledges of cash or charge over moneys in the bank accounts created to secure its liabilities for the purpose of obtaining working capital facilities granted in the ordinary course of business;
(g) any security created to secure its liabilities in respect of letters of credit, performance bonds and/or bank guarantees issued in the ordinary course of its business;
(h) any security created over any asset for the purposes of securing credit facilities to be applied towards the acquisition of another asset, provided that the amount secured by such security shall not exceed 70 per cent. of the then current market value of such asset (as determined on the basis of the most recent valuation report prepared by an independent professional valuer of good repute and delivered by the Issuer to the Trustee at the relevant time);
(i) any security over any of the debentures, preference shares and/or ordinary shares (collectively, the “Investment Securities”) issued by Perennial Somerset Investors Pte Ltd, for the sole purpose of financing the investment in the property known as “TripleOne Somerset” through the subscription for the Investments Securities, or any refinancing thereof; and
(j) any other security which has been approved by the Noteholders by way of an Extraordinary Resolution.
Financial Covenants : The Issuer has covenanted with the Trustee in the Trust Deed that for so long as any of the Notes or Coupons remains outstanding, it will ensure that:
(a) the Consolidated Tangible Net Worth (as defined in the Conditions) shall not at any time be less than S$75,000,000;
(b) the ratio of Consolidated EBITDA (as defined in the Conditions) to Consolidated Interest Expense (as defined in the Conditions) shall not at any time be less than 3.5: 1;
(c) the ratio of Consolidated Secured Debt (as defined in the Conditions) to Consolidated Total Assets (as defined in the Conditions) shall not at any time exceed 0.5: 1; and
15 (d) the ratio of Consolidated Total Borrowings (Net of Cash) (as defined in the Conditions) to Consolidated Tangible Net Worth shall not at any time exceed 3.0: 1.
Events of Default : See Condition 10 of the Notes.
Taxation : All payments of principal and interest in respect of any Notes shall be made free and clear of, and without withholding or deduction for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of Singapore or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law. In such event, the Issuer will pay such additional amounts as will result in the receipt by the Noteholders and the Couponholders of such amounts as would have been received by them had no such deduction or withholding been required. For further details, see Condition 8 of the Notes and the section titled “Singapore Taxation” .
Listing : Each Series of the Notes may, if so agreed between the Issuer and the relevant Dealer(s), be listed on the SGX-ST or any other stock exchange(s) as may be agreed between the Issuer and the relevant Dealer(s), subject to all necessary approvals having been obtained.
Selling Restrictions : For a description of certain restrictions on offers, sales and deliveries of Notes and the distribution of offering material relating to the Notes, see the section titled “Subscription, Purchase and Distribution” . Further restrictions may apply in connection with any particular Series or Tranche of Notes.
Governing Law : The MTN Programme and any Notes issued under the MTN Programme will be governed by, and construed in accordance with, the laws of Singapore.
16 TERMS AND CONDITIONS OF THE NOTES
The following is the text of the terms and conditions which, subject to completion and amendment and as supplemented or varied in accordance with the provisions of the relevant Pricing Supplement, will be endorsed on the Notes in definitive form (if any) issued in exchange for the Global Note(s) or the Global Certificates representing each Series. Either (i) the full text of these terms and conditions together with the relevant provisions of the Pricing Supplement or (ii) these terms and conditions as so completed, amended, supplemented or varied (and subject to simplification by the deletion of non- applicable provisions), shall be endorsed on such Notes. All capitalised terms that are not defined in these Conditions will have the meanings given to them in the relevant Pricing Supplement. Those definitions will be endorsed on such Bearer Notes or on the Certificates relating to such Registered Notes. References in the Conditions to “Notes” are to the Notes of one Series only, not to all Notes that may be issued under the Programme. Details of the relevant Series are shown on the face of the relevant Notes and in the relevant Pricing Supplement.
The Notes are constituted by a Trust Deed (as amended, varied or supplemented from time to time, the “Trust Deed”) dated 7 May 2014 made between (1) BreadTalk Group Limited, as issuer (the "Issuer”, which expression shall include its successors and permitted assigns), and (2) DB International Trust (Singapore) Limited (the “Trustee”, which expression shall wherever the context so admits include such company and all other persons for the time being the trustee or trustees of the Trust Deed), as trustee of the Noteholders (as defined below), and (where applicable) the Notes are issued with the benefit of a deed of covenant (as amended, varied or supplemented from time to time, the “Deed of Covenant”) dated 7 May 2014 relating to the Notes executed by the Issuer. These terms and conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Notes and Coupons referred to below. The Issuer has entered into an agency agreement dated 7 May 2014 (as amended, varied or supplemented from time to time, the "Agency Agreement”) made between (1) the Issuer, as issuer, (2) Deutsche Bank AG, Singapore Branch, in respect of Notes cleared through CDP, as principal paying agent (the “Principal Paying Agent”), registrar (the “CDP Registrar”) and transfer agent (the “CDP Transfer Agent”), (3) Deutsche Bank AG, Hong Kong Branch, in respect of Notes other than those cleared through CDP, as paying agent (the “Non-CDP Paying Agent”) and transfer agent (the “Non-CDP Transfer Agent”),(4) Deutsche Bank Luxembourg S.A., in respect of Registered Notes other than those cleared through CDP, as registrar (the “Non-CDP Registrar”), and (5) the Trustee, as trustee, and (where applicable) a calculation agency agreement (as amended, varied or supplemented from time to time, the “Calculation Agency Agreement”) made between (1) the Issuer, (2) the Trustee, (3) Deutsche Bank AG, Singapore Branch, (4) Deutsche Bank AG, Hong Kong Branch, (5) Deutsche Bank Luxembourg S.A., and (6) the entity specified thereon as calculation agent of the Notes. The Principal Paying Agent (which expression shall, wherever the context so admits, include any successor for the time being as Principal Paying Agent), the Non-CDP Paying Agent (which expression shall, wherever the context so admits, include any successor for the time being as Non-CDP Paying Agent, and together with the Principal Agent, the “Paying Agents”), (in the case of any Floating Rate Note, Variable Rate Note, Hybrid Note or Zero-Coupon Note) the Calculation Agent (as defined below) (which expression shall, wherever the context so admits, include any successor for the time being as Calculation Agent) and (in the case of Registered Notes) the CDP Registrar (which expression shall, wherever the context so admits, include any successor for the time being as CDP Registrar), the Non- CDP Registrar (which expression shall, wherever the context so admits, include any successor for the time being as Non-CDP Registrar), the CDP Transfer Agent (which expression shall, wherever the context so admits, include any successor for the time being as CDP Transfer Agent), and the Non-CDP Transfer Agent (which expression shall, wherever the context so admits, include any successor for the time being as Non-CDP Transfer Agent) for the Notes shall be the entity specified hereon as the Principal Paying Agent, the Non-CDP Paying Agent, the Calculation Agent, the CDP Registrar, the Non-CDP Registrar, the CDP Transfer Agent and the Non-CDP Transfer Agent. For the purposes of these Conditions, (a) all references to the Principal Paying Agent shall, with respect to a Series of Notes to be cleared through a clearing system other than the CDP System (as defined in the Trust Deed), be deemed to be a reference to the Non-CDP Paying Agent and all such references shall be construed accordingly, (b) “Registrar” shall refer to, as the context may require, the CDP Registrar or the Non-CDP Registrar, and (c) “Transfer Agent” shall refer to, as the context may require, the CDP Transfer Agent or the Non-CDP Transfer Agent.
17 The Noteholders and the holders of the coupons (the “Coupons”) appertaining to the interest-bearing Notes in bearer form (the “Couponholders”) are bound by and are deemed to have notice of all of the provisions of the Trust Deed, the Agency Agreement, and the Deed of Covenant.
Copies of the Trust Deed, the Agency Agreement and the Deed of Covenant are available for inspection at the principal office of the Trustee for the time being and at the respective specified offices of the Paying Agents for the time being.
1. FORM, DENOMINATION AND TITLE (a) Form and Denomination (i) The Notes of the Series of which this Note forms part (in these Conditions, the “Notes”) are issued in bearer form (“Bearer Notes”) or in registered form (“Registered Notes”) in each case in the Denomination Amount shown hereon.
(ii) This Note is a Fixed Rate Note, a Floating Rate Note, a Variable Rate Note, a Hybrid Note or a note that does not bear interest (a “Zero-Coupon Note”), a combination of any of the foregoing or any other type of Note (depending upon the Interest and Redemption/Payment Basis shown on its face).
(iii) Bearer Notes are serially numbered and issued with Coupons attached, save in the case of Zero-Coupon Notes in which case references to interest (other than in relation to default interest referred to in Condition 7(g)) in these Conditions are not applicable.
(iv) Registered Notes are represented by registered certificates (“Certificates”) and, save as provided in Condition 2(c), each Certificate shall represent the entire holding of Registered Notes by the same holder.
(b) Title (i) Subject as set out below, title to the Bearer Notes and the Coupons appertaining thereto shall pass by delivery. Title to the Registered Notes shall pass by registration in the register that the Issuer shall procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement.
(ii) Except as ordered by a court of competent jurisdiction or as required by law, the holder of any Note or Coupon shall be deemed to be and may be treated as the absolute owner of such Note or Coupon, as the case may be, for the purpose of receiving payment thereof or on account thereof and for all other purposes, whether or not such Note or Coupon shall be overdue and notwithstanding any notice of ownership, theft, loss or forgery thereof or any writing thereon made by anyone, and no person shall be liable for so treating the holder.
For so long as any of the Notes is represented by a Global Note (as defined in the Trust Deed) or, as the case may be, a Global Certificate (as defined in the Trust Deed) and such Global Note or Global Certificate is held by The Central Depository (Pte) Limited (“CDP”), each person who is for the time being shown in the records of CDP as the holder of a particular principal amount of such Notes (in which regard any certificate or other document issued by CDP as to the principal amount of such Notes standing to the credit of the account of any person shall be conclusive and binding for all purposes, save in the case of manifest error) shall be treated by the Issuer, the Trustee, the Principal Paying Agent, the Calculation Agent, the Transfer Agent, the Registrar and all other agents of the Issuer and the Trustee as the holder of such principal amount of Notes standing to the credit of the account of such person other than with respect to the payment of principal, premium (if any), interest, redemption or purchase amount (if any) and/or any other amounts in respect of the Notes, for which purpose the bearer of the Global Note or, as the case may be, the person whose name is shown on the Register shall be treated by the Issuer, the Trustee, the Principal Paying Agent, the Calculation Agent, the Transfer Agent, the Registrar and all other agents of the Issuer and the Trustee as the holder of such Notes in accordance
18 with and subject to the terms of the Global Note or, as the case may be, the Global Certificate (and the expressions “Noteholder” and “holder of Notes” and related expressions, where the context requires, shall be construed accordingly). Notes which are represented by the Global Note or, as the case may be, the Global Certificate and held by CDP will be transferable only in accordance with the rules and procedures for the time being of CDP.
For so long as any of the Notes is represented by a Global Note or, as the case may be, a Global Certificate and such Global Note or Global Certificate is held by a common depositary for Euroclear Bank S.A./N.V. (“Euroclear”) and/or Clearstream Banking, société anonyme (“Clearstream, Luxembourg”), each person who is for the time being shown in the records of Euroclear and/or Clearstream, Luxembourg as the holder of a particular principal amount of such Notes (in which regard any certificate or other document issued by Euroclear and/or Clearstream, Luxembourg as to the principal amount of such Notes (as the case may be) standing to the credit of the account of any person shall be conclusive and binding for all purposes, save in the case of manifest error) shall be treated by the Issuer, the Trustee, the Non-CDP Paying Agent, the Calculation Agent, the Transfer Agent, the Registrar and all other agents of the Issuer and the Trustee as the holder of such principal amount of Notes standing to the credit of the account of such person other than with respect to the payment of principal, premium (if any), interest, redemption or purchase amount (if any) and/or any other amounts in respect of such Notes, for which purpose the bearer of the Global Note or, as the case may be, the person whose name is shown on the Register shall be treated by the Issuer, the Trustee, the Non-CDP Paying Agent, the Calculation Agent, the Transfer Agent, the Registrar and all other agents of the Issuer and the Trustee as the holder of such Notes in accordance with and subject to the terms of the Global Note or, as the case may be, the Global Certificate (and the expressions “Noteholder” and “holder of Notes” and related expressions, where the context requires, shall be construed accordingly). Notes which are represented by a Global Note or, as the case may be, the Global Certificate and held by Euroclear and/ or Clearstream, Luxembourg will be transferable only in accordance with the rules and procedures for the time being of Euroclear and/or Clearstream, Luxembourg.
(iii) In these Conditions, “Noteholder” means the bearer of any Bearer Note or, as the case may be, the person in whose name a Registered Note is registered and “holder” (in relation to a Note or Coupon) means the bearer of any Bearer Note or Coupon or, as the case may be, the person in whose name a Registered Note is registered, “Series” means (A) (in relation to Notes other than Variable Rate Notes) a Tranche, together with any further Tranche or Tranches, which are (1) expressed to be consolidated and forming a single series and (2) identical in all respects (including as to listing) except for their respective issue dates, issue prices and/or dates of the first payment of interest and (B) (in relation to Variable Rate Notes) Notes which are identical in all respects (including as to listing) except for their respective issue prices and rates of interest and “Tranche” means Notes which are identical in all respects (including as to listing).
(iv) Words and expressions defined in the Trust Deed or used in the applicable Pricing Supplement (as defined in the Trust Deed) shall have the same meanings where used in these Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Trust Deed and the applicable Pricing Supplement, the applicable Pricing Supplement will prevail.
2. NO EXCHANGE OF NOTES AND TRANSFERS OF REGISTERED NOTES (a) No Exchange of Notes Registered Notes may not be exchanged for Bearer Notes. Bearer Notes of one Denomination Amount may not be exchanged for Bearer Notes of another Denomination Amount. Bearer Notes may not be exchanged for Registered Notes.
19 (b) Transfer of Registered Notes Subject to Condition 2(f) below, one or more Registered Notes may be transferred (in the authorised denominations set out herein) upon the surrender (at the specified office of the Registrar or the Transfer Agent) of the Certificate representing such Registered Notes to be transferred, together with the form of transfer endorsed on such Certificate (or another form of transfer substantially in the same form and containing the same representations and certifications (if any), unless otherwise agreed by the Issuer) duly completed and executed and any other evidence as the Registrar or the Transfer Agent may reasonably require to prove the title of the transferor and the authority of the individuals that have executed the form of transfer. In the case of a transfer of part only of a holding of Registered Notes represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. All transfers of Notes and entries on the Register will be made subject to the detailed regulations concerning transfers of Notes scheduled to the Agency Agreement. The regulations may be changed by the Issuer and the Registrar, with the prior approval (in the case of any regulation proposed by the Issuer) of the Trustee, the Transfer Agent and the Registrar and (in the case of any regulation proposed by the Registrar) of the Issuer and the Trustee. A copy of the current regulations will be made available by the Registrar to any Noteholder upon request.
(c) Exercise of Options or Partial Redemption in Respect of Registered Notes In the case of an exercise of an Issuer’s or Noteholders’ option in respect of, or a partial redemption of, a holding of Registered Notes represented by a single Certificate, a new Certificate shall be issued to the holder to reflect the exercise of such option or in respect of the balance of the holding not redeemed. In the case of a partial exercise of an option resulting in Registered Notes of the same holding having different terms, separate Certificates shall be issued in respect of those Notes of that holding that have the same terms. New Certificates shall only be issued against surrender of the existing Certificates to the Registrar or the Transfer Agent. In the case of a transfer of Registered Notes to a person who is already a holder of Registered Notes, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding.
(d) Delivery of New Certificates Each new Certificate to be issued pursuant to Condition 2(b) or 2(c) shall be available for delivery within five (5) business days of receipt of the form of transfer or Exercise Notice (as defined in Condition 6(b)) and surrender of the Certificate for exchange. Delivery of the new Certificate(s) shall be made at the specified office of the Registrar or the Transfer Agent (as the case may be) to whom delivery or surrender of such form of transfer, Exercise Notice or Certificate shall have been made or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant form of transfer, Exercise Notice or otherwise in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate to such address as may be so specified, unless such holder requests otherwise and pays in advance to the Transfer Agent the costs of such other method of delivery and/ or such insurance as it may specify. In this Condition 2(d), “business day” means a day, other than a Saturday or Sunday or a gazetted public holiday, on which banks are open for business in the place of the specified office of the Registrar or the Transfer Agent (as the case may be).
(e) Transfers Free of Charge Transfers of Notes and Certificates on registration, transfer, exercise of an option or partial redemption shall be effected without charge by or on behalf of the Issuer, the Registrar or the Transfer Agent, but upon payment of any tax or other governmental charges that may be imposed in relation to it (or the giving of such indemnity and/or security and/or prefunding as the Registrar or the Transfer Agent may require) in respect of tax or charges.
20 (f) Closed Periods No Noteholder may require the transfer of a Registered Note to be registered (i) during the period of 15 days prior to any date on which Notes may be called for redemption by the Issuer at its option pursuant to Condition 6(c), (ii) after any such Note has been called for redemption, or (iii) during the period of 15 days ending on (and including) any Record Date as defined in Condition 7(b).
3. STATUS The Notes and Coupons constitute direct, unconditional, unsubordinated and unsecured obligations of the Issuer. The Notes and Coupons shall at all times rank pari passu and rateably without any preference or priority among themselves, and pari passu with all other present and future unsecured obligations (other than subordinated obligations and priorities created by law) of the Issuer.
4. NEGATIVE PLEDGE, FINANCIAL AND OTHER COVENANTS (a) Negative Pledge The Issuer has covenanted with the Trustee in the Trust Deed that, so long as any of the Notes remains outstanding (as defined in the Trust Deed), the Issuer will not, and will ensure that none of its Principal Subsidiaries will, create or have outstanding any security over the whole or any part of its undertakings, assets, property or revenues, present or future, save for:
( i) liens or rights of set-off arising solely by operation of law (or by an agreement evidencing the same), in either case, in respect of indebtedness which either (A) has been due for less than 21 days or (B) is being contested in good faith and by appropriate means;
( ii) any security existing over any of its assets and disclosed in writing to the Trustee on or prior to the date of the Trust Deed and any security to be created over such assets in connection with the refinancing of the indebtedness secured by such existing security, provided that, in each case, the principal amount secured by such security shall not be increased without the prior approval of the Noteholders by way of Extraordinary Resolution;
( iii) any security over any of its assets acquired, developed or redeveloped, renovated or refurbished by it after the date of the Trust Deed for the sole purpose of financing the acquisition (including acquisition by way of acquisition of or subscription for the securities of the company or entity owning (whether directly or indirectly) the underlying asset), development or redevelopment, renovation or refurbishment of such assets or any refinancing (including by way of project financing) thereof and, in each case, securing a principal amount not exceeding the cost of that acquisition, development or redevelopment, renovation or refurbishment;
( iv) pledges of goods, related documents of title and/or other related documents arising in the ordinary course of its business as security only for indebtedness to a bank or financial institution directly relating to the goods or documents on or over which that pledge exists;
( v) any security created prior to and subsisting at the time of the acquisition of any asset by it after the date of the Trust Deed securing credit facilities extended by banks and financial institutions to the Group (as defined in the Trust Deed), provided that the amount secured by any such security may not exceed the cost of acquisition of such asset;
( vi) pledges of cash or charge over moneys in the bank accounts created to secure its liabilities for the purpose of obtaining working capital facilities granted in the ordinary course of business;
21 ( vii) any security created to secure its liabilities in respect of letters of credit, performance bonds and/or bank guarantees issued in the ordinary course of its business;
( viii) any security created over any asset for the purposes of securing credit facilities to be applied towards the acquisition of another asset, provided that the amount secured by such security shall not exceed 70 per cent. of the then current market value of such asset (as determined on the basis of the most recent valuation report prepared by an independent professional valuer of good repute and delivered by the Issuer to the Trustee at the relevant time);
( ix) any security over any of the debentures, preference shares and/or ordinary shares (collectively, the “Investment Securities”) issued by Perennial Somerset Investors Pte Ltd, for the sole purpose of financing the investment in the property known as “TripleOne Somerset” through the subscription for the Investments Securities, or any refinancing thereof; and
( x) any other security which has been approved by the Noteholders by way of an Extraordinary Resolution.
(b) Financial Covenants The Issuer has covenanted with the Trustee in the Trust Deed that for so long as any of the Notes or Coupons remains outstanding, it will ensure that:
(i) the Consolidated Tangible Net Worth shall not at any time be less than S$75,000,000;
(ii) the ratio of Consolidated EBITDA to Consolidated Interest Expense shall not at any time be less than 3.5: 1;
(iii) the ratio of Consolidated Secured Debt to Consolidated Total Assets shall not at any time exceed 0.5: 1; and
(iv) the ratio of Consolidated Total Borrowings (Net of Cash) to Consolidated Tangible Net Worth shall not at any time exceed 3.0: 1.
For the purpose of this Condition 4(b):
“Consolidated EBITDA” means, in relation to any period, the aggregate of the net earnings of the Group on its ordinary activities during such period before taking into account Consolidated Interest Expense and income tax expense but making adjustments thereto by adding back depreciation charged and amount attributable to amortisation of goodwill and other intangibles to the extent deducted in arriving at such earnings on ordinary activities during such period.
“Consolidated Interest Expense” means, in relation to any period, the consolidated aggregate amount of interest, commission, discounts, guarantee fees and other fees or charges incurred, paid or payable by the Group in connection with all indebtedness during that period.
“Consolidated Secured Debt” means, at any time, the portion of Consolidated Total Liabilities secured by any security interest over any asset of the Group.
“Consolidated Tangible Net Worth” means, at any time, the amount (expressed in Singapore dollars) for the time being, calculated in accordance with generally accepted accounting principles in Singapore, equal to the aggregate of:
(a) the share capital of the Issuer for the time being issued and paid-up; and
(b) the amounts standing to the credit of the capital and revenue reserves (including profit and loss account) of the Group on a consolidated basis,
22 all as shown in the then latest audited or, as the case may be, unaudited consolidated balance sheet of the Group but after:
(i) making such adjustments as may be appropriate in respect of any variation in the issued and paid-up share capital and the capital and revenue reserves set out in paragraph (b) above of the Group since the date of the latest audited or, as the case may be, unaudited consolidated balance sheet of the Group;
(ii) excluding any sums set aside for future taxation; and
(iii) deducting:
(A) an amount equal to any distribution by any member of the Group out of profits earned prior to the date of the latest audited or, as the case may be, unaudited consolidated balance sheet of the Group and which have been declared, recommended or made since that date except so far as provided for in such balance sheet and/or paid or due to be paid to members of the Group;
(B) all goodwill and other intangible assets; and
(C) any debit balances on consolidated profit and loss account, and so that no amount shall be included or excluded more than once.
“Consolidated Total Assets” means, at any particular time, the consolidated amount of the book values of all the assets of the Group, determined as assets in accordance with generally accepted accounting principles in Singapore.
“Consolidated Total Borrowings” means, at any time, in relation to the Group, an amount (expressed in Singapore dollars) for the time being calculated on a consolidated basis, in accordance with generally accepted accounting principles in Singapore, equal to the aggregate of:
(a) bank overdrafts and all other indebtedness in respect of any borrowings of any member of the Group;
(b) the principal amount of the Notes or any bonds or debentures of any member of the Group whether issued for cash or a consideration other than cash;
(c) the liabilities of the Issuer under the Trust Deed or the Notes; and
(d) any redeemable preference shares issued by any member of the Group (other than those shares which are regarded as equity as reflected in the latest audited or, as the case may be, unaudited consolidated balance sheet of the Group), and where such aggregate amount fails to be calculated, no amount shall be taken into account more than once in the same calculation.
“Consolidated Total Borrowings (Net of Cash)” means Consolidated Total Borrowings less any amount reflected as cash and cash equivalents (including, without limitation, any pledged deposits) as reflected in the then latest audited or, as the case may be, unaudited consolidated balance sheet of the Group.
“Consolidated Total Liabilities” means the aggregate of Consolidated Total Borrowings plus, insofar as not already taken into account, all other liabilities of the Group calculated in accordance with generally accepted accounting principles in Singapore, including:
(a) current creditors, proposed dividends and taxation payable within 12 months;
(b) the principal amount raised by acceptances under any acceptance credit in favour of any member of the Group;
23 (c) the face amount of any bills of exchange (other than cheques) or other instruments upon which any member of the Group is liable as drawer, acceptor or endorser;
(d) all actual and contingent liabilities of whatsoever nature of any member of the Group including, without limitation, the maximum premium payable on a redemption of any debenture or other indebtedness of any member of the Group and all actual and contingent liabilities of any other person (including the par value of any shares and the principal amount of any debentures or any person) to the extent that such liabilities, shares or debentures are directly or indirectly guaranteed or secured by or are, directly or indirectly, the subject of an indemnity given by, or with a right of recourse against, any member of the Group;
(e) the aggregate of the principal amounts outstanding under all agreements or transactions entered into by any member of the Group for leasing, hire purchase, conditional sale or purchase on deferred terms, or provision of funds in support of obligations of third parties and similar transactions in relation to any property (other than land), and any other amounts due to creditors other than current creditors (other than in relation to land);
(f) amounts standing to the credit of any deferred tax account or tax equalisation reserve; and
(g) any amount proposed to be distributed to shareholders (other than any member of the Group),
provided that no liabilities shall be included in a calculation of Consolidated Total Liabilities more than once.
5. RATE OF INTEREST
(I) INTEREST ON FIXED RATE NOTES (a) Interest Rate and Accrual Each Fixed Rate Note bears interest on its Calculation Amount (as defined in Condition 5(II)(e)) from the Interest Commencement Date (as defined in Condition 5(II)(e)) in respect thereof and as shown on the face of such Note at the rate per annum (expressed as a percentage) equal to the Interest Rate shown on the face of such Note payable in arrear on each Interest Payment Date or Interest Payment Dates shown on the face of such Note in each year and on the Maturity Date shown on the face of such Note if that date does not fall on an Interest Payment Date.
The first payment of interest will be made on the Interest Payment Date next following the Interest Commencement Date (and if the Interest Commencement Date is not an Interest Payment Date, will amount to the Initial Broken Amount shown on the face of such Note), unless the Maturity Date falls before the date on which the first payment of interest would otherwise be due. If the Maturity Date is not an Interest Payment Date, interest from the preceding Interest Payment Date (or from the Interest Commencement Date, as the case may be) to the Maturity Date will amount to the Final Broken Amount shown on the face of the Note.
Interest will cease to accrue on each Fixed Rate Note from the due date for redemption thereof unless, upon due presentation and subject to the provisions of the Trust Deed, payment of the Redemption Amount shown on the face of the Note is improperly withheld or refused, in which event interest at such rate will continue to accrue (as well after as before judgment) at the rate and in the manner provided in this Condition 5(I) to the Relevant Date (as defined in Condition 8(b)).
(b) Calculations In the case of a Fixed Rate Note, interest in respect of a period of less than one (1) year will be calculated on the Day Count Fraction shown on the face of such Note.
24 (II) INTEREST ON FLOATING RATE NOTES OR VARIABLE RATE NOTES (a) Interest Payment Dates Each Floating Rate Note or Variable Rate Note bears interest on its Calculation Amount from the Interest Commencement Date in respect thereof and as shown on the face of such Note, and such interest will be payable in arrear on each interest payment date (“Interest Payment Date”). Such Interest Payment Date(s) is/are either shown hereon as Specified Interest Payment Date(s) or, if no Specified Interest Payment Date(s) is/are shown hereon, Interest Payment Date shall mean each date which (save as mentioned in these Conditions) falls the number of months specified as the Interest Period on the face of the Note (the “Specified Number of Months”) after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date (and which corresponds numerically with such preceding Interest Payment Date or the Interest Commencement Date, as the case may be), provided that the Agreed Yield (as defined in Condition 5(II) (c)) in respect of any Variable Rate Note for any Interest Period (as defined below) relating to that Variable Rate Note shall be payable on the first day of that Interest Period. If any Interest Payment Date referred to in these Conditions that is specified to be subject to adjustment in accordance with a Business Day Convention would otherwise fall on a day that is not a business day, then if the Business Day Convention specified is (1) the Floating Rate Business Day Convention, such date shall be postponed to the next day which is a business day unless it would thereby fall into the next calendar month, in which event (i) such date shall be brought forward to the immediately preceding business day and (ii) each subsequent such date shall be the last business day of the month in which such date would have fallen had it not been subject to adjustment, (2) the Following Business Day Convention, such date shall be postponed to the next day that is a business day, (3) the Modified Following Business Day Convention, such date shall be postponed to the next day that is a business day unless it would thereby fall into the next calendar month, in which event such date shall be brought forward to the immediately preceding business day or (4) the Preceding Business Day Convention, such date shall be brought forward to the immediately preceding business day.
The period beginning on (and including) the Interest Commencement Date and ending on (but excluding) the first Interest Payment Date and each successive period beginning on (and including) an Interest Payment Date and ending on (but excluding) the next succeeding Interest Payment Date is herein called an “Interest Period”.
Interest will cease to accrue on each Floating Rate Note or Variable Rate Note from the due date for redemption thereof unless, upon due presentation and subject to the provisions of the Trust Deed, payment of the Redemption Amount is improperly withheld or refused, in which event interest will continue to accrue (as well after as before judgment) at the rate and in the manner provided in this Condition 5(II) to the Relevant Date.
(b) Rate of Interest - Floating Rate Notes (i) Each Floating Rate Note bears interest at a floating rate determined by reference to a Benchmark as stated on the face of such Floating Rate Note, being (in the case of Notes which are denominated in Singapore dollars) SIBOR (in which case such Note will be a SIBOR Note) or Swap Rate (in which case such Note will be a Swap Rate Note) or in any case (or in the case of Notes which are denominated in a currency other than Singapore dollars) such other Benchmark as is set out on the face of such Note.
Such floating rate may be adjusted by adding or subtracting the Spread (if any) stated on the face of such Note. The “Spread” is the percentage rate per annum specified on the face of such Note as being applicable to the rate of interest for such Note. The rate of interest so calculated shall be subject to Condition 5(V)(a).
The rate of interest payable in respect of a Floating Rate Note from time to time is referred to in these Conditions as the “Rate of Interest”.
25 (ii) The Rate of Interest payable from time to time in respect of each Floating Rate Note will be determined by the Calculation Agent on the basis of the following provisions:
(1) in the case of Floating Rate Notes which are SIBOR Notes:
(A) the Calculation Agent will, at or about the Relevant Time on the relevant Interest Determination Date in respect of each Interest Period, determine the Rate of Interest for such Interest Period which shall be the offered rate for deposits in Singapore dollars for a period equal to the duration of such Interest Period which appears on the Reuters Screen ABSIRFIX01 Page under the caption “ASSOCIATION OF BANKS IN SINGAPORE - SIBOR AND SWAP OFFER RATES - RATES AT 11:00 A.M. SINGAPORE TIME” and under the column headed “SGD SIBOR” (or such other Screen Page as may be provided hereon) and as adjusted by the Spread (if any);
(B) if on any Interest Determination Date, no such rate appears on the Reuters Screen ABSIRFIX01 Page under the column headed “SGD SIBOR” (or such other replacement page thereof), the Calculation Agent will, at or about the Relevant Time on such Interest Determination Date, determine the Rate of Interest for such Interest Period which shall be the rate which appears under the caption “SINGAPORE DOLLAR INTERBANK OFFERED RATES - 11:00 A.M.” and the row headed “SIBOR SGD” on the Reuters Screen SIBP Page (or such other replacement page thereof), being the offered rate for deposits in Singapore dollars for a period equal to the duration of such Interest Period and as adjusted by the Spread (if any);
(C) if no such rate appears on the Reuters Screen SIBP Page (or such other replacement page thereof or if no rate appears on such other Screen Page as may be provided hereon) or if the Reuters Screen SIBP Page (or such other replacement page thereof or such other Screen Page as may be provided hereon) is unavailable for any reason, the Calculation Agent will request the principal Singapore offices of each of the Reference Banks to provide the Calculation Agent with the rate at which deposits in Singapore dollars are offered by it at approximately the Relevant Time on the Interest Determination Date to prime banks in the Singapore interbank market for a period equivalent to the duration of such Interest Period commencing on such Interest Payment Date in an amount comparable to the aggregate principal amount of the relevant Floating Rate Notes. The Rate of Interest for such Interest Period shall be the arithmetic mean (rounded up, if necessary, to four decimal places) of such offered quotations and as adjusted by the Spread (if any), as determined by the Calculation Agent;
(D) if on any Interest Determination Date two but not all the Reference Banks provide the Calculation Agent with such quotations, the Rate of Interest for the relevant Interest Period shall be determined in accordance with (C) above on the basis of the quotations of those Reference Banks providing such quotations; and
(E) if on any Interest Determination Date one only or none of the Reference Banks provides the Calculation Agent with such quotations, the Rate of Interest for the relevant Interest Period shall be the rate per annum which the Calculation Agent determines to be the arithmetic mean (rounded up, if necessary, to four decimal places) of the prime lending rates for Singapore dollars quoted by the Reference Banks at or about the Relevant Time on such Interest Determination Date and as adjusted by the Spread (if any);
26 (2) in the case of Floating Rate Notes which are Swap Rate Notes:
(A) the Calculation Agent will, at or about the Relevant Time on the relevant Interest Determination Date in respect of each Interest Period, determine the Rate of Interest for such Interest Period which shall be the Average Swap Rate for such Interest Period (determined by the Calculation Agent as being the rate which appears on Page ABSI on the monitor of the Bloomberg agency under the caption “ASSOCIATION OF BANKS IN SG - SWAP OFFER AND SIBOR FIXING RATES” and under the column headed “SGD SWAP OFFER” (or such other page as may replace Page ABSI for the purpose of displaying the swap rates of leading reference banks) at or about the Relevant Time on such Interest Determination Date and for a period equal to the duration of such Interest Period) and as adjusted by the Spread (if any);
(B) if on any Interest Determination Date, no such rate appears on Page ABSI on the monitor of the Bloomberg agency (or such other replacement page thereof), the Calculation Agent will determine the Rate of Interest for such Interest Period which shall be the Average Swap Rate for such Interest Period (determined by the Calculation Agent as being the rate which appears on the Reuters Screen ABSIRFIX01 Page under the caption “ASSOCIATION OF BANKS IN SINGAPORE – SIBOR AND SWAP OFFER RATES” and under the column headed “SGD SWAP OFFER” (or such other page as may replace the Reuters Screen ABSIRFIX01 Page for the purpose of displaying the swap rates of leading reference banks) at or about the Relevant Time on such Interest Determination Date and for a period equal to the duration of such Interest Period) and as adjusted by the Spread (if any);
(C) if on any Interest Determination Date, no such rate is quoted on the Reuters Screen ABSIRFIX01 Page (or such other replacement page thereof or such other Screen Page as may be provided hereon) or if the Reuters Screen ABSIRFIX01 Page (or such other replacement page thereof or such other Screen Page as may be provided hereon) is unavailable for any reason, the Calculation Agent will determine the Average Swap Rate (which shall be rounded up, if necessary, to four decimal places) for such Interest Period in accordance with the following formula:
In the case of Premium:
Average Swap Rate = 365 (Premium x 36500) x LIBOR + 360 (T x Spot Rate)
(LIBOR x Premium) 365 + x (Spot Rate) 360
In the case of Discount:
Average Swap Rate = 365 (Discount x 36500) x LIBOR - 360 (T x Spot Rate)
(LIBOR x Discount) 365 - x (Spot Rate) 360
27 where:
LIBOR = the rate which appears on Page BBAM01 on the monitor of the Bloomberg agency under the caption “BRITISH BANKERS ASSOCIATION INTEREST SETTLEMENT RATES” and under the column headed “USD LIBOR” (or such other page as may replace Page BBAM01 for the purpose of displaying London interbank United States dollar offered rates of leading reference banks) at or about the Relevant Time on the relevant Interest Determination Date for a period equal to the duration of the Interest Period concerned;
Spot Rate = the rate being the composite quotation or in the absence of which, the arithmetic mean (rounded up, if necessary, to four decimal places) (determined by the Calculation Agent) of the rates quoted by the Reference Banks and which appear on Page ABSI on the monitor of the Bloomberg agency under the caption “ASSOCIATION OF BANKS IN SG – FX and SGD Swap Points” (or such other page as may replace Page ABSI for the purpose of displaying the spot rates and swap points of leading reference banks) at or about the Relevant Time on the relevant Interest Determination Date for a period equal to the duration of the Interest Period concerned;
Premium = the rate being the composite quotation or in the absence or Discount of which, the arithmetic mean (rounded up, if necessary, to four decimal places) (determined by the Calculation Agent) of the rates quoted by the Reference Banks for a period equal to the duration of the Interest Period concerned which appears on Page ABSI on the monitor of the Bloomberg agency under the caption “ASSOCIATION OF BANKS IN SG – FX and SGD Swap Points” (or such other page as may replace Page ABSI for the purpose of displaying the spot rates and swap points of leading reference banks) at or about the Relevant Time on the relevant Interest Determination Date for a period equal to the duration of the Interest Period concerned; and
T = the number of days in the Interest Period concerned.
The Rate of Interest for such Interest Period shall be the Average Swap Rate (as determined by the Calculation Agent) and as adjusted by the Spread (if any);
(D) if on any Interest Determination Date, any one of the components for the purposes of calculating the Average Swap Rate under (C) above is not quoted on the relevant Bloomberg Screen Page (or such other replacement page thereof) or if the relevant Bloomberg Screen Page (or such other replacement page thereof) is unavailable for any reason, the Calculation Agent will determine the Average Swap Rate (which shall be rounded up, if necessary, to four decimal places) for such Interest Period in accordance with the following formula:
28 In the case of Premium:
Average Swap Rate = 365 (Premium x 36500) x LIBOR + 360 (T x Spot Rate)
(LIBOR x Premium) 365 + x (Spot Rate) 360
In the case of Discount:
Average Swap Rate = 365 (Discount x 36500) x LIBOR - 360 (T x Spot Rate)
(LIBOR x Discount) 365 - x (Spot Rate) 360 where:
LIBOR = the rate which appears on the Reuters Screen LIBOR01 Page under the caption “REUTERS BBA LIBOR RATES – BRITISH BANKERS ASSOCIATION INTEREST SETTLEMENT RATES” and under the column headed “USD” (or such other page as may replace the Reuters Screen LIBOR01 Page for the purpose of displaying London interbank United States dollar offered rates of leading reference banks) at or about the Relevant Time on the relevant Interest Determination Date for a period equal to the duration of the Interest Period concerned;
Spot Rate = the rate being the composite quotation or in the absence of which, the arithmetic mean (rounded up, if necessary, to four decimal places) (determined by the Calculation Agent) of the rates quoted by the Reference Banks and which appear on the Reuters Screen ABSIRFIX06 Page under the caption “ASSOCIATION OF BANKS IN SINGAPORE – SGD SPOT AND SWAP OFFER RATES” and under the column headed “SPOT” (or such other page as may replace the Reuters Screen ABSIRFIX06 Page for the purpose of displaying the spot rates and swap points of leading reference banks) at or about the Relevant Time on the relevant Interest Determination Date for a period equal to the duration of the Interest Period concerned;
Premium = the rate being the composite quotation or in the absence or Discount of which, the arithmetic mean (rounded up, if necessary, to four decimal places) (determined by the Calculation Agent) of the rates quoted by the Reference Banks for a period equal to the duration of the Interest Period concerned which appear on the Reuters Screen ABSIRFIX06-7 Pages under the caption “ASSOCIATION OF BANKS IN SINGAPORE – SGD SPOT AND SWAP OFFER RATES” (or such other page as may replace the Reuters Screen ABSIRFIX06-7 Pages for the purpose of displaying the spot rates and swap points of leading reference banks) at or about the Relevant Time on the relevant Interest Determination Date for a period equal to the duration of the Interest Period concerned; and
29 T = the number of days in the Interest Period concerned.
The Rate of Interest for such Interest Period shall be the Average Swap Rate (as determined by the Calculation Agent) and as adjusted by the Spread (if any);
(E) if on any Interest Determination Date any one of the components for the purposes of calculating the Average Swap Rate under (D) above is not quoted on the relevant Reuters Screen Page (or such other replacement page as aforesaid) or the relevant Reuters Screen Page (or such other replacement page as aforesaid) is unavailable for any reason, the Calculation Agent will request the principal Singapore offices of the Reference Banks to provide the Calculation Agent with quotations of their Swap Rates for the Interest Period concerned at or about the Relevant Time on that Interest Determination Date and the Rate of Interest for such Interest Period shall be the Average Swap Rate for such Interest Period (which shall be the rate per annum equal to the arithmetic mean (rounded up, if necessary, to four decimal places) of the Swap Rates quoted by the Reference Banks or those of them (being at least two in number) to the Calculation Agent) and as adjusted by the Spread (if any). The Swap Rate of a Reference Bank means the rate at which that Reference Bank can generate Singapore dollars for the Interest Period concerned in the Singapore inter-bank market at or about the Relevant Time on the relevant Interest Determination Date and shall be determined as follows:
In the case of Premium:
Swap Rate = 365 (Premium x 36500) x LIBOR + 360 (T x Spot Rate)
(LIBOR x Premium) 365 + x (Spot Rate) 360
In the case of Discount:
Swap Rate = 365 (Discount x 36500) x LIBOR - 360 (T x Spot Rate)
(LIBOR x Discount) 365 - x (Spot Rate) 360
where:
LIBOR = the rate per annum at which United States dollar deposits for a period equal to the duration of the Interest Period concerned are being offered by that Reference Bank to prime banks in the Singapore inter-bank market at or about the Relevant Time on the relevant Interest Determination Date;
Spot Rate = the rate at which that Reference Bank sells United States dollars spot in exchange for Singapore dollars in the Singapore inter-bank market at or about the Relevant Time on the relevant Interest Determination Date;
30 Premium = the premium that would have been paid by that Reference Bank in buying United States dollars forward in exchange for Singapore dollars on the last day of the Interest Period concerned in the Singapore inter-bank market;
Discount = the discount that would have been received by that Reference Bank in buying United States dollars forward in exchange for Singapore dollars on the last day of the Interest Period concerned in the Singapore inter-bank market; and
T = the number of days in the Interest Period concerned; and
(F) if on any Interest Determination Date, one only or none of the Reference Banks provides the Calculation Agent with such quotation, the Average Swap Rate shall be determined by the Calculation Agent to be the rate per annum equal to the arithmetic mean (rounded up, if necessary, to four decimal places) of the rates quoted by the Reference Banks or those of them (being at least two in number) to the Calculation Agent at or about the Relevant Time on such Interest Determination Date as being their cost (including the cost occasioned by or attributable to complying with reserves, liquidity, deposit or other requirements imposed on them by any relevant authority or authorities) of funding, for the relevant Interest Period, an amount equal to the aggregate principal amount of the relevant Floating Rate Notes for such Interest Period by whatever means they determine to be most appropriate and the Rate of Interest for the relevant Interest Period shall be the Average Swap Rate (as so determined by the Calculation Agent) and as adjusted by the Spread (if any), or if on such Interest Determination Date one only or none of the Reference Banks provides the Calculation Agent with such quotation, the Rate of Interest for the relevant Interest Period shall be the rate per annum equal to the arithmetic mean (rounded up, if necessary, to four decimal places) of the prime lending rates for Singapore dollars quoted by the Reference Banks at or about the Relevant Time on such Interest Determination Date and as adjusted by the Spread (if any); and
(3) in the case of Floating Rate Notes which are not SIBOR Notes or Swap Rate Notes or which are denominated in a currency other than Singapore dollars, the Calculation Agent will determine the Rate of Interest in respect of any Interest Period at or about the Relevant Time on the Interest Determination Date in respect of such Interest Period as follows:
(A) if the Primary Source (as defined below) for the Floating Rate is a Screen Page (as defined below), subject as provided below, the Rate of Interest in respect of such Interest Period shall be:
(aa) the Relevant Rate (as defined below) (where such Relevant Rate on such Screen Page is a composite quotation or is customarily supplied by one entity); or
(bb) the arithmetic mean of the Relevant Rates of the persons whose Relevant Rates appear on that Screen Page, in each case appearing on such Screen Page at the Relevant Time on the Interest Determination Date,
and as adjusted by the Spread (if any);
31 (B) if the Primary Source for the Floating Rate is Reference Banks or if paragraph (b)(ii)(3)(A)(aa) applies and no Relevant Rate appears on the Screen Page at the Relevant Time on the Interest Determination Date or if paragraph (b)(ii)(3)(A)(bb) applies and fewer than two Relevant Rates appear on the Screen Page at the Relevant Time on the Interest Determination Date, subject as provided below, the Rate of Interest shall be the rate per annum which the Calculation Agent determines to be the arithmetic mean (rounded up, if necessary, to four decimal places) of the Relevant Rates that each of the Reference Banks is quoting to leading banks in the Relevant Financial Centre (as defined below) at the Relevant Time on the Interest Determination Date and as adjusted by the Spread (if any); and
(C) if paragraph (b)(ii)(3)(B) applies and the Calculation Agent determines that fewer than two Reference Banks are so quoting Relevant Rates, the Rate of Interest shall be the Rate of Interest determined on the previous Interest Determination Date.
(iii) On the last day of each Interest Period, the Issuer will pay interest on each Floating Rate Note to which such Interest Period relates at the Rate of Interest for such Interest Period.
(iv) For the avoidance of doubt, in the event that the Rate of Interest in relation to any Interest Period is less than zero, (subject to any applicable Minimum Rate of Interest) the Rate of Interest in relation to such Interest Period shall be zero.
(c) Rate of Interest - Variable Rate Notes (i) Each Variable Rate Note bears interest at a variable rate determined in accordance with the provisions of this paragraph (c). The interest payable in respect of a Variable Rate Note on the first day of an Interest Period relating to that Variable Rate Note is referred to in these Conditions as the “Agreed Yield” and the rate of interest payable in respect of a Variable Rate Note on the last day of an Interest Period relating to that Variable Rate Note is referred to in these Conditions as the “Rate of Interest”.
(ii) The Agreed Yield or, as the case may be, the Rate of Interest payable from time to time in respect of each Variable Rate Note for each Interest Period shall, subject as referred to in paragraph (c)(iv) below, be determined as follows:
(1) not earlier than 9.00 a.m. (Singapore time) on the ninth business day nor later than 3.00 p.m. (Singapore time) on the third business day prior to the commencement of each Interest Period, the Issuer and the Relevant Dealer (as defined below) shall endeavour to agree on the following:
(A) whether interest in respect of such Variable Rate Note is to be paid on the first day or the last day of such Interest Period;
(B) if interest in respect of such Variable Rate Note is agreed between the Issuer and the Relevant Dealer to be paid on the first day of such Interest Period, an Agreed Yield in respect of such Variable Rate Note for such Interest Period (and, in the event of the Issuer and the Relevant Dealer so agreeing on such Agreed Yield, the Rate of Interest for such Variable Rate Note for such Interest Period shall be zero); and
(C) if interest in respect of such Variable Rate Note is agreed between the Issuer and the Relevant Dealer to be paid on the last day of such Interest Period, a Rate of Interest in respect of such Variable Rate Note for such Interest Period (an “Agreed Rate”) and, in the event of the Issuer and the Relevant Dealer so agreeing on an Agreed Rate, such Agreed Rate shall be the Rate of Interest for such Variable Rate Note for such Interest Period; and
32 (2) if the Issuer and the Relevant Dealer shall not have agreed either an Agreed Yield or an Agreed Rate in respect of such Variable Rate Note for such Interest Period by 3.00 p.m. (Singapore time) on the third business day prior to the commencement of such Interest Period, or if there shall be no Relevant Dealer during the period for agreement referred to in (1) above, the Rate of Interest for such Variable Rate Note for such Interest Period shall automatically be the rate per annum equal to the Fall Back Rate (as defined below) for such Interest Period.
(iii) The Issuer has undertaken in the Agency Agreement that it will as soon as possible after the Agreed Yield or, as the case may be, the Agreed Rate in respect of any Variable Rate Note is determined but not later than 10.30 a.m. (Singapore time) on the next following business day notify the Principal Paying Agent and the Calculation Agent of the Agreed Yield or, as the case may be, the Agreed Rate for such Variable Rate Note for such Interest Period.
In addition, the Issuer will cause such Agreed Yield or, as the case may be, Agreed Rate for such Variable Rate Note to be notified by the Principal Paying Agent to the relevant Noteholder at its request.
(iv) For the purposes of sub-paragraph (ii) above, the Rate of Interest for each Interest Period for which there is neither an Agreed Yield nor Agreed Rate in respect of any Variable Rate Note or no Relevant Dealer in respect of the Variable Rate Note(s) shall be the rate (the “Fall Back Rate”) determined by reference to a Benchmark as stated on the face of such Variable Rate Note(s), being (in the case of Variable Rate Notes which are denominated in Singapore dollars) SIBOR (in which case such Variable Rate Note(s) will be SIBOR Note(s)) or Swap Rate (in which case such Variable Rate Note(s) will be Swap Rate Note(s)) or (in any other case or in the case of Variable Rate Notes which are denominated in a currency other than Singapore dollars) such other Benchmark as is set out on the face of such Variable Rate Note(s).
Such rate may be adjusted by adding or subtracting the Spread (if any) stated on the face of such Variable Rate Note. The “Spread” is the percentage rate per annum specified on the face of such Variable Rate Note as being applicable to the rate of interest for such Variable Rate Note.
The rate of interest so calculated shall be subject to Condition 5(V)(a).
The Fall Back Rate payable from time to time in respect of each Variable Rate Note will be determined by the Calculation Agent in accordance with the provisions of Condition 5(II)(b)(ii) (mutatis mutandis) and references therein to “Rate of Interest” shall mean “Fall Back Rate”.
(v) If interest is payable in respect of a Variable Rate Note on the first day of an Interest Period relating to such Variable Rate Note, the Issuer will pay the Agreed Yield applicable to such Variable Rate Note for such Interest Period on the first day of such Interest Period. If interest is payable in respect of a Variable Rate Note on the last day of an Interest Period relating to such Variable Rate Note, the Issuer will pay the Interest Amount for such Variable Rate Note for such Interest Period on the last day of such Interest Period.
(vi) For the avoidance of doubt, in the event that the Rate of Interest in relation to any Interest Period is less than zero, (subject to any applicable Minimum Rate of Interest) the Rate of Interest in relation to such Interest Period shall be zero.
33 (d) Minimum Rate of Interest If the applicable Pricing Supplement specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with Condition 5(II)(b) or Condition 5(II)(c) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest.
(e) Definitions As used in these Conditions:
“Benchmark” means the rate specified as such in the applicable Pricing Supplement;
“business day” means:
(i) a day (other than a Saturday, Sunday or gazetted public holiday) on which Euroclear, Clearstream, Luxembourg and CDP, as applicable, are operating;
(ii) a day (other than a Saturday, Sunday or gazetted public holiday) on which banks and foreign exchange markets are open for general business in the country of the Principal Paying Agent’s specified office; and
(iii) (if a payment is to be made on that day) (1) (in the case of Notes denominated in Singapore dollars) a day (other than a Saturday, Sunday or gazetted public holiday) on which banks and foreign exchange markets are open for general business in Singapore, (2) (in the case of Notes denominated in euros) a day (other than a Saturday, Sunday or gazetted public holiday) on which the TARGET System is open for settlement in euros and (3) (in the case of Notes denominated in a currency other than Singapore dollars and euros) a day (other than a Saturday, Sunday or gazetted public holiday) on which banks and foreign exchange markets are open for general business in Singapore and the principal financial centre for that currency;
“Calculation Agent” means in relation to any Series of Notes, the person appointed as the calculation agent pursuant to the terms of the Agency Agreement or, where applicable, the Calculation Agency Agreement, as specified in the applicable Pricing Supplement;
“Calculation Amount” means the amount specified as such on the face of any Note, or if no such amount is so specified, the Denomination Amount of such Note as shown on the face thereof;
“euro” means the currency of the member states of the European Union that adopt the single currency in accordance with the Treaty establishing the European Community, as amended from time to time;
“Interest Commencement Date” means the Issue Date or such other date as may be specified as the Interest Commencement Date on the face of such Note;
“Interest Determination Date” means, in respect of any Interest Period, that number of business days prior thereto as is set out in the applicable Pricing Supplement or on the face of the relevant Note;
“Primary Source” means the Screen Page specified as such in the applicable Pricing Supplement and (in the case of any Screen Page provided by any information service other than the Bloomberg agency or the Reuters Monitor Money Rates Service (“Reuters”)) agreed by the Calculation Agent;
“Reference Banks” means the institutions specified as such in the applicable Pricing Supplement or, if none, three major banks selected by the Calculation Agent in the interbank market that is most closely connected with the Benchmark;
34 “Relevant Currency” means the currency in which the Notes are denominated;
“Relevant Dealer” means, in respect of any Variable Rate Note, the Dealer party to the Programme Agreement referred to in the Agency Agreement with whom the Issuer has concluded or is negotiating an agreement for the issue of such Variable Rate Note pursuant to the Programme Agreement;
“Relevant Financial Centre” means, in the case of interest to be determined on an Interest Determination Date with respect to any Floating Rate Note or Variable Rate Note, the financial centre with which the relevant Benchmark is most closely connected or, if none is so connected, Singapore;
“Relevant Rate” means the Benchmark for a Calculation Amount of the Relevant Currency for a period (if applicable or appropriate to the Benchmark) equal to the relevant Interest Period;
“Relevant Time” means, with respect to any Interest Determination Date, the local time in the Relevant Financial Centre at which it is customary to determine bid and offered rates in respect of deposits in the Relevant Currency in the inter-bank market in the Relevant Financial Centre;
“Screen Page” means such page, section, caption, column or other part of a particular information service (including, but not limited to, Reuters) as may be specified in the applicable Pricing Supplement for the purpose of providing the Benchmark, or such other page, section, caption, column or other part as may replace it on that information service or on such other information service, in each case as may be nominated by the person or organisation providing or sponsoring the information appearing there for the purpose of displaying rates or prices comparable to the Benchmark;
“SGX-ST” means Singapore Exchange Securities Trading Limited; and
“TARGET System” means the Trans-European Automated Real Time Gross Settlement Express Transfer (known as TARGET2) System which was launched on 19 November 2007 or any successor thereto.
(III) INTEREST ON HYBRID NOTES (a) Interest Rate and Accrual Each Hybrid Note bears interest on its Calculation Amount from the Interest Commencement Date in respect thereof and as shown on the face of such Note.
(b) Fixed Rate Period (i) In respect of the Fixed Rate Period shown on the face of such Note, each Hybrid Note bears interest on its Calculation Amount from the first day of the Fixed Rate Period at the rate per annum (expressed as a percentage) equal to the Interest Rate shown on the face of such Note payable in arrear on each Interest Payment Date or Interest Payment Dates shown on the face of the Note in each year and on the last day of the Fixed Rate Period if that date does not fall on an Interest Payment Date.
(ii) The first payment of interest will be made on the Interest Payment Date next following the first day of the Fixed Rate Period (and if the first day of the Fixed Rate Period is not an Interest Payment Date, will amount to the Initial Broken Amount shown on the face of such Note), unless the last day of the Fixed Rate Period falls before the date on which the first payment of interest would otherwise be due. If the last day of the Fixed Rate Period is not an Interest Payment Date, interest from the preceding Interest Payment Date (or from the first day of the Fixed Rate Period, as the case may be) to the last day of the Fixed Rate Period will amount to the Final Broken Amount shown on the face of the Note.
35 (iii) Where the due date of redemption of any Hybrid Note falls within the Fixed Rate Period, interest will cease to accrue on the Note from the due date for redemption thereof unless, upon due presentation and subject to the provisions of the Trust Deed, payment of principal (or the Redemption Amount, as the case may be) is improperly withheld or refused, in which event interest at such rate will continue to accrue (as well after as before judgment) at the rate and in the manner provided in this Condition 5(III) to the Relevant Date.
(iv) In the case of a Hybrid Note, interest in respect of a period of less than one (1) year will be calculated on the Day Count Fraction specified hereon during the Fixed Rate Period.
(c) Floating Rate Period (i) In respect of the Floating Rate Period shown on the face of such Note, each Hybrid Note bears interest on its Calculation Amount from the first day of the Floating Rate Period, and such interest will be payable in arrear on each interest payment date (“Interest Payment Date”). Such Interest Payment Date(s) is/are either shown hereon as Specified Interest Payment Date(s) or, if no Specified Interest Payment Date(s) is/are shown hereon, Interest Payment Date shall mean each date which (save as mentioned in these Conditions) falls the number of months specified as the Interest Period on the face of the Note (the “Specified Number of Months”) after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the first day of the Floating Rate Period (and which corresponds numerically with such preceding Interest Payment Date or the first day of the Floating Rate Period, as the case may be). If any Interest Payment Date referred to in these Conditions that is specified to be subject to adjustment in accordance with a Business Day Convention would otherwise fall on a day that is not a business day, then if the Business Day Convention specified is (A) the Floating Rate Business Day Convention, such date shall be postponed to the next day which is a business day unless it would thereby fall into the next calendar month, in which event (1) such date shall be brought forward to the immediately preceding business day and (2) each subsequent such date shall be the last business day of the month in which such date would have fallen had it not been subject to adjustment, (B) the Following Business Day Convention, such date shall be postponed to the next day that is a business day, (C) the Modified Following Business Day Convention, such date shall be postponed to the next day that is a business day unless it would thereby fall into the next calendar month, in which event such date shall be brought forward to the immediately preceding business day or (D) the Preceding Business Day Convention, such date shall be brought forward to the immediately preceding business day.
(ii) The period beginning on (and including) the first day of the Floating Rate Period and ending on (but excluding) the first Interest Payment Date and each successive period beginning on (and including) an Interest Payment Date and ending on (but excluding) the next succeeding Interest Payment Date is herein called an “Interest Period”.
(iii) Where the due date of redemption of any Hybrid Note falls within the Floating Rate Period, interest will cease to accrue on the Note from the due date for redemption thereof unless, upon due presentation thereof, payment of principal (or Redemption Amount, as the case may be) is improperly withheld or refused, in which event interest will continue to accrue (as well after as before judgment) at the rate and in the manner provided in this Condition 5(III) to the Relevant Date.
(iv) The provisions of Condition 5(II)(b) shall apply to each Hybrid Note during the Floating Rate Period as though references therein to Floating Rate Notes are references to Hybrid Notes.
36 (IV) ZERO-COUPON NOTES Where a Note the Interest Basis of which is specified to be Zero-Coupon is repayable prior to the Maturity Date and is not paid when due, the amount due and payable prior to the Maturity Date shall be the Early Redemption Amount of such Note (determined in accordance with Condition 6(h)). As from the Maturity Date, the rate of interest for any overdue principal of such a Note shall be a rate per annum (expressed as a percentage) equal to the Amortisation Yield (as defined in Condition 6(h)(ii)).
(V) CALCULATIONS IN RESPECT OF FLOATING RATE NOTES, VARIABLE RATE NOTES AND HYBRID NOTES (a) Determination of Rate of Interest and Calculation of Interest Amounts The Calculation Agent will, as soon as practicable after the Relevant Time on each Interest Determination Date determine the Rate of Interest and calculate the amount of interest payable (the “Interest Amounts”) in respect of each Calculation Amount of the relevant Floating Rate Notes, Variable Rate Notes or (where applicable) Hybrid Notes for the relevant Interest Period (including the first day, but excluding the last day, of such Interest Period). The amount of interest payable in respect of any such Note shall be calculated by multiplying the product of the Rate of Interest and the Calculation Amount, by the Day Count Fraction shown on the Note and rounding the resultant figure to the nearest sub-unit of the Relevant Currency. The determination of any rate or amount, the obtaining of each quotation and the making of each determination or calculation by the Calculation Agent shall (in the absence of manifest error) be final and binding upon all parties.
(b) Notification The Calculation Agent will cause the Rate of Interest and the Interest Amounts for each Interest Period and the relevant Interest Payment Date to be notified to the Principal Paying Agent, the Trustee, the Issuer and (in the case of Floating Rate Notes) to be notified to Noteholders in accordance with Condition 16 as soon as possible after their determination but in no event later than the fourth business day thereafter. The Interest Amounts and the Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without notice in the event of an extension or shortening of the Interest Period by reason of any Interest Payment Date not being a business day. If the Floating Rate Notes, Variable Rate Notes or, as the case may be, Hybrid Notes become due and payable under Condition 10, the Rate of Interest and Interest Amounts payable in respect of the Floating Rate Notes, Variable Rate Notes or, as the case may be, Hybrid Notes shall nevertheless continue to be calculated as previously in accordance with this Condition but no publication of the Rate of Interest and Interest Amounts need to be made unless the Trustee requires otherwise.
(c) Determination or Calculation by the Trustee If the Calculation Agent does not at any material time determine or calculate the Rate of Interest for an Interest Period or any Interest Amount, the Trustee shall do so. In doing so, the Trustee shall apply the foregoing provisions of this Condition 5, with any necessary consequential amendments, to the extent that, in its opinion, it can do so, and, in all other respects, it shall do so in such manner as it shall deem fair and reasonable in all the circumstances.
(d) Calculation Agent and Reference Banks The Issuer will procure that, so long as any Floating Rate Note, Variable Rate Note or Hybrid Note remains outstanding, there shall at all times be three Reference Banks (or such other number as may be required) and, so long as any Floating Rate Note, Variable Rate Note, Hybrid Note or Zero-Coupon Note remains outstanding, there shall at all times be a Calculation Agent. If any Reference Bank or Calculation Agent (acting through its relevant office) is unable or unwilling to act as such or if the Calculation Agent fails duly to establish the Rate of Interest for any Interest Period or to calculate the Interest Amounts, the Issuer
37 will appoint another bank with an office in the Relevant Financial Centre to act as such in its place. The Calculation Agent may not resign its duties without a successor having been appointed as aforesaid.
6. REDEMPTION AND PURCHASE (a) Redemption at Maturity Date Unless previously redeemed or purchased and cancelled as provided below, this Note will be redeemed at its Redemption Amount on the Maturity Date shown on its face (if this Note is shown on its face to be a Fixed Rate Note, Hybrid Note (during the Fixed Rate Period) or Zero-Coupon Note) or on the Interest Payment Date falling in the Redemption Month shown on its face (if this Note is shown on its face to be a Floating Rate Note, Variable Rate Note or Hybrid Note (during the Floating Rate Period)).
So long as the Notes are listed on any Stock Exchange (as defined in the Trust Deed), the Issuer shall comply with the rules of such Stock Exchange in relation to the publication of any redemption of Notes.
(b) Redemption at the Option of Noteholder (i) General: If so provided hereon, the Issuer shall, at the option of the holder of any Note, redeem such Note on the date or dates so provided at its Redemption Amount, together with interest accrued to the date fixed for redemption. To exercise such option, the holder must deposit (in the case of Bearer Notes) such Note (together with all unmatured Coupons) with the Principal Paying Agent at its specified office or (in the case of Registered Notes) the Certificate representing such Note(s) with the Registrar or the Transfer Agent at its specified office, together with a duly completed option exercise notice (the “Exercise Notice”) in the form obtainable from the Principal Paying Agent or the Issuer (as applicable) within the Noteholder’s Redemption Option Period shown on the face hereof. Any Note so deposited may not be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer.
(ii) Cessation or Suspension of Trading of the Shares of the Issuer: If on any date, (1) the shares of the Issuer cease to be traded on the SGX-ST, or (2) trading in the shares of the Issuer on the SGX-ST is suspended for more than seven (7) consecutive days on which normal trading of securities on the SGX-ST is carried out (each, a “Trading Disruption Event”), the Issuer shall, at the option of the holder of any Note, redeem such Note at its Redemption Amount (together with interest accrued to the date fixed for redemption) on the date (or, if such date is not a business day, on the immediately preceding business day) falling 45 days after (in the case of (1)) the date of cessation of trading or (in the case of (2)) the day immediately following the expiry of the seven- day period (each, an “Effective Date”).
The Issuer shall, as soon as possible but in any event within five (5) business days from the Effective Date, give notice to the Trustee, the Principal Paying Agent and the Noteholders in accordance with Condition 16, which notice shall specify:
(1) the date on which the cessation or, as the case may be, suspension, of trading of the shares of the Issuer commenced;
(2) the date by which the Exercise Notice must be given;
(3) the date on which and the method by which the Redemption Amount will be paid;
(4) the names and specified offices of the Principal Paying Agent, the Calculation Agent and (in the case of Registered Notes) the Registrar and Transfer Agent; and
(5) such other information as the Trustee may reasonably require,
38 provided that any failure by the Issuer to give such notice shall not prejudice any Noteholder of such option. For the avoidance of doubt, the Trustee shall not be required to take any steps to ascertain whether the Trading Disruption Event or any event which could lead to the occurrence of the Trading Disruption Event has occurred and shall not be responsible or liable to Noteholders for any loss arising from any failure to do so.
To exercise such option, the holder must deposit (in the case of Bearer Notes) such Note (together with all unmatured Coupons) with the Principal Paying Agent at its specified office or (in the case of Registered Notes) the Certificate representing such Note(s) with the Registrar or Transfer Agent at its specified office, together with an Exercise Notice in the form obtainable from the Principal Paying Agent, the Registrar or Transfer Agent (as applicable), no later than the date falling 30 days after the date of the Notice.
Any Note or Certificate so deposited may not be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer.
(iii) Change of Shareholding Event: If, for any reason, a Change of Shareholding Event occurs, the Issuer will within seven (7) days of such occurrence give notice to the Noteholders of the occurrence of such event (the “Notice”) and shall, at the option of the holder of any Note, redeem such Note at its Redemption Amount, together with interest accrued to the date fixed for redemption, on the date falling 60 days from the date of the Notice (or if such date is not a business day, on the next day which is a business day).
To exercise such option, the holder must deposit (in the case of Bearer Notes) such Note (together with all unmatured Coupons) with the Principal Paying Agent at its specified office or (in the case of Registered Notes) the Certificate representing such Note(s) with the Registrar or Transfer Agent at its specified office, together with an Exercise Notice in the form obtainable from the Principal Paying Agent, the Registrar or Transfer Agent (as applicable), no later than the date falling 30 days after the relevant Effective Date.
Any Note or Certificate so deposited may not be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer.
For the purposes of this Condition 6(b)(iii),
( A) a “Change of Shareholding Event” occurs when Dr George Quek and Ms Katherine Lee Lih Heng and their respective Immediate Family Members cease to own in aggregate (whether directly or indirectly) at least 25 per cent. of the issued share capital of the Issuer; and
( B) “Immediate Family Members” means, in respect of a person, the father, mother, siblings, son(s) and daughter(s) of such person.
(c) Redemption at the Option of the Issuer If so provided hereon, the Issuer may, on giving irrevocable notice to the Noteholders falling within the Issuer’s Redemption Option Period shown on the face hereof, redeem all or, if so provided, some of the Notes at their Redemption Amount or integral multiples thereof, and on the date or dates so provided. Any such redemption of Notes shall be at their Redemption Amount, together with interest accrued to the date fixed for redemption. The Issuer shall notify the Principal Paying Agent and the Trustee of any early redemption at least five (5) business days prior to the latest date on which the Issuer is to give notice to the Noteholders in accordance with this paragraph.
All Notes in respect of which any such notice is given shall be redeemed on the date specified in such notice in accordance with this Condition 6(c).
39 In the case of a partial redemption of the Notes, the notice to Noteholders shall also contain the certificate numbers of the Bearer Notes or, in the case of Registered Notes, shall specify the principal amount of Registered Notes drawn and the holder(s) of such Registered Notes, to be redeemed, which shall have been drawn by or on behalf of the Issuer in such place and in such manner as may be fair and reasonable in the circumstances, taking account of prevailing market practices, subject to compliance with any applicable laws. So long as the Notes are listed on any Stock Exchange, the Issuer shall comply with the rules of such Stock Exchange in relation to the publication of any redemption of Notes.
(d) Purchase at the Option of the Issuer If so provided hereon, the Issuer shall have the option to purchase all or any of the Fixed Rate Notes, Floating Rate Notes, Variable Rate Notes or Hybrid Notes at their Redemption Amount on any date on which interest is due to be paid on such Notes and the Noteholders shall be bound to sell such Notes to the Issuer accordingly. To exercise such option, the Issuer shall give irrevocable notice to the Noteholders within the Issuer’s Purchase Option Period shown on the face hereof. Such Notes may be held, resold or surrendered to the Principal Paying Agent for cancellation. The Notes so purchased, while held by or on behalf of the Issuer, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Conditions 10, 11 and 12.
In the case of a purchase of some only of the Notes, the notice to Noteholders shall also contain the certificate numbers of the Bearer Notes, or in the case of Registered Notes, shall specify the principal amount of Registered Notes drawn and the holder(s) of such Registered Notes, to be purchased, which shall have been drawn by or on behalf of the Issuer in such place and in such manner as may be agreed between the Issuer and the Trustee, subject to compliance with any applicable laws. So long as the Notes are listed on any Stock Exchange, the Issuer shall comply with the rules of such Stock Exchange in relation to the publication of any purchase of Notes.
(e) Purchase at the Option of Noteholders (i) Each Noteholder shall have the option to have all or any of his Variable Rate Notes purchased by the Issuer at their Redemption Amount on any Interest Payment Date and the Issuer will purchase such Variable Rate Notes accordingly. To exercise such option, a Noteholder shall deposit any Variable Rate Notes to be purchased with the Principal Paying Agent at its specified office together with all Coupons relating to such Variable Rate Notes which mature after the date fixed for purchase, together with a duly completed option exercise notice in the form obtainable from the Principal Paying Agent within the Noteholders’ VRN Purchase Option Period shown on the face hereof. Any Variable Rate Notes so deposited may not be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer. Such Variable Rate Notes may be held, resold or surrendered to the Principal Paying Agent for cancellation. The Variable Rate Notes so purchased, while held by or on behalf of the Issuer, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Conditions 10, 11 and 12.
(ii) If so provided hereon, each Noteholder shall have the option to have all or any of his Fixed Rate Notes, Floating Rate Notes or Hybrid Notes purchased by the Issuer at their Redemption Amount on any date on which interest is due to be paid on such Notes and the Issuer will purchase such Notes accordingly. To exercise such option, a Noteholder shall deposit (in the case of Bearer Notes) such Note (together with all unmatured Coupons) with the Principal Paying Agent at its specified office or (in the case of Registered Notes) the Certificate representing such Note(s) with the Registrar or the Transfer Agent at its specified office, together with a duly completed option exercise notice in the form obtainable from the Principal Paying Agent within the Noteholders’ Purchase Option Period shown on the face hereof. Any Notes so deposited may not be withdrawn (except as provided in the Agency Agreement) without the prior consent of the Issuer. Such Notes may be held, resold or surrendered
40 to the Principal Paying Agent for cancellation. The Notes so purchased, while held by or on behalf of the Issuer, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Conditions 10, 11 and 12.
(f) Redemption for Taxation Reasons If so provided hereon, the Notes may be redeemed at the option of the Issuer in whole, but not in part, on any Interest Payment Date or, if so specified hereon, at any time on giving not less than 30 nor more than 60 days’ notice to the Noteholders (which notice shall be irrevocable), at their Redemption Amount or (in the case of Zero-Coupon Notes) Early Redemption Amount (as determined in accordance with Condition 6(h)) (together with interest accrued to (but excluding) the date fixed for redemption), if (i) the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 8, or increase the payment of such additional amounts, as a result of any change in, or amendment to, the laws (or any regulations, rulings or other administrative pronouncements promulgated thereunder) of Singapore or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws, regulations, rulings or other administrative pronouncements, which change or amendment is made public on or after the Issue Date or any other date specified in the Pricing Supplement and (ii) such obligations cannot be avoided by the Issuer taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Principal Paying Agent a certificate signed by a duly authorised officer of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and an opinion of independent legal or tax advisors of recognised standing to the effect that the Issuer has or is likely to become obliged to pay such additional amounts as a result of such change or amendment.
(g) Purchases The Issuer or any of its subsidiaries may at any time purchase Notes at any price (provided that they are purchased together with all unmatured Coupons relating to them) in the open market or otherwise, provided that in any such case such purchase or purchases is in compliance with all relevant laws, regulations and directives.
Notes purchased by the Issuer or any of its subsidiaries may be surrendered by the purchaser through the Issuer to the Principal Paying Agent for cancellation or may at the option of the Issuer or relevant subsidiary be held or resold.
For the purposes of these Conditions, “directive” includes any present or future directive, regulation, request, requirement, rule or credit restraint programme of any relevant agency, authority, central bank department, government, legislative, minister, ministry, official public or statutory corporation, self-regulating organisation, or stock exchange.
(h) Early Redemption of Zero-Coupon Notes (i) The Early Redemption Amount payable in respect of any Zero-Coupon Note, the Early Redemption Amount of which is not linked to an index and/or formula, upon redemption of such Note pursuant to Condition 6(f) or upon it becoming due and payable as provided in Condition 10, shall be the Amortised Face Amount (calculated as provided below) of such Note unless otherwise specified hereon.
(ii) Subject to the provisions of Condition 6(h)(iii), the Amortised Face Amount of any such Note shall be the scheduled Redemption Amount of such Note on the Maturity Date discounted at a rate per annum (expressed as a percentage) equal to the Amortisation Yield (which, if none is shown hereon, shall be such rate as would produce an Amortised Face Amount equal to the issue price of the Notes if they were discounted back to their issue price on the Issue Date) compounded annually.
41 (iii) If the Early Redemption Amount payable in respect of any such Note upon its redemption pursuant to Condition 6(f) or upon it becoming due and payable as provided in Condition 10 is not paid when due, the Early Redemption Amount due and payable in respect of such Note shall be the Amortised Face Amount of such Note as defined in Condition 6(h)(ii), except that such sub-paragraph shall have effect as though the date on which the Note becomes due and payable were the Relevant Date. The calculation of the Amortised Face Amount in accordance with this Condition 6(h)(iii) will continue to be made (as well after as before judgment) until the Relevant Date, unless the Relevant Date falls on or after the Maturity Date, in which case the amount due and payable shall be the scheduled Redemption Amount of such Note on the Maturity Date together with any interest which may accrue in accordance with Condition 5(IV).
Where such calculation is to be made for a period of less than one (1) year, it shall be made on the basis of the Day Count Fraction shown hereon.
(i) Cancellation All Notes purchased by or on behalf of the Issuer or any of its subsidiaries may be surrendered for cancellation, in the case of Bearer Notes, by surrendering each such Note together with all unmatured Coupons to the Principal Paying Agent at its specified office and, in the case of Registered Notes, by surrendering the Certificate representing such Notes to the Registrar and, in each case, if so surrendered, shall, together with all Notes redeemed by the Issuer, be cancelled forthwith (together with all unmatured Coupons attached thereto or surrendered therewith). Any Notes so surrendered for cancellation may not be reissued or resold.
7. PAYMENTS (a) Principal and Interest in respect of Bearer Notes Payments of principal (or, as the case may be, Redemption Amounts) and interest in respect of the Bearer Notes will, subject as mentioned below, be made against presentation and surrender of the relevant Notes or Coupons, as the case may be, at the specified office of the Principal Paying Agent by a cheque drawn in the currency in which that payment is due on, or, at the option of the holders, by transfer to an account maintained by the holder in that currency with a bank in the principal financial centre for that currency or, in the case of euro, in a city in which banks have access to the TARGET System.
(b) Principal and Interest in respect of Registered Notes Payments of principal in respect of Registered Notes will, subject as mentioned below, be made against presentation and surrender of the relevant Certificates at the specified office of the Transfer Agent or of the Registrar and in the manner provided in this Condition 7(b).
Interest on Registered Notes shall be paid to the person shown on the Register at the close of business on the fifteenth day before the due date for payment thereof (the “Record Date”). Payments of interest on each Registered Note shall be made by a cheque drawn in the currency in which payment is due on and mailed to the holder (or to the first named of joint holders) of such Note at its address appearing in the Register. Upon application by the holder to the specified office of the Registrar or the Transfer Agent before the Record Date, such payment of interest may be made by transfer to an account maintained by the payee in that currency with, a bank in the principal financial centre for that currency.
(c) Payments subject to law etc. All payments are subject in all cases to any applicable fiscal or other laws, regulations and directives, but without prejudice to the provisions of Condition 8. No commission or expenses shall be charged to the Noteholders or Couponholders in respect of such payments.
42 (d) Appointment of Agents The Principal Paying Agent, the Non-CDP Paying Agent, the Transfer Agent and the Registrar initially appointed by the Issuer and their specified offices are listed below. The Issuer reserves the right at any time to vary or terminate the appointment of the Principal Paying Agent, the Non-CDP Paying Agent, the Calculation Agent, the Transfer Agent and/or the Registrar in accordance with the terms of the Agency Agreement and to appoint additional or other Agents, provided that it will at all times maintain (i) a Paying Agent having a specified office in Singapore, (ii) a Non-CDP Paying Agent having a specified office in Hong Kong, (iii) a Transfer Agent in relation to Registered Notes, having a specified office in Singapore, (iv) a Registrar in relation to Registered Notes, having a specified office in Singapore and (v) a Calculation Agent where the Conditions so require.
Notice of any such change or any change of any specified office will promptly be given to the Noteholders in accordance with Condition 16.
The Agency Agreement may be amended by the Issuer, the Trustee and the Agents without the consent of any Noteholder or Couponholder, for the purpose of curing any ambiguity or of curing, correcting or supplementing any defective provision contained therein or in any manner which the Issuer, the Trustee and the Agents may mutually deem necessary or desirable and which shall not be materially prejudicial to the interests of the Noteholders and Couponholders.
(e) Unmatured Coupons (i) Bearer Notes which comprise Fixed Rate Notes and Hybrid Notes should be surrendered for payment together with all unmatured Coupons (if any) relating to such Notes (and, in the case of Hybrid Notes, relating to interest payable during the Fixed Rate Period), failing which an amount equal to the face value of each missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the amount of such missing unmatured Coupon which the sum of principal so paid bears to the total principal due) will be deducted from the Redemption Amount due for payment. Any amount so deducted will be paid in the manner mentioned above against surrender of such missing Coupon within the prescription period relating thereto under Condition 9.
(ii) Subject to the provisions of the relevant Pricing Supplement upon the due date for redemption of any Floating Rate Note, Variable Rate Note or Hybrid Note, unmatured Coupons relating to such Note (and, in the case of Hybrid Notes, relating to interest payable during the Floating Rate Period) (whether or not attached) shall become void and no payment shall be made in respect of them.
(iii) Where any Bearer Note comprising a Floating Rate Note, Variable Rate Note or Hybrid Note is presented for redemption without all unmatured Coupons relating to it (and, in the case of the Hybrid Note, relating to interest payable during the Floating Rate Period), redemption shall be made only against the provision of such indemnity as the Issuer may require.
(iv) If the due date for redemption or repayment of any Note is not a due date for payment of interest, interest accrued from the preceding due date for payment of interest or the Interest Commencement Date, as the case may be, shall only be payable against presentation (and surrender if appropriate) of the relevant Bearer Note or Certificate.
(f) Non-business days Subject as provided in the relevant Pricing Supplement and/or in these Conditions, if any date for the payment in respect of any Note or Coupon is not a business day, the holder shall not be entitled to payment until the next following business day and shall not be entitled to any further interest or other payment in respect of any such delay.
43 (g) Default Interest If on or after the due date for payment of any sum in respect of the Notes, payment of all or any part of such sum is not made against due presentation of the Notes or, as the case may be, the Coupons, the Issuer shall pay interest on the amount so unpaid from such due date up to the day of actual receipt by the relevant Noteholders or, as the case may be, Couponholders (as well after as before judgment) at a rate per annum determined by the Principal Paying Agent to be equal to two per cent. per annum above (in the case of a Fixed Rate Note or a Hybrid Note during the Fixed Rate Period) the Interest Rate applicable to such Note, (in the case of a Floating Rate Note or a Hybrid Note during the Floating Rate Period) the Rate of Interest applicable to such Note or (in the case of a Variable Rate Note) the variable rate by which the Agreed Yield applicable to such Note is determined or, as the case may be, the Rate of Interest applicable to such Note, or in the case of a Zero-Coupon Note, as provided for in the relevant Pricing Supplement. So long as the default continues then such rate shall be re-calculated on the same basis at intervals of such duration as the Principal Paying Agent may select, save that the amount of unpaid interest at the above rate accruing during the preceding such period shall be added to the amount in respect of which the Issuer is in default and itself bear interest accordingly. Interest at the rate(s) determined in accordance with this paragraph shall be calculated on the Day Count Fraction specified hereon and the actual number of days elapsed, shall accrue on a daily basis and shall be immediately due and payable by the Issuer.
8. TAXATION (a) Payment after Withholding All payments in respect of the Notes and Coupons by or on behalf of the Issuer shall be made free and clear of, and without deduction or withholding for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (“Taxes”) imposed or levied by or on behalf of Singapore or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law. In that event, the Issuer shall pay such additional amounts as will result in the receipt by the Noteholders and the Couponholders of such amounts as would have been received by them had no such deduction or withholding been required, except that no such additional amounts shall be payable in respect of any Bearer Note or Coupon presented (or in respect of which the Certificate representing it is presented) for payment:
(i) by or on behalf of a holder who is subject to such Taxes by reason of his being connected with Singapore (including, without limitation, the holder being (A) a resident in Singapore for tax purposes or (B) a non-resident of Singapore who has been granted an exemption by the Inland Revenue Authority of Singapore in respect of the requirement to withhold tax on payments made to it) otherwise than by reason only of the holding of such Note or Coupon or the receipt of any sums due in respect of such Note or Coupon; or
(ii) more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment on the last day of such period of 30 days.
(b) Interpretation As used in these Conditions, “Relevant Date” in respect of any Note or Coupon means the date on which payment in respect thereof first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which payment in full of the amount outstanding is made or (if earlier) the date falling seven (7) days after that on which notice is duly given to the Noteholders in accordance with Condition 16 that, upon further presentation of the Bearer Note (or relative Certificate) or Coupon being made in accordance with the Conditions, such payment will be made, provided that payment is in fact made upon presentation, and references to “principal” shall be deemed to include any premium payable in respect of the Notes, all Redemption Amounts, Early Redemption Amounts and all other amounts in the nature of principal payable pursuant to Condition 6, “interest” shall be deemed to include all Interest Amounts and all other amounts payable pursuant to Condition
44 5 and any reference to “principal” and/or “premium” and/or “Redemption Amounts” and/or “interest” and/or “Early Redemption Amounts” shall be deemed to include any additional amounts which may be payable under these Conditions.
9. PRESCRIPTION The Notes and Coupons shall become prescribed or void unless presented for payment within three (3) years from the appropriate Relevant Date for payment.
10. EVENTS OF DEFAULT If any of the following events (“Events of Default”) occurs, the Trustee at its discretion may (but is not obliged to), and if so requested in writing by the holders of at least 25 per cent. in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall, in each case subject to it being indemnified and/or secured and/or prefunded to its satisfaction, give notice in writing to the Issuer that the Notes are immediately repayable, whereupon the Redemption Amount of such Notes or (in the case of Zero-Coupon Notes) the Early Redemption Amount of such Notes together with accrued interest to the date of payment shall immediately become due and payable:
(a) the Issuer does not pay any principal amount payable by it under any of the Notes when due or does not pay any interest amount payable by it under any of the Notes when due and such default continues for a period of five (5) business days after the due date;
(b) the Issuer fails to perform or observe any one or more of its obligations, (other than the payment obligation referred to in Condition 10(a)) under any of the Transaction Documents (as defined in the Trust Deed) or any of the Notes, and if the default is capable of remedy, it is not remedied within 30 days of its occurrence;
(c) any representation, warranty or statement made by the Issuer in the Transaction Documents or any of the Notes or in any document delivered under the Transaction Documents or any of the Notes is not complied with in any respect or is or proves to have been incorrect in any respect when made or deemed repeated, and if the non-compliance is capable of remedy, it is not remedied within 30 days of its occurrence;
(d) (i) (A) (I) any other present or future indebtedness of the Issuer or any of its Principal Subsidiaries in respect of borrowed money is or is declared to be or is capable of being rendered due and payable prior to its stated maturity by reason of any actual or potential default, event of default or any analogous event (however described), (II) any such indebtedness of the Issuer or any of its Principal Subsidiaries in respect of borrowed money is not paid when due or, as the case may be, within any applicable grace period in any agreement relating to that indebtedness, or (B) any facility relating to any such indebtedness is declared to be or is cancelled or terminated before its normal expiry date or any person otherwise entitled to use any such facility is not so entitled, by reason of any actual default, event of default or any analogous event (however described); or
(ii) the Issuer or any of its Principal Subsidiaries fails to pay when properly called upon to do so, any amount payable by it under any guarantee for, or indemnity in respect of, any moneys borrowed or raised,
provided that no Event of Default will occur under this Condition 10(d) unless and until the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this Condition 10(d) have occurred equals or exceeds S$5,000,000 or its equivalent in other currencies;
(e) the Issuer or any of its Principal Subsidiaries (i) ceases or threatens to cease to carry on all or a material part of its business, operations and undertakings as carried on at the date hereof or (ii) disposes or threatens to dispose of all or a material part of its property or assets
45 (in each case, otherwise than for the purposes of such a reconstruction, amalgamation, reorganisation, merger or consolidation as stated in Condition 10(f) or as permitted under Clause 16(ee) of the Trust Deed);
(f) any meeting is convened, or any petition or originating summon is presented or an order is made, an effective resolution is passed or, as the case may be, an application or petition is made by the Issuer or any of its Principal Subsidiaries, for the winding-up of the Issuer or any of its Principal Subsidiaries (except, in the case of a Principal Subsidiary only, for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation not involving bankruptcy or insolvency or on terms approved by Noteholders by way of an Extraordinary Resolution before that event occurs) or for the appointment of a liquidator (including a provisional liquidator), receiver, judicial manager, trustee, administrator, agent or similar officer of the Issuer or any of its Principal Subsidiaries or over a material part of the assets of the Issuer or any of its Principal Subsidiaries;
(g) the Issuer or any of its Principal Subsidiaries is (or is, or could be, deemed by law or a court to be) insolvent or unable to pay its debts as they fall due, stops, suspends or threatens to stop or suspend payment of all or a material part of (or a particular type of) its indebtedness, begins negotiations or takes any other proceeding for the deferral, rescheduling or other readjustment of all or a material part of (or a particular type of) its indebtedness (or of any material part which it will or might otherwise be unable to pay when due) proposes or makes a general assignment or an arrangement or scheme or composition with or for the benefit of its creditors or a moratorium is agreed or declared in respect of or affecting all or a material part of (or of a particular type of) its indebtedness;
(h) a distress, attachment or execution or other legal process is levied, enforced or sued out on or against a material part of the properties or assets of the Issuer or any of its Principal Subsidiaries and is not removed, dismissed or discharged within 30 days;
(i) any security on or over the whole or a material part of the assets of the Issuer or any of its Principal Subsidiaries becomes enforceable or any step is taken to enforce it (including the taking of possession or the appointment of a receiver, manager or other similar person);
(j) any step is taken by any governmental authority or agency with a view to the seizure, compulsory acquisition, expropriation or nationalisation of all or a material part of the assets of the Issuer or any of its Principal Subsidiaries;
(k) any action, condition or thing (including the obtaining of any necessary consent) at any time required to be taken, fulfilled or done in order (i) to enable the Issuer lawfully to enter into, exercise its rights and perform and comply with its obligations under each of the Transaction Documents and the Notes, (ii) to ensure that those obligations are valid, legally binding and enforceable, (iii) to ensure that those obligations rank and will at all times rank in accordance with Condition 2 or (iv) to make the Transaction Documents and the Notes admissible in evidence in the courts of Singapore is not taken, fulfilled or done, or any such consent ceases to be in full force and effect without modification or any condition in or relating to any such consent is not complied with (unless that consent or condition is no longer required or applicable);
(l) it is or will become unlawful or illegal for the Issuer to observe, perform or comply with any one or more of its obligations under the Notes or any Transaction Document to which the Issuer is a party;
(m) (i) if any Transaction Document to which it is a party or the Notes ceases or is claimed by the Issuer to cease at any time and for any reason to constitute legal and valid obligations of the Issuer, binding upon it in accordance with its terms; or
(ii) any applicable law, directive, order or judgment is enacted, promulgated or entered, the effect of which would be to render any Transaction Document to which the Issuer is a party unenforceable;
46 (n) any litigation, arbitration or administrative proceeding (other than those of a frivolous or vexatious nature and discharged or stayed within 30 days of its commencement) is current or pending against the Issuer or any of its Principal Subsidiaries (i) to restrain the entry into, exercise of any of the rights and/or the performance or enforcement of or compliance with any of the obligations of the Issuer under the Transaction Documents to which it is a party or any of the Notes or (ii) which has or is likely to have a material adverse effect on the Issuer or the Group;
(o) any event occurs which, under the laws of any relevant jurisdiction, has an analogous effect to any of the events referred to in Conditions 10(e), (f), (g), (h), (i) or (j); or
(p) the Issuer or any of its Principal Subsidiaries is declared by the Minister of Finance to be a declared company under the provisions of Part IX of the Companies Act (as defined in the Trust Deed).
In these Conditions:
(1) “Principal Subsidiary” means, at any particular time, any subsidiary of the Issuer:
(A) whose total assets, as shown by the accounts of such subsidiary (consolidated in the case of a corporation which itself has subsidiaries), based upon which the latest audited consolidated accounts of the Group have been prepared, are at least five per cent. of the total assets of the Group as shown by such audited consolidated accounts; or
(B) whose total revenue, as shown by the accounts of such subsidiary (consolidated in the case of a corporation which itself has subsidiaries), based upon which the latest audited consolidated accounts of the Group have been prepared, is at least five per cent. of the total revenue of the Group as shown by such audited consolidated accounts,
provided that if any such subsidiary (the “transferor”) shall at any time transfer the whole or any part of its business, undertaking or assets to another subsidiary or the Issuer (the “transferee”) then:
(aa) if the whole of the business, undertaking and assets of the transferor shall be so transferred, the transferor shall thereupon cease to be a Principal Subsidiary and the transferee (unless it is the Issuer) shall thereupon become a Principal Subsidiary; and
(bb) if a part only of the business, undertaking and assets of the transferor shall be so transferred, the transferor shall remain a Principal Subsidiary and the transferee (unless it is the Issuer) shall thereupon become a Principal Subsidiary.
Any subsidiary which becomes a Principal Subsidiary by virtue of (aa) above or which remains or becomes a Principal Subsidiary by virtue of (bb) above shall continue to be a Principal Subsidiary until the date of issue of the first audited consolidated accounts of the Group prepared as at a date later than the date of the relevant transfer which show the assets or, as the case may be, the revenue as shown by the accounts of such subsidiary (consolidated in the case of a corporation which itself has subsidiaries), based upon which such audited consolidated accounts have been prepared, to be less than five per cent. of the total assets or, as the case may be, the total revenue of the Group, as shown by such audited consolidated accounts. A report by the Auditors (as defined in the Trust Deed), who shall also be responsible for producing any pro-forma accounts required for the above purposes, that in their opinion a subsidiary is or is not a Principal Subsidiary shall, in the absence of manifest error, be conclusive; and
(2) “subsidiary” has the meaning ascribed to it in Section 5 of the Companies Act (Chapter 50 of Singapore).
47 11. ENFORCEMENT At any time after an Event of Default has occurred (which has not been waived) or after the Notes shall have become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer as it may think fit to enforce repayment of the Notes, together with accrued interest, or any provision of the Transaction Documents but it shall not be bound to take any such proceedings unless (a) it shall have been so requested in writing by the holders of not less than 25 per cent. in principal amount of the Notes outstanding or so directed by an Extraordinary Resolution and (b) it shall have been indemnified and/or secured and/or prefunded by the Noteholders to its satisfaction. No Noteholder or Couponholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound to do so, fails or neglects to do so within a reasonable period and such failure or neglect is continuing.
12. MEETING OF NOTEHOLDERS AND MODIFICATIONS (a) The Trust Deed contains provisions for convening meetings of Noteholders of a Series to consider any matter affecting their interests, including modification by Extraordinary Resolution of the Notes of such Series (including these Conditions insofar as the same may apply to such Notes) or any of the provisions of the Trust Deed.
(b) The Trustee or the Issuer at any time may, and the Trustee upon the request in writing at the time after any Notes of any Series shall have become repayable due to default by Noteholders holding not less than 15 per cent. in principal amount of the Notes of any Series for the time being outstanding shall, convene a meeting of the Noteholders of that Series. An Extraordinary Resolution duly passed at any such meeting shall be binding on all the Noteholders of the relevant Series (save where provided to the contrary in the Trust Deed and these Conditions), whether present or not and on all relevant Couponholders, except that any Extraordinary Resolution proposed, inter alia, (i) to amend the dates of maturity or redemption of the Notes or any date for payment of interest or Interest Amounts on the Notes, (ii) to reduce or cancel the principal amount of, or any premium payable on redemption of, the Notes, (iii) to reduce the rate or rates of interest in respect of the Notes or to vary the method or basis of calculating the rate or rates of interest or the basis for calculating any amount of interest in respect of the Notes, (iv) to vary the currency or currencies of payment or denomination of the Notes, (v) to take any steps that as specified hereon may only be taken following approval by an Extraordinary Resolution to which the special quorum provisions apply, (vi) to modify the provisions concerning the quorum required at any meeting of Noteholders or the majority required to pass the Extraordinary Resolution or (vii) to vary any method of, or basis for, calculating the Redemption Amount or the Early Redemption Amount including the calculation of the Amortised Face Amount, will only be binding if passed at a meeting of the Noteholders of the relevant Series (or at any adjournment thereof) at which a special quorum (provided for in the Trust Deed) is present.
(c) The Trustee may agree, without the consent of the Noteholders or Couponholders, to any modification (subject to certain exceptions mentioned in the Trust Deed) of, or to the waiver or authorisation of any breach or proposed breach of, any of these Conditions or any of the provisions of the Trust Deed, or determine, without any such consent as aforesaid, that any Event of Default or Potential Event of Default (as defined in the Trust Deed) shall not be treated as such, which in any such case is not, in the opinion of the Trustee, materially prejudicial to the interests of the Noteholders or may agree, without any such consent as aforesaid, to any modification, waiver or authorisation which, in its opinion, is of a formal, minor or technical nature or to correct a manifest error or to comply with mandatory provisions of Singapore law or is required by Euroclear and/or Clearstream, Luxembourg and/or CDP and/or any other clearing system in which the Notes may be held. Any such modification, waiver or authorisation shall be binding on the Noteholders and the Couponholders and, if the Trustee so requires, such modification shall be notified to the Noteholders as soon as practicable.
(d) In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation determination or substitution), the Trustee shall have regard to the general interests of the Noteholders as a class but shall not have regard to any interests arising from circumstances particular to
48 individual Noteholders or Couponholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Noteholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Noteholder or Couponholder be entitled to claim, from the Issuer, the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders or Couponholders.
(e) These Conditions may be amended, modified, or varied in relation to any Series of Notes by the terms of the relevant Pricing Supplement in relation to such Series.
(f) For the purpose of ascertaining the right to attend and vote at any meeting of the Noteholders convened for the purpose of and in relation to Conditions 10, 11 and 12 and Clauses 9.2 and 27 of and Schedule 5 to the Trust Deed, those Notes (if any) which are beneficially held by, or are held on behalf of, the Issuer and any of its subsidiaries and not cancelled shall (unless and until ceasing to be so held) be disregarded when determining whether the requisite quorum of such meeting has been met and any votes cast or purported to be cast at such meeting in respect of such Notes shall be disregarded and be null and void.
13. REPLACEMENT OF NOTES AND COUPONS Should any Note, Certificate or Coupon be lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject to applicable laws, at the specified office of (in the case of Bearer Notes and Coupons) the Principal Paying Agent or (in the case of Certificates) the Registrar (or at the specified office of such other Principal Paying Agent or, as the case may be, Registrar as may from time to time be designated by the Issuer for the purpose and notice of whose designation is given to the Noteholders in accordance with Condition 16) upon payment by the claimant of the costs, expenses and duties incurred in connection with the replacement and on such terms as to evidence, undertaking, security and indemnity (which may provide, inter alia, that if the allegedly lost, stolen or destroyed Note, Certificate or Coupon is subsequently presented for payment, there will be paid to the Issuer on demand the amount payable by the Issuer in respect of such Note, Certificate or Coupon) or otherwise as the Issuer may reasonably require. Mutilated or defaced Notes, Certificates or Coupons must be surrendered before replacements will be issued.
14. FURTHER ISSUES The Issuer may from time to time without the consent of the Noteholders or Couponholders create and issue further notes having the same terms and conditions as the Notes of any Series and so that the same shall be consolidated and form a single Series with such Notes, and references in these Conditions to “Notes” shall be construed accordingly.
15. PROVISIONS RELATING TO THE TRUSTEE The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking action unless indemnified and/or secured and/or prefunded to its satisfaction.
The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (a) to enter into business transactions with the Issuer and to act as trustee of the holders of any other securities issued by, or relating to, the Issuer, (b) to exercise and enforce its rights, comply with its obligations and perform its duties under or in relation to any such transactions or, as the case may be, any such trusteeship without regard to the interests of, or consequences for, the Noteholders or Couponholders, and (c) to retain and not be liable to account for any profit made or any other amount or benefit received thereby or in connection therewith.
The Trust Deed also provides that the Trustee will not be liable for, inter alia, any action taken or omitted by it except to the extent that the Trustee’s gross negligence, wilful default or fraud was the primary cause of any loss to the Noteholders, and that each Noteholder shall be solely responsible for making and continuing to make its own independent appraisal of and investigation into the
49 financial condition, creditworthiness, condition, affairs, status and nature of the Issuer, and the Trustee shall not at any time have any responsibility for the same and each Noteholder shall not rely on the Trustee in this respect thereof.
16. NOTICES Notices to the holders of Registered Notes shall be mailed to them at their respective addresses in the Register and deemed to have been given on the fourth weekday (being a day other than a Saturday or a Sunday) after the date of mailing. Notices to the holders of Bearer Notes will be valid if published in a daily newspaper of general circulation in Singapore (or, if the holders of any Series of Notes can be identified, notices to such holders will also be valid if they are given to each of such holders). It is expected that such publication will be made in The Business Times. Notices will, if published more than once or on different dates, be deemed to have been given on the date of the first publication in such newspaper as provided above. Couponholders shall be deemed for all purposes to have notice of the contents of any notice to the holders of Bearer Notes in accordance with this Condition 16.
So long as the Notes are represented by a Global Note or a Global Certificate and such Global Note or Global Certificate is held in its entirety on behalf of Euroclear, Clearstream, Luxembourg and/or CDP, there may be substituted for such publication in such newspapers the delivery of the relevant notice to Euroclear, Clearstream, Luxembourg and/or CDP (subject to the agreement of CDP) for communication by it to the Noteholders, except that if the Notes are listed on the SGX-ST and the rules of such exchange so require, notice will in any event be published in accordance with the previous paragraph. Any such notice shall be deemed to have been given to the Noteholders on the seventh day after the day on which the said notice was given to Euroclear, Clearstream, Luxembourg and/or CDP.
Notices to be given by any Noteholder pursuant hereto (including to the Issuer) shall be in writing and given by lodging the same, together with the relative Note or Notes, with (in the case of Bearer Notes) the Principal Paying Agent or, as the case may be, the Non-CDP Paying Agent or (in the case of Certificates) the Registrar. Whilst the Notes are represented by a Global Note or a Global Certificate, such notice may be given by any Noteholder to the Principal Paying Agent, the Non-CDP Paying Agent or the Registrar (as the case may be) through Euroclear, Clearstream, Luxembourg and/or CDP in such manner as the Principal Paying Agent, the Non-CDP Paying Agent or the Registrar (as the case may be) and Euroclear, Clearstream, Luxembourg and/or CDP may approve for this purpose.
Notwithstanding the other provisions of this Condition, in any case where the identity and addresses of all the Noteholders are known to the Issuer, notices to such holders may be given individually by recorded delivery mail to such addresses and will be deemed to have been given when received at such addresses.
17. GOVERNING LAW The Notes and the Coupons are governed by, and shall be construed in accordance with, the laws of Singapore.
The courts of Singapore are to have jurisdiction to settle any disputes that may arise out of or in connection with the Trust Deed, the Notes or the Coupons and accordingly any legal action or proceedings arising out of or in connection with the Trust Deed, the Notes or the Coupons may be brought in such courts. The Issuer has in the Trust Deed irrevocably submitted to the jurisdiction of such courts.
The Issuer agrees that in any legal action or proceedings arising out of or in connection with the Notes and the Coupons against it or any of its assets, no immunity from such legal action or proceedings (which shall include, without limitation, suit, attachment prior to award, other attachment, the obtaining of an award, judgment, execution or other enforcement) shall be claimed by or on behalf of the Issuer or with respect to any of its assets and irrevocably waives any such right of immunity which it or its assets now have or may hereafter acquire or which may be attributed to it or its assets and consent generally in respect of any such legal action or proceedings
50 to the giving of any relief or the issue of any process in connection with such action or proceedings including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order, award or judgment which may be made or given in such action or proceedings.
18. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT (CHAPTER 53B OF SINGAPORE) No person shall have any right under the Contracts (Rights of Third Parties) Act (Chapter 53B of Singapore) to enforce or enjoy the benefit of any term or condition of this Note.
PRINCIPAL PAYING AGENT, CDP REGISTRAR AND CDP TRANSFER AGENT
Deutsche Bank AG, Singapore Branch One Raffles Quay #16-00 South Tower Singapore 048583
NON-CDP PAYING AGENT AND NON-CDP TRANSFER AGENT
Deutsche Bank AG, Hong Kong Branch Level 52, International Commerce Centre 1 Austin Road West Kowloon, Hong Kong
NON-CDP REGISTRAR
Deutsche Bank Luxembourg S.A. 2, Boulevard Konrad Adenauer L-1115 Luxembourg Luxembourg
51 SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM
1. Initial Issue of Notes Global Notes and Global Certificates may be delivered on or prior to the original issue date of the Tranche to a common depositary for Euroclear and Clearstream, Luxembourg (the “Common Depositary”) or CDP.
Upon the initial deposit of a Global Note with the Common Depositary or CDP, or registration of a Global Certificate in the name of (i) any nominee for Euroclear and Clearstream, Luxembourg, and/ or (ii) CDP and delivery of the relevant Global Certificate to the Common Depositary or CDP (as the case may be), the relevant clearing system will credit each subscriber with a nominal amount of Notes equal to the nominal amount thereof for which it has subscribed and paid.
Notes that are initially deposited with the Common Depositary may also be credited to the accounts of subscribers with (if indicated in the relevant Pricing Supplement) other clearing systems through direct or indirect accounts with Euroclear and Clearstream, Luxembourg held by such other clearing systems. Conversely, Notes that are initially deposited with any other clearing system may similarly be credited to the accounts of subscribers with Euroclear, Clearstream, Luxembourg or other clearing systems.
2. Relationship of Accountholders with Clearing Systems Save as provided in the following paragraph, each of the persons shown in the records of Euroclear, Clearstream, Luxembourg, CDP or any other clearing system (each an “Alternative Clearing System”) as the holder of a Note represented by a Global Note or a Global Certificate must look solely to Euroclear, Clearstream, Luxembourg, CDP or such Alternative Clearing System (as the case may be) for his share of each payment made by the Issuer to the bearer of such Global Note or the holder of the underlying Registered Notes, as the case may be, and in relation to all other rights arising under the Global Notes or Global Certificates, subject to and in accordance with the respective rules and procedures of Euroclear, Clearstream, Luxembourg, CDP or such Alternative Clearing System (as the case may be). Such persons shall have no claim directly against the Issuer in respect of payments due on the Notes for so long as the Notes are represented by such Global Note or Global Certificate and such obligations of the Issuer will be discharged by payment to the bearer of such Global Note or the holder of the underlying Registered Notes, as the case may be, in respect of each amount so paid.
3. Exchange 3.1 Temporary Global Notes Each Temporary Global Note will be exchangeable, free of charge to the holder:
(i) not later than the Exchange Date, for bearer Notes in definitive form (“Definitive Notes”) in an aggregate principal amount equal to the principal amount of the Temporary Global Note submitted for exchange; and
(ii) on or after the Exchange Date, in whole or in part from time to time by its presentation and, on exchange in full, surrender to or to the order of the relevant Paying Agent for interests in the Permanent Global Note in an aggregate principal amount equal to the principal amount of the Temporary Global Note submitted for exchange provided that, in the case of any part of a Note submitted for exchange for a permanent Global Note, there shall have been Certification (as defined in the Trust Deed) with respect to such nominal amount submitted for such exchange dated no earlier than the Exchange Date.
52 3.2 Permanent Global Notes Each Permanent Global Note will be exchangeable, on or after its Exchange Date, in whole but not in part, free of charge to the holder, for Definitive Notes:
(i) if the Permanent Global Note is held by or on behalf of Euroclear or Clearstream, Luxembourg or an Alternative Clearing System and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces an intention permanently to cease business or in fact does so; or
(ii) if the Permanent Global Note is held by or on behalf of CDP and (a) an event of default, enforcement event or analogous event entitling an Accountholder (as defined in the Trust Deed) or the Trustee to declare the Notes to be due and payable as provided in the Conditions has occurred and is continuing, (b) CDP is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise), (c) CDP has announced an intention to permanently cease business and no alternative clearing system is available or (d) CDP has notified the Issuer that it is unable or unwilling to act as depository for the Notes and to continue performing its duties as set out in the conditions for the provision of depository services and no alternative clearing system is available.
In the event that a Global Note is exchanged for Definitive Notes, such Definitive Notes shall be issued in Specified Denomination(s) only. A Noteholder who holds a principal amount of less than the minimum Specified Denomination will not receive a definitive Note in respect of such holding and would need to purchase a principal amount of Notes such that it holds an amount equal to one or more Specified Denominations.
3.3 Global Certificates The following will apply in respect of transfers of Notes held in Euroclear or Clearstream, Luxembourg, CDP or an Alternative Clearing System. These provisions will not prevent the trading of interests in the Notes within a clearing system whilst they are held on behalf of such clearing system, but will limit the circumstances in which the Notes may be withdrawn from the relevant clearing system.
Transfers of the holding of Notes represented by a Global Certificate pursuant to Condition 2(b) may only be made:
(a) in whole but not in part, if the Notes represented by the Global Certificate are held on behalf of Euroclear, Clearstream, Luxembourg, or an Alternative Clearing System and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so;
(b) in whole but not in part if the Notes represented by the Global Certificate are held by or on behalf of CDP and:
(i) an event of default, enforcement event or analogous event entitling an Accountholder (as defined in the Trust Deed) or the Trustee to declare the Notes to be due and payable as provided in the Conditions has occurred and is continuing;
(ii) CDP is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise);
(iii) CDP has announced an intention to permanently cease business and no alternative clearing system is available;
(iv) CDP has notified the Issuer that it is unable or unwilling to act as depository for the Notes and to continue performing its duties as set out in the Conditions for the provision of depository services and no alternative clearing system is available; or
53 (c) in whole or in part, with the consent of the Issuer,
provided that, in the case of a transfer pursuant to paragraph 3.3(a) or 3.3 (c) above, the holder of the Notes represented by the Global Certificate has given the relevant Registrar not less than 60 days’ notice at its specified office of such holder’s intention to effect such transfer. Where the holding of Notes represented by the Global Certificate is only transferable in whole, the Certificate issued to the transferee upon transfer of such holding shall be a Global Certificate. Where transfers are permitted in part, Certificates issued to transferees shall not be Global Certificates unless the transferee so requests and certifies to the relevant Registrar that it is, or is acting as a nominee for, Euroclear or Clearstream, Luxembourg, CDP or an Alternative Clearing System.
3.4 Delivery of Notes Any exchange for a Permanent Global Note may be effected on or after an Exchange Date by the holder of the Permanent Global Note surrendering the Permanent Global Note to or to the order of the relevant Paying Agent. In exchange for the Permanent Global Note, the Issuer shall deliver, or procure the delivery of, duly executed and authenticated Definitive Notes in an aggregate principal amount equal to the principal amount of the Permanent Global Note submitted for exchange (if appropriate, having attached to them all Coupons in respect of interest that have not already been paid on the Permanent Global Note), security printed in accordance with any applicable legal and stock exchange requirements and substantially in the form set out in the Trust Deed. Upon exchange (or payment) in whole the Permanent Global Note shall be deemed fully paid and shall be cancelled by the relevant Paying Agent and, unless otherwise instructed by the Issuer, the cancelled Permanent Global Note shall be returned to the Issuer.
Upon the whole or part of a Temporary Global Note being exchanged for a Permanent Global Note, the Permanent Global Note shall be exchangeable in accordance with its terms for Definitive Notes. The Definitive Notes for which the Temporary Global Note may be exchangeable shall be duly executed and authenticated, shall have attached to them all Coupons in respect of interest that has not already been paid on the Temporary Global Note and shall be substantially in the form set out in the Trust Deed. Upon any exchange of a Temporary Global Note for an equivalent interest in the Permanent Global Note or Definitive Notes, the portion of the principal amount so exchanged shall be endorsed by or on behalf of the relevant Paying Agent in the relevant Schedule to the Temporary Global Note, whereupon the principal amount hereof shall be reduced for all purposes by the amount so exchanged and endorsed. Upon exchange (or payment) in whole, the Temporary Global Note shall be deemed fully paid and shall be cancelled by the relevant Paying Agent and, unless otherwise instructed by the Issuer, the cancelled Temporary Global Note shall be returned to the Issuer.
3.5 Exchange Date “Exchange Date” means, in relation to a Temporary Global Note (a) the date falling three (3) calendar months after its issue date where exchangeable for Definitive Notes; or (b) the day falling after the expiry of 40 days after its issue date where exchangeable for interests in the Permanent Global Note; and, in relation to a Permanent Global Note, a day falling not less than 60 days after that on which the notice requiring exchange is given and on which commercial banks are open for business in the city in which the specified office of the relevant Paying Agent is located and in the city in which the relevant clearing system is located.
4. Amendment to Conditions The Temporary Global Notes, Permanent Global Notes and Global Certificates contain provisions that apply to the Notes that they represent, some of which modify the effect of the terms and conditions of the Notes set out in this Information Memorandum. The following is a summary of certain of those provisions:
54 4.1 Payments (a) Permanent Global Note No person shall be entitled to receive any payment in respect of the Notes represented by a Permanent Global Note that falls due on or after the Exchange Date unless, upon due presentation of the Permanent Global Note for exchange, delivery of Definitive Notes is improperly withheld or refused by or on behalf of the Issuer or the Issuer does not perform or comply with any one or more of what are expressed to be its obligations under any Definitive Notes.
Payments in respect of the Permanent Global Note shall be made to its holder against presentation and (if no further payment falls to be made on it) surrender of it and at the specified office of the relevant Paying Agent or of any paying agent provided for in the Conditions. A record of each such payment shall be endorsed on the Principal or Interest Schedule Permanent Global Note, as appropriate, by the relevant Paying Agent, which endorsement shall (until the contrary is proved) be prima facie evidence that the payment in question has been made.
(b) Temporary Global Note No person shall be entitled to receive any payment in respect of the Notes represented by a Temporary Global Note that falls due on or after the Exchange Date unless, upon due presentation of the Temporary Global Note for exchange, delivery of (or, in the case of a subsequent exchange, due endorsement of) the Permanent Global Note or the Definitive Notes is improperly withheld or refused by or on behalf of the Issuer.
Payments due in respect of a Note before the Exchange Date shall only be made in relation to such principal amount of the Temporary Global Note with respect to which there shall have been Certification (as defined in the Trust Deed) dated no earlier than such due date for payment.
Any payments that are made in respect of the Temporary Global Note shall be made to its holder against presentation and (if no further payment falls to be made on it) surrender of it at the specified office of the relevant Paying Agent or of any other paying agent provided for in the Conditions.
If any payment in full of principal is made in respect of any Note represented by the Temporary Global Note, the portion of the Temporary Global Note representing such Note shall be cancelled and the amount so cancelled shall be endorsed by or on behalf of the relevant Paying Agent in the Principal Schedule of the Temporary Global Note (such endorsement being prima facie evidence that the payment in question has been made) whereupon the principal amount hereof shall be reduced for all purposes by the amount so cancelled and endorsed. If any other payments are made in respect of the Notes represented by the Temporary Global Note, a record of each such payment shall be endorsed by or on behalf of the relevant Paying Agent on such Payment Schedule of the Temporary Global Note (such endorsement being prima facie evidence that the payment in question has been made).
All payments in respect of Notes represented by a Global Certificate (other than a Global Certificate held through CDP) will be made to, or to the order of, the person whose name is entered on the Register at the close of business on the Record Date (as defined in the Conditions).
All payments in respect of Notes represented by a Global Certificate held through CDP will be made to, or to the order of, the person whose name is entered on the Register at the close of business on the Record Date (as defined in the Conditions).
4.2 Prescription Claims in respect of principal and interest (as defined in the Conditions) for Notes that are represented by a Permanent Global Note shall become void unless it is presented for payment within a period of three (3) years from the relevant Relevant Date (as defined in Condition 9).
55 4.3 Meetings The holder of a Permanent Global Note shall (unless such Permanent Global Note represents only one Note) be treated as one person, and the holder of the Notes represented by a Global Certificate shall (unless such Global Certificate represents only one Note) be treated as two persons, for the purposes of any quorum requirements of a meeting of Noteholders and, at any such meeting, the holder of a Permanent Global Note or the Notes represented by a Global Certificate shall be treated as having one vote in respect of each principal amount of Notes equal to the minimum Denomination Amount of the Notes for which the Permanent Global Note or the Notes represented by a Global Certificate may be exchanged.
4.4 Cancellation Cancellation of any Note represented by a Permanent Global Note or Temporary Global Note that is required by the Conditions to be cancelled will be effected by reduction in the principal amount of the Permanent Global Note or Temporary Global Note representing such Note on its presentation to or to the order of the relevant Paying Agent for endorsement in the relevant schedule of such Permanent Global Note or Temporary Global Note.
4.5 Purchase Notes represented by a Permanent Global Note may only be purchased by the Issuer or any of its subsidiaries if they are purchased together with the right to receive all future payments of interest thereon.
4.6 Issuer’s Option Any option of the Issuer provided for in the Conditions of any Notes while such Notes are represented by a Permanent Global Note shall be exercised by the Issuer giving notice to the Noteholders within the time limits set out in and containing the information required by the Conditions, except that the notice shall not be required to contain the serial numbers of Notes drawn in the case of a partial exercise of an option and accordingly no drawing of Notes shall be required.
4.7 Noteholders’ Options Any option of the Noteholders provided for in the Conditions of any Notes while such Notes are represented by a Permanent Global Note may be exercised by the holder of the Permanent Global Note giving notice to the relevant Paying Agent within the time limits relating to the deposit of Notes with the relevant Paying Agent set out in the Conditions substantially in the form of the notice available from the relevant Paying Agent, except that the notice shall not be required to contain the certificate numbers of the Notes in respect of which the option has been exercised, and stating the principal amount of Notes in respect of which the option is exercised and at the same time presenting the Permanent Global Note to the relevant Paying Agent for notation accordingly.
4.8 Trustee’s Powers The Trustee may call for any certificate, report or other document to be issued by Euroclear, Clearstream, Luxembourg, CDP or an Alternative Clearing System as to the principal amount of Notes held in such clearing system standing to the account of any person. Any such certificate or other document shall be conclusive and binding for all purposes. The Trustee shall not be liable to any person by reason of having accepted as valid or not having rejected any certificate or other document to such effect purporting to be issued by such clearing system and subsequently found to be forged or not authentic.
In considering the interests of Noteholders while any Global Note is held on behalf of, or any Global Certificate is registered in the name of any nominee for, a clearing system, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to such Global Note or Global Certificate and may consider such interests as if such accountholders were the holders of the Notes represented by such Global Note or Global Certificate.
56 4.9 Notices Notices required to be given in respect of the Notes represented by a Global Note or a Global Certificate may be given by their being delivered (so long as the Global Note or Global Certificate is held on behalf of Euroclear, Clearstream, Luxembourg, CDP or any other clearing system) to Euroclear, Clearstream, Luxembourg or (subject to the agreement of CDP) CDP or, as the case may be, such other clearing system or otherwise to the holder of the Global Note or Global Certificate rather than by publication or direct notification to the Noteholders as required by the Conditions, except that so long as the Notes are listed on the SGX-ST and the rules of that exchange so require, notices in respect of such Notes shall also be published in a leading daily newspaper in the English language having general circulation in Singapore (which is expected to be The Business Times) (unless a waiver is obtained from such exchange).
4.10 General Any reference herein to the Paying Agent and the Registrar shall be deemed to refer to Deutsche Bank AG, Singapore Branch as principal paying agent and registrar in relation to Notes cleared through CDP; and to Deutsche Bank AG, Hong Kong Branch, as paying agent in relation to Notes other than those cleared through CDP; and Deutsche Bank Luxembourg S.A., as registrar, in relation to Registered Notes other than those cleared through CDP.
57 THE ISSUER
1. INTRODUCTION AND OVERVIEW Introduction The Issuer was incorporated in Singapore on 6 March 2003 as a public limited liability company. The Issuer was initially listed on the Stock Exchange of Singapore Dealing and Automated Quotation System (“SESDAQ”) on 13 June 2003 and subsequently transferred to the Main Board of the SGX-ST on 11 June 2009. The principal activity of the Issuer is that of investment holding and provision of management services.
As at the Latest Practicable Date, the Issuer has 281,893,238 issued shares and an issued share capital of S$33,302,916, and has a market capitalisation of approximately S$394,650,533.
Key Milestones, Awards and Accolades Over the years, the Group has expanded rapidly to become a household F&B brand owner and operator that has established its mark in Asia with its bakery, restaurant and food atrium operations, and has garnered numerous awards and accolades for the Group’s brands. The key milestones, awards and accolades from the commencement of its operations up to the Latest Practicable Date are as follows:
Applicable Year Key Milestone, Awards and Accolades
2000 - BreadTalk Pte Ltd is incorporated as a principal subsidiary on 24 April 2000, founded by the Group’s Chairman, Dr George Quek and the Group’s Deputy Chairman, Ms Katherine Lee as a F&B operator. - First BreadTalk retail outlet in Singapore commences business on 1 July 2000 at the Parco Bugis Junction shopping centre. - Second BreadTalk retail outlet in Singapore opens in December 2000 at Novena Square shopping centre.
2001 - Opens an additional five BreadTalk retail outlets in Singapore. - Sets up central production kitchen in Singapore and relocates corporate headquarters to a central location in KA Foodlink, Kampong Ampat, Singapore in September 2001.
2002 - Receives the Singapore Prestige Brand Award (“ SPBA’’) Most Promising Brand Award and voted by consumers as the Most Popular Brand (the Association of Small and Medium Enterprises (“ ASME’’) and Lianhe Zaobao news publication). - Dr George Quek wins the Entrepreneur of the Year Award (ASME and the Rotary Club). - Ranked No.1 in the Enterprise 50 Startup Award (Accenture and the Business Times newspapers). - The BreadTalk bakery business expands to 20 retail outlets in Singapore.
58 Applicable Year Key Milestone, Awards and Accolades
2003 - BreadTalk Group Limited is listed on SESDAQ. - First overseas BreadTalk retail outlet opens in Jakarta, Indonesia. - Sets up the Group’s headquarters in Mainland China and opens the first BreadTalk retail outlet in Shanghai. - Receives the SPBA Distinctive Brand Award (ASME and Lianhe Zaobao news publication).
2004 - Winner in the Design for Asia Award (Hong Kong Design Centre 2004). - Receives the SPBA Silver Award 2004 (ASME and Lianhe Zaobao news publication). - Opens the first BreadTalk retail outlet in the Glorietta 4 shopping centre in Makati City, the Philippines. - Brings the Din Tai Fung brand restaurants to Singapore as a franchised brand.
2005 - Launches the Food Republic brand at Wisma Atria, the first thematic food atrium in Singapore. - Launches the first Toast Box brand with its signature coffee (the “Nanyang kopi”) and specialised toast products. - Wins the SPBA Gold Award 2005 (ASME and Lianhe Zaobao news publication) and the CitiBusiness Regional Brand Award, SPBA, for brand success in foreign territories.
2006 - Receives the Five Star Diamond Brand and Diamond Award (World Brand Laboratory in Shanghai). - Dr George Quek wins the Emerging Entrepreneur Category of the Entrepreneur of the Year Awards 2006, organised by Ernst and Young, Singapore.
2007 - Celebrates its 100th store worldwide opening in Shanghai. - Launches the first Food Republic food atrium in Kuala Lumpur, Malaysia.
2008 - Launches brand new design concept store for its BreadTalk brand at the CityLink Mall shopping centre in Singapore. The new concept featured see-through kitchens showcasing the expertise of BreadTalk brand’s bakers. As part of this revamp, 100 new bread designs were also created by the research and development team in consultation with international chefs and food consultants from France, Japan, Spain and Taiwan. - Opens inaugural stores under the BreadTalk brand in Korea and Oman. - Launches “The Icing Room” brand cake shops (with Design-It-Yourself cakes concept) in Singapore. - The Food Republic brand is Overall Winner of Promising Brands in SPBA.
59 Applicable Year Key Milestone, Awards and Accolades
2009 - Signs a master franchise agreement with Bahraini partner Pan Arabian Gourmet, which will allow Pan Arabian Gourmet to sub-franchise BreadTalk retail outlets across 12 countries in the Middle East. - Emerges as a finalist in the Emerging Market Retailer of the Year Category at the World Retail Awards, Spain. - Listed by Brand Finance as one of the Top 100 brands in Singapore. - Launches the Bread Society brand premium bakery at ION Orchard in Singapore. - Partners with Japanese Sanpou Group to launch RamenPlay noodle restaurant in Singapore. - Obtains franchise for premium Californian fast food brand - Carl’s Jr. to operate in Mainland China. - Toast Box is Overall Winner of Promising Brands in SPBA.
2010 - Celebrates ten years of innovation with seven brands, 448 outlets spanning 13 countries in Asia and the Middle East. - Listed by Brand Finance as one of the Top 100 Brands in Singapore.
2011 - Receives the Overall Winner, Winner of the Most Popular Brand, Regional Brands Category in SPBA.
2012 - Launches the “Generation 4” concept of the BreadTalk brand in Shanghai at the Metro City and Kodak Cinema World complexes on 25 September 2012. The concept included both a fresh new look and another original line-up of new breads. - Acquires a new bakery brand, Thye Moh Chan. The flagship Thye Moh Chan outlet was launched at the Chinatown Point shopping centre, Singapore in November 2012. - The Group receives the Avant Garde award by SME One Asia Awards in Singapore. - Listed by Brand Finance as one of the Top 100 Brands in Singapore. - Conferred the World Brand Laboratory Award in Mainland China.
2013 - Official opening of its S$67 million international headquarters (BreadTalk IHQ) at Tai Seng Street, Singapore. - BreadTalk’s Generation 4 store concept in Shanghai won two awards, namely, the “Successful Design Award’’ from Successful Design Awards and the “Five Star Diamond Award’’ from World Brand Laboratory, both in Mainland China. - The Group’s ranking in Brand Finance’s Top 100 Singapore Brands Report improved from 70th in 2012 to 63rd in 2013. - Toast Box was voted the “Top Brand (Cafe Category)” in the Influential Brands study on “Generation Y” customers commissioned by Influential Brands, a member of the Brand Alliance Group.
60 2. GROUP STRUCTURE The corporate structure of the Issuer and its subsidiaries, joint venture companies and associated companies as at 31 December 2013 is set out below. Please also refer to pages 391 to 400 of this Information Memorandum for information on the business segment and principal activity of each subsidiary, joint venture company and associated company.
BreadTalk Group Limited
100% 100% 100% 100% 100% 100% 100% 100% Topwin Investment Imagine IHQ Imagine BreadTalk Pte Together Inc BreadTalk Star Food Pte. Shanghai Star Food Holding Pte Ltd Pte. Ltd. Properties Pte. Ltd (Singapore) Pte. Ltd. International Pte. Ltd. Ltd. (Singapore) F&B Management Co., (Singapore) (Singapore) Ltd. (Singapore) (Singapore) (Singapore) Ltd (PRC) 100% 100% 100% Food Republic Chongqing Food 100% 25% 29% 70% 85% Shanghai BreadTalk (Shanghai) Co. Ltd Republic Food & Beijing Star Food F&B Tate Projects Perennial Taster Food Pte. Ramen Play Co. Ltd (PRC) (PRC) Beverage Co., Management Co., Ltd Pte. (Chijmes) Pte. Ltd. (Singapore) Pte. Ltd. 30% 30% (PRC) Ltd.(Singapore) Ltd. (Singapore) (Singapore) Ltd (PRC) Shanghai Ramen 50% Play Co., Ltd (PRC) 50% 40% 30% Shanghai ABPan Co., Shanghai Hong Carl Karcher JBT (China) 90% Ltd (PRC) Bu Rang Food & Enterprises (Cayman) Pte Ltd 100% Taster Food Beijing Da Shi Dai Beverage Ltd (Cayman Islands) International Pte. (Singapore) 100% Food & Beverage Management Co. Ltd. (Singapore) Co. Ltd (PRC ) Ltd (PRC)
61 Shanghai BreadTalk Gourmet Co. Ltd 85% 100% (PRC) Megabite Hong Kong Food Republic 49% Limited (Hong Kong) (Chengdu) Co., Taster Food 100% Ltd (PRC) (Thailand) Co. Beijing BreadTalk Limited Rest. Mgmt Co. Ltd 75% 100% (Thailan d) (PRC) Food Republic Food Republic Guangzhou F&B Hangzhou F&B No. of Companies Management Co., Co., Ltd (PRC) Ultimate 100% Ltd (PRC) 100% Holding 1 100% Beijing BreadTalk Co. BreadTalk Thye Moh Chan Ltd (6) (PRC) 100% Co. Concept Hong Pte. Ltd. Food Republic Kong Limited Subsidiary 38 (Singapore) 49% Pte .Ltd. (Singapore) (Hong Kong) BreadTalk (Thailand) Associate 4 50% 100% 100% Company Limited Street Food Pte. Ltd. Food Republic (Thailand) Joint Queens Coffee (Sin gapore ) Shenzhen F&B Pte. Ltd. Venture 4 Management (Singapore) 100% Megabite (S) Pte. Co., Ltd (PRC) 90% 100% Ltd. (Sin gapore ) 47 ML BreadWorks Sdn. Food Art Pte. Ltd. Bhd. (Malaysia) 100% (Singapore) Megabite Eatery (M) Sdn Bhd (Malaysia ) 100% 90% MWA Pte. Food Republic Taiwan Co., Ltd Ltd.(Singapore) (Taiwan) 49% FR (Thailand ) Co. , Ltd (Thailan d) 50% Apex Excellent Sdn Bhd (Malaysia) 3. BUSINESS Overview The businesses of the Group can be broadly categorised into the following divisions:
(a) Bakery Division
(b) Restaurant Division
(c) Food Atrium Division
Distinctive F&B Brand Owner and Operator As at the date of this Information Memorandum, the Group’s key proprietary brands are:
“BreadTalk” brand (for its bakery operations)
“Toast Box” brand (for its food and beverage restaurant operations)
“Thye Moh Chan” brand (for its confectionery operations)
“Food Republic” brand (for its food atrium operations)
“RamenPlay” brand (for its noodles restaurant operations)
“The Icing Room” brand (for its creative-concept cake shop)
“Bread Society” brand (for its bakery boutique operations)
The Group also operates the following restaurant brands as at the date of this Information Memorandum:
“Din Tai Fung” brand (for its restaurant operations in Singapore and Thailand)
“Carl’s Jr.” brand (for its restaurant operations in Shanghai and the Zhejiang and Jiangsu provinces in Mainland China)
Geographical Reach With an existing global staff strength of over 7,000 employees, the Group operates more than 800 F&B outlets across 16 countries in Asia and the Middle East as at the Latest Practicable Date.
62 Revenue Breakdown The breakdown in revenue contribution by each of the Group’s principal business segment expressed as a percentage of total revenue for FY2011, FY2012 and FY2013 are set out in the pie charts below:
The breakdown in revenue contribution by geographical segments expressed as a percentage of total revenue of the Group for FY 2011, FY 2012 and FY2013 are set out in the pie charts below:
(a) Bakery Division As at the date of this Information Memorandum, the key brands used under the Group’s Bakery Division operations are the Group’s proprietary brands, being BreadTalk, Toast Box, The Icing Room and Bread Society, as well as Thye Moh Chan which the Group acquired in 2012.
The Bakery Division’s contribution to the Group’s revenue in percentage terms for FY2013, FY2012 and FY2011 are 50.6%, 52.1% and 53.2% respectively.
In 2013, the Group’s Bakery Division continued to expand in Mainland China, Singapore and Thailand, adding another 128 new retail outlets to its network of directly-owned and franchised BreadTalk retail outlets. As at the Latest Practicable Date, the Group’s total number of retail outlets under the Bakery Division is 743, of which 35.4% are directly owned and operated by the Group, with a further 64.6% of the retail outlets operated by franchisees in Indonesia, Mainland China, the Philippines, Kuwait, Oman, Vietnam, Bahrain, Sri Lanka, Jordan and Qatar. As at the Latest Practicable Date, the retail outlets are located as follows:
Country Number of Outlets Mainland China 369 Indonesia 125 Singapore 112 The Philippines 45 Hong Kong 26 Thailand 24
63 Country Number of Outlets Malaysia 12 Vietnam 10 Kuwait 5 Bahrain 4 Sri Lanka 4 Jordan 2 Oman 2 Saudi Arabia 2 Qatar 1 Total 74 3
“BreadTalk” Brand The “BreadTalk” Brand (“BreadTalk”) was developed by the Group and was launched in Singapore in July 2000. It offers a wide selection of bread and cakes. Its first retail outlet commenced business on 1 July 2000 at the Parco Bugis Junction shopping centre in Singapore and attracted many customers with its signature “Flosss” bun, which is a sweet cream-filled bun topped with a layer of pork floss. The “Flosss” bun has remained one of BreadTalk’s best sellers.
BreadTalk has since become a distinctive Singapore brand. Each BreadTalk retail outlet bears a clear glass, clean cut look and its signature transparent kitchens allow customers to view the baking process and which also serve to emphasise the freshness of BreadTalk’s products. Being the brand which laid the foundation for the Group, BreadTalk has been, and continues to be, a pillar of the Group. As at the Latest Practicable Date, BreadTalk offers a wide variety of over 100 kinds of bread and cakes.
The Group’s recent efforts to improve and refresh the BreadTalk experience for customers include: z The introduction of the BreadTalk Transit concept. This was first introduced in Singapore in 2010, and the concept revolved around positioning smaller BreadTalk retail outlets in locations such as education institutions, transit access points and other non-mall areas with heavy human traffic. Such outlets allow easy access to BreadTalk’s bakery products for customers on the go. The BreadTalk Transit retail outlets require only about half of the space of a regular BreadTalk retail outlet, shorter implementations times and leaner staff strength on-site, and has proven to be an efficient model for rapid expansion of the BreadTalk brand. The success of the BreadTalk Transit model in Singapore has paved the way for the Group to also open BreadTalk Transit retail outlets in Shanghai and Beijing. z The initial launch of Breadtalk’s Generation 4 concept in September 2012 in the Metro City complex in Shanghai and to be gradually introduced across all BreadTalk retail outlets. The launch of the Generation 4 concept of the BreadTalk brand was the Group’s most significant brand positioning effort in 2012. This concept included introducing a fresh new look to its outlets’ interior decoration as well as a new original line-up of breads. New stores designed with the Generation 4 décor reflect the rustic environment of romantic European bakeries. Older stores will gradually be refreshed to reflect this new concept. In line with the on- growing promotion of healthy lifestyles, BreadTalk also introduced 60 new bakery items as part of the Generation 4 concept, many of which are the result of recipes for healthier and more creative bread options.
64 z The introduction of the BreadTalk Cafe, as an extension of its BreadTalk brand. BreadTalk Cafe is a sit-down cafe which serves largely Western bistro fare with local flavours. The first BreadTalk Cafe was opened in the Suntec City Mall shopping centre in Singapore, in 2013, followed by a second outlet at the Westgate Mall shopping centre in the western part of Singapore.
Mainland China remains the primary overseas market for the BreadTalk brand. The brand has a presence in many first and second tier cities in Mainland China and as at the Latest Practicable Date, BreadTalk can be found in 57 cities in Mainland China.
As at the Latest Practicable Date, the Group has 629 BreadTalk retail outlets across 16 countries, including Singapore, Mainland China, Indonesia, the Philippines, Thailand, Hong Kong, Malaysia, Vietnam, Kuwait, Bahrain, Sri Lanka, Jordan, Oman, Saudi Arabia and Qatar, of which 474 outlets are franchised.
“Toast Box” Brand The “Toast Box” brand (“Toast Box”) was developed by the Group and was launched in Singapore in October 2005 to recreate the atmosphere of local “Nanyang” coffee shops of the 1960s and 1970s. The first Toast Box outlet opened in December 2005 as a food stall unit of the Food Republic food atrium in the Wisma Atria shopping centre in Singapore. “Nanyang Kopi” (or traditional ‘pulled’ local coffee) is a signature beverage at Toast Box’s retail outlets. Other items on Toast Box’s menu include traditional local offerings such as different varieties of local coffee and tea beverages and specialised local food items (for e.g. “peanut thick toast”, “mee siam”, “nasi lemak” and soft-boiled eggs).
The Group strives to ensure that Toast Box remains equally relevant to the younger demographics through social media such as Facebook, by organising regular coffee appreciation workshops and by introducing new items to appeal to their different lifestyle preferences and tastes. As mentioned in the section above titled “Introduction and Overview”, Toast Box was voted the “Top Brand (Cafe Category)” by this customer segment in 2013.
As at the Latest Practicable Date, the Group has 102 Toast Box retail outlets across five countries, including Singapore, Mainland China, Thailand, Hong Kong, Malaysia and the Philippines, of which only the six outlets in the Philippines are franchised.
“The Icing Room” Brand The “The Icing Room” brand (“The Icing Room”) was developed by the Group and was launched as a patisserie in Singapore in December 2008 to offer a wide range of cakes and which also allows customers the freedom to create their own customised designs and decorations on the cakes.
The Icing Room distinguishes itself from conventional bakers’ confectioneries by offering ‘Design-It- Yourself’ cake-decorative personalisation services. With a slew of decorative designs and toppings to choose from, customers can craft unique creations by adding their personal touches to ready- made, hand-baked cakes.
In 2013, the Group also launched the first The Icing Room retail outlet in Shanghai’s new “iAPM Mall” (“Shanghai iAPM Mall”) shopping centre located on Huaihai Zhong Road, one of the busiest shopping belts in Shanghai.
As at the Latest Practicable Date, the Group has four The Icing Room retail outlets in Singapore, one The Icing Room retail outlet in Mainland China and one The Icing Room retail outlet in Thailand.
“Bread Society” Brand The “Bread Society” brand (“Bread Society”) was developed by the Group and was launched in Singapore in July 2009 to target a different sector of customers with offerings of premium bread and pastries.
65 Conceptualised to be an upmarket bakery boutique that encompasses an artisanal theme, Bread Society offers an extensive selection of over 50 kinds of European-inspired breads and pastries freshly baked on the premises and using premium and healthier ingredients such as dark rye, wholemeal flour and wheatgrass.
In 2013, the Group launched the first overseas Bread Society retail outlet in Shanghai iAPM Mall shopping centre.
Also in 2013, the Group launched a new concept, Bread Society Cafe, as an extension of its Bread Society brand. Bread Society Cafe is a sit-down cafe which serves all-day brunch and desserts offerings.
As at the Latest Practicable Date, the Group has two Bread Society retail outlets in ION Orchard and Suntec City Mall shopping centres in Singapore, and one Bread Society retail outlet in Shanghai iAPM Mall shopping centre in Shanghai.
“Thye Moh Chan” Brand The Group acquired the historic family-run Thye Moh Chan business in Singapore in April 2012, thus adding another brand to its brand portfolio. Thye Moh Chan is a 70 year-old business that specialises in traditional handcrafted Teochew confections, such as their signature ‘tao sar piah’ (biscuits with mung bean paste).
The Group seeks to preserve the original quality and authenticity of the confections by keeping to the original recipes and engaging the existing chefs as consultants. At the same time, the Group also seeks to introduce a modern touch to marketing the brand by introducing new flavours to the confections and also re-packaging the products in a tasteful contemporary style to be more visually appealing to the older and younger demographics. In 2013, Thye Moh Chan added the “mooncakes” confections for the first time in Singapore which were well received by both corporate and retail customers.
As at the Latest Practicable Date, the Group has one Thye Moh Chan retail outlet in Singapore, located in the Chinatown Point shopping centre.
(b) Restaurant Division As at the date of this Information Memorandum, the brands which the Group is operating under the Restaurant Division are Din Tai Fung, RamenPlay and Carl’s Jr.
The Restaurant Division’s contribution to the Group’s revenue in percentage terms for FY2013, FY2012 and FY2011 are 22.8%, 22.9% and 21.0% respectively.
As at the Latest Practicable Date, the Group has a total of 36 restaurants under the Group’s management located in different countries as follows:
Country Number of Outlets Singapore 28 Mainland China 7 Thailand 1 Total 36
“Din Tai Fung” Brand In August 2003, the Group, through its 70% held joint venture entity, Taster Food Pte. Ltd. (“Taster”), obtained the franchise rights under a franchise agreement with Din Tai Fung Co., Ltd (“DTF”) to operate restaurants in Singapore under the “Din Tai Fung” brand (“Din Tai Fung”) (the “Singapore DTF Franchise”). DTF also holds a 20% interest in Taster while the remaining 10% in Taster is held by Taiwanese individuals. Subsequently in 2010, the Group further secured franchise rights under a franchise agreement with DTF to operate restaurants in Thailand under Din Tai Fung.
66 The duration of the franchise under the franchise agreement for Singapore is for a period of ten years from April 2009 to January 2019, while the duration of the franchise under the franchise agreement for Thailand is for a period of five years from March 2010 to April 2015.
The Din Tai Fung chain of restaurants has its origins from Taiwan more than 40 years ago and the signature items on its menu include ‘xiao long bao’ (steamed pork dumplings) and steamed chicken soup. It has been rated by The New York Times as one of the world’s top ten restaurants in 1993 and the restaurant’s first Hong Kong branch at Tsim Sha Tsui, Silvercord Branch, was awarded one Michelin star by the Hong Kong and Macau 2010 edition of the Michelin Guide. In 2013, it was also named “Best Chinese Restaurant” in the AsiaOne People’s Choice Awards 2013.
In 2013, the Group opened five new Din Tai Fung restaurants in Singapore at Chinatown Point, Jurong East Mall, Suntec City Mall and Bedok Mall shopping centres and the BreadTalk IHQ. Din Tai Fung has been, and continues to be, the pillar of the Group’s restaurant business.
As at the Latest Practicable Date, the Group operates 17 Din Tai Fung restaurants in Singapore and one in Bangkok, Thailand.
“RamenPlay” Brand RamenPlay is the Japanese arm of the Group’s Restaurant Division, and is a 85:15 joint venture between the Group and Japan’s Sanpou Co., Ltd respectively. This joint venture company is confined to operating in Singapore and Mainland China. Sanpou Co., Ltd has decades of experience in the F&B industry in Japan.
RamenPlay seeks to present itself as an authentic Japanese ramen (a specialised type of noodle) restaurant serving ramen dishes in a modern and contemporary setting.
In 2013, the Group opened several RamenPlay restaurants in Singapore (including in shopping centres such as Suntec City Mall, Chinatown Point, Novena Square and Bedok Mall) and one RamenPlay restaurant in Shanghai’s Super Brand Mall shopping centre.
As at the Latest Practicable Date, the Group operates 11 RamenPlay restaurants in Singapore and four RamenPlay restaurants in Shanghai.
“Carl’s Jr.” Brand Carl’s Jr. was added to the Group’s brand portfolio in February 2009. Known for its quality charbroiled burgers and vibrant atmosphere, the Carl’s Jr. chain which originated from the United States is well known for bringing innovative ideas to the quick service restaurant industry such as being the first to charbroil its burger patties over an open flame, which sears the juices and flavour into tasty burgers and chicken sandwiches.
In June 2008, Star Food Pte. Ltd. (“Star Food”) was incorporated pursuant to a joint venture agreement which the Group and Aspac F&B International Pte. Ltd. (“Aspac”) entered into on 14 May 2008. Star Food was set up to secure the Master License Agreements from Carl Karcher Enterprises, LLC (“CKE”) for the right to develop restaurants under the Carl’s Jr. brand in Mainland China. Shanghai Star Food F&B Management Co., Ltd (“Star Food Shanghai”) was also set up as a wholly-owned subsidiary of Star Food to hold the Carl’s Jr. restaurants in Mainland China which were opened by the Group.
In September 2012, the Group acquired the shares held by Aspac in the capital of Star Food and Star Food became a wholly-owned subsidiary of the Issuer.
On 16 July 2013, the Group (via Star Food) entered into a 40:60 joint venture with CKE pursuant to which the Group invested in Carl Karcher Enterprises (Cayman) Ltd. (“CKE Cayman”) for approximately S$3.1 million. CKE Cayman indirectly owns 100% of the equity interest in CKE (Shanghai) F&B Management Limited (“CKE Shanghai”). CKE Shanghai was set up with the purpose of locating, developing, owning and operating Carl’s Jr. restaurants, as a Carl’s Jr. franchisee, within the municipality of Shanghai and the Zhejiang and Jiangsu provinces in Mainland China.
67 Subsequent to the Group’s investment in CKE Cayman, the Group (via Star Food Shanghai) entered into an asset purchase agreement with CKE Shanghai pursuant to which Star Food Shanghai sold certain of its assets, including its four existing Carl’s Jr. restaurants in Mainland China, to CKE Shanghai for approximately S$1.8 million.
The joint venture with CKE in CKE Cayman is a strategic partnership to further develop the Carl’s Jr. brand in the municipality of Shanghai and the Zhejiang and Jiangsu provinces in Mainland China. With CKE’s expertise in operating fast food chains and the Group’s established track record of operating F&B outlets in Mainland China, the brand could see an accelerated pace in outlet expansion as well as a faster return on its investments. The sale of the four existing restaurants and certain assets to CKE Shanghai was to allow CKE Shanghai to transit into full operations seamlessly.
(c) Food Atrium Division The Group’s Food Atrium Division operates under the “Food Republic” brand.
The Food Atrium Division’s contribution to the Group’s revenue in percentage terms for FY2013, FY2012 and FY2011 are 26.6%, 25.0% and 25.8% respectively.
As at the Latest Practicable Date, the Group has a total of 61 food atriums under the Group’s management located in different countries as follows:
Country Number of Outlets Mainland China 34 Singapore 12 Hong Kong 7 Taiwan 3 Thailand 3 Malaysia 2 Total 61
“Food Republic” Brand The Group began its foray into the food atrium business with its acquisition of the award-winning “dashidai” (亳ҷ) food atrium chain in Mainland China.
Since then, the Group has re-invented the brand under a new brand name “Food Republic ” which offers a new concept of food court dining with each Food Republic food atrium offering a thematic dining proposition. Food Republic's strategy is to bring quality local hawker and street style food options at affordable prices under one roof and to encourage the appreciation of the indigenous culture of the country through distinctive flavours of its food and the craftsmanship of its hawkers. For instance, the Group opened a new Food Republic food atrium in Da Zhi, Taiwan in 2012, which features the theme of old Taiwanese streets and alleyways in the 1900s, with iconic Taiwanese architecture intricately recreated and corresponding food culture to match the theme of the era.
As an extension of the Food Republic brand, the Group also conceptualised the premium Food Opera food atriums in July 2009 which offer more restaurant-style F&B selections for diners looking for a more comfortable ambience. As at the Latest Practicable Date, the Group has three Food Opera food atriums located in ION Orchard shopping centre in Singapore, Mako shopping centre in Hong Kong and Super Brand Mall shopping centre in Shanghai.
In 2013, the Group's operations in China expanded with eight new food atriums in Beijing, Shanghai, Chengdu, Nanjing and Hong Kong. Significantly, the Group managed to secure strategic locations to position these food atriums, such as the Super Brand Mall shopping centre
68 in Shanghai's Pudong Lujiazui financial trade zone and the new luxury shopping centre, Galeries Lafayette, located in Beijing's vibrant Xidan shopping district. In Singapore, three new outlets were added at the Westgate Mall and City Square Mall shopping centres and the BreadTalk IHQ.
“All Things N’ice” Brand The Group also introduced a new dessert store concept in 2013. “All Things N’ice” features Taiwan and Hong Kong inspired iced and hot dessert offerings as well as local signature dessert offerings such as chendol. As at the Latest Practicable Date, the Group has two All Things N’ice outlets, one as a standalone restaurant and one as a store operating within the Group’s food atrium, in Singapore.
4. PROPERTY INVESTMENTS The Group started to develop its own property investment arm in November 2009. Imagine Properties Pte. Ltd. (“Imagine Properties”), which is a wholly-owned subsidiary of the Issuer incorporated in Singapore, is currently the primary vehicle for the Group’s property investments in the 112 Katong and TripleOne Somerset shopping centres and CHIJMES in Singapore and the Beijing Tongzhou Integrated Development (“BJTZ”) in Tongzhou, Beijing.
The Group’s property investment strategy is primarily to derive some long-term investment returns, which will serve to provide the Group with an alternative source of recurring income through rental yield as well as to provide the benefits of any capital appreciation in the investment properties in the future. Such investments also serve as a hedge against rising rental costs.
In addition, the Group has the first right of refusal to the retail outlet location selection in the properties in which it has invested, thereby giving the Group the advantage of securing prime locations for its retail outlets or restaurants, as applicable, at these properties.
Details of the properties in which the Group has invested in as at the Latest Practicable Date are set out below:
Interest Income Investment Value Contribution for FY2013 Property / Development (S$) (S$) 112 Katong 7,224,004 231,604 Beijing Tongzhou Integrated 20,130,000 - Development (Phase 1) Beijing Tongzhou Integrated 14,520,000 - Development (Phase 2) CHIJMES 18,000,072 325,173 TripleOne Somerset 17,222,403 -
112 Katong 112 Katong (formerly known as Katong Mall) is an 8-storey shopping centre in the eastern part of Singapore located at the intersection of East Coast Road and Joo Chiat Road. The shopping centre was redeveloped and re-opened in November 2011, newly comprising six levels of retail and lifestyle shops, two basement levels of car park and a rooftop landscaped garden with a wet playground on the fourth level of the building.
The owner of 112 Katong is Perennial Katong Retail Trust (“PKRT”) (through DBS Trustee Limited, as trustee of PKRT). The sole unitholder of PKRT is PRE 1 Investments Pte. Ltd. (“PRE 1”) through which Imagine Properties has, together with other investors, subscribed for bonds and redeemable preference shares in the capital of PRE 1 issued by PRE 1. The manager of PKRT is Katong AMC Pte. Ltd.. The investment allows the Group to place its brands such as BreadTalk, Toast Box, Din Tai Fung, Food Republic and RamenPlay strategically at the mall’s level one and building facade.
69 As at the Latest Practicable Date, the Group’s investment in 112 Katong comprises S$7,224,004 in principal amount of junior bonds issued by PRE 1 and 43 attached redeemable preference shares in the capital of PRE 1.
Beijing Tongzhou Integrated Development The BJTZ is located in Tongzhou city, which is less than 20 kilometres from the Beijing city centre and is being developed as an alternative business district to Beijing. The BJTZ is expected to comprise retail, office and residential spaces, with the Group having the first right of refusal to retail outlet location selection. The Group invested more than S$34.5 million in Phase 1 (comprising 3 plots of land) and Phase 2 (comprising another 3 plots of land).
Phase 1 Imagine Properties has, together with other investors, subscribed for ordinary shares in the capital of Perennial Tongzhou Development Pte. Ltd. (“PTD”). PTD is a company incorporated in Singapore which will indirectly hold 70% of the equity interest in each of three special purpose companies incorporated in Mainland China to hold three plots of land (being plots 13, 14-1 and 14-2) in BJTZ representing Phase 1.
Pursuant to the terms of the joint venture agreement, Imagine Properties had subscribed for 20,130 ordinary shares in PTD at S$1,000 per ordinary share for a total sum of S$20,130,000, which represents a 5.72% equity interest in PTD, and which translates into an effective stake of 4% in Phase 1 of BJTZ.
Phase 2 Imagine Properties has, together with other investors, subscribed for ordinary shares in the capital of Perennial Tongzhou Holdings Pte. Ltd. (“PTHD”). PTHD is a company incorporated in Singapore which will indirectly hold 50% of the equity interest in each of three special purpose companies incorporated in Mainland China to hold three plots of land (being plots 10, 11 and 12) in BJTZ representing Phase 2.
Pursuant to the terms of the joint venture agreement, Imagine Properties had subscribed for 14,520 ordinary shares in PTHD at S$1,000 per ordinary share for a total sum of S$14,520,000, which represents a 5.86% equity interest in PTHD and which translates into an effective stake of 2.93% of Phase 2 of BJTZ.
CHIJMES CHIJMES is located along Victoria Street in Singapore. It enjoys prominent frontage along Victoria Street, North Bridge Road and Bras Basah Road and is situated across the City Hall Mass Rapid Transit (“MRT”) station.
CHIJMES, an iconic heritage landmark, is an award-winning gazetted national monument and is also recognised by United Nations Educational, Scientific and Cultural Organisation (UNESCO) as an Asia Pacific Culture Heritage Conservation Building. It is also classified as a restored conservation building by the Urban Redevelopment Authority of Singapore (‘’URA’’).
It is intended that CHIJMES is expected to be transformed into a vibrant F&B and entertainment destination for locals and tourists. The URA approved renovation plans for the heritage site in 2013. The changes include the lowering of the cloister walls along Victoria Street and the addition of more entrances to the complex to enhance its visibility and access, adding more courtyards and gardens, and a new heritage trail that will show artefacts such as the school bell. The renovation is scheduled to be completed during the last quarter of 2014.
CHIJMES is owned by PRE 8 Investments Pte. Ltd. which is in turn owned by Perennial (Chijmes) Pte. Ltd. (“PCPL”). Imagine Properties has, together with other investors, subscribed for bonds and ordinary shares in the capital of PCPL issued by PCPL.
70 The Group’s investment in CHJIMES comprises S$18 million in principal amount of junior bonds issued by PCPL and 72 ordinary shares in the capital of PCPL (out of 248 ordinary shares in PCPL).
TripleOne Somerset On 31 March 2014, Imagine Properties entered into an agreement with investors to invest S$ 17,222,403 in Perennial Somerset Investors Pte. Ltd. (“PSIPL”) to acquire TripleOne Somerset through the subscription of junior bonds, preference shares and ordinary shares to be issued by PSIPL.
TripleOne Somerset is a 17-storey commercial building with a two-level retail podium and two separate basement car parks, and is located strategically within the prime Orchard Road precinct next to Somerset MRT station.
5. COMPETITIVE STRENGTHS The Group believes that its competitive strengths are as follows:
z Strong branding with creative differentiation The Group has a portfolio of seven creative brands which have provided an alternative as to how consumers view their daily staples.
The Group prides itself on presenting consumers with its blend of unique concepts that have led new food cultures across its bakery, restaurant and food atrium divisions. The Group seeks to do things in a distinctive way as it injects creative differentiation in its retail concepts.
Having garnered consumer and industry accolades alike from a multitude of international bodies, the Group’s strong brands have led the way in retail trends to bring a unique concept to customers.
z Constant product innovation Recognising that its customers have evolving tastes, the Group’s research and development team introduces new seasonal collections launched every few months to cater to customers’ changing taste buds.
Working alongside the research and development team, the Group’s team of chefs seeks to identify and keep up with evolving trends by developing new recipes for customers to savour.
Working with an international line-up of consultants from Japan, France, Germany and Spain, the Group aims to bring customers a combination of Asian and Western influences.
z Centralised facilities at BreadTalk IHQ In June 2013, the Group launched the opening of its new international headquarters, BreadTalk, located at Tai Seng Street, Paya Lebar, in Singapore. The ten-storey BreadTalk IHQ building occupies a land area of approximately 6,722.3 square metres and houses the Group’s corporate offices, research and development laboratories, BreadTalk Academy, warehousing facilities and central kitchens of its various F&B businesses. This facilitates the centralisation of operations together with supporting functions, allowing for a more comprehensive and consolidated support for the Group’s expansion plans. For more information on the Group’s next phase of general expansion, please see the section below titled “Business Strategies”.
The large-scale manufacturing capabilities within BreadTalk IHQ, together with the automated and fully equipped facilities, supply all of the Group’s retail outlets with specialised ingredients (namely, flour mixes and frozen dough) needed for the preparation of the Group’s brand products. The in-house research and development facilities in BreadTalk IHQ further provide a creative think tank environment to the Group.
71 z Strong partnership network in Asia With a presence in 16 countries spread across Asia and the Middle East as at the Latest Practicable Date, the Group’s global network of estate managers, procurement supply chains and international partners lend the Group the competitive edge to further expand its business in very strategic locations. Having built strong relationships with local networks especially in Mainland China, the Group’s business growth has been fuelled by strong relationship management and professional expertise in these countries.
z Established relationships with suppliers The Group has established a large and reliable network of suppliers of raw materials and ingredients for its businesses. These long and established relationships have enabled the Group to enjoy a continuous supply of raw materials and ingredients without major disruptions on favourable terms and prices.
z Experienced management team Headquartered in Singapore, the Group is led by its Chairman, Dr George Quek, who has over 30 years of experience in the F&B industry. The senior management team also comprises professionals with diverse financial, retail and F&B backgrounds, thereby providing a holistic wealth and depth of experience to the Group. Supported by the Independent Directors of the Group and a multi-national team of consultants and professionals, the Group’s management expertise and portfolio is further enhanced. For more information on the Group’s management, please see the section below titled “Directors and Management of the Issuer”.
z In-house training capability at the BreadTalk Academy The Group’s in-house training facility, the BreadTalk Academy, is situated within BreadTalk IHQ and plays an integral role in developing a career and training roadmap for the Group’s management as well as technical and retail staff. BreadTalk Academy also has a talent management division to develop tailored courses for senior management such as strategic thinking. BreadTalk Academy helps ensure that service standards of staff within the Group are maintained within the Group’s overall supervision. Supported by the Singapore Workforce Development Agency, BreadTalk Academy focuses on three key areas: research and development as well as technical training for its culinary teams, retail and service-quality training for its staff in store operations, and leadership courses for management. It also has programmes to equip its overseas franchise staff with the knowledge and skills to support the Group’s international franchise operations. With the establishment of 4,000 training places in 2013, the BreadTalk Academy’s goal is to increase its training capacity by 25% annually.
6. BUSINESS STRATEGIES The Group’s business strategies are as follows:
z To broaden and deepen the Group’s expansion efforts into the region As at the Latest Practicable Date, the Group’s F&B retail outlets (including franchises) can be found in 16 countries, including Singapore, Mainland China, Hong Kong and Indonesia. The Group intends to continue to expand its F&B business operations regionally through the opening of more retail outlets, joint ventures and/or franchising in existing cities and territories in which it already has a presence as well as other cities and territories which the Group has not yet ventured into. The Group’s macro strategy is to widen its reach in its core markets of Hong Kong and Mainland China, and to have Mainland China contribute more than 50% of the Group’s total revenue in the next few years. The Group will also continue to explore new markets such as India, Australia, Myanmar, Cambodia, Japan and the United States.
72 z To refurbish and refresh the Group’s existing F&B outlets In order to continue to capture customers’ attention and interest, the Group is constantly looking at refurbishing and refreshing its F&B outlets to inject a fresh new look with a different concept. In 2012, BreadTalk launched its Generation 4 concept where all its outlets will eventually see a change to their interior décor to reflect the new concept. The Food Republic outlets at the Suntec City Mall and Wisma Atria shopping centres also underwent refurbishment in 2012.
z To expand existing F&B businesses through acquisitions, joint ventures or strategic alliances The Group intends to expand its existing F&B businesses through acquisitions, joint ventures or strategic alliances with parties who can strengthen the Group’s market position, add value to the Group’s existing business, as well as enable the Group to expand into new food related businesses.
z To continue to consider property investment opportunities The Group made its maiden venture into property investment in 2009. While the F&B business will continue to remain as a core business of the Group, the Group will continue to consider property investment opportunities which will allow the Group to position its retail outlets in strategic locations, hedge against rental costs and benefit from rental income received from units in the entire property.
7. DIRECTORS AND MANAGEMENT OF THE ISSUER Board of Directors of the Issuer Information on the business and working experience of each of the Directors of the Issuer is set out below:
Dr George Quek Meng Tong Chairman Dr Quek, 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 scale, Dr Quek continues to drive the Group’s strategic direction and development into the future.
Dr Quek 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-ST in 2003 while creating a household name. Dr Quek is a Brand Champion 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 Group to always position itself as an inspiring company that delights consumers time and again.
Dr Quek 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), the “Entrepreneur of the Year Award 2002” organised by the Association of Small and Medium Enterprises and The Rotary Club of Singapore as well as the “Business Personality of the Year” Award 2013 accorded by Midas Touch Asia in conjunction with Channel News Asia.
Ms Katherine Lee Lih Leng Deputy Chairman Ms Lee was appointed to the Board on 6 March 2003 and last re-elected on 23 April 2013. She oversees the Group’s research and development, as well as pioneers new ideas and concepts.
73 Responsible for concept creation, product development and enhancement of our various brands both locally and globally, Ms Lee 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, Ms Lee spearheads product costing, which is an integral part of the Group’s product strategy.
Ms Lee has 20 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.
Dr Tan Khee Giap Independent Director Dr Tan 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. Dr Tan 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. Dr Tan 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. Dr Tan 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.
Mr Ong Kian Min Independent Director Mr Ong 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.
Mr Ong 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.
Mr Chan Soo Sen Independent Director Mr Chan was appointed to the Board on 15 August 2006 and last re-elected on 23 April 2013. He is the Chairman of the Remuneration Committee, as well as member of the Audit Committee and Nominating Committee of the Company.
Mr Chan 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.
74 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.
Senior Management of the Issuer Information on the experience and expertise of each of the key executive officers of the Issuer is set out below:
Mr Oh Eng Lock Group Chief Executive Officer Mr Oh was appointed as Group Chief Executive Officer on 1 January 2011. As Group Chief Executive Officer, he oversees the Group’s global operations, focusing on strategic planning, investments, business development and regional expansion.
Prior to his appointment as Chief Executive Officer, Mr Oh 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. Mr Oh holds a Bachelor of Arts degree from the University of Singapore.
Mr Lawrence Yeo Group Chief Financial Officer Mr Yeo was appointed as 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 Chief Financial Officer of two other SGX-ST-listed companies. Mr Yeo 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 Singapore Chartered Accountants and a member of the Singapore Institute of Directors.
75 SELECTED FINANCIAL INFORMATION OF THE GROUP
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2011, 31 DECEMBER 2012 AND 31 DECEMBER 2013
Group 31 December 31 December 31 December 2013 2012 2011 $’000 $’000 $’000 Non-current assets Property, plant and equipment 225,860 157,408 88,898 Intangible assets 7,772 8,531 9,214 Investment securities 59,799 45,883 11,669 Investment in subsidiaries – – – Investment in associates 4,568 900 – Investment in joint ventures 3,638 3,125 422 Other receivables 3,277 1,880 1,389 Due from related corporations – – – Fixed deposit 10,671 9,988 – Deferred tax assets 4,287 2,952 2,120
319,872 230,667 113,712
Current assets
Inventories 10,004 9,492 7,397 Trade and other receivables 49,145 43,618 46,800 Prepayments 6,395 6,324 5,389 Tax recoverable 6 – 230 Due from related corporations 959 1,652 1,297 Amounts due from minority shareholders of subsidiaries (non- 395 411 420 trade) Cash and cash equivalents 79,420 64,245 87,060 Assets of disposal group classified as held for sale 2,056 – –
148,380 125,742 148,593
Current liabilities
Trade and other payables 102,589 90,957 74,074 Other liabilities 59,531 52,477 41,124 Provision 10,223 7,977 5,871 Due to related corporations 3,901 2,211 395 Finance lease obligations, secured – – 37 Loan from a minority shareholder of a subsidiary 200 200 200 Short-term loans 9,746 7,896 15,764 Current portion of long-term loans 20,554 37,910 8,396 Tax payable 6,458 6,438 5,623
213,202 206,066 151,484
Net current liabilities (64,822) (80,324) (2,891)
76 Group 31 December 31 December 31 December 2013 2012 2011 $’000 $’000 $’000 Non-current liabilities
Other liabilities 10,297 6,191 7,039 Long-term loans 138,216 50,613 15,156 Loan from minority shareholders of subsidiaries – – 882 Deferred tax liabilities 2,554 2,514 2,276
151,067 59,318 25,353
Net assets 103,983 91,025 85,468
Equity attributable to owners of the Company
Share capital 33,303 33,303 33,303 Treasury shares (187) (406) (609) Accumulated profits 57,499 47,559 41,558 Other reserves 3,338 2,094 3,718
93,953 82,550 77,970 Non-controlling interests 10,030 8,475 7,498
Total Equity 103,983 91,025 85,468
77 CONSOLIDATED INCOME STATEMENT FOR FY2011, FY2012 AND FY2013
FY2013 FY2012 FY2011 $’000 $’000 $’000
Revenue 536,530 447,334 365,904 Cost of sales (251,973) (205,908) (165,846)
Gross profit 284,557 241,426 200,058 Other operating income 11,899 10,484 7,495 Interest income 1,316 1,685 824 Distribution and selling expenses (209,937) (180,500) (145,520) Administrative expenses (63,596) (52,786) (45,038) Interest expense (2,675) (1,386) (785)
Profit before tax and share of results of associates and 21,564 18,923 17,034 joint ventures Share of results of associates 231 – – Share of results of joint ventures 595 453 93
Profit before tax 22,390 19,376 17,127 Income tax expense (6,251) (5,818) (5,370)
Profit for the year 16,139 13,558 11,757
Profit attributable to: Owners of the Company 13,600 12,000 11,592 Non-controlling interests 2,539 1,558 165
16,139 13,558 11,757
Other comprehensive income: Items that may be reclassified subsequently to profit or loss Net fair value loss on available-for-sale financial assets (103) (390) – Foreign currency translation 1,421 (944) 911
Other comprehensive income for the year, net of tax 1,318 (1,334) 911
Total comprehensive income for the year 17,457 12,224 12,668
Total comprehensive income attributable to: Owners of the Company 14,918 10,666 12,503 Non-controlling interests 2,539 1,558 165
17,457 12,224 12,668
Earnings per share (cents) Basic 4.83 4.27 4.12
Diluted 4.82 4.25 4.10
78 FY2013 vs FY2012 (A) Statement of Comprehensive Income For the financial year ended 31 December 2013, Group revenue crossed the half a billion dollar mark at S$536.5 million representing a 19.9% growth against last year. Profit after tax and attributable to Shareholders (“PATMI”) for the same period grew 13.3% from S$12.0 million to S$13.6 million despite cost pressure on food, labour and rental expenses including investment in new stores opened during the year.
Bakery Division revenue and PATMI improved by 16.4% and 20.0% respectively. Revenue improved across all markets led by Mainland China. Singapore continued to dominate the revenue pie of the division but its performance was affected by the on-going labour crunch, rising rental cost and increased competition. Hong Kong and Thailand revenue strengthened while losses narrowed.
Food Atrium Division PATMI turned around to a profitable position on the back of a 29.2% revenue growth, which was led by top earners, Singapore, Mainland China and Hong Kong. Mainland China opened nine new stores during the year, the highest number in a year since the Division started business there. Taiwan and Thailand however did not perform as expected.
Restaurant Division grew its revenue by 19.1% with PATMI also growing by a similar margin. Din Tai Fung and RamenPlay posted positive revenue growth against last year with the exception of Carl’s Jr. in Shanghai which saw the closure of three non-performing outlets during the year. Din Tai Fung Singapore and Thailand PATMI grew strongly while RamenPlay as a whole is still performing under expectations.
Interest income reduced 21.9% from S$1.7 million to S$1.3 million mainly due to lower returns from the Group investments.
Earnings per share (EPS) on a fully diluted basis for the year rose 13.4% to 4.82 cents compared to 4.25 cents in 2012.
Net asset value per share was higher at 33.4 cents as at 31 December 2013 compared to 29.4 cents as at 31 December 2012.
Number of outlets including franchise under the Group:
31-Dec-13 31-Dec-12 Increase
Bakery 737 609 21.0% Food Atrium 58 47 23.4% Restaurant 41 30 36.7%
836 686 21.9%
(B) Balance Sheet Non-current assets increased by S$ 89.2 million or 38.7% from S$230.7 million to S$319.9 million as at 31 December 2013 mainly due to:
(i) investment in property, plant and equipment of S$ 107.8 million and net off by depreciation and amortisation charges for FY2013 of S$39.3 million;
(ii) increase in investment securities of S$14.0 million from investment in equity interest in Perennial Tongzhou Development Pte Ltd; and
(iii) investment in an associate of S$2.9 million.
79 Current assets increased by S$22.6 million from S$125.7 million to S$148.4 million as at 31 December 2013 which was attributed to:
(i) increase in cash and cash equivalents of S$15.2 million mainly due to higher cash flows from operating activities; and
(ii) increase in deposits by S$13.9 million due to outlet expansion.
Current liabilities increased by S$7.1 million or 3.5% from S$206.1 million to S$213.2 million as at 31 December 2013 due to:
(i) Trade and other payables increased by S$11.6 million or 12.8% to S$102.6 million as a result of longer credit terms granted by suppliers; offset by
(ii) Restructuring of short term loans to long term loans;
Non-current liabilities increased by 154.7% or S$91.7 million as at 31 December 2013 as the Group took up more long term financing to fund its investment in outlet expansion and property investment.
(C) Cash Flow Statement The Group generated operating cash flow of S$ 71.4 million in 2013 and raised further financing of S$65.1 million to support S$12 0.4 million used in investing activities resulting in an increase in its cash and cash equivalent of S$ 16.1 million to S$79.4 million as at 31 December 2013.
FY2012 vs FY2011 (A) Statement of Comprehensive Income The Group’s revenue for FY2012 grew 22.3% from S$365.9 million to S$447.3 million across all divisions on the back of same-store sales growth of 12.8% and contributions from new outlets opened during the year. Along with the higher revenue, PATMI for the same period rose 3.5% from S$11.6 million to S$12.0 million despite cost pressure on food, labour and rental expenses.
Restaurant Division was the top revenue and bottom-line growth contributor for the Group. All business units under the Division registered positive revenue growth against last year except for RamenPlay in Mainland China which saw a small dip due to closure of a loss making outlet during the year. Din Tai Fung Singapore PATMI grew strongly while Thailand showed improvement having gone through a full year of operation. Ramen Play as a whole did not perform well and is being repositioned for better performance in FY2013. The Group’s share of losses in Carl’s Jr. increased to 100% from 60% previously following the buyout of the minority shareholders in September 2012 in preparation for an on-going restructuring exercise.
Bakery Division revenue and bottom-line contribution continues to dominate the Group’s total revenue and PATMI at 52.2% and 61.6% respectively. Malaysia was the only country which showed negative revenue growth due to closure of some loss making outlets during the year. PATMI for all countries grew positively with Malaysia narrowing its loss from the prior year.
Food Atrium Division managed to close the year with double digit revenue growth despite the major disruption to its Singapore operations due to renovation and upgrading works at two major malls carried out by the landlords. Overall the division had narrowed its loss significantly.
Interest income rose 104.5% from S$0.8 million to S$1.7 million mainly from higher returns from the Group’s investment in investment securities and also maximising return on its cash with the banks.
Earnings per share (EPS) on a fully diluted basis for the year rose 3.7% to 4.25 cents compared to 4.10 cents in FY2011.
Net asset value per share was higher at 29.4 cents as at 31 December 2012 compared to 27.8 cents as at 31 December 2011.
80 Number of outlets including franchise under the Group:
31-Dec-12 31-Dec-11 Increase
Bakery 609 471 29.3% Food Atrium 47 37 27.0% Restaurant 30 26 15.4%
686 534 28.5%
(B) Balance Sheet Non-current assets increased by S$117.0 million or 102.9% from S$113.7 million to S$230.7 million as at 31 December 2012 mainly due to:
(i) investment in property, plant and equipment of S$103. 2 million and translation difference of S$2.3 million net off by depreciation and amortisation charges for FY2012 of S$31.0 million;
(ii) increase in investment securities of S$34.2 million from investment in Chijmes junior bonds and equity interest in Perennial Tongzhou Development Pte Ltd, net off by partial redemption of Katong Mall junior bonds;
(iii) investment in an associate of S$0.9 million;
(iv) investment in a joint venture of S$2.7 million; and
(v) placement of long term fixed deposits of S$10.0 million.
Current assets decreased by S$22.9 million from S$148.6 million to S$125.7 million as at 31 December 2012 which was attributed to:
(i) decrease in cash and cash equivalents of S$22.8 million mainly due to construction cost of new corporate building, acquisition of assets for opening of new outlets and placement of long term fixed deposits;
(ii) decrease in trade and other receivables by S$3.2 million; offset by increase in inventories by S$2.1 million; and
(iii) increase in prepayments by $0.9 million.
Current liabilities increased by S$54.6 million or 36.0% from S$151.5 million to S$206.1 million as at 31 December 2012 due to:
(i) trade and other payables increased by S$16.9 million or 22.8% to S$91.0 million as a result of longer credit terms granted by suppliers;
(ii) other liabilities increased 27.6% to S$52.5 million due to higher deferred revenue and accruals; and
(iii) additional financing taken up to fund the Group’s investment in outlet expansion.
Non-current liabilities increased by 134.0% or S$34.0 million as at 31 December 2012 as the Group took up more long term financing to fund its investment in outlet expansion and property investment.
(C) Cash Flow Statement The Group generated operating cash flow of S$53.4 million in FY2012 and raised further financing of S$50.2 million to support S$126. 7 million used in investing activities resulting in an decrease in its cash and cash equivalent of S$ 23.1 million to S$64.2 million as at 31 December 2012.
81 RISK FACTORS
Prior to making an investment or divestment decision, prospective investors in or existing holders of the Notes should carefully consider all of the information set forth in this Information Memorandum and any documents incorporated by reference herein, including the risk factors and uncertainties set out below, before making any investment. The risk factors set out below do not purport to be complete or comprehensive of all the risks that may be involved in the businesses of the Issuer or the Group or any decision to purchase, own or dispose of the Notes. Additional risks which the Issuer is currently unaware of may also impair the Issuer’s business, assets, financial condition, performance or prospects. If any of the following risk factors develops into actual events, the business, assets, financial condition, performance or prospects of the Issuer and/or the Group could be materially and adversely affected. In such cases, the ability of the Issuer to comply with its obligations under the Trust Deed and the Notes may be adversely affected, and investors may lose all or part of their investments in the Notes.
LIMITATIONS OF THIS INFORMATION MEMORANDUM This Information Memorandum does not purport to nor does it contain all information that a prospective investor in or existing holder of the Notes may require in investigating the Issuer or the Group, prior to making an investment or divestment decision in relation to the Notes issued under the MTN Programme. This Information Memorandum is not, and does not purport to be, investment advice. A prospective investor should make an investment in the Notes only after it has determined that such investment is suitable for its investment objectives. Determining whether an investment in the Notes is suitable is a prospective investor’s responsibility. Neither this Information Memorandum nor any other document or information (nor any part thereof) delivered or supplied under or in relation to the MTN Programme or the Notes (or any part thereof) is intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by the Issuer, the Arrangers or any of the Dealers that any recipient of this Information Memorandum or any such other document or information (or such part thereof) should subscribe for or purchase or sell any of the Notes. Each person receiving this Information Memorandum acknowledges that such person has not relied on the Issuer or its subsidiaries and/or associated companies (if any), the Arrangers or any of the Dealers or any person affiliated with each of them in connection with its investigation of the accuracy or completeness of the information contained herein or of any additional information considered by it to be necessary in connection with its investment or divestment decision. Any recipient of this Information Memorandum contemplating subscribing for or purchasing or selling any of the Notes should determine for itself the relevance of the information contained in this Information Memorandum and any such other document or information (or such part thereof) and its investment or divestment should be, and shall be deemed to be, based solely upon its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and its subsidiaries and/or associated companies (if any), the terms and conditions of the Notes and any other factors relevant to its decision, including the merits and risks involved. A prospective investor should consult with its legal, tax and financial advisers prior to deciding to make an investment in the Notes.
This Information Memorandum contains forward-looking statements. These forward-looking statements are based on a number of assumptions which are subject to uncertainties and contingencies, many of which are outside of the Issuer’s control. The forward-looking information in this Information Memorandum may prove inaccurate. Please see the section titled “Forward-Looking Statements” on page 4 of this Information Memorandum.
RISKS ASSOCIATED WITH AN INVESTMENT IN THE NOTES There is no active trading market for the Notes Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of Notes.
82 Fluctuation of market value of Notes issued under the MTN Programme The value of the Notes may fluctuate as a result of various factors, including (a) the market for similar securities, (b) general economic, political or financial conditions, and (c) the Group’s financial condition, results of operations and future prospects. Adverse economic developments, in Singapore as well as countries in which the Issuer and/or its subsidiaries and/or associated companies (if any) operate or have business dealings, could have a material adverse effect on the operating results and/or the financial condition of the Issuer and its subsidiaries and/or associated companies (if any).
Further, recent global financial turmoil has resulted in substantial and continuing volatility in international capital markets. Any further deterioration in global financial conditions could have a material adverse effect on worldwide financial markets or may adversely affect the market price of any Series or Tranche of Notes.
Interest rate risk Noteholders may suffer unforeseen losses due to fluctuations in interest rates. Generally, a rise in interest rates may cause a fall in the price of the Notes, resulting in a capital loss for the Noteholders. However, the Noteholders may reinvest the interest payments at higher prevailing interest rates. Conversely, when interest rates fall, the price of the Notes may rise. The Noteholders may enjoy a capital gain but interest payments received may be reinvested at lower prevailing interest rates.
Inflation risk Noteholders may suffer erosion on the return of their investments due to inflation. Noteholders would have an anticipated rate of return based on expected inflation rates on the purchase of the Notes. An unexpected increase in inflation could reduce actual returns.
Performance of contractual obligations by the Issuer is dependent on other parties The ability of the Issuer to make payments in respect of the Notes may depend upon the due performance by the other parties to the Programme Agreement, the Trust Deed and the Agency Agreement of their obligations thereunder including the performance by the Trustee, the Principal Paying Agent, the CDP Registrar, the CDP Transfer Agent, the Non-CDP Paying Agent, the Non-CDP Registrar and/or the Non- CDP Transfer Agent of their respective obligations. Whilst the non-performance of any relevant party will not relieve the Issuer of its obligations to make payments in respect of the Notes, the Issuer may not, in such circumstances, be able to fulfill its obligations to the Noteholders and the Couponholders.
The Notes may not be a suitable investment for all investors Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
(a) have sufficient knowledge and experience to make a meaningful evaluation of the relevant Notes, the merits and risks of investing in the relevant Notes and the information contained in this Information Memorandum or any applicable supplement to this Information Memorandum;
(b) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the relevant Notes and the impact such investment will have on its overall investment portfolio;
(c) have sufficient financial resources and liquidity to bear all of the risks of an investment in the relevant Notes, including Notes with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor’s currency;
(d) understand thoroughly the terms of the relevant Notes and be familiar with the behaviour of any relevant indices and financial markets; and
(e) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
83 The Notes are complex financial instruments. Sophisticated investors generally do not purchase complex financial instruments as standalone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured and appropriate addition of risk to their overall portfolios. A potential investor should not invest in the Notes, which are complex financial instruments, unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of such Notes and the impact this investment will have on the potential investor’s overall investment portfolio.
Where Global Notes are held in clearing systems, investors will need to rely on the relevant clearing system’s standard procedures for transfer, payment and communication with the Issuer.
Variable Rate Notes may have a multiplier or other leverage factor Notes with variable interest rates can be volatile investments. If they are structured to include multipliers or other leverage factors, or caps or floors, or any combination of those features or other similar related features, their market values may be even more volatile than those for securities that do not include those features.
Notes may be issued at a substantial discount or premium The market value of securities issued at a substantial discount or premium from their principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities.
The Notes may be subject to optional redemption by the Issuer An optional redemption feature is likely to limit the market value of Notes. During any period when the Issuer may elect to redeem Notes, the market value of such Notes generally will not rise substantially above the price at which they can be redeemed. This may also be true prior to any redemption period. The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate that is as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.
The Group may not freely hedge the currency risks associated with Notes denominated in foreign currencies The majority of the Group’s revenue is generally denominated in Singapore dollars and the majority of the Group’s operating expenses are generally incurred in Singapore dollars as well. As Notes issued under the MTN Programme may be denominated in currencies other than Singapore dollars, the Group may be affected by fluctuations between the Singapore dollar and such foreign currencies in meeting the payment obligations under such Notes and there is no assurance that the Group may be able to fully hedge the currency risks associated with such Notes denominated in foreign currencies.
Singapore taxation risk The Notes to be issued from time to time under the MTN Programme during the period from the date of this Information Memorandum to 31 December 2018 are intended to be “qualifying debt securities” for the purposes of the ITA, subject to the fulfilment of certain conditions more particularly described in the section “Singapore Taxation”. However, there is no assurance that such Notes will continue to enjoy the tax concessions in connection therewith should the relevant tax laws or MAS circulars be amended or revoked at any time.
The Notes may be represented by Global Notes or Global Certificates and holders of a beneficial interest in a Global Note must rely on the procedures of the relevant Clearing System(s) Notes issued under the MTN Programme may be represented by one or more Global Notes or Global Certificates. Such Global Notes and Global Certificates will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg or lodged with CDP. Except in certain limited circumstances described in the relevant Global Note or Global Certificate, investors will not be entitled to receive Definitive Notes or, as the case may be, Certificates. The relevant Clearing System(s) will maintain
84 records of their direct accountholders in relation to the Global Notes and Global Certificates. While the Notes are represented by one or more Global Notes or Global Certificates, investors will be able to trade their beneficial interests only through the Clearing Systems.
While the Notes are represented by one or more Global Notes or Global Certificates, the Issuer will discharge its payment obligations under the Notes by making payments to or to the order of the common depositary for Euroclear and Clearstream, Luxembourg or to CDP, as the case may be, for distribution to their accountholders. A holder of a beneficial interest in a Global Note or Global Certificate must rely on the procedures of the relevant Clearing System(s) to receive payments under the relevant Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Notes or Global Certificates. Other than in relation to Global Notes or Global Certificates held by CDP, holders of beneficial interests in the Global Notes or Global Certificates will not have a direct right to vote in respect of the relevant Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear or Clearstream, Luxembourg, as the case may be, to appoint appropriate proxies. Similarly, holders of beneficial interests in the Global Notes or Global Certificates will not have a direct right under the respective Global Notes or Global Certificates to take enforcement action against the Issuer following an Event of Default (as defined in the Trust Deed) under the relevant Notes but will have to rely upon their rights under the Trust Deed.
The Trustee may request Noteholders to provide an indemnity, security and/or pre-funding to its satisfaction In certain circumstances (pursuant to Condition 11 of the Notes), the Trustee may (at its discretion) request the Noteholders to provide an indemnity, security and/or pre-funding to its satisfaction before it takes action on behalf of the Noteholders. The Trustee shall not be obliged to take any such action if not indemnified, secured and/or pre-funded to its satisfaction. Negotiating and agreeing to an indemnity and/or security and/or pre-funding can be a lengthy process and may impact on when such actions can be taken. The Trustee may not be able to take action, notwithstanding the provision of an indemnity or security or pre-funding to it, in breach of the terms of the Trust Deed and in circumstances where there is uncertainty or dispute as to the applicable laws or regulations and, to the extent permitted by the agreements and the applicable law, it will be for the Noteholders to take such action directly.
The provisions in the Trust Deed and Conditions may be modified or waived The Conditions contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. The Conditions also provide that the Trustee may agree, without the consent of Noteholders or Couponholders, to any modification (subject to certain exceptions mentioned in the Trust Deed) of, or to the waiver or authorisation of any breach or proposed breach of, any of the Conditions or any of the provisions of the Trust Deed, or determine, without any such consent as aforesaid, that any Event of Default or Potential Event of Default (as defined in the Trust Deed) shall not be treated as such, which in any such case is not, in the opinion of the Trustee, materially prejudicial to the interests of the Noteholders or may agree, without any such consent as aforesaid, to any modification, waiver or authorisation which, in its opinion, is of a formal, minor or technical nature or to correct a manifest error or to comply with mandatory provisions of Singapore law or is required by Euroclear and/or Clearstream, Luxembourg and/or CDP and/or any other clearing system in which the Notes may be held. Any such modification, waiver or authorisation shall be binding on the Noteholders and the Couponholders.
RISKS RELATING TO THE INDUSTRY IN WHICH THE GROUP OPERATES The Group is subject to intense competition The Group operates in an industry which is highly competitive where barriers to entry are low. The Group’s competitors include large and diverse groups of bakery chains, restaurants, cafes, coffee joints and individual operators. Some of the Group’s competitors are established in the F&B industry and operating in similar business segments as the Group and may have substantially greater financial and marketing resources. There can also be no assurance that new competitors, some of which may have greater brand recognition and financial resources than the Group, will not compete with the Group. The entry of new competitors into the Group’s industry or into the immediate areas surrounding its existing F&B retail outlets, food atriums or restaurants could adversely affect its business, prospects, profitability, financial condition and results of operations.
85 The Group is subject to changes in consumer preferences or discretionary consumer spending The Group’s continued growth and success depend, in part, on the popularity of its bakery and restaurant menu items. The emergence of new lifestyle dining trends or any change in existing lifestyle dining trends could result in a change in consumer preferences. Shifts in consumer preferences away from the Group’s bakery and restaurant menu items to other kinds of take-out food items offered in other types of eateries could materially affect the Group’s business. In addition, the Group’s continued success depends, in general, on disposable consumer income and consumer confidence, all of which can affect discretionary consumer spending. Any outbreak of diseases and viruses from the region or around the world may affect consumer confidence and reduce discretionary spending and reduce the flow of customers. Please also refer to the risk factor entitled “The business and operations of the Group may be affected by factors outside of the Group’s control”. Any changes in the market and economic conditions of Singapore and countries which the Group may operate in may also affect the consumers’ disposable income, consumer confidence and hence discretionary consumer spending. If the Group is unable to keep pace with the changing tastes of consumers in the future, the patronage of its restaurants, F&B retail outlets and food atriums may be affected. Adverse changes in these factors would reduce the flow of customers and may adversely affect the Group’s business, prospects, profitability, financial condition and results of operations.
The Group is subject to changes in governmental regulations The Group is subject to government rules and regulations governing the F&B industry in various jurisdictions, including but not limited to laws and regulations relating to the sale of food, food hygiene and handling and storage of food. Any changes in such government regulations may have a negative impact on the Group’s business. Difficulties or failure in obtaining the required licences and approvals could delay, or result in the Group’s decision not to open new F&B retail outlets, food atriums, restaurants and/ or central kitchens. Local authorities may suspend or deny renewal of the Group’s existing food licences if they determine that the Group does not meet applicable standards. Although the Group has satisfied the licensing requirements for its existing F&B retail outlets, food atriums, restaurants and central kitchens, there is no assurance that it will be able to maintain these approvals or obtain these approvals at future locations. The failure to obtain, maintain or renew governmental licences, permits and approvals, including the food hygiene licences, could have a material adverse effect on the Group’s business, prospects, profitability, financial condition and results of operations. Compliance with laws and regulations may entail significant costs, while non-compliance could result in penalties and may be detrimental to the Group’s image. In addition, any change in or introduction of new laws and regulation that require compliance may increase costs of the Group’s operations. Any of these factors will have an adverse effect on the Group’s business, prospects, profitability, financial condition and results of operations.
With respect to its operations in Singapore, the Group is subject to labour laws which govern the employment of its local and foreign employees and is therefore affected by any changes in government policies and regulations relating to foreign workers such as foreign workers levy and the permitted dependency ratio of local to foreign workers in our industry as well as the supply of such foreign workers. Foreign workers employed by the Group in Singapore constitute approximately 50% of its total workforce in Singapore as at the Latest Practicable Date and should there be any tightening of foreign employee content or laws, the Group’s operations will be affected. Other changes in labour laws, such as imposition of minimum wages, increases in overtime pay, paid leave of absence and mandated health benefits and issues concerning the employment of foreign workers will increase the Group’s labour costs and adversely affect its profitability, financial condition and results of operations. In the event that the Group is unable to hire a sufficient number of workers (including part-time workers) for a reasonable cost or it has to decrease its dependency on foreign workers or there is a shortage of foreign workers, the Group may have to seek other sources of manpower at a higher cost and its operating expenses may increase as a result. If the Group is unable to fulfil its workforce requirements, its operations may be affected and its business growth may be curtailed.
RISKS RELATING TO THE GROUP’S BUSINESS AND OPERATIONS The Group’s business is largely service oriented and any failure to retain key staff and/or employ qualified employees could adversely affect its business The Group’s business operations are labour intensive and its continued success depends in part upon its ability to attract, motivate and retain a sufficient number of qualified and skilled employees for its F&B operations, including F&B retail outlet managers, master bakers and chefs, kitchen staff and servers. Qualified individuals of the requisite calibre are in short supply in these areas of F&B operations.
86 In particular, experienced and highly skilled master bakers and chefs are scarce and more difficult to attract. The Group may also not be able to maintain the quality of its food products due to a shortage of trained staff. As such, any failure to recruit skilled personnel, to retain and motivate the key staff, or to find adequate replacements for employees who leave the Group might adversely impact the Group’s operations and expansion plans. Any material increase in employee turnover rates in existing restaurants and/or F&B retail outlets could have a material adverse effect on the Group’s business, prospects, profitability, financial condition and results of operations. Additionally, competition for qualified employees would require the Group to pay higher wages to attract and retain sufficient employees, which could result in higher labour costs and lower profits.
Any failure to maintain the quality and hygiene standards of the food products the Group offers will adversely affect its business In the F&B industry, it is essential that the quality of food products served be consistent and the food products are prepared hygienically and thus safe for consumption.
A risk of contamination or deterioration exists during each stage of the production cycle, including during the production and delivery of raw materials, the packaging of the Group’s products, the stocking and delivery of the Group’s products to its F&B retail outlets, food atriums, restaurants and central kitchens and the storage and shelving of the Group’s products at the final points of sale. Any such contamination or deterioration could result in a recall of the Group’s products and/or criminal or civil liability and restrict the Group’s ability to sell its products which, in turn, could have a material adverse effect on the business, financial condition, results of operations and prospects of the Group. In addition, from time to time, the Group may be subject to false claims of contamination which could create negative publicity that could adversely affect the Group’s reputation and product sales, which could also adversely affect the business, financial condition, results of operations and prospects of the Group.
In addition, the Group may not be able to ensure that its third party suppliers maintain the quality of the materials they supply to the Group which may in turn affect the quality of the Group’s food products.
Any decline in the standards of hygiene or the consistency in the quality of the Group’s food products may result in customers’ dissatisfaction and hence a decrease in their patronage of the Group’s F&B retail outlets, food atriums and/or restaurants. In addition, high staff turnover, shortage of staff or the lack of proper supervision may also affect the consistency and quality of the food products served, the standard of hygiene in the preparation of the food products and the services at the Group’s F&B retail outlets, food atriums and/or restaurants. This will in turn adversely affect the business, prospects, profitability, financial condition and results of operations of the Group.
Rent hikes in the Group's F&B premises and any inability to renew or procure leases at strategic locations may affect the Group's profits, growth and financial performance Most of the Group's F&B retail outlets, food atriums and restaurants are housed under leased premises and although some of these F&B retail outlets, food atriums and restaurants are located within properties which the Group has investments in, any lease arrangement is still conducted at arm's length and on normal commercial terms. Upon expiry of such leased tenure, the landlords have the rights to review and alter the terms and conditions of the lease agreements. The Group faces the possibility of an increase in the rental prices by the landlords or not being able to renew the leases on terms and conditions which are favourable to the Group. Any increase in the rentals would inevitably increase the Group's operating costs, thereby affecting the Group's profits. The non-renewal of the leases, or renewal upon less favourable terms, or early termination of the leases may force the Group to relocate the affected operations. As such, there is no assurance that the Group will be able to secure prime locations for its F&B retail outlets, food atriums or restaurants or that the Group's operations will not be relocated. Such relocation of the Group's operations will cause disruptions to its normal business operations and it may have to incur additional expenses to, among other things, renovate the new premises.
Further, the success of the Group's business and growth is dependent on its ability to secure good locations for its F&B retail outlets, food atriums and restaurants. A good location possesses characteristics such as heavy traffic flow, reasonable rental costs, safe and conducive environment for dining and close proximity to target patrons. There is no assurance that the Group will be able to continue to secure good locations to expand its business, and this may affect its prospects, profitability, financial condition and results of operations.
87 The Group may be affected by any unexpected closure or plans to demolish buildings in which its F&B premises are located There is no assurance that the buildings in which the Group’s F&B retail outlets, food atriums and/or restaurants are located will continue to be in operation and will not be closed down or demolished. In the event that such closure or demolition happens, the Group will need to write off all the fixed assets of that particular F&B retail outlet, food atrium or restaurant. Furthermore, the Group may not be able to find suitable alternative locations which will give rise to a loss in income for the Group. The compensation that the Group may receive from the owners of the building may not be sufficient to offset the loss in income and the write-off in fixed assets. In such a situation, the Group’s earnings will be adversely affected.
The Group may be affected by any change in tenant mix and poor maintenance of the malls in which its F&B premises are located Any change in the tenant mix or a change in anchor tenant of a shopping centre or complex in which the Group’s F&B retail outlets, food atriums and/or restaurants are located may result in fewer customers visiting the shopping centre or complex and hence lower the human traffic flow to the Group’s F&B retail outlets, food atriums and/or restaurants. Additionally, poor maintenance of the shopping centre or complex may also result in less patronage and may consequently affect the Group’s business, profitability, financial condition and results of operations.
The Group’s business may be adversely affected if its competitors successfully imitate its baking and presentation methods The Group considers its baking and presentation methods, including its packaging and the design of the interior of its F&B retail outlets, to be essential to the appeal of its products and brands.
It may be difficult for the Group to prevent competitors from successfully imitating the design of its F&B retail outlets, methods or recipes. If the Group’s competitors successfully imitate the Group’s preparation or presentation methods or recipes, the value of the Group’s brands (in particular, the “BreadTalk” brand) may be diminished and the Group’s market share may decrease. Furthermore, the Group’s competitors may be able to develop food preparation and presentation methods or recipes that are more appealing to consumers. If any of the above events occur, the Group’s business, prospects, profitability, financial condition and results of operations may be adversely affected.
The Group’s operations are dependent on its intellectual property The Group’s trademarks have significant value and are important to its brand-building efforts and the marketing of its F&B retail outlet and food atrium concepts. Name recognition is important in order to promote new F&B retail outlets, food atriums, restaurants and concepts. There can be no assurance that the Group’s intellectual property rights will not be infringed upon or that ownership of such brands and related trademarks will not be challenged by third parties. In the event that any third party alleges proprietary rights over such brands and trademarks, the Group may be exposed to legal proceedings brought against it in respect of its use of the brands and trademarks. These legal proceedings may result in monetary losses and may prevent the Group from further using such brands and trademarks. In such an event, the Group’s business, prospects, profitability, financial condition and results of operations may be adversely affected.
Any unauthorised use of the brands and trademarks or variants thereof may also adversely affect the Group’s reputation and consequently its business, prospects, profitability, financial condition and results of operations. In addition, if the Group deems necessary, it may take action (including litigation) to stop infringement of its intellectual property rights or obtain adequate compensation or remedy. There is no assurance that the Group will be successful in protecting intellectual property rights and it may incur substantial costs in the process.
The Group may be affected by any adverse impact on its reputation The Group has over the years established its reputation in the F&B industry. The Group believes that its established reputation and track record has enabled it to gain its customers’ loyalty. Hence, if there are any major defects in the Group’s products, lapses in its services or adverse publicity of the Group, its reputation will be adversely affected and its customers may lose confidence in its products and services. This will adversely affect the Group’s financial performance and profitability.
88 The Group is dependent on its major suppliers The Group purchased approximately 36.3% of its supplies in FY2013 from its top ten suppliers. The involuntary or unexpected loss of any of the Group’s major suppliers will temporarily disrupt its supplies and may have an adverse effect on its business, profitability, financial condition and results of operations.
Furthermore, there can be no assurance that the Group’s major suppliers will be able to continue to fulfill the Group’s needs and expectations in terms of cost and product quality. In the event that the Group’s major suppliers are unable to fulfill the Group’s requirements or cease to supply raw materials to the Group, it may incur time and higher costs in sourcing from new suppliers, which could result in disruptions to the Group’s business and the Group’s profitability, financial condition and results of operations may be adversely affected.
The Group may not be able to manage its growth effectively The Group intends to expand locally and to expand overseas through direct investments, joint ventures or franchising. The Group may not be equipped to successfully manage any future periods of rapid growth or expansion, which could place a significant strain on its management, operating, financial and other resources. The Group may require implementation of additional management information systems to further develop its operating, administrative, financial and accounting systems and controls, and to maintain close coordination among accounting, finance, marketing, sales, distribution and operations. Moreover, the Group may need to hire and train additional personnel. Failure on the part of the Group to develop and maintain the infrastructure necessary to run its operations could have a material adverse impact on its business.
The Group is dependent on its franchise arrangements As at the date of this Information Memorandum, the Group holds the franchise rights to operate the Din Tai Fung brand of restaurants in Singapore and Thailand. However, there can be no assurance that the Group will continue to be the franchisee of the Din Tai Fung brand of restaurants in Singapore and Thailand. If the Group is found to be in breach of any condition of or fails to fulfill any of its obligations as franchisee under the relevant franchise agreement, Din Tai Fung may terminate the franchise and grant the franchise rights to another party. In the event that the Group is unable to retain its franchise rights, its business, prospects, profitability, financial condition and results of operations will be adversely affected.
In addition, as at the Latest Practicable Date, approximately 64.6% of the Group’s F&B retail outlets (being only the BreadTalk and Toast Box retail outlets) are operated by franchisees. There is no guarantee that the Group will always be able to attract suitable franchisees. Although the Group carefully evaluates and screens prospective franchisees, it cannot be absolutely certain that the franchisees selected will have the business acumen or financial resources necessary to operate successful franchises. Franchisees are independent business operators and, the Group does not exercise full control over their day-to-day operations. The quality of franchised F&B retail outlets may be diminished by various factors beyond the Group’s control. Consequently, franchisees may not operate the F&B retail outlets in a manner consistent with the Group’s standards and requirements or may not hire and train qualified and skilled employees. The failure of franchisees to maintain the Group’s standards and to operate the Group’s franchised F&B retail outlets successfully could have a material adverse effect on the Group, its reputation and its brands and could have a material adverse effect on the Group’s business, prospects, profitability, financial condition and results of operations.
Franchisees, as independent business operators, may from time to time disagree with the Group’s business strategies or the Group’s interpretation of rights and obligations under the franchise agreement. This may lead to disputes which could have a material adverse effect on the Group’s business, financial condition and results of operations. In addition, if one or more of these franchisees were to become insolvent or otherwise were unwilling or unable to pay the Group their franchise fees, it could adversely affect the Group’s financial condition and results of operations. Franchisees may also choose not to continue the franchise arrangement with the Group and the loss of any franchisee will result in a decrease in the Group’s revenues and the termination of any profitable franchise agreement will affect the Group’s profitability.
89 The Group is subject to risks inherent in joint venture structures The Group has, and expects in the future to have, interests in joint venture entities. However, there is no assurance that the Group’s current joint venture partners will continue to be a suitable fit or that the Group will be able to attract suitable joint venture partners in the future. Disputes may occur between the Group and its joint venture partners regarding the business and operations of the joint ventures which may not be resolved amicably. In addition, the Group’s joint venture partners may (a) have economic or business interests or goals that are not aligned with the those of the Group, (b) take actions contrary to the Group’s instructions, requests, policies or objectives, (c) be unable or unwilling to fulfil their obligations, (d) have financial difficulties or (e) have disputes with the Group as to the scope of their responsibilities and obligations.
Additionally, the Group’s joint venture partners (i) may not be able to fulfil their respective contractual obligations (for example they may default in making payments during future capital calls or capital raising exercises) or (ii) may experience a decline in creditworthiness. The occurrence of any of these events may materially and adversely affect the performance of the Group’s joint ventures, which in turn may materially and adversely affect the Group’s business, financial condition, prospects and results of operations. The termination of any profitable joint venture partnership may also adversely affect the Group’s profitability.
The Group relies heavily on its senior management staff and the inability to retain or attract senior staff will adversely affect its performance The Group is highly dependent on its senior management staff, in particular, its founder and current Chairman, Dr George Quek and its current Deputy Chairman, Ms Katherine Lee. The loss of such personnel without adequate replacements could adversely affect the Group’s business and prospects. In addition, the Group’s success also depends upon its ability to attract, retain and motivate its senior management. The Group’s inability to do so would adversely affect its business, prospects, profitability, financial condition and results of operations.
Pilferage and theft by the Group’s employees and outsiders will adversely affect the Group In the F&B industry, cash sales and food items are handled by the Group’s employees and lapses in internal controls may occur from time to time. Should the Group fail to impose strict monitoring on its staff for possible practices of pilferage and theft of raw materials by employees and outsiders, the Group will not be able to prevent such misdeeds from happening. These wrong-doings will not only adversely affect the Group’s business, profitability, financial condition and results of operations, but also its reputation and branding.
The business and operations of the Group may be affected by factors outside its control The business and operations of the Group may be adversely affected by factors outside its control, such as the following: z unforeseeable circumstances, such as power outages, labour disputes, severe weather conditions and natural or other catastrophes (like hurricanes, typhoons, earthquakes, floods, severe weather, fires and explosions) may cause disruptions to the Group’s operations as well as loss or damage to its F&B retail outlets, food atriums, restaurants and/or central kitchens. Such events may cause a disruption or cessation in the operations of the Group. Further, its operations of central kitchens are especially susceptible to any prolonged significant equipment downtime. Should such events materialise, customer confidence will drop and the Group’s expenditure in the replacement or repair of damaged property will also increase, which would adversely affect the Group’s business, prospects, profitability, financial condition and results of operations. Any occurrence of a catastrophic event could also materially and adversely affect international financial markets or domestic economies of the different jurisdictions where the Group operates (including Singapore, the PRC, Hong Kong, Thailand and Indonesia) and could thereby adversely affect the Group’s business, financial condition, results of operations or prospects. z an outbreak of any contagious or virulent disease in various countries around the world may adversely affect consumer sentiments, leading to a reduced willingness of the Group’s customers to patronise its F&B retail outlets, food atriums and/or restaurants, which would consequently have a material adverse effect on the Group’s business, profitability, financial condition and results of operations. If any of the Group’s employees in any of its F&B retail outlets, restaurants or central
90 kitchens becomes infected with the disease, it may be required to shut down the relevant F&B retail outlet, restaurant or central kitchen to prevent the spread of the disease, which may have an adverse impact on the Group’s business, profitability, financial condition and results of operations. z any outbreak of diseases in livestock or food scares in the region and around the world, for instance, the avian influenza H5N1 virus (also known as “bird flu”), Severe Acute Respiratory Syndrome, salmonella, porcine respiratory and encephalitis syndrome or the Nipah virus, may lead to a reduction in the consumption of the affected type of meat or food by consumers. The Group is not able to predict the outbreak and occurrences of such diseases, or when there might be an outbreak of new diseases affecting not only meat, but also seafood, vegetables or other ingredients used in the Group’s food products. In addition, a loss in consumer confidence arising from an outbreak of disease concerning any particular food ingredient may force the Group to reduce or totally eliminate the use of that food ingredient in its menu. In the event of any such outbreaks resulting in a severe loss of consumer confidence and a decline in the patronage at the Group’s F&B retail outlets, food atriums and/or restaurants, its business may be materially and adversely affected. z terrorist attacks and other acts of violence or war around the world, and particularly (but not limited to) those involving countries in Asia, may adversely affect the regional markets and the worldwide financial markets. The occurrence of any of these events may result in a loss of business confidence, which could potentially lead to economic recession and generally have an adverse effect on the Group’s business, results of operations and financial condition. z in addition, the occurrence of any of the abovementioned circumstances may also affect the sources of supply of food ingredients or raw materials. Any reduction in supply may lead to an increase in supply costs which the Group may not be able to pass on to its customers, or a shortage in supply of the affected food ingredients or raw materials will affect its ability to supply its F&B retail outlets, restaurants and central kitchens with the necessary food ingredients or raw materials for operations. Any increase in prices of or shortage in supply of the food ingredients or raw materials required for the Group’s F&B retail outlets, restaurants or central kitchens will adversely affect its business, prospects, profitability, financial condition and results of operations.
The Group will be adversely affected by any regulatory sanctions and civil law suits arising from accidents at its F&B premises The Group’s staff in its F&B retail outlets, food atriums, restaurants and central kitchens are involved in the preparation of food products and cleaning of the kitchen equipment. Due to the nature of their work, accidents may occur resulting in personal injury, death or losses or damages to property. The occurrence of accidents may disrupt or delay the Group’s operations, result in liabilities incurred by the Group and adversely affect its reputation, business, profitability, financial condition and results of operations. In the event the Group is guilty of any lapses or inadequacy in safety standards which result in such accidents, it may be subject to regulatory sanctions or civil law suits. Any civil law suits, if successfully brought against the Group, may involve the payment of damages and may also give rise to negative publicity, which may adversely affect the Group’s business, prospects, profitability, financial condition and results of operations, regardless of the outcome of such civil law suits. While the Group maintains insurance policies, its insurance coverage may not be sufficient to cover all its potential losses arising from accidents in its premises. In the event that the Group’s insurance coverage is not sufficient to cover its liabilities from such accidents, the Group’s profitability, financial condition and results of operations may be adversely affected.
The Group may be involved in legal and other proceedings from time to time In general, the Group is exposed to the risk of litigation by various parties such as suppliers, customers, employees and other parties involved in its business, including the risk of being joined as third parties to litigation actions or involvement in frivolous claims. These disputes may lead to legal and other proceedings, and may cause the Group to suffer additional costs and time wastages. In addition, the Group may have disagreements with regulatory bodies in the course of its operations, which may subject it to administrative proceedings and unfavourable orders, directives or decrees that may result in financial losses. There can be no assurance that these disputes will be settled, or settled on terms which are favourable to the Group. In the event such disputes are not settled on terms which are favourable to the Group, or at all, the Group’s business, prospects, profitability, financial condition and results of operations may be adversely affected.
91 The Group is subject to interest rate fluctuations The Group faces risks in relation to interest rate movements. Increases in interest reference rates may adversely affect the ability of the Group to service its loans and other borrowings, and may also impair its ability to compete effectively in its various businesses, relative to competitors with lower levels of indebtedness. Difficult conditions in the global credit markets could adversely impact the cost or other terms of its existing facilities, as well as its ability to obtain new credit facilities or access the capital markets on favourable terms.
The Group has not adopted any hedging policy with respect to its exposure to interest rate volatility, and has not entered into any significant hedging arrangements with respect to such exposure. Accordingly, increases in the market reference rates underlying the Group’s financial indebtedness may materially and adversely affect its business, profitability, financial condition and results of operations.
The Group is exposed to fluctuations in foreign exchange currencies which may result in the Group incurring foreign exchange losses The Group’s primary exposure to foreign exchange risk arises from sales, purchases and borrowings that are denominated in foreign currencies in regional markets in which the Group operates. The currencies giving rise to the risk include the Chinese Yuan, the Hong Kong dollar, the Malaysian Ringgit, the Taiwan dollar, the Euro and the Thai Baht. Accordingly, the Group is exposed to currency risks relating to fluctuations between these currencies.
The Group does not have any formal hedging policy against foreign exchange fluctuations. Therefore the Group’s profitability may be affected in the event of any adverse fluctuations in the exchange rate between the currencies in which the Group’s sales and purchases are respectively denominated.
Any fluctuations in currency exchange rates will also result in exchange gains and losses arising from transactions carried out in foreign currencies as well as translations of foreign currency monetary assets and liabilities as at the various balance sheet dates.
There is no assurance that the Group will be able to successfully manage its foreign exchange risks. In addition, there can be no assurance that the foreign exchange policies of the countries in which the Group’s subsidiaries operate will not be changed to their detriment.
The Group may be subject to restrictions in repatriation of funds The Group may be subject to foreign exchange controls that may adversely affect its ability to repatriate income or capital which is located outside of Singapore. Repatriation of income and capital may require the consent of the relevant governments. Delays in or refusals to grant any such approval, revocations or variations of consents previously granted, or the imposition of new restrictions may materially and adversely affect the Group’s business, results of operations and financial condition.
The Group is subject to the general risk of doing business overseas Depending on the availability of business opportunities, the Group may expand its business overseas further in the future. There are inherent general risks in doing business overseas. These general risks include unexpected changes in regulatory requirements (including permits and licences), difficulties in staffing and managing foreign operations, social and political instability, fluctuations in currency exchange rates, potentially adverse tax consequences, legal uncertainty regarding liability, tariffs and other trade barriers, variable and unexpected changes in local law and barriers to the repatriation of capital or profits, any of which could materially affect the Group’s overseas operations. These risks, if materialised, may adversely affect the Group’s business, prospects, profitability, financial condition and results of operations. In addition, if the governments in the jurisdictions in which the Group intends to expand its business tighten or otherwise adversely change their laws and regulations relating to the repatriation of their local currency, it may affect the ability of the Group’s overseas operations to repatriate profits to Singapore and, accordingly, the Group’s cash flows will be adversely affected.
92 Changes in laws, regulations, enforcement, political, social or economic policies in the PRC, or a slowdown in the PRC’s economy, may have an adverse impact on the Group’s operations A portion of the Group’s operations are situated in the PRC and it may expand its operations in the PRC further in the future. As a result, the Group’s results of operations and prospects are and will continue to be subject to political, economic, social and legal developments in the PRC. The PRC economy differs from the economies of most developed countries in many aspects, including the extent of government involvement, allocation of resources, capital reinvestment, level of development, growth rate, and control of foreign exchange. Historically, the Chinese economy was centrally-planned, with a series of economic plans promulgated and implemented by the PRC government. Since 1978, the PRC government has undergone various reforms of its economic system. Such reforms have resulted in economic growth for the PRC in the last two decades. However, continued governmental control of the economy may adversely affect the Group. It cannot give assurance that the PRC government will continue to pursue economic reforms. A variety of policies and measures that could be taken by the PRC government to regulate the economy, including (a) the introduction of measures to control inflation or deflation, or reduce growth, (b) changes in the rates or methods of taxation, or (c) the imposition of additional restrictions on currency conversions and remittances abroad, could materially and adversely affect its business, financial condition and results of operations. Accordingly, the Group’s financial condition and results of operations may be adversely affected by changes in the PRC’s political, economic and social conditions and by changes in policies of the PRC government or changes in laws, regulations or the interpretation or implementation thereof.
In addition, future changes in applicable laws, regulations or administrative interpretations, or stricter enforcement policies by the PRC government, could impose more stringent requirements on the Group, including fines and penalties. Compliance with such requirements could impose substantial additional costs or otherwise have a material adverse effect on its business, financial condition and results of operations.
The Group may experience limited availability of funds The Group may require additional financing to fund capital expenditure, working capital requirements, support the future growth of its business and/or refinance existing debt obligations. There can be no assurance that additional financing, either on a short-term or a long-term basis, will be made available or, if available, that such financing will be obtained on terms favourable to the Group. Factors that could affect the Group’s ability to procure financing include market disruption risks which could adversely affect the liquidity, interest rates and the availability of funding sources.
In addition, the Group’s future credit facilities may contain covenants that limit its operating and financing activities and require the creation of security interests over its assets. The Group’s ability to meet its payment obligations and to fund planned capital expenditures will depend on its continuing profitable operations, positive operating cashflow and the success of the Group’s business strategy to satisfy its obligations, which are subject to many uncertainties and contingencies beyond the Group’s control.
RISKS RELATING TO THE GROUP’S PROPERTY INVESTMENT BUSINESS The Group’s property investments are subject to risks associated with real estate investments The property interests of the Group are subject to certain general risks inherent in the investment, ownership and management of property investments. These risks include the cyclical nature of property markets and consequent rental income, changes in general economic, business and credit conditions, the illiquidity of land and other real property, changes in government policies or regulations, building material and labour shortages and increases in interest rates and the costs of labour and materials.
Property investments are generally illiquid, limiting the ability of an owner to convert property assets into cash at short notice or requiring a substantial reduction in the price that might otherwise be sought for such assets to ensure a quick sale.
The Group is subject in particular to risks incidental to the ownership and operation of office and related commercial properties. Such risks include, among other things, competition for tenants, changes in market rents, inability to renew leases or re-let space as existing leases expire, a concentration of renewal of leases or rent adjustments, inability to collect rent from tenants due to bankruptcy or insolvency of tenants or otherwise, inability to dispose of major investment properties at valuations recorded in the financial
93 statements, increased operating costs and the need to renovate, repair and re-let space periodically and to pay the associated costs. Accordingly, the Group’s property investment business and the value of its property investment portfolio is significantly reliant on the overall state of the real estate industry and market, declines in which may materially and adversely affect the value of its property investments, rental yields and investment returns.
The Group is exposed to risks associated with the management of its property investments The properties owned by the Group comprise real estate used for commercial and office and are subject to general and local economic conditions, competition, rental demand for their locations and other factors relating to the leasing and management of such property investments.
As at the Latest Practicable Date, the Group’s effective stake in its property investments ranges from 2.93% to 29.03%. As such, the Group does not hold substantive control over the day-to-day management of these properties.
The Group’s property investments are managed by third party property managers (the “Managers”) under management contracts, pursuant to which rental income is generated for the Group. Consequently, the Group is dependent on the Managers, which are independent third party contractors, for the oversight of the day-to-day operations, the administration and management, and the monitoring of the property management of the Group’s property investments. The rental yields of the Group’s properties therefore depend upon the ability of the Manager to manage the properties profitably and generate income for the Group and any failure by the Manager to properly manage the operations of the Group’s properties may adversely affect the underlying value of and/or income from these properties.
The successful management of the Group’s property investments to achieve positive rental yields depend on the Managers’ expertise and is also dependent upon factors such as accessibility, location, valuations and quality of tenants. Demand for commercial and office real estate may be adversely affected by changes in the economy, governmental rules and policies (including changes in zoning and land use), potential environmental and other liabilities, inflation, price and wage controls, exchange control regulations, taxation, expropriation and other political, economic or diplomatic developments in or affecting the jurisdictions in which the Group’s properties are situated. The Managers have no control over such conditions and developments, nor can it provide any assurance that such conditions and developments will not materially and adversely affect rental income. If the Managers are unable to manage the properties profitably for the Group and fail to generate income, this may adversely affect the business, financial condition, results of operations and prospects of the Group.
The Group is subject to risks relating to property investment valuations and declines in property values Property valuations generally include a subjective determination of certain factors relating to the relevant properties, such as their relative market positioning, financial and competitive strengths and physical conditions. Valuation of the Group’s property investments by professional valuers is based on certain assumptions and is not intended to be a prediction of, and may not accurately reflect, the actual values of those assets. There can be no assurance that the assumptions relied on are accurate measures of the market. Further, the inspection of the Group’s property investments in connection with a valuation exercise may not identify all material defects, breaches of contracts, laws and regulations, and other deficiencies and factors that could affect the valuation of such property investments.
The Group may be unable to generate adequate returns on, or may be exposed to impairment arising from a fall in value of its investment properties Property investment is subject to varying degrees of risk. As at the date of this Information Memorandum, the Group’s property investments are at its initial stages and not contributing to the Group’s revenues. These investments will need more time to generate income returns. The returns from the property investments depend to a large degree on the amount of capital appreciation generated, income earned and maintenance and property management expenses incurred on its property investments. The Group’s financial position may also be adversely affected by a fall in value of any such property investments. The value of such property investments may additionally be adversely affected by a number of factors, including but not limited to changes in market condition and rental rates, the ability to collect rent due to bankruptcy or insolvency of tenants or otherwise and the need to periodically repair and re-let space and
94 the costs thereof. In the event that the property investment business of the Group expands and the Group is unable to generate adequate returns on its property investments, the Group’s profitability, financial condition and results of operations will be adversely affected.
The Group may not be able to raise the capital required to support its property investment plans Property investments are typically capital intensive and may require high levels of financing. The Group’s available financial resources for investing in properties may be inadequate. The actual amount and timing of future capital requirements is difficult to ascertain in advance. If the Group decides to meet these funding requirements through debt financing, the Group’s interest obligations will increase and the Group may be subject to additional restrictive covenants, including restrictions on changes in shareholding, the constitution of the board of directors and management of the businesses. In addition, the Group’s ability to raise funds, either through equity or debt, is limited by certain restrictions imposed under applicable laws, including the laws of the jurisdictions in which such property investments are situated. There can be no assurance that the Group will be able to raise adequate capital in a timely manner and on acceptable terms or at all, particularly when the property market is depressed. The Group’s failure to obtain adequate financing may result in it having to delay or abandon its investment plans, which would materially and adversely affect the Group’s business, prospects, profitability, cash flows, financial condition and results of operations.
95 PURPOSE OF THE MTN PROGRAMME AND USE OF PROCEEDS
The net proceeds arising from the issue of the Notes under the MTN Programme (after deducting issue expenses) will be used by any company within the Group for general corporate purposes, including refinancing of existing borrowings, and financing capital expenditure and general working capital of the Group or such other purpose(s) as may be specified in the relevant Pricing Supplement.
96 CLEARING AND SETTLEMENT
Clearance and Settlement under the Depository System In respect of Notes which are accepted for clearance by CDP in Singapore, clearance will be effected through an electronic book-entry clearance and settlement system for the trading of debt securities (“Depository System”) maintained by CDP. Notes that are to be listed on the SGX-ST may be cleared through CDP.
CDP, a wholly-owned subsidiary of Singapore Exchange Limited, is incorporated under the laws of Singapore and acts as a depository and clearing organisation. CDP holds securities for its accountholders and facilitates the clearance and settlement of securities transactions between accountholders through electronic book-entry changes in the securities accounts maintained by such accountholders with CDP.
In respect of Notes which are accepted for clearance by CDP, the entire issue of the Notes is to be held by CDP in the form of a Global Note for persons holding the Notes in securities accounts with CDP (“Depositors”). Delivery and transfer of Notes between Depositors is by electronic book-entries in the records of CDP only, as reflected in the securities accounts of Depositors. Although CDP encourages settlement on the third Business Day following the trade date of debt securities, market participants may mutually agree on a different settlement period if necessary.
Settlement of over-the-counter trades in the Notes through the Depository System may only be effected through certain corporate depositors (“Depository Agents”) approved by CDP under the Companies Act to maintain securities sub-accounts and to hold the Notes in such securities sub-accounts for themselves and their clients. Accordingly, Notes for which trade settlement is to be effected through the Depository System must be held in securities sub-accounts with Depository Agents. Depositors holding the Notes in direct securities accounts with CDP, and who wish to trade Notes through the Depository System, must transfer the Notes to be traded from such direct securities accounts to a securities sub-account with a Depository Agent for trade settlement.
CDP is not involved in money settlement between Depository Agents (or any other persons) as CDP is not a counterparty in the settlement of trades of debt securities. However, CDP will make payment of interest and repayment of principal on behalf of issuers of debt securities.
Although CDP has established procedures to facilitate transfer of interests in the Notes in global form among Depositors, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Issuer, the Paying Agents or any other agent will have the responsibility for the performance by CDP of its obligations under the rules and procedures governing its operations.
Clearance and Settlement under Euroclear and/or Clearstream, Luxembourg Euroclear and Clearstream, Luxembourg each holds securities for participating organisations and facilitates the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in the accounts of such participants, thereby eliminating the need for physical movements of certificates and any risks from lack of simultaneous transfer. Euroclear and Clearstream, Luxembourg provide to their respective participants, among other things, services for safekeeping, administration, clearance and settlement of internationally-traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg each also deals with domestic securities markets in several countries through established depository and custodial relationships. The respective systems of Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems which enables their respective participants to settle trades with one another. Euroclear and Clearstream, Luxembourg participants are financial institutions throughout the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. Indirect access to Euroclear or Clearstream, Luxembourg is also available to other financial institutions, such as banks, brokers, dealers and trust companies which clear through or maintain a custodial relationship with a Euroclear or Clearstream, Luxembourg participant, either directly or indirectly.
97 A participant’s overall contractual relations with either Euroclear or Clearstream, Luxembourg are governed by the respective rules and operating procedures of Euroclear or Clearstream, Luxembourg and any applicable laws. Both Euroclear and Clearstream, Luxembourg act under those rules and operating procedures only on behalf of their respective participants, and have no record of, or relationship with, persons holding any interests through their respective participants. Distributions of principal with respect to book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the relevant Paying Agent, to the cash accounts of the relevant Euroclear or Clearstream, Luxembourg participants in accordance with the relevant system’s rules and procedures.
Book-Entry Ownership Bearer Notes The Issuer may make applications to Euroclear and/or Clearstream, Luxembourg for acceptance in their respective book-entry systems in respect of any Series of Bearer Notes. The Issuer may also apply to have Bearer Notes accepted for clearance through CDP. In respect of Bearer Notes, a temporary Global Note and/or a permanent Global Note in bearer form without coupons may be deposited with a common depositary for Euroclear and/or Clearstream, Luxembourg or CDP or any other clearing system (as “Alternative Clearing System”) as agreed between the Issuer and the relevant Dealer(s). Transfers of interests in such temporary Global Notes or permanent Global Notes will be made in accordance with the normal Euromarket debt securities operating procedures of CDP, Euroclear and Clearstream, Luxembourg or, if appropriate, the Alternative Clearing System.
Registered Notes The Issuer may make applications to CDP, Euroclear and/or Clearstream, Luxembourg for acceptance in their respective book-entry systems in respect of the Notes to be represented by a Global Certificate. Each Global Certificate deposited with a common depositary for, and registered in the name of, a nominee of Euroclear and/or Clearstream, Luxembourg and/or with CDP will, where applicable, have an ISIN and/or a Common Code.
All Registered Notes will initially be in the form of a Global Certificate. Definitive Certificates will only be available, in the case of Notes initially represented by a Global Certificate, in amounts specified in the relevant Pricing Supplement.
Transfers of Registered Notes Transfers of interests in Global Certificates within CDP, Euroclear and Clearstream, Luxembourg will be in accordance with the usual rules and operating procedures of the relevant clearing system.
In the case of Registered Notes to be cleared through CDP, Euroclear or Clearstream, Luxembourg, transfers may be made at any time by a holder of an interest in a Global Certificate in accordance with the relevant rules and regulations of the applicable clearing systems.
98 SINGAPORE TAXATION
The statements below are general in nature and are based on certain aspects of current tax laws in Singapore and administrative guidelines issued by the IRAS and MAS in force as at the date of this Information Memorandum and are subject to any changes in such laws or administrative guidelines, or the interpretation of those laws or guidelines, occurring after such date, which changes could be made on a retroactive basis. These laws and guidelines are also subject to various interpretations and the relevant tax authorities or the courts could later disagree with the explanations or conclusions set out below. Neither these statements nor any other statements in this Information Memorandum are intended or are to be regarded as advice on the tax position of any holder of the Notes or of any person acquiring, selling or otherwise dealing with the Notes or on any tax implications arising from the acquisition, sale or other dealings in respect of the Notes. The statements made herein do not purport to be a comprehensive or exhaustive description of all the tax considerations that may be relevant to a decision to subscribe for, purchase, own or dispose of the Notes and do not purport to deal with the tax consequences applicable to all categories of investors, some of which (such as dealers in securities or financial institutions in Singapore which have been granted the relevant Financial Sector Incentive tax incentive(s)) may be subject to special rules or tax rates. It should not be regarded as advice on the tax position of any person and should be treated with appropriate caution. Prospective Noteholders are advised to consult their own professional tax advisers as to the Singapore or other tax consequences of the acquisition, ownership or disposal of the Notes, including the effect of any foreign, state or local tax laws to which they are subject. It is emphasised that neither the Issuer, the Arrangers nor any other persons involved in the MTN Programme accept responsibility for any tax effects or liabilities resulting from the subscription, purchase, holding or disposal of the Notes.
1. Interest and other payments Subject to the following paragraphs in this Singapore Taxation disclosure, under Section 12(6) of the ITA, the following payments are deemed to be derived from Singapore:
(a) any interest, commission, fee or any other payment in connection with any loan or indebtedness or with any arrangement, management, guarantee, or service relating to any loan or indebtedness which is (i) borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore (except in respect of any business carried on outside Singapore through a permanent establishment outside Singapore or any immovable property situated outside Singapore) or (ii) deductible against any income accruing in or derived from Singapore; or
(b) any income derived from loans where the funds provided by such loans are brought into or used in Singapore.
Such payments, where made to a person not known to the paying party to be a resident in Singapore for tax purposes, are generally subject to withholding tax in Singapore. The rate at which tax is to be withheld for such payments (other than those subject to the 15% final withholding tax described below) to non- resident persons (other than non-resident individuals) is 17% with effect from Year of Assessment 2010. The applicable rate for non-resident individuals is 20%. However, if the payment is derived by a person not resident in Singapore otherwise than from any trade, business, profession or vocation carried on or exercised by such person in Singapore and is not effectively connected with any permanent establishment in Singapore of that person, the payment is subject to a final withholding tax of 15%. The rate of 15% may be reduced by applicable tax treaties.
Notwithstanding the above, with effect from 29 December 2009, the said deeming provisions of Section 12(6) of the ITA would not apply to payments for any arrangement, management, service or guarantee relating to any loan or indebtedness under Section 12(6A) of the ITA, where:
(i) the arrangement, management or service is performed outside Singapore; or
(ii) the guarantee is provided, for or on behalf of a person resident in Singapore or a permanent establishment in Singapore by a non-resident person who:
(A) is not an individual and is not incorporated, formed or registered in Singapore; and
99 (B) (1) does not by himself or in association with others, carry on a business in Singapore and does not have a permanent establishment in Singapore; or
(2) carries on a business in Singapore (by himself or in association with others) or has a permanent establishment in Singapore, but (a) the arrangement, management or service is not performed through; or (b) the giving of the guarantee is not effectively connected with, that business carried on in Singapore or through that permanent establishment.
Certain Singapore-sourced investment income derived by individuals from financial instruments is exempt from tax, including:
(a) interest from debt securities derived on or after 1 January 2004;
(b) discount income (not including discount income arising from secondary trading) from debt securities derived on or after 17 February 2006; and
(c) prepayment fee, redemption premium or break cost from debt securities derived on or after 15 February 2007, except where such income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession in Singapore.
References to “break cost”, “prepayment fee” and “redemption premium” in this Singapore tax disclosure have the same meaning as defined in the ITA.
The terms “break cost”, “prepayment fee” and “redemption premium” are defined in the ITA as follows:
“break cost” means, in relation to debt securities, qualifying debt securities or qualifying project debt securities, any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by any loss or liability incurred by the holder of the securities in connection with such redemption;
“prepayment fee” means, in relation to debt securities, qualifying debt securities or qualifying project debt securities, any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by the terms of the issuance of the securities; and
“redemption premium” means, in relation to debt securities, qualifying debt securities or qualifying project debt securities, any premium payable by the issuer of the securities on the redemption of the securities upon their maturity.
As the MTN Programme is wholly arranged by Australia and New Zealand Banking Group Limited and Oversea-Chinese Banking Corporation Limited, each of which is a financial sector incentive (bond market) company (as defined in the ITA) or a financial sector incentive (standard tier) company (as defined in the ITA), any Tranche of the Notes issued as debt securities under the MTN Programme during the period from the date of this Information Memorandum to 31 December 2018 (the “Relevant Notes”) would be “qualifying debt securities” for the purposes of the ITA, to which the following treatments shall apply:
(a) subject to certain prescribed conditions having been fulfilled (including the furnishing by the Issuer, or such other person as the Comptroller of Income Tax in Singapore (the “Comptroller”) may direct, of a return on debt securities for the Relevant Notes within such period as the Comptroller may specify and such other particulars in connection with the Relevant Notes as the Comptroller may require to the MAS and the inclusion by the Issuer in all offering documents relating to the Relevant Notes of a statement to the effect that where interest, discount income, prepayment fee, redemption premium or break cost from the Relevant Notes is derived by a person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption for qualifying debt securities shall not apply if the non-resident person acquires the Relevant Notes using funds from that person’s operations through the Singapore permanent establishment), interest, discount income (not including discount income arising from secondary trading), prepayment fee, redemption premium and break cost (collectively,
100 the “Specified Income”) from the Relevant Notes paid by the Issuer and derived by a holder who is not resident in Singapore and (i) who does not have any permanent establishment in Singapore or (ii) carries on any operation in Singapore through a permanent establishment in Singapore but the funds used by that person to acquire the Relevant Notes are not obtained from such operation in Singapore, are exempt from Singapore tax;
(b) subject to certain conditions having been fulfilled (including the furnishing by the Issuer, or such other person as the Comptroller may direct, of a return on debt securities for the Relevant Notes within such period as the Comptroller may specify and such other particulars in connection with the Relevant Notes as the Comptroller may require to the MAS), Specified Income from the Relevant Notes paid by the Issuer and derived by any company or body of persons (as defined in the ITA) in Singapore is generally subject to tax at a concessionary rate of 10%; and
(c) subject to:
(i) the Issuer including in all offering documents relating to the Relevant Notes a statement to the effect that any person whose interest, discount income, prepayment fee, redemption premium or break cost (i.e. the Specified Income) derived from the Relevant Notes is not exempt from tax shall include such income in a return of income made under the ITA; and
(ii) the Issuer, or such other person as the Comptroller may direct, furnishing to the MAS a return on debt securities for the Relevant Notes within such period as the Comptroller may specify and such other particulars in connection with the Relevant Notes as the Comptroller may require, payments of Specified Income derived from the Relevant Notes are not subject to withholding of tax by the Issuer.
However, notwithstanding the foregoing:
(a) if during the primary launch of any Tranche of Relevant Notes, the Relevant Notes of such Tranche are issued to fewer than four (4) persons and 50% or more of the issue of such Relevant Notes is beneficially held or funded, directly or indirectly, by a related party or related parties of the Issuer, such Relevant Notes would not qualify as “qualifying debt securities”; and
(b) even though a Tranche of Relevant Notes are “qualifying debt securities”, if, at any time during the tenure of such Tranche of Relevant Notes, 50% or more of the issue of such Relevant Notes is beneficially held or funded, directly or indirectly, by any related party(ies) of the Issuer, Specified Income derived from such Relevant Notes held by:
(i) any related party of the Issuer; or
(ii) any other person who acquires such Relevant Notes with funds obtained, directly or indirectly, from any related party of the Issuer,
shall not be eligible for the tax exemption or concessionary rate of tax as described above.
The term “related party”, in relation to a person, means any other person who, directly or indirectly, controls that person, or is controlled, directly or indirectly, by that person, or where he and that other person, directly or indirectly, are under the control of a common person.
Notwithstanding that the Issuer is permitted to make payments of Specified Income in respect of the Relevant Notes without deduction or withholding for tax under Section 45 or Section 45A of the ITA, any person whose Specified Income (whether it is interest, discount income, prepayment fee, redemption premium or break cost) derived from the Relevant Notes is not exempt from tax is required to include such income in a return of income made under the ITA.
Under the Qualifying Debt Securities Plus Scheme (“QDS Plus Scheme”), subject to certain conditions having been fulfilled (including the furnishing by the Issuer or such other person as the Comptroller may direct, of a return on debt securities in respect of the qualifying debt securities within such period as the
101 Comptroller may specify and such other particulars in connection with the qualifying debt securities as the Comptroller may require to the MAS), income tax exemption is granted on Specified Income derived by any investor from qualifying debt securities (excluding Singapore Government Securities) which:
(a) are issued during the period from 16 February 2008 to 31 December 2018;
(b) have an original maturity date of not less than 10 years;
(c) either –
(i) if they are issued before 28 June 2013, cannot be redeemed, called, exchanged or converted within 10 years from the date of their issue; or
(ii) if they are issued on or after 28 June 2013, cannot have their tenure shortened to less than 10 years from the date of their issue, except under such circumstances as may be prescribed by regulations; and
(d) cannot be re-opened with a resulting tenure of less than 10 years to the original maturity date.
In addition, the tax exemption on Specified Income from qualifying debt securities under the QDS Plus Scheme will not apply to any Specified Income derived from qualifying debt securities issued on or after 28 June 2013 that is derived on or after the date on which the tenure of any portion of those qualifying debt securities is shortened to less than 10 years from the date of their issue, where the shortening of the tenure occurs under such circumstances as may be prescribed by regulations.
The MAS has also released a circular FSD Cir 02/2013 entitled “Extension and Refinement of Tax Concessions for Promoting the Debt Market” dated 28 June 2013 providing details in respect of the refinement of the QDS Plus Scheme to allow debt securities with certain standard early termination clauses to qualify for the QDS Plus Scheme at the point of issuance. Examples of standard early termination clauses include clauses which provide for early termination due to a taxation event, default event, change of control event, change of shareholding event or change in listing status of an issuer. Subsequently, should the debt securities be redeemed prematurely due to standard early termination clauses (i.e. before the 10th year), the income tax exemption granted to income exempt under the QDS Plus Scheme prior to redemption will not be clawed back. Instead, the QDS Plus status of the debt securities will be revoked prospectively for outstanding debt securities, if any. The outstanding debt securities may still enjoy tax benefits under the qualifying debt securities scheme if the other conditions for qualifying debt securities continue to be met. Debt securities with embedded options with economic value (such as call, put, conversion or exchange options which can be triggered at specified prices or dates and are built into the bond’s pricing at the onset) which can be exercised within 10 years from the date of issuance will continue to be excluded from the QDS Plus Scheme. This refinement of the QDS Plus Scheme will take effect for debt securities that are issued on or after 28 June 2013.
In determining an investor’s income that is to be exempted from tax under the QDS Plus Scheme, prescribed conditions apply in relation to how the investor’s losses, expenses and capital allowances which are attributable to the exempt income are to be treated.
However, even if a Tranche of the Relevant Notes are “qualifying debt securities” which qualify under the QDS Plus Scheme, if, at any time during the tenure of such Tranche of Relevant Notes, 50% or more of the issue of such Relevant Notes is beneficially held or funded, directly or indirectly, by any related party(ies) of the Issuer, Specified Income from such Relevant Notes derived by:
(a) any related party of the Issuer; or
(b) any other person where the funds used by such person to acquire such Relevant Notes are obtained, directly or indirectly, from any related party of the Issuer, shall not be eligible for the tax exemption under the QDS Plus Scheme as described above.
102 2. Capital Gains Any gains considered to be in the nature of capital made from the sale of the Relevant Notes will not be taxable in Singapore. However, any gains derived by any person from the sale of the Relevant Notes which are gains from any trade, business, profession or vocation carried on by that person, if accruing in or derived from Singapore, may be taxable as such gains are considered revenue in nature.
Noteholders who adopt or are adopting Singapore Financial Reporting Standard 39 – Financial Instruments: Recognition and Measurement (“FRS 39”), may for Singapore income tax purposes be required to recognise gains or losses (not being gains or losses in the nature of capital) on the Relevant Notes, irrespective of disposal, in accordance with FRS 39. Please see the section below on “Adoption of FRS 39 treatment for Singapore income tax purposes”.
3. Adoption of FRS 39 treatment for Singapore income tax purposes The IRAS has issued a circular entitled “Income Tax Implications Arising from the Adoption of FRS 39 - Financial Instruments: Recognition & Measurement” (the “FRS 39 Circular”). Legislative amendments to give effect to the tax treatment set out in the FRS 39 Circular have been enacted in Section 34A of the ITA.
The FRS 39 Circular and Section 34A of the ITA generally apply, subject to certain “opt-out” provisions, to taxpayers who are required to comply with FRS 39 for financial reporting purposes.
Noteholders who may be subject to the tax treatment under the FRS 39 Circular and Section 34A of the ITA should consult their own accounting and tax advisers regarding the Singapore income tax consequences of their acquisition, holding or disposal of the Relevant Notes.
4. Estate Duty Singapore estate duty has been abolished with respect to all deaths occurring on or after 15 February 2008.
103 SUBSCRIPTION, PURCHASE AND DISTRIBUTION
The Programme Agreement provides for Notes to be offered from time to time through one or more Dealers. The price at which a Series or Tranche will be issued will be determined prior to its issue between the Issuer and the relevant Dealer(s). The obligations of the Dealer(s) under the Programme Agreement will be subject to certain conditions set out in the Programme Agreement. Each Dealer (acting as principal) will subscribe or procure subscribers for Notes from the Issuer pursuant to the Programme Agreement.
United States The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act (“Regulation S”).
The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986, as amended, and regulations thereunder.
Each Dealer has agreed that, and each further Dealer appointed under the MTN Programme will be required to agree that, except as permitted by the Programme Agreement, it will not offer, sell or deliver the Notes of any identifiable Tranche (i) as part of their distribution at any time or (ii) otherwise until 40 days after the completion of the distribution of such Tranche, as determined and certified to the Issuer by the relevant Paying Agent, by such Dealer (or, in the case of an issue of Notes on a syndicated basis, the relevant lead manager), of all Notes of the Tranche of which such Notes are a part, within the United States or to, or for the account or benefit of, U.S. persons, and it will have sent to each dealer to which it sells Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S.
In addition, until 40 days after the commencement of the offering of any identifiable Tranche of Notes, an offer or sale of Notes within the United States by a dealer that is not participating in the offering may violate the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S.
Hong Kong Each Dealer has represented, warranted and agreed, and each further Dealer appointed under the MTN Programme will be required to represent, warrant and agree, that:
(i) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Notes other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance; and
(ii) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Notes, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to Notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
104 Singapore Each Dealer has acknowledged that this Information Memorandum has not been and will not be registered as a prospectus with the MAS. Accordingly, each Dealer has represented, warranted and agreed that it has not offered or sold any Notes or caused the Notes to be made the subject of an invitation for subscription or purchase and will not offer or sell any Notes or cause the Notes to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this Information Memorandum or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the SFA, (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
General No action has been taken in any jurisdiction that would permit a public offering of any of the Notes, or possession or distribution of this Information Memorandum or any other document or any Pricing Supplement, in any country or jurisdiction (other than Singapore) where action for that purpose is required.
Each Dealer has agreed that it will comply with all applicable securities laws, regulations and directives in each jurisdiction in which it subscribes for, purchases, offers, sells or delivers Notes or any interest therein or rights in respect thereof or has in its possession or distributes, any other document or any Pricing Supplement. Other persons into whose hands this Information Memorandum or any Pricing Supplement comes are required by the Issuer and the Dealers to comply with all applicable laws and regulations in each country or jurisdiction in or from which they purchase, offer, sell or deliver Notes or possess, distribute or publish this Information Memorandum or any Pricing Supplement or any related offering material, in all cases at their own expense.
Selling restrictions may be supplemented or modified with the agreement of the Issuer. Any such supplement or modification may be set out in the relevant Pricing Supplement (in the case of a supplement or modification relevant only to a particular Tranche of Notes or a supplement to this Information Memorandum).
Any person who may be in doubt as to the restrictions set out in the SFA or the laws, regulations and directives in each jurisdiction in which it subscribes for, purchases, offers, sells or delivers the Notes or any interest therein or rights in respect thereof and the consequences arising from a contravention thereof should consult his own professional advisers and should make his own inquiries as to the laws, regulations and directives in force or applicable in any particular jurisdiction at any relevant time.
105 FORM OF PRICING SUPPLEMENT
Pricing Supplement
BREADTALK GROUP LIMITED (UEN / Company Registration No.: 200302045G) as the “Issuer” (Incorporated with limited liability in Singapore)
S$250,000,000 Multicurrency Medium Term Note Programme
SERIES NO: [z] TRANCHE NO: [z] [Brief Description and Amount of Notes] Issue Price: [z] per cent.
[Publicity Name(s) of Dealer(s)]
[Principal/Non-CDP]* Paying Agent [Deutsche Bank AG, Singapore Branch/Deutsche Bank AG, Hong Kong Branch]* [One Raffles Quay #16-00 South Tower Singapore 048583 / Level 52, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong]*
The date of this Pricing Supplement is [z].
106 This Pricing Supplement relates to the Tranche of Notes referred to above.
This Pricing Supplement, under which the Notes described herein (the “Notes”) are issued, is supplemental to, and should be read in conjunction with, the Information Memorandum dated 7 May 2014 (as revised, supplemented, amended, updated or replaced from time to time, the "Information Memorandum”) issued in relation to the S$250,000,000 Multicurrency Medium Term Note Programme of BreadTalk Group Limited (the “Issuer”). Terms defined in the Information Memorandum have the same meaning in this Pricing Supplement. The Notes will be issued on the terms of this Pricing Supplement read together with the Information Memorandum. The Issuer accepts responsibility for the information contained in this Pricing Supplement which, when read together with the Information Memorandum, contains all information that is material in the context of the issue of the Notes.
This Pricing Supplement does not constitute, and may not be used for the purposes of, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation, and no action is being taken to permit an offering of the Notes or the distribution of this Pricing Supplement in any jurisdiction where such action is required.
Where interest, discount income (other than discount income arising from secondary trading), prepayment fee, redemption premium or break cost is derived from any Notes by any person who (a) is not resident in Singapore, and (b) carries on any operations in Singapore through a permanent establishment in Singapore, the tax exemption available for qualifying debt securities (subject to certain conditions) under the Income Tax Act (Chapter 134 of Singapore) (the “Income Tax Act”), shall not apply if such person acquires such Notes using the funds and profits of such person’s operations through a permanent establishment in Singapore. Any person whose interest, discount income, prepayment fee, redemption premium or break cost derived from the Notes is not exempt from tax (including for the reasons described above) shall include such income in a return of income made under the Income Tax Act.
[[Except as disclosed in this Pricing Supplement, there/There] has been no material adverse change, or any development that is likely to result in a material adverse change, in the financial condition, business, results of operations, assets or properties of the Issuer or the Group, taken as a whole, since the date of the last published [audited/unaudited] consolidated accounts]*.
*Note: If any change is disclosed in the Pricing Supplement, it may require the approval of the relevant Stock Exchange(s). Consideration should be given as to whether or not such disclosure should be made by means of a supplemental Information Memorandum as opposed to in the Pricing Supplement.
107 The terms of the Notes and additional provisions relating to their issue are as follows:
[Include whichever of the following apply]
1. Series No.: [ ]
2. Tranche No.: [ ]
3. Currency: [ ]
4. Principal Amount of Series: [ ]
5. Principal Amount of Tranche: [ ]
6. Form [Bearer/Registered]
7. Denomination Amount: [ ]
8. Calculation amount (if different from [ ] Denomination Amount):
9. Issue Date: [ ]
10. Redemption Amount: [Denomination Amount/[others]] (including early redemption) [Specify early redemption amount if different from final redemption amount or if different from that set out in the Conditions]
11. Interest Basis: [Fixed Rate/Floating Rate/Variable Rate/Hybrid/ Zero Coupon]
12. Redemption/Payment Basis: [Redemption at par/specify other]
13. Interest Commencement Date: [ ]
14. Fixed Rate Note
(a) Maturity Date: [ ]
(b) Day Count Fraction: [ ]
(c) Interest Payment Date(s): [ ]
(d) Initial Broken Amount: [ ]
(e) Final Broken Amount: [ ]
(f) Interest Rate: [ ] per cent. per annum
15. Floating Rate Notes
(a) Redemption Month: [Specify month and year]
(b) Interest Determination Date: [ ] business days prior to the first day of each Interest Period
108 (c) Day Count Fraction: [ ]
(d) Specified Number of Months [ ] (Interest Period):
(e) Specified Interest Payment Dates: [ ]
(f) Business Day Convention: [Floating Rate Business Day Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/other (give details)]
(g) Benchmark: [SIBOR, Swap Rate or other benchmark]
(h) Primary Source: [Specify relevant screen page or “Reference Banks”]
(i) Reference Banks: [Specify three]
(j) Relevant Time: [ ]
(k) Relevant Financial Centre: [The financial centre most closely connected to the Benchmark - specify if not Singapore]
(l) Spread: [+/-][z] per cent. per annum
(m) Minimum Rate of Interest: [z] per cent. per annum
(n) Fall back provisions, rounding provisions and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions: [ ]
16. Variable Rate Notes
(a) Redemption Month: [Specify month and year]
(b) Interest Determination Date: [ ] business days prior to the first day of each Interest Period
(c) Day Count Fraction: [ ]
(d) Specified Number of Months [ ] (Interest Period):
(e) Specified Interest Payment Dates: [ ]
(f) Business Day Convention: [Floating Rate Business Day Convention/Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/other (give details)]
109 (g) Benchmark: [SIBOR, Swap Rate or other benchmark]
(h) Primary Source: [Specify relevant screen page or “Reference Banks”]
(i) Reference Banks: [Specify three]
(j) Relevant Time: [ ]
(k) Relevant Financial Centre: [The financial centre most closely connected to the Benchmark - specify if not Singapore]
(l) Spread: [+/-][z] per cent. per annum
(m) Minimum Rate of Interest: [z] per cent. per annum
17. Hybrid Notes
(a) Fixed Rate Period: [ ]
(b) Floating Rate Period: [ ]
(c) Maturity Date: [ ]
(d) Redemption Month: [Specify month and year]
(e) Interest Determination Date: [ ] business days prior to the first day of each Interest Period (f) Day Count Fraction: [ ]
(g) Interest Payment Date(s) (for [ ] Fixed Rate Period):
(h) Initial Broken Amount: [ ]
(i) Final Broken Amount: [ ]
(j) Interest Rate: [z] per cent. per annum
(k) Specified Number of Months [ ] (Interest Period):
(l) Specified Interest Payment Date(s) [ ] (for Floating Rate Period):
(m) Business Day Convention: [Floating Rate Business Day Convention/ Following Business Day Convention/Modified Following Business Day Convention/Preceding Business Day Convention/other (give details)]
(n) Benchmark: [SIBOR, Swap Rate or other benchmark]
(o) Primary Source: [Specify relevant screen page or “Reference Banks”]
110 (p) Reference Banks: [Specify three]
(q) Relevant Time: [ ]
(r) Relevant Financial Centre: [The financial centre most closely connected to the Benchmark - specify if not Singapore]
(s) Spread: [+/-][z] per cent. per annum
(t) Minimum Rate of Interest: [z] per cent. per annum
(u) Fall back provisions, rounding [ ] provisions and any other terms relating to the method of calculating interest on Hybrid Notes during the Floating Rate Period, if different from those set out in the Conditions:
18. Zero-Coupon Notes
(a) Maturity Date: [ ]
(b) Amortisation Yield: [z] per cent. per annum
(c) Any other formula/basis of [ ] determining amount payable:
(d) Day Count Fraction: [ ]
(e) Any amount payable under [ ] Condition 7(g) (Default interest on the Notes):
19. Noteholders’ Redemption Option: [Yes/No] Noteholders’ Redemption Option Period [Specify maximum and minimum number of days (Condition 6(b)[(i)/(ii)/(iii)]) for notice period – a minimum notice period of 15 business days is required for Notes to be cleared through Euroclear and/or Clearstream, Luxembourg] [Specify dates]
20. Issuer’s Redemption Option: [Yes/No] Issuer’s Redemption Option Period [Specify maximum and minimum number of days (Condition 6(c)) for notice period – a minimum notice period of five (5) business days is required for Notes to be cleared through Euroclear and/or Clearstream, Luxembourg] [Specify dates]
21. Issuer’s Purchase Option: [Yes/No] Issuer’s Purchase Option Period [Specify maximum and minimum number of days (Condition 6(d)) for notice period – a minimum notice period of five (5) business days is required for Notes to be cleared through Euroclear and/or Clearstream, Luxembourg] [Specify dates]
111 22. Noteholders’ VRN Purchase Option: [Yes/No] Noteholders’ VRN Purchase Option [Specify maximum and minimum number of days Period for notice period – a minimum notice period of (Condition 6(e)(i)) 15 business days is required for Notes to be cleared through Euroclear and/or Clearstream, Luxembourg] [Specify dates]
23. Noteholders’ Purchase Option: [Yes/No] Noteholders’ Purchase Option Period [Specify maximum and minimum number of days (Condition 6(e)(ii)) for notice period – a minimum notice period of 15 business days is required for Notes to be cleared through Euroclear and/or Clearstream, Luxembourg] [Specify dates]
24. Redemption for Taxation Reasons: [Yes/No/Not applicable] (Condition 6(f)) [on [insert other dates of redemption not on Interest Payment Dates]] [Specify maximum and minimum number of days for notice period – a minimum notice period of five (5) business days is required for Notes to be cleared through Euroclear and/or Clearstream, Luxembourg]
25. Notes to be represented on issue by: [Temporary Global Note/Permanent Global Note/ Global Certificate]
26. Temporary Global Note exchangeable for [Yes/No] Definitive Notes:
27. Temporary Global Note exchangeable for [Yes/No] Permanent Global Note:
28. Applicable TEFRA exemption: [C Rules/D Rules/Not Applicable]
29. Method of issue of Notes: [Individual Dealer/Syndicated Issue]
30. The following Dealer[s] [is/are] [Insert legal name(s) of Dealer(s)] subscribing for the Notes:
31. The aggregate principal amount of Notes S$[z] issued has been translated in Singapore Dollars at the rate of [z] producing a sum of (for Notes not denominated in Singapore Dollars):
32. Listing: [ ]
33. ISIN Code: [ ]
34. Common Code: [ ]
35. Clearing System(s): [Not Applicable/Euroclear/Clearstream, Luxembourg/ The Central Depository (Pte) Limited/others]
112 36. Depository: [Depository for Euroclear/Clearstream, Luxembourg/ The Central Depository (Pte) Limited/others]
37. Delivery: Delivery [against/free of] payment
38. Paying Agent: [ ]
39. Calculation Agent [ ]
40. In the case of Registered Notes, specify [ ] the location of the office of the Registrar:
41. Use of Proceeds: [ ]
42. Other terms: [ ]
Details of any additions or variations to terms and conditions of the Notes as set out in the Information Memorandum:
Any additions or variations to the selling restrictions:
BREADTALK GROUP LIMITED
Signed: ______Authorised Signatory
113 APPENDIX I
GENERAL AND OTHER INFORMATION
INFORMATION ON DIRECTORS 1. (a) The names and positions of the Directors are set out below:
Name Position
Dr George Quek Meng Tong Chairman
Ms Katherine Lee Lih Leng Deputy Chairman
Mr Ong Kian Min Independent Director
Dr Tan Khee Giap Independent Director
Mr Chan Soo Sen Independent Director
(b) No Director is or has been involved in any of the following events:
(i) a petition under any bankruptcy laws filed in any jurisdiction against such person or any partnership in which he was a partner or any corporation of which he was a director or an executive officer;
(ii) a conviction of any offence, other than a traffic offence, or judgment, including findings in relation to fraud, misrepresentation or dishonesty, given against him in any civil proceedings which may lead to such a conviction or judgment, or so far as such person is aware, any criminal investigation pending against him; or
(iii) the subject of any order, judgment or ruling of any court of competent jurisdiction, tribunal or government body, permanently or temporarily enjoining him from acting as an investment adviser, dealer in securities, director or employee of a financial institution and engaging in any type of business practice or activity.
(c) As at the Latest Practicable Date, none of the Directors is related by blood or marriage to one another nor are any of them related by blood or marriage to any substantial shareholder of the Issuer, save that Ms Katherine Lee Lih Leng is the spouse of Dr George Quek Meng Tong.
(d) Save as disclosed below, no option to subscribe for Shares or debentures of the Issuer has been granted to, or was exercised by, any Director during the last financial year ended 31 December 2013 up to the Latest Practicable Date.
The following Directors were awarded Shares in the last financial year ended 31 December 2013 up to the Latest Practicable Date pursuant to the Issuer’s Restricted Share Grant Plan:
Director Number of Shares Granted Dr George Quek Meng Tong 29,040 Katherine Lee Lih Leng 29,040
114 (e) The interests of the Directors and substantial shareholders of the Issuer in the Shares as at the Latest Practicable Date are as follows:
Directors Direct Interest Deemed Interest Number of Number of Shares % (1) Shares % (1) Dr George Quek Meng Tong(2) 95,673,470 34.01 52,400,830 18.63 Katherine Lee Lih Leng(2) 52,400,830 18.63 95,673,470 34.01 Ong Kian Min 120,000 0.04 - - Dr Tan Khee Giap - - 20,000 0.01
Notes:
(1) The percentage is calculated based on 281,328,614 issued Shares (excluding treasury shares) as at the Latest Practicable Date.
(2) Katherine Lee Lih Leng is the spouse of Dr George Quek Meng Tong.
Substantial Shareholders of the Issuer Direct Interest Deemed Interest Number of Number of Shares % (1) Shares % (1) Dr George Quek Meng Tong(2) 95,673,470 34.01 52,400,830 18.63 Katherine Lee Lih Leng(2) 52,400,830 18.63 95,673,470 34.01 Primacy Investment Limited 30,919,900 10.99 - -
Notes:
(1) The percentage is calculated based on 281,328,614 issued Shares (excluding treasury shares) as at the Latest Practicable Date.
(2) Katherine Lee Lih Leng is the spouse of Dr George Quek Meng Tong.
SHARE CAPITAL 2. As at the date of this Information Memorandum, there is one (1) class of Shares. The rights and privileges attached to the Shares are stated in the Articles of Association of the Issuer.
3. The issued share capital of the Issuer as at the Latest Practicable Date is as follows:
Share Designation Issued Share(s) Issued Share Capital (S$) Ordinary Shares (including 281,893,238 33,302,916 treasury shares)
BORROWINGS 4. Save as disclosed in paragraph 5 below and Appendix IV, the Issuer has as at the Latest Practicable Date no other borrowings or indebtedness in the nature of borrowings including bank overdrafts and liabilities under acceptances (other than normal trading bills) or acceptance credits, mortgages, charges, hire purchase commitments, guarantees or other material contingent liabilities.
115 5. Between the period 1 January 2014 up to the Latest Practicable Date, the Issuer:
(a) gave a corporate guarantee as part of the security required for the S$14.0 million loan granted by United Overseas Bank to its subsidiary, Imagine Properties Pte. Ltd., in relation to the Group’s investment in TripleOne Somerset; and
(b) gave a corporate guarantee as part of the security required for the S$7.76 million loan granted by Oversea-Chinese Banking Corporation Limited to its subsidiary, Food Republic Pte. Ltd., for capital expenditure purposes.
WORKING CAPITAL 6. The Directors are of the opinion that, after taking into account the present banking facilities and the net proceeds of the issue of the Notes, the Issuer will have adequate working capital for its present requirements.
CHANGES IN ACCOUNTING POLICIES 7. There have been no significant changes in the accounting policies of the Issuer since its audited financial accounts for FY2013.
MATERIAL ADVERSE CHANGE 8. There has been no material adverse change in the financial condition or business of the Group since 31 December 2013.
LITIGATION 9. There are no legal or arbitration proceedings pending or, to the best of the Issuer’s knowledge after making all due and careful enquiries, threatened against the Issuer or any of its subsidiaries the outcome of which may have or have had during the 12 months prior to the date of this Information Memorandum a material adverse effect on the financial position of the Issuer or the Group.
CONSENTS 10. The Auditors have given and have not withdrawn their written consent to the issue of this Information Memorandum with the references herein to their name and, where applicable, reports in the form and context in which they appear in this Information Memorandum.
DOCUMENTS AVAILABLE FOR INSPECTION 11. Copies of the following documents may be inspected at the registered office of the Issuer at 30 Tai Seng Street, #09-01, BreadTalk IHQ, Singapore 534013 during normal business hours for a period of six months from the date of this Information Memorandum:
(a) the Memorandum and Articles of Association of the Issuer;
(b) the Trust Deed; and
(c) the audited financial statements of the Group for FY2011, FY2012 and FY2013.
FUNCTIONS, RIGHTS AND OBLIGATIONS OF THE TRUSTEE 12. The functions, rights and obligations of the Trustee are set out in the Trust Deed.
116 APPENDIX II
AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2011
117 118 BreadTalk Group Limited and its Subsidiaries
General Information
Directors
George Quek Meng Tong Katherine Lee Lih Leng Ong Kian Min Chan Soo Sen Tan Khee Giap
Company Secretary
Tan Cher Liang
Registered Office
171 Kampong Ampat #05-05 KA Foodlink Singapore 368330 Tel: 6285 6116 Fax: 6285 1661
Bankers
DBS Bank Ltd The Hongkong and Shanghai Banking Corporation Malayan Banking Berhad Oversea-Chinese Banking Corporation Limited Standard Chartered Bank United Overseas Bank Limited
Share Registrar
Boardroom Corporate & Advisory Services Pte Ltd 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623
Auditors
Ernst & Young LLP
Partner in charge: Ang Chuen Beng (since financial year ended 31 December 2011)
119 BreadTalk Group Limited and its Subsidiaries
General Information
Index
Page
'LUHFWRUV¶5HSRUW 1
Statement by Directors 8
,QGHSHQGHQW$XGLWRUV¶5HSRUW 9
Consolidated Statement of Comprehensive Income 11
Balance Sheets 12
Statements of Changes in Equity 14
Consolidated Cash Flow Statement 17
Notes to the Financial Statements 20
120 BreadTalk Group Limited and its Subsidiaries
'LUHFWRUV¶Report
The directors are pleased to present their report to the members together with the audited financial statements of BreadTalk Group Limited (the ³Company´) and its subsidiaries (collectively, the ³Group´) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2011.
Directors
The directors of the Company in office at the date of this report are:
George Quek Meng Tong (Chairman) Katherine Lee Lih Leng (Deputy Chairman) Ong Kian Min Chan Soo Sen Tan Khee Giap
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.
'LUHFWRUV¶LQWHUHVWVLQVKDUHVDQGGHEHQWXUHV
The following directors, who held office at the end of the financial year, had, according to the register of GLUHFWRUV¶VKDUHKROGLQJVUHTXLUHGWREHNHSWXQGHUVHFWLRQRIWKH6LQJDSRUH&RPSDQLHV$FW&DS 50, an interest in shares of the Company as stated below:
Direct interest Deemed interest As at 1 As at 31 As at 1 As at 31 January December As at 21 January December As at 21 Name of director 2011 2011 January 2012 2011 2011 January 2012
The Company (Ordinary shares)
George Quek Meng 95,538,556 95,583,952 95,583,952 52,282,800 52,319,880 52,319,880 Tong Katherine Lee Lih Leng 52,282,800 52,319,880 52,319,880 95,538,556 95,583,952 95,583,952 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 111,104 125,708 125,708 94,220 117,140 117,140 Tong Katherine Lee Lih Leng 94,220 117,140 117,140 111,104 125,708 125,708
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121 BreadTalk Group Limited and its Subsidiaries
'LUHFWRUV¶Report
'LUHFWRUV¶LQWHUHVWVLQVKDUHVDQGGHEHQWXUHV FRQW¶G
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, date of appointment or the end of the financial year or on 21 January 2012.
'LUHFWRUV¶FRQWUDFWXDOEHQHILWV
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) 7KH%UHDG7DON*URXS/LPLWHG(PSOR\HHV¶6KDUH2SWLRQ6FKHPH
7KH%UHDG7DON*URXS/LPLWHG(PSOR\HHV¶6KDUH2SWLRQ6FKHPH (626 ZDVDSSURYHGDWDQ 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.
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122 BreadTalk Group Limited and its Subsidiaries
'LUHFWRUV¶Report
Share Option and Share Plans (cont'd)
(a) 7KH%UHDG7DON*URXS/LPLWHG(PSOR\HHV¶6KDUH2SWLRQ6FKHPH (cont'd)
Size of ESOS
The total number of new shares over which options may be granted pursuant to the ESOS shall not exceed fifteen per cent (15%) of the issued share capital of the Company on the date preceding the grant of an option.
The aggregate number of Shares available to eligible Controlling Shareholders and their Associates under the ESOS shall not exceed twenty five per cent (25%) of the Shares available under the ESOS. In addition, the number of Shares available to each Controlling Shareholder or his Associate shall not exceed ten per cent (10%) of the Shares available under the ESOS.
Grant of ESOS
Options may be granted from time to time during the year when the ESOS is in force, except that options shall be granted on or after the second market day on which an announcement of any matter involving unpublished price sensitive information is released.
Acceptance of ESOS
The grant of an option shall be accepted not more than 30 days from the offering date of that option and accompanied by payment to the Company of a nominal consideration of $1 or such other amount as required by the Remuneration Committee.
Since the commencement of the ESOS up to the end of the financial year, there were no options granted to any person. Any options granted under the ESOS do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any share issue of any other company.
(b) The BreadTalk Restricted Share Grant Plan
The BreadTalk Restricted Share Grant Plan ("RSG Plan") was approved at an Extraordinary General Meeting held on 28 April 2008.
The RSG Plan is centred on the accomplishment of specific pre-determined performance objectives and service conditions, which is the prerequisite for the contingent award of fully paid 6KDUHV ³$ZDUG´ 7KH UHZDUG VWUXFWXUH DOORZV WKH &RPSDQ\ WR WDUJHW VSHcific performance objectives and incentivise the Participants to put in their best efforts to achieve these targets.
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123 BreadTalk Group Limited and its Subsidiaries
'LUHFWRUV¶Report
Share Option and Share Plans (cont'd)
(b) The BreadTalk Restricted Share Grant Plan (cont'd)
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.
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.
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124 BreadTalk Group Limited and its Subsidiaries
'LUHFWRUV¶Report
Share Option and Share Plans (cont'd)
(b) The BreadTalk Restricted Share Grant Plan (cont'd)
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 56*3ODQZRXOGEHPDGHRQFHD\HDUDIWHUWKH&RPSDQ\¶VDQQXDOJHQHUDOPHHWLQJ,WZLOOEH 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 2011 are as follows:
Aggregate Aggregate conditional conditional Aggregate Aggregate restricted restricted conditional conditional shares Aggregate Conditional shares restricted restricted vested and conditional restricted awarded shares shares released restricted shares since lapsed since vested and since shares granted commence- commence- released commence- outstanding during the ment of the ment of the during the ment of the at end of the Name of Participant year Plan Plan year Plan year
Directors of the Company
George Quek Meng (1) Tong 65,000 201,200 ± 45,396 75,492 125,708 Katherine Lee Lih (1) Leng 65,000 176,000 ± 37,080 58,860 117,140
Associate of a Controlling Shareholder
Frankie Quek Swee (2) Heng 25,000 106,000 ± 26,880 48,660 57,340
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125 BreadTalk Group Limited and its Subsidiaries
'LUHFWRUV¶Report
Share Option and Share Plans (cont'd)
Aggregate Aggregate conditional conditional Aggregate Aggregate restricted restricted conditional conditional shares Aggregate Conditional shares restricted restricted vested and conditional restricted awarded shares shares released restricted shares since lapsed since vested and since shares granted commence- commence- released commence- outstanding during the ment of the ment of the during the ment of the at end of the Name of Participant year Plan Plan year Plan year
Participants who received 5% or more of the total grants available
(3) Oh Eng Lock 103,000 933,666 ± 16,660 798,326 135,340 Goh Tong Pak 25,000 298,200 ± 91,016 152,792 145,408 Catherine Lee Khia (4) Yee 51,000 187,600 51,000 45,508 76,396 60,204 Cheng William 34,000 204,200 ± 56,776 92,812 111,388 James Quek 107,000 166,800 ± 20,044 29,548 137,252 Other participants 206,000 611,400 84,420 93,532 183,424 343,556
681,000 2,885,066 135,420 432,892 1,516,310 1,233,336
(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. (4) Ms Catherine Lee resigned as Group CFO with effect from 7 September 2011.
:LWKWKH5HPXQHUDWLRQ&RPPLWWHH¶VDSSURYDORQWKHDFKLHYHPHQWRIWKHSHUIRUPDQFHWDUJHWV for the performance period FY2009 and FY2010, a total of 432,892 restricted shares were released via the issuance of treasury shares.
Audit Committee
The Audit Committee performed the functions specified in the Companies Act. The functions performed are detailed in the Report on Corporate Governance.
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126 127 128 BreadTalk Group Limited and its Subsidiaries
,QGHSHQGHQW$XGLWRUV¶5HSRUW For the financial year ended 31 December 2011
To the members of BreadTalk Group Limited
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 11 to 99, which comprise the balance sheets of the Group and the Company as at 31 December 2011, the statements of changes in equity of the Group and the Company, the statement of comprehensive income and 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.
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129 130 BreadTalk Group Limited and its Subsidiaries
Consolidated Statement of Comprehensive Income for the year ended 31 December 2011
Notes 2011 2010 ¶ ¶
Revenue 3 365,904 302,888 Cost of sales (165,846) (137,646)
Gross profit 200,058 165,242 Other operating income 4 7,495 14,188 Interest income 5 824 601 Distribution and selling expenses (145,520) (120,994) Administrative expenses (45,038) (41,872) Interest expense 5 (785) (635)
Profit before taxation and share of results of joint ventures 17,034 16,530 Share of results of joint ventures 93 158
Profit before taxation 6 17,127 16,688 Taxation 8 (5,370) (5,520)
Profit for the year 11,757 11,168
Profit attributable to: Equity holders of the Company 11,592 11,266 Non-controlling interests 165 (98)
11,757 11,168
Other comprehensive income: Net loss on available-for-sale financial assets ± (574) Foreign currency translation gain/(loss) 911 (859)
Other comprehensive income for the year, net of tax 911 (1,433)
Total comprehensive income for the year 12,668 9,735
Total comprehensive income attributable to: Equity holders of the Company 12,503 9,833 Non-controlling interests 165 (98)
12,668 9,735
Earnings per share (cents) Basic 9 4.12 4.01
Diluted 9 4.10 3.99
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
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131 BreadTalk Group Limited and its Subsidiaries
Balance Sheets as at 31 December 2011
Notes Group Company 2011 2010 2011 2010 ¶ ¶ ¶ ¶ Non-current assets Property, plant and equipment 10 88,898 73,306 7,222 5,766 Intangible assets 11 9,214 9,142 ± ± Investment securities 12 11,669 11,669 ± ± Investment in subsidiaries 13 ± ± 40,476 39,166 Investment in associates 14 ± ± ± ± Investment in joint ventures 15 422 446 ± ± Other receivables 17 1,389 857 ± ± Deferred tax assets 8 2,120 1,898 30 12
113,712 97,318 47,728 44,944
Current assets Inventories 16 7,397 6,114 ± ± Trade and other receivables 17 46,800 25,345 ± 26 Prepayments 5,389 3,306 36 83 Tax recoverable 230 9 ± ± Amounts due from subsidiaries (non-trade) 18 ± ± 15,335 5,748 Amounts due from joint ventures (non-trade) 18 1,297 506 ± ± Amounts due from minority shareholders of subsidiaries (non-trade) 18 420 455 ± ± Cash and cash equivalents 19 87,060 71,144 2,698 2,947 148,593 106,879 18,069 8,804
Current liabilities Trade and other payables 20 74,074 60,846 250 489 Other liabilities 21 41,124 32,387 2,115 1,845 Provision 21 5,871 3,536 ± ± Amounts due to subsidiaries (non-trade) 18 ± ± 7,394 8,762 Amounts due to joint ventures (non-trade) 18 395 140 ± ± Finance lease obligations, secured 23 37 54 ± ± Loan from a minority shareholder of a subsidiary 22 200 200 ± ± Short-term loans 24 15,764 4,698 12,000 ± Current portion of long-term loans 25 8,396 6,232 ± ± Tax payable 5,623 4,402 ± 80 151,484 112,495 21,759 11,176
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132 BreadTalk Group Limited and its Subsidiaries
Balance Sheets as at 31 December 2011 FRQW¶G
Notes Group Company 2011 2010 2011 2010 ¶ ¶ ¶ ¶
Net current liabilities (2,891) (5,616) (3,690) (2,372)
Non-current liabilities
Long-term loans 25 15,156 8,117 3,989 3,989 Finance lease obligations, secured 23 ± 37 ± ± Loans from minority shareholders of subsidiaries 22 882 ± ± ± Other payables 20 ± 59 ± ± Other liabilities 21 7,039 5,759 ± Deferred tax liabilities 8 2,276 2,647 ± ± 25,353 16,619 3,989 3,989
Net assets 85,468 75,083 40,049 38,583
Equity attributable to equity holders of the Company
Share capital 26 33,303 33,303 33,303 33,303 Treasury shares 26 (609) (199) (609) (199) Accumulated profits 27 41,558 33,090 6,812 5,064 Other reserves 27 3,718 2,368 543 415
77,970 68,562 40,049 38,583 Non-controlling interests 7,498 6,521 ± ± Total Equity 85,468 75,083 40,049 38,583
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
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133 BreadTalk Group Limited and its Subsidiaries
Statements of Changes in Equity for the year ended 31 December 2011
Attributable to equity holders of the Company
Fair value Share based Statutory Trans- adjust- compen- Non-con- 2010 Share Treasury Accumulated reserve lation ment sation Capital trolling Total Group capital shares profits fund reserve reserve reserve reserve Total interests equity $'000 ¶ $'000 $'000 $'000 $'000 $'000 ¶ $'000 $'000 $'000 (Note 26) (Note 26) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27)
At 1 January 2010 33,303 (283) 24,782 1,455 137 1,178 90 ± 60,662 5,504 66,166
Profit for the year ± ± 11,266 ± ± ± ± ± 11,266 (98) 11,168
Other comprehensive income Net loss on fair value changes of available-for- 134 sale financial assets ± ± ± ± ± (574) ± ± (574) ± (574)
Foreign currency translation ± ± ± ± (859) ± ± ± (859) ± (859) Other comprehensive income for the year, net of tax ± ± ± ± (859) (574) ± ± (1,433) ± (1,433) Total comprehensive income for the year ± ± 11,266 ± (859) (574) ± ± 9,833 (98) 9,735
Transactions with equity holders Share-based payments ± ± ± ± ± ± 668 ± 668 ± 668 Dividends paid (Note 34) ± ± (2,342) ± ± ± ± ± (2,342) ± (2,342) Dividend payable (Note 20) ± ± ± ± ± ± ± ± ± (820) (820) Transfer to statutory reserve ± ± (616) 616 ± ± ± ± ± ± ± Treasury shares transferred on vesting of restricted share grant ± 343 ± ± ± ± (511) 168 ± ± ± Purchase of treasury shares ± (259) ± ± ± ± ± ± (259) ± (259) Issuance of new shares to minority shareholders ± ± ± ± ± ± ± ± ± 1,935 1,935
At 31 December 2010 33,303 (199) 33,090 2,071 (722) 604 247 168 68,562 6,521 75,083
- 14 - BreadTalk Group Limited and its Subsidiaries
Statements of Changes in Equity for the year ended 31 December 2011 (cont'd)
Attributable to equity holders of the Company
Fair value Share based Statutory Trans- adjust- compen- Non-con- 2011 Share Treasury Accumulated reserve lation ment sation Capital trolling Total Group capital shares profits fund reserve reserve reserve reserve Total interests equity $'000 ¶ $'000 $'000 $'000 $'000 $'000 ¶ $'000 $'000 $'000 (Note 26) (Note 26) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27)
At 1 January 2011 33,303 (199) 33,090 2,071 (722) 604 247 168 68,562 6,521 75,083
Profit for the year ± ± 11,592 ± ± ± ± ± 11,592 165 11,757
Other comprehensive income Foreign currency translation ± ± ± ± 911 ± ± ± 911 ± 911 Other comprehensive income for the year, net of tax ± ± ± ± 911 ± ± ± 911 ± 911 135 Total comprehensive income for the year ± ± 11,592 ± 911 ± ± ± 12,503 165 12,668
Transactions with equity holders Share-based payments ± ± ± ± ± ± 276 ± 276 ± 276 Dividends paid (Note 34) ± ± (2,813) ± ± ± ± ± (2,813) ± (2,813) Transfer to statutory reserve ± ± (311) 311 ± ± ± ± ± ± ± Treasury shares transferred on vesting of restricted share grant ± 148 ± ± ± ± (166) 18 ± ± ± Purchase of treasury shares ± (558) ± ± ± ± ± ± (558) ± (558) Issuance of new shares to minority shareholders ± ± ± ± ± ± ± ± ± 812 812
At 31 December 2011 33,303 (609) 41,558 2,382 189 604 357 186 77,970 7,498 85,468
- 15 - BreadTalk Group Limited and its Subsidiaries
Statements of Changes in Equity for the year ended 31 December 2011 (cont'd)
Share based compen- Share Treasury Accumulated sation Capital Total capital shares profits reserve reserve equity ¶ ¶ ¶ ¶ ¶ ¶ (Note 26) (Note 26) (Note 27) (Note 27) (Note 27) 2010
Company
1 January 2010 33,303 (283) 4,253 90 ± 37,363 Profit for the year ± ± 3,153 ± ± 3,153
Total comprehensive income for the year ± ± 3,153 ± ± 3,153
Transactions with equity holders
Share-based payments ± ± ± 157 ± 157 Treasury shares transferred on vesting of restricted share grant ± 343 ± ± 168 511 Purchase of treasury shares ± (259) ± ± ± (259) Dividends paid (Note 34) ± ± (2,342) ± ± (2,342)
At 31 December 2010 33,303 (199) 5,064 247 168 38,583
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
Transactions with equity holders
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)
At 31 December 2011 33,303 (609) 6,812 357 186 40,049
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
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136 BreadTalk Group Limited and its Subsidiaries
Consolidated Cash Flow Statement for the year ended 31 December 2011
Notes 2011 2010 ¶ ¶
Cash flows from operating activities Profit before taxation 17,127 16,688 Adjustments for: Amortisation of intangible assets 11 442 408 Depreciation of property, plant and equipment 10 23,920 21,190 Impairment loss on intangible assets 11 125 19 Impairment loss on property, plant and equipment 10 289 761 Interest expense 785 635 Interest income (824) (601) Property, plant and equipment written off 1,219 2,285 Gain on disposal of property, plant and equipment (20) (4,568) Share based payment expenses 277 668 Share of results of joint ventures (93) (158) Translation difference (358) 563 Write-off of inventories 31 23 Write-down of inventories 25 ± Impairment/(write back of impairment) of trade receivables 253 (5) Impairment of other receivables 64 3 Impairment of an amount due from an associate (non-trade) ± 30 Operating cash flows before working capital changes 43,262 37,941 (Increase)/decrease in: Inventories (1,416) (1,299) Trade receivables (2,842) (1,330) Other receivables and deposits (6,616) (179) Prepayments (2,083) (983) Increase (decrease) in: Trade payables 4,782 4,070 Other payables and other liabilities 18,712 11,404
Cash flows generated from operations 53,799 49,594 Tax paid (4,933) (4,152)
Net cash flows from operating activities 48,866 45,472
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137 BreadTalk Group Limited and its Subsidiaries
Consolidated Cash Flow Statement for the year ended 31 December 2011
Notes 2011 2010 ¶ ¶
Cash flows from investing activities Interest income received 305 143 Purchase of property, plant and equipment A (37,077) (36,485) Additions to intangible assets (616) (499) Subscription of junior bonds ± (5,750) Cash paid for reinstatement expenses (126) (61) Proceeds from disposal of property, plant and equipment 225 9,082 Deposit for subscription of junior bonds 17 (12,000) ± Amount due from joint ventures(non-trade) (291) (37) Amount due to joint ventures (non-trade) 255 35 Amount due from an associate (non-trade) ± (30) Loan to a joint venture (500) ± Investment in a joint venture (100) ± Dividends received from a joint venture 200 ± Net cash flows used in investing activities (49,725) (33,602)
Cash flows from financing activities Interest paid (761) (611) Dividends paid to shareholders of the Company (2,813) (2,342) Dividends paid to minority shareholders of a subsidiary (820) (1,312) Purchase of treasury shares (558) (259) Proceeds from long-term loans 15,764 8,828 Repayment of long-term loans (6,625) (4,837) Proceeds from short-term loans 21,227 8,780 Repayment of short-term loans (10,196) (8,695) Capital injection from minority shareholders of subsidiaries 812 1,480 Repayment of finance lease obligations (54) (298) Loans from minority shareholders of subsidiaries 882 200 Repayment of amount due to landlord (83) (86)
Net cash flows from financing activities 16,775 848
Net increase in cash and cash equivalents 15,916 12,718 Cash and cash equivalents at the beginning of the year 71,144 58,426
Cash and cash equivalents at the end of the year 19 87,060 71,144
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
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138 BreadTalk Group Limited and its Subsidiaries
Consolidated Cash Flow Statement for the year ended 31 December 2011
Note A. Purchase of property, plant and equipment
During the year, the Group acquired property, plant and equipment with an aggregate cost of approximately $40,033,000 (2010: $39,168,000). The additions were by way of cash payments of $27,214,000 (2010: $28,769,000), increase in provision for reinstatement costs of $2,461,000 (2010: $536,000) and amount payable to other creditors of $10,358,000 (2010: $9,863,000).
Cash outflow for the year also include payments in respect of property, plant and equipment acquired in the previous years of $9,863,000 (2010: $7,716,000).
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
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139 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
1. General
1.1 Corporate information
BreadTalk Group Limited (the ³Company´) is a limited liability company, which is incorporated and domiciled in the Republic of Singapore and listed on the Singapore Exchange Securities Trading Ltd.
The registered office and principal place of business of the Company is located at 171 Kampong Ampat, #05-05 KA FoodLink, Singapore 368330.
The principal activity of the Company is that of investment holding and provision of management services. The principal activities of the subsidiaries are shown in Note 13 to the financial statements.
1.2 Fundamental accounting assumption
The financial statements of the Group have been prepared on a going concern basis. The *URXS¶V QHW FXUUHQW OLDELOLWLHV SRVLWLRQ DV DW 31 December 2011 was $2,891,000 (2010: $5,616,000).
Included in current liabilities are deposits from food court tenants and franchisees and stored value card deposits of $12,866,000 (2010: $12,516,000), provision for reinstatement costs of $5,871,000 (2010: $3,536,000) and deferred revenue of $14,496,000 (2010: $9,916,000) respectively. Deferred revenue relates to the unutilised value on the food court stored value cards, unredeemed cash vouchers sold and unearned franchise fees received. These current liabilities, because of their nature, are not expected to result in significant cash outflow from the Group within the next 12 months.
In addition, the Group has unutilised banking facilities available for future use. The directors are confident that the Group will be able to pay its debts as and when they fall due.
2. Summary of significant accounting policies
2.1 Basis of preparation
The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards ("FRS").
The financial statements have been prepared on 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 URXQGHGWRWKHQHDUHVWWKRXVDQG ¶ H[FHSWZKHQRWKHUZLVHLQGLFDWHG
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140 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
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 2011. The adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group and the Company.
2.3 Standards issued but not yet effective
The Group has not adopted the following standards and interpretations that have been issued but not yet effective:
Effective for annual periods beginning Description on or after
Amendments to FRS 107 Disclosures ± Transfers of Financial 1 July 2011 Assets Amendments to FRS 12 Deferred Tax: Recovery of Underlying 1 January 2012 Assets Amendments to FRS 1: Presentations of Items of Other 1 July 2012 Comprehensive Income Amendments to FRS 19 Employee Benefits 1 January 2013 FRS 27 Separate Financial Statements 1 January 2013 FRS 28 Investments in Associates and Joint Ventures 1 January 2013 FRS 110 Consolidated Financial Statements 1 January 2013 FRS 111 Joint Arrangements 1 January 2013 FRS 112 Disclosure of Interest in Other Entities 1 January 2013 FRS 113 Fair Value Measurements 1 January 2013
Except for FRS 27 and FRS 110, the directors expect that the adoption of the 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 FRS 27 and FRS 110 is described below.
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141 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.3 Standards issued but not yet effective (cont'd)
FRS 110 Consolidated Financial Statements and FRS 27 Separate Financial Statements
FRS 110 replaces the control assessment criteria and consolidation requirements currently in FRS 27 and INT FRS 12 Consolidation ± Special Purpose Entities.
FRS 110 defines the principle of control and establishes control as the basis for determining which entities are consolidated in the consolidated financial statements. It also provides more extensive application guidance on assessing control based on voting rights or other contractual rights. Under FRS 110, control assessment will be based on whether an investor has (i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii) the ability to use its power over the investee to affect the amount of the returns. FRS 27 remains as a standard applicable only to separate financial statements.
FRS 110 will take effect from financial years beginning on or after 1 January 2013, with full retrospective application. When the Group adopts FRS 110, entities it currently consolidates may not qualify for consolidation, and entities it currently does not consolidate may qualify for consolidation. The Group is currently estimating the effects of FRS 110 on its investments in the period of initial adoption.
2.4 Significant accounting estimates and judgements
Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They DIIHFWWKHDSSOLFDWLRQRIWKH*URXS¶VDFFRXQWLQJSROLFLHV reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances.
Judgments made in applying accounting policies
,Q WKH SURFHVV RI DSSO\LQJ WKH *URXS¶V DFFRXQWLQJ SROLFLHV PDQDJHPHQW KDV PDGH WKH 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 FRVW7KHGHWHUPLQDWLRQRIZKDWLV³VLJQLILFDQW´RU³SURORQJHG´UHTXLUHVMXGJPHQW,Q 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.
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142 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.4 Significant accounting estimates and judgements (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 GHWHUPLQDWLRQ LV PDGH 7KH FDUU\LQJ DPRXQW RI WKH *URXS¶V WD[ SD\DEOH DQG deferred tax liabilities at 31 December 2011 were approximately $5,623,000 (2010: $4,402,000) and $2,276,000 (2010: $2,647,000) respectively. The carrying amount RIWKH*URXS¶VWD[UHFRYHUDEOHDQGGHIHUUHGWD[DVVHWVDW'HFHPEHUZDV $230,000 (2010: $9,000) and $2,120,000 (2010: $1,898,000) 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.
(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 WKRVH FDVK IORZV 7KH FDUU\LQJ DPRXQW RI WKH *URXS¶V JRRGZLOO DW 'HFHPEHU 2011 was $6,048,000 (2010: $6,173,000). More details are given in Note 11.
- 23 -
143 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.4 Significant accounting estimates and judgements (cont'd)
(ii) Valuation and estimated useful life of brand value arising from acquisition of a subsidiary, Topwin Investment Holding Pte Ltd ("Topwin")
Brand value 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 (2010: $213,000) for the financial year ended 31 December 2011 and the carrying amount of the brand value at 31 December 2011 was $1,706,000 (2010: $1,919,000). 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 ZLWKLQ WR \HDUV 7KH FDUU\LQJ DPRXQW RI WKH *URXS¶V SURSHUW\ SODQW DQG equipment as at 31 December 2011 was $88,898,000 (2010: $73,306,000). 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.
(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 FUHGLW ULVN FKDUDFWHULVWLFV 7KH FDUU\LQJ DPRXQW RI WKH &RPSDQ\¶V ORDQV DQG receivables at balance sheet date is disclosed in Note 31 to the financial statements.
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144 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.5 Foreign currency
(a) Functional currency
7KH*URXS¶VFRQVROLGDWHGILQDQFLDOVWDWHPHQWVDUHSUHVHQWHGLQ6LQJDSRUH'ROODUV ZKLFK LV DOVR WKH SDUHQW FRPSDQ\¶V IXQFWLRQDO FXUUHQF\ (DFK HQWLW\ LQ WKH *URXS 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 closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet are recognised in profit or loss except for H[FKDQJH GLIIHUHQFHV DULVLQJ RQ PRQHWDU\ LWHPV WKDW IRUP SDUW RI WKH *URXS¶V QHW investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under translation reserve in equity. The translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.
(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 the end of the reporting period 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.
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145 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.6 Related parties
A related party is defined as follows:
(a) A person or a close member RI WKDW SHUVRQ¶V IDPLO\ LV UHODWHG WR WKH *URXS DQG 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).
- 26 -
146 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
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. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.
,Q WKH &RPSDQ\¶V VHSDUDWH ILQDQFLDO VWDWHPHQWV LQYHVWPHQWV LQ VXEVLGLDULHV DUH 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 reporting period. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the parent 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:
De-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost; De-recognises the carrying amount of any non-controlling interest; De-recognises the cumulative translation differences recorded in equity; Recognises the fair value of the consideration received; Recognises the fair value of any investment retained; Recognises any surplus or deficit in profit or loss; Re-FODVVLILHV WKH *URXS¶V VKDUH RI FRPSRQHQWV SUHYLRXVO\ recognised in other comprehensive income to profit or loss or retained earnings, as appropriate.
- 27 -
147 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.7 Subsidiaries, basis of consolidation and non-controlling interests (cont'd)
(b) Basis of consolidatioQDQGEXVLQHVVFRPELQDWLRQV FRQW¶G
(A) Basis of consolidation (cont'd)
Basis of consolidation prior to 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:
Acquisition of non-controlling interests, prior to 1 January 2010, were accounted for using the 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.
Losses incurred by the Group were attributed to the non-controlling interest until the balance was 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.
Upon loss of control, the Group accounted for the investment retained at its proportionate share 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.
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148 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.7 Subsidiaries, basis of consolidation and non-controlling interests (cont'd)
(B) Business combinations (cont'd)
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-FRQWUROOLQJLQWHUHVW¶VSURSRUWLRQDWHVKDUHRI the acquiree identifiable net assets.
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 DFTXLUHH LI DQ\ DQG WKH IDLU YDOXH RI WKH *URXS¶V SUHYLRXVO\ KHOG HTXLW\ interest in the acquiree (if DQ\ RYHU WKH QHW IDLU YDOXH RI WKH DFTXLUHH¶V 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 LQWHUHVW ZDV PHDVXUHG DW WKH SURSRUWLRQDWH VKDUH RI WKH DFTXLUHH¶V 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.
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149 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.7 Subsidiaries, basis of consolidation and non-controlling interests (cont'd)
(B) Business combinations (cont'd)
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.
&KDQJHV LQ WKH &RPSDQ\ RZQHUV¶ RZQHUVKLS LQWHUHVW LQ D VXEVLGLDU\ WKDW GR QRW 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.
2.8 Associates
An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. This generally coincides with the Group having 20% or more of the voting power, or has representation on the board of directors. 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- DFTXLVLWLRQFKDQJHVLQWKH*URXS¶VVKDUHRIQHWDVVHWVRIWKHDVVRFLDWHs. 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 GURXS¶VVKDUHRIWKHQHWIDLUYDOXH RIWKHDVVRFLDWH¶VLGHQWLILDEOHDVVHWVOLDELOLWLHVDQGFRQWLQJHQWOLDELOLWLHVRYHUWKHFRVWRIWKH investment is included as income in the determination RIWKH*URXS¶VVKDUHRIUHVXOWVRIWKH associate in the period in which the investment is acquired.
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150 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.8 Associates (cont'd)
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.
7KH*URXS¶VVKDUHRIWKHSURILW or loss of its associates is shown on the face of profit or loss after tax and non-controlling interests in the subsidiaries of associates.
:KHQ WKH *URXS¶V VKDUH RI ORVVHV LQ DQ DVVRFLDWH HTXDOV RU H[FHHGV LWV LQWHUHVW LQ WKH 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 WKH *URXS¶V LQYestment 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-DFTXLVLWLRQFKDQJHVLQWKH*URXS¶VVKDUHRIQHWDVVHWVRIWKHMRLQWYHQWXUH7KH *URXS¶VVKDUHRIprofit 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 WRWKH*URXS¶VQHWLQYHVWPHQWLQWKHMRLQWYHQWXUH7KHMRLQWYHQWXUHLVHTXLW\DFFRXQWHGIRU from the date the Group obtains joint control until the date the Group ceases to have joint control over the joint venture.
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151 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.9 Joint ventures (cont'd)
$GMXVWPHQWV DUH PDGH LQ WKH *URXS¶V FRQVROLGDWHG ILQDQFLDO VWDWHPHQWV WR HOLPLQDWH WKH *URXS¶V VKDUH RI LQWUDJURXS EDODQFHV LQFRPH DQG H[SHQVHV DQG XQUHDOLVHG JDLQV DQG 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.
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
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152 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.10 Property, plant and equipment (cont'd)
Construction-in-progress is stated at cost. No depreciation is provided for construction-in- progress 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, DOORFDWHGWRHDFKRIWKH*URXS¶VFDVK-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.
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153 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.11 Intangible assets (cont'd)
(a) Goodwill (cont'd)
Impairment losses recognised for goodwill are not reversed in subsequent periods.
Where goodwill forms part of a cash-generating unit 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.
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.
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154 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.11 Intangible assets (cont'd)
(b) Other intangible assets (cont'd)
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. The costs were previously amortised by a fixed amount as and when a new outlet starts operation. Based on a review performed for the year, the Group changed the amortisation method to straight line basis over the remaining useful life of 6 years. The change in estimate resulted in an annual amortisation expense of $102,000 and increased the amortisation expense for the year by $89,000.
(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.
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155 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
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 LVUHTXLUHGWKH*URXSPDNHVDQHVWLPDWHRIWKHDVVHW¶VUHFRYHUDEOHDPRXQW
$Q DVVHW¶V UHFRYHUDEOH DPRXQW LV WKH KLJKHU RI DQ DVVHW¶V RU FDVK-JHQHUDWLQJ XQLW¶V IDLU 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, quoted share prices for publicly traded subsidiaries or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations ZKLFKDUHSUHSDUHGVHSDUDWHO\IRUHDFKRIWKH*URXS¶VFDVK-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, WKH *URXS HVWLPDWHV WKH DVVHW¶V RU FDVK- JHQHUDWLQJXQLW¶Vrecoverable amount. A previously recognised impairment loss is reversed only if there has been a chDQJHLQWKHHVWLPDWHVXVHGWRGHWHUPLQHWKHDVVHW¶VUHFRYHUDEOH 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, in which case the reversal is treated as a revaluation increase.
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156 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
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, as well as 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.
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157 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
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.
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 (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). 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.
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158 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.14 Impairment of financial assets (cont'd)
(a) Financial assets carried at amortised cost (cont'd)
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.
(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 LQYHVWPHQWEHORZLWVFRVWVµ6LJQLILFDQW¶LVWREHHYDOXDWHGDJDLQVWWKHRULJLQDOFRVW RI WKH LQYHVWPHQW DQG µSURORQJHG¶ DJDLQVW WKH SHULRG LQ ZKLFK WKH IDLU YDOXH KDV been below its original cost.
If an available-for-sale financial asset is impaired, an amount comprising the difference between its 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.
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159 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
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.
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160 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
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.
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.
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.
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161 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
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 (³CPF´) scheme in Singapore, a defined contribution pension scheme. The Group makes monthly contributions based on stipulated contribution rates.
3HRSOH¶V5HSXEOLFRI&KLQD 35&
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 UHVSRQVLEOHIRUDGPLQLVWHULQJWKHVHDPRXQWVIRUWKHVXEVLGLDULHV¶35&HPSOR\HHV
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 when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.
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162 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.21 Employee benefits (cont'd)
(c) The BreadTalN5HVWULFWHG6KDUH*UDQW3ODQ ³56*3ODQ´
Employees receive remuneration under the RSG Plan in the form of fully-paid VKDUHV ³$ZDUGV´ RIWKH&RPSDQ\DVFRQVLGHUDWLRQIRUVHUYLFHVUHQGHUHG7KHFRVW 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 WKH&RPSDQ\¶VEHVWHVWLPDWHRIWKHQumber 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.
,Q WKH &RPSDQ\¶V VHSDUDWH ILQDQFLDO VWDWHPHQWV WKH IDLU value of the Awards granted to employees of its subsidiaries is recognised as an increase in the cost of WKH&RPSDQ\¶VLQYHVWPHQWLQVXEVLGLDULHVZLWKDFRUUHVSRQGLQJLQFUHDVHLQHTXLW\
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.
(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 IUDQFKLVHHV¶ UHYHQXH LQ DFFRUGDQFH ZLWK WHUPV DV VWDWHG LQ WKH IUDQFKLVH 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 UHQWDOLQFRPHZKLFKLVFRPSXWHGEDVHGRQDSHUFHQWDJHRIWKHIRRGFRXUWWHQDQWV¶ 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.
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163 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.22 Income recognition (cont'd)
(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 Income taxes
(a) Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date, 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.
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164 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.24 Income taxes (cont'd)
(b) Deferred tax
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and
In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
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:
Where the deferred income tax asset relating to the deductible temporary difference arises from the initial 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
In respect of deductible temporary differences associated with investments in subsidiaries, associates 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.
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165 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
2.24 Income taxes (cont'd)
(b) Deferred tax FRQW¶G
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.
(c) Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax except:
Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
Receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
2.25 Segment reporting
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.
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166 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
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
7KH*URXS¶VRZQHTXLW\LQVWUXPHQWVZKLFK are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the SXUFKDVHVDOHLVVXHRUFDQFHOODWLRQRIWKH*URXS¶VRZQHTXLW\LQVWUXPHQWV$Q\GLIIHUHQFH 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.
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
Group 2011 2010 ¶ ¶
Bakery sales 169,395 137,019 Restaurant sales 76,969 56,253 Sales to franchisee 15,231 12,600 Franchise income 9,807 8,512 Food court income 94,502 88,504
365,904 302,888
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167 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
4. Other operating income
Group 2011 2010 ¶ ¶
Management fee income 4,332 4,642 Government grant (1) 840 1,014 Grant income from Jobs Credit Scheme (2) ± 356 Income from expired food court stored value cards 139 111 Sponsorship income 651 436 Sundry sales 67 221 Compensation from landlord 339 1,721 Rental income ± 226 Agency commission 39 ± Gain on disposal of property, plant and equipment 20 4,568 Miscellaneous income 1,068 893
7,495 14,188
(1) Government grant in relation to business expansion activities undertaken by certain subsidiaries in the PRC.
(2) During the financial year ended 31 December 2009, the Singapore Finance Minister DQQRXQFHGWKHLQWURGXFWLRQRID-REV&UHGLW6FKHPH ³6FKHPH´ 8QGHUWKLV6FKHPH WKH *URXS UHFHLYHG D FDVK JUDQW RQ WKH ILUVW RI HDFK PRQWK¶V ZDJHV IRU each employee on their Central Provident Fund payroll. The Government extended the Scheme with another two payments at stepped-down rates of 6% and 3% in March and June 2010 respectively. During the financial year ended 31 December 2010, the Group received grant income of $356,000 under the Scheme.
5. Interest income and interest expense
Group 2011 2010 ¶ ¶ Interest income from: - loans and receivables 304 143 - held-to-maturity financial assets 520 458
824 601
Interest expense on: - Term loans (754) (603) - Finance lease obligations (3) (8) - Others (28) (24)
(785) (635)
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168 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
6. Profit before taxation
This is determined after charging/(crediting) the following:
Group 2011 2010 ¶ ¶
Audit fees to: - auditors of the Company 307 225 - other auditors 269 235 Non-audit fees to: - auditors of the Company 124 112 - other auditors 62 59 Amortisation of intangible assets (Note 11) 442 408 Impairment/(write back of impairment) of loans and receivables - trade receivables (Note 17) 253 (5) - other receivables (Note 17) 64 3 - amount due from an associate (non-trade) ± 30 'LUHFWRUV¶IHHV 170 124 Depreciation of property, plant and equipment (Note 10) 23,920 21,190 Employee benefits (Note 7) 102,284 84,338 Foreign exchange (gain)/loss, net (58) 368 Loss from misappropriation of funds (1) ± 622 Operating lease expenses - fixed portion 67,340 57,253 - variable portion 7,395 6,776 Property, plant and equipment written off 1,219 2,285 Impairment loss on intangible assets (Note 11) 125 19 Impairment loss on property, plant and equipment (Note 10) 289 761 Write-down of inventories (Note 16) 25 ± Write-off of inventories (Note 16) 31 23
(1) This relates to loss as a result of misappropriation of funds by an employee of a subsidiary.
7. Employee benefits
Group 2011 2010 ¶ ¶
Staff costs (including directors) Salaries and bonuses 76,060 64,122 Central Provident Fund and other pension contributions 7,811 6,990 Sales incentives and commission 2,357 2,533 Share-based payment (RSG Plan) 279 665 Other personnel benefits 15,777 10,028
102,284 84,338
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169 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
7. Employee benefits (cont'd)
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, 681,000 (2010: 1,356,539) restricted shares were granted. The number of restricted shares outstanding at year end is 1,233,336 (2010: 1,105,763) shares.
8. Taxation
Major components of income tax expense were:
Group 2011 2010 ¶ ¶ Current tax - Current year 5,280 5,596 - (Over)/under provision in prior year (129) (503)
Deferred tax - Origination and reversal of temporary differences (269) (93) - Under/(over) provision in prior year (156) 205
Withholding tax 644 315
Taxation expense 5,370 5,520
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170 BreadTalk Group Limited and its Subsidiaries
Notes to the Financial Statements - 31 December 2011
8. Taxation (cont'd)
A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax rate for the year ended 31 December is as follows:
Group 2011 2010 ¶ ¶
Profit before taxation 17,127 16,688
Tax at the domestic rates applicable to profits in the countries where the Group operates(1) 2,821 2,853
Tax effect of: Expenses not deductible for tax purposes 1,592 1,249 Income not subject to taxation (37) (64) Share of associates' and joint ventures' tax 68 (70) Tax savings arising from development and expansion incentive (2) (222) (189) (Over)/under provision in prior years - Current tax (129) (503) - Deferred tax (156) 205 Withholding tax expense 644 315 Effect of partial tax exemption and tax relief (93) (62) Deferred tax assets not recognised 1,829 1,967 Benefits from previously unrecognised deferred tax assets (434) (64) Tax savings from enhanced deductions (3) (483) (78) Others (30) (39)
Taxation expense 5,370 5,520
(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 scKHPH ³3,&´ 7KH3,&LVDYDLODEOHIRU - 51 - 171 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 8. Taxation (cont'd) Deferred income tax as at 31 December relates to the following: Group Company Balance sheet Profit or loss Balance sheet 2011 2010 2011 2010 2011 2010 ¶ ¶ ¶ ¶ ¶ ¶ Deferred tax liabilities: Differences in depreciation for tax purposes (1,941) (2,383) (442) 1,035 ± ± Provisions ± ± ± 43 ± ± Dividend income (168) (186) (17) 81 ± ± Other items (167) (78) 89 78 ± ± (2,276) (2,647) ± ± Deferred tax assets: Provisions 1,426 920 (342) (444) ± ± Differences in depreciation for tax purposes 640 693 57 (388) (4) ± Unutilised tax losses ± 265 264 (273) ± ± Other items 54 20 (34) (20) (14) 12 2,120 1,898 (18) 12 Deferred income tax (425) 112 Unrecognised tax losses, capital allowances and other temporary differences As at 31 December 2011, the Group has tax losses of approximately $19,634,000 (2010: $12,721,000), unutilised capital allowances of approximately $198,000 (2010: $410,000) and other temporary differences of approximately $3,546,000 (2010: $2,714,000) 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 2011, $13,872,000 (2010: $8,765,000) of the unrecognised tax losses will expire between 1 and 10 years. 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 SHUVKDUHLVFDOFXODWHGE\GLYLGLQJWKH*URXS¶VSURILWIRUWKH\HDUDWWULEXWDEOH to ordinary equity holders of the Company of $11,592,000 (2010: $11,266,000) by the weighted average number of ordinary shares, excluding treasury shares, of 281,197,676 (2010: 281,052,253) in issue during the year. 'LOXWHG HDUQLQJV SHU VKDUH LV FDOFXODWHG E\ GLYLGLQJ WKH *URXS¶V SURILW IRU WKH \HDU attributable to ordinary equity holders of the Company of $11,592,000 (2010: $11,266,000) 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 282,392,002 (2010: 282,153,201). - 52 - 172 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 10. Property, plant and equipment Machinery Leasehold Leasehold and Electrical Furniture Office property land equipment works and fittings equipment Group ¶ ¶ ¶ ¶ ¶ ¶ Cost As at 1.1.2010 8,391 ± 21,869 16,072 19,496 5,040 Additions ± 4,462 6,168 5,514 5,412 1,120 Reclassifications ± 685(2) 1,007 ± ± 157 Write offs ± ± (734) (334) (383) (113) Disposals (4,925) ± (287) ± (15) (8) Translation difference (278) ± (512) (499) (981) (140) As at 31.12.2010 and 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 ± ± (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 3,328 5,147 31,881 24,333 25,989 7,303 Accumulated depreciation and impairment losses As at 1.1.2010 1,613 ± 10,626 7,134 8,211 2,752 Charge for the year 375 ± 3,685 3,272 3,955 982 Reclassifications ± ± (49) ± ± 53 Write offs ± ± (512) (307) (255) (99) Disposals (1,071) ± (174) ± (7) (3) Impairment loss for the year ± ± 112 42 196 ± Translation difference (61) ± (181) (241) (461) (81) As at 31.12.2010 and 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 1,046 ± 17,186 12,737 13,917 4,204 Net carrying amount As at 31.12.2010 2,332 5,147 14,004 10,853 11,890 2,452 As at 31.12.2011 2,282 5,147 14,695 11,596 12,072 3,099 - 53 - 173 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 10. Property, plant and equipment (cont'd) Motor Construction Renovation (1) vehicles -in-progress Total ¶ ¶ ¶ ¶ Group Cost As at 1.1.2010 39,127 1,656 3,302 114,953 Additions 15,941 498 53 39,168 Reclassifications 124 ± (1,288) 685 Write offs (5,322) (1) (2) (6,889) Disposals (1,773) (836) (5) (7,849) Translation difference (1,198) (31) (107) (3,746) As at 31.12.2010 and 1.1.2011 46,899 1,286 1,953 136,322 Additions 13,431 125 10,144 40,033 Reclassifications 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 56,539 1,397 11,718 167,635 Accumulated depreciation and impairment losses As at 1.1.2010 19,346 919 ± 50,601 Charge for the year 8,642 279 ± 21,190 Reclassifications (4) ± ± ± Write offs (3,431) ± ± (4,604) Disposals (1,475) (605) ± (3,335) Impairment loss for the year 411 ± ± 761 Translation difference (554) (18) ± (1,597) As at 31.12.2010 and 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 28,880 767 ± 78,737 Net carrying amount As at 31.12.2010 23,964 711 1,953 73,306 As at 31.12.2011 27,659 630 11,718 88,898 (1) Additions in renovation for the year include provision for reinstatement costs of $2,461,000 (2010: $536,000). (2) The advance payment of land premium in 2009 was reclassified from prepayment during 2010. - 54 - 174 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 10. Property, plant and equipment (cont'd) Assets held under finance leases As at 31 December 2011, the net carrying amount of property, plant and equipment acquired under finance leases are as follows: Group 2011 2010 ¶ ¶ Machinery and equipment 106 152 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. The residual value of these assets has been assessed as nil. Assets pledged as security In addition to assets held under finance OHDVHVWKH*URXS¶VOHDVHKROGODQG with a carrying amount of $5,147,000 (2010: $5,147,000) is pledged to secure the Company¶V EDQN ORDQ (Note 25). Impairment of assets The impairment loss of $289,000 (2010:$761,000) recognised LQ³$GPLQLVWUDWLYHH[SHQVHV´ in profit or loss during the year comprised impairment loss on property, plant and equipment of certain food stalls which have been persistently incurring losses. - 55 - 175 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 10. Property, plant and equipment (cont'd) Cons- Furniture truction- and Electrical Office Leasehold in- fittings works equipment land progress Total ¶ ¶ ¶ ¶ ¶ ¶ Company Cost As at 1.1.2010 1 ± 127 ± 35 163 Additions ± ± 23 4,462 539 5,024 Reclassification ± ± ± 685(2) ± 685 As at 31.12.2010 and 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 16 3 173 5,147 2,027 7,366 Accumulated depreciation As at 1.1.2010 ± ± 62 ± ± 62 Charge for the year 1 ± 43 ± ± 44 As at 31.12.2010 and 1.1.2011 1 ± 105 ± ± 106 Charge for the year 6 1 31 ± ± 38 As at 31.12.2011 7 1 136 ± ± 144 Net carrying amount As at 31.12.2010 45 5,147 574 5,766 ± ± As at 31.12.2011 9 2 37 5,147 2,027 7,222 - 56 - 176 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 11. Intangible assets Group Brand Trade Franchise Location Goodwill value mark rights premium Total ¶ ¶ ¶ ¶ ¶ ¶ Cost As at 1.1.2010 6,173 3,209 790 1,182 505 11,859 Additions ± ± 22 477 ± 499 Translation difference ± ± ± (29) ± (29) As at 31.12.2010 and 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 6,173 3,209 814 2,201 505 12,902 Accumulated amortisation and impairment losses As at 1.1.2010 ± 1,077 627 553 505 2,762 Amortisation ± 213 79 116 ± 408 Impairment loss ± ± ± 19 ± 19 Translation difference ± ± ± (2) ± (2) As at 31.12.2010 and 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 125 1,503 758 797 505 3,688 Net carrying amount As at 31.12.2010 6,173 1,919 106 944 ± 9,142 As at 31.12.2011 6,048 1,706 56 1,404 ± 9,214 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 8 years (2010: 9 years), 1 to 5 years (2010: 1 to 5 years) and 1 to 5 years (2010: 1 to 5 years) as at 31 December 2011 respectively. In the previous year, a subsidiary impaired its intangible assets of $19,000 as it had ceased operations. AmortisatiRQH[SHQVHLVLQFOXGHGLQ³$GPLQLVWUDWLYHH[SHQVHV´LQSURILWRIORVV - 57 - 177 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 11. ,QWDQJLEOHDVVHWV FRQW¶G 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 Carrying Pre-tax Pre-tax amount as amount as discount discount at 31 at 31 rate rate December December 2011 2010 2011 2010 ¶ ¶ Shanghai segment 3,569 3,569 11.5% 10.6% Beijing segment 1,009 1,009 11.5% 10.6% ML Breadworks Sdn Bhd 202 327 8.5% 10.6% Food court operation at Wisma Atria, Singapore 1,268 1,268 8.5% 10.6% 6,048 6,173 The recoverable amount is determined based on a value in use calculation using the cash flow projections based on financial budgets approved by management covering a 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. - 58 - 178 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 11. ,QWDQJLEOHDVVHWV FRQW¶G 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 UHWXUQ RQ LQYHVWPHQW E\ WKH *URXS¶V LQYHVWRUV 7KH FRVW RI GHEW LV EDVHG RQ WKH LQWHUHVW 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 $125,000 (2010: $Nil) on ML Breadworks Sdn Bhd was UHFRJQLVHG LQ ³$GPLQLVWUDWLYH H[SHQVHV´ LQ SURILW RU ORVV IRU WKH ILQDQFLDO \HDU HQGHG December 2011 as the recoverable amount was less than the carrying value. 12. Investment securities Group 2011 2010 ¶ ¶ Available-for-sale financial assets - Equity instruments (quoted) 919 919 - Redeemable preference shares (unquoted) * * Held-to-maturity investments - 8% SGD junior bonds due on 29 January 2015 10,750 10,750 11,669 11,669 * less than $1,000 Junior bonds and redeemable preference shares 2Q-DQXDU\WKHVXEVLGLDU\,PDJLQH3URSHUWLHV3WH/WG ³,33/´ WRJHWKHUZLWKRWKHU LQYHVWRUVHQWHUHGLQWRDVXEVFULSWLRQDJUHHPHQWZLWK35(,QYHVWPHQWV3WH/WG ³35( for the subscription of junior bonds and attached redeemable preference shares in the capital of PRE 1,33/¶VVXEVFULSWLRQZDVLQSULQFLSDODPRXQWRIMXQLRUERQGV together with 43 preference shares at $0.10 per share, representing approximately 6.98% of the total aggregate value of the junior bonds and the preference shares issued by PRE 1. PRE 1 is the sole unitholder of the Perennial Katong Retail Trust which had acquired the .DWRQJ0DOO ³SURSHUW\´ - 59 - 179 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 12. Investment securities (cont'd) 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. 13. Investment in subsidiaries Company 2011 2010 ¶ ¶ Unquoted equity shares at cost 28,289 28,289 Loans to subsidiaries 11,950 10,750 Share based compensation reserve 237 127 40,476 39,166 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: Proportion of Country of ownership Name incorporation Principal activities interest 2011 2010 % % Held by the Company BreadTalk Pte Ltd (1) Singapore Bakers and 100 100 manufacturers of and dealers in bread, flour and biscuits BreadTalk International Singapore Investment holding 100 100 Pte Ltd (1) Topwin Investment Singapore Investment holding 100 100 Holding Pte Ltd (1) Star Food Pte Ltd (1) Singapore Investment holding 60 60 Imagine Properties Pte Singapore Investment holding 100 100 Ltd (1) Together Inc. Pte Ltd (8) Singapore Investment holding 100 100 - 60 - 180 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 13. Investment in subsidiaries (cont'd) Proportion of Country of ownership Name incorporation Principal activities interest 2011 2010 % % Held through subsidiaries Taster Food Pte Ltd (1) Singapore Operators of food and 70 70 drinks outlets, eating houses and restaurants Charcoal Pte Ltd (1) Singapore Dormant 75 75 Shanghai BreadTalk Co., 3HRSOH¶V Bakers and 100 100 Ltd (2) Republic of manufacturers of and China dealers in bread, flour and biscuits Shanghai BreadTalk 3HRSOH¶V Management of food 100 100 Gourmet Co., Ltd (2) Republic of and beverage, China manufacture and retail of bakery, confectionery products Beijing BreadTalk 3HRSOH¶V Management of food 100 100 Restaurant Management Republic of and beverage, Co., Ltd (2) China manufacture and retail of bakery, confectionery products Beijing BreadTalk Co.,Ltd 3HRSOH¶V Manufacture and sale of 100 100 (2) Republic of bakery and China confectionery products Food Republic 3HRSOH¶V Food court operator 100 100 (Shanghai) Co., Ltd (2) Republic of China Beijing Da Shi Dai Food 3HRSOH¶V Food court operator 100 100 and Beverage Co., Ltd (2) Republic of China Chongqing Food 3HRSOH¶V Food court operator 100 100 Republic Food & Republic of Beverage Co., Ltd (3) China - 61 - 181 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 13. Investment in subsidiaries (cont'd) Proportion of Country of ownership Name incorporation Principal activities interest 2011 2010 % % Held through subsidiaries (cont'd) Megabite Hong Kong Hong Kong Food court operator 85 85 Limited (4) Megabite (S) Pte Ltd (1) Singapore Investment holding 100 100 Food Republic Pte Ltd (1) Singapore Food court operator 100 100 BreadTalk (Thailand) Thailand Management of food 49 49 Company Limited (5)(14) and beverage, manufacture and retail of bakery, confectionery products Megabite Eatery (M) Sdn Malaysia Operator of food and 100 100 Bhd (6) beverage outlets BreadTalk Concept Hong Hong Kong Management of food 85 85 Kong Limited (4) and beverage, manufacture and retail of bakery, confectionery products ML Breadworks Sdn Bhd Malaysia Bakers and 90 90 (7) manufacturers of and dealers in bread, flour and biscuits MWA Pte Ltd (1) Singapore Dormant 100 100 Food Art Pte Ltd (1) Singapore Operators of food and 100 100 beverage outlets Shanghai Star Food F&B 3HRSOH¶V Operators of restaurants 60 60 Management Co., Ltd (2) Republic of (Note (a)) China Beijing Star Food F&B 3HRSOH¶V Operators of restaurants 60 60 Management Co., Ltd (9) Republic of China Ramen Play Pte Ltd (8) Singapore Operators of restaurants 60 60 Shanghai Ramen Play 3HRSOH¶V Operators of restaurants 60 60 Co., Ltd (3) Republic of (Note (a)) China - 62 - 182 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 13. Investment in subsidiaries (cont'd) Proportion of Country of ownership Name incorporation Principal activities interest 2011 2010 % % Held through subsidiaries (cont'd) Taster Food International Singapore Investment holding 63 63 Pte Ltd (8) Taster Food (Thailand) Thailand Operators of restaurants 31 31 Co. Limited (11)(14) Food Republic Hangzhou 3HRSOH¶V Food court operator 100 100 F&B Co.,Ltd (3) Republic of China Food Republic Shenzhen 3HRSOH¶V Food court operator 85 85 F&B Management Republic of Co.,Ltd (10) China Food Republic 3HRSOH¶V Food court operator 64 ± Guangzhou F&B Republic of Management Co., Ltd (13) China (Note (a)) Food Republic Taiwan Taiwan Food court operator 90 ± Co., Ltd (12) (Note (a)) FR (Thailand) Co., Ltd (11) Thailand Food court operator 49 ± (Note (a)) (1) Audited by Ernst & Young LLP, Singapore (2) Audited by member firms of Ernst & Young Global in the respective countries (3) Audited by Shanghai Xin Gao Xin Certified Public Accountants Co., Ltd, People's Republic of China (4) Audited by S.F. Kwok & Co. Certified Public Accountants, Hong Kong (5) Audited by CNN & S Co., Ltd, Thailand (6) Audited by RSM Robert Teo, Kuan & Co., Malaysia (7) Audited by C L Chong & Co., Malaysia (8) Audited by Trustnet Alliance, Singapore (9) $XGLWHGE\%HLMLQJ'D[LQJ&HUWLILHG3XEOLF$FFRXQWDQWV&R/WG3HRSOH¶V5HSXEOLFRI China (10) Audited by Shenzhen Zhigong Certified Public Accountants, 3HRSOH¶V 5HSXEOLF RI China (11) Audited by Phattarakit Aupliting Office Co.,Ltd, Thailand (12) Audited by KPMG, Taiwan (13) Audited by Guangzhou Dagong Certified 3XEOLF $FFRXQWDQWV 3HRSOH¶V 5HSXEOLF RI China (14) Considered a subsidiary of the Company as the Company has voting control at general meetings and Board meetings - 63 - 183 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 13. Investment in subsidiaries (cont'd) (a) New subsidiaries and additional investments 6KDQJKDL6WDU)RRG) %0DQDJHPHQW&R/WG ³6KDQJKDL6WDU)RRG´ During the year, Star Food Pte Ltd, a 60% owned subsidiary of the Group, subscribed for the additional share capital of its wholly owned subsidiary, Shanghai Star Food, of 1,600,000 new ordinary shares for a cash consideration of US$1,600,000 ($1,937,000). Food Republic Taiwan Co., Ltd ³Food Republic Taiwan´ Food Republic Taiwan was incorporated as a 90% owned subsidiary of Topwin ,QYHVWPHQW+ROGLQJ3WH/WG ³7RSZLQ´ DZKROO\-owned subsidiary of the Group in March 2011 with a registered capital and paid up capital of NT$5,000,000 ($215,000). Shanghai Ramen 3OD\&R/WG ³6KDQJKDL5DPHQ3OD\´ During the year, Shanghai BreadTalk Co., Ltd and Food Republic (Shanghai) Co., Ltd, subscribed for 30% each of the additional share capital issued by Shanghai Ramen Play for a total cash consideration of US$750,000 ($969,000). The Company retains an effective interest of 60% in Shanghai Ramen Play. Food Republic Guangzhou F&B Management &R/WG ³)ood Republic Guangzhou´ Food Republic Guangzhou was incorporated as a 75% owned subsidiary of Megabite Hong Kong Limited, a 85% owned subsidiary of the Group, in June 2011 with a registered and paid up capital of HK$1,,000,000 ($157,000). )5 7KDLODQG &R/WG ³)57KDLODQG During the year, Topwin subscribed for a 49% interest in FR Thailand for a cash consideration of THB 2,450,000 ($104,000). FR Thailand was incorporated in July 2011 with a paid up capital of THB 5,000,000 ($210,000). FR Thailand has not commenced operations as at 31 December 2011. FR Thailand is consolidated as a subsidiary as the Company has voting control at general meetings and Board meetings. - 64 - 184 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 14. Investment in associates Group 2011 2010 ¶ ¶ Investment in shares, unquoted Shares, at cost 1,252 1,252 Impairment loss (385) (385) Loan to an associate 614 614 Share of post-acquisition results of associates (1,481) (1,481) At end of year ± ± 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: Country of Proportion of Name incorporation Principal activities ownership interest 2011 2010 % % Held through subsidiaries Hong Kong BreadTalk Ltd Hong Kong Dormant 25 25 ³+.%7´ (1) Out of The Box Pte Ltd Singapore Dormant 30 30 ³227%´ (1) (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 OOTB where its share of losses H[FHHGV WKH *URXS¶V LQWHUHVW LQ WKHVH DVVRFLDWHV 7KH *URXS¶V FXPXODWLYH VKDUH RI unrecognised losses as at 31 December 2011 was $375,000 (2010: $402,000). The Group has no obligation in respect of these losses. - 65 - 185 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 14. ,QYHVWPHQWLQDVVRFLDWHV FRQW¶G The summarised financial information of the associates, not adjusted for the proportion of ownership interest held by the Group, is as follows: Group 2011 2010 ¶ ¶ Assets and liabilities Total assets 188 105 Total liabilities 3,486 3,435 Results Net profit/(loss) for the year 88 (69) 15. Investment in joint ventures Group 2011 2010 ¶ ¶ Investment in shares, unquoted Shares, at cost 434 334 Share of post-acquisition results of joint ventures 18 125 Exchange difference (30) (13) 422 446 - 66 - 186 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 15. Investment in joint ventures (cont'd) Details of the joint ventures are as follows: Country of Proportion of Name incorporation Principal activities ownership interest 2011 2010 % % Held through subsidiaries Shanghai Hong Bu Rang 3HRSOH¶V Dormant 50 50 Food & Beverage Republic of Management Co., Ltd (1) China Apex Excellent Sdn Bhd (2) Malaysia Food court operator 50 50 Street Food Pte Ltd (3) Singapore Food court operator 50 50 (1) Audited by Shanghai Xin Gao Xin Certified Public Accountants Co., Ltd, People's Republic of China (2) Audited by RSM Robert Teo, Kuan & Co., Malaysia (3) Audited by Ernst & Young LLP, Singapore Additional investment During the year, a wholly owned subsidiary, Food Republic Pte Ltd., increased its shareholding in Street Food Pte Ltd ("Street Food") by subscribing for additional 99,999 new ordinary shares of $1.00 each. The consideration for the new ordinary shares was satisfied by capitalizing part of the existing shareholders' loan owing by Street Food to the shareholders. 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: Group 2011 2010 ¶ ¶ Assets and liabilities Current assets 2,000 1,751 Non-current assets 827 150 Total assets 2,827 1,901 - 67 - 187 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 15. Investment in joint ventures (cont'd) Group 2011 2010 ¶ ¶ Current liabilities 2,431 1,481 Non-current liabilities 2 ± Total liabilities 2,433 1,481 Results Revenue 2,579 2,265 Other income 459 324 Expenses (2,945) (2,472) Profit for the year 93 117 The Group has not recognised losses relating to Shanghai Hong Bu Rang where its share of losses exceeGVWKH*URXS¶VLQWHUHVWLQWKLVMRLQWYHQWXUH7KH*URXS¶VFXPXODWLYHVKDUHRI unrecognised losses as at 31 December 2011 was $153,000 (2010: $153,000). The Group has no obligation in respect of these losses. 16. Inventories Group 2011 2010 ¶ ¶ Balance sheet: Raw materials and consumables, at cost 6,252 5,392 Semi-finished goods 648 444 Finished goods 300 137 Base inventories (1) 197 141 Total inventories at lower of cost and net realisable value 7,397 6,114 (1) This is stated after writing down 50% of the original cost of base inventories Group 2011 2010 ¶ ¶ Profit or loss: Inventories recognised as an expense in cost of sales 106,417 85,492 Inclusive of the following charge: - Write-down of inventories 25 ± - Write-off of inventories 31 23 - 68 - 188 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 17. Trade and other receivables Group Company 2011 2010 2011 2010 ¶ ¶ ¶ ¶ Trade and other receivables (current): Trade receivables 7,730 5,203 ± ± Other receivables 7,369 3,930 ± 26 Deposits 31,701 16,212 ± ± 46,800 25,345 26 ± Other receivables (non- current): Other receivables 1,389 857 ± ± Trade receivables Trade receivables are non-interest bearing and are generally on 15 to 60 days terms (2010: 30 to 90 days). They are recognised at their original invoice amounts which represents their fair values on initial recognition. Trade receivables denominated in foreign currencies at 31 December are as follows:- Group 2011 2010 ¶ ¶ United States Dollar 638 339 Euro 17 25 655 364 - 69 - 189 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 17. Trade and other receivables (cont'd) Receivables that are past due but not impaired The Group has trade receivables amounting to $3,661,000 (2010: $1,385,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows: Group 2011 2010 ¶ ¶ Trade receivables past due: Lesser than 30 days 2,076 495 30 to 60 days 456 256 61 to 90 days 390 205 91 to 120 days 79 89 More than 120 days 660 340 3,661 1,385 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: Group Individually impaired 2011 2010 ¶ ¶ Trade receivables ± nominal amounts 361 167 Less: Allowance for impairment (361) (120) ± 47 Movement in allowance accounts: At 1 January 120 125 Charge/(write back) during the year 253 (5) Written off during the year (13) ± Translation difference 1 ± At 31 December 361 120 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. - 70 - 190 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 17. Trade and other receivables (cont'd) Other receivables Other receivables (current) are non-interest bearing and are generally on 0 to 60 days terms (2010: 30 to 180 days). Other receivables that are past due but not impaired The Group has other receivables amounting to $2,307,000 (2010: $1,169,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows: Group 2011 2010 ¶ ¶ Other receivables past due: Lesser than 30 days 1,246 366 30 to 60 days 58 313 61 to 90 days 159 303 91 to 120 days 4 41 More than 120 days 840 146 2,307 1,169 Other receivables that are impaired / partially impaired 7KH *URXS¶V RWKHU UHFHLYDEOHV WKDW DUH LPSDLUHG DW WKH EDODQFH VKHHW date and the movement of the allowance accounts used to record the impairment are as follows: Group 2011 2010 ¶ ¶ Other receivables ± nominal amounts 82 277 Less: Allowance for impairment (82) (275) ± 2 Movement in allowance accounts: At 1 January 275 272 Charge during the year 64 3 Written off during the year (259) ± Translation difference 2 ± At 31 December 82 275 Deposits Deposits include an amount of $12,000,000 (2010: $Nil) for the subscription of junior bonds UHODWLQJWRWKH*URXS¶VLQYHVWPHQWLQDUHWDLOSURSHUW\WUXVWLQ6LQJDSRUH - 71 - 191 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 18. Amounts due from/to subsidiaries, joint ventures and minority shareholders of subsidiaries (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 $20,000 (2010: $1,881,000) which are repayable on demand; (ii) loans from subsidiaries of $7,378,000 (2010: $8,750,000). $7,000,000 and $378,000 are unsecured and repayable on demand. (i) loan to a subsidiary of $12,000,000 (2010: Nil) which bears an effective interest rate of 2.06% (2010: Nil) per annum and is repayable on demand Amounts due from subsidiaries include dividend receivable of $2,200,000 (2010: $3,000,000). The amounts due from minority shareholders of subsidiaries are unsecured, non-interest bearing and repayable on demand. Group Receivables that are past due but not impaired Amount due from joint ventures (non-trade) Group 2011 2010 ¶ ¶ Lesser than 30 days 125 47 30 to 60 days 38 15 61 to 90 days 24 15 91 to 120 days 26 ± More than 120 days 975 _ Total as at 31 December 1,188 77 Company Receivables that are past due but not impaired Amounts due from subsidiaries (non-trade) Company 2011 2010 ¶ ¶ Lesser than 30 days 8 7 30 to 60 days 4 ± 61 to 90 days ± 3 91 to 120 days ± ± More than 120 days 30 27 Total as at 31 December 114 37 - 72 - 192 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 19. Cash and cash equivalents Group Company 2011 2010 2011 2010 ¶ ¶ ¶ ¶ Fixed deposits 7,295 784 2,000 ± Cash on hand and at bank 79,765 70,360 698 2,947 87,060 71,144 2,698 2,947 Fixed deposits of the Group and the Company have varying maturity periods between 1 week to 1 month (2010: 12 months) with effective interest rates ranging from 0.11% to 0.88% (2010: 1.71% to 2.25%) per annum. Cash and cash equivalents denominated in foreign currencies at 31 December are as follows: Group Company 2011 2010 2011 2010 ¶ ¶ ¶ ¶ United States Dollar 1,193 1,455 34 35 20. Trade and other payables Group Company 2011 2010 2011 2010 ¶ ¶ ¶ ¶ Trade and other payables (current): Trade payables 22,896 18,114 ± ± Other payables 38,699 32,549 250 489 Sales collection on behalf of tenants 12,392 10,100 ± ± Amount due landlord (non-trade) 87 83 ± ± 74,074 60,846 250 489 Other payables (non-current): Amount due to landlord (non- trade) 59 ± ± ± - 73 - 193 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 20. Trade and other payables (cont'd) Trade payables/other payables These amounts are non-interest bearing. Trade payables are normally settled on 0 to 60 days terms (2010: 30 to 90 days terms) while other payables have an average term of 0 to 90 days term (2010: 30 to 90 days terms), except for retention sums which have repayment terms of up to 1 year. Other payables of the Group include food court tenant and stored value card deposits of $12,866,000 (2010: $12,516,000), amount payable for the purchase of property, plant and equipment of $10,358,000 (2010: $9,863,000) and dividend payable to minority shareholders of a subsidiary of $Nil (2010: $820,000). 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: Group 2011 2010 ¶ ¶ United States Dollar 241 232 Others 17 35 258 267 21. Other liabilities and provision Group Company 2011 2010 2011 2010 ¶ ¶ ¶ ¶ Other liabilities: Current Accrued operating expenses 25,318 21,579 2,115 1,845 Deferred revenue 14,496 9,916 ± ± Deferred rent 1,310 892 ± ± 41,124 32,387 2,115 1,845 Non-current Deferred rent 7,039 5,759 ± ± - 74 - 194 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 21. Other liabilities and provision (cont'd) Provision: Provision for reinstatement costs 2011 2010 Group ¶ ¶ At 1 January 3,536 3,061 Additions 2,461 536 Utilisation (126) (61) Total as at 31 December 5,871 3,536 22. Loans from minority shareholders of subsidiaries The loans from minority shareholders of subsidiaries are unsecured, non-interest bearing and repayable on demand except for loans of $882,000 (2010: Nil) which are not expected to be repaid on the next twelve months. 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: Group Total Total minimum Present minimum Present lease value of lease value of payments payments payments payments 2011 2011 2010 2010 ¶ ¶ ¶ ¶ Not later than one year 38 37 56 54 Later than one year but not later than five years ± ± 38 37 Total minimum lease payments 38 37 94 91 Less: amounts representing finance charges (1) ± (3) ± Present value of minimum lease payments 37 37 91 91 The leases have options to purchase at the end of the lease term. The effective interest rates of the leases are 2.20% (2010: 2.20%) per annum. Lease terms do not contain restrictions concerning dividends, additional debt or further leasing. - 75 - 195 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 24. Short-term loans Group Company 2011 2010 2011 2010 ¶ ¶ ¶ ¶ Bank loans - SGD 12,000 ± 12,000 ± - USD ± 778 ± ± - HKD 1,505 2,157 ± ± - RMB 1,409 1,763 ± ± - RM 203 ± ± ± - NTD 647 ± ± ± 15,764 4,698 12,000 ± The effective interests on these short-term loans range from 1.13% to 6.71% (2010: 1.86% to 7.72%) 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 (2010: 3 to 6 months). Short term loans of $1,320,000 (2010: $1,945,000) are secured by continuing guarantees by the Company and certain subsidiaries of the Group. All other short term loans except for a loan of $12,000,000 (2010: Nil) are secured by continuing guarantees by the Company. 25. Long-term loans Group Company Term loans Maturity 2011 2010 2011 2010 ¶ ¶ ¶ ¶ SGD loans 2012 - 2014 5,261 4,238 ± ± SGD loan Note 1 3,989 3,989 3,989 3,989 HKD loans 2012 - 2015 738 1,366 ± ± HKD loans 2012 ± 2015 (Note 3) 1,403 1,849 ± ± RMB loans 2012 ± 2015 2,965 1,959 ± ± (Note 3) RM loan 2012 - 2014 1,830 176 ± ± RM loan Note 2 182 286 ± ± THB loans 2012 - 2016 3,517 486 ± ± NTD loan 2015 3,667 _ ± 23,552 14,349 3,989 3,989 Current 8,396 6,232 ± ± Non-current 15,156 8,117 3,989 3,989 23,552 14,349 3,989 3,989 - 76 - 196 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 25. Long-term loans (cont'd) Note 1 ± the loan will be converted to a 15-year term loan within 3 months of the Temporary 2FFXSDWLRQ 3HUPLW 723 RI WKH *URXS¶V operations Headquarters or 30 April 2012, whichever is earlier. Note 2 ± the loan is repayable by 36 monthly instalments upon full drawdown of the loan to a specified sum. All the loans are floating rate loans with effective interest rates ranging from 1.25% to 7.29% (2010: 1.63% to 6.11%) per annum. The interest rates of these floating rate loans are repriced from time to time at the discretion of the respective banks. Securities Note 1 ± Term loan of $3,989,000 (2010: $3,989,000) is secured by a charge over the &RPSDQ\¶VOHDVHKROGODQG Note 3 ± Term loans of $4,368,000 (2010: $3,808,000) are secured by continuing guarantees by the Company and certain subsidiaries of the Group. All other term loans are secured by continuing guarantees by the Company. 26. Share capital and treasury shares (a) Share capital Group and Company 2011 2010 Number of Number of shares $'000 shares $'000 Issued and fully paid ordinary shares At beginning of the year 281,893,238 33,303 234,911,034 33,303 Allotment of bonus shares ± ± 46,982,204 ± At 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. On 30 March 2010, the Company issued bonus shares on the basis of one bonus share for every five existing ordinary shares. - 77 - 197 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 26. Share capital and treasury shares (cont'd) (b) Treasury shares Group and Company 2011 2010 Number of Number of shares $'000 shares $'000 At beginning of the year 580,582 (199) 970,000 (283) Acquired during the financial year 1,090,000 (558) 500,000 (259) Allotment of bonus shares ± ± 194,000 ± Treasury shares transferred on vesting of restricted share grant (432,892) 148 (1,083,418) 343 At end of the year 1,237,690 (609) 580,582 (199) Treasury shares relate to ordinary shares of the Company that is held by the Company. The Company acquired 1,090,000 (2010: 500,000) shares in the Company through purchases on the Singapore Exchange during the financial year. The total amount paid to acquire the shares was $558,000 (2010: $259,000) and this was presented as a FRPSRQHQWZLWKLQVKDUHKROGHUV¶HTXLW\ The Company reissued 432,892 (2010: 1,083,418) treasury shares pursuant to its restricted share grant at a weighted average share price of approximately $0.32 (2010: $0.32) each. - 78 - 198 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 27. Accumulated profits and other reserves Accumulated profits Included LQWKH*URXS¶VDFFXPXODWHGSURILWVLVDQDPRXQWRI$1,432,000 (2010: $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 Company Note 2011 2010 2011 2010 ¶ ¶ ¶ ¶ Other reserves Statutory reserve fund (a) 2,382 2,071 ± ± Translation reserve (b) 189 (722) ± ± Fair value adjustment (c) reserve 604 604 ± ± Share-based compensation reserve 357 247 357 247 Capital reserve (d) 186 168 186 168 3,178 2,368 543 415 (a) Statutory reserve fund In accordance with the Foreign Enterprise Law applicable to subsidiaries in the 3HRSOH¶V 5HSXEOLF RI &KLQD 35& WKH VXEVLGLDULHV DUH UHTXLUHG WR PDNH 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 WKH65)UHDFKHVRIWKHVXEVLGLDULHV¶UHJLVWHUHGFDSLWDO6XEMHFWWRWKHDSSURYDO 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 IXQFWLRQDOFXUUHQFLHVDUHGLIIHUHQWIURPWKDWRIWKH*URXS¶VSUHVHQWDWLRQFXUUHQF\ - 79 - 199 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 27. Accumulated profits and other reserves FRQW¶G (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. Group 2011 2010 ¶ ¶ Net loss on available-for-sale financial assets: - Net loss on fair value changes during the financial year ± 574 (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 GLVWULEXWLRQ ZKHWKHULQFDVKRURWKHUZLVH RIWKH&RPSDQ\¶VDVVHWV LQFOXGLQJDQ\ 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 Company 2011 2010 2011 2010 ¶ ¶ ¶ ¶ Commitment in respect of property, plant and equipment 49,355 1,952 47,324 1,834 Commitment in respect of investment securities 6,000 ± ± ± Commitment for capital contribution in a joint venture 2,372 ± ± ± 6KDUHKROGHU¶VORDQWRD joint venture ± 600 ± ± - 80 - 200 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 28. Commitments and contingencies (cont'd) (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¶VDFWLYLWLHVFRQFHUQLQJGLYLdends, additional debt or further leasing. Future minimum lease payments payable under non-cancellable operating leases as at 31 December are as follows: Group 2011 2010 ¶ ¶ Not later than one year 73,524 61,052 Later than one year but not later than five years 170,789 139,395 Later than five years 17,231 11,325 261,544 211,772 (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: Group 2011 2010 ¶ ¶ Not later than one year 30,889 29,458 Later than one year but not later than five years 21,189 18,866 52,078 48,324 (d) Letters of guarantees, secured As at 31 December 2011, the banks issued letters of guarantees on behalf of the Group to lessors of premises amounting to approximately $9,352,000 (2010: $8,097,000). - 81 - 201 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 28. Commitments and contingencies (cont'd) (e) Corporate guarantees As at 31 December 2011, the Company has given corporate guarantees to financial institutions in connection with banking facilities provided to its subsidiaries of which $44,716,000 (2010:$23,246,000) of the banking facilities have been utilised as at year end. (f) Undertakings In conjunction with the investment in junior bonds by the subsidiary, Imagine Properties Pte Ltd ³,33/´ (Note 12), the Company, together with the other investors of the junior bonds, had H[HFXWHGD6SRQVRUV¶8QGHUWDNLQJRQ -DQXDU\ ZKHUHE\ WKH &RPSDQ\ XQGHUWDNHV WR SD\ ,33/¶V SURSRUWLRQ RIDOOFRVW overruns in connection to the additions' and alterations' works to be undertaken on the Katong Mall. As at 31 December 2011, 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 ³-7&´ WRDFTXLUHDOHDVHKROGODQGORFDWHGDW3D\D/ebar 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. 7KH EXLOGLQJ ZLOO VHUYH DV WKH *URXS¶V PDQXIDFWXULQJ IDFLOLW\ 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. - 82 - 202 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 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: Group 2011 2010 ¶ ¶ Income Management fee income from a joint venture 327 142 Rental and miscellaneous income from a party related to a director of the Company 221 58 Dividend income from a joint venture 200 ± Expenses Rental expense to a joint venture 73 273 Royalty fees to minority shareholders 1,654 1,282 Purchase of goods from a party related to a director of the Company 97 59 Others Franchise fee to minority shareholders 52 79 Purchase of furniture and fittings from a company related to a director of the Company 194 25 Design fee to a company related to a director of a subsidiary 228 84 Purchase of lightings and fittings from a company related to a director of a subsidiary 38 80 Company 2011 2010 ¶ ¶ Income Management fee income from a subsidiary 7,247 6,399 Dividend income from subsidiaries 4,672 4,680 Training fee income from subsidiaries 155 ± Expense Facilities fee to a subsidiary 22 22 - 83 - 203 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 29. Related party disclosures (cont'd) (b) Compensation of key management personnel Group 2011 2010 ¶ ¶ Salaries and bonus 6,428 6,017 Central Provident Fund contributions and other pension contributions 259 172 Share-based payment (RSG Plan) 120 570 'LUHFWRUV¶IHHV 168 124 Other personnel expenses 622 509 Total compensation paid to key management personnel 7,597 7,392 Comprise amounts paid to: Directors of the Company 1,418 1,479 Directors of a subsidiary 344 575 Other key management personnel 5,835 5,338 7,597 7,392 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. 7KH *URXS¶V DQG &RPSDQ\¶V SULQFLSDO ILQDQFLDO LQVWUXPHQWV FRPSULVH EDQN ORDQV ILQDQFH leases and cash and short term deposits. The main purpose of these financial instruments is WRUDLVHILQDQFHIRUWKH*URXS¶VDQG&RPSDQ\¶VRSHUDWLRQV7KH*URXSDQG&RPSDQ\KDV various other financial assets and liabilities such as trade and other receivables, trade and other payables and related company balances, which arise directly from its operations. It is, and has been throughout the current and previous financial year WKH *URXS¶V DQG &RPSDQ\¶VSROLF\WKDWQRWUDGLQJLQGHULYDWLYHILQDQFLDOLQVWUXPHQWVVKDOOEHXQGHUWaken. - 84 - 204 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 30. Financial risk management objectives and policies (cont'd) 7KH IROORZLQJ VHFWLRQV SURYLGH GHWDLOV UHJDUGLQJ WKH *URXS¶V DQG &RPSDQ\¶V H[SRVXUH WR the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. (a) Interest rate risk ,QWHUHVWUDWHULVNLVWKHULVNWKDWWKHIDLUYDOXHRUIXWXUHFDVKIORZVRIWKH*URXS¶VDQG WKH &RPSDQ\¶V ILQDQFLDO LQVWUXPHQWV ZLOO IOXFWXDWH EHFDXVH RI FKDQJHV LQ PDUNHW interest rates. 7KH*URXS¶V DQGWKH&RPSDQ\¶VH[SRVXUHWRinterest 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. 7KH*URXS¶VSROLF\LVWRREWDLQWKHPRVWIDYRXUDEOHLQWHUHVWUDWHVDYDLODEOHZLWKRXW increasing its foreign exchange exposure. Surplus funds are placed with reputable banks. Sensitivity analysis for interest rate risk Group Effect on profit net of tax 100 basis 100 basis points points increase decrease ¶ ¶ 2011 - Singapore dollar (128) 128 - Renminbi (40) 40 - Hong Kong dollar (33) 33 - New Taiwan dollar (30) 30 - Ringgit Malaysia (22) 22 - Thai Baht (31) 31 - 85 - 205 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 30. Financial risk management objectives and policies (cont'd) (a) Interest rate risk FRQW¶G Group Effect on profit net of tax 100 basis 100 basis points points increase decrease ¶ ¶ 2010 - Singapore dollar (68) 68 - Renminbi (30) 30 - Hong Kong dollar (45) 45 - US dollar (6) 6 - Ringgit Malaysia (5) 5 - Thai Baht (4) 4 (b) Foreign currency risk The Group has transactional currency exposures arising from sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily SGD, Renminbi (RMB) and Hong Kong Dollar (HKD). The foreign currencies in which these transactions are denominated are mainly US dollars (USD), HKD, RMB and SGD. Currently, the Chinese government imposes control over foreign currency. RMB, the official currency in the People's Republic of China ("PRC"), is not freely convertible. Enterprises operating in the PRC can enter into exchange transactions through the 3HRSOH¶V %DQN RI &KLQD RU RWKHU DXWKRULVHG ILQDQFLDO LQVWLWXWLRQV 3D\PHQWV IRU imported materials or services and remittance of earnings outside of the PRC are subject to the availability of foreign currency which depends on the foreign currency denominated earnings of the enterprises, or exchanges of RMB for foreign currency PXVWEHDUUDQJHGWKURXJKWKH3HRSOH¶V%DQNRI&KLQDRURWKHUDXWKRULVHGILQDQFLDO institutions. ApprovaO IRU H[FKDQJHV DW WKH 3HRSOH¶V %DQN RI &KLQD RU RWKHU authorised financial institutions is granted to enterprises in the PRC for valid reasons such as purchase of imported materials and remittance of earnings. While conversion of RMB into Singapore dollars or other currencies can generally be HIIHFWHG DW WKH 3HRSOH¶V %DQN RI &KLQD RU RWKHU DXWKRULVHG ILQDQFLDO LQVWLWXWLRQV 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. 7KH *URXS¶V QHW LQYHVWPHQWV LQ WKHVH FRXQWULHV DUH QRW KHGJHG DV FXUUHQF\ positions in Ringgit Malaysia, RMB, Hong Kong dollar 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 net of tax to a reasonably possible change in the USD, HKD, RMB and SGD exchange rates against the respective functional currencies of the Group entities, with all other variables held constant. - 86 - 206 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 30. Financial risk management objectives and policies (cont'd) Group Effect on profit net of tax 2011 2010 ¶ ¶ Against SGD: USD - strengthened 6% (2010: 6%) 63 78 - weakened 6% (2010: 6%) (63) (78) RMB - strengthened 5% (2010: 5%) 169 (6) - weakened 5% (2010: 5%) (169) 6 Against RMB: USD - strengthened 6% (2010: 6%) (3) (43) - weakened 6% (2010: 6%) 3 43 SGD - strengthened 5% (2010: 5%) (3) (2) - weakened 5% (2010: 5%) 3 2 Against HKD SGD - strengthened 5% (2010: 5%) (56) (52) - weakened 5% (2010: 5%) 56 52 USD - strengthened 6% (2010: 6%) (5) (2) - weakened 6% (2010: 6%) 5 2 RMB - strengthened 5% (2010: 5%) (1) (4) - weakened 5% (2010: 5%) 1 4 Against Ringgit Malaysia SGD - strengthened 5% (2010: 5%) (8) (34) - weakened 5% (2010: 5%) 8 34 (c) Credit risk Credit risk is the risk of loss that may arise on outstanding financial instruments VKRXOG D FRXQWHUSDUW\ GHIDXOW RQ LWV REOLJDWLRQV 7KH *URXS¶V DQG WKH &RPSDQ\¶V 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 *URXS¶VSROLF\WKDWDOOFXVWRPHUVZKRZLVKWRWUDGHRQFUHGLWWHUPVDUHVXEMHFWWR credit verification procedures. In addition, receivable balances are monitored on an RQJRLQJ EDVLV ZLWK WKH UHVXOW WKDW WKH *URXS¶V H[SRVXUH WR EDG GHEWV LV QRW significant. - 87 - 207 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 30. Financial risk management objectives and policies (cont'd) (c) Credit risk FRQW¶G Exposure to credit risk $WWKHEDODQFHVKHHWGDWHWKH*URXS¶VDQGWKH&RPSDQ\¶VPD[LPXPH[SRVXUHWR credit risk is represented by: ± the carrying amount of each class of financial assets recognised in the balance sheets; and ± an amount of $32,716,000 (2010: $23,246,000) relating to corporate guarantees provided by the Company to financial institutions on its VXEVLGLDULHV¶ERUURZLQJVDQGRWKHUEDQNLQJIDFLOLWLHV 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 WKH*URXS¶VWUDGHUHFHLYDEOHVDWWKHEDODQFHVKHHWGDWHLVDVIROORZV Group 2011 2010 % of % of ¶ total ¶ total By country: Singapore 93 1% 66 1% 3HRSOH¶V5HSXEOLFRI China 3,949 51% 3,485 67% Indonesia 1,153 15% 471 9% The Philippines 1,114 15% 617 12% Thailand 342 4% 145 3% Taiwan 702 9% 226 4% Others 377 5% 193 4% 7,730 100% 5,203 100% Financial assets that are neither past due nor impaired Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default. Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Notes 17and 18 above. - 88 - 208 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2011 30. Financial risk management objectives and policies (cont'd) (d) Liquidity risk Liquidity risk is the risk that the Group or the Company will encounter difficulty in PHHWLQJ ILQDQFLDO REOLJDWLRQV GXH WR VKRUWDJH RI IXQGV 7KH *URXS¶V DQG WKH &RPSDQ\¶V H[SRVXUH WR OLTXLGLW\ ULVN DULVHV SULPDULO\ IURP PLVPDWFKHV RI WKH maturities of finDQFLDO DVVHWV DQG OLDELOLWLHV 7KH *URXS¶V DQG WKH &RPSDQ\¶V 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. - 89 - 209 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2011 30. Financial risk management objectives and policies (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: 2011 2010 1 year or 1 to 5 1 year or 1 to 5 less years Total less years Total Group $'000 $'000 $'000 $'000 $'000 $'000 Financial assets : Investment securities ± 14,249 14,249 ± 14,249 14,249 Trade and other receivables 46,800 1,389 48,189 25,345 857 26,202 Amounts due from joint ventures (non-trade) 1,297 ± 1,297 506 ± 506 Amounts due from minority shareholders of subsidiaries (non-trade) 420 ± 420 455 ± 455 Cash and short term deposits 87,060 ± 87,060 71,144 ± 71,144 210 135,577 15,638 151,215 97,450 15,106 112,556 Financial liabilities : Trade and other payables 74,074 ± 74,074 60,846 59 60,905 Accrued operating expenses (Note 21) 25,318 ± 25,318 21,579 ± 21,579 Amounts due to joint ventures 395 ± 395 140 ± 140 Loans and borrowings 25,022 16,911 41,933 11,308 8,227 19,535 124,809 16,911 141,720 93,873 8,286 102,159 Company Financial assets : Other receivables ± ± ± 26 ± 26 Amounts due from subsidiaries 15,335 ± 15,335 5,748 ± 5,748 Cash on hand and at bank 2,698 ± 2,698 2,947 ± 2,947 18,033 ± 18,033 8,721 ± 8,721 Financial liabilities : Other payables 250 ± 250 489 ± 489 Accrued operating expenses (Note 21) 2,115 ± 2,115 1,845 ± 1,845 Amounts due to subsidiaries 7,394 ± 7,394 8,762 ± 8,762 Loans and borrowings 12,301 4,042 16,343 56 4,044 4,100 22,060 4,042 26,102 11,152 4,044 15,196 - 90 - BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2011 30. Financial risk management objectives and policies (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. 2011 2010 1 year or 1 to 5 1 year or 1 to 5 less years Total less years Total Company $'000 $'000 $'000 $'000 $'000 $'000 Financial guarantees 34,375 16,029 50,404 19,498 8,134 27,632 211 - 91 - BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2011 30. Financial risk management objectives and policies (cont'd) (e) Market price risk Market price risk is the risk that the fair value or future cash flows of WKH*URXS¶V 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% (2010: 15%) higher/lower with all other variables held constant, the Group's Fair Value Adjustment Reserve in equity would have been $138,000 (2010: $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: Group 2011 2010 ¶ ¶ Loans and receivables Trade and other receivables 46,800 25,345 Amounts due from joint-ventures (non-trade) 1,297 506 Amounts due from minority shareholders of subsidiaries (non-trade) 420 455 Cash and fixed deposits 87,060 71,144 Total 135,577 97,450 Available-for-sale financial assets Investment securities 919 919 Held-to-maturity investments Investment securities 10,750 10,750 Financial liabilities carried at amortised cost Trade and other payables 74,074 60,486 Accrued operating expenses (Note 21) 25,318 21,579 Amounts due to joint-ventures (non-trade) 395 140 Short term loans (Note 24) 15,764 4,698 Long term loans (Note 25) 23,552 14,349 Loans from minority shareholders of subsidiaries 1,082 200 Total 140,185 101,452 - 92 - 212 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2011 31. Financial instruments (cont'd) (b) Fair values Financial instruments carried at fair value The fair value of quoted investment securities is determined by reference to the published market bid price at the balance sheet date. Financial instruments whose carrying amount approximate fair value Management has determined that the carrying amounts of unquoted investment securities, cash and bank balances, fixed deposits, trade and other receivables, trade and other payables, related company balances and floating rate bank loans, based on their notional amounts, reasonably approximate their fair values because these are mostly short term in nature or are repriced frequently. 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 value 2011 2010 2011 2010 ¶ ¶ ¶ ¶ Financial assets: Other receivables 1,389 857 1,019 839 Investment in junior bonds (Note 12) 10,750 10,750 11,315 11,362 Financial liabilities: Obligations under finance leases 37 91 37 89 Fair value is estimated by discounting expected future cash flows at market incremental lending rate for similar types of borrowing or leasing arrangements at the balance sheet date. No disclosure of fair values are made for the *URXS¶V quasi-capital loan to an associate, loans from minority shareholders of subsidiaries and long-term amount due to landlordDQGWKH&RPSDQ\¶VTXDVL-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. - 93 - 213 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2011 32. Capital management 7KHSULPDU\REMHFWLYHRIWKH*URXS¶VFDSLWDOPDQDJHPHQWLVWRHQVXUHWKDWLW PDLQWDLQV D 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 2011 and 2010. 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 2011 and 2010. The Group monitors capital using gearing ratio (which is total borrowings divided by total equity) and net gearing ratio (which is total borrowings less cash and cash equivalents divided by total equity). Group 2011 2010 ¶ ¶ Total borrowings (1) 40,435 19,338 Less: Cash and cash equivalents (87,060) (71,144) Net cash (46,625) (51,806) Total equity 85,468 75,083 Gearing ratio (times) 0.47 0.26 Net gearing Net cash Net cash (1) including bank loans, finance lease obligations and loans from minority shareholders of subsidiaries - 94 - 214 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2011 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 operation of food and drinks outlets within the food courts. (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. - 95 - 215 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2011 33. 6HJPHQWLQIRUPDWLRQ FRQW¶G Food Bakery Restaurant court 2011 operations (1) operations operations Others (2) Elimination Group ¶ ¶ ¶ ¶ ¶ ¶ Revenue External 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 Results Profit from operations 8,562 3,871 4,712 (150) ± 16,995 Interest income 239 11 55 519 ± 824 Interest expense (476) (94) (159) 56 ± (785) 6KDUHRIMRLQWYHQWXUHV¶ results ± ± 93 ± ± 93 Segment profit 8,325 3,788 4,701 313 ± 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 35,715 (26,692) 260,185 Deferred tax assets 2,120 Total assets 262,305 Segment liabilities (Note A) 63,006 29,702 80,833 25,405 (30,008) 168,938 Tax payable 5,623 Deferred tax liabilities 2,276 Total liabilities 176,837 Other information Investment in joint ventures ± ± 422 ± ± 422 Additions to non-current assets (Note B) 11,683 9,895 17,754 1,529 ± 40,843 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 - 96 - 216 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2011 33. Segment LQIRUPDWLRQ FRQW¶G Food Bakery Restaurant court 2010 operations (1) operations operations Others (2) Elimination Group ¶ ¶ ¶ ¶ ¶ ¶ Revenue External sales 158,131 56,253 88,504 ± ± 302,888 Inter-segment sales (Note A) 448 2,160 (2,608) ± ± ± Total revenue 158,579 56,253 90,664 ± (2,608) 302,888 Results Profit from operations 9,108 2,805 4,424 227 ± 16,564 Interest income 104 2 37 458 ± 601 Interest expense (214) (2) (375) (44) ± (635) 6KDUHRIMRLQWYHQWXUHV¶ results ± ± 158 ± ± 158 Segment profit 8,998 2,805 4,244 641 ± 16,688 Tax expense (5,520) Profit for the year 11,168 Assets and liabilities Segment assets (Note A) 79,296 41,519 86,986 23,258 (28,760) 202,299 Deferred tax assets 1,898 Total assets 204,197 Segment liabilities (Note A) 53,006 20,727 64,422 15,108 (31,198) 122,065 Tax payable 4,402 Deferred tax liabilities 2,647 Total liabilities 129,114 Other information Investment in joint ventures ± ± 446 ± ± 446 Additions to non-current assets (Note B) 12,450 10,571 11,623 5,023 ± 39,667 Depreciation and amortisation 8,235 2,857 10,463 43 ± 21,598 Other non-cash (income)/expenses (Note C) (3,844) (65) 2,458 668 ± (783) - 97 - 217 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2011 33. 6HJPHQWLQIRUPDWLRQ FRQW¶G 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: impairment/(write-back) of property, plant and equipment, intangible assets investment in associate, receivables, amount due from associates and inventories; write off of property, plant and equipment, bad debts and inventories; (gain)/loss on disposals of property, plant and equipment; share based payment expenses; and unrealised foreign exchange (gain)/loss. Geographical information (3) External sales Non-current assets 2011 2010 2011 2010 ¶ ¶ ¶ ¶ Singapore 191,237 157,503 40,552 38,619 Mainland China 117,573 97,755 38,178 33,408 Hong Kong 35,204 33,457 6,785 7,879 Rest of the world 21,890 14,173 12,597 2,542 Total 365,904 302,888 98,112 82,448 (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. - 98 - 218 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2011 34. Dividends Group and Company 2011 2010 ¶ ¶ Dividends paid during the year: First and final exempt (one-tier) dividend for 2010 of 1.0 cent per share (2009: 1.0 cent per share) 2,813 2,342 Proposed but not recognised as a liability as at 31 December: Dividends on ordinary shares, subject to shareholders' approval at the Annual General Meeting: First and final exempt (one-tier) ordinary dividend for 2011 of 1.0 cent per share (2010: 1.0 cent per share) 2,807 2,813 First and final exempt (one-tier) special dividend for 2011 of 0.5 cent per share (2010: Nil cent per share) 1,403 ± 4,210 2,813 35. Events subsequent to the balance sheet date (i) Investment in retail property trust in Singapore On 10 February 2012, the Group announced that the subsidiary, Imagine Properties 3WH/WG ³,33/´ KDGFRPSOHWHGWKHVXEVFULSWLRQRILQSULQFLSDODPRXQWRI junior bonds and was issued 72 ordinary shares of $1.00 per ordinary share in the share cDSLWDORI3HUHQQLDO &KLMPHV 3WH/WGLQUHODWLRQWRWKHFRPSDQ\¶VLQYHVWPHQWLQ a retail property trust in Singapore. The initial deposit of $12,000,000 (Note 17) was paid during the year and the balance subscription amount of $6,000,072 was paid in January 2012. (ii) Partial redemption of junior bonds On 27 February 2012, IPPL received a partial redemption of $3,526,000 on the junior bonds of $10,750,000 at 31 December 2011. 36. Authorisation of financial statements The financial statements for the year ended 31 December 2011 were authorised for issue in accordance with a resolution of the directors on 23 March 2012. - 99 - 219 APPENDIX III AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012 220 221 BreadTalk Group Limited and its Subsidiaries General Information Directors George Quek Meng Tong Katherine Lee Lih Leng Ong Kian Min Chan Soo Sen Tan Khee Giap Company Secretary Tan Cher Liang Registered Office 171 Kampong Ampat #05-05 KA Foodlink Singapore 368330 Tel: 6285 6116 Fax: 6285 1661 Bankers DBS Bank Ltd The Hongkong and Shanghai Banking Corporation Malayan Banking Berhad Oversea-Chinese Banking Corporation Limited Standard Chartered Bank United Overseas Bank Limited Australia and New Zealand Banking Group Limited Share Registrar Boardroom Corporate & Advisory Services Pte Ltd 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623 Auditors Ernst & Young LLP Partner in charge: Ang Chuen Beng (since financial year ended 31 December 2011) 222 BreadTalk Group Limited and its Subsidiaries General Information Index Page 'LUHFWRUV¶5HSRUW 1 Statement by Directors 8 Independent Auditor's Report 9 Consolidated Statement of Comprehensive Income 11 Balance Sheets 12 Statements of Changes in Equity 14 Consolidated Cash Flow Statement 17 Notes to the Financial Statements 20 223 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW The directors are pleased to present their report to the members together with the audited consolidated financial statements of BreadTalk Group Limited (the ³Company´) and its subsidiaries (collectively, the ³Group´) 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: George Quek Meng Tong (Chairman) Katherine Lee Lih Leng (Deputy Chairman) Ong Kian Min Chan Soo Sen Tan Khee Giap 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. DireFWRUV¶LQWHUHVWVLQVKDUHVDQGGHEHQWXUHV The following directors, who held office at the end of the financial year, had, according to the register of GLUHFWRUV¶VKDUHKROGLQJVUHTXLUHGWREHNHSWXQGHUVHFWLRQRIWKH6LQJDSRUH&RPSDQLHV$FW&DS 50, an interest in shares of the Company as stated below: Direct interest Deemed interest As at 1 As at 31 As at 1 As at 31 January December As at 21 January December As at 21 Name of director 2012 2012 January 2013 2012 2012 January 2013 The Company (Ordinary shares) George Quek Meng 95,583,952 95,644,430 95,644,430 ± ± ± Tong 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 125,708 43,230 43,230 ± ± ± Tong Katherine Lee Lih Leng 117,140 43,230 43,230 ± ± ± - 1 - 224 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW 'LUHFWRUV¶LQWHUHVWVLQVKDUHVDQGGHEHQWXUHV FRQW¶G 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. 'LUHFWRUV¶FRQWUDFWXDOEHQHILWV 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 LiPLWHG(PSOR\HHV¶6KDUH2SWLRQ6FKHPH 7KH%UHDG7DON*URXS/LPLWHG(PSOR\HHV¶6KDUH2SWLRQ6FKHPH (626 ZDVDSSURYHGDWDQ 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. - 2 - 225 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW Share Option and Share Plans (cont'd) (a) 7KH%UHDG7DON*URXS/LPLWHG(PSOR\HHV¶6KDUH2SWLRQ6FKHPH (cont'd) Size of ESOS The total number of new shares over which options may be granted pursuant to the ESOS shall not exceed fifteen per cent (15%) of the issued share capital of the Company on the date preceding the grant of an option. The aggregate number of Shares available to eligible Controlling Shareholders and their Associates under the ESOS shall not exceed twenty five per cent (25%) of the Shares available under the ESOS. In addition, the number of Shares available to each Controlling Shareholder or his Associate shall not exceed ten per cent (10%) of the Shares available under the ESOS. Grant of ESOS Options may be granted from time to time during the year when the ESOS is in force, except that options shall be granted on or after the second market day on which an announcement of any matter involving unpublished price sensitive information is released. Acceptance of ESOS The grant of an option shall be accepted not more than 30 days from the offering date of that option and accompanied by payment to the Company of a nominal consideration of $1 or such other amount as required by the Remuneration Committee. Since the commencement of the ESOS up to the end of the financial year, there were no options granted to any person. Any options granted under the ESOS do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any share issue of any other company. (b) The BreadTalk Restricted Share Grant Plan The BreadTalk Restricted Share Grant Plan ("RSG Plan") was approved at an Extraordinary General Meeting held on 28 April 2008. The RSG Plan is centred on the accomplishment of specific pre-determined performance objectives and service conditions, which is the prerequisite for the contingent award of fully paid 6KDUHV ³$ZDUG´ 7KH UHZDUG VWUXFWXUH DOORZV WKH &RPSDQ\ WR WDUJHW VSHFLILF SHUIRUPDQFH objectives and incentivise the Participants to put in their best efforts to achieve these targets. - 3 - 226 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW Share Option and Share Plans (cont'd) (b) The BreadTalk Restricted Share Grant Plan (cont'd) 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. 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. - 4 - 227 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW Share Option and Share Plans (cont'd) (b) The BreadTalk Restricted Share Grant Plan (cont'd) 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 56*3ODQZRXOGEHPDGHRQFHD\HDUDIWHUWKH&RPSDQ\¶VDQQXDOJHQHUDOPHHWLQJ,WZLOOEH 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: Aggregate Aggregate conditional conditional Aggregate Aggregate restricted restricted conditional conditional shares Aggregate Conditional shares restricted restricted vested and conditional restricted awarded shares shares released restricted shares since lapsed since vested and since shares granted commence- commence- released commence- outstanding during the ment of the ment of the during the ment of the at end of the Name of Participant year Plan Plan year Plan year Directors of the Company George Quek Meng (1) Tong 59,000 238,200 59,000 60,478 135,970 43,230 Katherine Lee Lih (1) Leng 59,000 213,000 59,000 51,910 110,770 43,230 Associate of a Controlling Shareholder Frankie Quek Swee (2) Heng 24,000 119,000 ± 32,150 80,810 38,190 - 5 - 228 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW Share Option and Share Plans (cont'd) Aggregate Aggregate conditional conditional Aggregate Aggregate restricted restricted conditional conditional shares Aggregate Conditional shares restricted restricted vested and conditional restricted awarded shares shares released restricted shares since lapsed since vested and since shares granted commence- commence- released commence- outstanding during the ment of the ment of the during the ment of the at end of the Name of Participant year Plan Plan year Plan year Participants who received 5% or more of the total grants available (3) Oh Eng Lock 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. :LWKWKH5HPXQHUDWLRQ&RPPLWWHH¶VDSSURYDORQWKHDFKLHYHPHQWRIWKHSHUIRUPDQFHWDUJHWV for the performance period from FY2009 to FY2011, a total of 608,076 restricted shares were released via the issuance of treasury shares. Audit Committee The Audit Committee performed the functions specified in the Companies Act. The functions performed are detailed in the Report on Corporate Governance. - 6 - 229 230 231 BreadTalk Group Limited and its Subsidiaries Independent Auditor's Report For the financial year ended 31 December 2012 Independent Auditor's Report to the members of BreadTalk Group Limited 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 11 to 103, 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. - 9 - 232 233 BreadTalk Group Limited and its Subsidiaries Consolidated Statement of Comprehensive Income for the year ended 31 December 2012 Notes 2012 2011 ¶ ¶ 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. - 11 - 234 BreadTalk Group Limited and its Subsidiaries Balance Sheets as at 31 December 2012 Notes Group Company 2012 2011 2012 2011 ¶ ¶ ¶ ¶ Non-current assets Property, 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 - 12 - 235 BreadTalk Group Limited and its Subsidiaries Balance Sheets as at 31 December 2012 FRQW¶G Notes Group Company 2012 2011 2012 2011 ¶ ¶ ¶ ¶ Net current liabilities (79,947) (2,891) (21,833) (3,690) Non-current liabilities Long-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 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. - 13 - 236 BreadTalk Group Limited and its Subsidiaries Statements of Changes in Equity for the year ended 31 December 2012 Attributable to equity holders of the Company Fair value Share based Statutory Trans- adjust- compen- Non-con- 2011 Share Treasury Accumulated reserve lation ment sation Capital trolling Total Group capital shares profits fund reserve reserve reserve reserve Total interests equity $'000 ¶ $'000 $'000 $'000 $'000 $'000 ¶ $'000 $'000 $'000 (Note 26) (Note 26) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) At 1 January 2011 33,303 (199) 33,090 2,071 (722) 604 247 168 68,562 6,521 75,083 Profit for the year ± ± 11,592 ± ± ± ± ± 11,592 165 11,757 Other comprehensive income Foreign currency translation ± ± ± ± 911 ± ± ± 911 ± 911 Other comprehensive income for the year, net of tax ± ± ± ± 911 ± ± ± 911 ± 911 237 Total comprehensive income for the year ± ± 11,592 ± 911 ± ± ± 12,503 165 12,668 Contributions by and distributions to owners Share-based payments ± ± ± ± ± ± 276 ± 276 ± 276 Dividends paid (Note 34) ± ± (2,813) ± ± ± ± ± (2,813) ± (2,813) Transfer to statutory reserve ± ± (311) 311 ± ± ± ± ± ± ± Treasury shares transferred on vesting of restricted share grant ± 148 ± ± ± ± (166) 18 ± ± ± Purchase of treasury shares ± (558) ± ± ± ± ± ± (558) ± (558) Issuance of new shares to minority shareholders ± ± ± ± ± ± ± ± ± 812 812 Total contributions by and distributions to owners ± (410) (3,124) 311 ± ± 110 18 (3,095) 812 (2,283) At 31 December 2011 33,303 (609) 41,558 2,382 189 604 357 186 77,970 7,498 85,468 - 14 - BreadTalk Group Limited and its Subsidiaries Statements of Changes in Equity for the year ended 31 December 2012 (cont'd) Attributable to equity holders of the Company Premium paid on Fair value Share based acquisition Statutory Trans- adjust- compen- of non- Non-con- 2012 Share Treasury Accumulated reserve lation ment sation controlling Capital trolling Total Group capital shares profits fund reserve reserve reserve interests reserve Total interests equity $'000 ¶ $'000 $'000 $'000 $'000 $'000 $'000 ¶ $'000 $'000 $'000 (Note 26) (Note 26) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) At 1 January 2012 33,303 (609) 41,558 2,382 189 604 357 ± 186 77,970 7,498 85,468 Profit for the year ± ± 12,000 ± ± ± ± ± ± 12,000 1,558 13,558 Other comprehensive income Net fair value loss on available-for-sale financial assets ± ± ± ± ± (390) ± ± ± (390) ± (390) Foreign currency translation ± ± ± ± (944) ± ± ± ± (944) ± (944) Other comprehensive income for the year, net of tax ± ± ± ± (944) (390) ± ± ± (1,334) ± (1,334) 238 Total comprehensive income for the year ± ± 12,000 ± (944) (390) ± ± ± 10,666 1,558 12,224 Contributions by and distributions to owners Share-based payments ± ± ± ± ± ± 291 ± ± 291 ± 291 Dividends paid (Note 34) ± ± (5,624) ± ± ± ± ± ± (5,624) (54) (5,678) Dividends payable ± ± ± ± ± ± ± ± ± ± (984) (984) Transfer to statutory reserve ± ± (375) 375 ± ± ± ± ± ± ± ± Treasury shares transferred on vesting of restricted share grant ± 299 ± ± ± ± (269) ± (30) ± ± ± Purchase of treasury shares ± (96) ± ± ± ± ± ± ± (96) ± (96) Total contributions by and distributions to owners ± 203 (5,999) 375 ± ± 22 ± (30) (5,429) (1,038) (6,467) Changes in ownership interests in a subsidiary Acquisition of non-controlling interests without a change in control ± ± ± ± ± ± ± (657) ± (657) 457 (200) Total changes in ownership interests in a subsidiary ± ± ± ± ± ± ± (657) ± (657) 457 (200) At 31 December 2012 33,303 (406) 47,559 2,757 (755) 214 379 (657) 156 82,550 8,475 91,025 - 15 - BreadTalk Group Limited and its Subsidiaries Statements of Changes in Equity for the year ended 31 December 2012 (cont'd) Share based compen- Share Treasury Accumulated sation Capital Total capital shares profits reserve reserve equity ¶ ¶ ¶ ¶ ¶ ¶ (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 and distributions 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 and distributions 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 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. - 16 - 239 BreadTalk Group Limited and its Subsidiaries Consolidated Cash Flow Statement for the year ended 31 December 2012 Notes 2012 2011 ¶ ¶ Cash flows from operating activities Profit 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 - 17 - 240 BreadTalk Group Limited and its Subsidiaries Consolidated Cash Flow Statement for the year ended 31 December 2012 Notes 2012 2011 ¶ ¶ Cash flows from investing activities Interest 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 activities Interest 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 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. - 18 - 241 BreadTalk Group Limited and its Subsidiaries 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). The accompanying accounting policies and explanatory notes form an integral part of the financial statements. - 19 - 242 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 1. General 1.1 Corporate information BreadTalk Group Limited (the ³Company´) is a limited liability company 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 $V DW 'HFHPEHU WKH *URXS¶V FXUUHQW OLDELOLWLHV H[FHHGHG LWV FXUUHQW DVVHWV E\ $79,947,000 (2011: $2,891,000). The ability of the Group to continue as a going concern is GHSHQGHQW RQ WKH *URXS¶V DELOLW\ WR JHQHUDWH SRVLWLYH FDVK IORZV ,Q WKH RSLQLRQ RI WKH 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 URXQGHGWRWKHQHDUHVWWKRXVDQG ¶ H[FHSWZKHQRWKHUZLVHLQGLFDWHG - 20 - 243 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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. 2.3 Standards issued but not yet effective The Group has not adopted the following standards and interpretations that have been issued but not yet effective: Effective for annual periods beginning Description on or after Amendments to FRS 1: Presentations of Items of Other 1 July 2012 Comprehensive Income Revised FRS 19 Employee Benefits 1 January 2013 FRS 113: Fair Value Measurement 1 January 2013 Amendments to FRS 107 Disclosures ± Offsetting Financial 1 January 2013 Assets and Financial Liabilities 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 1 January 2014 Liabilities Amendments to the transition guidance of FRS 110 Consolidated 1 January 2014 Financial Statements, FRS 111 Joint Arrangements and FRS 112 Disclosure of Interests in Other Entities Amendments to FRS 110, FRS 112 and FRS 27: Investment 1 January 2014 Entities 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. - 21 - 244 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.3 Standards issued but not yet effective (cont'd) 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. )56UHTXLUHVWKHGHWHUPLQDWLRQRIMRLQWDUUDQJHPHQW¶VFODVVLILFDWLRQWREHEDVHGRQWKH SDUWLHV¶ULJKWVDQGREOLJDWLRQVXQGHUWKHDUUDQJHPHnt, 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 WKH*URXSGRHVQRWH[SHFWDQ\LPSDFWRQWKH*URXS¶VILQDQFLDOVWDWHPHQWSUHVHQtation. 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. - 22 - 245 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.4 Significant accounting estimates and judgements 7KHSUHSDUDWLRQRIWKH*URXS¶VFRQVROLGDWHGILQDQFLDOVWDWHPHQWVUHTXLUHVPDQDJHPHQWWR make judgments, 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 ,Q WKH SURFHVV RI DSSO\LQJ WKH *URXS¶V DFFRXQWLQJ SROLFLHV PDQDJHPHQW KDV PDGH WKH 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 FRVW7KHGHWHUPLQDWLRQRIZKDWLV³VLJQLILFDQW´RU³SURORQJHG´UHTXLUHVMXGJPHQW,Q 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. (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 GHWHUPLQDWLRQ LV PDGH 7KH FDUU\LQJ DPRXQW RI WKH *URXS¶V WD[ SD\DEOH DQG 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 RIWKH*URXS¶VWD[UHFRYHUDEOHDQGGHIHUUHGWD[DVVHWVDW 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. - 23 - 246 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.4 Significant accounting estimates and judgements (cont'd) Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 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 occur. (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 WKRVH FDVK IORZV 7KH FDUU\LQJ DPRXQW RI WKH *URXS¶V JRRGZLOO DW 31 December 2012 was $5,846,000 (2011: $6,048,000). More details are given in Note 11. (ii) Valuation and estimated useful life of brand value arising from acquisition of a subsidiary, Topwin Investment Holding Pte Ltd ("Topwin") Brand value arising from the acquisition of Topwin was separately identified and recognised by management using the "relief from royalty method". The premise of this valuation method is the assumption that the Group would be compelled to pay the rightful owner of the brand name if the Group did not have the legal right to utilise the brand name. The ownership of the brand therefore relieves the Group from making such royalty payments. This requires an estimation of the royalty payments including initial fees and continuing royalty payments based on a percentage of projected revenue. The basis used to determine the revenue projections is the revenue for each food court of Topwin achieved in the financial year ended 31 December 2004 projected into the future. The useful life of the brand value is estimated by the directors to be 15 years as this is the length of time that they expect the benefits of the brand to flow to the Group. Amortisation of the brand amounted to $213,000 (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 ZLWKLQ WR \HDUV 7KH FDUU\LQJ DPRXQW RI WKH *URXS¶V SURSHUW\ SODQW DQG 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. - 24 - 247 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.4 Significant accounting estimates and judgements (cont'd) (iii) Useful lives of property, plant and equipment FRQW¶G During the year ended 31 December 2012, a subsidiary, Breadtalk Pte Ltd, VWDQGDUGL]HGLWVXVHIXOOLIHHVWLPDWHVDSSOLHGWRWKHRXWOHWV¶SODQWDQGHTXLSPHQWWR 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 ¶ ¶ ¶ ¶ Increase/(decrease) in profit before tax 1,052 610 16 (1,288) (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 FUHGLW ULVN FKDUDFWHULVWLFV 7KH FDUU\LQJ DPRXQW RI WKH &RPSDQ\¶V ORDQV DQG 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 7KH*URXS¶VFRQVROLGDWHGILQDQFLDOVWDWHPHQWVDUHSUHVHQWHGLQ6LQJDSRUH'ROODUV which is also the CRPSDQ\¶V IXQFWLRQDO FXUUHQF\ (DFK HQWLW\ LQ WKH *URXS determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. - 25 - 248 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.5 Foreign currency (cont'd) (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 date are recognised in profit or loss except for H[FKDQJH GLIIHUHQFHV DULVLQJ RQ PRQHWDU\ LWHPV WKDW IRUP SDUW RI WKH *URXS¶V QHW investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under translation reserve in equity. The translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation. (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 the 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) $ SHUVRQ RU D FORVH PHPEHU RI WKDW SHUVRQ¶V IDPLO\ LV UHODWHG WR WKH *URXS DQG 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. - 26 - 249 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.6 Related parties (cont'd) (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. ,Q WKH &RPSDQ\¶V VHSDUDWH ILQDQFLDO VWDWHPHQWV LQYHVWPHQWV LQ VXEVLGLDULHV DUH 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 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. - 27 - 250 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.7 Subsidiaries, basis of consolidation and non-controlling interests (cont'd) 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: De-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost; De-recognises the carrying amount of any non-controlling interest; De-recognises the cumulative translation differences recorded in equity; Recognises the fair value of the consideration received; Recognises the fair value of any investment retained; Recognises any surplus or deficit in profit or loss; Re-FODVVLILHV WKH *URXS¶V VKDUH RI FRPSRQHQWV SUHYLRXVO\ recognised in other comprehensive income to profit or loss or retained earnings, as appropriate. Basis of consolidation prior to 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: Acquisition of non-controlling interests, prior to 1 January 2010, were accounted for using the 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. Losses incurred by the Group were attributed to the non-controlling interest until the balance was 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. Upon loss of control, the Group accounted for the investment retained at its proportionate share 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. - 28 - 251 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.7 Subsidiaries, basis of consolidation and non-controlling interests (cont'd) (B) Business combinations Business combinations from 1 January 2010 Business combinations are accounted for 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-FRQWUROOLQJLQWHUHVW¶VSURSRUWLRQDWHVKDUHRI the acquiree¶V identifiable net assets. 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), aQG WKH IDLU YDOXH RI WKH *URXS¶V SUHYLRXVO\ KHOG HTXLW\ LQWHUHVW LQ WKH DFTXLUHH LI DQ\ RYHU WKH QHW IDLU YDOXH RI WKH DFTXLUHH¶V 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. - 29 - 252 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.7 Subsidiaries, basis of consolidation and non-controlling interests (cont'd) 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 LQWHUHVW ZDV PHDVXUHG DW WKH SURSRUWLRQDWH VKDUH RI WKH DFTXLUHH¶V 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. &KDQJHV LQ WKH &RPSDQ\ RZQHUV¶ RZQHUVKLS LQWHUHVW LQ D VXEVLGLDU\ WKDW GR QRW 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. - 30 - 253 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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- DFTXLVLWLRQFKDQJHVLQWKH*URXS¶VVKDUHRIQHWDVVHWVRIWKHDVVRFLDWHs. Goodwill relating to associates is included in the carrying amount of the investment and is neither amortised QRUWHVWHGLQGLYLGXDOO\IRULPSDLUPHQW$Q\H[FHVVRIWKH*URXS¶VVKDUHRIWKHQHWIDLUYDOXH RIWKHDVVRFLDWH¶VLGHQWLILDEOHDVVHWVOLDELOLWLHV and contingent liabilities over the cost of the investment is included as income in the determination RIWKH*URXS¶VVKDUHRIUHVXOWVRIWKH 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. 7KH *URXS¶V VKDUH RI WKH SURILWRU ORVV RI LWV DVVRFLDWHV LV 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. :KHQ WKH *URXS¶V VKDUH RI ORVVHV LQ DQ DVVRFLDWH HTXDOV RU H[FHHGV LWV LQWHUHVW LQ WKH 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 WKH *URXS¶V LQYHVWPHQW LQ 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. - 31 - 254 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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-DFTXLVLWLRQFKDQJHVLQWKH*URXS¶VVKDUHRIQHWDVVHWVRIWKHMRLQWYHQWXUH7KH *URXS¶VVKDUHRIprofit 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 WRWKH*URXS¶VQHWLQYHVWPHQWLQWKHMRLQWYHQWXUH7KHMRLQWYHQWXUHLVHTXLW\DFFRXQWHGIRU from the date the Group obtains joint control until the date the Group ceases to have joint control over the joint venture. $GMXVWPHQWV DUH PDGH LQ WKH *URXS¶V FRQVROLGDWHG ILQDQFLDO VWDWHPHQWV WR HOLPLQDWH WKH *URXS¶V VKDUH RI LQWUDJURXS EDODQFHV LQFRPH DQG H[SHQVHV DQG XQUHDOLVHG JDLQV DQG 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 into line with those of the Group. Upon loss of joint control, the Group measures and recognises 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. 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. - 32 - 255 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.10 Property, plant and equipment (cont'd) Depreciation of an asset begins when it is available for use and is computed on a straight- line basis over the estimated useful life of the asset as follows: Leasehold property ± 20 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 RIRXWOHWV¶ 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, DOORFDWHGWRHDFKRIWKH*URXS¶VFDVK-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. - 33 - 256 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.11 Intangible assets (cont'd) (a) Goodwill (cont'd) Impairment losses recognised for goodwill are not reversed in subsequent periods. Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating 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. 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. - 34 - 257 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.11 Intangible assets (cont'd) (b) Other intangible assets (cont'd) 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 basis 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. - 35 - 258 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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 LVUHTXLUHGWKH*URXSPDNHVDQHVWLPDWHRIWKHDVVHW¶VUHFRYHUDEOHDPRXQW $Q DVVHW¶V UHFRYHUDEOH DPRXQW LV WKH KLJKHU RI DQ DVVHW¶V RU FDVK-JHQHUDWLQJ XQLW¶V IDLU 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 ZKLFKDUHSUHSDUHGVHSDUDWHO\IRUHDFKRIWKH*URXS¶VFDVK-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, WKH *URXS HVWLPDWHV WKH DVVHW¶V RU FDVK- JHQHUDWLQJXQLW¶Vrecoverable amount. A previously recognised impairment loss is reversed RQO\LIWKHUHKDVEHHQDFKDQJHLQWKHHVWLPDWHVXVHGWRGHWHUPLQHWKHDVVHW¶VUHFRYHUDEOH 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. - 36 - 259 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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. - 37 - 260 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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. - 38 - 261 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.14 Impairment of financial assets (cont'd) (a) Financial assets carried at amortised cost (cont'd) If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss. (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 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 LQYHVWPHQWEHORZLWVFRVWVµ6LJQLILFDQW¶LVWREHHYDOXDWHGDJDLQVWWKHRULJLQDOFRVW RI WKH LQYHVWPHQW DQG µSURORQJHG¶ DJDLQVW WKH SHUiod 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. - 39 - 262 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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 amount 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. - 40 - 263 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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. 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 lessee 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. - 41 - 264 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.20 Leases (cont'd) (b) As lessor Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in 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 (³CPF´) scheme in Singapore, a defined contribution pension scheme. The Group makes monthly contributions based on stipulated contribution rates. 3HRSOH¶V5HSXEOLFRI&KLQD 35& 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 UHVSRQVLEOHIRUDGPLQLVWHULQJWKHVHDPRXQWVIRUWKHVXEVLGLDULHV¶35&HPSOR\HHV 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 recognized as a liability when they accrue to the employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date. - 42 - 265 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.21 Employee benefits (cont'd) (c) The BreadTalN5HVWULFWHG6KDUH*UDQW3ODQ ³56*3ODQ´ Employees receive remuneration under the RSG Plan in the form of fully-paid VKDUHV ³$ZDUGV´ RIWKH&RPSDQ\DVFRQVLGHUDWLRQIRUVHUYLFHVUHQGHUHG7KHFRVW 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 WKH&RPSDQ\¶VEHVWHVWLPDWHRIWKHQXPEHURI$ZDUGVWKDWZLOOXOWLPDWHO\YHVW7KH 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. ,Q WKH &RPSDQ\¶V VHSDUDWH ILQDQFLDO VWDWHPHQWV WKH IDLU YDOXH RI WKH $ZDUGV granted to employees of its subsidiaries is recognised as an increase in the cost of WKH&RPSDQ\¶VLQYHVWPHQWLQVXEVLGLDULHVZLWKDFRUUHVSRQGLQJLQFUHDVHLQHTXLW\ 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. (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 IUDQFKLVHHV¶ UHYHQXH LQ DFFRUGDQFH ZLWK WHUPV DV VWDWHG LQ WKH IUDQFKLVH 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 UHQWDOLQFRPHZKLFKLVFRPSXWHGEDVHGRQDSHUFHQWDJHRIWKHIRRGFRXUWWHQDQWV¶ 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. - 43 - 266 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.22 Income recognition (cont'd) (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 collectability 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. - 44 - 267 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.24 Taxes (cont'd) (b) Deferred tax Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. 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: Where the deferred income tax asset relating to the deductible temporary difference arises from the initial 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 In respect of deductible temporary differences associated with investments in subsidiaries, associates 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. - 45 - 268 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 2.24 Income taxes (cont'd) (b) Deferred tax FRQW¶G 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. (c) Sales tax Revenues, expenses and assets are recognised net of the amount of sales tax except: Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables that are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. 2.25 Segment reporting 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. - 46 - 269 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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 7KH*URXS¶VRZQHTXLW\LQVWUXPHQWVZKLFKDUHUHDFTXLUHG WUHDVXU\VKDUHV DUHrecognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the SXUFKDVHVDOHLVVXHRUFDQFHOODWLRQRIWKH*URXS¶Vown 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. 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 Group 2012 2011 ¶ ¶ 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 - 47 - 270 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 4. Other operating income Group 2012 2011 ¶ ¶ Management fee income 6,272 4,332 Government grant (1) 1,033 840 Grant income from Special Employment Credit(2) 36 ± 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 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 this 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 (PSOR\PHQW &UHGLW EDVHG RQ WKDW HPSOR\HH¶V VDODU\ 7KH 6FKHPH KDV SD\RXWV LQ 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. - 48 - 271 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 5. Interest income and interest expense Group 2012 2011 ¶ ¶ 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) 6. Profit before taxation This is determined after charging/(crediting) the following: Group 2012 2011 ¶ ¶ 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 'LUHFWRUV¶IHHV 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 - 49 - 272 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 7. Employee benefits Group 2012 2011 ¶ ¶ 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. 8. Taxation Major components of income tax expense were: Group 2012 2011 ¶ ¶ 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 - 50 - 273 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 8. Taxation (cont'd) A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax rate for the year ended 31 December is as follows: Group 2012 2011 ¶ ¶ 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 (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 ,QQRYDWLRQVFKHPH ³3,&´ 7KH3,&LVDYDLODEOHIRU - 51 - 274 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 8. Taxation (cont'd) Deferred income tax as at 31 December relates to the following: Group Company Balance sheet Profit or loss Balance sheet 2012 2011 2012 2011 2012 2011 ¶ ¶ ¶ ¶ ¶ ¶ 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) 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. - 52 - 275 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 8. Taxation (cont'd) Unrecognised temporary differences relating to investments in subsidiaries 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 RI WKH *URXS¶V subsidiaries as the Group has determined that undistributed earnings of these subsidiaries will not be distributed in the foreseeable future. Such temporary differences for which no deferred 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 %DVLFHDUQLQJVSHUVKDUHLVFDOFXODWHGE\GLYLGLQJWKH*URXS¶VSURILWIRUWKH\HDUDWWULEXWDEOH 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. 'LOXWHG HDUQLQJV SHU VKDUH LV FDOFXODWHG E\ GLYLGLQJ WKH *URXS¶V SURILW IRU WKH \HDU 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). - 53 - 276 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 10. Property, plant and equipment Machinery Leasehold Leasehold and Electrical Furniture Office property land equipment works and fittings equipment Group ¶ ¶ ¶ ¶ ¶ ¶ Cost As 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 amount As 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 - 54 - 277 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 10. Property, plant and equipment (cont'd) Motor Construction Renovation (1) vehicles -in-progress Total ¶ ¶ ¶ ¶ Group Cost As 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 losses As 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 amount As 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 to renovation during the year include provision for reinstatement costs of $2,350,000 (2011: $2,461,000). (2) Reclassifications relates to the reclassification of construction in progress to the respective property, plant and equipment category upon completion of construction. - 55 - 278 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 10. Property, plant and equipment (cont'd) 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: Group 2012 2011 ¶ ¶ 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 CRPSDQ\¶VEDQNORDQ 1RWH Group and Company 2012 2011 ¶ ¶ 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: $289,000) recognised LQ³$GPLQLVWUDWLYHH[SHQVHV´ 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 7KH*URXS¶VSURSHUW\SODQWDQGHTXLSPHQWLQFOXGHERUURZLQJFRVWVDULVLQJIURPEDQNORDQV 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). - 56 - 279 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 10. Property, plant and equipment (cont'd) Cons- Furniture truction- and Electrical Office Leasehold in- fittings works equipment land progress Total ¶ ¶ ¶ ¶ ¶ ¶ Company Cost As 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 ± 36,977 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 amount As 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 ± - 57 - 280 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 11. Intangible assets Group Brand Trade Franchise Location Goodwill value mark rights premium Total ¶ ¶ ¶ ¶ ¶ ¶ Cost As 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 and 1.1.2012 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. $PRUWLVDWLRQH[SHQVHLVLQFOXGHGLQ³$GPLQLVWUDWLYHH[SHQVHV´LQSURILWRIORVV - 58 - 281 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 11. ,QWDQJLEOHDVVHWV FRQW¶G 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 Carrying Pre-tax Pre-tax amount as amount as discount discount at 31 at 31 rate rate December December 2012 2011 2012 2011 ¶ ¶ 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 rates ± The forecasted growth rates are based on published industry research and do not exceed the long-term average growth rate for the industries relevant to the CGUs. - 59 - 282 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 11. ,QWDQJLEOHDVVHWV FRQW¶G 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 UHWXUQ RQ LQYHVWPHQW E\ WKH *URXS¶V LQYHVWRUV 7KH FRVW RI GHEW LV EDVHG RQ WKH LQWHUHVW 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: $Nil) ZDV UHFRJQLVHG LQ ³$GPLQLVWUDWLYH H[SHQVHV´ LQ profit or loss for the financial year ended 31 December 2012 as the recoverable amount was less than the carrying value. 12. Investment securities Group 2012 2011 ¶ ¶ 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 ³,33/´ received a partial redemption of $3,526,000 (2011: $Nil) on the junior bonds. - 60 - 283 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 12. Investment securities (cont'd) 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 ³3HUHQQLDO&KLMPHV´ ,33/¶VLQYHVtment 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 YHQWXUH DJUHHPHQW WR LQYHVW LQ 3HUHQQLDO 7RQJ]KRX 'HYHORSPHQW 3WH /WG ³37'´ IRU WKH subscription of ordinary shares in the capital of PTD. IPPL¶VVXEVFULSWLRQRIRUGLQDU\ shares for a cash consideration of $20,130,000 represents a 5.72% equity interest in PTD. 13. Investment in subsidiaries Company 2012 2011 ¶ ¶ 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. - 61 - 284 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 13. Investment in subsidiaries (cont'd) Details of the subsidiaries are as follows: Proportion of Country of ownership Name incorporation Principal activities interest 2012 2011 % % Held by the Company BreadTalk Pte Ltd (1) Singapore Bakers and 100 100 manufacturers of and dealers in bread, flour and biscuits BreadTalk International Singapore Investment holding 100 100 Pte Ltd (3) Topwin Investment Singapore Investment holding 100 100 Holding Pte Ltd (3) Star Food Pte Ltd (1) Singapore Investment holding 100 60 (Note (a)) Imagine Properties Pte Singapore Investment holding 100 100 Ltd (1) Together Inc. Pte Ltd (3) Singapore Investment holding 100 100 Imagine IHQ Pte Ltd (14) Singapore Investment holding 100 ± (Note (c)) Held through subsidiaries Taster Food Pte Ltd (1) Singapore Operators of food and 70 70 drinks outlets, eating houses and restaurants Charcoal Pte Ltd (15) Singapore Dormant 75 75 Shanghai BreadTalk Co., 3HRSOH¶V Bakers and 100 100 Ltd (2) Republic of manufacturers of and China dealers in bread, flour and biscuits - 62 - 285 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 13. Investment in subsidiaries (cont'd) Proportion of Country of ownership Name incorporation Principal activities interest 2012 2011 % % Held through subsidiaries (cont'd) Shanghai BreadTalk 3HRSOH¶V Management of food 100 100 Gourmet Co., Ltd (2) Republic of and beverage, China manufacture and retail of bakery, confectionery products Beijing BreadTalk 3HRSOH¶V Management of food 100 100 Restaurant Management Republic of and beverage, Co., Ltd (2) China manufacture and retail of bakery, confectionery products Beijing BreadTalk Co.,Ltd 3HRSOH¶V Manufacture and sale of 100 100 (2) Republic of bakery and China confectionery products Food Republic 3HRSOH¶V Food court operator 100 100 (Shanghai) Co., Ltd (2) Republic of China Beijing Da Shi Dai Food 3HRSOH¶V Food court operator 100 100 and Beverage Co., Ltd (2) Republic of China Chongqing Food 3HRSOH¶V Food court operator 100 100 Republic Food & Republic of Beverage Co., Ltd (5) China Megabite Hong Kong Hong Kong Food court operator 85 85 Limited (6) Megabite (S) Pte Ltd (3) Singapore Investment holding 100 100 Food Republic Pte Ltd (1) Singapore Food court operator 100 100 BreadTalk (Thailand) Thailand Management of food 49 49 Company Limited (7)(13) and beverage, manufacture and retail of bakery, confectionery products - 63 - 286 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 13. Investment in subsidiaries (cont'd) Proportion of Country of ownership Name incorporation Principal activities interest 2012 2011 % % Held through subsidiaries (cont'd) Megabite Eatery (M) Sdn Malaysia Operator of food and 100 100 Bhd (4) beverage outlets BreadTalk Concept Hong Hong Kong Management of food 85 85 Kong Limited (6) and beverage, manufacture and retail of bakery, confectionery products ML Breadworks Sdn Bhd Malaysia Bakers and 90 90 (4) manufacturers of and dealers in bread, flour and biscuits MWA Pte Ltd (15) Singapore Dormant 100 100 Food Art Pte Ltd (3) Singapore Dormant 100 100 Shanghai Star Food F&B 3HRSOH¶V Operators of restaurants 100 60 Management Co., Ltd (2) Republic of (Note (a)) China Beijing Star Food F&B 3HRSOH¶V Operators of restaurants 100 60 Management Co., Ltd (8) Republic of (Note (a)) China Ramen Play Pte Ltd (3) Singapore Operators of restaurants 60 60 Shanghai Ramen Play 3HRSOH¶V Operators of restaurants 60 60 Co., Ltd (5) Republic of China Taster Food International Singapore Investment holding 63 63 Pte Ltd (3) Taster Food (Thailand) Thailand Operators of restaurants 31 31 Co. Limited (10)(13) Food Republic Hangzhou 3HRSOH¶V Food court operator 100 100 F&B Co.,Ltd (6) Republic of China - 64 - 287 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 13. Investment in subsidiaries (cont'd) Proportion of Country of ownership Name incorporation Principal activities interest 2012 2011 % % Held through subsidiaries (cont'd) Food Republic Shenzhen 3HRSOH¶V Food court operator 85 85 F&B Management Republic of Co.,Ltd (9) China Food Republic 3HRSOH¶V Food court operator 64 64 Guangzhou F&B Republic of Management Co., Ltd (9) China Food Republic Taiwan Taiwan Food court operator 90 90 Co., Ltd (11) FR (Thailand) Co., Ltd (12) Thailand Food court operator 49 49 Food Republic (Chengdu) 3HRSOH¶V Food court operator 100 ± Co., Ltd (5) (Note (c)) Republic of China Thye Moh Chan Pte. Ltd. Singapore Wholesale of 100 ± (3) (Note (c)) confectionery and bakery products (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 BeLMLQJ'D[LQJ&HUWLILHG3XEOLF$FFRXQWDQWV&R/WG3HRSOH¶V5HSXEOLFRI&KLQD (9) Audited by Guang Dong Zhihe Certified Public Accountants, 3HRSOH¶V5HSXEOLFRI&KLQD (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. - 65 - 288 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 13. Investment in subsidiaries (cont'd) (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 acquired an additional 40% equity interest in Star )RRG 3WH /WG DQG LWV VXEVLGLDULHV ³6WDU )RRG *URXS´ IURP LWV QRQ-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 RI WKH DGGLWLRQDO LQWHUHVW DFTXLUHG KDV EHHQ UHFRJQLVHG DV ³3UHPLXP SDLG RQ acquisition of non-FRQWUROOLQJLQWHUHVWV´ZLWKLQHTXLW\ 7KHIROORZLQJVXPPDULVHVWKHHIIHFWWRWKHFKDQJHLQWKH*URXS¶VRZQHUVKLSLQWHUHVW in Star Food Group on the equity attributable to owners of the Company: ¶ 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 (c) New subsidiaries Thye Moh Chan Pte. Ltd. ³7K\H0RK&KDQ´ 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. )RRG5HSXEOLF &KHQJGX &R/WG ³)ood Republic &KHQJGX´ 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). - 66 - 289 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 14. Investment in associates Group 2012 2011 ¶ ¶ Investment in shares, unquoted Shares, 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: Country of Proportion of Name incorporation Principal activities ownership interest 2012 2011 % % Held through subsidiaries Hong Kong BreadTalk Ltd Hong Kong Dormant 25 25 ³+.%7´ (1) Out of The Box Pte Ltd (1) Singapore Dormant ± 30 Perennial (Chijmes) Pte Ltd Singapore Investment holding 29 ± ³3HUHQQLDO&KLMPHV´ (1) JBT (China) Pte Ltd (1) Singapore Investment holding 30 ± (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 VKDUHRIORVVHVH[FHHGVWKH*URXS¶VLQWHUHVWLQWKHVHDVVRFLDWHV7KH*URXS¶VFXPXODWLYH 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 \HDU¶VORVVHV. 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 the year for a sales consideration of $30,000 and correspondingly, recognised a gain on disposal of associate of $30,000. TKH *URXS¶V FXPXODWLYH VKDUH RI XQUHFRJQLVHG ORVVHV DV DW December 2012 was $Nil (2011: $83,000). . - 67 - 290 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 14. Investment in associates (cont'd) 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 ³-%7&KLQD´ 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 will register a wholly-owned subVLGLDU\LQ6KDQJKDL3HRSOH¶V 5HSXEOLF RI &KLQD 7KH *URXS¶V LQWHUHVW LQ WKH DVVRFLDWH, 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: Group 2012 2011 ¶ ¶ Assets and liabilities Total assets 192,774 188 Total liabilities 196,614 3,486 Results Revenue 10,468 ± Net (loss)/profit for the year (1,006) 88 15. Investment in joint ventures Group 2012 2011 ¶ ¶ Investment in shares, unquoted Shares, at cost 2,688 434 Share of post-acquisition results of joint ventures 471 18 Exchange difference (34) (30) 3,125 422 - 68 - 291 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 15. Investment in joint ventures (cont'd) Details of the joint ventures are as follows: Country of Proportion of Name incorporation Principal activities ownership interest 2012 2011 % % Held through subsidiaries Shanghai Hong Bu Rang 3HRSOH¶V Dormant 50 50 Food & Beverage Republic of Management Co., Ltd (1) China 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) 3HRSOH¶V Manufacture and sale of 50 ± Republic of frozen dough China (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) $XGLWHGE\(UQVW 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 /WG LQ 6KDQJKDL 3HRSOH¶V 5HSXEOLF RI &KLQD ZLWK D UHJLVWHUHG DQG SDLG XS share capital of 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: Group 2012 2011 ¶ ¶ Assets and liabilities Current assets 4,186 2,000 Non-current assets 1,865 827 Total assets 6,051 2,827 - 69 - 292 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 15. Investment in joint ventures (cont'd) Group 2012 2011 ¶ ¶ Current liabilities 3,029 2,431 Non-current liabilities 2 2 Total liabilities 3,031 2,433 Results Revenue 6,363 2,579 Other income 438 459 Expenses (6,428) (2,945) Profit for the year 373 93 16. Inventories Group 2012 2011 ¶ ¶ 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 Group 2012 2011 ¶ ¶ 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 - 70 - 293 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 17. Trade and other receivables Group Company 2012 2011 2012 2011 ¶ ¶ ¶ ¶ 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. Trade receivables denominated in foreign currencies at 31 December are as follows:- Group 2012 2011 ¶ ¶ United States Dollar 610 638 Euro Dollar 12 17 622 655 - 71 - 294 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 17. Trade and other receivables (cont'd) 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: Group 2012 2011 ¶ ¶ 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 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: Group Individually impaired 2012 2011 ¶ ¶ 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. - 72 - 295 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 17. Trade and other receivables (cont'd) 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: Group 2012 2011 ¶ ¶ 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 More than 120 days 195 840 1,181 2,307 Other receivables that are impaired / partially impaired 7KH *URXS¶V RWKHU receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows: Group 2012 2011 ¶ ¶ 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 At 31 December 34 82 Deposits Deposits include an amount of $Nil (2011: $12,000,000) for the subscription of junior bonds UHODWLQJ WR WKH *URXS¶V LQYHVWPHQW LQ D UHWDLO SURSHUW\ WUXVW LQ 6LQJDSRUH The deposit of $12,000,000 has been reclassified to investment securities upon completion of the subscription of junior bonds in 2012 (Note 12). - 73 - 296 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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. (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 is 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. Group Receivables that are past due but not impaired Amount due from joint ventures (non-trade) Group 2012 2011 ¶ ¶ 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 Receivables that are past due but not impaired Amounts due from subsidiaries (non-trade) Company 2012 2011 ¶ ¶ Lesser than 30 days 5 8 30 to 60 days 53 4 61 to 90 days 9 ± 91 to 120 days 4 ± More than 120 days 47 30 Total as at 31 December 118 42 - 74 - 297 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 19. Cash and cash equivalents Group Company 2012 2011 2012 2011 ¶ ¶ ¶ ¶ 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 Company 2012 2011 2012 2011 ¶ ¶ ¶ ¶ 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 Company 2012 2011 2012 2011 ¶ ¶ ¶ ¶ United States Dollar 676 1,193 32 34 - 75 - 298 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 20. Trade and other payables Group Company 2012 2011 2012 2011 ¶ ¶ ¶ ¶ 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 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: Group 2012 2011 ¶ ¶ United States Dollar 427 241 Others 75 17 502 258 - 76 - 299 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 21. Other liabilities and provision Group Company 2012 2011 2012 2011 ¶ ¶ ¶ ¶ 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 2012 2011 Group ¶ ¶ 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 agreements 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 KDVEHHQUHFRJQLVHGLQ³2WKHU RSHUDWLQJLQFRPH´LQSURILWRUORVV 1RWH - 77 - 300 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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: Group Total Total minimum Present minimum Present lease value of lease value of payments payments payments payments 2012 2012 2011 2011 ¶ ¶ ¶ ¶ 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 Company 2012 2011 2012 2011 ¶ ¶ ¶ ¶ 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 - 78 - 301 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 24. Short-term loans (cont'd) 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 Company Term loans Maturity 2012 2011 2012 2011 ¶ ¶ ¶ ¶ 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 ± ± 88,523 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 - 79 - 302 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 25. Long-term loans (cont'd) Note 1 ± the loan will be converted to a 15-year term loan within 3 months of the Temporary 2FFXSDWLRQ 3HUPLW 723 RI WKH *URXS¶V operations Headquarters or 30 June 2013, whichever is earlier and is secured by a charge over the CompaQ\¶V OHDVHKROG ODQG DQG 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. - 80 - 303 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 26. Share capital and treasury shares (a) Share capital Group and Company 2012 2011 Number of Number of shares $'000 shares $'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 Group and Company 2012 2011 Number of Number of shares $'000 shares $'000 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 FRPSRQHQWZLWKLQVKDUHKROGHUV¶HTXLW\ 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. - 81 - 304 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 27. Accumulated profits and other reserves Accumulated profits Included LQWKH*URXS¶VDFFXPXODWHGSURILWVLVan 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 Company Note 2012 2011 2012 2011 ¶ ¶ ¶ ¶ Other reserves Statutory reserve fund (a) 2,757 2,382 ± ± Translation reserve (b) (755) 189 ± ± Fair value adjustment (c) reserve 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 3,718 535 543 (a) Statutory reserve fund In accordance with the Foreign Enterprise Law applicable to subsidiaries in the 3HRSOH¶V 5HSXEOLF RI &KLQD 35& WKH VXEVLGLDULHV DUH UHTXLUHG WR PDNH 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 subsidiarieV¶UHJLVWHUHGFDSLWDO6XEMHFWWRWKHDSSURYDO 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 IXQFWLRQDOFXUUHQFLHVDUHGLIIHUHQWIURPWKDWRIWKH*URXS¶Vpresentation currency. - 82 - 305 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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. Group 2012 2011 ¶ ¶ 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 GLVWULEXWLRQ ZKHWKHULQFDVKRURWKHUZLVH RIWKH&RPSDQ\¶VDVVHWV LQFOXGLQJDQ\ 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 Company 2012 2011 2012 2011 ¶ ¶ ¶ ¶ 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 ± ± ± - 83 - 306 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 28. Commitments and contingencies (cont'd) (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¶VDFWLYLWLHVFRQFHUQLQJGLYLdends, additional debt or further leasing. Future minimum lease payments payable under non-cancellable operating leases as at 31 December are as follows: Group 2012 2011 ¶ ¶ 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: Group 2012 2011 ¶ ¶ 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). - 84 - 307 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 28. Commitments and contingencies (cont'd) (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 ³,33/´ (Note 12), the Company, together with the other LQYHVWRUVRIWKHMXQLRUERQGVKDGH[HFXWHGD6SRQVRUV¶8QGHUWDNLQJRQ -DQXDU\ ZKHUHE\ WKH &RPSDQ\ XQGHUWDNHV WR SD\ ,33/¶V SURSRUWLRQ RIDOOFRVW 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. 3% SGD junior bonds In conjunction with the investment in junior bonds by the subsidiary, IPPL (Note 12), WRJHWKHU ZLWK WKH RWKHU LQYHVWRUV RI WKH MXQLRU ERQGV KDG H[HFXWHG D 6SRQVRUV¶ Undertaking on 30 January 2012 whereby IPPL undertakes to pay all cost overruns in connection to the addLWLRQV¶DQGDOWHUDWLRQV¶ZRUNVWREHXQGHUWDNHQRQ&KLMPHV As at 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 ³-7&´ WRDFTXLUHDOHDVHKROGODQGORFDWHGDW3D\D/ebar 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. 7KH EXLOGLQJ ZLOO VHUYH DV WKH *URXS¶V PDQXIDFWXULQJ IDFLOLW\ 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. - 85 - 308 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 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: Group 2012 2011 ¶ ¶ 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 Expenses Rental 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 Others Franchise 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 Company 2012 2011 ¶ ¶ 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 - 86 - 309 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 29. Related party disclosures (cont'd) (b) Compensation of key management personnel Group 2012 2011 ¶ ¶ Salaries and bonus 6,924 6,428 Central Provident Fund contributions and other pension contributions 298 259 Share-based payment (RSG Plan) 89 120 'LUHFWRUV¶IHHV 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 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 EHHQWKURXJKRXWWKHFXUUHQWDQGSUHYLRXVILQDQFLDO\HDUWKH*URXS¶VSROLF\WKDWQRWUDGLQJLQ derivatives for speculative purposes shall be undertaken. 7KH IROORZLQJ VHFWLRQV SURYLGH GHWDLOV UHJDUGLQJ WKH *URXS¶V DQG &RPSDQ\¶V H[SRVXUH WR the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. 7KHUHKDVEHHQQRFKDQJHWRWKH*URXS¶VH[SRsure to these financial risks or the manner in which it manages and measures the risks. 7KH *URXS¶V DQG &RPSDQ\¶V SULQFLSDO ILQDQFLDO LQVWUXPHQWV FRPSULVH EDQN ORDQV ILQDQFH leases and cash and short term deposits. The main purpose of these financial instruments is WRUDLVHILQDQFHIRUWKH*URXS¶VDQG&RPSDQ\¶VRSHUDWLRQV7KH*URXSDQG&RPSDQ\KDV 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 - 87 - 310 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 30. Financial risk management objectives and policies (cont'd) (a) Interest rate risk ,QWHUHVWUDWHULVNLVWKHULVNWKDWWKHIDLUYDOXHRUIXWXUHFDVKIORZVRIWKH*URXS¶VDQG WKH &RPSDQ\¶V ILQDQFLDO LQVWUXPHQWV ZLOO IOXFWXDWH EHFDXVH RI FKDQJHV LQ PDUNHW interest rates. 7KH*URXS¶V DQGWKH&RPSDQ\¶VH[SRVXUHWRinterest 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. 7KH*URXS¶VSROLF\LVWRREWDLQWKHPRVWIDYRXUDEOHLQWHUHVWUDWHVDYDLODEOHZLWKRXW increasing its foreign exchange exposure. Surplus funds are placed with reputable banks. Sensitivity analysis for interest rate risk Group Effect on profit before tax 100 basis 100 basis points points increase decrease ¶ ¶ 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 - 88 - 311 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 30. Financial risk management objectives and policies (cont'd) (a) ,QWHUHVWUDWHULVN FRQW¶G Group Effect on profit before tax 100 basis 100 basis points points increase decrease ¶ ¶ 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 (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 3HRSOH¶V %DQN RI &KLQD RU RWKHU DXWKRULVHG ILQDQFLDO LQVWLWXWLRQV 3D\PHQWV IRU 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 PXVWEHDUUDQJHGWKURXJKWKH3HRSOH¶V%DQNRI&KLQDRURWKHUauthorised financial LQVWLWXWLRQV $SSURYDO IRU H[FKDQJHV DW WKH 3HRSOH¶V %DQN RI &KLQD RU RWKHU 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 Singapore dollars or other currencies can generally be HIIHFWHG DW WKH 3HRSOH¶V %DQN RI &KLQD RU RWKHU DXWKRULVHG ILQDQFLDO LQVWLWXWLRQV 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. 7KH *URXS¶V QHW LQYHVWPHQWV LQ WKHVH FRXQWULHV DUH QRW KHGJHG Ds 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. - 89 - 312 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 30. Financial risk management objectives and policies (cont'd) Group Effect on profit before tax 2012 2011 ¶ ¶ 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 SGD - strengthened 5% (2011: 5%) (111) (60) - 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 SGD - strengthened 5% (2011: 5%) (86) (8) - 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 VKRXOG D FRXQWHUSDUW\ GHIDXOW RQ LWV REOLJDWLRQV 7KH *URXS¶V DQG WKH &RPSDQ\¶V 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. - 90 - 313 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 30. Financial risk management objectives and policies (cont'd) (c) &UHGLWULVN FRQW¶G The Group trades only with recognised and creditworthy third parties. It is the *URXS¶VSROLF\WKDWDOOFXVWRPHUVZKRZLVKWRWUDGHRQFUHGLWWHUPVDUHVXEMHFWWR credit verification procedures. In addition, receivable balances are monitored on an RQJRLQJ EDVLV ZLWK WKH UHVXOW WKDW WKH *URXS¶V H[SRVXUH WR EDG GHEWV LV QRW significant. Exposure to credit risk $WWKHEDODQFHVKHHWGDWHWKH*URXS¶VDQGWKH&RPSDQ\¶VPD[LPXPH[SRVXUHWR 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 VXEVLGLDULHV¶ERUURZLQJVDQGRWKHUEDQNLQJIDFLOLWLHV 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 WKH*URXS¶VWUDGHUHFHLYDEOHVDWWKHEDODQFHVKHHWGDWHLVDVIROORZV Group 2012 2011 % of % of ¶ total ¶ total By country: Singapore 76 1% 93 1% 3HRSOH¶V5HSXEOLFRI 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% - 91 - 314 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2012 30. Financial risk management objectives and policies (cont'd) Excessive risk concentration Concentration arise when a number of couter 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 GURXS¶V SHUIRUPDQFH WR GHYHORSPHQWV affecting a particular industry. In order to avoid excessive concentration of risk, the GURXS¶V SROLFLHV DQG 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 neither past due nor impaired Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default. Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Notes 17 and 18 above. (d) Liquidity risk Liquidity risk is the risk that the Group or the Company will encounter difficulty in PHHWLQJ ILQDQFLDO REOLJDWLRQV GXH WR VKRUWDJH RI IXQGV 7KH *URXS¶V DQG WKH &RPSDQ\¶V H[SRVXUH WR OLTXLGLW\ ULVN DULVHV SULPDULO\ IURP PLVPDWFKHV RI WKH maturities of finDQFLDO DVVHWV DQG OLDELOLWLHV 7KH *URXS¶V DQG WKH &RPSDQ\¶V 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. - 92 - 315 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2012 30. Financial risk management objectives and policies (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 2011 1 year or 1 to 5 1 year or 1 to 5 less years Total less 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 ± 87,060 316 109,926 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 Company Financial 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 - 93 - BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2012 30. Financial risk management objectives and policies (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 2011 1 year or 1 to 5 1 year or 1 to 5 less years Total less years Total Company $'000 $'000 $'000 $'000 $'000 $'000 Financial guarantees 60,639 35,586 96,225 34,375 16,029 50,404 317 - 94 - BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2012 30. Financial risk management objectives and policies (cont'd) (e) Market price risk Market price risk is the risk that the fair value or IXWXUHFDVKIORZVRIWKH*URXS¶V 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: Group 2012 2011 ¶ ¶ 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 - 95 - 318 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2012 31. Financial instruments (cont'd) (b) Fair values (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 (Level 1) 2012 Financial assets: Available-for-sale financial assets (Note 12) - Equity instruments (quoted) 529 At 31 December 2012 529 2011 Financial assets: Available-for-sale financial assets (Note 12) - Equity instruments (quoted) 919 At 31 December 2011 919 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: x Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities 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. - 96 - 319 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2012 31. Financial instruments (cont'd) (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 assets 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. (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 value 2012 2011 2012 2011 ¶ ¶ ¶ ¶ 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 arrangements at the balance sheet date. No disclosure of fair values are made for the *URXS¶V quasi-capital loan to an associate and loans from minority shareholders of subsidiariesDQGWKH&RPSDQ\¶V 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 - 97 - 320 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2012 32. Capital management Capital includes debt and equity items as disclosed in the table below. 7KHSULPDU\REMHFWLYHRIWKH*URXS¶VFDSLWDOPDQDJHPHQWLVWRHQVXUHWKDWLW PDLQWDLQV 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. 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 *URXS¶VSROLF\LVWRNHHSWKHJHDULQJUDWLRbelow 2. Group 2012 2011 ¶ ¶ 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 Net gearing borrowings Net cash (1) including bank loans, finance lease obligations and loans from minority shareholders of subsidiaries - 98 - 321 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2012 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. - 99 - 322 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2012 33. 6HJPHQWLQIRUPDWLRQ FRQW¶G Food Bakery Restaurant court 2012 operations (1) operations operations Investment Others (2) Elimination Group ¶ ¶ ¶ ¶ ¶ ¶ ¶ Revenue External 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 Results Profit 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 YHQWXUHV¶UHVXOWV 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 information Investment 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 - 100 - 323 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2012 33. 6HJPHQWLQIRUPDWLRQ FRQW¶G Food Bakery Restaurant court 2011 operations (1) operations operations Investment Others (2) Elimination Group ¶ ¶ ¶ ¶ ¶ ¶ ¶ Revenue External 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 Results Profit 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 YHQWXUHV¶UHVXOWV ± ± 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 information Investment 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 - 101 - 324 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2012 33. 6HJPHQWLQIRUPDWLRQ FRQW¶G 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: impairment/(write-back) of property, plant and equipment, intangible assets investment in associate, receivables, amount due from associates and inventories; write off of property, plant and equipment, bad debts and inventories; (gain)/loss on disposals of property, plant and equipment; share based payment expenses; and unrealised foreign exchange (gain)/loss. Geographical information Revenue and non-current assets information based on the geographical location of customers and assets respectively are as follows: (3) External sales Non-current assets 2012 2011 2012 2011 ¶ ¶ ¶ ¶ 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. - 102 - 325 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2012 34. Dividends Group and Company 2012 2011 ¶ ¶ Dividends paid during the year: Dividends on ordinary shares First and final exempt (one-tier) ordinary dividend for 2011 of 1.0 cent per share (2010: 1.0 cent per share) 2,812 2,813 First and final exempt (one-tier) special dividend for 2011 of 0.5 cent per share (2010: Nil cent per share) 1,406 ± Interim exempt (one-tier) dividend for 2012 of 0.5 cent per share (2011: Nil 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: First and final exempt (one-tier) ordinary dividend for 2012 of 0.8 cent per share (2011: 1.0 cent per share) 2,250 2,812 First and final exempt (one-tier) special dividend for 2011 of Nil cent per 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. - 103 - 326 APPENDIX IV AUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 327 328 BreadTalk Group Limited and its Subsidiaries General Information Directors Dr George Quek Meng Tong Katherine Lee Lih Leng Ong Kian Min Chan Soo Sen Dr Tan Khee Giap Company Secretary Cho Form Po (appointed on 6 November 2013) Tan Cher Liang (resigned on 6 November 2013) Registered Office 30 Tai Seng Street #09-01 BreadTalk IHQ Singapore 534013 Tel: 6285 6116 Fax: 6285 1661 Bankers Australia and New Zealand Banking Group Limited DBS Bank Ltd Oversea-Chinese Banking Corporation Limited United Overseas Bank Limited Share Registrar Boardroom Corporate & Advisory Services Pte Ltd 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623 Auditor Ernst & Young LLP Partner in charge: Ang Chuen Beng (since financial year ended 31 December 2011) 329 BreadTalk Group Limited and its Subsidiaries General Information Index Page 'LUHFWRUV¶5HSRUW 1 Statement by Directors 8 Independent Auditor's Report 9 Consolidated Statement of Comprehensive Income 11 Balance Sheets 12 Statements of Changes in Equity 14 Consolidated Cash Flow Statement 17 Notes to the Financial Statements 20 330 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW The directors are pleased to present their report to the members together with the audited consolidated financial statements of BreadTalk Group Limited (the ³Company´) and its subsidiaries (collectively, the ³Group´) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2013. Directors The directors of the Company in office at the date of this report are: Dr George Quek Meng Tong (Chairman) Katherine Lee Lih Leng (Deputy Chairman) Ong Kian Min Chan Soo Sen Tan Khee Giap 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. 'LUHFWRUV¶LQWHUHVWVLQVKDUes and debentures The following directors, who held office at the end of the financial year, had, according to the register of GLUHFWRUV¶VKDUHKROGLQJVUHTXLUHGWREHNHSWXQGHUVHFWLRQRIWKH6LQJDSRUH&RPSDQLHV$FW&DS 50, an interest in shares of the Company as stated below: Direct interest Deemed interest As at 1 As at 31 As at 1 As at 31 January December As at 21 January December As at 21 Name of director 2013 2013 January 2014 2013 2013 January 2014 The Company (Ordinary shares) Dr George Quek Meng 95,644,430 95,673,470 95,673,470 ± ± ± Tong Katherine Lee Lih Leng 52,371,790 52,400,830 52,400,830 ± ± ± Ong Kian Min 120,000 120,000 120,000 ± ± ± Tan Khee Giap ± ± ± 20,000 20,000 20,000 (Conditional award of restricted shares) Dr George Quek Meng 43,230 14,190 14,190 ± ± ± Tong Katherine Lee Lih Leng 43,230 14,190 14,190 ± ± ± - 1 - 331 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW 'LUHFWRUV¶LQWHUHVWVLQVKDUHVDQGGHEHQWXUHV FRQW¶G By virtue of Section 7 of the Companies Act, Cap. 50, Dr 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 2014. 'LUHFWRUV¶FRQWUDFWXDOEHQHILWV 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) 7KH%UHDG7DON*URXS/LPLWHG(PSOR\HHV¶6KDUH2SWLRQ6FKHPH 7KH%UHDG7DON*URXS/LPLWHG(PSOR\HHV¶6KDUH2SWLRQ6FKHPH (626 ZDVDSSURYHGDWDQ 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. - 2 - 332 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW Share Option and Share Plans (cont'd) (a) 7KH%UHDG7DON*URXS/LPLWHG(PSOR\HHV¶6KDUH2SWLRQ6FKHPH (cont'd) Size of ESOS The total number of new shares over which options may be granted pursuant to the ESOS shall not exceed fifteen per cent (15%) of the issued share capital of the Company on the date preceding the grant of an option. The aggregate number of Shares available to eligible Controlling Shareholders and their Associates under the ESOS shall not exceed twenty five per cent (25%) of the Shares available under the ESOS. In addition, the number of Shares available to each Controlling Shareholder or his Associate shall not exceed ten per cent (10%) of the Shares available under the ESOS. Grant of ESOS Options may be granted from time to time during the year when the ESOS is in force, except that options shall be granted on or after the second market day on which an announcement of any matter involving unpublished price sensitive information is released. Acceptance of ESOS The grant of an option shall be accepted not more than 30 days from the offering date of that option and accompanied by payment to the Company of a nominal consideration of $1 or such other amount as required by the Remuneration Committee. Since the commencement of the ESOS up to the end of the financial year, there were no options granted to any person. Any options granted under the ESOS do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any share issue of any other company. (b) The BreadTalk Restricted Share Grant Plan The BreadTalk Restricted Share Grant Plan ("RSG Plan") was approved at an Extraordinary General Meeting held on 28 April 2008. The RSG Plan is centred on the accomplishment of specific pre-determined performance objectives and service conditions, which is the prerequisite for the contingent award of fully paid 6KDUHV ³$ZDUG´ 7KH UHZDUG VWUXFWXUH DOORZV WKH &RPSDQ\ WR WDUJHW VSHFLILF SHUIRUPDQFH objectives and incentivise the Participants to put in their best efforts to achieve these targets. - 3 - 333 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW Share Option and Share Plans (cont'd) (b) The BreadTalk Restricted Share Grant Plan (cont'd) 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. 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. - 4 - 334 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW Share Option and Share Plans (cont'd) (b) The BreadTalk Restricted Share Grant Plan (cont'd) 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 56*3ODQZRXOGEHPDGHRQFHD\HDUDIWHUWKH&RPSDQ\¶VDQQXDOJHQHUDOPHHWLQJ,WZLOOEH 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 2013 are as follows: Aggregate Aggregate conditional conditional Aggregate Aggregate restricted restricted conditional conditional shares Aggregate Conditional shares restricted restricted vested and conditional restricted awarded shares shares released restricted shares since lapsed since vested and since shares granted commence- commence- released commence- outstanding during the ment of the ment of the during the ment of the at end of the Name of Participant year Plan Plan year Plan year (a) (b) (c) (a)-(b)-(c) Directors of the Company Dr George Quek (1) Meng Tong ± 238,200 59,000 29,040 165,010 14,190 Katherine Lee Lih (1) Leng ± 213,000 59,000 29,040 139,810 14,190 Associate of a Controlling Shareholder Frankie Quek Swee (2) Heng 10,000 125,000 ± 16,370 97,180 27,820 - 5 - 335 BreadTalk Group Limited and its Subsidiaries 'LUHFWRUV¶5HSRUW Share Option and Share Plans (cont'd) Aggregate Aggregate conditional conditional Aggregate Aggregate restricted restricted conditional conditional shares Aggregate Conditional shares restricted restricted vested and conditional restricted awarded shares shares released restricted shares since lapsed since vested and since shares granted commence- commence- released commence- outstanding during the ment of the ment of the during the ment of the at end of the Name of Participant year Plan Plan year Plan year (a) (b) (c) (a)-(b)-(c) Participants who received 5% or more of the total grants available (3) Oh Eng Lock 48,000 1,053,666 ± 74,890 915,906 137,760 Goh Tong Pak 9,000 319,200 ± 40,770 292,050 27,150 Cheng William 27,000 301,200 ± 54,990 222,060 79,140 James Quek 54,000 294,800 ± 71,030 145,760 149,040 Jenson Ong Chin Hock 10,000 66,600 ± 17,690 35,150 31,450 Lawrence Yeo Kia Yeow 31,000 91,000 ± 20,400 20,400 70,600 Other participants 64,000 733,400 77,220 93,770 497,470 158,710 253,000 3,436,066 195,220 447,990 2,530,796 710,050 (1) Also a controlling shareholder of the Company (2) Associate of Dr 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. :LWKWKH5HPXQHUDWLRQ&RPPLWWHH¶VDSSURYDORQWKHDFKLHYHPHQWRIWKHSHUIRUPDQFHWDUJHWV for the performance period from FY2009 to FY2012, a total of 447,990 restricted shares were released via the issuance of treasury shares. Audit Committee The Audit Committee performed the functions specified in the Companies Act. The functions performed are detailed in the Report on Corporate Governance. - 6 - 336 337 338 BreadTalk Group Limited and its Subsidiaries Independent Auditor's Report For the financial year ended 31 December 2013 Independent Auditor's Report to the members of BreadTalk Group Limited 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 11 to 106, which comprise the balance sheets of the Group and the Company as at 31 December 2013, 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. - 9 - 339 340 BreadTalk Group Limited and its Subsidiaries Consolidated Statement of Comprehensive Income for the year ended 31 December 2013 Notes 2013 2012 ¶ ¶ Revenue 3 536,530 447,334 Cost of sales (251,973) (205,908) Gross profit 284,557 241,426 Other operating income 4 11,899 10,484 Interest income 5 1,316 1,685 Distribution and selling expenses (209,937) (180,500) Administrative expenses (63,596) (52,786) Interest expense 5 (2,675) (1,386) Profit before tax and share of results of associates and joint ventures 21,564 18,923 Share of results of associates 231 ± Share of results of joint ventures 595 453 Profit before tax 6 22,390 19,376 Income tax expense 8 (6,251) (5,818) Profit for the year 16,139 13,558 Profit attributable to: Owners of the Company 13,600 12,000 Non-controlling interests 2,539 1,558 16,139 13,558 Other comprehensive income: Items that may be reclassified subsequently to profit or loss Net fair value loss on available-for-sale financial assets (103) (390) Foreign currency translation 1,421 (944) Other comprehensive income for the year, net of tax 1,318 (1,334) Total comprehensive income for the year 17,457 12,224 Total comprehensive income attributable to: Owners of the Company 14,918 10,666 Non-controlling interests 2,539 1,558 17,457 12,224 Earnings per share (cents) Basic 9 4.83 4.27 Diluted 9 4.82 4.25 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. - 11 - 341 BreadTalk Group Limited and its Subsidiaries Balance Sheets as at 31 December 2013 Notes Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Non-current assets Property, plant and equipment 10 225,860 157,408 74,115 44,286 Intangible assets 11 7,772 8,531 ± ± Investment securities 12 59,799 45,883 ± ± Investment in subsidiaries 13 ± ± 23,657 23,785 Investment in associates 14 4,568 900 ± ± Investment in joint ventures 15 3,638 3,125 ± ± Other receivables 17 3,277 1,880 ± ± Due from related corporations 18 ± ± ± ± Fixed deposit 19 10,671 9,988 ± ± Deferred tax assets 8 4,287 2,952 67 67 319,872 230,667 97,839 68,138 Current assets Inventories 16 10,004 9,492 ± ± Trade and other receivables 17 49,145 43,618 968 1,025 Prepayments 6,395 6,324 86 41 Tax recoverable 6 ± ± ± Due from related corporations 18 959 1,652 16,753 31,261 Amounts due from minority shareholders of subsidiaries (non-trade) 23 395 411 ± ± Cash and cash equivalents 19 79,420 64,245 9,214 431 Assets of disposal group classified as held for sale 20 2,056 ± ± ± 148,380 125,742 27,021 32,758 Current liabilities Trade and other payables 21 102,589 90,957 2,669 4,445 Other liabilities 22 59,531 52,477 5,793 7,588 Provision 22 10,223 7,977 22 ± Due to related corporations 18 3,901 2,211 27,457 16,695 Loan from a minority shareholder of a subsidiary 23 200 200 ± ± Short-term loans 24 9,746 7,896 ± ± Current portion of long-term loans 25 20,554 37,910 3,135 25,863 Tax payable 6,458 6,438 ± ± 213,202 206,066 39,076 54,591 - 12 - 342 BreadTalk Group Limited and its Subsidiaries Balance Sheets as at 31 December 2013 FRQW¶G Notes Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Net current liabilities (64,822) (80,324) (12,055) (21,833) Non-current liabilities Other liabilities 22 10,297 6,191 ± ± Long-term loans 25 138,216 50,613 49,048 18,000 Deferred tax liabilities 8 2,554 2,514 ± ± 151,067 59,318 49,048 18,000 Net assets 103,983 91,025 36,736 28,305 Equity attributable to owners of the Company Share capital 26 33,303 33,303 33,303 33,303 Treasury shares 26 (187) (406) (187) (406) Accumulated profits 27 57,499 47,559 3,159 (5,127) Other reserves 27 3,338 2,094 461 535 93,953 82,550 36,736 28,305 Non-controlling interests 10,030 8,475 ± ± Total Equity 103,983 91,025 36,736 28,305 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. - 13 - 343 BreadTalk Group Limited and its Subsidiaries Statements of Changes in Equity for the year ended 31 December 2013 Attributable to owners of the Company Premium paid on Fair value Share based acquisition Statutory Trans- adjust- compen- of non- Non-con- 2012 Share Treasury Accumulated reserve lation ment sation controlling Capital trolling Total Group capital shares profits fund reserve reserve reserve interests reserve Total interests equity $'000 ¶ $'000 $'000 $'000 $'000 $'000 $'000 ¶ $'000 $'000 $'000 (Note 26) (Note 26) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) At 1 January 2012 33,303 (609) 41,558 2,382 189 604 357 ± 186 77,970 7,498 85,468 Profit for the year ± ± 12,000 ± ± ± ± ± ± 12,000 1,558 13,558 Other comprehensive income Net fair value loss on available-for-sale financial assets ± ± ± ± ± (390) ± ± ± (390) ± (390) Foreign currency translation ± ± ± ± (944) ± ± ± ± (944) ± (944) Other comprehensive income for the year, net of tax ± ± ± ± (944) (390) ± ± ± (1,334) ± (1,334) Total comprehensive income for the year ± ± 12,000 ± (944) (390) ± ± ± 10,666 1,558 12,224 344 Contributions by and distributions to owners Share-based payments ± ± ± ± ± ± 291 ± ± 291 ± 291 Dividends paid (Note 35) ± ± (5,624) ± ± ± ± ± ± (5,624) (54) (5,678) Dividends payable ± ± ± ± ± ± ± ± ± ± (984) (984) Treasury shares transferred on vesting of restricted share grant ± 299 ± ± ± ± (269) ± (30) ± ± ± Purchase of treasury shares ± (96) ± ± ± ± ± ± ± (96) ± (96) Total contributions by and distributions to owners ± 203 (5,624) ± ± ± 22 ± (30) (5,429) (1,038) (6,467) Changes in ownership interests in a subsidiary Acquisition of non-controlling interests without a change in control ± ± ± ± ± ± ± (657) ± (657) 457 (200) Total changes in ownership interests in a subsidiary ± ± ± ± ± ± ± (657) ± (657) 457 (200) Total transactions with owners in their capacity as owners ± 203 (5,624) ± ± ± 22 (657) (30) (6,086) (581) (6,667) Others Transfer to statutory reserve ± ± (375) 375 ± ± ± ± ± ± ± ± Total others ± ± (375) 375 ± ± ± ± ± ± ± ± At 31 December 2012 33,303 (406) 47,559 2,757 (755) 214 379 (657) 156 82,550 8,475 91,025 - 14 - BreadTalk Group Limited and its Subsidiaries Statements of Changes in Equity for the year ended 31 December 2013 (cont'd) Attributable to owners of the Company Premium paid on Fair value Share based acquisition Statutory Trans- adjust- compen- of non- Non-con- 2013 Share Treasury Accumulated reserve lation ment sation controlling Capital trolling Total Group capital shares profits fund reserve reserve reserve interests reserve Total interests equity $'000 ¶ $'000 $'000 $'000 $'000 $'000 $'000 ¶ $'000 $'000 $'000 (Note 26) (Note 26) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) (Note 27) At 1 January 2013 33,303 (406) 47,559 2,757 (755) 214 379 (657) 156 82,550 8,475 91,025 Profit for the year ± ± 13,600 ± ± ± ± ± ± 13,600 2,539 16,139 Other comprehensive income Net fair value loss on available-for-sale financial assets ± ± ± ± ± (103) ± ± ± (103) ± (103) Foreign currency translation ± ± ± ± 1,421 ± 1,421 ± 1,421 Other comprehensive income for the year, net of tax ± ± ± ± 1,421 (103) ± ± ± 1,318 ± 1,318 345 Total comprehensive income for the year ± ± 13,600 ± 1,421 (103) ± ± ± 14,918 2,539 17,457 Contributions by and distributions to owners Share-based payments ± ± ± ± ± ± 145 ± ± 145 ± 145 Dividends paid (Note 35) ± ± (3,660) ± ± ± ± ± ± (3,660) ± (3,660) Dividends payable ± ± ± ± ± ± ± ± ± ± (984) (984) Treasury shares transferred on vesting of restricted share grant ± 219 ± ± ± ± (238) ± 19 ± ± ± Purchase of treasury shares ± ± ± ± ± ± ± ± ± ± ± ± Total transactions with owners in their capacity as owners ± 219 (3,660) ± ± ± (93) ± 19 (3,515) (984) (4.499) At 31 December 2013 33,303 (187) 57,499 2,757 666 111 286 (657) 175 93,953 10,030 103,983 - 15 - BreadTalk Group Limited and its Subsidiaries Statements of Changes in Equity for the year ended 31 December 2013 (cont'd) Share based compen- Share Treasury Accumulated sation Capital Total capital shares profits reserve reserve equity ¶ ¶ ¶ ¶ ¶ ¶ (Note 26) (Note 26) (Note 27) (Note 27) (Note 27) 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 and distributions 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 35) (5,624) (5,624) ± ± ± ± Total transactions with owners in their capacity as owners ± 203 (5,624) 22 (30) (5,429) At 31 December 2012 33,303 (406) (5,127) 379 156 28,305 2013 Company 1 January 2013 33,303 (406) (5,127) 379 156 28,305 Profit for the year 11,946 11,946 ± ± ± ± Total comprehensive income for the year 11,946 11,946 ± ± ± ± Contributions by and distributions to owners Share-based payments ± ± ± 145 ± 145 Treasury shares transferred on vesting of restricted share grant ± 219 ± (238) 19 ± Purchase of treasury shares ± ± ± ± ± ± Dividends paid (Note 35) ± ± (3,660) ± ± (3,660) Total transactions with owners in their capacity as owners ± 219 (3,660) (93) 19 (3,515) At 31 December 2013 33,303 (187) 3,159 286 175 36,736 The accompanying accounting policies and explanatory notes form an integral part of the financial statements. - 16 - 346 BreadTalk Group Limited and its Subsidiaries Consolidated Cash Flow Statement for the year ended 31 December 2013 Notes 2013 2012 ¶ ¶ Cash flows from operating activities Profit before taxation 22,390 19,376 Adjustments for: Amortisation of intangible assets 11 489 618 Depreciation of property, plant and equipment 10 38,849 30,379 Gain on disposal of an associate 14 ± (30) Gain on disposal of intangible assets 14 (11) ± (Gain) / loss on disposal of property, plant and equipment (111) 753 Write back of provision for reinstatement cost (394) ± Impairment loss on intangible assets 11 ± 215 Impairment loss on property, plant and equipment 10 824 167 Impairment / (write back of impairment) of trade receivables 197 (11) Impairment of amount due from joint venture 607 ± Interest expense 2,675 1,386 Interest income (1,316) (1,685) Property, plant and equipment written off 743 732 Share based payment expenses 146 291 Share of results of associates (231) ± Share of results of joint ventures (595) (453) Unrealised exchange (gain) / loss, net (1,115) 608 Waiver of loans by minority shareholders of subsidiaries ± (882) Impairment / (write back of impairment) of other receivables 26 (41) Write-down of inventories ± 15 Write-off of inventories ± 22 Operating cash flows before working capital changes 63,173 51,460 Increase in: Inventories (992) (2,132) Trade and other receivables (8,319) (9,620) Prepayments (71) (935) Amount due from joint ventures (trade) 278 (283) Increase in: Trade and other payables 10,400 13,929 Other liabilities 14,019 4,585 Amount due to a joint venture (trade) 496 1,847 Cash flows generated from operations 78,984 58,851 Tax paid (7,545) (5,415) Net cash flows from operating activities 71,439 53,436 - 17 - 347 BreadTalk Group Limited and its Subsidiaries Consolidated Cash Flow Statement for the year ended 31 December 2013 (cont'd) Notes 2013 2012 ¶ ¶ Cash flows from investing activities Interest income received 2,070 2,048 Purchase of property, plant and equipment A (106,441) (92,893) Additions to intangible assets (219) (196) Subscription of junior bonds ± (6,000) Cash paid for reinstatement expenses (375) (157) Proceeds from disposal of property, plant and equipment 271 327 Amount due from joint ventures(non-trade) (138) (72) Amount due to joint ventures (non-trade) ± (30) Loan to a joint venture (55) ± Amount due to an associate (non-trade) 1,193 ± Investment in a joint venture ± (2,310) Investment in associates (2,910) (900) Proceeds from disposal of an associate 14 ± 30 Purchase of investment securities (14,020) (20,130) Placement of long-term fixed deposit ± (9,988) Partial redemption of junior bonds 12 ± 3,526 Dividends received from a joint venture 208 ± Cash under asset held for sale 20 (4) ± Net cash flows used in investing activities (120,420) (126,745) Cash flows from financing activities Interest paid (2,675) (1,386) Dividends paid to shareholders of the Company (3,660) (5,624) Dividends paid to minority shareholders of a subsidiary (984) (54) Purchase of treasury shares ± (96) Proceeds from long-term loans 73,831 59,933 Repayment of long-term loans (32,314) (6,501) Proceeds from short-term loans 34,159 10,461 Repayment of short-term loans (3,223) (6,181) Repayment of finance lease obligations ± (37) Acquisition of non-controlling interests ± (200) Repayment of amount due to landlord (14) (70) Net cash flows from financing activities 65,120 50,245 Net increase/(decrease) in cash and cash equivalents 16,139 (23,064) Effect of exchange rate changes on cash and cash (964) 249 equivalents Cash and cash equivalents at the beginning of the year 64,245 87,060 Cash and cash equivalents at the end of the year 19 79,420 64,245 - 18 - 348 BreadTalk Group Limited and its Subsidiaries Consolidated Cash Flow Statement for the year ended 31 December 2013 (cont'd) Note A. Purchase of property, plant and equipment During the year, the Group acquired property, plant and equipment with an aggregate cost of approximately $107,751,000 (2012: $103,206,000). The additions were by way of cash payments of $90,392,000 (2012: $88,455,000), increase in provision for reinstatement costs of $2,926,000 (2012: $2,350,000), in amount payable to other creditors of $11,302,000 (2012: $12,401,000) and accruals of $3,131,000 (2012: $5,992,000). Cash outflow for the year also include payments in respect of property, plant and equipment acquired in the previous years of $16,049,000 (2012: $10,358,000). The accompanying accounting policies and explanatory notes form an integral part of the financial statements. - 19 - 349 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 1. General 1.1 Corporate information BreadTalk Group Limited (the ³Company´) is a limited liability company 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 Breadtalk IHQ, 30 Tai Seng Street, #09-01 Singapore 534013. 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. Related corporations comprise companies within the BreadTalk Group Limited group of companies, and include associates and joint ventures. 2. Summary of significant accounting policies 2.1 Basis of preparation and fundamental accounting assumption As at 31 December 2013 WKH *URXS¶V DQG &RPSDQ\¶V current liabilities exceeded their current assets by $64,822,000 (2012: $80,324,000) and $12,055,000 (2012: $21,833,000) respectively. The ability of the Group to continue as a going concern is dependent on the *URXS¶VDELOLW\WRJHQHUDWHSRVLWLYHFDVKIORZV,QWKHRSLQLRQRIWKHGLUHFWRUVWKH*URXSLV 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. 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 URXQGHGWRWKHQHDUHVWWKRXVDQG ¶ H[FHSWZKHQRWKHUZLVHLQGLFDWHG - 20 - 350 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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 which are effective for annual financial periods beginning on or after 1 January 2013. The adoption of these standards did not have any effect on the financial performance or position of the Group and the Company. 2.3 Standards issued but not yet effective The Group has not adopted the following standards that have been issued but not yet effective: Effective for annual periods beginning on or Description after 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 1 January 2014 Liabilities Amendments to FRS 110, FRS 111, FRS 112, FRS 27 (2011) and 1 January 2014 FRS 28 (2011) Mandatory Effective Date Amendments to FRS110, FRS 111 and FRS 112 Transition 1 January 2014 Guidance Amendments to FRS110, FRS 112 and FRS 27 Investment 1 January 2014 Entities Amendments to FRS 36 Recoverable Amount Disclosures for 1 January 2014 Non-Financial Assets Amendments to FRS 19 Defined Benefit Plans: Employee 1 July 2014 Contributions Improvements to FRSs (various) 1 July 2014 The directors expect that the adoption of the standards above will have no material impact on the financial statements in the period of initial application. - 21 - 351 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.4 Significant accounting estimates and judgements 7KHSUHSDUDWLRQRIWKH*URXS¶VFRQVROLGDWHGILQDQFLDOVWDWHPHQWVUHTXLUHVPDQDJHPHQWWR make judgments, 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 ,Q WKH SURFHVV RI DSSO\LQJ WKH *URXS¶V DFFRXQWLQJ SROLFLHV PDQDJHPHQW KDV PDGH WKH following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the consolidated financial statements: (a) 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 FRVW7KHGHWHUPLQDWLRQRIZKDWLV³VLJQLILFDQW´RU³SURORQJHG´UHTXLUHVMXGJPHQW,Q 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. (b) 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 GHWHUPLQDWLRQ LV PDGH 7KH FDUU\LQJ DPRXQW RI WKH *URXS¶V WD[ SD\DEOH DQG deferred tax liabilities at 31 December 2013 were approximately $6,458,000 (2012: $6,438,000) and $2,554,000 (2012: $2,514,000) respectively. The carrying amount RIWKH*URXS¶VWD[UHFRYHUDEOHDQGGHIHUUHGWD[DVVHWVDW 31 December 2013 was $6,000 (2012: Nil) and $4,287,000 (2012: $2,952,000) 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. The DEI expired as of 31 December 2012. The company has applied for a further extension of the DEI for 5 years from 2013 to 2018. The company has estimated its tax and deferred tax liabilities for the year by applying the statutory tax rate of 17% on income for the year. - 22 - 352 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.4 Significant accounting estimates and judgements (cont'd) Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period 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 occur. (a) 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 WKRVH FDVK IORZV 7KH FDUU\LQJ DPRXQW RI WKH *URXS¶V JRRGZLOO DW 31 December 2013 was $5,846,000 (2012: $5,846,000). More details are given in Note 11. (b) 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 $214,000 (2012: $213,000) for the financial year ended 31 December 2013 and the carrying amount of the brand value at 31 December 2013 was $1,279,000 (2012: $1,493,000). More details are given in Note 11. (c) 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 2013 was $10,223,000 (2012: $7,977,000). If the estimated provision had been 5% KLJKHUORZHU WKDQ PDQDJHPHQW¶V Hstimate, the carrying amount of the provision would have been $511,000 (2012: 399,000) higher/lower. - 23 - 353 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.5 Foreign currency (a) Functional currency The financial statements are presented in Singapore Dollars, which is also the &RPSDQ\¶V IXQFWLRQDO FXUUHQF\ (DFK HQWLW\ LQ WKH *URXS GHWHUPLQHV LWV RZQ 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 end of the reporting period are recognised in profit or loss except for exchange differences arising on monetary items that form part of the *URXS¶VQHWLQYHVWPHQWLQIRUHLJQRSHUDWLRQVZKLFKDUHUHFRJQLVHGLQLWLDOO\LQRWKHU comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation. (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 the 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. - 24 - 354 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.6 Related parties A related party is defined as follows: (a) $ SHUVRQ RU D FORVH PHPEHU RI WKDW SHUVRQ¶V IDPLO\ LV UHODWHG WR WKH *URXS DQG 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). - 25 - 355 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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 &RPSDQ\¶V VHSDUDWH ILQDQFLDO VWDWHPHQWV LQYHVWPHQWV LQ VXEVLGLDULHV DUH 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 reporting period. 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: De-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost; De-recognises the carrying amount of any non-controlling interest; De-recognises the cumulative translation differences recorded in equity; Recognises the fair value of the consideration received; Recognises the fair value of any investment retained; Recognises any surplus or deficit in profit or loss; Re-FODVVLILHV WKH *URXS¶V VKDUH RI FRPSRQHQWV SUHYLRXVO\ recognised in other comprehensive income to profit or loss or retained earnings, as appropriate. - 26 - 356 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.7 Subsidiaries, basis of consolidation and non-controlling interests (cont'd) Basis of consolidation prior to 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: Acquisition of non-controlling interests, prior to 1 January 2010, were accounted for using the 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. Losses incurred by the Group were attributed to the non-controlling interest until the balance was 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. Upon loss of control, the Group accounted for the investment retained at its proportionate share 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 for 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. - 27 - 357 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.7 Subsidiaries, basis of consolidation and non-controlling interests (cont'd) 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), that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation, is recognised on the acquisition date at fair value, or at the non-FRQWUROOLQJ LQWHUHVW¶V SURSRUWLRQDWH VKDUH RI WKH DFTXLUHH¶V identifiable net assets. Other components of non-controlling interests are measured at their acquisition date fair value, unless another measurement basis is required by another FRS. 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 DFTXLUHH LI DQ\ DQG WKH IDLU YDOXH RI WKH *URXS¶V SUHYLRXVO\ KHOG HTXLW\ LQWHUHVW LQ WKH DFTXLUHH LI DQ\ RYHU WKH QHW IDLU YDOXH RI WKH DFTXLUHH¶V 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 LQWHUHVW ZDV PHDVXUHG DW WKH SURSRUWLRQDWH VKDUH RI WKH DFTXLUHH¶V 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. - 28 - 358 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.7 Subsidiaries, basis of consolidation and non-controlling interests (cont'd) (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. &KDQJHV LQ WKH &RPSDQ\ RZQHUV¶ RZQHUVKLS LQWHUHVW LQ D VXEVLGLDU\ WKDW GR QRW 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. 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- DFTXLVLWLRQFKDQJHVLQWKH*URXS¶VVKDUHRIQHWDVVHWVRIWKHDVVRFLDWHs. Goodwill relating to associates is included in the carrying amount of the investment and is neither amortised nor tested individually for impaLUPHQW$Q\H[FHVVRIWKH*URXS¶VVKDUHRIWKHQHWIDLUYDOXH RIWKHDVVRFLDWH¶VLGHQWLILDEOHDVVHWVOLDELOLWLHVDQGFRQWLQJHQWOLDELOLWLHVRYHUWKHFRVWRIWKH investment is included as income in the determination RIWKH*URXS¶VVKDUHRIUHVXOWVRIWKH 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. 7KH *URXS¶V VKDUH RI WKH SURILW RU ORVV 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. :KHQ WKH *URXS¶V VKDUH RI ORVVHV LQ DQ DVVRFLDWH HTXDOV RU 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. - 29 - 359 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.8 Associates (cont'd) After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on WKH *URXS¶V LQYHVWPHQW LQ 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-DFTXLVLWLRQFKDQJHVLQWKH*URXS¶VVKDUHRIQHWDVVHWVRIWKHMRLQWYHQWXUH7KH *URXS¶VVKDUHRIprofit 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 WRWKH*URXS¶VQHWLQYHVWPHQWLQWKHMRLQWYHQWXUH7KHMRLQWYHQWXUHLVHTXLW\DFFRXQWHGIRU from the date the Group obtains joint control until the date the Group ceases to have joint control over the joint venture. $GMXVWPHQWV DUH PDGH LQ WKH *URXS¶V FRQVROLGDWHG ILQDQFLDO VWDWHPHQWV WR HOLPLQDWH WKH *URXS¶V VKDUH RI LQWUDJURXS EDODQFHV LQFRPH DQG H[SHQVHV DQG XQUHDOLVHG JDLQV DQG 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 into line with those of the Group. Upon loss of joint control, the Group measures and recognises 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. - 30 - 360 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.10 Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipment other than freehold land and buildings are measured at cost less accumulated depreciation and any accumulated impairment losses. The 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 ± 57 years Leasehold land ± 57 years Machinery and equipment ± 5 - 20 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 Assets under construction included in plant and equipment are not depreciated as these assets are not yet available for use. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual values, useful life and depreciation method are reviewed at each financial year- end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in profit or loss in the year the asset is derecognised. - 31 - 361 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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 LVIURPWKHDFTXLVLWLRQGDWHDOORFDWHGWRWKH*URXS¶VFDVK-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 units to which goodwill have 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 cash-generating 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 assets. - 32 - 362 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.11 Intangible assets (cont'd) (b) Other intangible assets FRQW¶G 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 useful 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 basis 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. - 33 - 363 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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 LVUHTXLUHGWKH*URXSPDNHVDQHVWLPDWHRIWKHDVVHW¶VUHFRYHUDEOHDPRunt. $Q DVVHW¶V UHFRYHUDEOH DPRXQW LV WKH KLJKHU RI DQ DVVHW¶V RU FDVK-JHQHUDWLQJ XQLW¶V IDLU 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. The Group bases its impairment calculation on detailed budgets and forecast calculations ZKLFKDUHSUHSDUHGVHSDUDWHO\IRUHDFKRIWKH*URXS¶VFDVK-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, 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, WKH *URXS HVWLPDWHV WKH DVVHW¶V RU FDVK- JHQHUDWLQJXQLW¶Vrecoverable amount. A previously recognised impairment loss is reversed RQO\LIWKHUHKDVEHHQDFKDQJHLQWKHHVWLPDWHVXVHGWRGHWHUPLQHWKHDVVHW¶VUHFRYHUDEOH 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. - 34 - 364 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.13 Financial instruments (a) 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. - 35 - 365 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.13 Financial Instruments (cont'd) (a) Financial assets (cont'd) (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. 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. - 36 - 366 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.13 Financial Instruments (cont'd) (b) 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 that are not carried at fair value through profit or loss 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. (c) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is presented in the balance sheets, when and only when, there is a currently enforceable legal right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. (d) Financial guarantee A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantees are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, financial guarantees are recognised as income in profit or loss over the period of the guarantee. If it is probable that the liability will be higher than the amount initially recognised less amortisation, the liability is recorded at the higher amount with the difference charged to profit or loss. - 37 - 367 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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 the impaired financial asset is reduced directly or if an amount was charged to the allowance account, the amount charged to the allowance account is 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 amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss. (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 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. - 38 - 368 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.14 Impairment of financial assets (cont'd) (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 LQYHVWPHQWEHORZLWVFRVWVµ6LJQLILFDQW¶LVWREHHYDOXDWHGDJDLQVWWKHRULJLQDOFRVW RI WKH LQYHVWPHQW DQG µSURORQJHG¶ DJDLQVW WKH SHULRG LQ ZKLFh 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 and unpledged short-term fixed deposits. 2.16 Inventories Inventories comprise raw materials, consumables, semi-finished goods, finished goods and base inventories. 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. - 39 - 369 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.17 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. 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 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 lessee 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. - 40 - 370 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.19 Leases (cont'd) (b) As lessor Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in 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(g). Contingent rents are recognised as revenue in the period in which they are earned. 2.20 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 (³CPF´) scheme in Singapore, a defined contribution pension scheme. The Group makes monthly contributions based on stipulated contribution rates. 3HRSOH¶V5HSXEOLFRI&KLQD 35& 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 UHVSRQVLEOHIRUDGPLQLVWHULQJWKHVHDPRXQWVIRUWKHVXEVLGLDULHV¶35&HPSOR\HHV 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 recognized as a liability when they accrue to the employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date. - 41 - 371 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.20 Employee benefits (cont'd) (c) The BreadTalN5HVWULFWHG6KDUH*UDQW3ODQ ³56*3ODQ´ Employees receive remuneration under the RSG Plan in the form of fully-paid VKDUHV ³$ZDUGV´ RIWKH&RPSDQ\DVFRQVLGHUDWLRQIRUVHUYLFHVUHQGHUHG7KHFRVW 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 WKH&RPSDQ\¶VEHVWHVWLPDWHRIWKHQXPEHURI$ZDUGVWKDWZLOOXOWLPDWHO\YHVW7KH 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. ,Q WKH &RPSDQ\¶V VHSDUDWH ILQDQFLDO VWDWHPHQWV WKH IDLU YDOXH RI WKH $ZDUGV granted to employees of its subsidiaries is recognised as an increase in the cost of WKH&RPSDQ\¶VLQYHVWPHQWLQVXEVLGLDULHVZLWKDFRUUHVSRQGLQJLQFUHDVHLQHTXLW\ 2.21 Non-current assets held for sale Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised. 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. - 42 - 372 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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 fraQFKLVHHV¶ UHYHQXH LQ DFFRUGDQFH ZLWK WHUPV DV VWDWHG LQ WKH IUDQFKLVH 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 UHQWDOLQFRPHZKLFKLVFRPSXWHGEDVHGRQDSHUFHQWDJHRIWKHIRRGFRXUWWHQDQWV¶ 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 collectability is in doubt. (f) Dividend income Dividend income is recognised when the Group's right to receive payment is established. (g) Rental income Rental income arising from operating leases is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis. 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. - 43 - 373 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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: Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. 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: Where the deferred income tax asset relating to the deductible temporary difference arises from the initial 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 In respect of deductible temporary differences associated with investments in subsidiaries, associates 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. - 44 - 374 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 2.24 Taxes (cont'd) (b) Deferred tax FRQW¶G 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. (c) Sales tax Revenues, expenses and assets are recognised net of the amount of sales tax except: Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and Receivables and payables that are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. - 45 - 375 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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 34, 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 7KH*URXS¶VRZQHTXLW\LQVWUXPHQWVZKLFKDUHUHDFTXLUHG WUHDVXU\VKDUHV DUHrecognised at cost and deducted from equity. No gain or loss is recognised in profit or loss on the SXUFKDVHVDOHLVVXHRUFDQFHOODWLRQRIWKH*URXS¶VRZQHTXLW\LQVWUXPHQWV$Q\GLIIHUHQFH 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. 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. 2.29 Transfers between levels of the fair value hierarchy Transfers between levels of the fair value hierarchy are deemed to have occurred on the date of the event or change in circumstances that caused the transfers. - 46 - 376 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 3. Revenue Group 2013 2012 ¶ ¶ Bakery sales 230,021 199,735 Restaurant sales 122,203 102,620 Sales to franchisee 28,624 21,595 Franchise income 12,675 11,806 Food court income 143,007 111,578 536,530 447,334 4. Other operating income Group 2013 2012 ¶ ¶ Dividend income from joint venture 208 ± Management fee income 6,954 6,272 Government grant (1) 1,683 1,033 Grant income from Special Employment Credit(2) 40 36 Income from expired food court stored value cards 64 ± Sponsorship income 585 216 Sundry sales 143 250 Compensation from landlord ± 452 (3) Waiver of loans by minority shareholders of subsidiaries ± 882 Rental income 641 ± Gain on disposal of an associate ± 30 Gain on disposal of intangible assets (Note 14) 11 ± Gain on disposal of property, plant and equipment 111 ± Foreign exchange gain 148 ± Write back of impairment of loans and receivables - trade receivables (Note 17) ± 11 - other receivables (Note 17) ± 41 Write back of provision for reinstatement cost 394 ± Miscellaneous income 917 1,261 11,899 10,484 (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 this 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 (PSOR\PHQW &UHGLW EDVHG RQ WKDW HPSOR\HH¶V VDODU\ 7KH 6FKHPH KDV SD\RXWV LQ March and September. The Group received $40,000 (2012: $36,000) during the year. - 47 - 377 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 4. Other operating income (cont'd) (3) The waiver of loans in 2012 comprises a waiver of loan payable by Star Food Pte Ltd of $800,000 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 to the minority shareholder due to plans to liquidate the company. 5. Interest income and interest expense Group 2013 2012 ¶ ¶ Interest income from: - loans and receivables 758 460 - held-to-maturity financial assets 558 1,225 1,316 1,685 Interest expense on: - Term loans (2,673) (1,385) - Finance lease obligations (2) (1) (2,675) (1,386) 6. Profit before taxation This is determined after charging the following: Group 2013 2012 ¶ ¶ Audit fees to: - auditors of the Company 281 281 - other auditors 333 313 Non-audit fees to: - auditors of the Company 27 23 - other auditors 4 18 Amortisation of intangible assets (Note 11) 489 618 Impairment of loans and receivables - trade receivables (Note 17) 197 ± - other receivables (Note 17) 26 ± - amount due from joint venture (Note 18) 607 ± 'LUHFWRUV¶IHHV 168 168 Depreciation of property, plant and equipment (Note 10) 38,849 30,379 Employee benefits (Note 7) 142,638 122,774 Forex loss, net ± 615 Operating lease expenses - fixed portion 101,795 77,951 - variable portion 13,007 12,408 Property, plant and equipment written off 743 732 Loss on disposal of property, plant and equipment ± 753 Impairment loss on intangible assets (Note 11) ± 215 Impairment loss on property, plant and equipment (Note 10) 824 167 Write-down of inventories (Note 16) ± 15 Write-off of inventories (Note 16) ± 22 - 48 - 378 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 7. Employee benefits Group 2013 2012 ¶ ¶ Staff costs (including directors) Salaries and bonuses 104,971 94,338 Central Provident Fund and other pension contributions 14,103 11,269 Sales incentives and commission 2,908 3,182 Share-based payment (RSG Plan) 217 280 Other personnel benefits 20,439 13,705 142,638 122,774 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, 253,000 (2012: 720,000) restricted shares were granted. The number of restricted shares outstanding at year end is 710,050 (2012: 1,210,050) shares. 8. Taxation Major components of income tax expense were: Group 2013 2012 ¶ ¶ Current tax - Current year 7,152 6,235 - Over provision in prior year (114) (937) Deferred tax - Origination and reversal of temporary differences (988) (682) - (Over)/under provision in prior year (215) 355 Withholding tax 416 847 Taxation expense 6,251 5,818 - 49 - 379 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 8. Taxation (cont'd) A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax rate for the year ended 31 December is as follows: Group 2013 2012 ¶ ¶ Profit before taxation 22,390 19,376 Tax at the domestic rates applicable to profits in the countries where the Group operates(1) 4,015 2,706 Tax effect of: Expenses not deductible for tax purposes 3,250 2,303 Income not subject to taxation (583) (955) Share of results of associates and joint ventures 337 169 Tax savings arising from development and expansion incentive (2) ± (249) (Over)/under provision in prior years - Current tax (114) (937) - Deferred tax (215) 355 Withholding tax expense 416 847 Effect of partial tax exemption and tax relief (140) (298) Deferred tax assets not recognised 582 2,470 Benefits from previously unrecognised temporary differences (541) ± Tax savings from enhanced deductions (3) (759) (586) Tax losses which cannot be carried forward (3) ± Others 6 (7) Taxation expense 6,251 5,818 (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, and expired as of 31 December 2012. The subsidiary has applied for a further extension of the DEI for a period of 5 years from 2013 to 2018. (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 ,QQRYDWLRQVFKHPH ³3,&´ 7KH3,&LVDYDLODEOHIRU - 50 - 380 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 8. Taxation (cont'd) Deferred income tax as at 31 December relates to the following: Group Company Balance sheet Profit or loss Balance sheet 2013 2012 2013 2012 2013 2012 ¶ ¶ ¶ ¶ ¶ ¶ Deferred tax liabilities: Differences in depreciation for tax purposes (2,174) (1,746) (428) (189) ± ± Dividend income ± (168) 168 ± ± ± Other items (380) (600) 220 433 ± ± (2,554) (2,514) ± ± Deferred tax assets: Provisions 1,508 1,280 163 76 ± ± Differences in depreciation for tax purposes 922 819 72 (219) (15) (15) Unutilised capital allowances 473 56 416 ± 56 56 Unutilised tax losses 851 377 499 ± ± ± Other items 533 420 93 (428) 26 26 4,287 2,952 67 67 Deferred income tax (1,203) (327) Unrecognised tax losses, capital allowances and other temporary differences As at 31 December 2013, the Group has tax losses of approximately $23,153,000 (2012: $21,808,000), unutilised capital allowances of approximately $765,000 (2012: $824,000) and other temporary differences of approximately $1,460,000 (2012: $1,498,000) 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 comparative figures have been adjusted based on the latest tax submissions and finalisation of certain years of tax assessments. 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 2013, $15,285,000 (2012: $17,428,000) of the unrecognised tax losses will expire between 1 and 5 years. - 51 - 381 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 8. Taxation (cont'd) Unrecognised temporary differences relating to investments in subsidiaries At the balance sheet date, no deferred tax liability (2012: $Nil) has been recognised for WD[HV WKDW ZRXOG EH SD\DEOH RQ WKH XQGLVWULEXWHG HDUQLQJV RI FHUWDLQ RI WKH *URXS¶V subsidiaries as the Group has determined that undistributed earnings of these subsidiaries will not be distributed in the foreseeable future. Such temporary differences for which no deferred tax liability has been recognised aggregate to $24,218,000 (2012: $14,473,000). The deferred tax liability is estimated to be $1,211,000 (2012: $724,000). 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 are FDOFXODWHG E\ GLYLGLQJ WKH *URXS¶V SURILW IRU WKH \HDU attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share are FDOFXODWHG E\ GLYLGLQJ WKH *URXS¶V SURILW IRU WKH \HDU attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. These profit and share data are presented in the table below: Group 2013 2012 ¶ ¶ Profit for the year attributable to owners of the Company 13,600 12,000 No. of shares No. of shares µ000 ¶ Weighted average number of ordinary shares for basic earnings per share computation * 281,362 280,928 Effects of dilution: - Restricted shares granted FRQGLWLRQDOO\XQGHUWKH³%UHDG7DON 5HVWULFWHG6KDUH*UDQW3ODQ´ 877 1,308 Weighted average number of ordinary shares for diluted earnings per share computation * 282,239 282,236 The weighted average number of shares takes into account the weighted average effect of changes in treasury shares transactions during the year. - 52 - 382 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 10. Property, plant and equipment Machinery Leasehold Leasehold and Electrical Furniture Office property land equipment works and fittings equipment Group ¶ ¶ ¶ ¶ ¶ ¶ Cost As at 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 and 1.1.2013 3,493 7,503 36,170 32,581 34,652 8,329 Additions 4,228 12,531 15,149 15,415 11,618 2,780 Reclassifications(2) 45,224 ± 933 3,139 2,315 (196) Write offs ± ± (3,502) (2,147) (1,876) (401) Disposals ± ± (700) (298) (193) (84) Attributable to assets (3) held for sale ± ± (1,555) ± (174) (219) Translation difference 228 85 612 207 295 116 As at 31.12.2013 53,173 20,119 47,107 48,897 46,637 10,325 Accumulated depreciation and impairment losses As at 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 and 1.1.2013 1,137 17 20,138 16,017 18,176 5,153 Charge for the year 652 233 6,140 6,918 6,838 1,569 Reclassifications ± ± 197 1,028 33 (138) Write offs ± ± (3,320) (2,001) (1,777) (386) Disposals ± ± (633) (290) (116) (80) Impairment loss for the year ± ± 552 100 37 28 Attributable to assets (3) held for sale ± ± (1,145) ± (106) (176) Translation difference 82 2 280 160 247 93 As at 31.12.2013 1,871 252 22,209 21,932 23,332 6,063 Net carrying amount As at 31.12.2012 2,356 7,486 16,032 16,564 16,476 3,176 As at 31.12.2013 51,302 19,867 24,898 26,965 23,305 4,262 - 53 - 383 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 10. Property, plant and equipment (cont'd) Motor Construction Renovation (1) vehicles -in-progress Total ¶ ¶ ¶ ¶ Group Cost As at 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 and 1.1.2013 78,027 1,446 54,032 256,233 Additions 33,727 457 11,846 107,751 Reclassifications(2) 5,342 ± (56,757) ± Write offs (3,445) (136) ± (11,507) Disposals (321) (52) ± (1,648) Attributable to assets held for sale(3) (1,882) ± (127) (3,957) Translation difference 2,613 32 384 4,572 As at 31.12.2013 114,061 1,747 9,378 351,444 Accumulated depreciation and impairment losses As at 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 and 1.1.2013 37,368 819 ± 98,825 Charge for the year 16,285 214 ± 38,849 Reclassifications (1,120) ± ± ± Write offs (3,158) (122) ± (10,764) Disposals (317) (52) ± (1,488) Impairment loss for the year 107 ± ± 824 Attributable to assets held for sale(3) (1,379) ± ± (2,806) Translation difference 1,262 18 ± 2,144 As at 31.12.2013 49,048 877 ± 125,584 Net carrying amount As at 31.12.2012 40,659 627 54,032 157,408 As at 31.12.2013 65,013 870 9,378 225,860 - 54 - 384 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 10. Property, plant and equipment (cont'd) (1) Additions to renovation during the year include provision for reinstatement costs of $2,926,000 (2012: $2,350,000). (2) Reclassifications mainly relate to the reclassification of construction in progress to the respective property, plant and equipment category upon completion of construction. (3) Assets held for sale are detailed in Note 20 to the financial statements. 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 The Group has the following assets pledged to secure the *URXS¶Vbank loans (Note 25). Group and Company 2013 2012 ¶ ¶ Leasehold land 17,514 5,147 Leasehold property 48,955 ± Construction-in-progress ± 39,004 66,469 44,151 Impairment of assets The impairment loss of $824,000 (2012: $167,000) recognised LQ³$GPLQLVWUDWLYHH[SHQVHV´ in profit or loss during the year comprised impairment loss on property, plant and equipment of restaurants and certain food stalls which have been persistently incurring losses, and of restaurants closed during the year. Capitalisation of borrowing costs 7KH*URXS¶Vleasehold property include borrowing costs arising from bank loans borrowed specifically for the purpose of the construction of leasehold property. During the financial year, the borrowing costs capitalised as cost of property, plant and equipment amounted to $145,000 (2012: $88,000). - 55 - 385 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 10. Property, plant and equipment (cont'd) Furniture Leasehold Leasehold Machinery & Electrical and property land equipment works fittings ¶ ¶ ¶ ¶ ¶ Company Cost As at 1.1.2012 ± 5,147 ± 3 16 Additions ± ± ± 19 4 As at 31.12.2012 and 1.1.2013 ± 5,147 ± 22 20 Additions 4,228 12,531 297 1,970 703 Reclassifications 45,224 ± ± ± ± Write offs ± ± ± (3) ± As at 31.12.2013 49,452 17,678 297 1,989 723 Accumulated depreciation As at 1.1.2012 ± ± ± 1 7 Charge for the year ± ± ± 21 10 As at 31.12.2012 and 1.1.2013 ± ± ± 22 17 Charge for the year 497 164 29 172 62 Write offs ± ± ± (3) ± As at 31.12.2013 497 164 29 191 79 Net carrying amount As at 31.12.2012 5,147 3 ± ± ± As at 31.12.2013 48,955 17,514 268 1,798 644 - 56 - 386 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 10. Property, plant and equipment (cont'd) Office Construction- equipment Renovation in-progress Total ¶ ¶ ¶ ¶ Company Cost As at 1.1.2012 173 ± 2,027 7,366 Additions 140 ± 36,977 37,140 As at 31.12.2012 and 1.1.2013 313 ± 39,004 44,506 Additions 925 4,486 6,220 31,360 Reclassifications ± ± (45,224) ± Write offs ± ± ± (3) As at 31.12.2013 1,238 4,486 ± 75,863 Accumulated depreciation As at 1.1.2012 136 ± ± 144 Charge for the year 45 ± ± 76 As at 31.12.2012 and 1.1.2013 181 ± ± 220 Charge for the year 171 436 ± 1,531 Write offs ± ± ± (3) As at 31.12.2013 352 436 ± 1,748 Net carrying amount As at 31.12.2012 132 39,004 44,286 ± As at 31.12.2013 886 4,050 74,115 ± - 57 - 387 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 11. Intangible assets Group Brand Trade Franchise Location Goodwill value mark rights premium Total ¶ ¶ ¶ ¶ ¶ ¶ Cost As at 1.1.2012 6,173 3,209 814 2,201 505 12,902 Additions ± ± 118 78 ± 196 Translation difference ± ± ± (63) ± (63) As at 31.12.2012 and 1.1.2013 6,173 3,209 932 2,216 505 13,035 Additions ± ± 91 128 ± 219 Disposal ± ± ± (878) ± (878) Translation difference ± ± 1 29 ± 30 As at 31.12.2013 6,173 3,209 1,024 1,495 505 12,406 Accumulated amortisation and impairment losses As at 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 and 1.1.2013 327 1,716 792 1,164 505 4,504 Amortisation ± 214 50 225 ± 489 Disposal ± ± ± (362) ± (362) Translation difference ± ± ± 3 ± 3 As at 31.12.2013 327 1,930 842 1,030 505 4,634 Net carrying amount As at 31.12.2012 5,846 1,493 140 1,052 ± 8,531 As at 31.12.2013 5,846 1,279 182 465 ± 7,772 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 6 years (2012: 7 years), 1 to 5 years (2012: 1 to 5 years) and 1 to 6 years (2012: 1 to 6 years) as at 31 December 2013 respectively. $PRUWLVDWLRQH[SHQVHLVLQFOXGHGLQ³$GPLQLVWUDWLYHH[SHQVHV´LQSURILWRIORVV During the year, the Group disposed off franchise rights with a net carrying amount of $516,000 in conjunction with its investment in an associate (Note 14). There was no disposal of intangible assets in 2012. - 58 - 388 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 11. ,QWDQJLEOHDVVHWV FRQW¶G 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 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 Carrying amount as amount as Pre-tax Pre-tax at 31 at 31 discount discount December December rate rate 2013 2012 2013 2012 ¶ ¶ Shanghai segment 3,569 3,569 13.0% 13.0% Beijing segment 1,009 1,009 13.0% 13.0% Food court operation at Wisma Atria, Singapore 1,268 1,268 10.0% 8.8% 5,846 5,846 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. Key assumptions used in the value in use calculations 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 rates ± The forecasted growth rates are based on published industry research and do not exceed the long-term average growth rate for the industries relevant 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 RQ LQYHVWPHQW E\ WKH *URXS¶V LQYHVWRUV 7KH FRVW RI GHEW LV EDVHG RQ WKH LQWHUHVW 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. - 59 - 389 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 11. ,QWDQJLEOHDVVHWV FRQW¶G Sensitivity to changes in assumptions With regards to the assessment of value in use for the CGUs, management believes that no reasonably possible changes in any of the above key assumptions would cause the carrying value of the unit to materiality exceed its recoverable amount. Impairment loss recognised In 2012, the Group recognised an impairment loss on goodwill of $202,000 on the CGU, ML Breadworks Sdn Bhd and franchise rights of $13,000 in profit or loss as the recoverable amount was less than the carrying value. 12. Investment securities Group 2013 2012 ¶ ¶ Available-for-sale financial assets - Equity instruments (quoted), at fair value 425 529 - Equity instruments (unquoted), at cost 34,150 20,130 - Redeemable preference shares (unquoted), at cost * * 34,575 20,659 Held-to-maturity investments - 8% SGD junior bonds due on 29 January 2015 (unquoted) 7,224 7,224 - 3% SGD junior bonds due on 31 December 2016 (unquoted) 18,000 18,000 25,224 25,224 59,799 45,883 * less than $1,000 8% SGD junior bonds and redeemable preference shares The junior bonds are secured by a mortgage over the Katong Mall property, assignment of rental proceeds of the property and debentures of Pre 1 Investments Pte Ltd. 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. IQWKHVXEVLGLDU\,PDJLQH3URSHUWLHV3WH/WG ³,33/´ UHFHLYHGDSDUWLDOUHGHPSWLRQRI $3,526,000 on the junior bonds. - 60 - 390 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 12. Investment securities (cont'd) 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 ³3CPL´ ,33/¶V LQYestment in ordinary shares of PCPL 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. During the year, it was agreed among the shareholders of PCPL to waive the coupon payment on the junior bonds for the period June 2013 to December 2014. Equity instruments (unquoted) On 15 April 2013, the Company together with a consortium of investors, entered into a joint YHQWXUH DJUHHPHQW WR LQYHVW LQ 3HUHQQLDO 7RQJ]KRX +ROGLQJV 3WH /WG ³37+'´ IRU WKH VXEVFULSWLRQ RI RUGLQDU\ VKDUHV RI 37+' 7KH &RPSDQ\¶V VXEVFULSWLRQ RI RUGLQDU\ shares for a cash consideration of $14,520,000 represents a 5.86% equity interest in PTHD. As at 31 December 2013, the Company has paid approximately 97% of the subscription amount or $14,020,000. On 30 September 2012, IPPL together with a consortium of investors, entered into a joint YHQWXUH DJUHHPHQW WR LQYHVW LQ 3HUHQQLDO 7RQJ]KRX 'HYHORSPHQW 3WH /WG ³37'´ IRU WKH VXEVFULSWLRQRIRUGLQDU\VKDUHVRI37',33/¶VVXEVFULSWLRQRIRUGLQDU\VKDUHVIRUD cash consideration of $20,130,000 represents a 5.72% equity interest in PTD. Investments pledged as security The *URXS¶V LQYHVWPHQWs in unquoted equity instruments of $20,130,000 (2012: $20,130,000) and junior bonds of $25,224,000 (2012: 25,224,000) have been pledged as security for bank loans (Note 25). 13. Investment in subsidiaries Company 2013 2012 ¶ ¶ Unquoted equity shares at cost 28,489 28,489 Share based compensation reserve 468 396 Impairment losses: - Unquoted shares (note a) (5,300) (5,100) 23,657 23,785 - 61 - 391 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 13. Investment in subsidiaries (cont'd) Details of the subsidiaries are as follows: Proportion of Country of ownership Name incorporation Principal activities interest 2013 2012 % % Held by the Company BreadTalk Pte Ltd (1) Singapore Bakers and 100 100 manufacturers of and dealers in bread, flour and biscuits BreadTalk International Singapore Investment holding 100 100 Pte Ltd (3) Topwin Investment Singapore Investment holding 100 100 Holding Pte Ltd (3) Star Food Pte Ltd (3) Singapore Investment holding 100 100 Imagine Properties Pte Singapore Investment holding 100 100 Ltd (1) Together Inc. Pte Ltd (3) Singapore Investment holding 100 100 Imagine IHQ Pte Ltd (3) Singapore Investment holding 100 100 Held through subsidiaries Taster Food Pte Ltd (1) Singapore Operators of food and 70 70 drinks outlets, eating houses and restaurants Charcoal Pte Ltd (14) Singapore Dormant ± 75 Shanghai BreadTalk Co., 3HRSOH¶V Bakers and 100 100 Ltd (2) Republic of manufacturers of and China dealers in bread, flour and biscuits - 62 - 392 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 13. Investment in subsidiaries (cont'd) Proportion of Country of ownership Name incorporation Principal activities interest 2013 2012 % % Held through subsidiaries (cont'd) Shanghai BreadTalk 3HRSOH¶V Management of food 100 100 Gourmet Co., Ltd (2) Republic of and beverage, China manufacture and retail of bakery, confectionery products Beijing BreadTalk 3HRSOH¶V Management of food 100 100 Restaurant Management Republic of and beverage, Co., Ltd (2) China manufacture and retail of bakery, confectionery products Beijing BreadTalk Co.,Ltd 3HRSOH¶V Manufacture and sale of 100 100 (2) Republic of bakery and China confectionery products Food Republic 3HRSOH¶V Food court operator 100 100 (Shanghai) Co., Ltd (2) Republic of China Beijing Da Shi Dai Food 3HRSOH¶V Food court operator 100 100 and Beverage Co., Ltd (2) Republic of China Chongqing Food 3HRSOH¶V Food court operator 100 100 Republic Food & Republic of Beverage Management China Co., Ltd (5) Megabite Hong Kong Hong Kong Food court operator 85 85 Limited (6) Megabite (S) Pte Ltd (3) Singapore Investment holding 100 100 Food Republic Pte Ltd (1) Singapore Food court operator 100 100 BreadTalk (Thailand) Thailand Management of food 49 49 Company Limited (7)(13) and beverage, manufacture and retail of bakery, confectionery products - 63 - 393 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 13. Investment in subsidiaries (cont'd) Proportion of Country of ownership Name incorporation Principal activities interest 2013 2012 % % Held through subsidiaries (cont'd) Megabite Eatery (M) Sdn Malaysia Operator of food and 100 100 Bhd (4) beverage outlets BreadTalk Concept Hong Hong Kong Management of food 85 85 Kong Limited (6) and beverage, manufacture and retail of bakery, confectionery products ML Breadworks Sdn Bhd Malaysia Bakers and 90 90 (4) manufacturers of and dealers in bread, flour and biscuits MWA Pte Ltd (14) Singapore Dormant 100 100 Food Art Pte Ltd (3) Singapore Dormant 100 100 Shanghai Star Food F&B 3HRSOH¶V Operators of restaurants 100 100 Management Co., Ltd (2) Republic of China Beijing Star Food F&B 3HRSOH¶V Dormant 100 100 Management Co., Ltd (8) Republic of China Ramen Play Pte Ltd (3) Singapore Operators of restaurants 85 60 (Note (b)) Shanghai Ramen Play 3HRSOH¶V Operators of restaurants 60 60 Co., Ltd (5) Republic of China Taster Food International Singapore Investment holding 63 63 Pte Ltd (3) Taster Food (Thailand) Thailand Operators of restaurants 31 31 Co. Limited (10)(13) Food Republic Hangzhou 3HRSOH¶V Food court operator 100 100 F&B Co.,Ltd (5) Republic of China - 64 - 394 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 13. Investment in subsidiaries (cont'd) Proportion of Country of ownership Name incorporation Principal activities interest 2013 2012 % % Held through subsidiaries (cont'd) Food Republic Shenzhen 3HRSOH¶V Food court operator 85 85 F&B Management Republic of Co.,Ltd (9) China Food Republic 3HRSOH¶V Food court operator 64 64 Guangzhou F&B Republic of Management Co., Ltd (9) China Food Republic Taiwan Taiwan Food court operator 90 90 Co., Ltd (11) FR (Thailand) Co., Ltd (12) Thailand Food court operator 49 49 (13) Food Republic (Chengdu) 3HRSOH¶V Food court operator 100 100 Co., Ltd (5) Republic of China Thye Moh Chan Pte. Ltd. Singapore Wholesale of 100 100 (3) confectionery and bakery products Queens Coffee Pte Ltd (3) Singapore Processing, sale and 100 ± (Note (c)) distribution of premium coffee beans and tea dust; and distribution of related processing equipment (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) $XGLWHGE\%HLMLQJ'D[LQJ&HUWLILHG3XEOLF$FFRXQWDQWV&R/WG3HRSOH¶V5HSXEOLFRI&KLQD (9) Audited by Guang Dong Zhihe Certified Public Accountants, 3HRSOH¶V5HSXEOLFRI&KLQD (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) MWA Pte Ltd is the process of striking off and unaudited financial statements have been used for the preparation of the consolidated financial statements as it is not significant to the Group. Charcoal Pte Ltd has been struck off during the year. - 65 - 395 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 13. Investment in subsidiaries (cont'd) (a) Impairment testing of investment in subsidiaries During the financial year, management performed an impairment test for the investment in Star Food Pte Ltd the subsidiary has been making losses. An impairment loss of $200,000 (2012: $3,600,000) was recognised for the year ended 31 December 2013. The loan of $1,200,000 to the subsidiary was also fully impaired in 2012 (Note 18). In 2012, the investment in Together Inc. Pte Ltd of $1,500,000 was fully impaired as the subsidiary had been making losses. (b) AddLWLRQDOLQWHUHVWLQWKHVXEVLGLDU\5DPHQ3OD\3WH/WG ³533/´ During the year, RPPL increased its share capital to $6,681,091 with the allotment of 4,181,091 ordinary shares, fully subscribed by the immediate holding company, Together Inc Pte Ltd. AccorGLQJO\WKH*URXS¶VLQWHUHVWLQ533/LQFUHDVHGIURP% to 85%. (c) New subsidiaries Queens Coffee Pte. Ltd. ³Queens Coffee´ Queens Coffee was incorporated as a wholly-owned subsidiary of BreadTalk Pte Ltd in July 2013 with a share capital of $2. 14. Investment in associates Group 2013 2012 ¶ ¶ Investment in shares, unquoted Shares, at cost 4,337 900 Share of post-acquisition results of associates 231 ± At end of year 4,568 900 - 66 - 396 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 14. Investment in associates (cont'd) Details of the associates are as follows: Country of Proportion of Name incorporation Principal activities ownership interest 2013 2012 % % Held through subsidiaries Perennial (Chijmes) Pte Ltd Singapore Investment holding 29 29 ³PCPL´ (1) JBT (China) Pte Ltd (2) Singapore Investment holding 30 30 Tate Projects Pte. Ltd. (3) Singapore General building contractor 25 ± Carl Karcher Enterprises Cayman Investment holding 40 ± (Cayman) Ltd ³CKEC´ (4) islands Held by CKEC Carl Karcher Enterprises (HK) Hong Kong Investment holding 40 ± Limited (4) CKE (Shanghai) F&B 3HRSOH¶V Operators of restaurants 40 ± Management Limited (4) Republic of China (1) Audited by KPMG LLP, Singapore (2) Audited by Deloitte LLP, Singapore (3) Audited by Leethen & Associates, Singapore (4) The associate was inactive during the year 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 PCPL where its share of losses exceeds WKH *URXS¶V LQWHUHVW LQ WKHVH associates. 7KH *URXS¶V FXPXODWLYH VKDUH RI XQUHFRJQLVHG losses as at 31 December 2013 was $457,000 (2012: $293,000). The Group has no obligation in respect of these losses. New associates Tate Projects Pte. Ltd. Pursuant to an agreement by a wholly-owned subsidiary, Imagine iHQ Pte Ltd ³,,+4´ with Tate Interior Contractors Pte Ltd and Mr Song Yih, Tate Projects Pte Ltd was incorporated in SingaporHRQ)HEUXDU\,,+4¶VHTXLW\LQWHUHVWLQWKHDVVRFLDWHLV - 67 - 397 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 14. Investment in associates (cont'd) New associates FRQW¶G Carl Karcher Enterprises (Cayman) Ltd ³&.(&´ In August 2013 a wholly-owned subsidiary, Star Food Pte Ltd, was allotted 2,400 shares in the capital of CKEC at an investment cost of $3,062,000 (USD2,400,000). The investment comprises a cash payment of $2,535,000 and a consideration of $527,000 for the franchise rights previously paid to CKE Restaurants, Inc.. Accordingly, the Group recorded a disposal of the related franchise rights with a net carrying amount of $516,000 (Note 11) and recognised a net gain of $11,000 in profit or loss on the disposal of franchise rights. 7KH*URXS¶VLQWHUHVWLQWKHDVVRFLDWHLV The remaining 60% equity interest is held by CKE Asia Holdco (Cayman), Ltd. The summarised financial information of the associates, not adjusted for the proportion of ownership interest held by the Group, is as follows: Group 2013 2012 ¶ ¶ Assets and liabilities Total assets 226,798 192,774 Total liabilities 213,776 196,614 Results Revenue 14,988 10,468 Net profit/ (loss) for the year 787 (1,006) - 68 - 398 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 15. Investment in joint ventures Group 2013 2012 ¶ ¶ Investment in shares, unquoted Shares, at cost 2,688 2,688 Share of post-acquisition results of joint ventures 858 471 Exchange difference 92 (34) 3,638 3,125 Details of the joint ventures are as follows: Country of Proportion of Name incorporation Principal activities ownership interest 2013 2012 % % Held through subsidiaries Shanghai Hong Bu Rang 3HRSOH¶V Dormant 50 50 Food & Beverage Republic of Management Co., Ltd (1) China 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) 3HRSOH¶V Manufacture and sale of 50 50 Republic of frozen dough China (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) $XGLWHGE\(UQVW 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: Group 2013 2012 ¶ ¶ Assets and liabilities Current assets 4,850 4,186 Non-current assets 1,641 1,865 Total assets 6,491 6,051 - 69 - 399 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 15. Investment in joint ventures (cont'd) Group 2013 2012 ¶ ¶ Current liabilities 3,137 3,029 Non-current liabilities 12 2 Total liabilities 3,149 3,031 Results Income 8,467 6,801 Expenses (8,094) (6,428) 16. Inventories Group 2013 2012 ¶ ¶ Balance sheet: Raw materials and consumables, at cost 9,012 8,454 Semi-finished goods 571 560 Finished goods 366 280 Base inventories (1) 55 198 Total inventories at lower of cost and net realisable value 10,004 9,492 (1) This is stated after writing down 50% of the original cost of base inventories. Group 2013 2012 ¶ ¶ Profit or loss: Inventories recognised as an expense in cost of sales 137,190 129,171 Inclusive of the following charge: - Write-down of inventories ± 15 - Write-off of inventories ± 22 - 70 - 400 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 17. Trade and other receivables Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Trade receivables 9,944 8,865 ± ± Other receivables 10,067 8,688 734 ± Deposits 29,134 25,219 234 179 49,145 42,772 968 179 Other receivables (non-current) 3,277 1,880 ± ± Financial assets 52,422 44,652 968 179 GST receivable (current) ± 846 ± 846 Non-financial assets ± 846 ± 846 Current 49,145 43,618 968 1,025 Non-current 3,277 1,880 ± ± 52,422 45,498 968 1,025 Other receivables (current) include initial fee receivable of $5,992,000 (2012: $4,369,000) from food atrium stall tenants. The initial fee receivable is a contribution from tenants mainly for renovation costs of the leased food atrium stalls. Other receivables (non-current) include the following: (a) 'XULQJWKH\HDUDVXEVLGLDU\%UHDG7DON3WH/WG ³%73/´ HQWHUHGLQWRDQDJUHHPHQWWR subscribe for non-convertible notes of $550,000 in a private limited company incorporated in Singapore. The non-convertible notes carry a fixed interest of 1.93% per annum. The notes and related accrued interest is payable in September 2016. (b) BTPL also entered into an agreement to subscribe for convertible notes of 900,000 at a total issue price of $900,000 in a private limited company incorporated in Singapore. The convertible notes carry a fixed interest of 1.93% per annum. The notes mature and accrued interest is payable in September 2016. The notes provide BTPL the rights to convert outstanding amounts of the notes and interest by the allotment of such number of shares in the company at the conversion rate of $1 to 1 share such that BTPL shall own 60% of the enlarged issued capital of the company. Trade receivables Trade receivables are non-interest bearing and are generally on 15 to 60 days terms (2012: 15 to 60 days). They are recognised at their original invoice amounts which represents their fair values on initial recognition. - 71 - 401 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 17. Trade and other receivables (cont'd) Trade receivables denominated in foreign currencies at 31 December are as follows:- Group 2013 2012 ¶ ¶ United States Dollar 852 610 Receivables that are past due but not impaired The Group has trade receivables amounting to $1,862,000 (2012: $2,143,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows: Group 2013 2012 ¶ ¶ Trade receivables past due: Lesser than 30 days 653 1,112 30 to 60 days 551 361 61 to 90 days 296 262 91 to 120 days 253 76 More than 120 days 109 332 1,862 2,143 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: Group Individually impaired 2013 2012 ¶ ¶ Trade receivables ± nominal amounts 197 152 Less: Allowance for impairment (197) (152) ± ± Movement in allowance accounts: At 1 January 152 361 Charge/(write back) during the year 197 (11) Written off during the year (152) (197) Translation difference ± (1) At 31 December 197 152 - 72 - 402 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 17. Trade and other receivables (cont'd) 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 (2012: 0 to 60 days). Other receivables that are past due but not impaired The Group has other receivables amounting to $2,300,000 (2012: $1,181,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows: Group 2013 2012 ¶ ¶ Other receivables past due: Lesser than 30 days 1,041 556 30 to 60 days 586 373 61 to 90 days 19 46 91 to 120 days 31 11 More than 120 days 623 195 2,300 1,181 Other receivables that are impaired / partially impaired 7KH *URXS¶V RWKHU UHFHLYDEOHV WKDW DUH LPSDLUHG DW WKH EDODQFH VKHHW GDWH DQG WKH movement of the allowance accounts used to record the impairment are as follows: Group Individually impaired 2013 2012 ¶ ¶ Other receivables ± nominal amounts 45 34 Less: Allowance for impairment (45) (34) ± ± Movement in allowance accounts: At 1 January 34 82 Charge/(write back) during the year 26 (41) Written off during the year (14) (5) Translation difference (1) (2) At 31 December 45 34 - 73 - 403 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 17. Trade and other receivables (cont'd) Other 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. 18. Due from/to related corporations Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Non-current Amounts due from: Loan to subsidiary ± ± 1,200 1,200 Loan to associate ± 614 ± ± Less: Impairment losses ± (614) (1,200) (1,200) ± ± ± ± The loans to subsidiary and associate are quasi-capital in nature, non-interest bearing and have no fixed terms of repayment. Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Current Amounts due from: Subsidiaries (non-trade) ± ± 16,753 31,261 Joint ventures (trade) 4 283 ± ± Joint ventures (non-trade) 955 1,369 ± ± 959 1,652 16,753 31,261 Amounts due to: Subsidiaries (non-trade) ± ± 27,457 16,695 Associate (non-trade) 1,193 ± ± ± Joint ventures (trade) 2,343 1,847 ± ± Joint ventures (non-trade) 365 364 ± ± 3,901 2,211 27,457 16,695 - 74 - 404 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 18. Due from/to UHODWHGFRUSRUDWLRQV FRQW¶G The amounts due from/to related corporations (current) are to be settled in cash, unsecured, non-interest bearing and generally on 30 to 60 days term except for: (i) loans to subsidiaries of $8,782,000 (2012: $12,514,000) which are repayable on demand; (ii) loans from subsidiaries of $10,275,000 (2012: $16,673,000) which are unsecured and repayable on demand; (iii) loan to a subsidiary of Nil (2012: $18,000,000) which bears an effective interest rate of Nil (2012: 2.14%) per annum and is repayable on demand; (iv) loan from a subsidiary of $15,584,000 (2012: Nil) which bears an effective interest rate of 1.5% (2012: Nil) per annum and is repayable on demand. Receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows: Group Individually impaired 2013 2012 ¶ ¶ Amount due from joint venture (non-trade) ± nominal amounts 607 ± Less: Allowance for impairment (607) ± ± ± Movement in allowance accounts: At 1 January ± ± Charge during the year 607 ± At 31 December 607 ± 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. - 75 - 405 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 18. Due from/to UHODWHGFRUSRUDWLRQV FRQW¶G Receivables that are past due but not impaired Group 2013 2012 ¶ ¶ Amounts due from joint ventures (non-trade) Lesser than 30 days 47 76 30 to 60 days ± 1 61 to 90 days ± ± 91 to 120 days ± 685 More than 120 days 777 ± Total as at 31 December 824 762 Company 2013 2012 ¶ ¶ Amounts due from subsidiaries (non-trade) Lesser than 30 days 279 5 30 to 60 days 225 53 61 to 90 days ± 9 91 to 120 days ± 4 More than 120 days 5,901 47 Total as at 31 December 6,405 118 19. Cash and cash equivalents, and fixed deposit (a) Cash and cash equivalents Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Fixed deposits (current) 6 5,011 ± ± Cash on hand and at bank 79,414 59,234 9,214 431 79,420 64,245 9,214 431 Fixed deposits of the Group have a maturity period of 1 month (2012: 1 month) with effective interest rates of 0.05% (2012: 0.05% to 0.4%) per annum. - 76 - 406 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 19. Cash and cash equivalents, and fixed deposit (cont'd) Cash and cash equivalents denominated in foreign currencies at 31 December are as follows: Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ United States Dollar 271 676 32 32 (b) Fixed deposit (non-current) The fixed deposit has a maturity period of 2 years (2012: 3 years) with an effective interest rate of 4.46% (2012: 4.46%) per annum. 20. Assets of disposal group classified as held for sale ,Q FRQMXQFWLRQ ZLWK WKH *URXS¶V LQYHVWPHQW LQ Carl Karcher Enterprises (Cayman) Ltd ³&.(&´ (Note 14), a wholly-owned subsidiary, Shanghai Star Food F&B Management Co., Ltd signed an Asset Purchase Agreement with CKE (Shanghai) F&B Management Limited (a wholly-owned subsidiary of CKEC) to sell certain of its assets. The consideration for the assets is subject to adjustment based on the variation of the book value of the assets at the dates of transfer which is expected to occur in the next twelve months. As at 31 December 2013, the related assets have been presented in the balance sheet as µ¶$VVHWV RI GLVSRVDO JURXS FODVVLILHG DV KHOG IRU VDOH¶¶ and the carrying amount for these assets is $2,056,000. Balance sheet disclosures: The assets classified as held for sale as at 31 December are as follows: Group 2013 2012 ¶ ¶ Assets: Property, plant and equipment 1,151 ± Inventories 481 ± Other receivables 420 ± Cash and short-term deposits 4 ± Assets of disposal group classified as held for sale 2,056 ± - 77 - 407 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 21. Trade and other payables Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Financial liabilities Trade payables 26,100 24,026 ± ± Other payables - Other creditors 19,886 18,926 412 79 - Payable for purchase of property, plant and equipment 13,646 12,401 1,188 4,366 - Sales collection on behalf of tenants 18,957 14,334 ± ± Deposits 21,624 18,887 732 ± Dividend payable 984 984 ± ± Amount due to landlord (non- trade) ± 14 ± ± 101,197 89,572 2,332 4,445 Non-financial liabilities GST payable 1,392 1,385 337 ± 102,589 90,957 2,669 4,445 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 (2012: 0 to 60 days terms) while other payables have an average term of 0 to 90 days term (2012: 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: Group 2013 2012 ¶ ¶ United States Dollar 234 427 Others 54 75 - 78 - 408 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 22. Other liabilities and provision Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Other liabilities: Current: Accrued operating expenses 28,318 24,075 2,428 2,045 Accrued property, plant and equipment 3,131 5,992 2,789 5,543 Financial guarantees ± ± 576 ± Financial liabilities 31,449 30,067 5,793 7,588 Deferred revenue (current) 24,952 19,368 ± ± Deferred rent (current) 3,130 3,042 ± ± 28,082 22,410 ± ± Deferred rent (non-current) 10,297 6,191 ± ± Non-financial liabilities 38,379 28,601 ± ± Current 59,531 52,477 5,793 7,588 Non-current 10,297 6,191 ± ± 69,828 58,668 5,793 7,588 Provision for reinstatement costs Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ At 1 January 7,977 5,871 ± ± Additions 2,926 2,350 22 ± Utilisation (375) (157) ± ± Provision no longer required (394) ± ± ± Exchange differences 89 (87) ± ± Total as at 31 December 10,223 7,977 22 ± 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 agreements upon the expiration of the lease agreements. During the year, the Group incurred reinstatement costs for certain closed outlets and an excess provision of $394,000 (2012: Nil) was reversed. - 79 - 409 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 23. Due from/(to) minority shareholders of subsidiaries The amounts due from and loan from minority shareholders of subsidiaries are to be settled in cash, unsecured, non-interest bearing and repayable on demand. 24. Short-term loans 2013 2012 Group ¶ ¶ Bank loans - Singapore Dollar 2,640 2,640 - Hong Kong Dollar 491 474 - Chinese Yuan ± 629 - Malaysia Ringgit 115 204 - New Taiwan Dollar 3,638 2,699 - Thai Baht 2,862 1,250 9,746 7,896 The effective interests on these short-term loans range from 1.63% to 4.79% (2012: 1.57% to 6.02%) 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 1 to 12 months (2012: 3 to 12 months). Short term loans of $491,000 (2012: $746,000) are secured by continuing guarantees by the Company and certain subsidiaries of the Group. All other short term loans are secured by continuing guarantees by the Company. - 80 - 410 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 25. Long-term loans Group Company Term loans Maturity 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Singapore Dollar 2014 - 2017 37,148 5,387 ± ± Singapore Dollar Note 1 52,183 25,863 52,183 25,863 Singapore Dollar Note 2 30,000 30,000 ± 18,000 Singapore Dollar 2014 (Note 3) 2,167 4,167 ± ± Singapore Dollar 2019 (Note 4) 13,068 ± ± ± Singapore Dollar 2020 (Note 5) 3,752 ± ± ± Hong Kong Dollar 2015 499 ± ± ± Hong Kong Dollar 2015 (Note 6) 414 592 ± ± Hong Kong Dollar 2017 (Note 7) 2,021 2,326 ± ± Chinese Yuan 2015 (Note 6) 2,542 2,142 ± ± Malaysia Ringgit 2014 2015 706 1,515 ± ± ± Malaysia Ringgit Note 8 338 110 ± ± Thai Baht 2014 2018 7,331 9,806 ± ± ± New Taiwan Dollar 2016 (Note 7) 7,100 6,116 ± ± 158,770 88,523 52,183 43,863 Current portion 20,554 37,910 3,135 25,863 Non-current portion 138,216 50,613 49,048 18,000 158,770 88,523 52,183 43,863 - 81 - 411 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 25. Long-term loans (cont'd) Note 1 ± the term loans are secured by a charge over the CompaQ\¶VOHDVHKROGODQGDQG property. The loans mature in 2028. They include the following financial covenants which require the Group to maintain: - a gearing ratio not exceeding 2.0 times; and - a consolidated tangible net worth not less than $70 million 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 4.0 times; and - EBITDA exceeding the loan amounts granted. The loans mature in 2017. 7KH &RPSDQ\¶V ORDQ RI PLOOLRQ LQ WKH SUHYLRXV \HDU ZDV transferred to a subsidiary during the year. 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. Note 4 ± WKHORDQLVVHFXUHGE\DFKDUJHRYHUWKH&RPSDQ\¶VOHDVHKROGODQGDQGSURSHUW\ and continuing guarantee by the Company. It includes a financial covenant which requires the Group to maintain: - a net worth exceeding the loan covenants granted - a gearing ratio not exceeding 2.0 times; and - EBITDA exceeding the loan covenants granted Note 5 ± the loan is secured by a charge over a deed of guarantee executed by the Company. Note 6 ± the loans are secured by continuing guarantees by the Company and certain subsidiaries of the Group. Note 7 ± 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 8 ± 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 6.88% (2012: 1.25% to 7.37%) per annum. The interest rates of these floating rate loans are repriced from time to time at the discretion of the respective banks. - 82 - 412 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 26. Share capital and treasury shares (a) Share capital Group and Company 2013 2012 Number of Number of shares $'000 shares $'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 Group and Company 2013 2012 Number of Number of shares $'000 shares $'000 At beginning of the year 829,614 (406) 1,237,690 (609) Acquired during the financial year ± ± 200,000 (96) Treasury shares transferred on vesting of restricted share grant (447,990) 219 (608,076) 299 At end of the year 381,624 (187) 829,614 (406) Treasury shares relate to ordinary shares of the Company that is held by the Company. The Company acquired Nil (2012: 200,000) shares in the Company through purchases on the Singapore Exchange during the financial year. The total amount paid to acquire the shares was $Nil (2012: $96,000) and this was presented as a FRPSRQHQWZLWKLQVKDUHKROGHUV¶HTXLW\ The Company reissued 447,990 (2012: 608,076) treasury shares pursuant to its restricted share grant at a weighted average share price of approximately $0.49 (2012: $0.49) each. - 83 - 413 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 27. Accumulated profits and other reserves Accumulated profits Included LQWKH*URXS¶VDFFXPXODWHGSURILWVLVDQDPRXQWof $1,432,000 (2012: $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 Company Note 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Statutory reserve fund (a) 2,757 2,757 ± ± Translation reserve (b) 666 (755) ± ± Fair value adjustment (c) reserve 111 214 ± ± Share-based compensation reserve 286 379 286 379 Capital reserve (d) 175 156 175 156 Premium on acquisition of non-controlling interests (e) (657) (657) ± ± 3,338 2,094 461 535 (a) Statutory reserve fund In accordance with the Foreign Enterprise Law applicable to subsidiaries in the 3HRSOH¶V 5HSXEOLF RI &KLQD 35& WKH VXEVLGLDULHV DUH UHTXLUHG WR PDNH 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 rHDFKHVRIWKHVXEVLGLDULHV¶UHJLVWHUHGFDSLWDO6XEMHFWWRWKHDSSURYDO 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 differeQWIURPWKDWRIWKH*URXS¶VSUHVHQWDWLRQFXUUHQF\ - 84 - 414 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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. Group 2013 2012 ¶ ¶ Net loss on available-for-sale financial assets: - Net loss on fair value changes during the financial year 103 390 (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 GLVWULEXWLRQ ZKHWKHULQFDVKRURWKHUZLVH RIWKH&RPSDQ\¶VDVVHWV LQFOXGLQJDQ\ distribution of assets to members on a winding up) may be made in respect of this reserve. (e) Premium on acquisition of non-controlling interests On 31 August 2012, the Company acquired an additional 40% equity interest in Star Food Pte Ltd and its VXEVLGLDULHV ³6WDU )RRG *URXS´ IURP LWV QRQ-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 beHQ UHFRJQLVHG DV ³3UHPLXP SDLG RQ acquisition of non-FRQWUROOLQJLQWHUHVWV´ZLWKLQHTXLW\ 7KHIROORZLQJVXPPDULVHVWKHHIIHFWWRWKHFKDQJHLQWKH*URXS¶VRZQHUVKLSLQWHUHVW in Star Food Group on the equity attributable to owners of the Company: ¶ 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 - 85 - 415 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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 Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Commitment in respect of property, plant and equipment 4,529 10,990 237 10,435 Commitment in respect of investment securities 500 ± ± ± (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¶VDFWLYLWLHVFRQFHUQLQJGLYLdends, additional debt or further leasing. Future minimum lease payments payable under non-cancellable operating leases as at 31 December are as follows: Group 2013 2012 ¶ ¶ Not later than one year 90,633 87,203 Later than one year but not later than five years 210,440 217,097 Later than five years 27,189 33,890 328,262 338,190 - 86 - 416 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 28. Commitments and contingencies (cont'd) (c) Operating lease The Group has entered into non-cancellable operating leases to sublease its food court and retail outlet premises. The Company has non-cancellable operating leases for its leasehold property. Future sublease rental receivable as at 31 December is as follows: Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Not later than one year 56,966 46,764 3,144 ± Later than one year but not later than five years 51,321 28,132 5,100 ± Over five years ± ± 83 ± 108,287 74,896 8,327 ± (d) Corporate guarantees As at 31 December 2013, the Company has given corporate guarantees to financial institutions in connection with banking facilities provided to its subsidiaries of which $130,860,000 (2012: $63,487,000) of the banking facilities have been utilised as at year end. (e) Undertakings 3% SGD junior bonds In conjunction with the investment in junior bonds by the subsidiary, Imagine 3URSHUWLHV 3WH /WG ³,33/´ 1RWH WKH &RPSDQy, together with the other LQYHVWRUVRIWKHMXQLRUERQGVKDGH[HFXWHGD6SRQVRUV¶8QGHUWDNLQJRQ-DQXDU\ 2012 whereby IPPL undertakes to pay all cost overruns in connection to the DGGLWLRQV¶DQGDOWHUDWLRQV¶ZRUNVWREHXQGHUWDNHQRQ&KLMPHV$VDWDecember 2013, there were no contingent liabilities resulting from the aforesaid undertaking. - 87 - 417 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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: Group 2013 2012 ¶ ¶ Income Management fee income from a joint venture 792 185 Rental and miscellaneous income from a party related to a director of the Company 314 249 Dividend income from a joint venture 208 ± Sales of goods to a joint venture 721 ± Expenses Rental expense to a joint venture 324 342 Royalty fees to minority shareholders 2,795 2,291 Purchase of goods from a party related to a director of the Company 85 147 Design fee to a company related to a director of a subsidiary ± 553 Miscellaneous expense 99 ± Others Franchise fee to non-controlling interests 128 24 Purchase of furniture and fittings from a company related to a director of the Company 769 102 Purchase of plant and equipment from an associate 11,065 ± - 88 - 418 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 29. Related party disclosures (cont'd) Company 2013 2012 ¶ ¶ Income Management fee income from a subsidiary 11,821 8,222 Dividend income from subsidiaries 12,075 ± Training fee income from subsidiaries 212 241 Rental income from subsidiaries 2,443 ± Expense Facilities fee to a subsidiary ± 11 Purchase of goods from subsidiaries 10 ± Interest expense payable to a subsidiary 243 ± Miscellaneous expense payable to a subsidiary 71 ± Miscellaneous expense payable to an associate 10 ± Others Purchase of plant and equipment from an associate 4,672 ± (b) Compensation of key management personnel Group 2013 2012 ¶ ¶ Salaries and bonus 7,082 6,924 Central Provident Fund contributions and other pension contributions 329 298 Share-based payment (RSG Plan) 215 89 'LUHFWRUV¶IHHV 168 168 Other personnel expenses 1,106 898 Total compensation paid to key management personnel 8,900 8,377 Comprise amounts paid to: Directors of the Company 1,560 1,535 Directors of a subsidiary 1,546 502 Other key management personnel 5,794 6,340 8,900 8,377 - 89 - 419 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 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 EHHQWKURXJKRXWWKHFXUUHQWDQGSUHYLRXVILQDQFLDO\HDUWKH*URXS¶VSROLF\WKDWQRWUDGLQJLQ derivatives for speculative purposes shall be undertaken. 7KH IROORZLQJ VHFWLRQV SURYLGH GHWDLOV UHJDUGLQJ WKH *URXS¶V DQG &RPSDQ\¶V H[SRVXUH WR the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. 7KHUHKDVEHHQQRFKDQJHWRWKH*URXS¶VH[SRsure to these financial risks or the manner in which it manages and measures the risks. 7KH*URXS¶VDQG&RPSDQ\¶VSULQFLSDOILQDQFLDOLQVWUXPHQWVFRPSULVHEDQNORDQV and cash and short term deposits. The main purpose of these financial instruments is to raise finance IRU WKH *URXS¶V DQG &RPSDQ\¶V RSHUDWLRQV 7KH *URXS DQG &RPSDQ\ KDV YDULRXV RWKHU 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 ,QWHUHVWUDWHULVNLVWKHULVNWKDWWKHIDLUYDOXHRUIXWXUHFDVKIORZVRIWKH*URXS¶VDQG WKH &RPSDQ\¶V ILQDQFLDO LQVWUXPHQWV ZLOO IOXFWXDWH EHFDXVH RI FKDQJHV LQ PDUNHW interest rates. 7KH*URXS¶V DQGWKH&RPSDQ\¶VH[SRVXUHWRinterest 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 REWDLQV DGGLWLRQDO ILQDQFLQJ WKURXJK EDQN ERUURZLQJV 7KH *URXS¶V SROLF\ LV WR 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 Group Effect on profit before tax 100 basis 100 basis points points increase decrease ¶ ¶ 2013 - Singapore dollar interest rates (1,410) 1,410 - Chinese Yuan interest rates 81 (81) - Hong Kong dollar interest rates (29) 29 - New Taiwan dollar interest rates (107) 107 - Malaysia Ringgit interest rates (12) 12 - Thai Baht interest rates (102) 102 - 90 - 420 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 30. Financial risk management objectives and policies (cont'd) (a) ,QWHUHVWUDWHULVN FRQW¶G Group Effect on profit before tax 100 basis 100 basis points points increase decrease ¶ ¶ 2012 - Singapore dollar interest rates (630) 630 - Chinese Yuan interest rates 72 (72) - Hong Kong dollar interest rates (39) 39 - New Taiwan dollar interest rates (88) 88 - Malaysia Ringgit interest rates (18) 18 - Thai Baht interest rates (111) 111 (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. 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. 7KH *URXS¶V QHW LQYHVWPHQWV LQ WKHVH FRXQWULHV DUH QRW KHGJHG Ds 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. - 91 - 421 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 30. Financial risk management objectives and policies (cont'd) (b) Foreign currency risk FRQW¶G Group Effect on profit before tax 2013 2012 ¶ ¶ Against SGD: USD - strengthened 6% (2012: 6%) 56 58 - weakened 6% (2012: 6%) (56) (58) CNY - strengthened 5% (2012: 5%) 363 285 - weakened 5% (2012: 5%) (363) (285) Against CNY: SGD - strengthened 5% (2012: 5%) (21) (13) - weakened 5% (2012: 5%) 21 13 HKD - strengthened 5% (2012: 5%) (52) (44) - weakened 5% (2012: 5%) 52 44 Against HKD SGD - strengthened 5% (2012: 5%) (124) (111) - weakened 5% (2012: 5%) 124 111 USD - strengthened 6% (2012: 6%) ± (2) - weakened 6% (2012: 6%) ± 2 CNY - strengthened 5% (2012: 5%) (2) (2) - weakened 5% (2012: 5%) 2 2 Against Malaysia Ringgit SGD - strengthened 5% (2012: 5%) 8 (86) - weakened 5% (2012: 5%) (8) 86 USD - strengthened 6% (2012: 6%) ± (9) - weakened 6% (2012: 6%) 9 ± (c) Credit risk Credit risk is the risk of loss that may arise on outstanding financial instruments VKRXOG D FRXQWHUSDUW\ GHIDXOW RQ LWV REOLJDWLRQV 7KH *URXS¶V DQG WKH &RPSDQ\¶V 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. - 92 - 422 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 30. Financial risk management objectives and policies (cont'd) (c) &UHGLWULVN FRQW¶G The Group trades only with recognised and creditworthy third parties. It is the *URXS¶VSROLF\WKDWDOOFXVWRPHUVZKR ZLVKWRWUDGHRQFUHGLWWHUPVDUHVXEMHFWWR credit verification procedures. In addition, receivable balances are monitored on an RQJRLQJ EDVLV ZLWK WKH UHVXOW WKDW WKH *URXS¶V H[SRVXUH WR EDG GHEWV LV QRW significant. Exposure to credit risk $WWKHEDODQFHVKHHWGDWHWKH*URXS¶VDQGWKH&RPSDQ\¶VPD[LPXPH[SRVXUHWR credit risk is represented by: ± the carrying amount of each class of financial assets recognised in the balance sheets; and ± an amount of $130,860,000 (2012: $63,487,000) relating to corporate guarantees provided by the Company to financial institutions on its VXEVLGLDULHV¶ERUURZLQJs and other banking facilities. Credit risk concentration profile The Group determines concentrations of credit risk by monitoring the country profile of its trade receivables, other receivables and deposits on an on-going basis. The credit risk concentration SURILOHRIWKH*URXS¶VWUDGHUHFHLYDEOHV, other receivables and deposits at the balance sheet date is as follows: Group 2013 2012 % of % of ¶ total ¶ total By country: Singapore 20,509 39% 17,572 39% 3HRSOH¶VRepublic of China 20,190 39% 16,750 38% Hong Kong 5,349 10% 3,589 8% Malaysia 504 1% 762 2% Indonesia 667 1% 737 2% The Philippines 1,223 2% 848 2% Thailand 1,717 3% 1,935 4% Taiwan 1,863 4% 2,004 4% Others 400 1% 455 1% 52,422 100% 44,652 100% - 93 - 423 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements - 31 December 2013 30. Financial risk management objectives and policies (cont'd) Excessive risk concentration Concentration arise when a number of outer 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 GURXS¶VSHUIRUPDQFHWRGHYHORSPHQWVDIIHFWLQJDSDUWLFXODU industry. In order to avoid excessive concentration of risk, the GURXS¶V SROLFLHV DQG 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 neither past due nor impaired Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default. Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Notes 17 and 18 above. (d) Liquidity risk Liquidity risk is the risk that the Group or the Company will encounter difficulty in PHHWLQJ ILQDQFLDO REOLJDWLRQV GXH WR VKRUWDJH RI IXQGV 7KH *URXS¶V DQG WKH &RPSDQ\¶V H[SRVXUH WR OLTXLGLW\ ULVN DULVHV SULPDULO\ IURP PLVPDWFKHV RI WKH maturities of financial assets and liabilLWLHV 7KH *URXS¶V DQG WKH &RPSDQ\¶V 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. - 94 - 424 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 30. Financial risk management objectives and policies (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: 2013 2012 1 year or 1 to 5 Over 5 1 year or 1 to 5 less years years Total less years Total Group $'000 $'000 $'000 $'000 $'000 $'000 $'000 Financial assets : Investment securities ± 60,427 ± 60,427 ± 51,107 51,107 Trade and other receivables 49,145 3,277 ± 52,422 42,772 1,880 44,652 Amounts due from related corporations 959 ± ± 959 1,652 ± 1,652 Amounts due from minority shareholders of subsidiaries 395 ± ± 395 411 ± 411 Cash and fixed deposits 79,420 11,504 ± 90,924 64,245 11,213 75,458 425 129,919 75,208 ± 205,127 109,080 64,200 173,280 Financial liabilities : Trade and other payables 101,197 ± ± 101,197 89,572 ± 89,572 Other liabilities 31,449 ± ± 31,449 30,067 ± 30,067 Amounts due to related corporations 3,901 ± ± 3,901 2,211 ± 2,211 Loans and borrowings 30,430 110,405 40,059 180,894 52,982 60,531 113,513 166,977 110,405 40,059 317,441 174,832 60,531 235,363 Company Financial assets : Other receivables 968 ± ± 968 179 ± 179 Amounts due from related corporations 16,753 ± ± 16,753 31,261 ± 31,261 Cash on hand and at bank 9,214 ± ± 9,214 431 ± 431 26,935 ± ± 26,935 31,871 ± 31,871 Financial liabilities : Other payables 2,332 ± ± 2,332 4,445 ± 4,445 Other liabilities 5,793 ± ± 5,793 7,588 ± 7,588 Amounts due to related corporations 27,457 ± ± 27,457 16,695 ± 16,695 Loans and borrowings 3,178 14,841 39,636 57,655 32,345 19,156 51,501 38,760 14,841 39,636 93,237 61,073 19,156 80,229 - 95 - BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 30. Financial risk management objectives and policies (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. 2013 2012 1 year or 1 to 5 1 year or 1 to 5 less years Total less years Total Company $'000 $'000 $'000 $'000 $'000 $'000 Financial guarantees 41,692 89,168 130,860 30,874 32,613 63,487 426 - 96 - BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 30. Financial risk management objectives and policies (cont'd) (e) Market price risk 0DUNHWSULFHULVNLVWKHULVNWKDWWKHIDLU YDOXHRUIXWXUHFDVKIORZVRIWKH*URXS¶V 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% (2012: 15%) higher/lower with all other variables held constant, the Group's Fair Value Adjustment Reserve in equity would have been $64,000 (2012: $79,000) 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 The carrying amount by category of financial assets and liabilities are as follows: Group Company 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Loans and receivables Trade and other receivables (Note 17) 52,422 44,652 968 179 Amounts due from related corporations 959 1,652 16,753 31,261 Amounts due from minority shareholders of subsidiaries (non-trade) 395 411 ± ± Cash and fixed deposits 90,091 74,233 9,214 431 Total 143,867 120,948 26,935 31,871 Available-for-sale financial assets Investment securities (Note 12) 34,575 20,659 ± ± Held-to-maturity investments Investment securities (Note 12) 25,224 25,224 ± ± Financial liabilities carried at amortised cost Trade and other payables (Note 21) 101,197 89,572 2,332 4,445 Other liabilities (Note 22) 31,449 30,067 5,793 7,588 Amounts due to related corporations 3,901 2,211 27,457 16,695 Short term loans 9,746 7,896 ± ± Long term loans (Note 25) 158,770 88,523 52,183 43,863 Loan from a minority shareholder of a subsidiary 200 200 ± ± Total 305,263 218,469 87,765 72,591 - 97 - 427 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 32. Fair value of assets and liabilities Fair value hierarchy The Group categories fair value measurements using a fair value hierarchy that is dependent on the valuation inputs used as follows: - Level 1 ± Quoted prices (unadjusted) in active market for identical assets or liabilities that the Group can access at the measurement date, - Level 2 ± Inputs other that quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, and - Level 3 ± Unobservable inputs for the asset or liability. Fair value measurements that use inputs of different hierarchy levels are categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. (a) Assets and liabilities measured at fair value The following table shows an analysis of each class of assets and liabilities measured at fair value by level at the end of the reporting period: Group 2013 ¶ Quoted prices in active markets for identical instruments (Level 1) Recurring fair value measurements Financial assets: Available-for-sale financial assets (Note 12) - Equity instruments (quoted) 425 At 31 December 2013 425 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. - 98 - 428 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 32. )DLUYDOXHRIDVVHWVDQGOLDELOLWLHV FRQW¶G (b) Assets and liabilities not carried at fair value but for which fair value is disclosed The following table VKRZV DQ DQDO\VLV RI WKH *URXS¶V DVVHWV DQG OLDELOLWLHV QRW measured at fair value at 31 December 2013 but for which fair value is disclosed: Group 2013 ¶ Significant unobservable Carrying inputs amount (Level 3) Assets Investment in junior bonds (Note 12) 25,852 25,244 Other receivables (non-current) 2,907 3,277 Fixed deposit (non-current) 10,232 10,671 Determination of fair value Fair value is estimated by discounting expected future cash flows at market incremental lending rate for similar types of borrowing or leasing arrangements at the balance sheet date. - 99 - 429 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 32. )DLUYDOXHRIDVVHWVDQGOLDELOLWLHV FRQW¶G (c) Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value The fair value of financial assets and liabilities by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value are as follows: Carrying amount Fair value 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Group Financial assets: Equity instruments (unquoted), at cost 34,150 20,130 * * Investment in junior bonds (Note 12) 25,244 25,224 25,852 30,448 Other receivables 3,277 1,880 2,907 1,325 Fixed deposit 10,671 9,988 10,232 9,349 * Investment in equity instruments (unquoted) at cost )DLUYDOXHLQIRUPDWLRQKDVQRWEHHQGLVFORVHGIRUWKH*URXS¶VLQYHVWPHQWVin equity instruments that are carried at cost because fair value cannot be measured reliably. These equity instruments represent ordinary shares in companies that are not quoted on any market. The Group does not intend to dispose of these investments in the foreseeable future. - 100 - 430 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 33. Capital management Capital includes debt and equity items as disclosed in the table below. 7KHSULPDU\REMHFWLYHRIWKH*URXS¶VFDSLWDOPDQDJHPHQWLVWRHQVXUHWKDWLW PDLQWDLQV D 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 2013 and 2012. 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 2013 and 2012. The Group monitors capital using a gearing ratio, which is net debt divided by total capital SOXVQHWGHEW7KH*URXS¶VSROLF\LVWRNHHSWKHJHDUing ratio between 60% and 80%. The Group includes within net debt, loans and borrowings, trade and other payables, amounts due to related corporations, less cash and short-term deposits. Capital includes equity attributable to the owners of the Company less the fair value adjustment reserve and restricted statutory reserve fund. Group 2013 2012 ¶ ¶ Loans and borrowings (1) 168,716 96,619 Trade and other payables 102,589 90,957 Amounts due to related corporations 3,901 2,211 Less: Cash and cash equivalents (79,420) (64,245) Net debt 195,786 125,542 Equity attributable to the owners of the Company 93,953 82,550 Less: - Fair value adjustment reserve (111) (214) - Statutory reserve fund (2,757) (2,757) Total capital 91,085 79,579 Capital and net debt 286,871 205,121 Gearing ratio 68% 61% (1) including bank loans and loans from minority shareholders of subsidiaries - 101 - 431 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 34. 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. - 102 - 432 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 34. 6HJPHQWLQIRUPDWLRQ FRQW¶G Food Bakery Restaurant court 2013 operations (1) operations operations Investment Others (2) Elimination Group ¶ ¶ ¶ ¶ ¶ ¶ ¶ Revenue External sales 271,320 122,203 143,007 ± ± ± 536,530 Inter-segment sales (Note A) 375 2 3,045 ± ± (3,422) ± Total revenue 271,695 122,205 146,052 ± ± (3,422) 536,530 Results Profit from operations 11,145 9,019 4,873 (22) (2,092) ± 22,923 Interest income 615 280 331 558 45 (513) 1,316 Interest expense (487) (52) (884) (992) (773) 513 (2,675) 6KDUHRIDVVRFLDWHV¶ results ± (193) ± ± 424 ± 231 Share of joint YHQWXUHV¶UHVXOWV 329 ± 266 ± ± ± 595 Segment profit/(loss) 11,602 9,054 4,586 (456) (2,396) ± 22,390 Tax expense (6,251) Profit for the year 16,139 Assets and liabilities Segment assets (Note A) 152,040 76,681 147,344 60,177 99,675 (71,958) 463,959 Tax recoverable 6 Deferred tax assets 4,287 Total assets 468,252 Segment liabilities (Note A) 111,901 38.795 133,654 59,057 86,578 (74,728) 355,257 Tax payable 6,458 Deferred tax liabilities 2,554 Total liabilities 364,269 Other information Investment in associates ± 2,869 ± ± 1,699 ± 4,568 Investment in joint ventures 2,773 ± 638 ± 227 ± 3,638 Additions to non- current assets (Note B) 30,564 17,711 28,299 ± 31,396 ± 107,970 Depreciation and amortisation 12,791 8,313 16,696 ± 1,538 ± 39,338 Other non-cash (income)/ expenses (Note C) 143 406 1,070 ± 183 ± 1,802 - 103 - 433 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 34. 6HJPHQWLQIRUPDWLRQ FRQW¶G Food Bakery Restaurant court 2012 operations (1) operations operations Investment Others (2) Elimination Group ¶ ¶ ¶ ¶ ¶ ¶ ¶ Revenue External 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 Results Profit 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) 6KDUHRIDVVRFLDWHV¶ results ± ± ± ± ± ± ± Share of joint YHQWXUHV¶UHVXOWV 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 62,099 121,003 47,469 59,594 (41,553) 353,457 Tax recoverable ± Deferred tax assets 2,952 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 information Investment in associates ± ± ± ± 900 ± 900 Investment in joint ventures 2,479 ± 646 ± ± ± 3,125 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 - 104 - 434 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 34. 6HJPHQWLQIRUPDWLRQ FRQW¶G 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: impairment/(write-back of impairment) of property, plant and equipment, intangible assets, investment in associate, receivables, amount due from associates and joint ventures, and provision for reinstatement cost; write off of property, plant and equipment, bad debts and inventories; (gain)/loss on disposals of property, plant and equipment and intangible assets; share based payment expenses; and unrealised foreign exchange (gain)/loss. Geographical information Revenue and non-current assets information based on the geographical location of customers and assets respectively are as follows: (3) External sales Non-current assets 2013 2012 2013 2012 ¶ ¶ ¶ ¶ Singapore 270,569 228,422 145,680 91,387 Mainland China 172,652 142,992 53,102 40,402 Hong Kong 53,141 41,902 12,188 9,569 Rest of the world 40,168 34,018 22,662 24,581 Total 536,530 447,334 233,632 165,939 (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. - 105 - 435 BreadTalk Group Limited and its Subsidiaries Notes to the Financial Statements ± 31 December 2013 35. Dividends Group and Company 2013 2012 ¶ ¶ Dividends paid during the year: Dividends on ordinary shares First and final exempt (one-tier) ordinary dividend for 2012 of 0.8 cent per share (2012: dividend for 2011 of 1.0 cent per share) 2,252 2,812 First and final exempt (one-tier) special dividend for 2012 of Nil cent per share (2012: dividend for 2011 of 0.5 cent per share) ± 1,406 Interim exempt (one-tier) dividend for 2013 of 0.5 cent per share (2012: 0.5 cent per share) 1,408 1,406 3,660 5,624 Proposed but not recognised as a liability as at 31 December: Dividends on ordinary shares, subject to shareholders' approval at the Annual General Meeting: First and final exempt (one-tier) ordinary dividend for 2013 of 1.3 cent per share (2012: 0.8 cent per share) 3,700 2,250 3,700 2,250 36. Events subsequent to the balance sheet date Investment in commercial and retail property trust in Singapore On 9 January 2014, the subsidiary, Imagine Properties Pte Ltd, entered into a subscription agreement to subscribe for $17,490,000 in principal amount of junior bonds, preference shares and ordinary shares of Perennial Somerset Investors Pte Ltd in relation to the investment in a commercial and retail property trust in Singapore. 37. Authorisation of financial statements The financial statements for the year ended 31 December 2013 were authorised for issue in accordance with a resolution of the directors on 28 March 2014. - 106 - 436