OLDTOWN BERHAD (797771-M) A N N U A L REPORT www.oldtown.com.my 2011 contents 2 vision and mission statement 24 statement on corporate social responsibility 3 business overview 26 corporate governance statement 4 milestones 31 audit committee report 4 awards & accolades 34 statement on internal control 6 group structure 36 additional compliance information 7 corporate information 38 financial statements 8 board of directors 115 list of properties 13 financial highlights 119 analysis of shareholdings 14 chairman’s statement 121 notice of annual general meeting 18 group managing director’s review of operations proxy form ANNUAL REPORT 2011 1

A Significant Milestone for From a humble beginning Oldtown Group of operating a coffee shop in Ipoh, Oldtown Group has come a long way in its business growth to become one of the largest cafe chain operator in Malaysia, as well as a manufacturer and exporter of coffee and other beverages with an established brand name. Oldtown Berhad achieved a monumental milestone when the Company was successfully listed on the Main Market of Bursa Malaysia on 13 July 2011. The successful listing of the Company is a testament and recognition of the Company’s achievement and provides a strong foundation for the Company to scale greater heights in its business. 2 OLDTOWN BERHAD (797771-M)

vision To be Asia Pacific’s Leading White Coffee Brand

OUR PEOPLE: mission We Believe That Our People Are Our Assets We acknowledge and appreciate our people as those who grow with us and for their full dedication. We value them for their effort and what they are able to bring to the company, statement hence we constantly provide a platform and opportunities for career growth and enrichment of knowledge. We cultivate the passion of delighting our consumers into all our staffs to bring forth the best experience possible.

COMMUNITY: We Nurture The Community We are aware and committed to our community hence we operate our business in a manner that does not compromise the wellness of our future generations. We are passionate about our corporate responsibilities and do our best to provide for the community in different ways, from doing our part for the earth we live in to providing underprivileged children with better homes. We will not look lightly upon our social responsibilities as we believe in giving back to the community as part of the effort towards a better future.

OUR CONSUMERS: We Delight Our Consumers With Our Products We are consumer centric and are always focused on consumer needs. Hence we are dedicated to delighting our consumers with all our product offerings, by committing ourselves in sourcing the finest ingredients through ethical ways to provide them with the best quality products. We hold strongly to our origins in order to bring to consumers the authentic experience that they expect to enjoy.

MOTHER EARTH: We Do Our Part in Saving Mother Earth We are attuned with the growing needs to nurture our mother earth and to do our part in caring for the environment. With this, we share and grow the passion and knowledge of caring for the environment with our partners and consumers for them to live this together with us as part of our corporate values.

INVESTORS: We Focus on Prospering Our Investors We are dedicated to growing and maximising the financial rewards of our investors as we see it as a platform for our company to continue to provide to our consumers and the community. ANNUAL REPORT 2011 3

business overview

The business activities of Oldtown Group can be divided into three broad categories as follows:

Operation Manufacturing Marketing and sales of Cafe Chain of coffee and other of coffee and other :: Own Cafe Outlets* beverages beverages :: Franchised Outlets :: Instant Coffee Mix :: Instant Coffee Mix :: Food Processing :: Roasted Coffee Powder :: Roasted Coffee Powder :: Instant Milk Tea Mix :: Instant Milk Tea Mix :: Instant Chocolate :: Instant Chocolate

*Own cafe outlets include those that are fully and partially owned. :: Ready-to-drink coffee 4 OLDTOWN BERHAD (797771-M) milestones: our journey of Started exporting instant coffee mix to Taiwan & Indonesia Expanded vertically into the food services Expanded our instant coffee sector by opening mix’s product line to include a chain of cafe different variations such as Successfully outlets based on hazelnut flavour, no added commercialised Successfully the traditional Ipoh sugar and ice cold versions our instant 3 in 1 commercialised coffee shop setting coffee mix under the Expanded our export markets our own formulated and ambience under ‘OLDTOWN’ brand name for our instant coffee mix to blend of 3 in 1 instant the ‘OLDTOWN WHITE for the retail sector Hong Kong milk tea COFFEE’ brand name

1999 2000 2001 2002 2003 2004 2005

Commenced our first Expanded our nationwide Successfully manufactured roasted export of the ‘OLDTOWN’ retail distribution to cover coffee powder for the food services brand of 3 in 1 instant East and West Malaysia sector and marketed to the retail coffee mix to Singapore via hypermarkets and sector under the ‘NAN YANG’ brand supermarkets Penetrated the export markets for our instant coffee mix to cover the United States of America and United Kingdom awards & accolades

Oldtown Group has won numerous awards since the Group operated its chain of OLDTOWN WHITE COFFEE cafe outlets. The Group’s numerous awards are a testament to the success of its brand equity. Its established brand name, associated with its fine coffee beverages and high quality food, provides the Group with a key competitive advantage to compete effectively in the F&B industry.

2007 2008 2009 2010 Golden Bull Award 2007 Golden Award in the Ranked first in the Top 10 Silver Award (Fast Food) organised by Nanyang Siang Pau National Growth Award 2008 outstanding SMEs category in Putra Brand Awards 2010 from the Malaysian in the Golden Bull Award 2009 organised by the AAAAM Best Brands Food and Retailer-Chains Association organised by Nanyang Siang Pau Beverage Kopitiam 2007 Platinum Award for by the BrandLaureate Enterprise 50 Award 2008 Gold Award (National Growth Outstanding Malaysian Brand organised by SME Corporation Award) in the MRCA Award in the Outstanding Business SME Brand Excellence Malaysia and Deloitte Malaysia 2009 from the Malaysian Awards 2010 organised by Award 2007 from the Retailer-Chains Association the Star SMI Association of Malaysia Golden Bull Award 2008 organised by Nanyang Siang Pau Ranked No.1 in the Malaysia Book of Records Super Golden Bull category for achieving the largest in the Golden Bull Award 2010 Kopitiam chain in Malaysia organised by Nanyang Siang Pau by year end 2007 Enterprise 50 Award 2010 organised by SME Corporation Malaysia and Deloitte Malaysia ANNUAL REPORT 2011 5 success

Commenced cafe operations under Expanded into PT Oldtown Indonesia the ready-to-drink Started exporting (“RTD”) market Opened the first cafe instant coffee mix segment under the outlet in China to Thailand and ‘OLDTOWN’ brand Philippines name

2006 2007 2008 2009 2010 2011

Expanded our export Launched our first Commenced operation of Successful listing market for our partially owned fully owned cafe outlets in on Bursa Malaysia instant coffee mix ‘OLDTOWN WHITE Singapore on 13 July 2011 to include Canada COFFEE’ cafe outlet Started exporting instant and China in Singapore coffee mix to Australia

2011 Product Excellence Award (Category III) in Industry Excellence Award 2010 organised by Ministry of International Trade and Industry (MITI) Industry Excellence Award 2010 organised by MITI The People’s Choice Special Mention (Retail – Fast Food) in Putra Brand Awards 2011 organised by the Association of Accredited Advertising Agents Malaysia (AAAAM) group 6 structure OLDTOWN BERHAD (797771-M)

White Cafe Sdn Bhd 100%

Gongga Food Sdn Bhd 100%

White Cafe Marketing Sdn Bhd 100%

Emperor’s Kitchen Sdn Bhd 100%

Dynasty Confectionery Sdn Bhd 100%

Esquire Chef Sdn Bhd 100%

Kopitiam Asia Pacific Sdn Bhd Old Town Kopitiam Sdn Bhd 100% 100%

Oldtown Singapore Pte Ltd OTK Singapore Pte Ltd 100% 50%

Old Town Kopitiam Dynasty Kitchen Sdn Bhd Butterworth Sdn Bhd 100% 100% Oldtown Berhad Old Town Kopitiam Kuala Lumpur Sdn Bhd 100%

Old Town Kopitiam Cheras Sdn Bhd 100%

Oldtown Logistics Sdn Bhd 100%

Old Town (M) Sdn Bhd 100%

Oldtown APP Sdn Bhd 100%

Conneczone Sdn Bhd 80%

Plus One Solution Sdn Bhd 50%

OTK Eatery Sdn Bhd 40% corporate ANNUAL REPORT 2011 information 7

BOARD OF DIRECTORS Datuk Dr. Ahmed Tasir Dr. Leong Chik Weng Chuah Seong Meng Bin Lope Pihie Independent Executive Director PJN, PMP, JSM, FASc Non-Executive Director Clarence D’Silva A/L Leon D’Silva Independent Mark Wing Kong Executive Director Non-Executive Chairman Independent Goh Ching Mun Lee Siew Heng Non-Executive Director Executive Director Group Managing Director Chin Lai Yoong Tan Say Yap Non-Independent Executive Director Non-Executive Director

BOARD COMMITTEES

AUDIT COMMITTEE REMUNERATION COMMITTEE NOMINATION COMMITTEE Mark Wing Kong Dr. Leong Chik Weng Datuk Dr. Ahmed Tasir Bin Lope Pihie Chairman Chairman Chairman

Datuk Dr. Ahmed Tasir Bin Lope Pihie Datuk Dr. Ahmed Tasir Bin Lope Pihie Dr. Leong Chik Weng Dr. Leong Chik Weng Lee Siew Heng Mark Wing Kong Mark Wing Kong Goh Ching Mun

COMPANY SECRETARY REGISTRARS STATUTORY AUDITORS Ng Yuet Seam (MAICSA No 7005639) Tricor Investor Services Sdn Bhd Messrs. Deloitte KassimChan (AF 0080) Level 17, The Gardens North Tower Chartered Accountants REGISTERED OFFICE Mid Valley City, Lingkaran Syed Putra No. 87, Jalan Sultan Abdul Jalil 59200 Kuala Lumpur 30450 Ipoh, Perak Darul Ridzuan 47A, Jalan Chung Ah Ming, Pasir Puteh Tel: (603) 2264 3883 Tel: (605) 253 1358 31650 Ipoh, Perak Darul Ridzuan Fax: (603) 2282 1886 Fax: (605) 253 0090 Tel: (605) 253 6073 Fax: (605) 241 0878 PRINCIPAL BANKERS STOCK EXCHANGE LISTING

HEAD OFFICE Public Bank Berhad Main Market of Bursa Malaysia Securities Berhad No. 1, Persiaran Tasek Timur 6 CIMB Bank Berhad (Listed since 13 July 2011) Taman Medan Bercham HSBC Bank Malaysia Berhad Stock Name: OLDTOWN 31400 Ipoh, Perak Darul Ridzuan Stock Code: 5201 Tel: (605) 545 4369

WEBSITE www.oldtown.com.my board of 8 directors OLDTOWN BERHAD (797771-M)

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1. Datuk Dr. Ahmed Tasir Bin Lope Pihie 2. Lee Siew Heng 3. Dr. Leong Chik Weng 4. Mark Wing Kong 5. Chuah Seong Meng 4 6. Clarence D’Silva A/L Leon D’Silva 7. Goh Ching Mun 8. Tan Say Yap Not in picture: Chin Lai Yoong

Datuk Dr. Ahmed Tasir Bin Lope Pihie, a Malaysian, aged 61, is the Independent Non-Executive Chairman of Oldtown Berhad and was appointed to the Board on 10 November 2009. He is the Chairman of the Nomination Committee and is also a member of the Audit Committee and Remuneration Committee. He holds a Doctor of Philosophy (PhD) in Science and Technology Policy from the University of Manchester, Master of Science in Seed Technology from the University of Edinburgh, Scotland and a Bachelor in Agriculture Science from the University of Malaya. He was with the Malaysian Agricultural Research and Development Institute (MARDI) from 1972 to 1992 and last held the post as a Director before he left the institute. He was the Chief Executive Officer of the Malaysia Industry-Government Group for High Technology (MIGHT) from 1993 to 2008. He is presently the Chairman of Strand Aerospace Malaysia Sdn Bhd and a Director of other private companies including Inno Bio Ventures Sdn Bhd, Inno Biologics Sdn Bhd, Inno Bio Diagnostics Sdn Bhd, Natural Products Asia Sdn Bhd, A7N Sdn Bhd, Bio Innovation Centre Sdn Bhd and R7 Sdn Bhd. He also holds the post as Adjunct Professor of the University Malaysia Pahang. Datuk Dr. Ahmed Tasir does not have any family relationship with any Director and/or major shareholders of the Company. He does not have any conflict of interest in any business arrangement involving the Company other than those disclosed under Notes to the Financial Statements of this Annual Report. He is a shareholder of Oldtown Berhad and his shareholdings is indicated on page 119 of this Annual Report under the section on Analysis of Shareholdings. Datuk Dr. Ahmed Tasir has attended the two (2) Board Meetings which were held in the financial year ended 31 December 2011. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years. ANNUAL REPORT 2011 9

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Lee Siew Heng, a Malaysian, aged 46, is the Group Managing Director of Oldtown Berhad and also one (1) of the two (2) first Directors of Oldtown Berhad, since its incorporation on 30 November 2007. He is also a member of the Remuneration Committee. He brings with him invaluable industry experience, having accumulated more than 20 years of experience in the manufacturing and retailing industries, of which more than 10 years is in the coffee beverage industry. He has been instrumental in the growth and development of the Oldtown Group of companies and has been a key driving force in the expansion of the Group’s beverage manufacturing and cafe chain operation businesses. As the Group Managing Director, he is currently responsible for the overall strategic direction and overall management of the Oldtown Group of companies. Upon completion of his secondary education in 1986, he started his career as Production Manager of Chong Ngai Knitting Factory Sdn Bhd, a company involved in the manufacturing of garments. In 1991, as General Manager, he was responsible for the overall operations of the said company. He left the company in 1997 to join CN Supplies Sdn Bhd, a company which was then involved in the trading of hotel supplies, where he was appointed as a Director, a position which he still holds todate. In 2001, he joined White Cafe Marketing and was appointed Managing Director and in 2005, he was subsequently appointed the Managing Director of Old Town International Group. On 10 November 2009, he was redesignated as the Group Managing Director of our Group. He also holds Directorships in several private companies involved in rental of properties, manufacturing, trading and investment holding and is currently the Chairman of Old Town International Sdn Bhd, the holding company of Oldtown Berhad. Mr Lee is the brother-in-law of Madam Chin Lai Yoong, a Non-Independent Non-Executive Director of the Company who is also one of the major shareholders of Oldtown Berhad. He does not have any conflict of interest in any business arrangement involving the Company other than those disclosed under Notes to the Financial Statements of this Annual Report. He is a deemed substantial shareholder of Oldtown Berhad and his shareholdings is indicated on page 119 of this Annual Report under the section on Analysis of Shareholdings. Mr Lee has attended the two (2) Board Meetings which were held in the financial year ended 31 December 2011. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years. board of 10 directors OLDTOWN BERHAD (797771-M)

Dr. Leong Chik Weng, a Malaysian, aged 49, is an Independent Non-Executive Director of Oldtown Berhad and was appointed to the Board on 10 November 2009. He is the Chairman of the Remuneration Committee and is also a member of the Audit Committee and Nomination Committee. He holds a Doctor of Philosophy (PhD) in Chemical Engineering from the University of Massachusetts in Amherst, Massachusetts, USA, and a Bachelor of Science in Chemical Engineering from West Virginia University, Morgantown, USA. He joined Raychem Corporation Menlo Park, California, USA from 1989 to 1996. His last position at Raychem was Technical Director. Later, he was engaged as a Consultant with Guidant Corporation Santa Clara, USA from 1997 to 1998. He was Managing Director of Universal Search Machine Sdn Bhd from 1998 to 2000. He was appointed Chief Executive Officer of e-Lock Corporation Sdn Bhd in 1998, a position he still holds todate. He is currently an Independent Non-Executive Director for A-Rank Berhad, UMW Holdings Berhad Group and Chemical Company of Malaysia Berhad. He also holds Directorships in private companies involved in access control and CCTV as well as land development and construction. Dr. Leong has no family relationship with any Director and/or major shareholders of the Company nor has he any conflict of interest in any business arrangement involving the Company. He is a shareholder of Oldtown Berhad and his shareholdings is indicated on page 119 of this Annual Report under the section on Analysis of Shareholdings. Dr. Leong has attended the two (2) Board Meetings which were held in the financial year ended 31 December 2011. He has no conviction for any offences within the past 10 years.

Mark Wing Kong, a Malaysian, aged 53, is an Independent Non-Executive Director of Oldtown Berhad and was appointed to the Board on 10 November 2009. He is the Chairman of the Audit Committee and also a member of the Nomination Committee and Remuneration Committee. He is a member of the Malaysian Institute of Certified Public Accountants. His career started as an auditor with Kassim, Chan & Co in 1980. He joined Arab-Malaysian Securities Sdn Bhd as Operations Manager in 1986 and was transferred to Arab-Malaysian Merchant Bank Berhad (now known as AmInvestment Bank Berhad) in 1988 where he took up the post of Operations Manager in the Investment Department. In 1990, he was transferred to the Corporate Finance Department where his last held position was General Manager, Corporate Finance. He left in 1997 and joined LB Aluminium Berhad, a company principally engaged in the business of manufacturing, marketing and trading of aluminium extrusion and ceiling metal tee products, where he is currently the Chief Executive Officer. He is also an Independent Non-Executive Director of M3 Technologies (Asia) Berhad which is involved in the provision of mobile-internet messaging solutions and retailing of GPS navigators and other IT accessories. LB Aluminium Berhad and M3 Technologies (Asia) Berhad are listed on the Main Market and ACE Market of Bursa Malaysia Securities Berhad respectively. He is also a director of Calltime Technology Sdn Bhd. Mr Mark has no family relationship with any Director and/or major shareholders of the Company nor has he any conflict of interest in business arrangement involving the Company. He is a shareholder of Oldtown Berhad and his shareholdings is indicated on page 119 of this Annual Report under the section on Analysis of Shareholdings. Mr Mark has attended the two (2) Board Meetings which were held in the financial year ended 31 December 2011. He has no conviction for any offences within the past 10 years.

Chin Lai Yoong, a Malaysian, aged 44, is a Non-Independent Non-Executive Director of Oldtown Berhad and was appointed to the Board on 10 November 2009. She graduated with a London Chamber of Commerce and Industry (LCCI) Diploma in Cost Accounting. She started her career in 1987 with The Asia Insurance Co. Ltd, Ipoh, as a Clerk in the Administrative and Accounts Department. She left in 1989 to join Singapore Airport Terminal SVS Pte Ltd as Passenger Services Agent before becoming a cabin crew member at Malaysian Airline Systems in 1991. She left and joined Oriental Bank Berhad, Ipoh, later in that same year as a Clerk in the Credit Department and was mainly responsible for loan processing and disbursement. In 1998, she participated as an investor in a fashion retailing business before joining White Cafe Marketing Sdn Bhd and later the Old Town International Group as an Administration Officer from 2003 to July 2009. She also holds Directorships in private companies involved in the supply of car audio accessories and trading of textile fabrics and garments. Madam Chin is the sister-in-law of Mr Lee Siew Heng, the Group Managing Director of Oldtown Berhad. She does not have any conflict of interest in any business arrangement involving the Company other than those disclosed under Notes to the Financial Statements of this Annual Report. She is a deemed substantial shareholder of Oldtown Berhad and her shareholdings is indicated on page 119 of this Annual Report under the section on Analysis of Shareholdings. Madam Chin has attended the two (2) Board Meetings which were held in the financial year ended 31 December 2011. She does not have any other directorship in any public companies. She has no conviction for any offences within the past 10 years. ANNUAL REPORT 2011 11

Chuah Seong Meng, a Malaysian, aged 37, is an Executive Director of Oldtown Berhad and was appointed to the Board on 10 November 2009. He graduated with a Bachelor of Business, majoring in Marketing from the University of Tasmania, Australia in 1997. He is also a certified marketer of the Chartered Institute of Marketing, United Kingdom. His career started in 1997 as a Sales Executive with Besta Computerized Dictionary Sdn Bhd, a distributor of computer dictionary products and subsequently he left in 1999 to join Apex Furniture Sdn Bhd as Sales Executive. He left and joined White Cafe Sdn Bhd in 1999 as Marketing Manager and later assumed a similar role with White Cafe Marketing Sdn Bhd in 2001. He was promoted to Senior Marketing Manager in 2003 and subsequently the Group Marketing General Manager of White Cafe Marketing Sdn Bhd in 2007. He currently assumes the role of Chief Operating Officer of the FMCG sector of the Group. He oversees the overall business operations including strategy formulation, objectives setting and strategy implementation of the Group’s FMCG businesses. He has no family relationship with any Director and/or major shareholders of the Company nor has he any conflict of interest in any business arrangement involving the Company. He does not have any shareholdings in the Company. Mr Chuah has attended the two (2) Board Meetings which were held in the financial year ended 31 December 2011. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years.

Clarence D’Silva A/L Leon D’Silva, a Malaysian, aged 51, is an Executive Director of Oldtown Berhad and was appointed to the Board on 10 November 2009. He has over a span of 29 years in the Food Service industry where he has managed several International Brands and has done start up for new food business in Indonesia, Thailand, Philippines, Hong Kong and Malaysia and served in several senior positions with Multi National Companies. He graduated with a Bachelor of Business Administration from the California Technical College, United States in 1982. His career started in 1983 when he joined Kentucky Fried Chicken as a Management Trainee. In 1989, he left to take up employment with Carl’s Jr. Asia Development Corporation, part of the MBF Group of Companies and was eventually promoted to General Manager of the brand in Thailand. In 1998, he joined Sushi Kin Sdn Bhd as the General Manager/Chief Operating Officer and was appointed to the Board of Directors of Sushi Kin Sdn Bhd in 2000. In 2003, he left and joined Yoshinoya Food Systems, part of the Wing Tai Asia Limited in Singapore as the Chief Operating Officer. In 2006, he left and took up the position of Chief Operating Officer with FB Food System (HK) Ltd, a subsidiary of Far East Consortium, Hong Kong. He left and joined Oldtown Group of companies in 2009 and is currently the Chief Operating Officer of the Food and Beverage (F&B) Sector of the Oldtown Group. His main responsibilities include overseeing the development of the franchising business operations of the Group. Mr Clarence has no family relationship with any Director and/or major shareholders of the Company nor has he any conflict of interest in any business arrangement involving the Company. He is a shareholder of Oldtown Berhad and his shareholdings is indicated on page 119 of this Annual Report under the section on Analysis of Shareholdings. Mr Clarence has attended the two (2) Board Meetings which were held in the financial year ended 31 December 2011. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years. board of 12 directors OLDTOWN BERHAD (797771-M)

Goh Ching Mun, a Malaysian, aged 41, is an Executive Director of Oldtown Berhad and also one (1) of the two (2) first Directors of Oldtown Berhad, since its incorporation on 30 November 2007. He is also a member of the Remuneration Committee. He completed his secondary education in 1988. As the co-founder of Oldtown Group of companies, he has accumulated more than 20 years of experience in the coffee manufacturing industry. His career started in 1983 when he was involved in the family business of operating the Nam Heong Coffee Shop in Ipoh. Subsequently in 1999, he co-founded and established White Cafe Sdn Bhd where he was appointed Product Research and Development Director and was then responsible for the formulation of the blend of white coffee that is currently produced by the Group. He is currently responsible for product research and development activities of the Group. He is also the Chairman of the Corporate Social Responsibility (CSR) Committee that carries out the social responsibility functions of the Group via Oldtown Children Care Fund (OCAF) and Oldtown Earthcare activities. He is also a director of OTK Northern Sdn Bhd, which is an OLDTOWN WHITE COFFEE cafe outlet franchisee. Mr Goh does not have any family relationship with any Director and/or major shareholders of the Company. He does not have any conflict of interest in any business arrangement involving the Company other than those disclosed under Notes to the Financial Statements of this Annual Report. He is a deemed substantial shareholder of Oldtown Berhad and his shareholdings is indicated on page 119 of this Annual Report under the section on Analysis of Shareholdings. Mr Goh has attended the two (2) Board Meetings which were held in the financial year ended 31 December 2011. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years.

Tan Say Yap, a Malaysian, aged 37, is an Executive Director of Oldtown Berhad and was appointed to the Board on 10 November 2009. He has more than 10 years of experience in the coffee manufacturing industry. As the co-founder of the Oldtown Group of companies, he is instrumental in the formulation of the blend of white coffee, which started the beverage manufacturing business of the Group. He obtained a Diploma in Hotel Business Management from Syuen Hotel and Catering Management Institute, Ipoh in 1996. His career started in 1997 as Commis One at the Pangkor Laut Resort Hotel where he was mainly involved in the preparation of food for the hotel’s food and beverage outlets. In 1999, he co-founded and established White Cafe Sdn Bhd and was appointed Director of White Cafe Sdn Bhd. He was appointed Business Development Director of Kopitiam Asia Pacific Sdn Bhd and is responsible for the cafe outlet operations from 2005 to 2009. He is currently the Corporate Relation Director of Kopitiam Asia Pacific Sdn Bhd where he is responsible for fostering corporate relations with franchisees, landlords, business associates and business partners. Mr Tan does not have any family relationship with any Director and/or major shareholders of the Company. He does not have any conflict of interest in any business arrangement involving the Company other than those disclosed underNotes to the Financial Statements of this Annual Report. He is a shareholder of Oldtown Berhad and his shareholdings is indicated on page 119 of this Annual Report under the section on Analysis of Shareholdings. Mr Tan has attended the two (2) Board Meetings which were held in the financial year ended 31 December 2011. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years. financial ANNUAL REPORT 2011 highlights 13

Revenue Profit Before Tax (RM’000) 285,424 (RM’000) 300,000 60,000 255,133 51,954 250,000 50,000 43,379 193,666 40,160 200,000 40,000 138,437 27,417 150,000 30,000 79,186 100,000 20,000 13,935 50,000 10,000

0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011

Profit Attributable to Equity Holders of the Company Earnings Per Share (RM’000) (Sen) 45,000 14.00 40,177 12.17 40,000 12.00 35,000 9.16 9.61 30,231 31,700 10.00 30,000 25,000 8.00 20,446 6.20 20,000 6.00 15,000 3.28 10,821 4.00 10,000 2.00 5,000 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011

Financial year ended 31 December 2007* 2008* 2009* 2010* 2011^ RM’000 Revenue 79,186 138,437 193,666 255,133 285,424 Profit Before Tax 13,935 27,417 40,160 43,379 51,954 Profit Attributable to Equity Holders of the Company 10,821 20,446 30,231 31,700 40,177 # Earnings Per Share (Sen) 3.28 6.20 9.16 9.61 12.17

The financial highlights for the years ended 31 December 2007 to 2010 are presented on a pro-forma basis (on the assumption that the Group has been in existence throughout the years under review.) * based on the proforma consolidated financial information as disclosed in the Prospectus dated 22 June 2011. ^ based on the audited financial statements for year 2011. # The EPS for the financial years 2007 to 2011 are calculated based on the enlarged share capital of 330 million ordinary shares after the public listing. They are different from the EPS disclosed in the Prospectus and audited financial statements for year 2011 which are computed based on the enlarged share capital prior to the public listing and weighted average number of shares of 199,434,778 in issue during the year. chairman’s 14 statement OLDTOWN BERHAD (797771-M)

Dear Shareholders, On behalf of the Board of Directors, I am pleased to present the maiden Annual Report of Oldtown Berhad (“the Company” or “the Group”) for the financial year ended 31 December 2011 (“FY2011”) since it was listed on Bursa Malaysia Securities Berhad on 13 July 2011. ANNUAL REPORT 2011 15

Strong Financial Performance (Note) earnings per share of 12.17 sen for FY2011 against FY2010 earnings per share of 9.61 sen, based on enlarged share The Group has continued to achieve another year of robust capital base of 330 million ordinary shares at RM1.00 each financial performance in 2011. This is in tandem with the as at the end of each financial year. commendable economic growth achieved by Malaysia in 2011. On this note, Malaysia has registered GDP growth Prudent Financial Discipline rate of 5.1% y-o-y in 2011. The shareholders’ fund of the Group was RM217.072 For the period ended 31 December 2011, the Group million as at end 2011 which translated into net assets achieved larger consolidated revenue of RM285.424 million, per share of RM0.66 as at the end of FY2011, based on which is 11.9% higher than the pro-forma consolidated enlarged share capital base of 330 million ordinary shares. revenue of RM255.133 million for the financial year ended The total debt to total equity ratio remained at almost nil, 31 December 2010 (“FY2010”). The increase in revenue gearing ratio level of 0.07 times as at the end of FY2011. in FY2011 from FY2010 was mainly due to the increase of export sales for the Group’s beverage products and higher The fixed deposits, cash and bank balances conserved as average selling prices for the Group’s cafe chain operation at the end of FY2011 was RM85.627 million against total and beverage products during the year. debt of RM15.712 million. As a result, this has turned the Group into a net cash position of RM69.915 million as at The operation of cafe chain segment continued to be the the end of FY2011. With a healthy balance sheet position main and dominant revenue contributor to the Group, and armed with vast availability of borrowing capacity, attributing 62% of the FY2011 revenue, with the remaining the Group is always looking out for any good business 38% contributed by manufacturing of beverages segment. opportunities that may arise in the near future to further The Group’s revenue and profit before tax in FY2011 were expand its business venture. mainly derived from cafe chain operation which recorded RM177.155 million and RM34.269 million respectively. Improved Financial Liquidity The Group’s manufacturing of beverages division reported revenue of RM108.269 million and profit before tax of The Group experienced net operating cash inflow of RM18.670 million in FY2011. RM42.235 million for the 12-month period ended 31 December 2011, despite netting off the cumulative However, the Group’s FY2011 profit before tax included disposal gain of RM8.417 million, from disposal on gain on disposal of investment in associate companies of investment in associate companies and from disposal on RM5.574 million and gain on disposal of property, plant property, plant and equipment. and equipment of RM2.843 million. Overall, the profit after taxation of the Group of RM40.216 million for FY2011 is The sharp increase in cash inflow from financing activities 26.2% higher than the pro-forma consolidated profit after of RM58.372 million was primarily due to the IPO proceeds tax of RM31.872 million for FY2010. of RM79.243 million which were successfully raised during the financial year 2011. A public issue of 63.394 million The Group registered a higher net profit attributable to new ordinary shares were issued at RM1.25 per share shareholders of RM40.177 million in FY2011 against to the investing public pursuant to the Company’s listing the pro-forma net profit attributable to shareholders of exercise, which was completed on 13 July 2011. RM31.700 million in FY2010, which translated into higher

Note: The restructuring exercise was completed on 16 May 2011 (“Completion Date”) as disclosed in the Prospectus of the Company dated 22 June 2011. The above comment on the Group’s financial performance refers to the audited Statements of Comprehensive Income for FY2011 against FY2010 that is prepared based on the combined results of Oldtown Berhad (“Company”) and its subsidiaries (“Group”), assuming the Group has existed on or before 1 January 2010. chairman’s 16 statement OLDTOWN BERHAD (797771-M)

In FY2011, the Group has experienced a net increase in pursuant to the Proposed Share Buy-Back Mandate. cash and cash equivalents of RM72.983 million, which has The Proposed Share Buy-Back Mandate is subject to the translated into cash and cash equivalents of RM83.198 shareholders’ approval at the Company’s forthcoming million for the period ended 31 December 2011. Annual General Meeting.

Reward to Shareholders – Dividend Promising Business Prospects Moving Forward A first interim single-tier dividend of 2.5 sen per share After the Malaysian economy witnessed a continuous amounting to RM8.25 million in respect of the financial y-o-y GDP growth rate of 5.1% in 2011 against 7.2% in year ended 31 December 2011 has been paid on 18 2010, the Malaysian economy is projected to grow by 4% October 2011. to 5% y-o-y in 2012 in accordance to forecasts made by various economists and government bodies. The Board of Directors further recommend a final single- tier dividend of 4.0 sen per share amounting to RM13.20 Hence, we are cautiously optimistic that our business is million in respect of the financial year ended 31 December expected to remain strong in 2012, despite less robust 2011, subject to the approval of the shareholders at the global economic outlook which may derail the domestic forthcoming Annual General Meeting. economy’s performance in 2012 and our export markets into other region. However, the food and beverages Should the final single-tier dividend of RM13.20 million industry is fairly resilient in its nature and is proven with be approved by the shareholders at the forthcoming the ability to weather through various economic cycles Annual General Meeting, coupled with RM8.25 million historically without seriously experiencing negative impact interim single-tier dividend paid on 18 October 2011, by any economic slowdown or even recession. this will translate into a dividend payout ratio of 53.4% in respect of the financial year ended 31 December 2011, The Company has outlined various pragmatic business a total dividend payout of RM21.45 million against net strategies and holistic business plans to take on greater profit attributable to shareholders of RM40.177 million in challenges in the near future as stated in detail in the Group FY2011. Managing Director’s Review of Operations of this report. All these promising development and initiatives will augur The Company intends to distribute a minimum of 50% of well for the Group’s performance in the ensuing year. the Group’s annual profit attributable to the shareholders as gross dividend. While retaining a sizable portion of Acknowledgement profit and funds to finance future growth, the Company also strives to reward its shareholders with a generous On behalf of the Board, I would like to extend my heartfelt level of dividend payout. gratitude to our shareholders, bankers, customers, business partners and regulatory authorities for their continued Recent Corporate Proposal support, guidance and assistance extended to the Group. The Board would like to express its appreciation to the On 26 April 2012, the Company proposed to seek the management and employees of the Group for their hard approval of its shareholders to authorise the Company to work and dedication. purchase up to ten per cent (10%) of the issued and paid- up share capital of the Company (“Proposed Share Buy- Back Mandate”). Datuk Dr. Ahmed Tasir Based on the issued and paid-up share capital of the bin Lope Pihie Company of RM330,000,000 comprising 330,000,000 Chairman ordinary shares, a maximum of 33,000,000 ordinary shares of the Company may be repurchased by the Company Cafe Chain Making Its Presence Felt in Malaysia and Overseas group managing director’s review 18 of operations OLDTOWN BERHAD (797771-M)

Dear Shareholders, On behalf of the Management Team, I am pleased to present the operations review of Oldtown Berhad (“the Company” or “the Group”) for financial year ended 31 December 2011 (“FY2011’) together with the 2012 market prospects for the Group. ANNUAL REPORT 2011 19

2011 OPERATIONS REVIEW (Note) consolidated revenue in FY2010 was RM166.035 million). The increase in revenue in FY2011 as compared to FY2010 Oldtown Berhad (“the Company” or “the Group’) is one of was mainly due to the higher number of cafe outlets the fastest growing cafe operators and beverages players opened by the Group in 2011 (total outlets as at the end in Malaysia at present where the Group commands of FY2011 and FY2010 are 196 and 175 respectively) and significant market share in the business segment within the higher average selling prices for the Group’s cafe chain the respective industries. operation during the year. The revenue of the Group is primarily divided into two The Group’s manufacturing of beverages segment major segments, i.e. the operation of cafe chain and reported consolidated revenue of RM108.269 million (pro- manufacturing of beverages. The operation of cafe forma consolidated revenue in FY2010 was RM89.098 chain segment continued to be the main and dominant million). The increase in revenue in FY2011 as compared revenue contributor to the Group, attributing 62% of to FY2010 was mainly due to the increase of export sales the consolidated revenue for the financial year ended for the Group’s beverage products and rapid expansion of 31 December 2011 (“FY2011”) (65% of the pro-forma distribution networks across the various regions. consolidated revenue for the financial year ended 31 December 2010 (“FY2010”)); whereas, the remaining The cafe chain operation revenue has grown by leaps 38% of the FY2011 consolidated revenue (35% of the and bounds over the past 5 years, which grew from the pro-forma consolidated FY2010 revenue) was contributed pro-forma consolidated revenue of RM47.889 million in by manufacturing of beverages segment. FY2007 to the consolidated revenue RM177.155 million in FY2011, i.e. an increase of close to 269.9% over the past In terms of geographical breakdown for consolidated 5 years or has grown at the compounded annual growth revenue achieved in FY2011 of RM285.424 million, 76.3% rate of 38.7% over the past 4 years. This signified that the was derived from the local market and the remaining Group has managed to consistently achieve a larger scale 23.7% was from the export market. Within the export of operation capability over the years. market segment, South East Asia contributing 9.8%, other Asian countries contributing 11.7% and others contributing The manufacturing of beverages revenue has equally the balance of 2.2%. On the other hand, for the pro-forma achieved fast growth pace over the past 5 years, which consolidated revenue of RM255.133 million registered in grew from the pro-forma consolidated revenue of FY2010, 80.7% was derived from the local market and RM31.296 million in FY2007 to the consolidated revenue the remaining 19.3% was from the export market. Within of RM108.269 million in FY2011, i.e. an increase of the export market segment, South East Asia contributing close to 245.9% over the past 5 years or has achieved a 8.0%, other Asian countries contributing 8.9% and others compounded annual growth rate of 36.4% over the past contributing the remaining 2.4%. 4 years. This indicated that various pragmatic marketing strategies implemented by the Group have bear fruits The Group’s consolidated revenue in FY2011 derived from over the years. cafe chain operation were RM177.155 million (pro-forma

Note: The restructuring exercise was completed on 16 May 2011 (“Completion Date”) as disclosed in the Prospectus of the Company dated 22 June 2011. The above comment on the Group’s financial performance refers to the audited Statements of Comprehensive Income for FY2011 against FY2010 that is prepared based on the combined results of Oldtown Berhad (“Company”) and its subsidiaries (“Group”), assuming the Group has existed on or before 1 January 2010. group managing director’s review 20 of operations OLDTOWN BERHAD (797771-M)

2012 MARKET PROSPECTS According to a recent market survey completed by Nielsen, an international prominent market research and Integrated Business Model and Strategies survey company, which covered the period from 1 July 2010 until 30 June 2011 on a rolling 12-month basis, Overall, the Oldtown Group is an established and reputable our products commands a relatively high ranking and operator of chain cafe since 2005 and manufacturer market share value in Malaysia, Singapore and Hong Kong of beverages since 1999. As at the end of FY2011, we market. For instance, our white coffee ranked No. 1 with operated a total of 196 cafe outlets in Malaysia, Singapore, 42.3% market share value and our coffee mix ranked No. Indonesia and China. Amongst the 196 cafe outlets, 79 are 3 with 9.5% market share value in Malaysia. Our coffee fully owned cafe outlets, 18 partially owned outlets, 96 mix ranked No. 2 with 15.8% market share value in Hong franchised and 3 licensed outlets. All the 196 cafe outlets Kong and our coffee mix owned 11.5% market share in Malaysia, Singapore, Indonesia and China are based value in Singapore. on the traditional coffee shop in Ipoh with contemporary settings with some modification to suit the local landscape Oldtown Berhad is one of the very few players in the especially for the overseas markets. We are specialised market place that operate under an integrated business in our own formulation of hot and cold coffee and tea model where both cafe operation and manufacturing of beverages using high quality coffee beans roasted with beverages operation complement each other in terms our proprietary roasting process. All our cafe outlets are of support services, marketing campaign, promotion, well supported by three centralised food processing centre business strategies and advertisements. This proven fully owned by the Group. business model has enabled the Group to grow both business segments tremendously since 2005 to become Additionally, the Group is also involved in manufacturing, one of the leading beverage manufacturers in the white marketing and sales of coffee and other beverages coffee segment and the largest Oriental style cafe operator where our products are exported to countries such as in terms of number of outlets in Malaysia as at today. The Hong Kong, Singapore, USA, Taiwan, China and etc. Our integrated features are essential to erect an invisible wall products includes instant coffee mix, roasted coffee to fend off competition and create higher entry barriers for powder, instant milk tea mix, instant chocolate mix and other potential and existing competitors from expanding ready to drink canned coffee. As at the end of FY2011, we their market share easily. have a total of 18 distributors in the local and overseas markets specifically for our retail packed coffee and tea. In view of the integrated business model pursued by the By leveraging on third party retailers and intermediaries, Group, we can adopt integrated business strategies in the Group is able to widen our market reach via their expanding our business ventures by focusing on five key network without investing heavily into sales, marketing important areas. First, we place emphasis on branding by and logistics infrastructure. The Group has 11,390 retail strengthening and promoting the ‘OLDTOWN’ brand name outlets as at the end of FY2011 which carry and distribute which is essential in building up brand equity and uphold our beverage products. Amongst others are Tesco, Jusco, customer loyalty. Second, we shall continue to expand 7-Eleven, SOGO, Isetan, Giant, Mydin, Carrefour, Wal Mart, cafe network via our franchise programme locally and Petronas, Shell, Fair Price, The Store, Cold Storage and etc., internationally, besides solely relying on the establishment various types of hypermarkets and retail outlets located in of our fully owned outlets. Third, we shall focus on market Malaysia, Singapore and Hong Kong. positioning by strengthening our position as an operator ANNUAL REPORT 2011 21

of a major cafe chain and beverages manufacturer that from the company operated outlet to the sub licensing is specialised in coffee related products. Fourth, we shall model in the near future. expand our product offering by continuing to develop China is another market that presents vast business new and innovative product offerings whilst leveraging opportunities to the Group in the long run in view of the on our established branding. Fifth, emphasis is placed on size of the country and its population. We target to open a the high standards of our quality products and services total of 36 new outlets by 2015, after the first two China by continuing to ensure that our products consistently outlets were successfully opened in November 2011 and meet or exceed our benchmark standards of quality and March 2012 in Guangzhou city. We are also exploring the customers’ expectations. possibility of appointing potential licensees from other regions of China. As part of our next 5-year business plan, Cafe Chain Operation Development Plans we are planning to set up a new food processing centre in In the domestic front, we are adopting multi-pronged Guangzhou and target to begin its operation before end of strategies to penetrate into new market segments and 2012. A permanent food processing centre in Guangzhou enhance our leading market position as the largest Oriental will enable the Group to expand into other territories of style cafe operator in Malaysia. Under the Group’s market China more easily where the proximity factor does plays development plans, we intend to open approximately 20 a significant role in supporting our long term expansion to 30 new outlets by 2012, of which 50% is operated by plans in China. the franchisee and the remaining 50% is fully owned by the Group. Even though OLDTOWN cafe outlets are easily Manufacturing of Beverages Development Plans visible in most of the urban cities throughout Malaysia, we In view of the rising demand towards the Group’s also plan to penetrate into the sub urban and rural market beverage products, we are planning to relocate our over the next few years, where most of the second and existing beverage manufacturing operations to new third tier cities and township present vast room for the premises by constructing a new factory in Ipoh with cost Group to reach wider scope and range of customers. of approximately RM44.13 million excluding the land cost The Group will continuously advertise and promote of RM5.03 million. We also plan to acquire new machinery intensively our breakfast package and we aim to maintain and equipment with estimated cost of RM12.00 million. approximately 15% to 20% cafe operation revenue to The new beverage manufacturing facility is targeted be generated from daily breakfast segment. We are also to begin its commercial production by the third focusing into the lunch segment by creating new set lunch quarter 2012. About 50% of the total capital menu by inducing customers to increase their spending expenditure of RM61.16 million would be per single lunch segment. financed from IPO proceeds with the balance financed from internally generated funds and/ For the international markets, our development plans or bank borrowings. The new manufacturing in Singapore include the opening of 2 to 3 fully owned facility will provide us with additional capacity new outlets in 2012 and exploring licensing opportunities for our instant coffee mix and instant milk tea within the Singapore market. We are also in the process mix, where this expansion aims to increase of revamping the existing Singapore operating model and production capacity by approximately 350% aim to launch a more innovative concept and design for when we refer to 2011 full year output capacity. OLDTOWN cafe outlet in 2012. For the Indonesian market, we target to open another 5 to 8 new outlets in 2012. We also plan to shift the Indonesian market business module group managing director’s review 22 of operations OLDTOWN BERHAD (797771-M)

In the domestic market, while the Group’s beverage such as in China, Singapore and Thailand. We are also products are currently focused on the market segment looking into the right opportunity to expand further into comprising professionals, managers, executives and new markets, such as South Korea and Vietnam over the businessmen for the age group between 30 and 50 years next few years. old, we are also planning to penetrate into the Malay For instance, we are introducing new packaging of market segment for the age group of between 30 and 50 OLDTOWN’s products for the China markets as seen in our years old. Our recent “Jom Heboh” marketing campaign products, such as OLDTOWN white coffee classic, hazelnut, in 2011 aimed to expand the Group’s share within the cane sugar, coffee & creamer and OLDTOWN milk tea with Malay market. 8 sticks packaging. The Group is gradually expanding to With a rising number of more healthy conscious customers penetrate into various territories in China over the next 2 amongst consumer group nowadays, the Group also years. For the northern region, we plan to cover large cities introduced healthier choices of beverage products into the such as Beijing and Tianjin; for central region, we plan to marketplace, such as “2 in 1 No Sugar Added” and “3 in 1 map into Shanghai city, Jiangsu and Zhejiang provinces; with Natural Cane Sugar” coffee products. and last for southern region, we are aiming for Guangdong province. Nowadays, most of China major retailers are On the domestic front, we consistently invest in advertising, selling OLDTOWN’s various products, such as in international promotional and marketing campaigns to uphold and local retail chain like Wal Mart, Carrefour, Jusco, Auchan OLDTOWN’s branding and to enhance its brand equity value and RT Mart and other smaller retail outlets. in the marketplace. Our advertisements are easily located and identified in printed media such as major stream For the Singapore market, the Group has launched its new newspapers and magazines; digital media such as radio and packaging size in the first quarter 2012 for our products TV commercials; as well as outdoor media in the form of such as OLDTOWN white coffee classic and hazelnut road signboards and poster wall. We also organised various 8 sticks pouch pack. Our target distribution channel includes on-the-ground events such as consumer contests, products large provision shops, minimarkets and convenience chain testing and sampling, road shows; and participated in expos stores. and exhibitions. The recent and more prominent events are In the Thailand market, new packaging launch and new “Cut the Sugar” campaign and “Win an i-Pad 2” contest, product launch is expected to be undertaken in the besides our self-organised “Jom Heboh” marketing drive second quarter of 2012 for our series of products such as and our participation in the Petronas coffee break campaign OLDTOWN white coffee 3 in 1 classic 30 gram pack, coffee during the festive season. & creamer 20 gram pack and hazelnut 30 gram packaging. The Group is adopting various adaptive strategies by Our target distribution channel includes all modern trade customising its marketing campaign and product mix and selected convenience chain stores. when venturing into the international markets. We are enhancing and expanding our market share in the existing Lee Siew Heng markets where the Group already has market presence, Group Managing Director OLDTOWN White Coffee and Other Beverage Products Making Inroads into Local and Export Markets

UK• •Canada Beijing• Shanghai• •USA Shenzhen••Hong Kong •Taiwan Thailand• Malaysia• •Philippines Singapore• •Brunei Indonesia•

•Australia

New Zealand•

Enjoyed All Around The World Our products are currently exported to over 13 countries. statement on corporate social 24 responsibility OLDTOWN BERHAD (797771-M)

The Board recognises the importance of the Group fulfilling its corporate social responsibility (“CSR”) to uphold Integrity, Respect and Responsibility as key values, focusing on CSR in the community, CSR to the environment and CSR at the workplace.

CSR IN THE COMMUNITY Oldtown Children Care Fund (OCAF) was established on 14 June 2008 with the objective of sowing love, hope and purpose into the lives of orphaned, abandoned and vulnerable children around Malaysia, bringing them hope and happy smiles. As part of the Group’s social responsibilities, this aid fund is specifically for needy or critically-ill children or youth below 18 who may need medical, emergency funds, education aid or short term living expenses support. Among the activities carried out are as follows: OCAF contributed a van to Joyful Home (December 2011) :: Charity Trip :: Festival Celebrations :: Sponsorships & Donations for Unfortunate Children to charity, welfare and :: Charity Movie Outing voluntary associations :: Aid Fund to Deprived Children :: “An Orphanage A Year” :: School Projects Project

Contribution of RM2,400 education aid fund to underprivileged student

In conjunction with “An Orphanage A Year” project, Oldtown Berhad raised a total of RM368,921.50 for Pertubuhan Kebajikan Harapan Baru new building construction (November 2011)

Contribution of food packs to underprivileged families in the month of Ramadhan (August 2011)

Donation of RM2,000 to Pusat Harian Kanak-Kanak Spastik ANNUAL REPORT 2011 25

CSR TO THE ENVIRONMENT Oldtown EARTHCARE was established to inculcate environmentally intelligent practices with a variety of green initiatives and activities. This includes organizing green events and activities to reach out, share and educate the community to be environmentally conscious. Among the activities carried out are as follows:

:: Garden Greening Competition :: Oldtown Environmental Colouring Books

:: Practice of 3Rs - Reduce, Reuse & Recycle in Oldtown Berhad Distribution of Oldtown Environmental Colouring Books to primary schools (22 April 2011)

1st Prize Winner for Garden Greening Competition conducted by Oldtown Earthcare Contribution of recycle bins to schools (15 July 2011) (22 April – 22 August 2011)

CSR AT THE WORKPLACE Oldtown Bowling Tournament 2011 The Group believes that its human capital is its most valuable asset. In line with this organised at Summit USJ Bowling Court belief, the Group is dedicated to be a caring employer. (30 July 2011) The Group’s CSR at the workplace includes the following initiatives:

:: Recreational, Sports & Leisure Activities To promote a healthy lifestyle, the Group organises various sport competitions and

activities as well as social gatherings and recreational activities. An employees’ teambuilding :: Employee Welfare Programmes session The Group seeks to enhance the quality of life of its employees by in progress providing various employee welfare programmes such as medical benefits and financial assistance in the form of education subsidy and employee emergency assitance fund. The Group also organises annual dinner and recognises long service staff with the Long Service Award.

:: Training & Development Programme The Group sponsors employees to attend external seminars and workshops to keep them abreast of new developments in their respective field of expertise. Various training and development programmmes are carried out to enhance the core competencies of the staff.

:: Health & Safety The Group strives to provide a safe, healthy and conducive work environment for

all employees. To achieve this, various safety awareness briefings, seminars and Oldtown Business Strategy Workshop involving the employees trainings are conducted to enhance employees’ knowledge in health and safety. (13–15 October 2011) corporate governance 26 statement OLDTOWN BERHAD (797771-M)

The Board of Directors (“the Board”) of Oldtown Berhad (“the to facilitate decision making and effective running of the Group’s Company”) has always been supportive of the application of the business are included in the meeting agenda. principles and compliance with the best practices of the Malaysian The Group Managing Director is responsible for the daily management Code on Corporate Governance (“the Code”). The Board is therefore of the Group’s operations and implementation of the Board’s policies pleased to provide the following statement, which outlines how the and decisions. He is responsible for communicating matters relating Group has applied the principles laid down in Part 1 of the Code and to the Group’s business affairs and issues to the Board. His vast the extent of compliance with the best practices set out in Part 2 of experience, business knowledge and skills contributed significantly the Code during the financial year. towards the attainment of the Group’s goals and objectives.

THE BOARD OF DIRECTORS The Board recognizes the importance of the role of the Independent Non-Executive Directors particularly in corporate accountability. They Board Composition and Balance are essential for protecting the interests of non-controlling interests and can make significant contributions to a company’s decision The Board has nine (9) members which comprises of five (5) Executive making by bringing in the quality of detached impartiality. Directors and four (4) Non-Executive Directors. Three (3) of the Board members are Independent Directors. This composition complies with Independent Non-Executive Directors provide unbiased and Paragraph 15.02 of the Main Market Listing Requirements of Bursa independent views in ensuring that the strategies proposed by the Malaysia Securities Berhad (“Bursa Securities”) which requires at least Management are fully deliberated and examined objectively, taking two (2) directors or one-third (1/3) of the Board, whichever is the into perspective the long term interests of shareholders, other higher, to be independent. The profiles of the Directors are set out on stakeholders and the community at large. page 8 to page 12 of this Annual Report. Board Meetings The Executive Directors take on the primary responsibility of the day-to-day running of the Group’s business as well as implementing The Company was listed on the Main Market of Bursa Securities the policies and decisions of the Board. on 13 July 2011. The Board met 2 times to discuss issues on the Group’s financial performance, significant investments, corporate The Independent Non-Executive Directors act independently of development, strategy and business plan. The attendance record of management and do not participate in any business dealings and are each Director at the Board Meetings is as follows: not involved in any other relationship with the Group that may impair their independent judgement and decision-making. They provide a No. of Meetings broader view and independent assessment to the Board’s decision Name of Directors Attended making process by acting as an effective check and balance. Datuk Dr. Ahmed Tasir Bin Lope Pihie 2/2 Together, with their diverse backgrounds, professional experience Lee Siew Heng 2/2 and wide range of skills, the Board can effectively manage and run Dr. Leong Chik Weng 2/2 the Group’s operations. Mark Wing Kong 2/2 No Senior Independent Non-Executive Director has been appointed Chin Lai Yoong 2/2 to whom any concerns pertaining to the Group may be conveyed Chuah Seong Meng 2/2 as recommended by the Code. The Board will shoulder this Clarence D’Silva A/L Leon D’Silva 2/2 responsibility collectively. Goh Ching Mun 2/2 Tan Say Yap 2/2 Board Responsibilities Supply of Information The Board assumes full responsibility over the overall performance of the Company and the Group by discharging its stewardship All Board members are supplied with information concerning responsibilities through providing entrepreneurial leadership, the Company and the Group on a timely manner. Board reports overseeing the conduct of the Company’s business, identification are circulated prior to the Board meetings for deliberation. All and management of principal risks, reviewing the adequacy and proceedings of the Board Meetings were minuted and signed in integrity of the Company’s internal controls system and developing accordance with the provisions of Section 156 of the Companies an investor relations program. The Board has also delegated specific Act, 1965. Where necessary, members of senior management and responsibilities to the Board Committees, all of which discharge the external advisers are invited to attend these meetings to provide duties and responsibilities within their specific terms of reference. additional insights and professional views on specific items on the agenda. The role of the Chairman and the Group Managing Director are clearly distinct for effective balance of power and authority because In exercising their duties, the Board has complete and unrestricted the positions are held by two different individuals. The Chairman access to all information on the Group, the advice and services of is primarily responsible for ensuring Board’s effectiveness and the Company Secretary and independent professional advice where conduct. He ensures that all relevant issues and quality information necessary, at the Company’s expense. ANNUAL REPORT 2011 27

Directors’ Training Re-election of Directors All the Directors have attended and successfully completed the The Articles of Association (“The Articles”) of the Company provides Mandatory Accreditation Programme as prescribed by Bursa that one-third (1/3) of the Directors are subject to retirement by Securities. rotation at the AGM at least once in every three (3) years and all retiring Directors shall be eligible for re-election. The Board acknowledges that continuous education is essential for the Directors to further enhance their skills and knowledge. The Articles of the Company further provides that all Directors who As an integral part of their training program, they are provided are appointed during the financial year are subject to retirement with updates from time to time on the relevant changes in laws, and re-election by the shareholders at the AGM following their regulations and the business environment. During the financial appointment. year ended 31 December 2011, seminars and training programs Directors over seventy (70) years of age are required to submit attended by the Directors are as follows: themselves for re-appointment annually in accordance with Section Name of Directors Training/Courses Attended 129(6) of the Companies Act, 1965.

Datuk Dr. Ahmed Tasir Is the Global Economy still slowing down? Board Committees Bin Lope Pihie Implications on Malaysian Business The Board Committees were established to assist the Board Lee Siew Heng Failed Business: Deriving Sound in discharging its responsibilities. The Board delegates specific Strategic Insights responsibilities to three (3) Committees, namely the Audit Committee, the Nomination Committee and the Remuneration Committee. Dr. Leong Chik Weng Group Directors & Senior Management All committees have written terms of references and operating Training 2011: Competition Act procedures and the Board receives reports on their proceedings Mark Wing Kong The 2011 Economic and Rates Seminar and deliberations. The Chairman of the respective Committees shall report the outcome of their meetings to the Board, which are then Sustainability Session for Directors incorporated into the minutes of the Board Meetings. – Industrial Products Details of the membership, objectives, duties and responsibilities, Economic Outlook 2012 authorities and meetings of the Board Committees are set out below: Advocacy Sessions on Disclosure for CEOs and CFOs Audit Committee Key Amendments of Listing Requirements The Audit Committee comprises three (3) Independent Non- and Corporate Disclosure Guide Executive Directors. The composition of the Committee, terms of reference, attendance record and its activities are set out in the Audit Chin Lai Yoong Failed Business: Deriving Sound Committee Report on Page 31 to Page 33 of this Annual Report. Strategic Insights Nomination Committee Chuah Seong Meng Failed Business: Deriving Sound Strategic Insights The Nomination Committee comprises of the following members:

Clarence D’Silva Is the Global Economy still slowing down? Name Designation Directorship A/L Leon D’Silva Implications on Malaysian Business Datuk Dr. Ahmed Tasir Chairman Independent Goh Ching Mun Failed Business: Deriving Sound Bin Lope Pihie Non-Executive Strategic Insights Chairman Tan Say Yap Failed Business: Deriving Sound Dr. Leong Chik Weng Member Independent Strategic Insights Non-Executive Director Mark Wing Kong Member Independent Appointment to the Board Non-Executive Director The Nomination Committee, which comprises independent The key task of the Nomination Committee is to ensure that the directors, is responsible for making recommendations for any new Company recruits and retains the best available Executive and appointments to the Board. In making these recommendations, Non-Executive Directors with the right mix of skills and knowledge the Nomination Committee considers the required mix of skills relevant to the Company. and experiences which the Directors would bring to the Board. Any new nomination received is recommended to the full Board for assessment and endorsement. corporate governance 28 statement OLDTOWN BERHAD (797771-M)

The terms of reference of the Nomination Committee are as follows: Remuneration Committee

A. Size and Composition The Remuneration Committee comprise of the following members:

(i) The Board shall appoint members to the Nomination Name Designation Directorship Committee, comprise wholly of Non-Executive Directors Dr. Leong Chik Weng Chairman Independent and a majority of whom are independent and shall consist Non-Executive Director of not less than three (3) members. Datuk Dr. Ahmed Tasir Member Independent (ii) The members of the Nomination Committee shall elect Bin Lope Pihie Non-Executive the Chairman from amongst themselves who shall be an Chairman Independent Non-Executive Director. Lee Siew Heng Member Group Managing (iii) In the event of any vacancy in the Nomination Committee Director resulting in the number of members being reduced to below three (3), the Board shall fill the vacancy within Mark Wing Kong Member Independent three (3) months. Non-Executive Director

B. Meetings Goh Ching Mun Member Executive Director The Committee shall hold at least one meeting per year or The terms of reference of the Remuneration Committee are: more frequently when the need arises. The quorum for each meeting shall be two (2). Minutes of the meeting shall be kept A. Size and Composition and circulated to each member. (i) The Board shall appoint members to the Remuneration C. Responsibilities and Functions Committee, comprise wholly or mainly Non-Executive Directors and shall consist of not less than three (3) (i) To recommend to the Board, candidates to be appointed members. as Directors of the Company. (ii) The members of the Committee shall elect the Chairman (ii) To consider in making its recommendations, candidates from amongst themselves who shall be an Independent for directorship proposed by the Group Managing Non-Executive Director. Director or by any senior management or any director or shareholder. (iii) In the event of any vacancy in the Committee resulting in the number of members being reduced to below three (3), (iii) To recommend to the Board, candidates to fill the seats on the Board shall fill the vacancy within three (3) months. the Board Committees. B. Meetings (iv) To assist the Board in its annual review of the required mix of skills and experience and other qualities including core The Remuneration Committee shall hold at least one meeting competencies which Non-Executive Directors should bring per year or more frequently when the need arises. The quorum to the Board and to assess the effectiveness of the Board for each meeting shall be two (2). Minutes of meeting shall be as a whole, the Board Committees and the individual kept and circulated to each member. director on an annual basis. C. Responsibilities and Functions During the financial year ended 31 December 2011, the Nomination (i) To recommend to the Board the appropriate remuneration Committee met once to carry out an annual review on the Board, packages of the Group Managing Director and Executive Board Committees and individual directors of the Company. Directors. None of the Executive Directors participate in The attendance record of the Nomination Committee members is any way in determining their individual remuneration. as follows: (ii) To ensure the Executive Directors are fairly and appropriately No. of Meeting remunerated for their individual contributions to the Name of Directors Attended Company’s overall performance. Datuk Dr. Ahmed Tasir Bin Lope Pihie 1/1 (iii) To ensure the remuneration offered commensurate with Dr. Leong Chik Weng 1/1 the level of executive responsibilities and encourage Executive Directors to act in ways that enhance the Mark Wing Kong 1/1 company’s long-term profitability and value. The Board as a whole determines the remuneration of the Non- Executive Directors. None of the individual Directors participate in determining their individual remuneration. ANNUAL REPORT 2011 29

The Remuneration Committee met once during the financial year The number of Directors whose total remuneration fall in the bands under review and the meeting attendance record is as follows: of RM50,000 for the financial year ended 31 December 2011 is tabulated below: No. of Meeting Name of Directors Attended No. of No. of Executive Non-Executive Dr. Leong Chik Weng 1/1 Remuneration Band Directors Directors Datuk Dr. Ahmed Tasir Bin Lope Pihie 1/1 RM50,000 and below 0 3 Lee Siew Heng 1/1 RM50,001 – RM100,000 0 1 Mark Wing Kong 1/1 RM100,001 – RM150,000 1 0 RM150,001 – RM200,000 0 0 Goh Ching Mun 1/1 RM200,001 – RM250,000 1 0 RM250,001 – RM300,000 2 0 DIRECTORS REMUNERATION RM300,001 – RM350,000 0 0 RM350,001 – RM400,000 0 0 The Company aims to set the levels of remuneration in such a way RM400,001 – RM450,000 0 0 that it supports the strategies and long-term vision of the Company RM450,001 – RM500,000 1 0 as well as provides adequate motivational incentive for directors to pursue the long-term growth and success of the Company. The SHAREHOLDERS levels of remuneration should be sufficient to attract and retain the directors needed to run the Company successfully. Shareholders and Investor Relations Remuneration packages for Executive Directors are structured The Board recognizes the importance of keeping shareholders and so as to link rewards to corporate and individual performance. investors informed of its latest business and corporate developments. The remuneration of Executive Directors includes salaries & other The Board believes that an effective investor relationship is essential emoluments, bonus, fees and benefits-in-kind. in enhancing value to its shareholders. In the case of Non-Executive Directors, the level of remuneration The dissemination of information about the Company, its businesses reflects the experience and level of responsibilities undertaken by and its activities is conducted via the timely release of quarterly them. Currently, the Non-Executive Directors are paid Directors’ fees financial results, press releases and announcements. The Company and attendance allowance for each Board/Committee meeting they also holds regular briefings and dialogues with fund managers, attended. analysts, potential shareholders and research houses from time to time. Whilst the Company endeavors to provide as much information The aggregate remuneration of Directors of the Company for the as possible, it is aware of the legal and regulatory framework financial year ended 31 December 2011 is categorized into the governing the release of material and price sensitive information. following components: The Company’s website at www.oldtown.com.my provides easy Executive Non-Executive Directors Directors access to corporate and financial information of the Group. The (RM’000) (RM’000) Investor Relations updates and information on the financial results are uploaded on the website immediately after the announcements Salaries & Other Emoluments 1,036 12 were made to Bursa Securities. Bonus 148 – Fees 73 156 Annual General Meeting (“AGM”) Benefits-in-kind 77 9 The AGM serves as the principal forum for direct interaction and Total 1,334 177 dialogue among shareholders, Board and management. The AGM provides an opportunity for the shareholders to seek and clarify any issues and to have a better understanding of the Group’s performance and other matters of concern. Shareholders are encouraged to actively participate in the question and answer session. The Board and the senior management will be present to answer and provide appropriate clarifications at the meeting. Normally, a press conference will be held after the AGM to advise the media of the resolutions passed by shareholders, brief the media on the operations, performance and financial results of the Group for the year under review and clarify issues posed by the media. corporate governance 30 statement OLDTOWN BERHAD (797771-M)

ACCOUNTABILITY AND AUDIT The Statement on Internal Control set out on Page 34 to Page 35 in this Annual Report provides an overview of the state of internal Financial Reporting controls within the Group. The Statement on Internal Control has been reviewed by the external auditors pursuant to Paragraph 15.23 The Board is committed to provide a balanced, clear and of the Bursa Securities Main Market Listing Requirements. comprehensive assessment of the Group’s financial position and prospects by making sure the financial statements and quarterly Relationship with Auditors announcements are prepared in accordance with the provisions of the Companies Act, 1965 (“the Act”) and applicable approved The Board has maintained a transparent and professional relationship accounting standards. with the Group’s external and internal auditors through the Audit Committee. The Board is assisted by the Audit Committee in reviewing the appropriateness of accounting policies applied by the Group as well For the financial year ended 31 December 2011, the Group’s as the changes in these policies. The Audit Committee also assists the internal audit function is outsourced to external consultants. The Board in overseeing the financial reporting process and ensuring the outsourced internal auditors audit internal control practices and quality of the financial reporting by the Group. The Audit Committee reports significant findings to the Audit Committee together with reviews and monitors the accuracy and integrity of the Group’s recommended corrective actions. They assist the Board and Audit annual and quarterly financial statements for announcement to the Committee in providing independent assessment on the adequacy, public within the stipulated time frame. efficiency and effectiveness of the Group’s internal control system. The Group’s external auditors are invited to attend the Audit Statement On Directors’ Responsibility Committee meetings when deemed necessary. The Audit Committee The Directors are required, pursuant to Section 169 of the Act, to meets the external auditors to review the scope and adequacy of draw up financial statements for each financial year that gives a the audit process, the financial statements and their audit findings. true and fair view of the state of affairs of the Company and the During the financial year ended 31 December 2011, the Audit Group as at the end of the financial year and of the results and cash Committee met twice with the external auditors without the flow for the financial year. In addition, the Directors have the overall presence of the management. responsibility for taking such steps as are reasonably available to them to safeguard the assets of the Group and to prevent fraud The role of the Board in relation to both the internal and external and other irregularities. In preparing the financial statements for the auditors is further explained in the Audit Committee Report set out financial year ended 31 December 2011, the Directors have: in this Annual Report. (i) adopted appropriate accounting policies and applied them COMPLIANCE STATEMENT consistently; Saved as disclosed below, the Board is of the view that the Group (ii) made reasonable and prudent judgments and estimates; is generally in compliance with the principles and best practices of (iii) ensured that the applicable approved Financial Reporting the Code. Standards in Malaysia and the provisions of the Act are complied with; and Reference Summary of the Board’s to the Code principle/best practice comments (iv) prepared financial statements on a going concern basis, having made enquiries that the Company and the Group have Part 1 B III The Company’s The Board is of the view adequate resources to continue operations in the foreseeable annual report that the transparency of future. should contain Directors’ remuneration has details of the been sufficiently dealt with The Statement by Directors pursuant to the Act is set out on remuneration of by the “band disclosure” Page 114 in this Annual Report. each director presented in this Statement. Internal Control Part 2 AA VII The Board to The Board has not nominated identify a Senior a Senior Independent Non- The Board acknowledges its responsibility for maintaining a sound Independent Executive Director to whom system of internal controls in the Company and the Group. These Non-Executive concerns may be conveyed controls provide reasonable but no absolute assurance against Director as the Board will shoulder material misstatement, loss or fraud. this responsibility collectively. The Directors’ responsibilities for the Group’s system of internal controls cover not only the financial aspects but also compliance This Statement on Corporate Governance is made in accordance and operational controls as well as risks management matters and with the resolution of the Board of Directors dated 26 April 2012. reviewing the adequacy and integrity of the system. audit committee ANNUAL REPORT 2011 report 31

The Board of Directors (“the Board”) of Oldtown Berhad (“the (iii) The Board shall at all times ensure that at least one Company”) is pleased to present the Audit Committee (“the (1) member of the Audit Committee: Committee”) Report for the financial year ended 31 December (a) must be a member of the Malaysian Institute of 2011. Accountants; or

1. COMPOSITION (b) if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) The members of the Audit Committee are as follows: years’ working experience and: Chairman (i) he must have passed the examinations Mark Wing Kong specified in Part I of the 1st Schedule of the (Independent Non-Executive Director) Accountants Act 1967; or

Members (ii) he must be a member of one of the associations of accountants specified in Part Datuk Dr. Ahmed Tasir Bin Lope Pihie II of the 1st Schedule of the Accountants Act (Independent Non-Executive Chairman) 1967; or Dr. Leong Chik Weng (c) fulfills such other requirements as prescribed or (Independent Non-Executive Director) approved by Bursa Malaysia Securities Berhad.

2. ATTENDANCE (iv) In the event of any vacancy in the Audit Committee resulting in the number of members being reduced The Company was listed on the Main Market of Bursa Malaysia to below three (3), the Board shall within three (3) Securities Berhad on 13 July 2011 and only two (2) meetings months appoint such number of new members as were held during the financial year ended 31 December 2011. may be required to make up the minimum number The details of attendance of each member are as follows: of three (3) members.

No. of (v) No alternate director shall be appointed as a member Meetings of the Audit Committee. Name of Members Attended (vi) The term of office and performance of the Audit Mark Wing Kong 2/2 Committee and each of its members shall be reviewed by the Board at least once every three (3) Datuk Dr. Ahmed Tasir Bin Lope Pihie 2/2 years. Dr. Leong Chik Weng 1/2 C. Authority

3. TERMS OF REFERENCE (i) The Audit Committee is authorized by the Board within its term of reference and at the cost of the A. Objective of the Audit Committee Company to investigate any matter and have the The primary objective of the Audit Committee is to assist resources which are required to perform its duties. the Board in fulfilling its fiduciary responsibilities relating (ii) The Audit Committee shall have full and unrestricted to corporate accounting, system of internal controls and access to any information of the Company. risk management processes, management and financial reporting practices of the Group. (iii) The Audit Committee shall be able to obtain external or independent professional advice and may invite B. Composition of the Audit Committee outsiders with relevant experience to attend their (i) The Committee shall be appointed by the Board from meetings, if necessary. amongst its number and shall consist of not less (iv) The Audit Committee shall have direct communication than three (3) members, all of whom must be non- channels with the external auditors and persons executive directors, with a majority of them being carrying out the internal audit function or activity. independent directors. (v) The Audit Committee shall be able to convene (ii) The Chairman of the Audit Committee shall be meetings with the external auditors, the internal elected among the members of the Audit Committee auditors or both, excluding the attendance of other and shall be an independent director. directors and employees of the Company, whenever deemed necessary. audit committee 32 report OLDTOWN BERHAD (797771-M)

D. Meetings, Quorum and Procedures (ii) Internal Audit (i) Meetings shall be held not less than four (4) times in (a) To review the adequacy of the scope, functions, a financial year, although additional meetings may be competency and resources of the internal audit called at any time by the Chairman upon the request function and that it has the necessary authority of any committee members, the external or the to carry out its work. internal auditors or at the Chairman’s discretion. (b) To review the internal audit program, processes (ii) The quorum shall consist of not less than two (2) and results and, where necessary, ensure members; the majority of the members present that appropriate actions are taken on the must be independent directors. In the absence of recommendations of the internal audit function the Chairman, the members present shall elect and provide general guidance to the internal a Chairman for the meeting from amongst the audit function. members present. (c) To evaluate the performance and decide on the (iii) The Secretary to the Committee shall, but need not, remuneration of the outsourced Internal Audit be the Company Secretary. function. (iv) The Audit Committee may, as and when deemed (d) To consider the major findings of internal necessary, invite other Board members, senior investigations and management’s response. management personnel, a representative of (iii) Financial Reporting the external auditors and external independent professional advisers to attend the meetings. To review the quarterly and annual financial statements of the Company and the Group and to (v) The Audit Committee shall meet with the external recommend the same to the Board for approval, auditors at least twice in a financial year without the focusing particularly on: presence of any executive board member. (a) any changes in or implementation of new (vi) Minutes of each meeting shall be kept and distributed accounting policies and practices; to each member of the Committee and of the Board. (b) significant and unusual events;

E. Duties and Responsibilities (c) significant adjustments arising from the audit; The duties and responsibilities of the Committee shall be: (d) the going concern assumption; and

(i) External Audit (e) compliance with applicable approved accounting standards and other legal and regulatory (a) To consider and recommend the appointment requirements. of the external auditor, the audit fee and any questions of resignation, dismissal or (iv) Risk Management reappointment. To review the adequacy and effectiveness of risk (b) To discuss with the external auditors before the management, internal control and governance annual audit commences, the nature and scope systems instituted in the Group. of audit plan. (v) Related Party Transactions (c) To discuss problems and reservations arising from To monitor and review any related party transaction the final and interim audits; evaluation of the and conflict of interest situation that may arise within system of internal controls and any matter the the Group including any transaction, procedure external auditors may wish to discuss, including or course of conduct that raises questions on assistance given by the employees of the Group management integrity. to the auditors and to review the auditors’ audit report, management letter and management’s (vi) Other Matters response. To perform such other functions and responsibilities as may be agreed by the Committee and the Board. ANNUAL REPORT 2011 33

4. SUMMARY OF ACTIVITIES DURING THE FINANCIAL YEAR 5. SUMMARY OF ACTIVITIES OF THE INTERNAL AUDIT FUNCTION The Audit Committee had carried out the following activities in The Company was listed on 13 July 2011 and has not set accordance with the terms of reference of the Audit Committee up an internal audit department during the financial year during the financial year ended 31 December 2011: but has outsourced the internal audit function to undertake independent objective, regular and systematic reviews of the A. Financial Reporting internal control system. Reviewed the quarterly unaudited financial results of the During the financial year ended 31 December 2011, the Company and the Group for the second quarter and third outsourced internal audit function assisted the Committee quarter of 2011 on 26 August 2011 and 24 November in discharging its duties and responsibilities by executing 2011 respectively, prior to recommending them for the independent reviews to determine the adequacy and Board’s approval. effectiveness of the Group’s internal control system. The B. Internal Audit activities performed by the outsourced internal audit function include: (i) Considered and approved the appointment of outsourced internal auditor. (i) conducted a review of business processes in accordance with the risk-based internal audit plan approved by the (ii) Reviewed the annual audit plan of the outsourced Committee; internal audit function to ensure adequate scope and comprehensive coverage of the activities of the (ii) reported the results of internal audit reviews and provided Group. recommendations for improvement to the Committee; (iii) Reviewed the internal audit reports, recommendations (iii) followed up on the implementation of audit made and Management’s response to those recommendations and action plans agreed upon by the recommendations. Management; (iv) Noted the corrective actions on outstanding audit (iv) ascertained the extent of compliance with the Group’s issues to ensure the key risks and control lapses have policies, procedures and statutory requirements; and been addressed and rectified. (v) conducted a corporate governance review to ascertain (v) Reviewed the Proposed Internal Audit Charter. the level of compliance to the Revised Malaysian Code on Corporate Governance and Bursa Malaysia Listing C. External Audit Requirements. (i) Reviewed the 2011 Audit Planning Memorandum The internal audits conducted during the financial year did not prepared by the external auditors to ensure adequate reveal material weaknesses which would result in material scope and comprehensive coverage over the activities losses, contingencies or uncertainties that would require of the Group. disclosure in the Annual Report. (ii) Discussed the scope of work, key audit areas, audit The costs incurred for the outsourced internal audit function approach, audit timetable and the proposed audit in respect of the financial year ended 31 December 2011 was fees of the Group for the financial year ended 31 RM36,659.00. December 2011.

D. Related Party Transactions (i) Noted the related party transactions entered into by the Company and the Group. (ii) Reviewed and considered the Review Methods and Procedures for Related Party Transactions of the Company. statement on 34 internal control OLDTOWN BERHAD (797771-M)

Introduction (ii) Annual Budget The Malaysian Code on Corporate Governance requires listed Budgetary control is applied to every company of the companies to maintain a sound system of internal control to safeguard Group and actual performance is closely monitored against shareholders’ investment and the company’s assets. Pursuant to budgets to identify significant variances. Discussions Paragraph 15.26 (b) of the Main Market Listing Requirements of are held between the Management and the heads of Bursa Malaysia Securities Berhad (“Bursa Securities”), the Board of operating units to ensure the budgets are attainable and Directors (“the Board”) of Oldtown Berhad is pleased to provide the realistic. following statement on the state of the Group’s internal controls. (iii) Active Involvement by Executive Directors

Board’s Responsibilities The Executive Directors are actively involved in the running of the business and operations and they report The Board acknowledges its responsibility and re-affirms its to the Board on significant changes in the business and commitment in maintaining a sound system of internal control external environment, which affect the operations of the as well as reviewing the adequacy and integrity of the system of Group at large. internal control. (iv) External Certification The internal control system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can The effectiveness of the system of internal control is also only provide reasonable and not absolute assurance against material reviewed through the ISO 9001:2008, HACCP (Hazard misstatement or loss. The system of internal control covers financial, Analysis Critical Control Point Management System) operational, compliance controls as well as risk management. and GMP (Good Manufacturing Practice) certifications. The demanding control procedures and documentation Monitoring And Reviewing The Effectiveness Of The System Of requirements of the certifications further strengthen Internal Controls the control environment. Regular review and periodic audit continuously manages and controls the quality The Board is committed to maintain a strong control structure requirement of the Group’s products. whereby internal control is embedded in the business processes for the Group to pursue its objectives. The key features of the Group’s (v) Policies and Procedures internal control system are: Operational policies and procedures form an integral part of the internal control system to safeguard the Group’s assets 1. Control Environment against material losses. These include standard operating (i) Organization Structure & Authorization Procedures practices, memorandum, manuals and handbooks that are periodically updated when needs arise to meet the The Group maintains formal and structured lines changing environment requirements. of reporting, that includes the clear definition of responsibilities and delegation of authority. It sets out the (vi) Trained Personnel roles and responsibilities, review and approval procedures Emphasis is placed on enhancing the quality and ability to enhance the internal control system of the Group’s of employees through a wide variety of training programs various operations. Limits of authorities are imposed and workshops to enhance their knowledge and expand for revenue and capital expenditure for all operating the employees’ competency levels in executing daily units to keep potential exposure under control. Capital jobs. and revenue expenditure, acquisition and disposal of investment interests are all properly approved before they are carried out. ANNUAL REPORT 2011 35

2. Risk Management Framework 5 Monitoring And Review Risk Management is regarded by the Board to be an integral Scheduled operational and management meetings are held part of the business operations. Key management staff and to discuss and review the business plans, budgets, financial Heads of Department are delegated with the responsibility and operational performances of the Group. The Senior to manage identified risks within defined parameters and Management Team meets regularly to review the reports, standards. monitors the business development and resolves key operational and management issues. The quarterly financial The above mentioned risk management practices of the Group statements containing key financial results and comparisons serve as the on-going process used to identify, evaluate and are presented to the Board for their review. manage significant risks. Weaknesses In Internal Controls Which Resulted In Material 3. Internal Audit Function Losses The Group’s internal audit function is outsourced to external There were no major weaknesses in internal controls which resulted consultants to assist the Board and Audit Committee in in material losses during the current financial year. providing independent assessment on the adequacy, efficiency and effectiveness of the Group’s internal control system. Conclusion During the financial year ended 31 December 2011, the internal The Board is of the view that the Group’s system of internal controls audit function carried out audits in accordance with the risk- are adequate to safeguard shareholders’ investments and the based internal audit plan approved by the Audit Committee. The Group’s assets. However, the Board is also cognizant of the fact results of the internal audit reviews and the recommendations that the Group’s system of internal control and risk management for improvement were presented to the Audit Committee at practices must continuously evolve to meet the changing and their quarterly meetings. Based on the internal audit reviews challenging business environment. Therefore, the Board will, when conducted, none of the weaknesses noted have resulted in necessary, put in place appropriate action plans to further enhance any material losses, contingencies or uncertainties that would the system of internal controls. require separate disclosure in this Annual Report. This statement is made in accordance with the resolution of the 4 Information And Communication Board dated 26 April 2012. Information critical to the achievement of the Group’s business objectives are communicated through established reporting lines across the Group. This is to ensure that matters that require the Board and Senior Management’s attention are highlighted for review, deliberation and decision on a timely basis. additional compliance 36 information OLDTOWN BERHAD (797771-M)

1. Utilization of Proceeds 5. Imposition of Sanctions/Penalties The gross proceeds received from the Initial Public Offering of There were no sanctions and/or penalties imposed on the RM79.243 million in conjunction with the Company’s listing on Company and its subsidiaries, Directors or management by the Main Market of Bursa Securities on 13 July 2011 have been any relevant regulatory bodies during the financial year under utilized in the following manner: review except for a compound of RM250 imposed by the Suruhanjaya Syarikat Malaysia for omission of the company Intended name and number on documents and rubber stamp of one of Proposed Actual Timeframe Utilization Utilization for Deviation the operating cafe outlets of a subsidiary. Purpose (RM’000) (RM’000) Utilization (RM’000) 6. Non-Audit Fees (i) Acquisitions 19,718 19,718 within 3 – The amount of non-audit fees incurred for services rendered to of Companies months the Group for the financial year ended 31 December 2011 by (ii) Repayment 5,897 5,416 within 6 481* the Company’s external auditors and their affiliates amounted of Bank months to RM204,750.00. Borrowings 7. Variation in Results (iii) Capital 38,083 3,985 within 24 N/A Expenditure months There were no variances of 10% or more between the results for the financial year 2011 and the unaudited results previously (iv) Working 10,545 10,545 within 24 – announced. Capital months

(v) Estimated 5,000 5,000 immediate – 8. Profit Guarantees Listing The Company did not give any profit guarantee during the Expenses financial year under review. 79,243 44,664 9. Material Contracts * The unutilized amount of RM481,000 as a result of lower No material contracts (not being contracts entered into in the settlement amount shall be utilized for working capital ordinary course of business) have been entered into by the purposes. Company and/or its subsidiaries which involved Directors’ and/or substantial shareholders’ interests, either still subsisting 2. Share Buy­-Backs at the end of the financial year ended 31 December 2011 or, if There was no share buy-back by the Company during the not then subsisting, entered into since the end of the previous financial year under review. financial year.

3. Options, Warrants or Convertible Securities 10. Recurrent Related Party Transactions of a Revenue or Trading Nature No options, warrants or convertible securities have been issued by the Company. The related party transactions are set out in Note 26 of the Financial Statements in which the transactions entered into 4. Depository Receipt Programme were in the ordinary course of business and were carried out on terms and conditions not materially different from those The Company did not sponsor any depository receipt programme obtainable from transactions with unrelated parties. during the financial year under review. financial statements

38 directors’ report 43 independent auditors’ report 45 statements of comprehensive income 46 statements of financial position 48 statements of changes in equity 50 statements of cash flows 54 notes to the financial statements 113 supplementary information 114 statement by directors 114 declaration by the officer directors’ 38 report OLDTOWN BERHAD (797771-M)

The directors of OLDTOWN BERHAD have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended December 31, 2011.

INCORPORATION AND COMMENCEMENT OF OPERATIONS The Company was incorporated on November 30, 2007 and commenced business operations in investment holding during the financial year. The principal activities of the subsidiaries are disclosed in Note 18 to the financial statements. Other than as stated above, there have been no significant changes in the nature of the activities of the Company and its subsidiaries during the financial year.

SIGNIFICANT EVENTS (i) During the financial year, in conjunction with the listing and quotation for the entire enlarged issued and paid-up share capital of RM330,000,000 ordinary shares of RM1.00 each on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Malaysia”), the Company completed the acquisition of the following companies on May 16, 2011: To be satisfied via Percentage No. of Purchase No. of acquired shares at consideration shares Cash Companies (%) RM1.00 each (RM) issued (RM)

Emperor’s Kitchen Sdn. Bhd. 100.00 200,002 16,353,000 8,176,000 8,177,000 Esquire Chef Sdn. Bhd. 100.00 1,000 10,759,000 5,380,000 5,379,000 Old Town Kopitiam Butterworth Sdn. Bhd. 100.00 100,000 14,964,477 5,985,000 8,979,477 Old Town Kopitiam Kuala Lumpur Sdn. Bhd. 100.00 100,000 2,135,810 1,495,000 640,810 Dynasty Confectionery Sdn. Bhd. 100.00 200,000 4,179,000 2,507,000 1,672,000 Old Town Kopitiam Cheras Sdn. Bhd. 100.00 160,000 11,911,000 11,911,000 – Conneczone Sdn. Bhd. 80.00 40,000 3,900,000 3,900,000 – White Cafe Sdn. Bhd. 100.00 1,000,000 62,263,998 62,263,998 – Gongga Food Sdn. Bhd. 100.00 300,000 69,825,000 69,825,000 – White Cafe Marketing Sdn. Bhd. 100.00 1,700,000 21,156,000 21,156,000 – Kopitiam Asia Pacific Sdn. Bhd. 100.00 1,250,000 66,230,000 66,230,000 – Oldtown Singapore Pte. Ltd. 100.00 SGD100,000 6,676,000 6,676,000 – OTK Eatery Sdn. Bhd. 40.00 40,000 1,101,000 1,101,000 – Total 291,454,285 266,605,998 24,848,287

(ii) Public Issue A public issue of 63,394,000 new ordinary shares of RM1.00 each in the Company at an issue price of RM1.25 per share on July 4, 2011; and

(iii) Listing on the Main Board of Bursa Malaysia The listing and quotation for the entire enlarged issued and paid-up share capital of the Company comprising 330,000,000 ordinary shares of RM1.00 each on the Main Market of Bursa Malaysia on July 13, 2011. ANNUAL REPORT 2011 39

RESULTS OF OPERATIONS The results of operations of the Group and of the Company for the financial year are as follows: The Group The Company RM RM

Profit for the year 40,215,980 10,525,150

Profit attributable to: Owners of the Company 40,177,325 10,525,150 Non-controlling interests 38,655 –

40,215,980 10,525,150

In the opinion of the directors, the results of operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDS An interim dividend declared in respect of the current financial year under single tier tax system of 2.5 sen per share, amounting to RM8,250,000 was paid on October 18, 2011. The directors have proposed a final dividend under single tier tax system of 4.0 sen per share, amounting to RM13,200,000 computed based on the outstanding issued and paid-up share capital of 330,000,000 ordinary shares of RM1 each in respect of the current financial year. The proposed final dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company and has not been included as a liability in the financial statements. Upon approval by the shareholders, the dividend payment will be accounted for in equity as an appropriation of retained earnings during the financial year ending December 31, 2012.

RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements.

ISSUE OF SHARES AND DEBENTURES As approved by the shareholders at an Extraordinary General Meeting held on May 16, 2011, the issued and paid-up share capital of the Company was increased from RM2 consisting of 2 ordinary shares of RM1 each to RM266,606,000 consisting of 266,606,000 ordinary shares of RM1 each by the additional allotment of RM266,605,998 shares consisting of 266,605,998 ordinary shares of RM1 each to the shareholders of the newly acquired subsidiaries. As approved by the shareholders at an Extraordinary General Meeting held on July 4, 2011 and in conjunction with the listing of the entire enlarged issued and paid-up share capital of the Company on the Main Board of Bursa Malaysia, the issued and paid-up share capital of the Company was increased from RM266,606,000 consisting of 266,606,000 ordinary shares of RM1 each to RM330,000,000 consisting of 330,000,000 ordinary shares of RM1 each by way of Public Issue of 63,394,000 ordinary shares of RM1 each of the Company at an issue price of RM1.25 per ordinary share to Malaysian public, eligible directors, employees and business associates of the Group and identified investors. The resulting premium has been credited to the share premium account. The new ordinary shares issued rank pari passu with the then existing ordinary shares of the Company. The Company has not issued any debentures during the financial year. directors’ 40 report OLDTOWN BERHAD (797771-M)

SHARE OPTIONS No options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company. No shares have been issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company. As of the end of the financial year, there were no unissued shares of the Company under options.

OTHER FINANCIAL INFORMATION Before the statements of comprehensive income and the statements of financial position of the Group and of the Company were made out, the directors took reasonable steps: (a) to ascertain that proper action have been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and have satisfied themselves that all known bad debts have been written off and that adequate allowance had made for doubtful debts; and (b) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business have been written down to their estimated realisable values. At the date of this report, the directors are not aware of any circumstances: (a) which would render the amount written off of bad debts or the amount of allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or (b) which would render the values attributed to current assets in the financial statements of the Group and of the Company misleading; or (c) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate; or (d) not otherwise dealt with in this report or financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading. At the date of this report, there does not exist: (a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year and secures the liability of any other person; or (b) any contingent liability of the Group and of the Company which has arisen since the end of the financial year. No contingent or other liability has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due. In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of operations of the Group and of the Company for the financial year in which this report is made. ANNUAL REPORT 2011 41

DIRECTORS The following directors served on the Board of the Company since the date of the last report:

Datuk Dr. Ahmed Tasir bin Lope Pihie, PJN, PMP, JSM, FASc Mr. Lee Siew Heng Dr. Leong Chik Weng Mr. Mark Wing Kong Madam Chin Lai Yoong Mr. Chuah Seong Meng Mr. Clarence D’Silva A/L Leon D’Silva Mr. Goh Ching Mun Mr. Tan Say Yap In accordance with Article 84 of the Company’s Articles of Association, Dr. Leong Chik Weng, Mr. Mark Wing Kong and Mr. Chuah Seong Meng retire by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.

DIRECTORS’ INTERESTS The shareholdings in the Company of those who were directors at the end of the financial year, as recorded in the Register of Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965, are as follows:

Number of ordinary shares of RM1 each Balance as of Balance as of 1.1.2011 Bought Sold 31.12.2011

Shares in the Company Registered in the name of directors Datuk Dr. Ahmed Tasir Bin Lope Pihie, PJN, PMP, JSM, FASc – 100,000 – 100,000 Mr. Lee Siew Heng 1 17,772,559 – 17,772,560 Dr. Leong Chik Weng – 10,000 – 10,000 Mr. Mark Wing Kong – 100,000 – 100,000 Madam Chin Lai Yoong – 4,634,559 – 4,634,559 Mr. Chuah Seong Meng – 80,000 (80,000) – Mr. Clarence D’Silva A/L Leon D’Silva – 100,000 – 100,000 Mr. Goh Ching Mun 1 330,000 – 330,001 Mr. Tan Say Yap – 6,980,500 (1,873,300) 5,107,200 Indirect interest by virtue of shares held by a company in which the directors have interest Mr. Lee Siew Heng – 228,099,998 (33,000,000) 195,099,998 Madam Chin Lai Yoong – 228,099,998 (33,000,000) 195,099,998 Mr. Goh Ching Mun – 228,099,998 (33,000,000) 195,099,998 Shares in the ultimate holding company, Old Town International Sdn. Bhd. Mr. Lee Siew Heng 675,001 – – 675,001 Madam Chin Lai Yoong 549,002 – – 549,002 Mr. Chuah Seong Meng 70,000 – – 70,000 Mr. Goh Ching Mun 920,001 – – 920,001 Mr. Tan Say Yap 250,001 – – 250,001 By virtue of their interest in the shares of the Company and of the holding company, Mr. Lee Siew Heng, Mr. Goh Ching Mun and Madam Chin Lai Yoong are also deemed to have an interest in the shares of the subsidiaries to the extent that the Company and the holding company have interest. Other than disclosed above, Mr. Chuah Seong Meng did not hold shares in the Company during the financial year. Under the Company’s Articles of Association, the directors are not required to hold any share in the Company. directors’ 42 report OLDTOWN BERHAD (797771-M)

DIRECTORS’ BENEFITS Since the end of the previous financial year, none of the directors of the Company has received or become entitled to receive any benefit (other than the benefit included in the aggregate amount of emoluments received or due and receivable by directors as disclosed in the financial statements or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except for any benefit which may be deemed to have arisen by virtue of the transactions between the Company and certain companies in which certain directors of the Company are also directors and/or shareholders or have substantial financial interests as disclosed in Note 26 to the financial statements. During and at the end of the financial year, no arrangement subsisted to which the Company was a party whereby directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

HOLDING COMPANY During the financial year, the Company became a subsidiary of Old Town International Sdn. Bhd., a company incorporated in Malaysia and the directors regard it as the ultimate holding company.

AUDITORS The auditors, Messrs. Deloitte KassimChan, have indicated their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the Directors,

DATUK DR. AHMED TASIR BIN LOPE PIHIE, PJN, PMP, JSM, FASc

MR. LEE SIEW HENG

Ipoh, April 26, 2012 independent ANNUAL REPORT 2011 auditors’ report 43 TO THE MEMBERS OF OLDTOWN BERHAD

REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of Oldtown Berhad, which comprise the statements of financial position of the Group and of the Company as of December 31, 2011 and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 45 to 112.

Directors’ Responsibility for the Financial Statements The directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected, depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider 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 the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of December 31, 2011 and of their financial performance and cash flows for the year then ended.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that: (a) in our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiaries of which we have acted as auditors, have been properly kept in accordance with the provisions of the Act; (b) we have considered the accounts and auditors’ report of the subsidiary, of which we have not acted as auditors, as mentioned in Note 18 to the financial statements, being accounts that have been included in the financial statements of the Group; (c) we are satisfied that the accounts of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group, and we have received satisfactory information and explanations as required by us for these purposes; and (d) the auditors’ reports on the accounts of the subsidiaries were not subject to any qualification and did not include any adverse comment made under Section 174 (3) of the Act. independent 44 auditors’ report OLDTOWN BERHAD (797771-M) TO THE MEMBERS OF OLDTOWN BERHAD

OTHER REPORTING RESPONSIBILITIES The supplementary information set out in Note 44 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1 “Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements” as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

OTHER MATTERS This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility towards any other person for the contents of this report.

DELOITTE KASSIMCHAN AF 0080 Chartered Accountants

YEOH SIEW MING Partner – 2421/05/13(J/PH) Chartered Accountant

April 26, 2012 statements of comprehensive ANNUAL REPORT 2011 income 45 FOR THE YEAR ENDED DECEMBER 31, 2011

The Group The Company 2011 2010 2011 2010 Note(s) RM RM RM RM

Revenue 6&7 285,424,166 232,030,688 12,275,003 – Cost of sales and direct expenses (199,853,139) (161,488,386) – – Gross profit 85,571,027 70,542,302 12,275,003 – Investment revenue 8 1,008,674 210,943 446,534 – Other gains and losses 9 9,169,730 (1,465,122) 26,617 – Other operating income 6,870,180 5,522,658 – 220,000 Selling and distribution expenses (26,214,985) (23,193,624) – – Administrative and general expenses (22,115,515) (14,890,196) (1,957,180) (263,733) Profit/(Loss) from operations 54,289,111 36,726,961 10,790,974 (43,733) Share of losses in associates (663,302) (565,387) – – Finance costs 10 (1,671,369) (1,383,513) (824) (180) Profit/(Loss) before tax 12 51,954,440 34,778,061 10,790,150 (43,913) Income tax expense 13 (11,738,460) (9,114,640) (265,000) – PROFIT/(LOSS) FOR THE YEAR 40,215,980 25,663,421 10,525,150 (43,913)

Other comprehensive income/(loss): Exchange difference on translating foreign subsidiary 27,343 (18,058) – –

TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 40,243,323 25,645,363 10,525,150 (43,913)

Profit/(Loss) attributable to: Owners of the Company 40,177,325 25,663,421 10,525,150 (43,913) Non-controlling interests 38,655 – – –

40,215,980 25,663,421 10,525,150 (43,913)

Total comprehensive income/(loss) attributable to: Owners of the Company 40,204,668 25,645,363 10,525,150 (43,913) Non-controlling interests 38,655 – – –

40,243,323 25,645,363 10,525,150 (43,913)

Earnings per share Basic and diluted (RM per share) 14 0.20 12,831,711

The accompanying Notes form an integral part of the financial statements. statements of 46 financial position OLDTOWN BERHAD (797771-M) AS OF DECEMBER 31, 2011

The Group The Company 2011 2010 2011 2010 Note RM RM RM RM

ASSETS Non-current assets Property, plant and equipment 15 52,804,871 45,199,768 494,581 – Prepaid lease payments 16 13,988,408 14,178,543 – – Investment properties 17 1,860,000 1,800,000 – – Investments in subsidiaries 18 – – 290,452,291 4 Investments in associates 19 1,208,690 448,739 1,101,002 – Other investments 20 765,752 29,000 – – Goodwill on consolidation 21 25,671,638 6,629 – – Intangible asset 22 22,065,786 – – – Deferred tax assets 23 1,194,000 1,065,000 – –

Total non-current assets 119,559,145 62,727,679 292,047,874 4

Current assets Inventories 24 16,416,371 11,872,978 – – Trade and other receivables 25 44,408,047 40,341,115 98,335 977,826 Amount owing by ultimate holding company 26 – 5,229,705 – – Amount owing by subsidiaries 26 – – 10,905,656 522,500 Amount owing by associates 26 1,398,828 2,839,617 60,000 – Other investments 20 10,205,442 – – – Current tax assets 13 550,388 292,170 – 5,500 Fixed deposits, cash and bank balances 27 85,627,025 15,417,931 48,222,820 96,064 Total current assets 158,606,101 75,993,516 59,286,811 1,601,890

Total assets 278,165,246 138,721,195 351,334,685 1,601,894

(Forward) ANNUAL REPORT 2011 47

The Group The Company 2011 2010 2011 2010 Note RM RM RM RM

EQUITY AND LIABILITIES Capital and reserves Issued capital 28 330,000,000 2 330,000,000 2 Reserves 29 (210,335,578) 3,476,745 12,311,332 – Retained earnings/(Accumulated losses) 30 97,407,300 65,479,975 1,048,764 (1,226,386)

Equity attributable to owners of the Company 217,071,722 68,956,722 343,360,096 (1,226,384) Non-controlling interests 235,562 – – –

Net equity 217,307,284 68,956,722 343,360,096 (1,226,384)

Non-current liabilities Hire-purchase payables 31 1,829,991 1,746,538 – – Borrowings 32 11,484,307 15,789,775 – – Deferred income 33 2,773,260 2,808,865 – – Deferred capital grant 34 46,852 – – – Deferred tax liabilities 23 2,261,061 1,987,054 – – Total non-current liabilities 18,395,471 22,332,232 – –

Current liabilities Trade and other payables 35 34,600,908 37,930,882 264,751 2,828,278 Amount owing to ultimate holding company 26 51,196 27,348 1,545 – Amount owing to subsidiaries 26 – – 7,453,968 – Amount owing to a director of a subsidiary 36 4,463 – – – Hire-purchase payables 31 860,763 606,865 – – Borrowings 32 1,536,869 5,542,994 – – Deferred income 33 1,298,597 1,288,779 – – Deferred capital grant 34 24,180 – – – Current tax liabilities 13 4,085,515 2,035,373 254,325 – Total current liabilities 42,462,491 47,432,241 7,974,589 2,828,278

Total liabilities 60,857,962 69,764,473 7,974,589 2,828,278

Total equity and liability 278,165,246 138,721,195 351,334,685 1,601,894

The accompanying Notes form an integral part of the financial statements. statements of 48 changes in equity OLDTOWN BERHAD (797771-M) FOR THE YEAR ENDED DECEMBER 31, 2011

RM 27,343 (18,058) Net equity Net (6,000,000) (8,250,000) 49,311,359 25,663,421 25,645,363 68,956,722 40,215,980 40,243,323 342,311,330 (225,954,091) 217,307,284

– – – – – – – – – RM 38,655 38,655 interests 196,907 235,562 Non-controlling

RM 27,343 (18,058) (6,000,000) (8,250,000) 49,311,359 25,663,421 25,645,363 68,956,722 40,177,325 40,204,668 Attributable of owners to the company 342,311,330 (226,150,998) 217,071,722

– – – – RM losses) losses) Retained Retained reserve – reserve earnings/ (6,000,000) (8,250,000) 45,816,554 25,663,421 25,663,421 65,479,975 40,177,325 40,177,325 Distributable 97,407,300 (Accumulated

– – – – – – RM 6,984 (2,301) 27,343 27,343 reserve Foreign (18,058) (18,058) (20,359) currency translation

– – – – – – – – – RM

Reserve 3,497,104 3,497,104 arising from restructuring (226,150,998) (222,653,894) Non-distributable reserves

– – – – – – – – – – – RM Share premium 12,311,332 12,311,332

2 2 – – – – – – – – – RM Issued capital The accompanying Notes form an integral part of the financial statements. the financial part of an integral form Notes The accompanying 329,999,998 330,000,000

37 37 28 Note

The Group

2010 January 1, as of Balance the year for loss Other comprehensive year for the Profit the year for income comprehensive Total Payment of dividends of Payment Balance as of December 31, 2010 31, December as of Balance subsidiaries of acquisition Arising from the year for income Other comprehensive year for the Profit the year for income comprehensive Total Payment of dividends of Payment Issue of shares shares of Issue Balance as of December 31, 2011 31, December as of Balance

ANNUAL REPORT 2011 49

Distributable Non- reserve – distributable Retained reserve – earnings/ Issued Share (Accumulated Net capital premium losses) equity The Company Note RM RM RM RM

Balance as of January 1, 2010 2 – (1,182,473) (1,182,471) Loss and total comprehensive loss for the year – – (43,913) (43,913)

Balance as of December 31, 2010 2 – (1,226,386) (1,226,384) Profit and total comprehensive income for the year – – 10,525,150 10,525,150 Payment of dividends 37 – – (8,250,000) (8,250,000) Issue of shares 28 329,999,998 12,311,332 – 342,311,330

Balance as of December 31, 2011 330,000,000 12,311,332 1,048,764 343,360,096

The accompanying Notes form an integral part of the financial statements. statements of 50 cash flows OLDTOWN BERHAD (797771-M) FOR THE YEAR ENDED DECEMBER 31, 2011

The Group 2011 2010 Note RM RM

CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES Profit for the year 40,215,980 25,663,421 Adjustments for: Depreciation of property, plant and equipment 12,225,702 8,158,351 Income tax expense recognised in profit or loss 11,738,460 9,114,640 Finance costs 1,671,369 1,383,513 Amortisation of intangible asset 1,366,907 – Property, plant and equipment written off 666,301 322,800 Share of losses in associates 663,302 565,387 Amortisation of prepaid lease payments 190,135 124,022 Real Property Gains Tax 80,986 – Bad debts written off 18,436 5,763 Allowance for doubtful debts 6,325 – Gain on disposal of investment in associates (5,573,468) – (Gain)/Loss on disposal of property, plant and equipment (2,843,305) 31,307 Investment revenue recognised in profit and loss (1,008,674) (210,943) Gain on revaluation of other investments (205,442) – Unrealised (gain)/loss on foreign exchange (140,827) 68,521 Gain on revaluation of investment properties (60,000) – Gain on disposal of available-for-sale investment (51,101) – Deferred capital grant income (14,105) – Reversal of impairment loss on trade receivables (6,385) (44,313) Dividend income (5,000) (210,000) Tax penalty – 18,293 58,935,596 44,990,762 Movements in working capital: (Increase)/Decrease in: Inventories (3,134,220) (3,662,642) Trade and other receivables (6,717,137) (6,491,935) Amount owing by associates 731,585 (1,147,515) Other assets (97,173) – Increase in: Trade and other payables 3,384,879 7,643,611 Deferred income 407,440 391,301 Cash Generated From Operations 53,510,970 41,723,582 Income tax refunded 525,499 471,173 Income tax paid (11,720,835) (9,490,716) Real Property Gains Tax paid (80,986) – Interest income received – 31,164 Net Cash From Operating Activities 42,234,648 32,735,203

(Forward) ANNUAL REPORT 2011 51

The Group 2011 2010 Note RM RM

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES Proceeds from disposal of other investments 10,051,101 – Proceeds from disposal of property, plant and equipment 6,533,507 435,120 Withdrawal of fixed deposits 1,623,099 373,569 Interest income received 779,286 93,343 Proceeds from disposal of investment in an associate company 450,000 – Rental income received 115,100 117,600 Dividend income received 5,000 187,500 Purchase of other investments (20,000,000) – Acquisition of subsidiaries* (Net) (13,006,415) (2) Purchase of property, plant and equipment 39(a) (12,436,634) (16,925,828) Additional investment in associates (861,322) (307,374) Advance payments for acquisition of property, plant and equipment (793,263) – Advances granted to associates (60,000) (180,211) Investment in unquoted shares (22,561) – Advances granted to ultimate holding company – (2,129,787) Additions to prepaid lease payments – (6,501,917) Net Cash Used In Investing Activities (27,623,102) (24,837,987)

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES Proceeds from issuance of shares 79,242,500 – Proceeds from term loans 4,800,000 7,102,224 Repayment from ultimate holding company 799,816 27,348 Repayment of term loans (10,066,980) (1,285,846) Dividends paid (8,250,000) (6,000,000) Payment for share issue expenses (3,537,168) – Repayment of bankers’ acceptances – net (2,065,000) (1,937,000) Finance costs paid (1,671,369) (1,383,513) Repayment of hire-purchase payables (880,170) (888,871) Net Cash From/(Used In) Financing Activities 58,371,629 (4,365,658)

NET INCREASE IN CASH AND CASH EQUIVALENTS 72,983,175 3,531,558 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,291,416 6,730,662 Currency translation differences (76,924) 29,196

CASH AND CASH EQUIVALENTS AT END OF YEAR 39(c) 83,197,667 10,291,416

The accompanying Notes form an integral part of the financial statements. statements of 52 cash flows OLDTOWN BERHAD (797771-M) FOR THE YEAR ENDED DECEMBER 31, 2011

The Company 2011 2010 Note RM RM

CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES Profit/(Loss) for the year 10,525,150 (43,913) Adjustments for: Income tax expense recognised in profit or loss 265,000 – Depreciation of property, plant and equipment 54,033 – Finance cost 824 180 Property, plant and equipment written off 649 – Investment revenue recognised in profit or loss (446,534) – Gain on disposal of available-for-sale investment (26,617) – 10,372,505 (43,733) Movements in working capital: Decrease/(Increase) in trade and other receivables 819,490 (977,526) Increase in trade and other payables 1,325,136 1,590,868 Cash Generated From Operations 12,517,131 569,609 Income tax paid (5,175) (5,500) Net Cash From Operating Activities 12,511,956 564,109

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES Proceeds from disposal of available-for-sale investment 5,026,617 – Interest income received from short-term investment fund 446,534 – Acquisition of subsidiaries* (19,817,002) (4) Advances granted to subsidiaries – net (10,383,156) (522,500) Purchase of available-for-sale investment (5,000,000) – Purchase of property, plant and equipment 39(a) (385,475) – Investment in associate (2) – Net Cash Used In Investing Activities (30,112,484) (522,504)

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES Proceeds from issuance of shares 79,242,500 – Advances from holding company – net 1,545 – Dividend paid (8,250,000) – Payment for share issue expenses (3,537,168) – Repayment to subsidiaries – net (1,728,769) – Finance cost paid (824) (180) Net Cash From/(Used In) Financing Activities 65,727,284 (180)

NET INCREASE IN CASH AND CASH EQUIVALENTS 48,126,756 41,425 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 96,064 54,639 CASH AND CASH EQUIVALENTS AT END OF YEAR 39(c) 48,222,820 96,064

(Forward) ANNUAL REPORT 2011 53

*ANALYSIS OF ACQUISITION OF SUBSIDIARIES During the financial year, the Company acquired nine (9) subsidiaries as mentioned in Note 18. The fair values of the assets acquired and the liabilities assumed are as follows: RM RM

Property, plant and equipment 13,240,640 Deferred franchise fees 439,135 Inventories 1,408,132 Trade and other receivables 6,973,617 Other assets 2,056,229 Current tax assets 301,540 Fixed deposits, cash and bank balances 7,165,757 Supplier exclusive right 23,432,693 Trade and other payables (11,934,316) Deferred capital grant (85,137) Other liabilities (1,311,828) Hire-purchase payables (590,721) Borrowings (662,906) Amount owing to a director (4,463) Current tax liabilities (1,044,185) Deferred tax liabilities (650,000) Fair value of net assets acquired 38,734,187 Minority interests (196,907) Group’s share of net assets acquired 38,537,280 Goodwill on consolidation 25,665,009 Cost of acquisition 64,202,289

Consideration paid in cash 24,848,289 Consideration paid by issuance of shares 39,354,000 64,202,289

Consideration paid in cash 24,848,289 Less: Cash paid to Kopitiam Asia Pacific Sdn. Bhd. for its investments in Old Town Kopitiam Butterworth Sdn. Bhd. and Old Town Kopitiam Kuala Lumpur Sdn. Bhd. prior to the acquisition (5,130,287) 19,718,002 Less: Cash and bank balances (7,165,757) Fixed deposit on lien to bank 454,170 Net cash outflow on acquisition of subsidiaries 13,006,415

The accompanying Notes form an integral part of the financial statements. notes to the 54 financial statements OLDTOWN BERHAD (797771-M)

1. GENERAL INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Board of Bursa Malaysia Securities Berhad. The Company was incorporated on November 30, 2007 and commenced business operations in investment holding during the financial year. The principal activities of the subsidiaries are disclosed in Note 18. Other than as stated above, there have been no significant changes in the nature of the activities of the Company and its subsidiaries during the financial year. The registered office of the Company is located at 47A, Jalan Chung Ah Ming, Pasir Puteh, 31650 Ipoh, Perak Darul Ridzuan. The principal place of business of the Company is located at No. 80, Hala Bercham Timur 11, Bercham Heights, 31400 Ipoh, Perak Darul Ridzuan. The financial statements of the Group and of the Company were authorised for issue by the Board of Directors in accordance with a resolution of the directors on April 26, 2012.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ADOPTION OF NEW AND REVISED FINANCIAL REPORTING STANDARDS The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards (“FRSs”) and the provisions of the Companies Act, 1965 in Malaysia.

2.1 Adoption of new and revised FRSs and IC Interpretations (“IC Int.”) During the financial year, the Group and the Company adopted all new and revised FRSs and IC Int. issued by the Malaysian Accounting Standards Board (“MASB”) that are relevant to their operations and effective for accounting periods beginning on or after March 1, 2010. The adoption of these new and revised FRSs and IC Int. have not resulted in material changes to the Group’s and the Company’s accounting policies except for:

FRS 127 Consolidated and Separate Financial Statements (Revised in 2010)

The Group has applied FRS 127, Consolidated and Separate Financial Statements (revised) where losses applicable to the non- controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. This change in accounting policy is applied prospectively in accordance with the transitional provisions of the standard and does not have impact on earnings per share.

2.2 Standards and IC Int. in issue but not yet effective At the date of authorisation for issue of these financial statements, the FRSs, IC Int. and amendments to FRSs and IC Int. which were in issue but not yet effective are as listed below: Effective for annual periods beginning FRS and IC Int. on or after

FRS 1 First-time Adoption of Financial Reporting Standards (Amendments relating to Severe January 1, 2012 Hyperinflation and Removal of Fixed Dates for First-time Adopters) FRS 7 Financial Instruments: Disclosures (Amendments relating to Disclosures – Transfers of January 1, 2012 Financial Assets) FRS 7 Financial Instruments: Disclosures (Amendments relating to Mandatory Effective Date March 1, 2012 of FRS 9 (International Financial Reporting Standards (“IFRS”) 9 issued by International Accounting Standards Board (“IASB”) in November 2009 and October 2010 respectively) and Transition Disclosures) FRS 7 Financial Instruments: Disclosures (Amendments relating to Disclosures – Offsetting Financial January 1, 2013 Assets and Financial Liabilities) FRS 9 Financial Instruments (IFRS 9 issued by the IASB in November 2009) January 1, 2015* FRS 9 Financial Instruments (IFRS 9 issued by IASB in October 2010) January 1, 2015* FRS 10 Consolidated Financial Statements January 1, 2013 FRS 11 Joint Arrangements January 1, 2013 ANNUAL REPORT 2011 55

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ADOPTION OF NEW AND REVISED FINANCIAL REPORTING STANDARDS (Cont’d) 2.2 Standards and IC Int. in issue but not yet effective (Cont’d) Effective for annual periods beginning FRS and IC Int. on or after

FRS 12 Disclosure of Interests in Other Entities January 1, 2013 FRS 13 Fair Value Measurement January 1, 2013 FRS 101 Presentation of Financial Statements (Amendments relating to Presentation of Items of July 1, 2012 Other Comprehensive Income) FRS 112 Income Taxes (Amendments relating to Deferred tax: Recovery of Underlying Assets) January 1, 2012 FRS 119 Employee Benefits (2011) January 1, 2013 FRS 124 Related Party Disclosure (Revised) January 1, 2012 FRS 127 Separate Financial Statements (2011) January 1, 2013 FRS 128 Investments in Associates and Joint Ventures (2011) January 1, 2013 FRS 132 Financial Instruments: Presentation (Amendments relating to Offsetting Financial Assets January 1, 2014 and Financial Liabilities) IC Int. 14 FRS 119 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their July 1, 2011 Interaction (Amendments relating to Prepayments of a Minimum Funding Requirement) IC Int. 19 Extinguishing Financial Liabilities with Equity Instruments July 1, 2011 IC Int. 20 Stripping Costs in the Production Phase of a Surface Mine January 1, 2013

* Effective for annual periods beginning on or after January 1, 2015 immediately upon the issuance of Amendments to FRS 9 (IFRS 9 issued by IASB on November 2009 and October 2010 respectively) and FRS 7 relating to “Mandatory Effective Date of FRS 9 and Transition Disclosures” on March 1, 2012. The directors anticipate that the abovementioned Standards and IC Int. that are relevant to the operations of the Group and of the Company will be adopted in the annual financial statements of the Group and of the Company when they become effective. Apart from additional disclosures as required by FRS 7, FRS 9, and FRS 101, the adoption of these Standards and IC Int. will have no material impact on the financial statements of the Group and of the Company in the period of initial application. In addition, on November 19, 2011, the MASB issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards Framework (“MFRS Framework”) in conjunction with its planned convergence of FRSs with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) on January 1, 2012. The MFRS Framework is a fully IFRS-compliant framework, equivalent to IFRSs which is mandatory for adoption by all Entities Other than Private Entities for annual periods beginning on or after January 1, 2012, with the exception for Transitioning Entities. Transitioning Entities, being entities which are subject to the application of MFRS 141 Agriculture and/or IC Interpretation 15 Agreements for the Construction of Real Estate are given an option to defer adoption of the MFRS Framework for an additional one year. Transitioning Entities also includes those entities that consolidates, equity accounts or proportionately consolidates an entity that has chosen to continue to apply the FRS Framework for annual periods beginning on or after January 1, 2012.

Accordingly, the Group and the Company which are not Transitioning Entities will be required to apply MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards (“MFRS 1”) in their financial statements for the financial year ending December 31, 2012, being the first set of financial statements prepared in accordance with the new MFRS Framework. Further, an explicit and unreserved statement of compliance with IFRSs will be made in these financial statements. The Group and the Company are currently assessing the impact of adoption of MFRS 1, including identification of the differences in existing accounting policies as compared to the new MFRSs and the use of optional exemptions as provided for in MFRS 1. As at the date of authorisation of issue of the financial statements, accounting policy decisions or elections have not been finalised. Thus, the impact of adopting the new MFRS Framework on the Group’s and the Company’s first set of financial statements prepared in accordance with the MFRS Framework cannot be determined and estimated reliably until the process is complete. notes to the 56 financial statements OLDTOWN BERHAD (797771-M)

3. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of the Group and of the Company have been prepared on historical cost basis except for the revaluation of certain non-current assets and financial instruments. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

Basis of Consolidation (i) Subsidiaries The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries made up to December 31, 2011. A subsidiary is a company where the Group has control through the power to govern the financial and operating policies of the subsidiary so as to obtain benefits therefrom. Control is presumed to exist when the Group owns, directly or indirectly through subsidiaries, more than one half of the voting rights of the subsidiary. Financial statements of subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method, the results of the subsidiaries acquired or disposed of are included in the consolidated profit or loss from the effective date of acquisition or up to the effective date of disposal. On acquisition, the assets and liabilities of the relevant subsidiaries are measured at their fair values at the date of acquisition. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 3, Business Combinations are recognised at their fair values at the acquisition date. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Group. All intragroup transactions, income and expenses are eliminated in full on consolidation. A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties, both before and after the business combination, and that control is not transitory. The consolidated financial statements incorporate the financial statements items of the combining entities in which the common control combination occurs as if they had been combined from the date when the combining entities first came under the control of the controlling parties. The cost of investment in the holding’s book is recorded at the nominal value of shares acquired. A single uniform set of accounting policies is adopted by the combined entity. Therefore, the net assets of the combining entities are combined using the existing book values from the controlling parties’ perspective. No amount is recognised in respect of goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling parties’ interest.

(ii) Associates An associate is a non-subsidiary in which the Group and the Company hold not less than 20% of the equity voting rights as long- term investment and in which the Group and the Company is in a position to exercise significant influence in its management. The investment in associate of the Group is accounted for under the equity method of accounting based on the audited financial statements of the associated company made up to December 31, 2011. Under this method of accounting, the interest in the post-acquisition profits and reserves of the associate of the Group is included in the consolidated results while dividend received is reflected as a reduction of the investment in the consolidated statements of financial position. Unrealised profits and losses arising on transactions between the Group and its associate are eliminated to the extent of the equity interest of the Group in the associated company except where unrealised losses provide evidence of an impairment of the asset transferred. ANNUAL REPORT 2011 57

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Sale of food and beverages

Sale of food and beverages are recognised when food and beverages are served, net of service tax.

Sale of goods

Revenue from sale of goods is recognised when the following conditions are satisfied:

• the Group has transferred to the customer the significant risks and rewards of ownership of the goods; • the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• the amount of revenue can be measured reliably; • it is probable that the economic benefits associated with the transaction will flow to the Group; and • the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Dividend income

Dividend income from quoted and unquoted investments is recognised when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably).

Interest income

Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income is accrued on a time apportion basis, by reference to the principal outstanding and at the interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Rental income

Rental income is accrued on a time apportion basis, by reference to the agreements entered. Rental income from investment properties is recognised on a straight-line basis over the term of the relevant lease.

Franchise, advertising and promotion, rights and royalty fees

Franchise, advertising and promotion, rights and royalty fees are recognised on an accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably). Franchise, advertising and promotion, rights and royalty fees are recognised on a straight-line basis over the period of the relevant agreement.

Fees for opening of outlets

Income from opening of outlets is recognised by reference to the terms of the agreements entered.

Income from accounting services, initial training fees and management fees

Income from rendering of accounting services, initial training fees and management fees is recognised as and when services are provided. notes to the 58 financial statements OLDTOWN BERHAD (797771-M)

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Foreign Currencies The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Ringgit Malaysia (“RM”), which is the functional currency of the Company, and also the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual entities, transactions in currencies other than the functional currency of the entity (foreign currencies) are recorded at the rates of exchange prevailing on the date of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in statements of comprehensive income in the period in which they arise except for:

• exchange differences arising on the retranslation of non-monetary items carried at fair value in respect of which gains and losses are recognised in other comprehensive income. For such non-monetary items, the exchange component of that gain or loss is also recognised in other comprehensive income; and

• exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore, forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to statements of comprehensive income on disposal or partial disposal of the investment. For the purpose of presenting consolidated financial statements, the assets and liabilities of the foreign incorporated subsidiaries of the Group are expressed in RM using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuated significantly during that year, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in the translation reserve of the Group. Such exchange differences accumulated in the translation reserve of the Group are reclassified to statements of comprehensive income in the year in which the foreign incorporated subsidiary is disposed of when the gain or loss on disposal is recognised. On consolidation, exchange differences arising from the translation of net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are taken to the foreign currency translation reserve. The closing rate per unit of Ringgit Malaysia used in the translation of functional foreign currency of the subsidiary (foreign currency) is as follows: 2011 2010 Foreign Currency RM RM

Singapore Dollar 2.4373 2.3867

Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. ANNUAL REPORT 2011 59

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Government Grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the statements of financial position and transferred to the statements of comprehensive income on a systematic and rational basis over the useful lives of the related assets. Other government grants are recognised as revenue over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in the statements of comprehensive income in the period in which they become receivable.

Operating Lease Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Employee Benefits

Short-term employee benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group and of the Company. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences and short- term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

Defined contribution plan

The Group and the Company are required by law to make monthly contributions to the Employees’ Provident Fund (“EPF”), a statutory defined contribution plan for all its eligible employees based on certain prescribed rates of the employees’ salaries. The Group’s and the Company’s contributions to EPF are recognised as an expense when employees have rendered service entitling them to the contributions and are disclosed separately. The employees’ contributions to EPF are included in salaries and wages. Once the contributions have been paid, the Group and the Company have no further payment obligations.

Taxation Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statements of comprehensive income because of items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The liability of the Group and of the Company for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of reporting period.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. notes to the 60 financial statements OLDTOWN BERHAD (797771-M)

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Taxation (Cont’d)

Deferred tax (Cont’d) Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of each reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group and the Company expect, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group and the Company intend to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the year

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items that are recognised outside profit or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss.

Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Freehold land and capital work-in-progress are stated at cost and is not depreciated. Capital work-in-progress comprises contractors’ payments and directly attributable costs incurred in preparing these assets for their intended use. Depreciation on assets under construction commences when the assets are ready for their intended use. Depreciation is recognised so as to write off the cost of assets, less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Annual depreciation rates used to depreciate property, plant and equipment, over their estimated remaining useful lives are as follows: Buildings and apartments 2% Plant, machinery and equipment 5% to 20% Motor vehicles 10% to 20% Factory equipment, signboard and electrical fittings 10% to 20% Air-conditioners, computers, furniture, fittings and office equipment 10% to 20% Renovation 10% to 20% Assets held under hire-purchase arrangements are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant hire-purchase. The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in profit or loss.

Property, Plant and Equipment under Hire-Purchase Arrangements Assets acquired under hire-purchase arrangements which transfer substantially all of the risks and rewards incident to ownership of the assets are capitalised under property, plant and equipment. The assets and the corresponding hire-purchase obligations are recorded at their fair values or, if lower, at the present value of the minimum lease payment of the assets under hire-purchase at the inception of the respective arrangements. Finance costs, which represent the difference between the total hire-purchase commitments and the fair values of the assets acquired, are charged to profit or loss over the term of the relevant hire-purchase period so as to give a constant periodic rate of charge on the remaining balance of the obligations for each accounting period. ANNUAL REPORT 2011 61

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Prepaid Lease Payments Leasehold land that normally has an indefinite economic life and where title is not expected to pass to the lessee by the end of the lease period is treated as an operating lease. The payment made on entering into or acquiring a leasehold interest is accounted for as prepaid lease payments at the end of the reporting period. In the case of a lease of land and buildings, the prepaid lease payments are allocated whenever necessary, between the land element and building element of the lease at the inception of the lease in proportion to their relative fair value. Prepaid lease payments on leasehold land are stated at surrogate cost less accumulated amortisation and accumulated impairment losses, if any. Leasehold land is amortised on a straight-line basis over the remaining lease terms ranging from 43 to 97 years.

Investment Properties Investment properties, which are properties held to earn rentals and/or for capital appreciation, are measured initially at cost. Subsequent to initial recognition, investment properties are measured at fair value. Fair value is arrived at by reference to market evidence of transaction prices for similar properties. Gain or loss arising from changes in the fair values of investment properties is included in profit or loss in the period in which they arise. Investment properties are derecognised when either they have been disposed of or when the investment properties are permanently withdrawn from use and no future economic benefit is expected from their disposal. Gain or loss on the retirement or disposal of an investment property is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the statements of comprehensive income in the period in which the retirement or disposal arise.

Investments Investments in subsidiaries, which are eliminated on consolidation, and investment in associate, are stated in the Company’s financial statements at cost less accumulated impairment losses, if any. Investment in quoted unit trusts are classified as available-for-sale investment and stated at fair value. Investments in unquoted shares are stated at cost less allowance for diminution in value of investments to recognise any decline, other than a temporary decline, in the value of the investments.

Goodwill/Negative Goodwill Goodwill arising on consolidation represents the excess of cost of business combination over the Group’s interest in the net fair values of the identifiable assets, liabilities and contingent liabilities recognised of the acquiree at the date of the combination. Goodwill which is recognised as an asset is initially measured at its cost and is subsequently measured at cost less any accumulated impairment losses. After initial recognition, goodwill is not amortised. Instead, it is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Any impairment loss is recognised immediately to the statements of comprehensive income and any impairment loss recognised for goodwill is not subsequently reversed. On disposal of an entity or operation, the goodwill associated with the entity or operation disposed of is included in the carrying amount of the entity or operation when determining the gain or loss on disposal. Any excess of the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over costs of acquisition (previously known as negative goodwill), after reassessed, is recognised immediately to the statements of comprehensive income. notes to the 62 financial statements OLDTOWN BERHAD (797771-M)

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Intangible asset Intangible asset represents supplier exclusive right for sale of goods to a chain of outlets by the Group. The right is carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over its estimated useful life of 10 years. At the end of each reporting period, the Group assesses whether there is any indication of impairment. If such indication exists, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. An impairment loss is provided for if the carrying amount exceeds the recoverable amount.

Impairment of Assets excluding Goodwill and Intangible asset At the end of each reporting period, the Group and the Company review the carrying amounts of their assets (other than goodwill, intangible asset, investment properties, other investments, inventories and financial assets, which are dealt with in their respective policies) to determine if there is any indication that those assets may be impaired. If any such indication exists, the asset’s recoverable amount is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group and the Company estimate the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash- generating units for which a reasonable and consistent allocation basis can be identified. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but the increased carrying amount would not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined principally on the “First-in, First-out” method. Costs of trading merchandise, raw materials, packing materials, food, beverages and consumables comprise the original purchase price plus cost incurred in bringing the inventories to their present location and condition. The costs of finished goods and work-in-progress comprise the cost of raw materials, direct labour and an appropriate proportion of production overheads. Net realisable value represents the estimated selling price less estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Provisions Provisions are recognised when the Group and the Company have a present obligations (legal or constructive) as a result of past event and it is probable that the Group and the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligations. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. ANNUAL REPORT 2011 63

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Financial Instruments Financial assets and financial liabilities are recognised in the statements of financial position when the Group and the Company become a party to the contractual provisions of the financial instrument. Where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, such financial assets are recognised and derecognised on trade date. Financial instruments are initially measured at fair value, plus transaction costs, except for those financial assets and financial liabilities classified as at fair value through profit or loss (“FVTPL”), which are initially measured at fair value.

Effective Interest Method

The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period. Income and expense is recognised on an effective interest basis for debt instruments.

(a) Financial Assets

(i) Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL. A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling it in the near term; or • on initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument. A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and FRS 139 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL. Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the “other gains and losses” line item in the statement of comprehensive income. Fair value is determined in the manner described in Note 38.

(ii) Available-for-sale (“AFS”) financial assets

AFS financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at FVTPL. All AFS financial assets with the exception of unquoted shares which are measured at cost, are measured at fair value at the end of the reporting period. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investment revaluation reserve, with the exception of impairment losses, interest calculated using the effective interest method, and foreign exchange gains and losses on monetary assets, which are recognised in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investment revaluation reserve is reclassified to profit or loss. Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive the dividends is established. notes to the 64 financial statements OLDTOWN BERHAD (797771-M)

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Financial Instruments (Cont’d)

Effective Interest Method (Cont’d)

(a) Financial Assets (Cont’d)

(iii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. Financial assets of the Group are other investments, fixed deposits, cash and bank balances, trade and other receivables and amount owing by associates. Financial assets of the Company are fixed deposits, cash and bank balances, amount owing by subsidiaries and amount owing by associates.

(iv) Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or • default or delinquency in interest or principal payments; or • it becoming probable that the borrower will enter bankruptcy or financial re-organisation. For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. AFS investments are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the AFS investments, the estimated future cash flows of the investments have been affected. For unlisted equity investments classified as AFS, a significant or prolonged decline in the fair value of the investments below their costs is considered to be objective evidence of impairment. When an AFS investment is considered to be impaired, cumulative gains or losses previously recognised in investments revaluation reserve are reclassified to the income statements even though the investment has not been derecognised. Impairment losses of AFS investments previously recognised in the income statements are not reversed through the income statements. Any increase in fair value subsequent to an impairment loss is recognised in investments revaluation reserve. For financial assets carried at amortised cost, the amount of the impairment loss recognised is 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. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are debited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the income statements. 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 through the income statements to the extent that the carrying amount of the financial assets at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. ANNUAL REPORT 2011 65

3. SIGNIFICANT ACCOUNTING POLICIES (Cont’d) Financial Instruments (Cont’d)

Effective Interest Method (Cont’d)

(a) Financial Assets (Cont’d)

(v) Derecognition of financial assets

The Group and the Company derecognise a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group and the Company neither transfer nor retain substantially all the risk and rewards of ownership and continues to control the transferred asset, the Group and the Company recognise their retained interest in the asset and an associated liability for amounts it may have to pay. If the Group and the Company retain substantially all the risk and rewards of ownership of a transferred financial asset, the Group and the Company continue to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

(b) Financial Liabilities and Equity Instruments

(i) Classification as debt or equity

Financial liabilities and debt and equity instruments issued by the Group and the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

(ii) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group and of the Company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.

(iii) Financial liabilities

Financial liabilities of the Group and of the Company are classified into the “other financial liabilities” category.

(iv) Other financial liabilities

Other financial liabilities are initially measured at fair value, net of transaction costs, and subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. Financial liabilities of the Group are trade and other payables, amount owing to ultimate holding company, hire-purchase payables, borrowings and amount owing to a director of a subsidiary. Financial liabilities of the Company are trade and other payables and inter-company indebtedness.

(v) Derecognition of financial liabilities

The Group and the Company derecognise financial liabilities when, and only when, the Group’s and the Company’s obligations are discharged, cancelled or expired.

Statements of Cash Flows The Group and the Company adopt the indirect method in the preparation of the statements of cash flows. Cash equivalents are short-term, highly liquid investments with maturities of three months or less from the date of acquisition and are readily convertible to cash with insignificant risks of changes in value. notes to the 66 financial statements OLDTOWN BERHAD (797771-M)

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (a) Critical Judgements in Applying the Group’s and the Company’s Accounting Policies In the application of the Group’s and of the Company’s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

(b) Key Sources of Estimation Uncertainty The following are key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets in the next financial year:

(i) Impairment of Goodwill

The Group tests goodwill for impairment annually in accordance with its accounting policy. More regular reviews are performed if events indicate that this is necessary. For the purpose of assessing impairment, goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose. Significant judgement is required in the estimation of the present value of future cash flows generated by the cash-generating units, which involve uncertainties and are significantly affected by assumptions used and judgement made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the tests for impairment of goodwill.

(ii) Impairment of Property, Plant and Equipment and Intangible Asset

The carrying amounts of property, plant and equipment of the Group and of the Company as of December 31, 2011 are RM52,804,871 (2010: RM45,199,768) and RM494,581 (2010: RMNil) respectively and the carrying amounts of intangible asset of the Group is RM22,065,786 (2010: RMNil). The Group and the Company assess impairment of assets whenever the events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable i.e. the carrying amount of the asset is more than the recoverable amount. Recoverable amount is measured at the higher of the fair value less cost to sell for that asset and its value-in-use. The value-in-use is the net present value of the projected future cash flow derived from that asset discounted at an appropriate discount rate. Projected future cash flows are based on the Group’s and the Company’s estimate calculated based on historical, sector and industry trends, general market and economic conditions, changes in technology and other available information. Management of the Group and of the Company have carried out an impairment review on their property, plant and equipment and concluded that there is no indication of impairment.

(iii) Estimated Useful Lives of Property, Plant and Equipment

The Group and the Company regularly review the estimated useful lives of property, plant and equipment at the end of each reporting period based on factors such as business plan and strategies, expected level of usage and future technological developments. Future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned above. A reduction in the estimated useful lives of property, plant and equipment would increase the recorded depreciation and decrease the value of property, plant and equipment.

(iv) Recoverability of Receivables

The carrying amounts of third-party trade and other receivables of the Group as of December 31, 2011 were RM33,599,810 (2010: RM32,399,773). An allowance is established when there is objective evidence that the Group and the Company will not be able to collect all amounts due according to the original terms of receivables. This is determined based on the ageing profile and collection patterns. ANNUAL REPORT 2011 67

5. SEGMENT REPORTING The segment reporting is presented on the same basis as information reported to the chief operating decision maker for the purposes of allocating resources to the segment and assessing its performance.

Business Segment The Group’s operations can be segmented into three (3) business segments as follows: (a) Operation of a chain of cafes; (b) Manufacturing of coffee and other beverages; and (c) Others. Information reported to the chief operating decision maker for the purpose of resources allocation and assessment of performance focused on the business operations of the Group by business segment as disclosed above. Segment revenue from external customers is based on the business segments.

Operations of Manufacturing cafe chain of beverages Others Total The Group RM RM RM RM

2011 Revenue Sales 249,625,688 151,620,560 12,275,003 413,521,251 Inter-company sales (72,470,549) (43,351,533) (12,275,003) (128,097,085) Total Revenue 177,155,139 108,269,027 – 285,424,166

Results Segment results 34,269,077 18,669,652 (984,289) 51,954,440

The Group

2010 Revenue Sales 172,193,068 128,675,658 – 300,868,726 Inter-company sales (30,615,703) (38,222,335) – (68,838,038) Total Revenue 141,577,365 90,453,323 – 232,030,688

Results Segment results 23,588,816 11,416,670 (227,425) 34,778,061

Geographical Segment The Group operates in four principal geographical areas – Malaysia (country of domicile), South East Asia, other Asian countries and others. The Group’s revenue from continuing operations from external customers by geographical area are detailed below:

Revenue from external customers 2011 2010 RM RM

Malaysia 217,790,469 182,812,508 South East Asia 27,916,680 20,466,595 Other Asian countries 33,477,414 22,688,410 Others 6,239,603 6,063,175 285,424,166 232,030,688

There is no one customer who contributed more than 10% of the total revenue in each segment during the financial year. Segment assets and segment liabilities were not disclosed as they were not regularly provided to the chief operating decision maker for their day-to-day operation decision making. notes to the 68 financial statements OLDTOWN BERHAD (797771-M)

6. REVENUE The Group The Company 2011 2010 2011 2010 RM RM RM RM

Sale of goods 267,676,834 214,356,825 – – Royalty, advertising and promotion fees 15,272,816 14,942,783 – – Franchise fees 1,262,814 1,287,438 – – Rights fees 500,000 500,000 – – Initial training fees 310,000 321,570 – – Accounting fees 201,500 276,300 – – Licence fees 87,448 73,766 – – Fees for opening of outlets 102,688 62,006 – – Dividend income 5,000 210,000 11,167,503 – Management fees 5,066 – 1,107,500 – 285,424,166 232,030,688 12,275,003 –

7. OPERATING COSTS APPLICABLE TO REVENUE The operating costs classified by nature applicable to revenue, are as follows:

The Group The Company 2011 2010 2011 2010 Note RM RM RM RM

Changes in inventories of finished goods, work-in-progress, trading merchandise food, beverages and consumables 192,486 (2,512,066) – – Raw materials and consumables used 74,812,551 53,907,079 – – Purchase of trading merchandise, food, beverages and consumables 60,830,239 70,273,967 – – Directors’ remuneration 11 1,425,117 881,301 342,450 156,000 Employee benefits expenses 12 38,231,816 26,747,192 966,612 11,740 Depreciation of property, plant and equipment 15 12,225,702 8,158,351 54,033 – Amortisation of prepaid lease payments 16 190,135 124,022 – – Amortisation of supplier exclusive right 22 1,366,907 – – – Other operating expenses 12 60,288,492 41,101,926 594,085 95,993

249,563,445 198,681,772 1,957,180 263,733

8. INVESTMENT REVENUE The Group The Company 2011 2010 2011 2010 RM RM RM RM

Investment revenue earned on loans and receivables (including cash and cash equivalents): Interest income from: Short-term investment funds 605,229 – 305,749 – Repo 140,785 – 140,785 – Fixed deposits 136,576 93,343 – – Property rental income 115,100 117,600 – – Current account 10,984 – – –

1,008,674 210,943 446,534 – ANNUAL REPORT 2011 69

9. OTHER GAINS AND LOSSES The Group The Company 2011 2010 2011 2010 RM RM RM RM

Gain on disposal of investment in associated companies 5,573,468 – – – Gain/(Loss) on disposal of property, plant and equipment 2,843,305 (31,307) – – Gain arising from settlement of legal claim 259,000 – – – Gain on revaluation of other investment 205,442 – – – Gain/(Loss) on foreign exchange: Unrealised 140,827 (68,521) – – Realised (45,330) (1,365,294) – – Government grant received 81,917 – – – Gain on revaluation of investment properties 60,000 – – – Gain on disposal of available-for-sale investment 51,101 – 26,617 – 9,169,730 (1,465,122) 26,617 –

10. FINANCE COSTS The Group The Company 2011 2010 2011 2010 RM RM RM RM

Interest on: Term loans 1,310,280 941,804 – – Hire-purchases 161,184 130,757 – – Bankers’ acceptances 40,335 112,838 – – Bank overdrafts 27,542 82,341 – – Bank charges and commission 132,028 115,773 824 180 1,671,369 1,383,513 824 180

11. DIRECTORS’ REMUNERATION The Group The Company 2011 2010 2011 2010 RM RM RM RM

Executive directors: Salaries, bonuses and allowances The Company 156,558 – 156,558 – Subsidiary 904,326 555,910 – – Fees – subsidiary 72,873 107,171 – – Non-executive directors of the Company: Fees 156,000 156,000 156,000 156,000 Allowances 12,000 – 12,000 – Contributions to EPF: Executive directors: The Company 17,892 – 17,892 – Subsidiary 105,468 62,220 – – 1,425,117 881,301 342,450 156,000

The estimated monetary value of benefits-in-kind received and receivable by the executive directors otherwise than in cash from the Group and from the Company amounted to RM85,746 (2010: RM46,083). notes to the 70 financial statements OLDTOWN BERHAD (797771-M)

11. DIRECTORS’ REMUNERATION (Cont’d) Directors’ remuneration which including benefits-in-kind paid or payable by the Company and its subsidiaries to the directors of the Company for the current year are broadly categorised into the following bands: Number of directors Executive Non-executive Range of remuneration directors directors

RM1 to RM50,000 – 3 RM50,001 to RM100,000 – 1 RM100,001 to RM150,000 1 – RM150,001 to RM200,000 – – RM200,001 to RM250,000 1 – RM250,001 to RM300,000 2 – RM300,001 to RM350,000 – – RM350,001 to RM400,000 – – RM400,001 to RM450,000 – – RM450,001 to RM500,000 1 –

12. PROFIT/(LOSS) BEFORE TAX Profit/(Loss) before tax has been arrived at after crediting/(charging): The Group The Company 2011 2010 2011 2010 RM RM RM RM

Rental income 367,773 217,250 – – Reversal of impairment loss on trade receivables 6,385 44,313 – – Rental of: Premises (15,837,526) (11,192,656) – – Equipment (98,544) (79,643) – – Motor vehicles (47,400) (44,400) – – Others (32,066) (302,841) – – Property, plant and equipment written off (666,301) (322,800) (649) – Listing expenses (337,404) (60,253) (337,404) (60,253) Audit fees: Statutory audit: – auditors of the Company (410,085) (118,500) (40,000) (1,500) – other auditors (26,234) (43,671) – – Rental of premises paid to: – a company in which a director has substantial interest (40,800) (9,700) (30,000) – – a close family member of a director of the Company (28,100) (16,800) – – – a director of the Company (10,500) – – – Bad debts written off (18,436) (5,763) – – Allowance for doubtful debts (6,325) – – – Preliminary expenses – (2,345) – –

Included in employee benefits expenses of the Group and the Company are contributions made to EPF of RM2,390,559 (2010: RM1,645,954) and RM120,136 (2010: RMNil) respectively. ANNUAL REPORT 2011 71

13. INCOME TAX EXPENSE The Group The Company 2011 2010 2011 2010 RM RM RM RM

Income tax comprises: Current tax expense in respect of the current year 12,525,334 9,105,534 265,000 – Adjustments recognised in the current year in relation to the income tax of prior years (281,881) (198,270) – – 12,243,453 8,907,264 265,000 – Deferred tax expense relating to origination and reversal of temporary differences (650,418) 80,376 – – Adjustments recognised in the current year in relation to the deferred tax of prior years 145,425 127,000 – – (Note 23) (504,993) 207,376 – – Total income tax expense 11,738,460 9,114,640 265,000 –

The tax expense for the year can be reconciled to profit/(loss) before tax as follows: The Group The Company 2011 2010 2011 2010 RM RM RM RM

Profit/(Loss) before tax 51,954,440 34,778,061 10,790,150 (43,913)

Tax expense calculated using Malaysian statutory income tax rate of 25% (2010: 25%) 12,989,000 8,695,000 2,698,000 (11,000) Tax effects of: Expenses that are not deductible in determining taxable profit 1,634,953 1,182,294 442,000 11,000 Income that are not taxable in determining taxable profit (1,574,676) (31,837) (2,875,000) – Expenses allowed for double tax deductions (1,001,000) (390,547) – – Reinvestment allowances utilised (29,000) (240,000) – – Enhanced deduction for qualifying expenditure (17,361) – – – Effect of difference in tax rate in foreign jurisdictions 22,000 (29,000) – – Effect of difference in tax rate applicable to small and medium scale companies (149,000) – – – Adjustments recognised in the current year in relation to the taxes of prior years: Income tax (281,881) (198,270) – – Deferred tax 145,425 127,000 – – Income tax expense recognised in profit or loss 11,738,460 9,114,640 265,000 –

Current tax assets and liabilities The Group The Company 2011 2010 2011 2010 RM RM RM RM

Current tax assets Tax refund receivables 550,388 292,170 – 5,500

Current tax liabilities Income tax payables 4,085,515 2,035,373 254,325 – notes to the 72 financial statements OLDTOWN BERHAD (797771-M)

14. EARNINGS PER SHARE The basic and diluted earnings per share are calculated as follows: The Group 2011 2010

Basic and diluted Profit for the year attributable to owners of the Company RM40,177,325 RM25,663,421

Number of ordinary shares in issue as of January 1 2 2 Effects of: Issuance of shares as consideration for purchase of subsidiaries 167,998,300 – Public issue 31,436,476 – Weighted average number of ordinary shares in issue 199,434,778 2

Basic and diluted earnings per ordinary share (RM) 0.20 12,831,711 15. PROPERTY, PLANT AND EQUIPMENT Air- conditioners, Factory computers, Leasehold Plant, equipment, furniture, buildings machinery signboard fittings Capital and Freehold Factory and Motor and electrical and office work-in- apartments land building equipment vehicles fittings equipment Renovation progress Total The Group RM RM RM RM RM RM RM RM RM RM

Cost As of January 1, 2010 2,811,035 5,000,000 1,229,887 5,935,095 4,413,014 10,293,362 9,327,384 4,968,569 – 43,978,346 Additions – – – 2,147,396 2,305,249 6,017,115 4,948,733 4,028,971 387,048 19,834,512 Disposals – – – (14,200) (925,576) – – – – (939,776) Write off – – – – – (141,234) (87,792) (471,802) – (700,828)

As of December 31, 2010 2,811,035 5,000,000 1,229,887 8,068,291 5,792,687 16,169,243 14,188,325 8,525,738 387,048 62,172,254 Arising from acquisition of subsidiaries 1,592,635 – – 2,441,401 523,814 9,391,158 7,989,605 4,362,059 – 26,300,672 Additions – – 64,800 363,868 1,622,716 2,827,009 2,803,049 1,820,354 5,182,653 14,684,449 Disposals (1,324,270) (3,800,000) – – (501,754) (1,577,544) (905,355) (1,050,219) – (9,159,142)

Write off – – – – (185,465) (297,911) (586,113) (237,322) – (1,306,811) 2011 REPORT ANNUAL Translation reserve – – – – – 8,985 17,999 30,016 – 57,000

As of December 31, 2011 3,079,400 1,200,000 1,294,687 10,873,560 7,251,998 26,520,940 23,507,510 13,450,626 5,569,701 92,748,422 73 74

15. PROPERTY, PLANT AND EQUIPMENT (Cont’d) Air- conditioners, financial statements notes to the Factory computers, Leasehold Plant, equipment, furniture, buildings machinery signboard fittings Capital and Freehold Factory and Motor and electrical and office work-in- apartments land building equipment vehicles fittings equipment Renovation progress Total The Group RM RM RM RM RM RM RM RM RM RM

Accumulated depreciation and accumulated impairment loss As of January 1, 2010 45,121 – 115,591 1,391,920 1,665,662 2,409,317 2,825,684 1,208,058 – 9,661,353

Depreciation charge (797771-M) BERHAD OLDTOWN for the year 57,220 – 24,598 720,538 879,788 2,562,662 2,468,386 1,445,159 – 8,158,351 Disposals – – – (6,030) (467,319) – – – – (473,349) Write off – – – – – (38,732) (32,451) (306,845) – (378,028) Translation reserve – – – – – 653 1,290 2,216 – 4,159

As of December 31, 2010 102,341 – 140,189 2,106,428 2,078,131 4,933,900 5,262,909 2,348,588 – 16,972,486 Arising from acquisition of subsidiaries 66,649 – – 895,111 219,685 5,183,035 4,437,427 2,258,125 – 13,060,032 Depreciation charge for the year 73,593 – 25,138 1,126,493 1,136,682 4,093,341 3,628,420 2,142,035 – 12,225,702 Disposals (91,147) – – – (383,027) (606,987) (339,496) (263,784) – (1,684,441) Write off – – – – (80,118) (160,219) (306,014) (94,159) – (640,510) Translation reserve – – – – – 1,560 3,124 5,598 – 10,282

As of December 31, 2011 151,436 – 165,327 4,128,032 2,971,353 13,444,630 12,686,370 6,396,403 – 39,943,551

Carrying amounts As of December 31, 2010 2,708,694 5,000,000 1,089,698 5,961,863 3,714,556 11,235,343 8,925,416 6,177,150 387,048 45,199,768

As of December 31, 2011 2,927,964 1,200,000 1,129,360 6,745,528 4,280,645 13,076,310 10,821,140 7,054,223 5,569,701 52,804,871 ANNUAL REPORT 2011 75

15. PROPERTY, PLANT AND EQUIPMENT (Cont’d) Furniture, fittings and Motor office vehicle Signboard equipment Total The Company RM RM RM RM

Cost As of January 1, 2010 – – – – Additions – – – – As of December 31, 2010 – – – – Additions 374,113 368 174,782 549,263 Write off – – (735) (735)

As of December 31, 2011 374,113 368 174,047 548,528

Accumulated depreciation and accumulated impairment loss As of January 1, 2010 – – – – Depreciation charge for the year – – – – As of December 31, 2010 – – – – Depreciation charge for the year 31,176 49 22,808 54,033 Write off – – (86) (86)

As of December 31, 2011 31,176 49 22,722 53,947

Carrying amounts As of December 31, 2010 – – – –

As of December 31, 2011 342,937 319 151,325 494,581

Freehold land and leasehold buildings of the Group with total carrying value of RM4,496,843 (2010: RM8,798,392) are charged to certain local licensed banks for banking facilities granted to the Group as mentioned in Note 32. The carrying amounts of certain motor vehicles of the Group acquired under hire-purchase arrangements are RM2,004,401 (2010: RM2,581,039). Included in property, plant and equipment of the Group are fully depreciated assets which are still in use, with the following costs:

The Group 2011 2010 RM RM

Plant, machinery and equipment 87,000 87,000 Motor vehicles 84,572 64,572 Factory equipment, signboard, and electrical fittings 1,805,959 6,160 Air-conditioners, computers, furniture, fittings and office equipment 1,587,429 34,236 Renovation 602,463 – 4,167,423 191,968 notes to the 76 financial statements OLDTOWN BERHAD (797771-M)

16. PREPAID LEASE PAYMENTS Short-term Long-term leasehold land leasehold land Total The Group RM RM RM

2011 At cost At beginning of year 105,820 14,256,333 14,362,153 Additions – – – At end of year 105,820 14,256,333 14,362,153

Accumulated amortisation At beginning of year 6,291 177,319 183,610 Amortisation for the year 2,385 187,750 190,135 At end of year 8,676 365,069 373,745

Carrying amount 97,144 13,891,264 13,988,408

2010 At cost At beginning of year 105,820 2,954,416 3,060,236 Additions – 11,301,917 11,301,917 At end of year 105,820 14,256,333 14,362,153

Accumulated amortisation At beginning of year 3,906 55,682 59,588 Amortisation for the year 2,385 121,637 124,022 At end of year 6,291 177,319 183,610

Carrying amount 99,529 14,079,014 14,178,543

The leasehold land of the Group with total carrying value of RM13,988,408 (2010: RM14,178,543) are charged to certain local licensed banks for banking facilities granted to the Group as mentioned in Note 32.

17. INVESTMENT PROPERTIES Long-term leasehold land Freehold and building shoplot Total The Group RM RM RM

2011 At fair value At beginning of year 1,140,000 660,000 1,800,000 Increase in fair value during the year – 60,000 60,000 At end of year 1,140,000 720,000 1,860,000

Carrying amount 1,140,000 720,000 1,860,000

2010 At fair value At beginning and end of year 1,140,000 660,000 1,800,000

Carrying amount 1,140,000 660,000 1,800,000 ANNUAL REPORT 2011 77

17. INVESTMENT PROPERTIES (Cont’d) The fair values of the investment properties were estimated at RM1,860,000 (2010: RM1,800,000) based on valuation by an independent professionally qualified valuer. Valuations were arrived at by reference to market evidence of transaction prices for similar properties. The investment properties amounting to RM1,140,000 (2010: RM1,800,000) were charged to local licensed banks for banking facilities granted to the Group as mentioned in Note 32. The strata title for the freehold shoplot has yet to be issued as of December 31, 2011. The rental income and direct operating expenses arising from the investment properties that generated rental income which was recognised during the financial year amounted to RM115,100 (2010: RM117,600) and RM18,092 (2010: RM16,389) respectively.

18. INVESTMENT IN SUBSIDIARIES The Company 2011 2010 RM RM

Unquoted shares, at cost 290,452,291 4

Details of subsidiaries acquired from Old Town International Sdn. Bhd. considered as entities under common control are as follows:

Effective equity interest Country of 2011 2010 Name of company incorporation % % Principal activities

White Cafe Sdn. Bhd. Malaysia 100.00 100.00 Manufacturing of beverages. White Cafe Marketing Sdn. Bhd. Malaysia 100.00 100.00 Marketing of beverages. Gongga Food Sdn. Bhd. Malaysia 100.00 100.00 Manufacture of roasted coffee powder and procurement of food items.

Kopitiam Asia Pacific Sdn. Bhd. Malaysia 100.00 100.00 Franchising of cafe outlets and provision of management services.

Oldtown Singapore Pte. Ltd.* Singapore 100.00 100.00 Franchising of cafe outlets, provision of management services, procurement of food items and operator of cafe outlet.

Old Town Kopitiam Sdn. Bhd.# Malaysia 100.00 100.00 Operator of cafe outlets.

* The financial statements of this subsidiary were examined by auditors other than the auditors of the Company. # Held through Kopitiam Asia Pacific Sdn. Bhd.. The consolidated financial statements incorporate the financial statements of the entities under common control from the earliest date presented or since the date when combining entities first came under common control. The effect of the said transaction on the financial statements of the Group are as follows: 2011 RM

Purchase consideration 226,150,998 Less: Nominal value of shares in subsidiaries acquired (3,497,104) Reserve as of December 31, 2011 222,653,894 notes to the 78 financial statements OLDTOWN BERHAD (797771-M)

18. INVESTMENT IN SUBSIDIARIES (Cont’d) Details of the subsidiaries consolidated using the acquisition method of accounting are as follows:

Effective equity interest Country of 2011 2010 Name of company incorporation % % Principal activities

Oldtown Logistics Sdn. Bhd. Malaysia 100.00 100.00 Dormant. Old Town (M) Sdn. Bhd. Malaysia 100.00 100.00 Investment holding. Emperor’s Kitchen Sdn. Bhd. Malaysia 100.00 – Central food processing centre. Dynasty Confectionery Sdn. Bhd. Malaysia 100.00 – Central bakery and confectionery processing centre.

Esquire Chef Sdn. Bhd. Malaysia 100.00 – Central food processing centre. Old Town Kopitiam Butterworth Sdn. Bhd. Malaysia 100.00 – Operator of cafe outlets. Old Town Kopitiam Kuala Lumpur Sdn. Bhd. Malaysia 100.00 – Operator of cafe outlets. Old Town Kopitiam Cheras Sdn. Bhd. Malaysia 100.00 – Operator of cafe outlets.

Dynasty Kitchen Sdn. Bhd.@ Malaysia 100.00 – Distribution centre. Oldtown APP Sdn. Bhd. Malaysia 100.00 – Dormant. Conneczone Sdn. Bhd. Malaysia 80.00 – Operator of cafe outlets.

@ Held through Old Town Kopitiam Butterworth Sdn. Bhd.. During the financial year, the Company acquired eight (8) direct and indirect subsidiaries by way of issuance of 39,354,000 new ordinary shares of RM1 each and cash consideration of RM24,848,287. The acquisition was completed on May 16, 2011. The acquired subsidiaries before inter-company eliminations have contributed the following results to the Group: 2011 RM

Revenue 54,831,911 Profit for the year 6,021,197

Had these business combinations been effected at January 1, 2011, the revenue of the Group operations would have been RM296,349,542 and the profit for the year would have been RM43,421,581. The directors of the Group consider these “pro-forma” numbers to represent an approximate measure of the performance of the combined group on an annualised basis and to provide a reference point for comparison in future periods. Acquisition related costs amounting to RM165,177 have been excluded from the consideration transferred and have been recognised as an expense in the period within the “other expenses” line item in the statements of comprehensive income. The Company incorporated a wholly-owned subsidiary, Oldtown APP Sdn. Bhd. (“Oldtown APP”) on November 10, 2011 with authorised share capital RM100,000 of RM1 each and issued and fully paid-up share capital of RM2 of RM1 each. Oldtown APP has not commenced business operations as of reporting date. ANNUAL REPORT 2011 79

19. INVESTMENT IN ASSOCIATES The Group The Company 2011 2010 2011 2010 RM RM RM RM

Unquoted equity shares, at cost 1,461,107 482,019 1,101,002 – Group’s share of post-acquisition reserve (252,417) (33,280) – – 1,208,690 448,739 1,101,002 –

Summarised financial information in respect of the Group’s associates is set out below: The Group 2011 2010 RM RM

Total assets 8,253,779 5,174,363 Total liabilities (6,834,995) (4,321,827) Net assets 1,418,784 852,536

Group’s share of net assets of associates 587,608 371,097

Total revenue 29,793,479 17,597,593

Total loss for the year (497,774) (1,276,440)

Group’s share of losses of associates (252,417) (33,280)

The details of the associates of the Group are as follows:

Effective equity interest Country of 2011 2010 Name of company incorporation % % Principal activities

PT Oldtown Indonesia* Indonesia – 35.00 Operator of cafe outlets. OTK Singapore Pte. Ltd. *# Singapore 50.00 50.00 Operator of cafe outlets. OTK Eatery Sdn. Bhd. Malaysia 40.00 – Operator of cafe outlets. Plus One Solution Sdn. Bhd. Malaysia 50.00 – Information technology service centre.

* The financial statements of this company are examined by auditors other than the auditors of the Company. # Held through Oldtown Singapore Pte. Ltd.. During the financial year, the Company disposed off 16% equity interest in PT Oldtown Indonesia and was reclassified as other investments with effective equity interest of 19% as disclosed in Note 20. notes to the 80 financial statements OLDTOWN BERHAD (797771-M)

20. OTHER INVESTMENTS The Group 2011 2010 RM RM

Non-current Unquoted shares at cost in: Malaysia 29,000 29,000 Indonesia 736,752 – 765,752 29,000

Current Available-for-sale investments: Quoted unit trusts in Malaysia, at fair value 10,205,442 –

Fair value measurements of quoted unit trusts are derived from quoted prices (unadjusted) in active market for identical assets.

21. GOODWILL ON CONSOLIDATION Goodwill on consolidation The Group RM

Cost As of January 1, 2010 – Arising from acquisition of a new subsidiary 6,629 As of January 1, 2011 6,629 Arising from acquisition of a new subsidiary 25,665,009

As of December 31, 2011 25,671,638

Carrying amount As of December 31, 2010 –

As of December 31, 2011 25,671,638

Goodwill acquired in business combination is allocated, at acquisition, to the cash-generated units (“CGUs”) that are expected to benefit from the business combinations. The Group considers each subsidiary acquired as a single CGU and the carrying amounts of goodwill were allocated to the respective subsidiaries. Goodwill arose in the acquisition of five (5) direct and indirect subsidiaries including Old Town Kopitiam Butterworth Sdn. Bhd., Old Town Kopitiam Kuala Lumpur Sdn. Bhd., Old Town Kopitiam Cheras Sdn. Bhd., Dynasty Kitchen Sdn. Bhd. and Conneczone Sdn. Bhd. because the cost of the combination included a control premium. In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expect synergies, revenue growth, future market development and the assembled workforce of the subsidiaries. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. The Group also acquired the supplier exclusive right as part of the acquisition from Emperor’s Kitchen Sdn. Bhd., Esquire Chef Sdn. Bhd. and Dynasty Confectionery Sdn. Bhd.. This intangible asset has been separately recognised from goodwill as they are able to meet the definition of intangible assets as disclosed in Note 22. None of the goodwill arising on these acquisition is expected to be deductible for tax purposes. The recoverable amounts of the CGUs were based on value-in-use calculations. The calculations were determined using projected cash flows for a ten-year period by extrapolation using the growth rate based on historical experience, management’s assessment of future trends and expectation of market developments in the respective industries. ANNUAL REPORT 2011 81

21. GOODWILL ON CONSOLIDATION (Cont’d) The key assumptions used in preparation of the projected cash flows are as follows:

• Post-tax discount rate of 12%; • There will be no material changes in the structure and principal activities of the subsidiaries; • Chain of outlets will continue to operate under the franchise license for 2 terms (5 years each term); • Projected growth rate of food and beverages at 6.8% per annum; • There will not be any significant changes in the prices and supply of raw materials, wages and other related costs, resulting from industrial dispute, adverse changes in economic conditions or other abnormal factors, which will adversely affect the operations of the Group; and

• The statutory income tax rate for Malaysia will remain at 25%. There will be no material changes to the present legislation or regulations, rates and bases of duties, levies and other taxes affecting the Group’s activities. No impairment loss is recognised for goodwill as the recoverable amount exceeds its carrying amount during the financial year.

22. INTANGIBLE ASSET Supplier exclusive right The Group RM

Cost As of January 1, 2011 – Arising from acquisition of new subsidiaries 23,432,693

As of December 31, 2011 23,432,693

Accumulated amortisation As of January 1, 2011 – Amortisation for the year 1,366,907

As of December 31, 2011 1,366,907

Carrying amount As of December 31, 2010 –

As of December 31, 2011 22,065,786

Intangible asset represents supplier exclusive right for sale of goods to a chain of outlets. The right is amortised over the useful life of ten (10) years. notes to the 82 financial statements OLDTOWN BERHAD (797771-M)

23. DEFERRED TAX ASSETS/(LIABILITIES) Arising At from Recognised beginning acquisition of in income At end of year subsidiaries statements of year The Group RM RM RM RM

2011 Deferred tax assets Property, plant and equipment (254,666) – 9,619 (245,047) Deferred income 1,276,112 – 108,615 1,384,727 Unabsorbed tax capital allowances 43,554 – 10,766 54,320 1,065,000 – 129,000 1,194,000

Deferred tax liabilities Property, plant and equipment (1,986,054) (650,000) 416,993 (2,219,061) Investment properties – – (15,000) (15,000) Trade receivables (13,000) – (25,000) (38,000) Unrealised gain on foreign exchange – – 7,000 7,000 Unabsorbed tax capital allowances 12,000 – (8,000) 4,000 (1,987,054) (650,000) 375,993 (2,261,061)

At Recognised beginning in income At end of year statements of year The Group RM RM RM

2010 Deferred tax assets Property, plant and equipment (194,695) (59,971) (254,666) Deferred income 935,338 340,774 1,276,112 Unabsorbed tax capital allowances 27,357 16,197 43,554

768,000 297,000 1,065,000

Deferred tax liabilities Property, plant and equipment (1,463,678) (522,376) (1,986,054) Trade receivables (19,000) 6,000 (13,000) Unabsorbed tax capital allowances – 12,000 12,000 (1,482,678) (504,376) (1,987,054)

24. INVENTORIES The Group 2011 2010 RM RM

Finished goods and trading merchandise 7,394,839 7,577,793 Raw materials 5,929,420 2,794,857 Packing materials 1,307,519 540,350 Work-in-progress 292,418 155,201 Food, beverages and consumables 1,492,175 804,777 16,416,371 11,872,978 ANNUAL REPORT 2011 83

25. TRADE AND OTHER RECEIVABLES The Group The Company 2011 2010 2011 2010 RM RM RM RM

Trade receivables 29,122,304 32,213,884 – – Less: Allowance for doubtful debts (6,325) (10,892) – – 29,115,979 32,202,992 – – Other receivables 4,483,831 196,781 – – Refundable deposits 6,863,737 4,099,530 13,370 – Loans and receivables 40,463,547 36,499,303 13,370 – Advance payment for acquisition of landed properties and plant and machinery 2,054,665 1,554,259 – – Prepaid expenses 1,889,835 2,287,553 84,965 977,826 44,408,047 40,341,115 98,335 977,826

Trade and other receivables disclosed above are classified as loans and receivables and are therefore, measured at amortised cost. Trade receivables of the Group comprise amounts receivable for the sale of goods. Other receivables of the Group comprise sale proceeds receivable from disposal of property, plant and equipment. Certain trade transactions of the Group were on cash terms and credit period ranged from 14 to 90 days (2010: 14 to 120 days). The currency profile of trade and other receivables are as follows: The Group 2011 2010 RM RM

Ringgit Malaysia 25,925,793 27,614,872 United States Dollar 6,589,718 4,039,284 Singapore Dollar 1,090,624 756,509 33,606,135 32,410,665

An allowance has been made for estimated irrecoverable amounts of trade receivables of the Group of RM6,325 (2010: RM10,892) based on the default experience of the Group. Movement in the allowance for doubtful debts is as follows: The Group 2011 2010 RM RM

Balance at beginning of year 10,892 55,205 Impairment losses reversed (6,385) (44,313) Impairment losses recognised on receivables 6,325 – Amounts written off during the year as uncollectible (4,507) – Balance at end of year 6,325 10,892

Included in trade receivables of the Group are related parties’ balances of RM10,381,912 (2010: RM15,133,613). Included in trade receivables of the Group are receivables with total carrying amount of RM2,657,010 (2010: RM7,272,642) which are past due as of December 31, 2011 for which the Group has not provided for impairment loss. The Group does not hold any collateral over these balances nor does it have a legal right to offset against any amounts owed by the Group to the counterparty. notes to the 84 financial statements OLDTOWN BERHAD (797771-M)

25. TRADE AND OTHER RECEIVABLES (Cont’d) Ageing of trade receivables which are past due but not impaired are as follows: The Group 2011 2010 RM RM

Within 30 days 8,678 939,239 31 days to 60 days 1,427,328 1,738,172 61 days to 90 days 940,522 1,567,445 91 days to 120 days 62,869 941,227 Over 121 days 217,613 2,086,559 2,657,010 7,272,642

Average age (days) 71 94

The Group seeks to maintain strict control over their outstanding trade receivables and has a credit period policy to minimise credit risk. Overdue balances are reviewed regularly by management. The Group has not provided for impairment loss on trade receivable accounts that are past due as there has not been a significant change in credit quality and the amounts are still considered recoverable. Transaction with related parties are disclosed in Note 26.

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS During the financial year, the Company became a subsidiary of Old Town International Sdn. Bhd., a company incorporated in Malaysia and the directors regard it as the ultimate holding company. The amount owing by subsidiaries comprise mainly management fees receivable, advances and expenses paid on behalf, which are unsecured, interest free and repayable upon demand. The amount owing by associates arose mainly from advances granted which are unsecured, interest-free and repayable upon demand. The amount owing to a subsidiary arose mainly from outstanding purchase consideration for the acquisition of subsidiaries and expenses paid on behalf, which are unsecured, interest-free and repayable upon demand. Other than as disclosed elsewhere in the financial statements, the related parties and their relationship with the Company and its subsidiaries are as follows:

Names of related parties Relationship

Old Town International Sdn. Bhd. ) Holding company of the Company.

Conneczone Sdn. Bhd. ) Dynasty Confectionery Sdn. Bhd. ) Dynasty Kitchen Sdn. Bhd. ) Esquire Chef Sdn. Bhd. ) Emperor’s Kitchen Sdn. Bhd. ) Gongga Food Sdn. Bhd. ) Kopitiam Asia Pacific Sdn. Bhd. ) Old Town Kopitiam Butterworth Sdn. Bhd. ) Subsidiaries of the Company. Old Town Kopitiam Cheras Sdn. Bhd. ) Old Town Kopitiam Kuala Lumpur Sdn. Bhd. ) Old Town Kopitiam Sdn. Bhd. ) Old Town (M) Sdn. Bhd. ) Oldtown Logistics Sdn. Bhd. ) Oldtown Singapore Pte. Ltd. ) White Cafe Marketing Sdn. Bhd. ) White Cafe Sdn. Bhd. ) ANNUAL REPORT 2011 85

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d) Names of related parties Relationship

OTK Eatery Sdn. Bhd. ) OTK Singapore Pte. Ltd. ) Associates of the Company. Plus One Solution Sdn. Bhd. ) AC Montage Marketing Sdn. Bhd. ) A company in which a close family member of a director of the Company who is also ) a substantial shareholder of the Company is a director and has substantial financial ) interest. ) A company in which a director of the Company is a shareholder. ) GC Alamanda Sdn. Bhd. ) GC Bangsar Two Sdn. Bhd. ) GC Brickfields Sdn. Bhd. ) GC Port Klang Sdn. Bhd. ) GC Selayang Sdn. Bhd. ) Companies in which a close family member of a director of the Company is a director GC Shamelin Sdn. Bhd. ) and has substantial financial interest. Gourmet Chef Sdn. Bhd. ) Gourmet Corner KL Sdn. Bhd. ) Manifest Corporate Services Sdn. Bhd. ) Natural Marketing Sdn. Bhd. ) OTK (Genting) Sdn. Bhd. ) GC Ampang Sdn. Bhd. ) A company in which a close family member of a director of the Company is a director ) until July 15, 2011 and ceased to have substantial financial interest with effect from ) June 29, 2011. Acadian Gourmet KK Sdn. Bhd. ) Companies in which a director of the Company is deemed to have substantial financial Acadian Gourmet PB Sdn. Bhd. ) interest. Acadian Gourmet Sdn. Bhd. ) PT Oldtown Indonesia ) An associate of Old Town (M) Sdn. Bhd., a subsidiary of Oldtown Berhad from August ) 13, 2010 to October 21, 2011. Oldtown Kopitiam Pavilion Sdn. Bhd. ) A company in which directors of the Company are directors and have substantial ) financial interests. Gourmet Corner Ipoh Sdn. Bhd. ) A company in which close family member of a director of the Company is a director and ) has substantial financial interest. ) A company in which a director of the Company is deemed to have substantial ) financial interest. ) Mayson Trade (M) Sdn. Bhd. ) Companies in which a close family member of a director of the Company has substantial OTK Logistics Sdn. Bhd. ) financial interest. Nam Heong ) A business in which close family members of a director of the Company are partners. Oldtown Asia Pacific Limited ) Companies in which a director of the Company is a director and has substantial financial OTK Northern Sdn. Bhd. ) interest. notes to the 86 financial statements OLDTOWN BERHAD (797771-M)

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d) Names of related parties Relationship

GC Bangsar Sdn. Bhd. ) GC Kapar Sdn. Bhd. ) GC South City Sdn. Bhd. ) OTK (Alam Damai) Sdn. Bhd. ) OTK (Intan) Sdn. Bhd. ) Companies in which a close family member of a director of the Company is a OTK (Kuala Selangor) Sdn. Bhd. ) director and deemed to have substantial financial interest. OTK (Rawang) Sdn. Bhd. ) OTK (Shah Alam) Sdn. Bhd. ) OTK Manjung Sdn. Bhd. ) OTK Sarawak Sdn. Bhd. ) CN Properties Sdn. Bhd. ) A company in which close family members of a director of the Company are ) directors and have substantial financial interest. CN Supplies Sdn. Bhd. ) A company in which a director of the Company and his wife are directors and have ) substantial financial interests. First Habour Coffee Shop ) A business in which a close family member of a director of the Company is the ) sole proprietor. Gourmet Corner Sdn. Bhd. ) A company in which a close family member of a director of the Company is a ) director and has direct and indirect substantial financial interest. ) A company in which a director of the Company is deemed to have substantial ) financial interest and a close family member of a director of the Company has ) substantial financial interest. ) Noble Virtue Sdn. Bhd. ) A company in which a director of the Company and close family members are ) directors and have substantial financial interests. Body Revolution Sdn. Bhd. ) A company in which a director of the Company is deemed to have substantial ) financial interest. ) A company in which a close family member of a director of the holding company ) has substantial financial interest. ) GC Bangi Sdn. Bhd. ) OTK Ipoh Road Sdn. Bhd. ) OTK Megah Sdn. Bhd. ) Companies in which close family members of a director of the Company are OTK USJ Sdn. Bhd. ) directors and have substantial financial interests. OTK Sunway Sdn. Bhd. ) OTK (Petaling Jaya) Sdn. Bhd. ) Lee Teck Wai ) Brother of a director and a shareholder of the Company. Lee Siew Ming ) Brother of a director of the Company. ) Spouse of a director of the Company. Lee Siew Heng ) Director and deemed substantial shareholder of the Company. ANNUAL REPORT 2011 87

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d) During the financial year, significant related parties transactions are as follows:

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Ultimate holding company

Old Town International Sdn. Bhd. Rental of premises paid/payable 721,646 – – – Management fee paid 486,000 – – – Dividend paid – – 4,875,000 –

Subsidiaries

Old Town (M) Sdn. Bhd. Advances granted – – 620,000 515,000

Oldtown Logistics Sdn. Bhd. Advances granted – – – 13,500 Repayment of advances granted – – – 6,000

Gongga Food Sdn. Bhd. Dividend received (gross) – – 1,995,000 – Management fees received/receivable – – 166,250 –

Kopitiam Asia Pacific Sdn. Bhd. Acquisition of investment – – 5,130,287 – Dividend received (gross) – – 3,312,500 – Advances received – – 570,004 – Management fees received/receivable – – 166,250 – Trade purchases – – 3,270 –

Dynasty Kitchen Sdn. Bhd. Management fees received/receivable – – 20,000 –

Old Town Kopitiam Cheras Sdn. Bhd. Management fees received/receivable – – 25,000 –

Old Town Kopitiam Sdn. Bhd. Management fees received/receivable – – 166,250 –

Oldtown Singapore Pte. Ltd. Management fees received/receivable – – 11,250 –

White Cafe Marketing Sdn. Bhd. Dividend received (gross) – – 1,190,000 – Management fees received/receivable – – 166,250 – Trade purchases – – 2,092 –

White Cafe Sdn. Bhd. Advances granted – – 52,000,000 – Repayment of advance granted – – 40,000,000 – Dividend received (gross) – – 4,000,000 – Advances received – – 300,000 – Management fees received/receivable – – 166,250 – notes to the 88 financial statements OLDTOWN BERHAD (797771-M)

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d)

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Subsidiaries (Cont’d)

Dynasty Confectionery Sdn. Bhd. Management fees received/receivable – – 45,000 –

Emperor’s Kitchen Sdn. Bhd. Dividend received (gross) – – 270,003 – Management fees received/receivable – – 45,000 –

Esquire Chef Sdn. Bhd. Dividend received (gross) – – 135,000 – Management fees received/receivable – – 45,000 –

Old Town Kopitiam Butterworth Sdn. Bhd. Dividend received (gross) – – 265,000 – Management fees received/receivable – – 45,000 –

Conneczone Sdn. Bhd. Management fees received/receivable – – 20,000 –

Old Town Kopitiam Kuala Lumpur Sdn. Bhd. Management fees received/receivable – – 20,000 –

Associates

OTK Eatery Sdn. Bhd. Royalty fees paid/payable 438,435 – – – Advertisement and promotion fees received/receivable 263,061 – – – Logistic and loading fees paid/payable 219,218 – – – Franchise fees received/receivable 80,000 – – – Trade sales 48,977 – – – Security deposit received/receivable 30,000 – – – Accounting fees received/receivable 23,400 – – – Incentives paid/payable 3,000 – – – Advances granted – – 60,000 –

OTK Singapore Pte. Ltd. Trade sales 3,759,345 3,148,583 – – Royalty fees received/receivable 916,723 756,638 – – Advertising and promotion fees received/receivable 550,034 453,984 – – Licence fees received/receivable – 70,818 – –

Plus One Solution Sdn. Bhd. Trade purchases 162,885 – – – ANNUAL REPORT 2011 89

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d)

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Associates (Cont’d)

PT Oldtown Indonesia Trade sales 423,776 273,335 – – Royalty fees received/receivable 68,976 – – – Advertisement and promotion fees received/receivable 17,244 – – – Initial training fees received – 311,570 – – Licence fees received/receivable – 155,540 – – Outlet opening fees received/receivable – 62,006 – –

Other related parties

Old Town Kopitiam Kuala Lumpur Sdn. Bhd. Trade sales 746,576 2,192,010 – – Royalty fees received/receivable 97,786 229,331 – – Advertisement and promotion fees received/receivable 58,672 137,599 – – Accounting fees received/receivable 6,000 14,400 – – Management fees received/receivable 2,000 – – – Staff training fees received/receivable 1,850 500 – – Incentive paid/payable – 2,833 – –

Old Town International Sdn. Bhd. Rental of premises paid/payable 448,958 – – – Repayment of advances – – 90,000 – Advances received – 1,590,000 890,000 1,590,000 Acquisition of investment – – 227,251,998 – Transfer of property, plant and equipment – – 163,788 –

Dynasty Confectionery Sdn. Bhd. Trade purchases 2,176,770 4,395,683 – – Rental received 19,000 90,000 – – Rental of motor vehicles paid/payable 18,500 – – – Accounting fees received/receivable 3,500 8,400 – – Management fees received/receivable 3,000 – – – Purchase of consumables – 616 – –

Dynasty Kitchen Sdn. Bhd. Trade sales 3,045,148 6,170,793 – – Accounting fees received/receivable 3,000 7,200 – – Management fees received/receivable 2,000 – – –

Conneczone Sdn. Bhd. Trade sales 949,582 2,455,790 – – Royalty fees received/receivable 148,802 365,260 – – Advertisement and promotion fees received/receivable 89,281 219,156 – – Accounting fees received/receivable 6,000 14,400 – – Staff training fees received/receivable 3,000 2,000 – – Management fees received/receivable 2,000 – – – Incentive paid/payable – 4,000 – – Rental paid/payable – 1,200 – – notes to the 90 financial statements OLDTOWN BERHAD (797771-M)

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d)

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Other related parties (Cont’d)

Esquire Chef Sdn. Bhd. Trade purchases 2,206,782 5,145,579 – – Accounting fees received/receivable 3,500 8,400 – – Management fees received/receivable 3,000 – – – Laboratory fee received/receivable – 26,400 – –

Emperor’s Kitchen Sdn. Bhd. Trade purchases 9,147,344 20,663,159 – – Accounting fees received/receivable 4,000 9,600 – – Management fees received/receivable 3,000 – – – Trade sales 1,446 – – – Rental of premises paid/payable 550 2,570 – –

Old Town Kopitiam Butterworth Sdn. Bhd. Trade sales 976,067 2,672,442 – – Royalty fees received/receivable 511,585 1,074,816 – – Advertisement and promotion fees received/receivable 306,951 644,890 – – Accounting fees received/receivable 22,500 49,500 – – Staff training fees received/receivable 14,850 4,350 – – Management fees received/receivable 3,000 – – – Rental paid/payable 600 3,000 – – Dividend received/receivable – net – 187,500 – – Franchise fee received/receivable – 160,000 – – Security deposit received/receivable – 60,000 – – Incentive paid/payable – 8,583 – –

Old Town Kopitiam Cheras Sdn. Bhd. Trade sales 1,199,200 3,129,674 – – Royalty fees received/receivable 169,446 413,081 – – Advertisement and promotion fees received/receivable 101,668 247,849 – – Accounting fees received/receivable 6,000 14,400 – – Staff training fees received/receivable 3,250 5,100 – – Management fees received/receivable 3,000 – – – Rental paid/payable – 6,800 – – Rental received/receivable – 5,100 – – Incentives paid/payable – 4,000 – – Contract wages received/receivable – 152 – –

Noble Virtue Sdn. Bhd. Rental paid/payable 52,800 – – –

Lee Siew Heng Rental of premises paid/payable 18,000 – – –

Manifest Corporate Services Sdn. Bhd. Rental of motor vehicles paid/payable 18,100 – – – ANNUAL REPORT 2011 91

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d)

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Other related parties (Cont’d)

GC Bangi Sdn. Bhd. Trade sales 615,547 – – – Royalty fees received/receivable 80,305 – – – Advertisement and promotion fees received/receivable 48,183 – – – Staff training fees received/receivable 3,150 – – – Accounting fees received/receivable 3,000 – – – Incentive paid/payable 1,000 – – –

GC Shamelin Sdn. Bhd. Trade sales 762,440 – – – Franchise fees received/receivable 80,000 – – – Security deposit received/receivable 30,000 – – – Initial training fees received/receivable 20,000 – – – Royalty fees received/receivable 14,235 – – – Advertisement and promotion fees received/receivable 8,541 – – –

Oldtown Singapore Pte. Ltd. Management fees received/receivable 750 – – –

AC Montage Marketing Sdn. Bhd. Rental of premises paid/payable 49,200 46,500 – – Rental deposit paid/payable – 6,600 – – Utilities deposit paid/payable – 1,000 – –

GC Alamanda Sdn. Bhd. Trade sales 556,921 492,860 – – Royalty fees received/receivable 78,048 68,471 – – Advertisement and promotion fees received/receivable 46,829 41,083 – – Accounting fees received/receivable 3,000 3,600 – – Staff training fees received/receivable 2,200 250 – –

GC Ampang Sdn. Bhd. Trade sales 317,124 678,526 – – Royalty fees received/receivable 46,807 96,847 – – Advertisement and promotion fees received/receivable 28,084 58,108 – – Accounting fees received/receivable 1,800 3,600 – – Incentive paid/payable 650 1,000 – – Rental paid/payable – 2,200 – – Staff training fees received/receivable – 850 – –

GC Bangsar Two Sdn. Bhd. Trade sales 653,303 601,044 – – Royalty fees received/receivable 107,248 98,048 – – Advertisement and promotion fees received/receivable 64,349 58,829 – – Accounting fees received/receivable 3,000 3,600 – – Incentive paid/payable 1,000 1,000 – – Staff training fees received/receivable 850 350 – – notes to the 92 financial statements OLDTOWN BERHAD (797771-M)

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d)

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Other related parties (Cont’d)

GC Brickfields Sdn. Bhd. Trade sales 699,092 970,070 – – Royalty fees received/receivable 98,853 103,183 – – Advertisement and promotion fees received/receivable 59,312 61,910 – – Accounting fees received/receivable 3,000 3,600 – – Incentive paid/payable 1,000 1,000 – – Franchise fees received – 80,000 – – Security deposit received – 30,000 – – Staff training fees received/receivable – 250 – –

GC Selayang Sdn. Bhd. Trade sales 532,449 576,617 – – Royalty fees received/receivable 77,646 81,088 – – Advertisement and promotion fees received/receivable 46,587 48,653 – – Accounting fees received/receivable 3,000 3,600 – – Incentive paid/payable 1,000 1,000 – – Staff training fees received/receivable 700 350 – –

Gourmet Chef Sdn. Bhd. Trade sales 443,671 529,876 – – Royalty fees received/receivable 64,981 74,641 – – Advertisement and promotion fees received/receivable 38,988 44,784 – – Staff training fees received/receivable 1,710 150 – – Incentive paid/payable 1,000 1,000 – – Rental paid/payable – 1,200 – –

Gourmet Corner KL Sdn. Bhd. Trade sales 868,194 903,389 – – Rental paid/payable 241,300 – – – Royalty fees received/receivable 133,674 133,650 – – Advertisement and promotion fees received/receivable 80,204 80,190 – – Staff training fees received/receivable 5,350 300 – – Accounting fees received/receivable 3,000 3,600 – –

Natural Marketing Sdn. Bhd. Trade purchases 228,614 259,005 – –

OTK (Genting) Sdn. Bhd. Trade sales 6,276,381 5,373,464 – – Royalty fees received/receivable 1,047,112 835,014 – – Advertisement and promotion fees received/receivable 628,267 501,008 – – Franchise fees received 160,000 160,000 – – Security deposit received 60,000 60,000 – – Initial training fee received 20,000 – – – Accounting fees received/receivable 17,700 16,500 – – Staff training fees received/receivable 6,450 – – – Trade purchases – 241 – – ANNUAL REPORT 2011 93

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d)

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Other related parties (Cont’d)

Acadian Gourmet KK Sdn. Bhd. Trade sales 555,679 533,269 – – Royalty fees received/receivable 75,489 76,627 – – Advertisement and promotion fees received/receivable 45,293 45,976 – – Accounting fees received/receivable 3,000 3,600 – – Staff training fees received/receivable 1,750 500 – – Incentive paid/payable 1,000 1,000 – – Rental paid/payable – 1,200 – –

Acadian Gourmet PB Sdn. Bhd. Trade sales 680,208 786,129 – – Royalty fees received/receivable 80,870 90,331 – – Advertisement and promotion fees received/receivable 48,522 54,199 – – Accounting fees received/receivable 3,000 3,600 – – Staff training fees received/receivable 2,150 500 – – Incentive paid/payable 1,000 1,000 – –

Acadian Gourmet Sdn. Bhd. Trade sales 392,863 400,681 – – Royalty fees received/receivable 50,447 50,354 – – Advertisement and promotion fees received/receivable 30,268 30,213 – – Accounting fees received/receivable 3,000 3,600 – – Incentives paid/payable 1,000 1,000 – – Staff training fees received/receivable 150 500 – –

Oldtown Kopitiam Pavilion Sdn. Bhd. Rental paid – 11,500 – –

Gourmet Corner Ipoh Sdn. Bhd. Trade sales 1,000,776 1,016,028 – – Royalty fees received/receivable 139,469 131,879 – – Advertisement and promotion fees received/receivable 83,681 79,127 – – Staff training fees received/receivable 2,950 150 – – Incentive paid/payable 2,000 2,000 – – Rental paid/payable – 1,000 – –

Mayson Trade (M) Sdn. Bhd. Trade purchases 161,652 201,731 – –

OTK Logistics Sdn. Bhd. Trade sales 3,035,343 2,308,795 – –

Oldtown Asia Pacific Limited Outlet opening fees received/receivable 8,065 – – – Management fees received/receivable 5,066 – – – Royalty fee received/receivable 2,325 – – – notes to the 94 financial statements OLDTOWN BERHAD (797771-M)

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d)

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Other related parties (Cont’d)

OTK Northern Sdn. Bhd. Trade sales 735,566 115,035 – – Royalty fees received/receivable 82,381 80,857 – – Advertisement and promotion fees received/receivable 49,428 48,514 – – Accounting fees received/receivable 3,000 3,600 – – Staff training fees received/receivable 1,650 550 – – Incentive paid/payable 1,000 1,000 – –

GC Bangsar Sdn. Bhd. Trade sales 662,499 656,578 – – Royalty fee received/receivable 102,981 98,477 – – Advertisement and promotion fees received/receivable 61,789 59,086 – – Accounting fees received/receivable 3,000 3,600 – – Incentive paid/payable 1,000 1,000 – – Staff training fees received/receivable 850 700 – –

GC Kapar Sdn. Bhd. Trade sales 393,978 483,243 – – Royalty fees received/receivable 52,527 66,965 – – Advertisement and promotion fees received/receivable 31,516 40,179 – – Accounting fees received/receivable 3,000 3,600 – – Staff training fees received/receivable 1,700 300 – – Incentive paid/payable 1,000 1,000 – –

GC South City Sdn. Bhd. Trade sales 425,275 448,409 – – Royalty fees received/receivable 60,802 63,985 – – Advertisement and promotion fees received/receivable 36,481 38,391 – – Accounting fees received/receivable 3,000 3,600 – – Staff training fees received/receivable 650 300 – –

OTK (Alam Damai) Sdn. Bhd. Trade sales 297,789 553,506 – – Royalty fees received/receivable 41,170 44,796 – – Advertisement and promotion fees received/receivable 24,702 26,877 – – Accounting fees received/receivable 3,000 3,300 – – Incentive paid/payable 1,000 833 – – Staff training fees received/receivable 400 200 – – Franchise fees received – 80,000 – – Security deposit received – 30,000 – –

OTK (Intan) Sdn. Bhd. Trade sales 574,541 593,458 – – Royalty fees received/receivable 80,813 75,902 – – Advertisement and promotion fees received/receivable 48,488 45,541 – – Accounting fees received/receivable 3,000 3,600 – – Incentive paid/payable 1,000 1,000 – – ANNUAL REPORT 2011 95

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d)

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Other related parties (Cont’d)

OTK (Kuala Selangor) Sdn. Bhd. Trade sales 353,763 521,092 – – Royalty fees received/receivable 55,941 45,633 – – Advertisement and promotion fees received/receivable 33,565 27,380 – – Accounting fees received/receivable 3,000 2,400 – – Incentive paid/payable 1,000 667 – – Staff training fees received/receivable 100 – – – Franchise fees received – 80,000 – – Security deposit received – 30,000 – –

OTK (Rawang) Sdn. Bhd. Trade sales 514,251 612,094 – – Franchise fees received/receivable 80,000 – – – Royalty fees received/receivable 70,239 64,552 – – Advertisement and promotion fees received/receivable 42,143 38,731 – – Security deposit received/receivable 30,000 – – – Accounting fees received/receivable 4,200 3,600 – – Incentive paid/payable 1,000 1,000 – – Staff training fees received/receivable 400 600 – – Administrative fees received/receivable 333 – – –

OTK (Shah Alam) Sdn. Bhd. Trade sales 915,716 498,096 – – Franchise fees received/receivable 80,000 – – – Royalty fees received/receivable 55,988 53,745 – – Advertisement and promotion fees received/receivable 33,593 32,247 – – Security deposit received/receivable 30,000 – – – Initial training fees received/receivable 20,000 – – – Accounting fees received/receivable 4,200 3,600 – – Incentive paid/payable 1,500 1,000 – – Staff training fees received/receivable 550 200 – –

OTK Manjung Sdn. Bhd. Trade sales 552,067 609,972 – – Royalty fees received/receivable 71,654 74,593 – – Advertisement and promotion fees received/receivable 42,993 44,756 – – Accounting fees received/receivable 3,000 3,600 – – Incentive paid/payable 1,000 1,000 – –

OTK Sarawak Sdn. Bhd. Trade sales 162,684 147,462 – – Royalty fees received/receivable 118,400 60,846 – – Franchise fees received 80,000 80,000 – – Advertisement and promotion fees received/receivable 71,040 36,508 – – Logistics and loading fees paid/payable 59,200 – – – Security deposit received 30,000 30,000 – – Accounting fees received/receivable 5,700 2,700 – – notes to the 96 financial statements OLDTOWN BERHAD (797771-M)

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d)

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Other related parties (Cont’d)

CN Supplies Sdn. Bhd. Rental paid 19,700 19,200 – –

Gourmet Corner Sdn. Bhd. Trade sales 945,670 1,078,199 – – Royalty fees received/receivable 129,755 131,800 – – Advertisement and promotion fees received/receivable 77,853 79,080 – – Incentive paid/payable 2,000 2,000 – – Staff training fees received/receivable 1,700 1,200 – – Rental paid/payable – 100 – –

CN Properties Sdn. Bhd. Rental paid 48,600 48,000 30,000 –

Body Revolution Sdn. Bhd. Rental received/receivable 29,000 63,606 – –

First Habour Coffee Shop Trade sales 573 – – –

OTK Ipoh Road Sdn. Bhd. Trade sales 438,139 484,569 – – Royalty fees received/receivable 56,039 62,376 – – Advertisement and promotion fees received/receivable 33,623 37,426 – – Accounting fees received/receivable 3,000 3,600 – – Incentive paid/payable 1,000 1,000 – – Administrative fees received/receivable 1,000 – – – Staff training fees received/receivable 350 450 – – Rental paid/payable – 2,200 – –

OTK Megah Sdn. Bhd. Trade sales 353,850 396,215 – – Royalty fees received/receivable 44,067 49,182 – – Advertisement and promotion fees received/receivable 26,440 29,509 – – Accounting fees received/receivable 3,000 3,600 – – Administrative fees received/receivable 1,458 – – – Incentive paid/payable 1,000 1,000 – – Staff training fees 150 300 – –

OTK USJ Sdn. Bhd. Trade sales 595,346 623,043 – – Royalty fees received/receivable 92,444 85,206 – – Advertisement and promotion fees received/receivable 55,466 51,123 – – Accounting fees received/receivable 3,000 3,600 – – Staff training fees received/receivable 1,600 150 – – ANNUAL REPORT 2011 97

26. HOLDING COMPANY AND RELATED PARTY TRANSACTIONS (Cont’d)

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Other related parties (Cont’d)

OTK Sunway Sdn. Bhd. Trade sales 583,442 683,388 – – Royalty fees received/receivable 80,544 90,339 – – Advertisement and promotion fees received/receivable 48,326 54,203 – – Rental paid/payable 5,400 1,200 – – Accounting fees received/receivable 3,000 3,600 – – Administrative fees received/receivable 1,689 – – – Incentive paid/payable 1,000 1,000 – – Staff training fees received/receivable 900 450 – –

OTK (Petaling Jaya) Sdn. Bhd. Trade sales 1,142,003 1,285,231 – – Royalty fees received/receivable 146,776 167,238 – – Advertisement and promotion fees received/receivable 88,065 100,343 – – Accounting fees received/receivable 6,000 7,200 – – Administrative fees received/receivable 5,302 – – – Incentive paid/payable 2,000 2,000 – – Staff training fees received/receivable 1,700 550 – – Rental paid/payable – 3,400 – –

OTK Eatery Sdn. Bhd. Trade sales – 632,136 – – Royalty fees paid/payable – 361,478 – – Franchise fees received/receivable – 320,000 – – Advertisement and promotion fees received/receivable – 216,887 – – Security deposit received/receivable – 120,000 – – Logistic and loading fees paid/payable – 89,541 – – Accounting fees received/receivable – 15,600 – – Incentives paid/payable – 1,583 – –

Lee Siew Meng Rental paid 17,250 16,800 – –

Compensation of key management personnel The remuneration of directors is disclosed in Note 11. The remuneration of other members of key management personnel of the Group during the financial year are as follows:

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Salaries, bonus and allowances 794,780 323,576 169,910 – EPF contributions 92,814 37,649 20,394 – 887,594 361,225 190,304 –

The estimated monetary value of benefits-in-kind received and receivable by the key management personnel otherwise than in cash from the Group and the Company amounted to RM48,466 and RM8,625 (2010: RM27,659 and RMNil) respectively. notes to the 98 financial statements OLDTOWN BERHAD (797771-M)

27. FIXED DEPOSITS, CASH AND BANK BALANCES The Group The Company 2011 2010 2011 2010 RM RM RM RM

Fixed deposits with licensed banks 3,712,877 3,483,996 – – Short-term investment fund 63,280,482 – 47,904,821 – Cash and bank balances 18,633,666 11,933,935 317,999 96,064 85,627,025 15,417,931 48,222,820 96,064

The effective interest rates are as follows: The Group The Company 2011 2010 2011 2010 % % % %

Fixed deposits 2.50 – 3.00 2.49 – 2.80 – – Short-term investment fund 2.13 – 2.95 – 2.14 – 2.95 –

The fixed deposits of the Group have maturity period of 30 days to 365 days (2010: 365 days). The currency profile of fixed deposits, cash and bank balances are as follows:

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Ringgit Malaysia 80,872,537 14,163,624 48,222,820 96,064 Singapore Dollar 2,994,460 730,292 – – United States Dollar 1,760,028 524,015 – – 85,627,025 15,417,931 48,222,820 96,064

The fixed deposits of the Group with carrying amounts of RM2,429,358 (2010: RM3,483,996) are placed under lien to local licensed banks as security for banking facility granted to the Group as disclosed in Note 32.

28. SHARE CAPITAL The Group and The Company 2011 2010 Number of Number of 2011 2010 shares shares RM RM

Authorised: Ordinary shares of RM1 each: 500,000,000 ordinary shares of RM1 each 500,000,000 500,000,000 500,000,000 500,000,000

Issued and fully paid: Ordinary shares of RM1 each: At beginning of year 2 2 2 2 Allotment of shares 329,999,998 – 329,999,998 – At end of year 330,000,000 2 330,000,000 2 ANNUAL REPORT 2011 99

28. SHARE CAPITAL (Cont’d) As approved by the shareholders at an Extraordinary General Meeting held on May 16, 2011, the issued and paid-up share capital of the Company was increased from RM2 consisting of 2 ordinary shares of RM1 each to RM266,606,000 consisting of 266,606,000 ordinary shares of RM1 each by the additional allotment of RM266,605,998 shares consisting of 266,605,998 ordinary shares of RM1 each to the shareholders of the newly acquired subsidiaries. As approved by the shareholders at an Extraordinary General Meeting held on July 4, 2011 and in conjunction with the listing of the entire enlarged issued and paid-up share capital of the Company on the Main Board of Bursa Malaysia, the issued and paid-up share capital of the Company was increased from RM266,606,000 consisting of 266,606,000 ordinary shares of RM1 each to RM330,000,000 consisting of 330,000,000 ordinary shares of RM1 each by way of Public Issue of 63,394,000 ordinary shares of RM1 each of the Company at an issue price of RM1.25 per ordinary share to Malaysian public, eligible directors, employees and business associates of the Group and identified investors. The new ordinary shares issued rank pari passu with the then existing ordinary shares of the Company.

29. RESERVES The Group The Company 2011 2010 2011 2010 RM RM RM RM

Share premium 12,311,332 – 12,311,332 – Foreign currency translation reserve 6,984 (20,359) – – Reserve arising from restructuring (222,653,894) 3,497,104 – – (210,335,578) 3,476,745 12,311,332 –

The Group and The Company 2011 2010 RM RM

Share premium The share premium arose from the public issue of shares: Balance at beginning of year – – Issuance of ordinary shares 15,848,500 – Share issue expenses (3,537,168) – Balance at end of year 12,311,332 –

The share premium arose from the Public Issue of 63,394,000 ordinary shares of RM1 each at RM1.25 per ordinary shares of the Company, net of share issue expenses. The Group 2011 2010 RM RM

Foreign currency translation reserve Balance at beginning of year (20,359) (2,301) Exchange differences on translating foreign associates 27,343 (18,058) Balance at end of year 6,984 (20,359)

Exchange differences relating to the translation of the net assets of the Group’s foreign operations from their functional currencies to the Group’s presentation currency (i.e. Ringgit Malaysia) are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve. Gains and losses on hedging instruments that are designated as hedges of net investments in foreign operations are included in the foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation reserve (in respect of translating both the net assets of foreign operations and hedges of foreign operations) are reclassified to profit or loss on the disposal or partial disposal of the foreign operation. notes to the 100 financial statements OLDTOWN BERHAD (797771-M)

29. RESERVES (Cont’d) The Group 2011 2010 RM RM

Reserve arising from restructuring Balance at beginning of year 3,497,104 3,497,104 Arising from acquisition of subsidiaries (226,150,998) – Balance at end of year (222,653,894) 3,497,104

Reserve arising from restructuring arose from acquisition of common control entities as explained in Note 18.

30. RETAINED EARNINGS The Company has opted to disregard the Section 108 tax credit balance in accordance with the Finance Act, 2007 and switched to a single tier tax system.

31. HIRE-PURCHASE PAYABLES Minimum Present value of minimum hire-purchase payments hire-purchase payments 2011 2010 2011 2010 The Group RM RM RM RM

Amounts payable under hire-purchase arrangements: Within one year 1,003,787 729,546 860,763 606,865 In the second to fifth year inclusive 1,967,170 1,911,417 1,816,377 1,746,538 After fifth year 15,162 – 13,614 – 2,986,119 2,640,963 2,690,754 2,353,403 Less: Future finance charges (295,365) (287,560) – – Present value of hire-purchase payables 2,690,754 2,353,403 2,690,754 2,353,403

Less: Amount due within 12 months (shown under current liabilities) (860,763) (606,865) Non-current portion 1,829,991 1,746,538

The non-current portion is repayable as follows: The Group 2011 2010 RM RM

Financial years ending December 31: 2012 – 595,003 2013 743,965 496,657 2014 634,109 471,440 2015 353,638 183,438 2016 84,665 – 2017 and above 13,614 – 1,829,991 1,746,538

It is the Group’s policy to acquire certain of its property, plant and equipment under hire-purchase arrangements. The terms for hire- purchase of the Group ranged from 3 years to 9 years (2010: 3 years to 7 years). For the financial year ended December 31, 2011, the effective borrowing rates of the Group ranged from 4.25% to 8.03% (2010: 4.27% to 8.03%) per annum. Interest rates are fixed at the inception of the hire-purchase arrangements. The hire-purchase payables of the Group are secured by the assets under hire-purchase and are also guaranteed by certain directors of the Company. The fair values of the hire-purchase payables of the Group are approximately equal to their carrying amounts. ANNUAL REPORT 2011 101

32. BORROWINGS The Group 2011 2010 RM RM

Unsecured: Term loans 158,435 – Secured: Term loans 12,862,741 17,625,250 Bankers’ acceptances – 2,065,000 Bank overdrafts – 1,642,519 13,021,176 21,332,769 Less: Amount due within 12 months (shown under current liabilities) (1,536,869) (5,542,994) Non-current portion 11,484,307 15,789,775

The non-current portion is repayable as follows: The Group 2011 2010 RM RM

Financial years ending December 31: 2012 – 1,918,812 2013 1,560,522 2,032,000 2014 1,619,414 2,135,927 2015 1,691,348 2,052,441 2016 1,788,780 1,996,046 2017 and above 4,824,243 5,654,529 11,484,307 15,789,775

The Group’s term loans and banking facilities with licensed banks amounting to RM57,434,571 (2010: RM42,949,000) are secured by: (i) Fixed legal charge over the leasehold land and buildings of the Group as mentioned in Notes 15 and 16; (ii) Investment properties of the Group as disclosed in Note 17; (iii) Letter of set-off of fixed deposits as disclosed in Note 27; (iv) Guaranteed by CGC (M) Bhd. under SME Assistance Financing Facility; and

(v) A stamped facility agreement of RM29.173 million. Certain term loans and other banking facilities are also guaranteed by the Company, the directors of the Company and the ultimate holding company jointly and severally. The Group has twenty one (21) term loans: (a) a six (6) year term loan of RM2,500,000 (2010: RM2,500,000) which is repayable by 72 monthly instalments of RM44,446 each (2010: RM44,446) commencing October 2000. The term loan was fully settled during the financial year; (b) a ten (10) year term loan of RM92,000 (2010: RM92,000) which is repayable by 120 monthly instalments of RM4,230 each (2010: RM4,230) commencing October 2000. The term loan was fully settled during the financial year; (c) a twenty (20) year term loan of RM1,049,000 (2010: RM1,049,000) which is repayable by 240 monthly instalments of RM8,284 each (2010: RM8,284) commencing March 2006. The term loan was fully settled during the financial year; (d) a fifteen (15) year term loan of RM448,000 (2010: RM448,000) which is repayable by 180 monthly instalments of RM3,393 each (2010: RM3,393) commencing October 2008; (e) a seven (7) year term loan of RM4,000,000 (2010: RM4,000,000) which is repayable by 84 monthly instalments of RM58,051 each (2010: RM58,051) commencing April 2010; notes to the 102 financial statements OLDTOWN BERHAD (797771-M)

32. BORROWINGS (Cont’d) (f) a ten (10) year term loan of RM2,500,000 (2010: RM2,500,000) which is repayable by 120 monthly instalments of RM28,451 each (2010: RM28,451) commencing May 2010; (g) a ten (10) year term loan of RM1,415,000 (2010: RM1,415,000) which is repayable by 60 monthly instalments of RM14,665 each (2010: RM14,665) for the first to fifth year commencing October 30, 2008 and 60 monthly instalments of RM15,025 each (2010: RM15,025) for the sixth to tenth year commencing October 30, 2013; (h) a ten (10) year term loan of RM1,147,500 (2010: RM1,147,500) which is repayable by 60 monthly instalments of RM11,893 each (2010: RM11,893) for the first to fifth year commencing October 14, 2009 and 60 monthly instalments of RM12,185 each (2010: RM12,185) for the sixth to tenth year commencing October 14, 2014; (i) a ten (10) year term loan of RM552,500 (2010: RM552,500) which is repayable by 60 monthly instalments of RM5,726 each (2010: RM5,726) for the first to fifth year commencing October 14, 2009 and 60 monthly instalments of RM5,867 each (2010: RM5,867) for the sixth to tenth year commencing October 14, 2014; (j) a fifteen (15) year term loan of RM3,700,000 (2010: RM3,700,000) which is repayable by 180 monthly instalments of RM26,907 each (2010: RM26,907) commencing September 14, 2009. The term loan was fully settled during the financial year; (k) a five (5) year term loan of RM350,000 (2010: RM350,000) which is repayable by 60 monthly instalments of RM6,493 each (2010: RM6,493) commencing January 16, 2011. The term loan was fully settled during the financial year; (l) a twenty (20) year term loan of RM240,000 (2010: RM240,000) which is repayable by 240 monthly instalments of RM1,837 each (2010: RM1,837) commencing April 2006. The term loan was fully settled during the financial year; (m) a five (5) year term loan of RM1,000,000 (2010: RM1,000,000) which is repayable by 60 monthly instalments of RM19,707 each (2010: RM19,707) commencing November 2009. The term loan was fully settled during the financial year; (n) a ten (10) year term loan of RM4,800,000 which is repayable by 120 monthly instalments of RM49,285 each commencing February 2011; (o) a fifteen (15) year term loan of RM370,000 (2010: RM370,000) which is repayable by: (i) 12 monthly instalments of RM3,073 each in the first year; (ii) 12 monthly instalments of RM3,200 each in the second year; and (iii) 156 monthly instalments of RM3,462 each thereafter. The term loan was fully settled during the financial year. (p) a ten (10) year term loan of RM220,000 (2010: RM220,000) which is repayable by 60 monthly instalments of RM2,280 each for the first to fifth year commencing September 2007 and 60 monthly instalments of RM2,424 each for the sixth to tenth year commencing September 2012; (q) a ten (10) year term loan of RM150,000 (2010: RM150,000) which is repayable by 60 monthly instalments of RM1,555 each for the first to fifth year commencing January 2008 and 60 monthly instalments of RM1,653 each for the sixth to tenth year commencing February 2013; (r) a five (5) year term loan of RM200,000 (2010: RM200,000) which is repayable by 60 monthly instalments of RM3,941 each (2010: RM3,941) commencing July 2009. The term loan was fully settled during the financial year; (s) a five (5) year fixed interest rate loan of RM200,000 (2010: RM200,000) which is repayable by 60 monthly instalments of RM3,684 each (2010: RM3,684) commencing June 2009 with an effective interest rate of 3.44% (2010: 3.44%) per annum; (t) a three (3) year floating interest rate loan of RM200,000 (2010: RM200,000) which is repayable by 36 monthly instalments of RM6,180 each (2010: RM6,180) commencing October 2009 with an effective interest rate of 5.97% (2010: 5.97%) per annum; and (u) a two (2) year fixed interest rate loan of RM550,000 (2010: RM550,000) which is repayable by 24 monthly instalments of RM23,884 each (2010: RM23,884) commencing August 15, 2010 with an effective interest rate of 1.78% (2010: 3.04%) per annum. The term loan was fully settled during the financial year. ANNUAL REPORT 2011 103

32. BORROWINGS (Cont’d) The fair values of the bank borrowings of the Group approximate their carrying amounts. The effective interest rates per annum are as follows: The Group 2011 2010 % %

Term loans 1.78 – 8.35 4.29 – 8.05 Bankers’ acceptances 4.43 – 4.45 2.23 – 4.43 Bank overdrafts 4.50 – 8.35 4.50 – 8.05

33. DEFERRED INCOME The Group 2011 2010 RM RM

Non-current portion: Deferred franchise fees 2,773,260 2,808,865 Current portion: Deferred franchise fees 1,298,597 1,288,779 Total 4,071,857 4,097,644

Deferred franchise fees represent franchise fees received in advance from franchisees. The revenue is recognised in the statements of comprehensive income on a straight-line basis over the term of the franchise agreement of 5 years (2010: 5 years).

34. DEFERRED CAPITAL GRANT The Group 2011 2010 RM RM

Cost At beginning of year – – Arising from the acquisition of subsidiaries 120,897 Received during the financial year – – At end of the year 120,897 –

Accumulated amortisation At beginning of year – – Arising from the acquisition of subsidiaries 35,760 Amortisation 14,105 – At end of the year 49,865 –

Net carrying amount Current 24,180 – Non-current 46,852 – 71,032 –

Deferred capital grant relates to government grant received for the acquisition of plant and machinery. There are no unfulfilled conditions or contingencies attached to this grant. notes to the 104 financial statements OLDTOWN BERHAD (797771-M)

35. TRADE AND OTHER PAYABLES The Group The Company 2011 2010 2011 2010 RM RM RM RM

Trade payables 18,607,750 19,356,935 – – Other payables 4,611,413 10,819,501 25,273 2,825,778 23,219,163 30,176,436 25,273 2,825,778 Accrued expenses 9,061,955 5,578,470 239,478 2,500 Refundable deposits received 2,319,790 2,175,976 – – 34,600,908 37,930,882 264,751 2,828,278

Trade and other payables comprise amounts outstanding for trade purchases and ongoing costs. The terms granted to the Group for trade purchases ranged from cash terms to credit period of 90 days (2010: cash terms to credit period of 60 days). These amounts are non-interest bearing. The Group and the Company have financial risk management policies to ensure that all payables are paid within the pre-agreed credit terms. Included in trade and other payables of the Group are related parties’ balances of RM157,512 (2010: RM5,322,339). The amounts owing to other payables of the Group and of the Company are unsecured, interest-free and repayable upon demand. The currency profile of trade and other payables are as follows: The Group The Company 2011 2010 2011 2010 RM RM RM RM

Ringgit Malaysia 22,948,560 29,742,347 25,273 2,825,778 Singapore Dollar 270,603 303,409 – – United States Dollar – 130,680 – – 23,219,163 30,176,436 25,273 2,825,778

Transactions with related parties are disclosed in Note 26.

36. AMOUNT OWING TO A DIRECTOR OF A SUBSIDIARY The amount owing to a director of a subsidiary arose mainly from expenses paid on behalf, which is unsecured, interest-free and repayable upon demand. ANNUAL REPORT 2011 105

37. DIVIDENDS The Group The Company 2011 2010 2011 2010 RM RM RM RM

An interim dividend of 2.5%, single tier (2010: Nil) 8,250,000 – 8,250,000 – Interim dividends* – 6,000,000 – – 8,250,000 6,000,000 8,250,000 –

Net dividend per share The Group The Company 2011 2010 2011 2010 Sen Sen Sen Sen

An interim dividend of 2.5%, single tier (2010: Nil) 2.5 – 2.5 – Interim dividends* – – – – 2.5 – 2.5 –

An interim dividend declared in respect of the current financial year under single tier tax system of 2.5 sen per share, amounting to RM8,250,000 was paid on October 18, 2011. The directors have proposed a final dividend under single tier tax system of 4.0 sen per share, amounting to RM13,200,000 computed based on the outstanding issued and paid-up share capital of 330,000,000 ordinary shares of RM1 each in respect of the current financial year. The proposed final dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company and has not been included as a liability in the financial statements. Upon approval by the shareholders, the dividend payment will be accounted for in equity as an appropriation of retained earnings during the financial year ending December 31, 2012. * In 2010, interim dividends of RM6,000,000, tax-exempt in respect of financial year ended December 31, 2010 were declared and paid by the common control subsidiaries to Old Town International Sdn. Bhd. and was not eliminated on consolidation. notes to the 106 financial statements OLDTOWN BERHAD (797771-M)

38. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT Categories of financial instruments The Group The Company 2011 2010 2011 2010 RM RM RM RM

Financial assets Loans and receivables: Other investments – unquoted shares 765,752 29,000 – – Trade and other receivables 40,463,547 36,499,303 13,370 – Amount owing by ultimate holding company – 5,229,705 – – Amount owing by subsidiaries – – 10,905,656 522,500 Amount owing by associates 1,398,828 2,839,617 60,000 – Fixed deposits, cash and bank balances 85,627,025 15,417,931 48,222,820 96,064 Available-for-sale: Other investments – quoted unit trusts 10,205,442 – – –

Financial liabilities Amortised cost: Trade and other payables 34,600,908 37,930,882 264,751 2,828,278 Amount owing to ultimate holding company 51,196 27,348 1,545 – Amount owing to subsidiaries – – 7,453,968 – Amount owing to a director of a subsidiary 4,463 – – – Hire-purchase payables 2,690,754 2,353,403 – – Borrowings 13,021,176 21,332,769 – –

Financial Risk Management Objectives and Policies Risk management is integral to the whole business of the Group and of the Company. Management continually monitors the Group’s and the Company’s risk management process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in the market conditions and the Group’s and the Company’s activities. There have been no changes to the Group’s and the Company’s exposure to these financial risks or the manner in which it manages and measures the risk.

(a) Credit risk management

The maximum exposure to credit risk in the event that the counterparties fail to perform their obligations as at the end of the financial period in relation to each class of recognised financial assets of the Group and of the Company are the carrying amount of those assets, as stated in the statements of financial position. The Group and the Company are exposed to credit risk mainly from trade and other receivables as well as fixed deposits, cash and bank balances. The Group’s and the Company’s established policies on credit control involve regular review of customers’ outstanding balances and payment trends. The Group places its cash and cash equivalents with a number of creditworthy financial institutions. The Group’s policy limits the concentration of financial exposure to any single financial institution.

(b) Liquidity and cash flow risks management

Ultimate responsibility for liquidity and cash flow risks management rests with the Board of Directors, which has established an appropriate liquidity and cash flow risks management framework for the management of the Group’s and of the Company’s short, medium and long-term funding and liquidity and cash flow management requirements. The Group and the Company manage liquidity and cash flow risks by maintaining adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and financial liabilities. The Group and the Company expect that the cash generated from its operations, its existing credit facilities and the trade terms provided by its suppliers will be sufficient to meet the Group’s and the Company’s currently anticipated capital expenditure and working capital needs for at least the next 12 months. ANNUAL REPORT 2011 107

38. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Cont’d) Financial Risk Management Objectives and Policies (Cont’d)

(b) Liquidity and cash flow risks management (Cont’d)

The maturity profile for the non-derivative financial assets/liabilities of the Group and of the Company at the end of the reporting period based on the undiscounted cash flows of the respective financial assets/liabilities representing the earliest date on which the Group and the Company are entitled to receive/required to pay, is as follows:

On demand or One year Over five within one year to 5 years years Total The Group RM RM RM RM

2011 Non-derivative financial assets: Other investments – unquoted shares 765,752 – – 765,752 Trade and other receivables 40,463,547 – – 40,463,547 Amount owing by associates 1,398,828 – – 1,398,828 Fixed deposits, cash and bank balances 87,231,355 – – 87,231,355 Available-for-sale: Other investments – quoted unit trusts 10,205,442 – – 10,205,442 Total undiscounted non-derivative financial assets 140,064,924 – – 140,064,924 Non-derivative financial liabilities: Trade and other payables 34,600,908 – – 34,600,908 Amount owing to ultimate holding company 51,196 – – 51,196 Amount owing to a director of a subsidiary 4,463 – – 4,463 Hire-purchase payables 1,003,787 1,967,170 15,162 2,986,119 Borrowings 2,207,349 9,543,441 4,401,742 16,152,532 Total undiscounted non-derivative financial liabilities 37,867,703 11,510,611 4,416,904 53,795,218 Total net undiscounted non-derivative financial assets/(liabilities) 102,197,221 (11,510,611) (4,416,904) 86,269,706

2010 Non-derivative financial assets: Other investments – unquoted shares 29,000 – – 29,000 Trade and other receivables 36,499,303 – – 36,499,303 Amount owing by ultimate holding company 5,229,705 – – 5,229,705 Amount owing by associates 2,839,617 – – 2,839,617 Fixed deposits, cash and bank balances 15,417,931 – – 15,417,931 Total undiscounted non-derivative financial assets 60,015,556 – – 60,015,556 Non-derivative financial liabilities: Trade and other payables 37,930,882 – – 37,930,882 Amount owing to ultimate holding company 27,348 – – 27,348 Hire-purchase payables 729,546 1,911,417 – 2,640,963 Borrowings 5,814,375 11,716,367 8,720,949 26,251,691 Total undiscounted non-derivative financial liabilities 44,502,151 13,627,784 8,720,949 66,850,884 Total net undiscounted non-derivative financial assets/(liabilities) 15,513,405 (13,627,784) (8,720,949) (6,835,328) notes to the 108 financial statements OLDTOWN BERHAD (797771-M)

38. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Cont’d) Financial Risk Management Objectives and Policies (Cont’d)

(b) Liquidity and cash flow risks management (Cont’) On demand or One year Over five within one year to 5 years years Total The Company RM RM RM RM

2011 Non-derivative financial assets: Trade and other receivables 13,370 – – 13,370 Amount owing by subsidiaries 10,905,656 – – 10,905,656 Amount owing by associates 60,000 – – 60,000 Fixed deposits, cash and bank balances 49,541,159 – – 49,541,159 Total undiscounted non-derivative financial assets 60,520,185 – – 60,520,185 Non-derivative financial liabilities: Trade and other payables 264,751 – – 264,751 Amount owing to ultimate holding company 1,545 – – 1,545 Amount owing to subsidiaries 7,453,968 – – 7,453,968 Total undiscounted non-derivative financial liabilities 7,720,264 – – 7,720,264

Total net undiscounted non-derivative financial assets 52,799,921 – – 52,799,921

2010 Non-derivative financial assets: Amount owing by subsidiaries 522,500 – – 522,500 Fixed deposits, cash and bank balances 96,064 – – 96,064 Total undiscounted non-derivative financial assets 618,564 – – 618,564 Non-derivative financial liabilities: Trade and other payables 2,828,278 – – 2,828,278

Total net undiscounted non-derivative financial liabilities (2,209,714) – – (2,209,714)

The Group and the Company have not committed to any derivative financial instruments during the financial year.

(c) Market risk

The Group’s and the Company’s activities expose them primarily to the financial risks of changes in foreign currency exchange rates and interest rates. There have been no changes to the Group’s and the Company’s exposure to market risks or the manner in which these risks are managed and measured.

(i) Foreign currency risk management

The Group is exposed to the effects of foreign currency exchange rate fluctuation primarily in relation to the United States Dollar (“USD”) and Singapore Dollar (“SGD”) arising from normal trading and investment activities. Exposure to foreign currency risk is monitored on an ongoing basis and the Group endeavours to keep the net exposure at an acceptable level. The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the end of the reporting period are as follows: 2011 2010 USD SGD USD SGD

Trade and other receivables 6,589,718 1,090,624 4,039,284 756,509 Fixed deposits, cash and bank balances 1,760,028 2,994,460 524,015 730,292 Trade and other payables – 270,603 130,680 303,409 ANNUAL REPORT 2011 109

38. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Cont’d) Financial Risk Management Objectives and Policies (Cont’d)

(c) Market risk (Cont’d)

(i) Foreign currency risk management (Cont’d)

Foreign currency sensitivity analysis The following table details the Group’s sensitivity to a 3% increase and decrease in RM against the relevant foreign currencies. 3% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonable possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 3% change in foreign currency rates. A positive number below indicates a decrease in profit and other equity where RM strengthens 3% against the relevant currency. For a 3% weakening of RM against the relevant currency, there would be a comparable impact on the profit and other equity, and the balances below would be negative. 2011 2010 Profit Profit Changes before tax Changes before tax % RM % RM

USD 3 250,492 3 132,979 SGD 3 114,434 3 35,502

(ii) Interest rate risk management

Interest rate risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises primarily from their borrowings.

Interest rate sensitivity analysis At the end of the reporting period, if interest rates had been 100 (2010: 100) basis points lower/higher, with all other variables held constant, the Group’s profit net of tax would have been RM130,212 (2010: RM196,902) higher/lower arising mainly as a result of lower/higher interest expense on floating rate borrowings. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.

(d) Capital risk management

The Group and the Company manage their capital to ensure the Group and the Company will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s and the Company’s overall strategy remain unchanged from 2010. The capital structure of the Group and of the Company consists of net debt and equity of the Group and of the Company.

Fair Values of Financial Assets and Financial Liabilities The fair value of long-term financial assets and liabilities are determined by the present value of future cash flows estimated and discounted using the current interest rates for similar instruments at the end of the reporting period. There is no material difference between the fair values and carrying values of these assets and liabilities as of the reporting period. The carrying amounts of cash and cash equivalents, trade and other receivables, inter-company indebtedness, amount owing to a director of a subsidiary and trade and other payables approximate their respective fair values due to the relatively short-term maturity of these financial instruments. The fair values of investments on unquoted shares are not established as it cannot be measured reliably without incurring excessive cost. The other investments on unquoted shares are measured at cost. The Group intends to hold the unquoted investments on a long- term basis. The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to the financial statements. notes to the 110 financial statements OLDTOWN BERHAD (797771-M)

38. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Cont’d) Fair Values of Financial Assets and Financial Liabilities (Cont’d)

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Level 2 Level 3 Total The Group RM RM RM RM

2011 Available-for-sale: Other investments – quoted unit trusts 10,205,442 – – 10,205,442

There were no transfers between Levels 1 and 2 in 2011.

39. STATEMENTS OF CASH FLOWS (a) Purchase of property, plant and equipment Property, plant and equipment were acquired by the following means: The Group The Company 2011 2010 2011 2010 RM RM RM RM

Cash purchase 12,436,634 16,925,828 385,475 – Hire-purchase financing 626,800 1,470,500 – – Amount owing to ultimate holding company 163,788 – 163,788 – Amount owing to trade and other payables 1,457,227 1,438,184 – – 14,684,449 19,834,512 549,263 –

The principal amounts of instalment repayments for property, plant and equipment acquired by hire-purchase are reflected as cash outflows from financing activities.

(b) Additions to prepaid leased land During the financial year, prepaid leased land was acquired by the following means: The Group 2011 2010 RM RM

Cash purchase – 6,501,917 Other payables – 4,800,000 – 11,301,917 ANNUAL REPORT 2011 111

39. STATEMENTS OF CASH FLOWS (Cont’d) (c) Cash and cash equivalents For the purposes of the statements of cash flows, cash and cash equivalents include fixed deposits, short-term investment fund, cash and bank balances and net of outstanding bank overdrafts. Cash and cash equivalents at the end of the reporting period as shown in the statements of cash flows can be reconciled to the related items in the statements of financial position as follows:

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Fixed deposits 3,712,877 3,483,996 – – Short-term investment fund 63,280,482 – 47,904,821 – Cash and bank balances 18,633,666 11,933,935 317,999 96,064 Bank overdraft – (1,642,519) – – 85,627,025 13,775,412 48,222,820 96,064 Less: Fixed deposits held on lien to local licensed banks (2,429,358) (3,483,996) – – 83,197,667 10,291,416 48,222,820 96,064

40. OPERATING LEASE ARRANGEMENTS Operating lease for the Group relates to leases of offices, outlets, billboards, factory, warehouses, hostels and kitchen equipment with average term of 1 to 3 years (2010: 1 to 3 years). Operating lease for the Company relates to leases of office with average term of 2 years (2010: Nil). All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have an option to purchase the leased offices, outlets, billboards, factory, warehouses, hostels and kitchen equipment at the expiry of the lease period. Payment recognised as an expense: The Group The Company 2011 2010 2011 2010 RM RM RM RM

Minimum lease payments 15,888,939 11,262,135 30,000 –

Non-cancellable operating leases commitments are as follows: The Group The Company 2011 2010 2011 2010 RM RM RM RM

Within one year 17,194,837 10,592,588 48,000 – In the second to fifth year inclusive 12,583,897 10,336,182 16,000 – 29,778,734 20,928,770 64,000 –

41. CAPITAL COMMITMENTS As of December 31, 2011, the Group has the following capital expenditure in respect of property, plant and equipment: The Group 2011 2010 RM RM

Capital expenditure: Approved and contracted for 6,874,875 5,245,246 Approved but not contracted for 609,999 – 7,484,874 5,245,246 notes to the 112 financial statements OLDTOWN BERHAD (797771-M)

42. SIGNIFICANT EVENTS (i) During the financial year, in conjunction with the listing and quotation for the entire enlarged issued and paid-up share capital of RM330,000,000 ordinary shares of RM1.00 each on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Malaysia”), the Company completed the acquisition of the following companies on May 16, 2011: To be satisfied via Percentage No. of Purchase No. of acquired shares at consideration shares Cash Companies (%) RM1.00 each (RM) issued (RM)

Emperor’s Kitchen Sdn. Bhd. 100.00 200,002 16,353,000 8,176,000 8,177,000 Esquire Chef Sdn. Bhd. 100.00 1,000 10,759,000 5,380,000 5,379,000 Old Town Kopitiam Butterworth Sdn. Bhd. 100.00 100,000 14,964,477 5,985,000 8,979,477 Old Town Kopitiam Kuala Lumpur Sdn. Bhd. 100.00 100,000 2,135,810 1,495,000 640,810 Dynasty Confectionery Sdn. Bhd. 100.00 200,000 4,179,000 2,507,000 1,672,000 Old Town Kopitiam Cheras Sdn. Bhd. 100.00 160,000 11,911,000 11,911,000 – Conneczone Sdn. Bhd. 80.00 40,000 3,900,000 3,900,000 – White Cafe Sdn. Bhd. 100.00 1,000,000 62,263,998 62,263,998 – Gongga Food Sdn. Bhd. 100.00 300,000 69,825,000 69,825,000 – White Cafe Marketing Sdn. Bhd. 100.00 1,700,000 21,156,000 21,156,000 – Kopitiam Asia Pacific Sdn. Bhd. 100.00 1,250,000 66,230,000 66,230,000 – Oldtown Singapore Pte. Ltd. 100.00 SGD100,000 6,676,000 6,676,000 – OTK Eatery Sdn. Bhd. 40.00 40,000 1,101,000 1,101,000 –

Total 291,454,285 266,605,998 24,848,287

(ii) Public Issue A public issue of 63,394,000 new ordinary shares of RM1.00 each in the Company at an issue price of RM1.25 per share on July 4, 2011; and

(iii) Listing on the Main Board of Bursa Malaysia The listing and quotation for the entire enlarged issued and paid-up share capital of the Company comprising 330,000,000 ordinary shares of RM1.00 each on the Main Market of Bursa Malaysia on July 13, 2011.

43. COMPARATIVE FIGURES Certain comparative figures in the financial statements of the Group and of the Company have been reclassified to conform with current year’s presentation. The consolidated financial statements incorporate the financial statements of the entities under common control from the earliest date presented as disclosed in Note 18. As such, the comparative financial information included the financial statements of White Cafe Sdn. Bhd., White Cafe Marketing Sdn. Bhd., Gongga Food Sdn. Bhd., Kopitiam Asia Pacific Sdn. Bhd., Oldtown Singapore Pte. Ltd. and Old Town Kopitiam Sdn. Bhd.. In 2010, interim dividends of RM6,000,000, tax-exempt in respect of financial year ended December 31, 2010 were declared and paid by the common control subsidiaries to Old Town International Sdn. Bhd. and was not eliminated on consolidation. The comparative figures of the Group have not been audited. ANNUAL REPORT 2011 113

44. SUPPLEMENTARY INFORMATION – DISCLOSURE ON REALISED AND UNREALISED PROFITS OR LOSSES The breakdown of the retained earnings/(accumulated losses) of the Group and of the Company as of December 31, 2011 into realised and unrealised profits or losses, pursuant to the directive issued by Bursa Malaysia Securities Berhad on March 25, 2010, is as follows:

The Group The Company 2011 2010 2011 2010 RM RM RM RM

Total retained earnings/(accumulated losses) of the Company and its subsidiary companies Realised 116,480,236 67,545,181 1,048,764 (1,226,386) Unrealised (597,569) (927,352) – – Total share of retained earnings from associated companies Realised (319,509) (36,198) – – Unrealised 67,092 9,547 – – 115,630,250 66,591,178 1,048,764 (1,226,386) Add: Consolidation adjustments (18,222,950) (1,111,203) – – Total retained earnings/(accumulated losses) as per statements of financial position 97,407,300 65,479,975 1,048,764 (1,226,386)

The determination of realised and unrealised profits or losses is based on Guidance of Special Matter No. 1 “Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Securities Listing Requirements” as issued bythe Malaysian Institute of Accountants on December 20, 2010. This supplementary information have been made solely for complying with the disclosure requirements as stipulated in the directives of Bursa Malaysia and is not made for any other purposes. statement by 114 directors OLDTOWN BERHAD (797771-M)

The directors of OLDTOWN BERHAD state that, in their opinion, the accompanying financial statements are drawn up in accordance with Financial Reporting Standards and the provisions of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of December 31, 2011 and of the financial performance and the cash flows of the Group and of the Company for the year ended on that date. The supplementary information set out in Note 44, which is not part of the financial statements, is prepared in all material respects, in accordance with Guidance on Special Matter No. 1 “Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements” as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad.

Signed in accordance with a resolution of the Directors,

DATUK DR. AHMED TASIR BIN LOPE PIHIE, MR. LEE SIEW HENG PJN, PMP, JSM, FASc

Ipoh, April 26, 2012

declaration by the officer PRIMARILY RESPONSIBLE FOR THE FINANCIAL MANAGEMENT OF THE COMPANY

I, MS. CHAO KAR PO, the officer primarily responsible for the financial management ofOLDTOWN BERHAD, do solemnly and sincerely declare that the accompanying financial statements are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

MS. CHAO KAR PO Subscribed and solemnly declared by the abovenamed Ms. Chao Kar Po at IPOH this 26th day of April, 2012.

Before me,

S. LETCHUMI DEVI (A 080) Commissioner for Oaths ANNUAL REPORT 2011 list of properties 115 owned by oldtown group

Approxi- mate Audited Age of Net Book Description Land Area/ Building Value Date of and Existing Built-up as at as at Revaluation/ Use/Number Area 31.12.2011 31.12.2011 Date of No. Title/Location of storeys (Sq feet) Tenure (Years) (RM) Acqusition*

1 No.1, Persiaran Tasek Timur 6, Factory 10,168.19/ Leasehold 19 1,316,942 27.07.2005* Taman Medan Bercham, and office/ 40,507.00 of 99 years,

31400 Ipoh, Perak Darul Ridzuan 4 storeys expiring on

27-Apr-2088 The 4 storey factory and office is held

under the following individual titles: a) PN 296889, Lot 179748 (previously held under H.S(D) 3733); b) PN 296887, Lot 179747 (previously held under H.S(D) 3732); c) PN 296890, Lot 179749 (previously held under H.S(D) 3734); d) PN 296891, Lot 179750 (previously held under H.S(D) 3735); and e) PN 296892, Lot 179751 (previously held under H.S(D) 3736), all in the Mukim of Hulu Kinta, District of Kinta, State of Perak Darul Ridzuan.

2 No. 11, Perusahaan Industri Rapat 2, Factory 10,491.00/ Leasehold 14 580,000 13.12.2011 Kawasan Perindustrian Ringan Sri Rapat, and office/ 9,770.00 of 99 years, 31350 Ipoh, Perak Darul Ridzuan 1½ storeys expiring on 4-Jul-2094 The 1½ storey semi-detached factory and office is held under individual title H.S(D) 41503, PT 132753 in the Mukim of Hulu Kinta, District of Kinta, State of Perak Darul Ridzuan.

3 No. 13, Perusahaan Industri Rapat 2, Factory 10,491.00/ Leasehold 14 560,000 13.12.2011 Kawasan Perindustrian Ringan Sri Rapat, and office/ 7,780.00 of 99 years,

31350 Ipoh, Perak Darul Ridzuan 1½ storeys expiring on

4-Jul-2094 The 1½ storey semi-detached factory and office

is held under individual title H.S(D) 41502, PT 132752 in the Mukim of Hulu Kinta, District of Kinta, State of Perak Darul Ridzuan.

4 Lot 60178, Jalan Portland, The new The land Leasehold N/A 10,397,758 01.09.2009* Tasek Industrial Estate, manufacturing & area is of 99 years, Mukim Ulu Kinta, Daerah Kinta, food processing 391,923.00 expiring on Perak Darul Ridzuan plant is being 1-Jul-2072 (formerly identified in the Sale and Purchase constructed Agreement as No. 59, Medan Tasek, on the land Kawasan Perindustrian Tasek, 31400 Ipoh, Perak Darul Ridzuan.) The vacant land is held under individual title PN 2864, Lot 60178, in the Mukim and District of Kinta, State of Perak Darul Ridzuan. 116 list of properties OLDTOWN BERHAD (797771-M) owned by oldtown group

Approxi- mate Audited Age of Net Book Description Land Area/ Building Value Date of and Existing Built-up as at as at Revaluation/ Use/Number Area 31.12.2011 31.12.2011 Date of No. Title/Location of storeys (Sq feet) Tenure (Years) (RM) Acqusition*

5 No. 21, Lebuh Bercham (S) 2/8, Factory 2,399.48/ Leasehold 14 240,951 10.02.2009* Kawasan Perindustrian Bercham, and office/ 2,400.00 of 60 years,

31400 Ipoh, Perak Darul Ridzuan 1 storey expiring on 29-Mar-2052 The 1 storey factory and office held under individual title PN 287301, Lot 195649 (previously held under H.S.(D) 70419) in the Mukim of Hulu Kinta, District of Kinta, State of Perak Darul Ridzuan.

6 No. 19, Lebuh Bercham (S) 2/8, Factory 2,399.48/ Leasehold 14 222,826 04.05.2006* Kawasan Perindustrian Bercham, and office/ 2,400.00 of 60 years, 31400 Ipoh, Perak Darul Ridzuan 1 storey expiring on 29-Mar-2052 The 1 storey factory and office is held under individual title PN 287302, Lot 195650 (previously held under H.S.(D) 70420) in the Mukim of Hulu Kinta, District of Kinta, State of Perak Darul Ridzuan.

7 Lot 212152 (previously known as PT 126279), The land The land Leasehold N/A 377,856 18.08.2006* Persiaran Tasek Timur 7, is vacant. area is of 99 years, Taman Medan Bercham, 21,480.00 expiring on 31400 Ipoh, Perak Darul Ridzuan 17-Apr-2093 The vacant land is held under individual title PN 346134, Lot 212152 (previously held under H.S.(D) 33231, PT 126279) in the Mukim of Hulu Kinta, District of Kinta, State of Perak Darul Ridzuan.

8 PT77647, Kampung Batu 13½ Puchong, The land The land Leasehold N/A 6,206,642 18.05.2010* 47150 Puchong is vacant. area is of 99 years, 59,677.29 expiring on This property which is held under individual 9-Dec-2107 title H.S.(M) 30242, PT 77647 Kampung Batu 13 Puchong in the Mukim and District of Petaling State of Selangor Darul Ehsan.

9 No. 72, Solok Pendamar Indah 1, The ground floor 2,829.88/ Freehold 2 1,373,568 15.10.2009 Taman Pendamar Indah, of the 3 storey 8,365.00 42000 Port Klang, Selangor Darul Ehsan shop office is used to operate The 3 storey shop office is held under an OLDTOWN individual tittle GRN 279149, Lot 123298 WHITE COFFEE (previously held under H.S.(D) 113157, cafe outlet. The PT 114925), in the Mukim of Klang, first and second District of Klang, State of Selangor Darul Ehsan. floors of the 3 storey shop office are rented to a private entity. /3 storeys ANNUAL REPORT 2011 117

Approxi- mate Audited Age of Net Book Description Land Area/ Building Value Date of and Existing Built-up as at as at Revaluation/ Use/Number Area 31.12.2011 31.12.2011 Date of No. Title/Location of storeys (Sq feet) Tenure (Years) (RM) Acqusition*

10 No. 70, Solok Pendamar Indah 1, The ground, first 1,398.80/ Freehold 2 659,749 15.10.2009 Taman Pendamar Indah, and second floors 4,168.00

42000 Port Klang, Selangor Darul Ehsan of the 3 storey shop office have The 3 storey shop office is held under been rented out individual title GRN 279150, Lot 123299 by Old Town (previously held under H.S(D) 113158, Kopitiam to PT 114926), in the Mukim of Klang, private entities./ District of Klang, 3 storeys State of Selangor Darul Ehsan.

11 Unit No.G1, No. 55, 55-1 and 55-2, The ground 4,761.00/ Leasehold 2 3,225,062 30.04.2009 Jalan Rampai Niaga 5, and first floors 12,854.00 for 88 years, Medan Niaga Rampai, of the 3 storey expiring on 53300 Kuala Lumpur shop office are 28-Mar-2085 used to operate The 3 storey shop office is held under an OLDTOWN individual title H.S.(D) 117765 PT No 9138 WHITE COFFEE Mukim of Setapak, District of Kuala Lumpur cafe outlet. The which is pending registration into the name second floor is for of the Company. general use and storage purposes in relation to the operation of the said cafe outlet./ 3 storeys

12 Lot No. 3A-G26, Kompleks Bukit Jambul, The 1 storey The built-up Freehold 14 720,000 10.01.2012 Jalan Rumbia, 11900 Bayan Lepas, Penang shop lot is area is rented by 600.00 The 1 storey shop lot forms part of a complex White Cafe known as Kompleks Bukit Jambul, which is Marketing situated under parent lot title GRN 61275, to a private Lot 9954 in the Mukim 13, District of Timor entity./ Laut, State of Penang. The property has yet to 1 storey be issued with an individual strata title.

13 C-3-7, FairVille Apartment, Jalan USJ 22/1, Apartment The built-up Freehold 10 161,700 25.01.2011* 47630 Subang Jaya, Selangor Darul Ehsan used as area is accommodation approximately This apartment is held under strata title for factory staff 818 sq ft Geran 52283/M1/3/108, Lot No.49175, (76 sq m)** District of Petaling, Town of Subang Jaya, State of Selangor

14 C-8-8, FairVille Apartment, Jalan USJ 22/1, Apartment The built-up Freehold 10 151,900 04.01.2011* 47630 Subang Jaya, Selangor Darul Ehsan used as area is accommodation approximately This apartment is held under strata title for factory staff 818 sq ft Geran 52283/M1-B/8/229, (76 sq m)** Lot No. 49175, District of Petaling, Town of Subang Jaya, State of Selangor 118 list of properties OLDTOWN BERHAD (797771-M) owned by oldtown group

Approxi- mate Audited Age of Net Book Description Land Area/ Building Value Date of and Existing Built-up as at as at Revaluation/ Use/Number Area 31.12.2011 31.12.2011 Date of No. Title/Location of storeys (Sq feet) Tenure (Years) (RM) Acqusition*

15 C-8-10, FairVille Apartment, Jalan USJ 22/1, Apartment The built-up Freehold 10 151,900 04.01.2011* 47630 Subang Jaya, Selangor Darul Ehsan used as area is accommodation approximately This apartment is held under strata title for factory staff 818 sq ft Geran 52283/M1-B/8/231, Lot No. 49175, (76 sq m)** District of Petaling, Town of Subang Jaya, State of Selangor

16 A-5-4, FairVille Apartment, Jalan USJ 22/1, Apartment The built-up Freehold 10 145,040 07.01.2011* 47630 Subang Jaya, Selangor Darul Ehsan used as area is accommodation approximately This apartment is held under strata title for factory staff 818 sq ft Geran 52283/M1/5/154, Lot No. 49175, (76 sq m)** District of Petaling, Town of Subang Jaya, State of Selangor

17 B-4-4, FairVille Apartment, Jalan USJ 22/1, Apartment The built-up Freehold 10 149,940 03.01.2011* 47630 Subang Jaya, Selangor Darul Ehsan used as area is accommodation approximately The apartment is held under strata title for factory staff 818 sq ft Geran 52283/M1/4/131, Lot No. 49175, (76 sq m)** District of Petaling, Town of Subang Jaya, State of Selangor

* Based on the date of the sale and purchase agreement ** Based on strata title Note: The parcels of shoplots known as Unit No. S 07 Maju Utama Business Centre, No 1, Lorong Maju Utama 2, Pusat Perniagaan Maju Utama, 14000 Bukit Mertajam, Seberang Perai Tengah, Penang (“Unit S 07”) erected on lands previously known as Lot Nos. 12019, 12020 & 12021 all of Mukim 15, District of Seberang Perai Tengah, Penang held under Qualified Title No. H.S.(M) 2618, 2619 & 2620 and Lot Nos. 1830 & 1831, both of Seksyen 6, Bandar Bukit Mertajam, District of Seberang Perai Tengah, Penang held under Qualified Title H.S. (D) 38104 & 38105 respectively and Unit No. S 08 Maju Utama Business Centre, No 3, Lorong Maju Utama 2, Pusat Perniagaan Maju Utama 2, 14000 Bukit Mertajam Bukit Mertajam, Seberang Perai Tengah, Penang (“Unit S 08”) erected on lands previously known as Lot Nos. 20399 & 20400 , both of Mukim 15, District of Seberang Perai Tengah, Penang held under Qualified Title No. H.S.(M) 5301 & 5302 and Lot No. 2094 & PT No. 73, both of Seksyen 6, Bandar Bukit Mertajam, District of Seberang Perai Tengah, Penang held under Qualified Title No. H.S.(D) 55049 & 55027 respectively have been sold to a third party vide a sale and purchase agreement dated 22 September 2011. The sale of the abovementioned shoplots has yet to be completed as at 27 April 2012. analysis of ANNUAL REPORT 2011 shareholdings 119 as at 27 April 2012

Authorised Share Capital : RM500,000,000 Issued and paid-up share capital : RM330,000,000 Class of Shares : Ordinary shares of RM1.00 each Voting rights : One (1) vote per ordinary share

ANALYSIS BY SIZE OF SHAREHOLDINGS No of Size of shareholdings shareholders % Shareholdings %

Less than 100 10 0.31 349 – 100 to 1,000 631 19.75 499,769 0.15 1,001 to 10,000 1,891 59.19 9,348,800 2.83 10,001 to 100,000 547 17.12 17,576,462 5.33 100,001 to 16,499,999 (less than 5% of the issued shares) 114 3.57 94,229,620 28.55 16,500,000 (5% of the issued shares) and above 2 0.06 208,345,000 63.14

Total 3,195 100.00 330,000,000 100.00

SUBSTANTIAL SHAREHOLDERS As per the Register of Substantial Shareholders Direct Interest Indirect Interest Name No of shares held % No of shares held %

Old Town International Sdn Bhd 175,345,000 53.13 –– Lee Siew Heng 5,000,000 1.52 175,345,000(1) 53.13 Goh Ching Mun 330,001 0.10 175,345,000(1) 53.13 Chin Lai Yoong 1,634,559 0.50 175,345,000(1) 53.13 Neobalano Carpus Limited 33,000,000 10.00 –– Notes:

(1) Deemed interested by virtue of their shareholdings in Old Town International Sdn Bhd, pursuant to Section 6A of the Companies Act,1965.

DIRECTORS’ INTEREST IN SHARES As per the Register of Directors’ Shareholdings Direct Interest Indirect Interest Name No of shares held % No of shares held %

Datuk Dr. Ahmed Tasir Bin Lope Pihie 100,000 0.03 –– Lee Siew Heng 5,000,000 1.52 175,345,000(1) 53.13 Leong Chik Weng 10,000 0.003 –– Mark Wing Kong 100,000 0.03 –– Chin Lai Yoong 1,634,559 0.50 175,345,000(1) 53.13 Chuah Seong Meng –– –– Clarence D’Silva A/L Leon D’Silva 100,000 0.03 –– Goh Ching Mun 330,001 0.10 175,345,000(1) 53.13 Tan Say Yap 2,107,200 0.64 –– Notes:

(1) Deemed interested by virtue of their shareholdings in Old Town International Sdn Bhd, pursuant to Section 6A of the Companies Act,1965. analysis of 120 shareholdings OLDTOWN BERHAD (797771-M) as at 27 April 2012

TOP THIRTY SECURITY ACCOUNT HOLDERS (Without aggregating the securities from different securities accounts belonging to the same Depositor.)

Name No of shares held %

1 Old Town International Sdn. Bhd. 175,345,000 53.13 2 OSK Nominees (Asing) Sdn Berhad 33,000,000 10.00 Neobalano Carpus Ltd 3 AmanahRaya Trustees Berhad 16,000,000 4.85 Public Small Cap Fund 4 TA Nominees (Tempatan) Sdn Bhd 13,594,900 4.12 Pledged Securities Account for Bong Yam Keng 5 HSBC Nominees (Asing) Sdn Bhd 5,000,000 1.51 HSBC-FS for Value Partners High-Dividend Stocks Fund 6 Lee Siew Heng 5,000,000 1.51 7 CitiGroup Nominees (Tempatan) Sdn Bhd 4,483,300 1.36 Employees Provident Fund Board (PHEIM) 8 Cartaban Nominees (Asing) Sdn Bhd 3,793,200 1.15 BBH (LUX) SCA for Fidelity Funds Malaysia 9 Maybank Nominees (Tempatan) Sdn Bhd 2,300,000 0.70 Mayban Trustees Berhad for CIMB-Principal Small Cap Fund (240218) 10 Tan Say Yap 2,107,200 0.64 11 HSBC Nominees (Asing) Sdn Bhd 2,018,700 0.61 TNTC for Driehaus Emerging Market Small Cap Growth Fund 12 CitiGroup Nominees (Asing) Sdn Bhd 2,000,000 0.61 CGML IPB for Barker Asia Total Return Fund 13 Chin Lai Yoong 1,634,559 0.50 14 Amsec Nominees (Tempatan) Sdn Bhd 1,500,000 0.45 AmTrustee Berhad for Hong Leong Penny Stock Fund 15 HLB Nominees (Tempatan) Sdn Bhd 1,474,000 0.45 Pledged Securities Account for Lee Chiah Cheang 16 Chin Lai Foong 1,302,560 0.39 17 CitiGroup Nominees (Asing) Sdn Bhd 1,300,000 0.39 CIPLC for Manulife Global Fund-Asian Small Cap Equity Fund 18 Chin Kwok Yew 1,180,000 0.36 19 Universal Trustee (Malaysia) Berhad 1,086,500 0.33 CIMB-Principal Equity Fund 2 20 Public Nominees (Tempatan) Sdn Bhd 1,080,000 0.33 Pledged Secutities Account for Lee Chiah Cheang (TCS/HLG) 21 Amsec Nominees (Tempatan) Sdn Bhd 1,046,700 0.32 AmTrustee Berhad for Pacific Pearl Fund (UT-PM-PPF) 22 AIBB Nominees (Tempatan) Sdn Bhd 950,000 0.29 Low Mei Loon 23 CitiGroup Nominees (Tempatan) Sdn Bhd 780,000 0.24 Exempt An for American International Assurance Berhad 24 SBB Nominees (Tempatan) Sdn. Bhd. 710,000 0.22 Manulife Insurance (Malaysia) Berhad-(Equity Fund) 25 Public Nominees (Tempatan) Sdn Bhd 699,600 0.21 Pledged Securities Account for Kong Goon Khing (E-BTR) 26 SBB Nominees (Tempatan) Sdn. Bhd. 669,200 0.20 Manulife Insurance (Malaysia) Berhad-(Managed Fund) 27 UOBM Nominees (Tempatan) Sdn Bhd 600,000 0.18 UOB-OSK Asset Management Sdn Bhd for Uni.Asia Life Assurance Berhad (PAR Fund) 28 HSBC Nominees (Tempatan) Sdn Bhd 581,300 0.18 HSBC (M) Trustees Bhd for Pertubuhan Keselamatan Sosial (Pacific6939-407) 29 CitiGroup Nominees (Asing) Sdn Bhd 580,500 0.17 CBHK for Premium Asia Fund 30 HSBC Nominees (Asing) Sdn Bhd 530,000 0.16 HSBC-FS I for Samsung Global Best Southeast Asia Equity Mother Fund

Total 282,347,219 85.56 notice of annual general ANNUAL REPORT 2011 meeting 121

NOTICE IS HEREBY GIVEN THAT the Fourth (4th) Annual General Meeting (“AGM”) of Oldtown Berhad (“Oldtown” or “the Company”) will be held at Impiana Hotel, Ballroom 1 & 2, 18 Jalan Raja Dr Nazrin Shah, 30250 Ipoh, Perak Darul Ridzuan on Thursday, 28 June 2012 at 10.30 a.m. for the following purposes:

AGENDA 1. To receive the Audited Financial Statements for the financial year ended 31 December 2011 and the Reports of the (Please refer Directors and Independent Auditors thereon. to Explanatory Note 1) 2. To approve the payment of a final dividend of 4 sen per share under the single-tier system in respect of the financial Ordinary year ended 31 December 2011. Resolution 1 3. To approve the payment of Directors’ fees of RM156,000 in respect of the financial year ended 31 December 2011. Ordinary Resolution 2 4. To re-elect the following directors who are retiring by rotation in accordance with Article 84 of the Company’s Articles of Association and who being eligible offer themselves for re-election:

(a) Dr Leong Chik Weng Ordinary Resolution 3 (b) Mr Mark Wing Kong Ordinary Resolution 4 (c) Mr Chuah Seong Meng Ordinary Resolution 5 5. To re-appoint Messrs Deloitte KassimChan as Auditors of the Company for the ensuing year and to authorise the Ordinary Directors to determine their remuneration. Resolution 6 As Special Business: To consider and, if thought fit, to pass the following Ordinary and Special Resolutions:

6. ORDINARY RESOLUTION AUTHORITY TO ALLOT AND ISSUE SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965 “THAT subject always to the Companies Act, 1965 (“the Act”), the Articles of Association of the Company and Ordinary the approvals of the relevant governmental/regulatory authorities, the Directors be and are hereby empowered, Resolution 7 pursuant to Section 132D of the Act, to allot and issue shares in the capital of the Company from time to time at such price, upon such terms and conditions, for such purposes and to such person or persons whomsoever as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued pursuant to this Resolution does not exceed ten per centum (10%) of the total issued share capital of the Company for the time being, AND THAT the Directors be and are hereby also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad (“Bursa Securities”) AND THAT such authority shall continue in force until the conclusion of the next AGM of the Company.” notice of annual general 122 meeting OLDTOWN BERHAD (797771-M)

7. ORDINARY RESOLUTION PROPOSED SHAREHOLDERS’ RATIFICATION FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE WITH RELATED PARTIES (“PROPOSED RATIFICATION”) “THAT pursuant to Paragraph 10.09 Part E of the Main Market Listing Requirements of Bursa Securities, all the Ordinary recurrent related party transactions (“RRPT”) of a revenue or trading nature entered into by the Company and/or its Resolution 8 subsidiaries with the Related Parties from 13 July 2011, being the date of listing of the Company until the date of the Fourth AGM of the Company as set out in Appendix II of the Circular to Shareholders dated 6 June 2012, which are necessary for the day-to-day operations and/or in the ordinary course of business of the Company and its subsidiaries on terms not more favourable to the related parties than those generally available to the public and are not detrimental to the minority shareholders of the Company, be and is hereby approved and ratified;

AND THAT all the actions taken and the execution of all necessary documents by the Directors of the Company as they had considered expedient or deemed fit in the interest of the Company, be and is hereby approved and ratified.”

8. ORDINARY RESOLUTION PROPOSED SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE WITH RELATED PARTIES (“PROPOSED RRPT MANDATE”) “THAT subject to Paragraph 10.09 Part E of the Main Market Listing Requirements of Bursa Securities, approval be and Ordinary is hereby given to the Company and/or its subsidiaries to enter into RRPT of a revenue or trading nature with the Resolution 9 Related Parties as set out in Appendix II of the Circular to Shareholders dated 6 June 2012, subject to the following: (i) the RRPT are: (a) necessary for the day-to-day operations; (b) undertaken in the ordinary course of business and at arm’s length basis and are on terms not more favourable to the related parties than those generally available to the public; and (c) are not detrimental to the minority shareholders of the Company; and (ii) the disclosure is made in the Annual Report of the Company of the aggregate value of the RRPT based on the type of transactions, the names of the Related Parties and their relationships with the Company pursuant to the Proposed RRPT Mandate during the financial year and in the Annual Report of the Company in the subsequent years during which the Proposed RRPT Mandate is in force; and (iii) the Proposed RRPT Mandate is subject to annual renewal and will continue to be in full force until: (a) conclusion of the next AGM of the Company following this AGM, at which time it will lapse, unless by a resolution passed at the meeting, the authority is renewed; (b) the expiration of the period within which the next AGM after that date is required to be held pursuant to Section 143(1) of the Act (but must not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or (c) revoked or varied by resolution passed by the shareholders in general meeting, whichever is the earlier.

AND THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things as they may consider expedient or necessary (including executing all such documents as may be required) to give effect to the RRPT contemplated and/or authorised by this Ordinary Resolution.” ANNUAL REPORT 2011 123

9. ORDINARY RESOLUTION PROPOSED SHAREHOLDERS’ MANDATE FOR THE PURCHASE BY OLDTOWN OF ITS OWN ORDINARY SHARES ON BURSA SECURITIES OF NOT MORE THAN TEN PER CENTUM (10%) OF THE ISSUED AND PAID-UP SHARE CAPITAL OF OLDTOWN (“PROPOSED SBB MANDATE”) “THAT subject to the Act, the Articles of Association of the Company, the Main Market Listing Requirements of Bursa Ordinary Securities and all other applicable laws, regulations and guidelines, the Directors of the Company be and are hereby Resolution 10 authorised to purchase such number of ordinary shares of RM1.00 each in the Company as may be determined by the Directors of the Company from time to time through Bursa Securities provided that: (i) the aggregate number of ordinary shares purchased and/or held by the Company as treasury shares shall not exceed ten per centum (10%) of the issued and paid-up ordinary share capital of the Company at any point in time; (ii) the funds allocated by the Company for the purpose of purchasing its shares shall not exceed the total retained profits and share premium account of the Company; (iii) the authority conferred by this resolution shall continue to be in force until: (a) the conclusion of the next AGM of the Company following the general meeting at which such resolution was passed at which time it will lapse unless by ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions; (b) the expiration of the period within which the next AGM after that date is required by law to be held; or (c) revoked or varied by ordinary resolution passed by the shareholders of the Company in general meeting, whichever occurs first.

THAT the Directors of the Company be and are hereby authorised to deal with the shares purchased in their absolute discretion in the following manner: (i) cancel all the shares so purchased; and/or (ii) retain the shares so purchased in treasury for distribution as dividend to the shareholders and/or resell on the market of Bursa Securities; and/or (iii) retain part thereof as treasury shares and cancel the remainder.

AND THAT the Directors of the Company be and are hereby authorised to give effect to the Proposed SBB Mandate with full power to assent to any modifications and/or amendments as may be required by the relevant authorities.”

10. SPECIAL RESOLUTION PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION OF THE COMPANY (“PROPOSED AMENDMENTS”)

“THAT the Proposed Amendments to the Articles of Association of the Company as set out in Appendix III of the Special Circular to Shareholders dated 6 June 2012 be and are hereby approved and adopted. Resolution 1

AND THAT the Directors and the Secretary of the Company be and are hereby authorised to do all such acts, deeds and things as are necessary and/or expedient in order to give full effect to the Proposed Amendments with full powers to assent to any conditions, modifications and/or amendments as may be required by the relevant authorities.” 11. To consider any other business of which due notice shall have been given in accordance with the Act.

BY ORDER OF THE BOARD

NG YUET SEAM (MAICSA 7005639) Company Secretary Ipoh, Perak Darul Ridzuan 6 June 2012 notice of annual general 124 meeting OLDTOWN BERHAD (797771-M)

NOTES: 1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint more than two (2) proxies to attend and vote in his/her stead at the same meeting. A proxy may but need not be a member of the Company and Section 149(1)(a) and (b) of the Act shall not apply to the Company. 2. Where a member appoints two (2) or more proxies, the appointment shall be invalid unless the member specifies the proportion of his shareholdings to be represented by each proxy. Each proxy appointed, shall represent a minimum of 100 shares held by the member. 3. Where a member of the Company is an authorized nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy in respect of each securities account in holds with ordinary shares of the Company standing to the credit of the said securities account. 4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee defined under the Securities Industry (Central Depositories) Act 1991 (“SICDA”) which is exempted from compliance with the provisions of subsection 25A(1) of SICDA. 5. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or if the appointor is a corporation, either under its common seal or under the hand of its attorney duly authorised. 6. The instrument appointing a proxy shall be deposited at the Registered Office of the Company at 47A, Jalan Chung Ah Ming, Pasir Puteh, 31650 Ipoh, Perak Darul Ridzuan not less than forty-eight (48) hours before the time appointed for holding the meeting or at any adjournment thereof. 7. For the purpose of determining a member who shall be entitled to attend the meeting, the Company shall be requesting Bursa Malaysia Depository Sdn. Bhd., in accordance with Article 60(c) of the Company’s Articles of Association and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991 to issue a General Meeting Record of Depositors as at 20 June 2012. Only a depositor whose name appears on the Record of Depositors as at 20 June 2012 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote in his/her stead.

EXPLANATORY NOTES ON ORDINARY AND SPECIAL BUSINESS: 1. Item 1 of the Agenda – The Audited Financial Statements for the financial year ended 31 December 2011 and the Reports of the Directors and Independent Auditors thereon This Agenda item is meant for discussion only, as the provision of Section 169(1) of the Act does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this Agenda item is not put forward for voting. 2. Ordinary Resolution 7 – Authority to Allot and Issue Shares pursuant to Section 132D of the Companies Act, 1965 The proposed Ordinary Resolution 7, if passed, will empower the Directors of the Company, from the date of the above AGM, to allot and issue new shares of the Company up to an amount not exceeding in total ten per centum (10%) of the issued share capital of the Company for the time being for such purposes as the Directors consider would be in the best interest of the Company. This authority, unless earlier revoked or varied by the Company at a general meeting, will expire at the next AGM of the Company. Nevertheless this mandate is sought to avoid incurring any costs or delay in convening a general meeting. The Directors would utilize the proceeds raised from this mandate for working capital or such other applications they may in their absolute discretion deem fit. 3. Ordinary Resolution 8 – Proposed Ratification The proposed Ordinary Resolution 8, if passed, will ratify all RRPT of a revenue of trading nature entered by the Company and/or its subsidiaries with the Related Parties as set out in Appendix II of the Circular to Shareholders dated 6 June 2012 circulated together with this Annual Report from the listing of the Company on 13 July 2011 up to the date of the Fourth AGM of the Company. 4. Ordinary Resolution 9 – Proposed RRPT Mandate The proposed Ordinary Resolution 9, if passed, will provide the Company and/or its subsidiaries a mandate to enter into RRPT of a revenue or trading nature with the Related Parties in compliance with the Main Market Listing Requirements of Bursa Securities. The mandate, unless revoked or varied by the Company at a general meeting, will expire at the next AGM of the Company. Detailed information of the Proposed RRPT Mandate is set out in Appendix II of the Circular to Shareholders dated 6 June 2012 circulated together with this Annual Report. 5. Ordinary Resolution 10 – Proposed SBB Mandate The proposed Ordinary Resolution 10, if passed, will give the Directors of the Company the authority to purchase the Company’s own shares up to an amount not exceeding in total ten per centum (10%) of its issued share capital at any point in time upon such terms and conditions as the Directors may deem fit in the interest of the Company. This authority, unless revoked or varied by the Company at a general meeting, will expire at the next AGM of the Company. Further information on the Proposed SBB Mandate is set out in Section 4 of the Circular to Shareholders dated 6 June 2012 circulated together with this Annual Report. 6. Special Resolution 1 – Proposed Amendments The proposed Special Resolution 1, if passed, will allow the Company to incorporate the amendments made to the Main Market Listing Requirements of Bursa Securities to ensure compliance. Details of the Proposed Amendments are set out in Appendix III of the Circular to Shareholders dated 6 June 2012 circulated together with this Annual Report. OLDTOWN BERHAD proxy form CDS Account No. of authorised nominee (797771-M) FOURTH (4TH) ANNUAL GENERAL MEETING

I/We (Full name in block capitals)

NRIC No./Company No of (Address) being a Member of OLDTOWN BERHAD, hereby appoint (Full name in block capitals)

NRIC No. of (Address) or failing him/her, (Full name in block capitals)

NRIC No. of (Address) or failing him/her, *the Chairman of the meeting as *my/our proxy to vote for *me/us and on *my/our behalf at the Fourth (4th) Annual General Meeting of the Company, to be held at Impiana Hotel, Ballroom 1 & 2, 18 Jalan Raja Dr Nazrin Shah, 30250 Ipoh, Perak Darul Ridzuan on Thursday, 28 June 2012, at 10.30 a.m. and, at every adjournment thereof. *My/Our proxy is to vote as indicated below:

RESOLUTIONS FOR AGAINST

Ordinary Resolution 1 Ordinary Resolution 2 Ordinary Resolution 3 Ordinary Resolution 4 Ordinary Resolution 5 Ordinary Resolution 6 Ordinary Resolution 7 Ordinary Resolution 8 Ordinary Resolution 9 Ordinary Resolution 10 Special Resolution 1

Please indicate with an “X” in the spaces provided above how you wish your vote to be casted. If no specific direction as to the voting is given, the proxy will vote or abstain from voting at his/her discretion. (* Strike out whichever is not desired)

Signed this day of 2012

No. of ordinary shares held

Signature/Common Seal of Member Telephone Number of Member

Notes: 1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint more than two (2) 5. The instrument appointing a proxy shall be in writing under the hand of the appointor or proxies to attend and vote in his/her stead at the same meeting. A proxy may but need not be a member of the of his attorney duly authorised in writing or if the appointor is a corporation, either under Company and Section 149(1)(a) and (b) of the Act shall not apply to the Company. its common seal or under the hand of its attorney duly authorised. 2. Where a member appoints two (2) or more proxies, the appointment shall be invalid unless the member 6. The instrument appointing a proxy shall be deposited at the Registered Office of the specifies the proportion of his/her shareholding to be represented by each proxy. Each proxy appointed, shall Company at 47A, Jalan Chung Ah Ming, Pasir Puteh, 31650 Ipoh, Perak Darul Ridzuan represent a minimum of 100 shares held by the member. not less than forty-eight (48) hours before the time appointed for holding the meeting 3. Where a member of the Company is an authorized nominee as defined under the Securities Industry (Central or at any adjournment thereof. Depositories) Act 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with 7. For the purpose of determining a member who shall be entitled to attend the meeting, ordinary shares of the Company standing to the credit of the said securities account. the Company shall be requesting Bursa Malaysia Depository Sdn. Bhd., in accordance 4. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company with Article 60(c) of the Company’s Articles of Association and Section 34(1) of the for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of Securities Industry (Central Depositories) Act, 1991 to issue a General Meeting Record proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt of Depositors as at 20 June 2012. Only a depositor whose name appears on the Record authorised nominee refers to an authorised nominee defined under the Securities Industry (Central Depositories) Act of Depositors as at 20 June 2012 shall be entitled to attend the said meeting or appoint 1991 (“SICDA”) which is exempted from compliance with the provisions of subsection 25A(1) of SICDA. proxies to attend and/or vote in his/her stead. Then fold here

Affix RM0.80 Stamp

The Company Secretary

OLDTOWN BERHAD (797771-M) 47A, Jalan Chung Ah Ming Pasir Puteh 31650 Ipoh, Perak Darul Ridzuan

First fold here