Message To Shareholders

Dear Shareholders,

I am happy to report that the BreadTalk Group has turned in a steady set of results for financial year ended 31 December 2008 ("FY2008"), bettering our 2007 financial performance. We have achieved this by pursuing a resilient business strategy comprising a diversified product range of strong and innovative brands coupled with an extensive and growing market reach.

Our Group revenue increased by 35.5% from FY2007's high of $156.6 million to a new record-breaking $212.2 million in FY2008, driven by broad-based double-digit growth across all business segments and geographical markets. Group operating profit, likewise, surpassed previous records, reaching a new high of $13.2 million in FY2008. This is a 8.9% improvement over the previous year's operating profit. The improvement was spurred by solid performances by our bakery and food court operations, tempered by impairment charge and startup expenses of our new businesses. But for these items, operating profit would have been $15.7 million, representing a growth of 29.3% over FY2007. On the back of the strong topline performance, net profit attributable to shareholders grew by 6.2% to $7.8 million.

In 2008, we continued the preceding year's focus on fortifying and refreshing our brands with new products and retail concepts. Hence, for our bakery business, which turned eight years old in July, this meant giving our stores a total design overhaul and ushering in a new bakery boutique store concept. While maintaining our signature clean lines and bright atmosphere, our new store concept exudes a warmer, cosier feel. This is our ongoing effort to nurture our signature brand by updating our retail concepts so as to boost same store sales and to raise consumer recognition of our brands. As a trendsetter in food and dining concepts, our efforts are part and parcel of ensuring that we remain ahead of the competition in bringing fresh ideas to our products and stores. Our market diversification strategy saw us seizing growth opportunities in the region where these presented themselves. We thus increased the number of newly-owned bakeries and franchise outlets, adding a total of 27 new owned bakeries and an additional 44 franchised outlets across our existing markets as well as new markets in Asia. We added 5 new food courts to our regional stable, 3 more in Hong Kong and 2 in the PRC. We also took steps towards building new revenue streams both in Singapore and in the PRC by laying the groundwork for the introduction of a premium burger chain, Carl's Jr.®, to be rolled out in the PRC later this year.

In view of the financial turmoil that plunged the global economy into a downward spiral from the second half of 2008, we were also judicious in our spending. We thus kept a tight rein on expenses, improving operational efficiencies, diversifying our sources of raw material and rationalising our businesses to focus on profitable stores while re-thinking our existing strategies for under-performing ones. In March 2009, we disposed off our stake in the J Co. Donuts business to better focus on our other brands with multiple market access.

Our efforts through the year have seen our earning per share on a diluted basis rise 2.5% to 3.31 cents while net asset value per share improved 18.6% to 22.3 cents as of 31 December 2008.

SEGMENTAL REVIEW

Bakery Business

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

During the course of the year, we added new franchisees in Korea, Bahrain, Saudi Arabia and Vietnam and 7 cities in the PRC. Correspondingly, our franchise revenue grew 45.6% to $16.0 million in FY2008 following higher master franchise fees, growth in royalty fees and raw materials sales to these franchised outlets. Overall, the bakery business registered an 11.3% rise in operating profit to $4.3 million in FY2008, mainly driven by higher profits from the PRC and Singapore bakery operations. Our strong showing was offset by start-up loss of $0.9 million incurred by J Co. Donuts and by an operating loss of $1.1 million from our Hong Kong bakery business.

Our reach has grown substantially during the year and as at 31 December 2008, we have 100 owner-operated bakeries compared to 73 the previous year. These consist of 69 BreadTalk stores and 29 Toast Box outlets spanning Singapore, the PRC, Hong Kong, Malaysia and Thailand. Our network of franchised outlets stood, as at year end 2008, at 141, compared with 97 in 2007 - 48 in Indonesia, 15 in the Philippines, 7 in Kuwait, 4 in UAE, 1 in Oman, 7 in India, 1 in Korea and 58 in the PRC.

Food Atrium Business

Our food atrium business has performed well contributing 32.6% or $69.2 million of Group revenue, from higher revenue contribution from Singapore, the PRC and Hong Kong. This was a 42.9% increase over FY2007 with Singapore food atrium revenue surging 68.0% to $21.0 million in FY2008 mainly due to consolidation of revenue from MWA Pte Ltd, ("MWA") as well as the maiden full-year revenue contribution from our Suntec City outlet, which commenced operations in May 2007. MWA was previously a 50% joint venture for the food court at Wisma Atria in Singapore which became a wholly-owned subsidiary after we acquired the remaining 50% equity stake in December 2007. The PRC and Hong Kong registered higher revenues of $32.5 million and $15.4 million, representing a 16.9% and 87.8% revenue increase respectively over FY2007 levels. We opened 4 additional food atria, closed 2 and renovated 1 in the PRC. Following the upgrade, sales increased significantly as we benefited from the full-year revenue contribution from the recently upgraded Shanghai Metro City food atrium. Hong Kong operations recorded higher revenue from the addition of 3 food atria. We are pleased to report that our foray into Malaysia at the end of 2007, with the first Food Republic food atrium at the upmarket Pavilion Shopping Centre in Kuala Lumpur, has proved to be a resounding success with a fast growing following from food enthusiasts.

Food atrium operating profit grew 74.3% to $6.1 million in FY2008, driven mainly by expansion and higher revenue from both the PRC and Singapore. This was offset by operating loss of $1.3 million incurred by our Hong Kong operations. They were, unfortunately, impacted by project cost overrun and delay in the opening of new outlets where operating leases had already commenced.

As at 31 December 2008, the Group owns 29 food atria, an increase of 5 from 31 December 2007, comprising 20 in the PRC, 5 in Hong Kong, 3 in Singapore and 1 in Malaysia.

Restaurant Business

The Restaurant segment, made up of our chain of 6 Din Tai Fung restaurants, 1 Station Kitchen and 1 Cosmopolitan Cafe in Singapore, contributed 15.2% or $32.2 million, representing a 13.5% increase over FY2007. The revenue growth was from higher same store sales from our famed Din Tai Fung restaurants and revenue consolidation from Cosmopolitan Cafe at Wisma Atria, Singapore, after it became a subsidiary of the Group in December 2007. The restaurant business operating profit declined by 34.8% to $3.0 million in FY2008 due to higher operating loss from Cosmopolitan Cafe and the Station Kitchen which suffered an impairment loss on fixed assets of $0.4 million, as well as start-up costs relating to Carl's Jr.® restaurant business. On the other hand, Din Tai Fung enjoyed a 2.0% improvement in its operation profit following higher revenues, despite facing higher personnel and food cost.

Business Outlook

Our sound business strategy, strong brands and diversified markets coupled with prudent cash management and a cautious investment approach, has lent resilience to the Group. Thus, despite the tough economic conditions anticipated for 2009, we are confident of being well-positioned to ride through the short-term economic challenges. We are also in a good position to take advantage of opportunities that still abound in this climate. We believe that Singapore and the PRC, which are our key markets, will continue to provide a steady income stream. Our differentiated dining concepts which offer top quality fare at very affordable prices are less likely to be impacted than more expensive alternatives by any expected decrease in consumer spending.

In ensuring continued growth, we will invest part of our profits in the construction of new platforms and infrastructure for future revenue growth, such as the introduction of Carl's Jr.® restaurants into the PRC. As far as operational improvements are concerned, we will also continue to invest substantially in training our people across all levels of the organisation. This will ensure that our standards of service excellence are maintained. Such skills training and development will enable our personnel to progress within the organisation and ensure staff retention. We will also upgrade our IT systems and improve our operational efficiencies. These measures will strengthen our position in our existing markets and sustain our ability to extend our reach to new ones.

Dividend

The Board is pleased to propose a first and final exempt (one-tier) dividend of 1.00 cent per ordinary share for FY2008 in appreciation for the loyalty and strong support shown by our shareholders. This represents approximately 30% of the Group's net profits for the year. While we have a healthy cash balance of $47.9 million as at 31 December 2008, we are conscious of the need to manage our resources to ensure our ability to ride through this climate, and to make the necessary investments at the opportune time.

Accolades

At BreadTalk, our pursuit for creative excellence extends beyond the culinary arts. In 2008, Food Republic was the overall winner in the Promising Brands category of the Singapore Prestige Brand Award 2008. On the corporate governance front, we received the Most Transparent Company Award (Sesdaq category) for 2004, 2005, 2007 and 2008. In addition, we had the honour of receiving the 2008 Davey Award (Silver) for Best Annual Report design for our 2007 Annual Report entitled, "Adding Flavour To Your Life" presented by the International Academy of the Visual Arts.

Appreciation

The success of the BreadTalk Group is owed to a collective set of individuals - our loyal shareholders, our faithful customers, our supportive business partners and last but certainly not least, our dedicated and tireless staff. On behalf of the Board, I would like to convey to each of them our sincerest thanks. With their continued support and patronage, we believe we have the necessary fortitude to brave the challenges ahead.

George Quek
Chairman