OTWC 2013 AR

(797771-M)

ANNUAL REPORT 2013

ContentsFinancial Highlights 1

Vision and Mission Statement

2

Business Overview 3

Corporate Information

4

Group Structure 6

Awards & Accolades

7

Board of Directors 8

Chairmans Statement

14

Group Managing Directors Review of Operations

20

Sustainability and Corporate Responsibility

28

31 Corporate Responsibility Community & Workplace Events and Highlights

33 Corporate Governance Statement

41 Audit Committee Report

44 Statement on Risk Management and Internal Control

46 Additional Compliance Information

51 Financial Statements

136 List of Properties Owned by Oldtown Group

141 Analysis of Shareholdings

143 Notice of Annual General Meeting

Proxy Form

The financial highlights for the years ended 31 December 2008 to 2010 are presented on a pro-forma basis (on the assumption that the Group has been in existence throughout the years under review).

# The EPS for the financial years 2008 to 2013 are calculated based on the enlarged share capital of 363 million ordinary shares after the listing of 330 million shares in 2011 and private placement of 33 million shares in December 2012.

They are different from the EPS disclosed in the Prospectus for financial years from 2008 to 2010 (computed based on the enlarged share capital prior to the public listing), audited financial statements for 12-month financial year ended 31 December 2011 (computed based on the enlarged share capital prior to the public listing and weighted average number of shares of 199,434,778 in issue for the financial year ended 31 December 2011) and for 15-month financial period ended 31 March 2013 (computed based on weighted average number of shares of 337,470,330 shares for the financial period ended 31 March 2013).

p* : based on the proforma consolidated financial information as disclosed in the Prospectus dated 22 June 2011.

a^ : based on the audited financial statements for 12-month financial year ended 31 December 2011.

b^ : based on the audited financial statements for 15-month financial period ended 31 March 2013.

The Company has on 27 August 2012 changed the financial year end of the Company from 31 December to 31 March. The financial period ended 31 March 2013 made up of 15 months results covering period from 1 January 2012 to 31 March 2013.

500,000

400,000

300,000

200,000

100,000

0

60,000

50,000

40,000

30,000

20,000

10,000

0

80,000

60,000

40,000

20,000

0

20.00

15.00

10.00

5.00

0

2008 2009 2010 2011 2013

2008 2009 2010 2011 2013

2008 2009 2010 2011 2013

2008 2009 2010 2011 2013

Revenue (RM000)

Profit Attributable to Owners of the Company (RM000)

Profit Before Tax (RM000)

Earnings Per Share (Sen)

138,437

20,446

27,417

5.63

193,666

31,70030,231

40,160

8.33

255,133 43,379

51,954

8.73

285,424

422,054

55,527

40,177

74,947

15.30

11.07

Financial year (in RM000) 2008p* 2009p* 2010p* 2011a^ 2013b^

Revenue 138,437 193,666 255,133 285,424 422,054

Profit Before Tax 27,417 40,160 43,379 51,954 74,947

Profit Attributable to Owners of the Company 20,446 30,231 31,700 40,177 55,527

# Earnings Per Share (Sen) 5.63 8.33 8.73 11.07 15.30

1

ANNUAL REPORT 2013

Financial Highlights

2OLDTOWN BERHAD (797771-M)

Vision and Mission Statement

Vision To be Asia Pacifics Leading White Coffee Brand

Mission Statement

OUR PEOPLE: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, 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 CommunityWe 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 ProductsWe 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 InvestorsWe 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 2013

3

Business OverviewOperation of Cafe Chain:: Own Cafe Outlets*:: Franchised Outlets:: Food Processing

Manufacturing of coffee and other beverages:: Instant Coffee Mix:: Roasted Coffee Powder:: Instant Milk Tea Mix:: Instant Chocolate

Marketing and sales of coffee and other beverages:: Instant Coffee Mix:: Roasted Coffee Powder:: Instant Milk Tea Mix:: Instant Chocolate:: Ready-to-drink coffee

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

*Own cafe outlets include those that are fully and partially owned.

4OLDTOWN BERHAD (797771-M)

Corporate Information

COMPANY SECRETARY

Ng Yuet Seam (MAICSA 7005639)

REGISTERED OFFICE

47A, Jalan Chung Ah Ming, Pasir Puteh 31650 Ipoh, Perak Darul Ridzuan Tel: (605) 253 6073 Fax: (605) 241 0878

HEAD OFFICE

No. 2, Jalan Portland, Kawasan Perindustrian Tasek 31400 Ipoh, Perak Darul Ridzuan Tel: (605) 541 5511 Fax: (605) 547 9123

WEBSITE

www.oldtown.com.my

REGISTRARS

Tricor Investor Services Sdn Bhd (118401-V) Level 17, The Gardens North Tower Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur Tel: (603) 2264 3883 Fax: (603) 2282 1886

PRINCIPAL BANKERS

CIMB Bank Berhad (13491-P)

HSBC Bank Malaysia Berhad (127776-V)

BOARD OF DIRECTORS

Datuk Dr. Ahmed Tasir Bin Lope Pihie PJN, PMP, JSM, FASc

Independent Non-Executive Chairman

Lee Siew Heng Group Managing Director

Mark Wing Kong Independent Non-Executive Director

Tan Chon Ing @ Tan Chong Ling Independent Non-Executive Director

Chin Lai Yoong Non-Independent Non-Executive Director

Chuah Seong Meng Executive Director

Clarence DSilva A/L Leon DSilva Executive Director

Goh Ching Mun Executive Director

Tan Say Yap Executive Director

BOARD COMMITTEES

AUDIT COMMITTEE

Mark Wing Kong Chairman

Datuk Dr. Ahmed Tasir Bin Lope Pihie

Tan Chon Ing @ Tan Chong Ling

REMUNERATION COMMITTEE

Tan Chon Ing @ Tan Chong Ling Chairman

Datuk Dr. Ahmed Tasir Bin Lope Pihie

Lee Siew Heng

Mark Wing Kong

Goh Ching Mun

NOMINATION COMMITTEE

Datuk Dr. Ahmed Tasir Bin Lope Pihie Chairman

Mark Wing Kong

Tan Chon Ing @ Tan Chong Ling

5

ANNUAL REPORT 2013

STATUTORY AUDITORS

Messrs. Deloitte KassimChan (AF 0080) Chartered Accountants No. 87, Jalan Sultan Abdul Jalil 30450 Ipoh, Perak Darul Ridzuan Tel: (605) 253 1358 Fax: (605) 253 0090

STOCK EXCHANGE LISTING

Main Market of Bursa Malaysia Securities Berhad (Listed since 13 July 2011) Stock Name: OLDTOWN Stock Code: 5201

White Cafe Sdn Bhd 100%

Gongga Food Sdn Bhd 100%

White Cafe Marketing Sdn Bhd 100%

Emperors Kitchen Sdn Bhd 100%

Dynasty Confectionery Sdn Bhd 100%

Esquire Chef Sdn Bhd 100%

Kopitiam Asia Pacific Sdn Bhd 100%

Oldtown Singapore Pte Ltd 100%

Old Town Kopitiam Butterworth Sdn Bhd 100%

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%

OTK (HK) Investment Limited 51%

Old Town Kopitiam Sdn Bhd 100%

OTK Singapore Pte Ltd 50%

Dynasty Kitchen Sdn Bhd 100%

6

OLDTOWN BERHAD (797771-M)

Group StructureAS OF MARCH 31, 2013

7ANNUAL REPORT 2013

Awards & Accolades

Oldtown Group has won numerous awards since the Group operated its chain of OLDTOWN WHITE COFFEE cafe outlets. The Groups 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.

2007Golden Bull Award 2007 organised by Nanyang Siang Pau.

Best Brands Food and Beverage Kopitiam 2007 by the BrandLaureate.

SME Brand Excellence Award 2007 from the SMI Association of Malaysia.

Malaysia Book of Records for achieving the largest Kopitiam chain in Malaysia by year end 2007.

2008Gold Award (National Growth Award) from the Malaysian Retailer-Chains Association in 2008.

Enterprise 50 Award 2008 organised by SME Corporation Malaysia and Deloitte Malaysia.

Golden Bull Award 2008 organised by Nanyang Siang Pau.

2009Ranked first in the Top 10 outstanding SMEs category in the Golden Bull Award 2009 organised by Nanyang Siang Pau.

Gold Award (National Growth Award) in the MRCA Award 2009 from the Malaysian Retailer-Chains Association.

2010Silver Award (Fast Food) in the Putra Brand Awards organised by 4As (Association of Accredited Advertising Agencies).

Platinum Award for Outstanding Malaysian Brand in the Outstanding Business Awards 2010 organised by the Star.

Ranked No.1 in the Super Golden Bull category in the Golden Bull Award 2010 organised by Nanyang Siang Pau.

Enterprise 50 Award 2010 organised by SME Corporation Malaysia and Deloitte Malaysia.

2011Product 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 Peoples Choice Special Mention (Retail Fast Food) in the Putra Brand Awards organised by 4As (Association of Accredited Advertising Agencies).

International Franchisor of the Year 2011 by the Licensing Association of Singapore.

Asia Excellence Brand Award by Yazhou Zhoukan 2011.

2012Gold Award for The Most Promising Brand and Silver Award (Retail Fast Food) in the Putra Brand Awards organised by 4As (Association of Accredited Advertising Agencies).

Franchisor of the Year Award and International Franchisor of the Year 2012 Award from the Malaysian Franchise Association (MFA).

Asia Excellence Brand Award by Yazhou Zhoukan 2012.

Malaysias Most Valuable Brand Award by the 4As (Association of Accredited Advertising Agencies) and MATRADE (Malaysia External Trade Development Association).

Datuk Dr. Ahmed Tasir Bin Lope Pihie, a Malaysian, aged 62, 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 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 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 141 of this Annual Report under the Analysis of Shareholdings section.

Datuk Ahmed Tasir has attended all the seven (7) Board Meetings which were held in the financial period ended 31 March 2013. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years.

1. Datuk Dr. Ahmed Tasir Bin Lope Pihie

2. Lee Siew Heng

3. Tan Chon Ing @ Tan Chong Ling

4. Mark Wing Kong

5. Chuah Seong Meng

6. Clarence DSilva A/L Leon DSilva

7. Goh Ching Mun

8. Tan Say Yap

Not in picture: Chin Lai Yoong

74

5

8


Board of Directors

Lee Siew Heng, a Malaysian, aged 47, is the Group Managing Director of Oldtown Berhad and 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 21 years of experience in the manufacturing and retailing industries, of which more than 11 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 Groups 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 Sdn Bhd and was appointed Managing Director and in 2005, he was appointed the Managing Director of Old Town International Group. On 10 November 2009, he was redesignated as the Group Managing Director of Oldtown Group. He 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 Mdm Chin Lai Yoong, a Non-Independent Non-Executive Director of the Company who is also a deemed substantial shareholder 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 141 of this Annual Report under the Analysis of Shareholdings section.

Mr Lee has attended all the seven (7) Board Meetings which were held in the financial period ended 31 March 2013. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years.

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ANNUAL REPORT 2013

Mark Wing Kong, a Malaysian, aged 54, 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 141 of this Annual Report under the Analysis of Shareholdings section.

Mr Mark has attended all the seven (7) Board Meetings which were held in the financial period ended 31 March 2013. He has no conviction for any offences within the past 10 years.

Tan Chon Ing @ Tan Chong Ling, a Malaysian, aged 52, is an Independent Non-Executive Director of Oldtown Berhad and was appointed to the Board on 7 November 2012. He is the Chairman of the Remuneration Committee and is a member of the Audit Committee and Nomination Committee of Oldtown Berhad. He graduated with a honours degree in Bachelor of Civil Engineering from the National University of Singapore in 1985. He joined WTS Konsultant in Kuching from 1985 to 1990 as a Civil Engineer. He was the Managing Director of Uomo Donna Sarawak Sdn Bhd from 1991 to 1993 and was appointed Chief Executive Officer of PT Indoscala, Indonesia, a wholesaler and retailer of ladies apparel, from 1993 to 1996. He is a business entrepreneur

with more than 16 years of experience in construction and property development which include a golf course township development. Mr Tan is the founder and Vice Chairman of Eduland China with 11 years of experience in the setting up, operation and franchise of a chain of Bilingual Early Childhood Education centres in Central China namely Shanghai City, Suzhou and Zhejiang Provinces to provide quality early childhood care and education at purpose built kindergarten buildings located at premium township and residential area.

In the construction and development sector, Mr Tan is a Director of Integrated DC Builders Sdn Bhd and Vice Chairman of Liang Court Wanisara (Sarawak) Sdn Bhd.

Mr Tan 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 Tan has attended the two (2) Board Meetings since his appointment to the Board on 7 November 2012. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years.

10


Board of Directors

Chuah Seong Meng, a Malaysian, aged 38, 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. He left in 1999 to join Apex Furniture Sdn Bhd as Sales Executive. He resigned 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 Groups FMCG businesses.

He does not have any 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 all the seven (7) Board Meetings which were held in the financial period ended 31 March 2013. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years.

Chin Lai Yoong, a Malaysian, aged 45, 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, 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.

Mdm Chin is the sister-in-law of Mr Lee Siew Heng, the Group Managing Director of Oldtown Berhad who is also a deemed substantial shareholder 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 141 of this Annual Report under the Analysis of Shareholdings section.

Mdm Chin has attended five (5) out of seven (7) Board Meetings which were held in the financial period ended 31 March 2013. She does not have any other directorship in any public companies. She has no conviction for any offences within the past 10 years.

11

ANNUAL REPORT 2013

Goh Ching Mun, a Malaysian, aged 42, is an Executive Director of Oldtown Berhad and 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 21 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 and is also a director of two companies which are involved in property investments.

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 141 of this Annual Report under the Analysis of Shareholdings section.

Mr Goh has attended all the seven (7) Board Meetings which were held in the financial period ended 31 March 2013. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years.

Clarence DSilva A/L Leon DSilva, a Malaysian, aged 52, is an Executive Director of Oldtown Berhad and was appointed to the Board on 10 November 2009. He has over a span of 30 years in the Food Service industry where he 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 Carls 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. 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 141 of this Annual Report under the Analysis of Shareholdings section.

Mr Clarence has attended all the seven (7) Board Meetings which were held in the financial period ended 31 March 2013. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years.

12


Board of Directors

Tan Say Yap, a Malaysian, aged 38, is an Executive Director of Oldtown Berhad and was appointed to the Board on 10 November 2009. He has more than 13 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 hotels 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 under Notes to the Financial Statements of this Annual Report. He is a shareholder of Oldtown Berhad and his shareholdings is indicated on page 141 of the Annual Report under the Analysis of Shareholdings section.

Mr Tan has attended all the seven (7) Board Meetings which were held in the financial period ended 31 March 2013. He does not have any other directorship in any public companies. He has no conviction for any offences within the past 10 years.

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ANNUAL REPORT 2013

14


Chairmans Statement

500,000

400,000

300,000

200,000

100,000

02011 2013

Revenue (RM000)

Strong Overall Financial Performance (Note)

The Groups financial results are in tandem with the commendable economic growth rate of 5.6% y-o-y achieved by Malaysia in 2012. For the 15-month period ended 31 March 2013, the Group achieved a consolidated revenue of RM422.054 million whereas the consolidated revenue achieved in the previous financial year for the 12-month ended 31 December 2011 (FY2011) was RM285.424 million.

Note: The Company had on 27 August 2012 changed its financial year end from 31 December to 31 March. The financial period ended 31 March 2013 was made up of results for 15 months covering the period from 1 January 2012 to 31 March 2013.

Operation of Cafe Chain is the Main Revenue Growth Driver

The operation of cafe chain segment continued to be the main and dominant revenue contributor to the Group, attributing 60% of the FP2013 revenue, with the remaining 40% contributed by the manufacturing of beverages segment.

The Groups revenue and profit before tax in FP2013 were mainly derived from the cafe chain operation which recorded RM252.369 million and RM42.276 million respectively. The Groups manufacturing of beverages division reported revenue of RM169.685 million and profit before tax of RM33.765 million in FP2013.

The Groups FP2013 profit before tax included RM1.960 million goodwill written off which took place on 31 December 2012 after the Company conducted its annual goodwill impairment test. Whereas, the Groups FY2011 profit before tax included a gain on disposal of investment in associate companies of RM5.574 million and a gain on disposal of property, plant and equipment of RM2.843 million. Overall, the profit after taxation of the Group for FP2013 was RM55.587 million, while profit after tax was RM40.216 million for FY2011.

Increase in Earnings Per Share

The Group registered a net profit attributable to owners of the Company of RM55.527 million in FP2013 against the net profit attributable to owners of the Company of RM40.177 million in FY2011, which translated into an earnings per share of 15.30 sen for FP2013 against FY2011 earnings per share of 11.07 sen, based on an enlarged share capital base of 363 million ordinary shares at RM1.00 each.

Prudent Financial Discipline

The shareholders fund of the Group was RM304.851 million as at 31 March 2013 which translated into net assets per share of RM0.84, based on the enlarged share capital base of 363 million ordinary shares.

As at 31 March 2013, the total debt to total equity ratio or gross gearing ratio level was at 0.11 times. The fixed deposits, cash and bank balances conserved as at 31 March 2013 was RM86.227 million against a total debt of RM34.541 million. As a result, this has turned the Group into a net cash position of RM51.686 million as at 31 March 2013. With a healthy balance sheet position and armed with vast availability of borrowing capacity, the Group is always looking out for any good business opportunities that may arise in the near future to further expand its business venture.

Stable Financial Liquidity

The Group experienced a net operating cash inflow of RM71.586 million for the 15-month period ended 31 March 2013, mainly after adding back a one-off non-cash flow item of goodwill written off at RM1.960 million. In contrast, the Group experienced net investing cash outflow of RM119.842 million for the 15-month period ended 31 March 2013 which was primarily due to the purchase of other investments of RM60 million and purchase of property, plant and equipment of RM63.682 million.

285,424

422,054

15

ANNUAL REPORT 2013

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present the Annual Report of Oldtown Berhad (the Company or the Group) for the financial period ended 31 March 2013 (FP2013) and am equally delighted to report that the Group has continued to register strong growth as a result of strategic foresight and robust financial performance.

The net cash inflow from financing activities of RM48.661 million was primarily due to a cash inflow from the private placement proceeds at RM64.350 million and a net increase of term loans at RM15.585 million, after netting off dividend payment of RM33 million. The issuance of 33 million new ordinary shares was issued at RM1.95 per share to the investing public pursuant to the Companys private placement exercise, which was completed on 21 December 2012. The cash and cash equivalents as at 31 March 2013 was RM83.668 million.

Growing the Value for Shareholders Dividend (Note)

Upon evaluating the Groups funding requirements, our commitment to deliver value to our shareholders is reinforced by the Company to distribute a minimum of 50% of the Groups annual profit attributable to the owners of the Company as gross dividend. Whilst retaining a sizable portion of profit and funds to finance future growth, the Company also strives to reward its shareholders with a generous level of dividend payout.

In respect of the financial period ended 31 March 2013, a first interim single-tier dividend of 6.0 sen per share amounting to RM19.80 million based on a share capital of 330 million ordinary shares was paid on 10 January 2013. The Board of Directors further recommended a final single-tier dividend of 3.0 sen per share amounting to RM10.89 million based on the enlarged share capital of 363 million ordinary shares in respect of the financial period ended 31 March 2013, subject to the approval of the shareholders at the forthcoming Annual General Meeting.

Should the final single-tier dividend of RM10.89 million be approved by the shareholders at the forthcoming Annual General Meeting, coupled with the RM19.80 million interim single-tier dividend paid on 10 January 2013, this will translate into a dividend payout ratio of 55.3% in respect of the financial period ended 31 March 2013. The cumulative total dividend payout would be RM30.69 million against a net profit attributable to owners of the Company of RM55.527 million in FP2013, if and after the final single-tier dividend of RM10.89 million is approved by the shareholders at the forthcoming Annual General Meeting.

Note: Pursuant to a change of financial year end from 31 December 2012 to 31 March 2013, FP2013 was made up of 15 months period from 1 January 2012 to 31 March 2013. The cumulative total dividend payout of 9 sen per share in respect of FP2013 is for 15 months period financial results from 1 January 2012 to 31 March 2013.

Recent Corporate Development

Completing the First Private Placement Exercise

Post listing, the Company has completed its first private placement exercise to raise gross proceeds of RM64.350 million during the FP2013. On 21 December 2012, 33 million new placement shares were successfully listed and quoted on the Main Market of Bursa Malaysia Securities Berhad. The newly issued 33 million ordinary shares, which represented 10% share capital of the Company of 330 million ordinary shares, were issued to third party investors at a placement price of RM1.95 per share. Approximately 70% of the proceeds or RM44.695 million has been allocated for capital expenditure in view of the Groups business expansion plans; and the remaining 30% or RM19.655 million for working capital needs and expenses incurred in relation to the private placement exercise.

Drawing Up a New Processing Food Centre in China

To support the Groups expansion of licensed cafe outlets in the territory of Southern China, Peoples Republic of China, a new food processing centre will be set up to ensure adequate supply of large food quantities required for the cafe outlets. Understanding this need, on 8 February 2013, the Company has via its wholly owned subsidiary, Old Town (M) Sdn Bhd, executed a Shareholders Agreement with Year Full Group Limited (YF Group) for the establishment of a joint venture company (JV Company) in the Hong Kong Special Administrative Region. The JV Company will act as an investment holding company to establish a wholly owned foreign enterprise in the territory of Guangdong Province, China for the establishment of a new food processing centre. The JV company known as OTK (HK) Investment Limited (OTK HK) has been incorporated on 26 March 2013 with an authorised and issued capital of HKD10 million divided into 10 million ordinary shares of HKD1.00 each, of which 51% is held by OTM and the remaining 49% is held by YF Group.

Taking Control of Distribution Operation in Hong Kong

On 8 April 2013, the Company has via its wholly owned subsidiary, Old Town (M) Sdn Bhd, entered into a Sale and Purchase Agreement for Shares with Chan, Koon Hung Nelson, Law Cho Hong and Lee Siu Chung to acquire 1.4 million ordinary shares of HKD1.00 each in Advance City Limited, Hong Kong (ACL), representing 70% of the issued and paid up share capital of ACL. This acquisition has enabled the Company to take control of the

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Chairmans Statement

current distribution operation with the objective to maximise sales potential for greater financial return in the long run. The acquisition was completed on 22 April 2013 following the fulfillment of terms and conditions in accordance with the Sales and Purchase Agreement for Shares.

Promising Business Prospects Moving Forward

After the Malaysian economy witnessed a continuous y-o-y GDP growth rate of 5.6% in 2012 against 5.1% in 2011, the Malaysian economy is projected to grow by 4.5% to 5.6% y-o-y in 2013 in accordance to forecasts made by various economists and government bodies.

We look forward to the future with confidence and are optimistic that our business is expected to remain strong in 2013 and beyond, despite less robust global economic outlook which may derail the domestic economys performance in 2013 and our export markets business segments. Whilst Malaysias economy is tied to the global economy, our countrys fundamentals remain strong and it is supported by the expansion in private consumption and investment. Domestic demand is expected to continue to be the driver of Malaysias growth; complemented by the governments measures to boost national productivity, per capita income and consumption.

Malaysias economic growth remains intact despite the uncertain outlook while the Malaysian Government has implemented various measures to ensure the domestic market remains resilient and competitive under various key initiatives, such as the Economic Transformation Programme and the Government Transformation Programme. In addition, the food and beverages industry is fairly resilient in its nature and is proven with the ability to weather through various economic cycles historically without seriously experiencing negative impact by any economic slowdown or even recession.

While market space and landscape in the food and beverages industry is becoming more challenging with intensified competition, we will continue to drive innovative business strategies and plans across all channels to consolidate and build our leadership in the respective market segments that we are operating in. The Company has outlined various pragmatic business strategies and holistic business plans to take on greater challenges in the near future as described in detail in the Group Managing Directors Review

of Operations of this Annual Report. I believe with high confidence that all of these promising development and our initiatives will augur well for the Groups performance in the ensuing year.

Acknowledgement

On behalf of the Board, I would like to extend my heartfelt gratitude to our shareholders, bankers, customers, business partners and regulatory authorities for their continued support, guidance and assistance extended to the Group. The Board would like to express its appreciation to the management and employees of the Group for their hard work and dedication.

The Board would like to express its highest appreciation to Dr. Leong Chik Weng, who has ceased to become the director of the Company since 13 September 2012, for his invaluable contributions and services to the Group since the Company was listed as a public entity in July 2011. The Board would also like to extend a warm welcome to Mr. Tan Chon Ing @ Tan Chong Ling as a new board member, succeeding Dr. Leong Chik Weng as an Independent Non-Executive Director on 7 November 2012. Mr. Tan is a successful entrepreneur and brings with him a wealth of experience in various business sectors, such as in education franchise, construction and property development industry, which will enable the Group to benefit from his vast experience and guidance in the future.

Datuk Dr. Ahmed Tasir bin Lope Pihie Chairman

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Chairmans Statement

Oldtown Berhad (the Company or the Group) is one of the fastest growing cafe operators and beverages players in Malaysia. This is continuously reflected by the Groups robust performance during the 15-month financial period ended 31 March 2013 (FP2013). The Group has successfully commanded significant market share in the business segments of operation of cafe chain and manufacturing of beverages within the respective

industries.

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2013 OPERATIONS REVIEW

Strong Growth in the Operation of Cafe Chain Segment

The operation of cafe chain segment continued to be the main and dominant revenue contributor to the Group, attributing 60% of the consolidated revenue for the financial period ended 31 March 2013 (FP2013) (62% of the consolidated revenue for the financial year ended 31 December 2011 (FY2011)); whereas, the remaining 40% of consolidated revenue for FP2013 (38% of the consolidated revenue for FY2011) was contributed by the manufacturing of beverages segment.

The Groups consolidated revenue derived from the cafe chain operation in FP2013 was RM252.369 million (consolidated revenue derived from the cafe chain operation in FY2011 was RM177.155 million). A higher quantum of revenue achieved in FP2013 mainly due to higher number of cafe outlets operated by the Group during FP2013 (total outlets as at the end of FP2013 and FY2011 were 222 and 196 respectively). The higher revenue was also attributable to the extended financial period of 15 months.

The cafe chain operation revenue has grown by leaps and bounds over the years. From a lower pro-forma consolidated revenue of RM47.889 million achieved in FY2007, the segments revenue has grown more than 5 folds to RM252.369 million in FP2013 (Note). This signified that the Group has managed to consistently achieve a larger scale of operation capability over the years.

Robust Growth in the Manufacturing of Beverages Segment

The Groups manufacturing of beverages segment reported consolidated revenue of RM169.685 million in FP2013 (the consolidated revenue derived from the manufacturing of beverages segment in FY2011 was RM108.269 million). The higher quantum of revenue achieved in FP2013 was mainly due to increase in both local and export sales for the Groups beverage products, rapid expansion of distribution networks across the various regions and the extended financial period of 15 months.

The manufacturing of beverages revenue has equally achieved fast growth pace over the years. From a lower pro-forma consolidated revenue of RM31.296 million achieved in FY2007, the segments revenue has also grown more than 5 folds to RM169.685 million in FP2013 (Note). This indicated that the various pragmatic marketing

strategies implemented by the Group have been fruitful over the years.

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 Groups financial performance refers to the audited Statements of Comprehensive Income for FP2013 against FY2007 which was prepared based on the combined results of Oldtown Berhad and its subsidiaries (the Group), assuming the Group has existed on or before 1 January 2007.

Building Strong Foundation in Local and Overseas Markets

In terms of geographical breakdown for the consolidated revenue of RM422.054 million achieved in FP2013, 75.2% was derived from the local market and the remaining 24.8% was from the export market. Within the export market segment, South East Asia contributed 9.9%, other Asian countries contributed 12.9% and the remaining 2.0% was contributed by other countries.

On the other hand, 76.3% of the consolidated revenue of RM285.424 million registered in FY2011 was derived from the local market and the remaining 23.7% was from the export market. Within the export market segments, South East Asia contributed 9.8%, other Asian countries contributed 11.7% and the remaining 2.2% was contributed by other countries.

Taking Proactive Steps to Shape Our Future

In view of the Groups regional business expansion plans, the Company plans to utilise RM44.695 million (70% of the gross proceeds) of the RM64.350 million raised from the private placement exercise for capital expenditure, of which RM33.79 million was utilised to acquire 70% equity interest in Advance City Limited, Hong Kong. The remaining proceeds are intended to be utilised for business expansion in domestic and international markets. It would comprise, but not limited to, opening of new outlets in the domestic and international markets, acquisition of equipment for the new and existing outlets, acquisition of plant and machinery for the new and existing factories, and also investment into a new food processing centre to support the development of licensed cafe outlets in China.

An amount of approximately RM19.155 million (29% of the gross proceeds) is earmarked for the working capital needs. The working capital is mainly to be utilised to finance the growth of operations of the

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ANNUAL REPORT 2013

Group which includes the purchase of raw materials and for operating expenses. The actual expenses incurred for the private placement were RM0.504 million (1% of the gross proceeds) with the minor shortfall of approximately RM0.004 million funded by internally generated funds.

We anticipate that the food and beverage business landscape will be even more competitive while consumers become more sophisticated and discerning in the foreseeable future. The future success of the Group will be determined by our ability to meet the varied demands of our consumers and to keep abreast of trends while fulfilling existing loyal consumers needs and aspirations. At the same time, we will also continue to attract new customers and come forward to become our larger group of future loyal clientele. All of the proactive measurements that we have undertaken at present will lift the Groups operational performance and market position to greater heights tomorrow as a sustainable and competitive business enterprise.

2013/2014 MARKET PROSPECTS

We Deliver What We Can Do Best

Overall, the Oldtown Group is an established and reputable operator of chain cafe since 2005 and a manufacturer of beverages since 1999. As at 31 March 2013, the Group has a total of 222 cafe outlets in Malaysia, Singapore, Indonesia and China. Amongst the 222 cafe outlets, 83 are fully owned cafe outlets, 19 partially owned outlets, 108 franchised and 12 licensed outlets.

We are specialised in our own formulation of hot and cold coffee and tea beverages using high quality coffee beans roasted with our proprietary roasting process. We are also adopting flexible approach in making some modifications in our beverage and food items to suit the local landscape and the individual markets consumer taste profile especially for the overseas markets. All of our cafe outlets in Malaysia are well supported by three centralised food processing centres fully owned by the Group. Our unique, focused and flexible business strategies will enable the Group to generate significant growth momentum as we continuously expand our presence in the regional markets.

Additionally, the Group is also involved in manufacturing, marketing and sales of coffee and other beverages where our products are exported to countries such as Hong Kong, Singapore, USA, Taiwan, China and etc. Our products include instant coffee mix, roasted coffee powder, instant milk tea mix, instant chocolate mix and ready to drink canned coffee. The Group is able to widen its market reach by leveraging on third party distributors, retailers and intermediaries networks where they will carry and distribute our beverage products in various distribution points, such as departmental stores, hypermarkets, supermarkets, convenient stores and retail outlets, located both locally and abroad.

Adopting a Unique Integrated Business Model

Oldtown Berhad is one of the very few players in the market place that operates under an integrated business model where both cafe operation and manufacturing of beverages operation complement



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each other in terms of raw materials procurement, support services, marketing campaign, promotion, business strategies and advertisement. This proven business model has enabled the Group to grow both business segments tremendously since 2005 to become one of the leading beverage manufacturers in the white coffee segment and the largest Asian style cafe operator in terms of number of outlets in Malaysia as at today.

The integrated features are essential to erect an invisible wall to fend off competition and create higher barriers of expansion for other potential and existing competitors from expanding their market share easily. In view of the unique integrated business model pursued by the Group, we are able to expand our business ventures by focusing on promoting our beverage products and cafe outlet services under a single flagship brand of OTDTOWN across the regions. This integration has placed us in a stronger position to create more value, capture market share and generate new growth for the Group in the long run.

Pursuing Practical Business Strategies for Growth

First, we place emphasis on branding by strengthening and promoting the OLDTOWN brand name which is essential in building up brand equity and uphold customer loyalty by embarking on a rebranding exercise in the second half of 2013. Second, we shall continue to expand cafe network via our franchise programme locally and internationally, besides solely relying on the establishment of our fully or partially owned outlets. Third, besides focusing on market positioning by strengthening our position as one of the largest Asian cafe chain operators and beverages manufacturer that specialises in coffee related products, we shall also focus on becoming a Halal certified cafe chain operator and beverages manufacturer.

Riding on OLDTOWNs strong and influential brand equity coupled with our unique integrated business strategies, both the cafe chain operation and manufacturing of beverages segments are expected to progress optimistically as a result of our strategic foresight which would lead to solid financial and operational performance in the ensuing year.

Progress of Cafe Chain Operation Development Plans

Adopting Multi-Pronged Strategies for Domestic Market

As at 31 March 2013, the Group has a total of 222 cafe outlets, of which 199 are located in Malaysia, 8 in Singapore, 11 in Indonesia and 4 in China.

In the domestic front, we are adopting multi-pronged strategies to penetrate into new market segments and enhance our leading market position as the largest Asian style cafe operator in Malaysia. Under the Groups market development plans, we intend to open approximately 20 to 30 new outlets in Malaysia by 2013, of which 50% is to be operated by the franchisee and the remaining 50% is to be fully owned by the Group. Although OLDTOWN cafe outlets are easily visible in most of the urban cities throughout Malaysia, we are progressively penetrating into the suburban and rural markets over the next few years, whereby most of the second and third tier cities and townships present vast opportunity for the Group to reach a wider scope and range of customers.

One of the most significant milestones which has been achieved by the Group in 2013 was the Groups celebration of the successful opening of its 200th outlet opening on 18 April 2013, reminiscing our humble beginnings when the first OLDTOWN cafe outlet was opened in 2005 in the Ipoh town of Perak, Malaysia. The Company has also taken the opportunity to launch a New Menu Set nationwide on the same day. In addition, since early May 2013, OLDTOWN cafe outlets have crossed another significant hurdle with the acceptance of credit card payments via our collaboration with the RHB Banking Group in Malaysia. The acceptance of credit payment is a tested and proven model which would help to increase sales in almost all types of consumer related services or businesses. It is an essential tool to create incremental sales per customer spending in OLDTOWN cafe outlets in the long run.

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ANNUAL REPORT 2013

In order to capture the ever changing market dynamics and as part of our core marketing strategy in 2013, the Group has adopted a tactical marketing strategy via the introduction of the All Day Set Menu by focusing on two key marketing elements, namely the Affordability and Availability factors. Customers will be able to enjoy promotional packages on breakfast, lunch, tea, dinner and supper set menus at anytime, on any day and in any one of OLDTOWN cafe outlets at affordable prices. This will help to attract larger quantum of customers besides increasing the frequency of their visits to OLDTOWN cafe outlets.

Making Our Cafe Outlets the Preferred Place for All to Patronise

Since the Group has begun to embark on getting each individual cafe outlet to be certified as a Halal compliant outlet, the Group has eventually completed the Halal certification process for majority of the outlets operated in Malaysia and Singapore by the end of June 2013. Since 2011, we have been working closely with the Department of Islamic Development Malaysia (JAKIM) to certify the operation of each cafe outlet, so that we are able to penetrate into the Muslim consumer markets more comfortably for the second half of 2013 onwards. The number of cafe outlets that have been certified Halal in both Malaysia and Singapore are 168 and 8 outlets respectively as at 30 June 2013.

A few core marketing strategies have been adopted by the Company to capture additional revenue from this huge untapped market segment. On 8 July 2013, the Company has officially launched a Halal campaign in the OLDTOWN cafe outlet located at the Paradigm Mall, Kelana Jaya in conjunction with the commencement of the Muslim fasting month. For the Ramadhan month promotion, the Company has launched My Dulang set menu and will continue to enhance our Muslim Ramadan and Hari Raya festival meal sets throughout the entire month.

A series of various public relation activities and engagement exercises have been organised during the Muslim fasting month from early July 2013 to early August 2013; and during the month long Muslim New Year celebration from early August 2013 to early September 2013. The promotional campaigns will include holding Ramadhan Buka Puasa (Breaking Fast) in all our cafe outlets and Open House Celebrations in some of the selected cafe outlets. All the promotional activities and initiatives are targeted to gradually upgrade OLDTOWN cafe outlets to become one of the

favourite places where all Malaysians can together patronise in the medium to long term.

The Group has also initiated an animation contest for OLDTOWNs Mascot. We have invited all Malaysians to participate in this animation contest in order to create the next Malaysian ICON which will represent Oldtown White Coffee. As part of our corporate rejuvenation process, we have begun a rebranding campaign to upgrade the image of all the cafe outlets by changing our marketing posters, outlet layout and introducing a new brand tagline by changing our previous brand tagline of Take Your Time to Aroma of Good Times.

Ramping Up New Cafe Outlets Opening in the International Markets

Currently, our presence is entrenched stronger than before in 3 key countries within the Asian region, namely Singapore, Indonesia and China. Nonetheless, we are also continuously and actively exploring penetration opportunities into other new countries within the Asian region along our international markets expansion journey, while focusing to strengthen our market position and speed up our expansion pace within each individual existing market that we presently operate in.

For the international markets, our development plans in Singapore include the opening of 2 to 3 fully owned new outlets in 2013 and exploring licensing opportunities within the Singapore market. Since early 2012, we have and are still in the process of revamping the existing Singapore operating model and have launched a more innovative concept and design for OLDTOWN cafe outlets in Singapore. However, the net increase in cafe outlets in Singapore appeared to be nil for FP2013 because whilst the Group opened 2 new cafe outlets during the year, there were 2 cafe outlets being closed down due to expiry of tenancy. Nonetheless, the 2 cafe outlets will be relocated and opened in new premises at Bedok Mall and Aperia Kallang Park in 2013.

For the Indonesian market, we target to open another 5 to 8 new outlets in 2013. We have also gradually changed the Indonesian market business model from company operated outlet to the sub-licensing model and we plan to open more licensed outlets in Indonesia in 2013. We managed to open 7 new cafe outlets in FP2013 and currently we are operating a total of 11 cafe outlets in Indonesia as at 31 March 2013.

For the China market, there is a huge growth potential for OLDTOWN cafe chain business in view

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of its large population base and growing spending power, therefore, the Group has an ambitious vision of opening more licensed outlets in strategic locations in China. We target to open a total of 30 new cafe outlets by 2015, after the first 4 China cafe outlets were successfully opened in Guangzhou and Shenzhen city of Southern China.

As part of our long term business plan, we are planning to set up a new food processing centre in Guangdong Province, China to support a larger number of new cafe outlets. The expansion in China is expected to be able to accelerate at a faster pace once the proposed new food processing centre is ready to roll out its commercial production by the end of 2013. A permanent food processing centre which is located in the Southern China will enable the Group to expand into other territories of China more easily, where the proximity factor will play a significant role in supporting the Groups long term expansion plans in China.

Progress of Beverages Manufacturing Development Plans

A New Home for Manufacturing of Beverages

In view of the rising demand towards the Groups beverage products, we have gradually relocated our existing beverage manufacturing operations to a new and larger factory constructed in Tasek Industrial Estate of Ipoh. The execution and completion of a seamless transition to a new state-of-the-art integrated facility, including the production facility, warehouse, research and development laboratory, administrative and logistic processing centre in single location, will not only enhance our capabilities and capacity but also allows the new plant to reinforce our goals for the Group to capture the relatively untapped markets in the past. In view of the larger facilities to be established and to support the Groups sustainable business development plan, the total capital expenditure has been revised upward to approximately RM66 million from the initial budgeted amount of RM61 million, which include the construction cost in the new premises, land acquisition, and the acquisition cost of new machinery and equipment.

The installation of new system and equipment, production lines testing and commissioning for the new plant has been fully completed by end June 2013, after the construction of the new factory and its ancillary buildings in Ipoh were completed in January 2013. The new beverage manufacturing facility began its commercial production in July 2013, which is expected to lift the Groups instant

coffee mix and instant milk tea mix core products production capacity to the next new height. It will provide an additional production capacity of approximately 300% compared to the output capacity in year 2012.

The investment in technology continue to be a primary enabler for us to optimise efficiencies and increase output to cater for faster response across our extensive distribution network and rising demand from the marketplace. From now onwards, the supply constraint faced by the Group on production of beverage products has since been overcome and the Group now has abundant capacity to cope with the rising demand easily over the next 5 years.

Enhancement and Investment in OLDTOWNs Brand Equity

Our tireless efforts in enhancing OLDTOWN brand equity has enabled us to stand up tall and proud today, even as the business landscape becomes more crowded and competitive. On the domestic front, we consistently invest in advertising, promotional and marketing campaigns to uphold OLDTOWNs branding and to enhance its brand equity value and customer loyalty in the marketplace. Our advertisements are not only easily located and identified in printed media, such as major stream newspapers and magazines; but also well exposed via the digital media world such as radio and TV commercials; online media and social networks. We also organised various on-the-ground events such as consumer contests, products testing and sampling, road shows; and participated in expos and exhibitions.

In the domestic market, we foresee growing demand as the Group is actively participating in various joint marketing programs organised by the local key retailers. Amongst others, such as the launching of Old Town White Coffee Chinese New Year Gift Pack, conducting exclusive consumer contest via collaborations with Giant and AEON and launching of Modern Trade Display Contest. Besides our participation in product road shows organised by major retailers such as Giant, AEON Big and AEON, we are also continuing to expand the Muslim market segment for the age group of 30 to 40 years old. Our recent participation in Jom Heboh marketing campaign and TV commercial and advertisement are targeted to expand the Groups share within the Muslim market in the long run. We believe, our flagship brand, OLDTOWN, will continue to maintain its dominant presence in the domestic market, as a result of our continuous

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ANNUAL REPORT 2013

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effort to engage consumers through successful execution of all the above mentioned promotional activities and marketing campaigns.

Expansion for Beverages Products Export Markets

The Group is continuously intensifying efforts to scale up existing export markets share and penetration into the more promising Asian region, comprising Hong Kong, China, Singapore and Taiwan, besides increasing our growth within and beyond the 13 countries to which the Groups beverage products are currently exported to.

The Group foresees that there is much more room to grow for its beverages products in China in view of the countrys enormous market potential and rising affluent amongst the urban population. The other overseas markets with huge market potentials are Taiwan and Thailand. Hence, the Group is seeking for more potential new distributors and retailers in different countries to improve its regional market share and export sales.

For the China market, most of the China major retailers along the coastal cities of China are selling OLDTOWNs various beverage products. International and local retail chain, such as Wal Mart, Carrefour, Jusco, Auchan and RT Mart and other smaller retail outlets, do carry and sell OLDTOWN beverage products within their premises.

For 2013 and 2014, the Group plans to expand further into the central region of China by distributing its beverage products across most of the second tier cities in China, such as Tianjin, Shenyang, Suzhou, Hangzhou, Dalian, Qingdao, Dongguan, Nanjing, Foshan, Wuhan, Xiamen, Chengdu, Chongqing, Wuxi and Changzhou. Recently, the Company has participated in SIAL Expo in Shanghai to increase OLDTOWNs brand equity and search for more expansion opportunities in the greater part of China.

For the Thailand market, three variances of white coffee i.e. OLDTOWN White Coffee Classic, Hazelnut and Coffee & Creamer have been launched since the first quarter of 2013. We target to penetrate into major modern trade distribution channels with the distribution of OLDTOWN White Coffee products to more than 400 retailing outlets in the second half of 2013. The target retailer chains that the Group aims to list its products are Tops Supermarket (161 outlets) and a few hypermarket chains such as Big C (116 outlets), Tesco (91 outlets) and Makro (49 outlets).

The Group is adopting various flexible and adaptive strategies by customising its marketing

campaign and product mix when venturing into the international markets, as each consumer market possesses unique characteristics and preferences.

Strategic Investments Ahead of the Curve

On the international front, one of the significant milestones which was achieved by the Group in 2013 was the acquisition of OLDTOWN beverage products sole distributor in Hong Kong, which is expected to contribute favourably to the Groups financial performance in the medium to long term. The completion of the acquisition of 70% stake in Advance City Limited, Hong Kong (ACL) will not only enable the Company to take control of ACLs current operations, but it will also allow the Group to gain direct access to ACLs existing management expertise, marketing operations and distribution network. ACL will source its coffee beverage products from the Group directly and distribute the products into southern China markets, such as Hong Kong, Macau and Guangdong Province in the Peoples Republic of China territory. Currently, ACL owns approximately 1,450 and 1,360 distribution networks points in both Hong Kong and Guangdong Province respectively.

Moving forward, the Group will be able to participate directly in the pricing, marketing and branding strategy to further strengthen the current market positioning and distribution operations of ACL. On top of that, the Group also aims to improve ACLs human capital strength, internal process and operating efficiency in the long run. This vertical integration by acquiring the downstream distributor of OLDTOWN beverage products in Hong Kong will not only augur well for the Groups regional expansion plans but also assist to enhance the Groups business prospects in the Southern China region for the long run with a better grip. This is also an earning accretive acquisition whereby the profits generated by ACL would contribute positively to the Groups overall earnings and net assets in the next financial year.

I believe our committed implementation of all the business strategies that have been thoughtfully crafted will hopefully deliver another successful year for the Group and compliment our aim to continue the creation of value, growth and profitability for all the shareholders in a sustainable future.

Lee Siew Heng Group Managing Director

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MalaysiaSingaporeThailandIndonesia

BruneiPhilippinesTaiwanHong Kong

ShenzhenShanghaiBeijingUK

CanadaUSAAustraliaNew Zealand

OLDTOWN White Coffee and Other Beverage Products Making Inroads into Local and Export Markets

Enjoyed All Around The WorldOur products are currently exported to over 13 countries.

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ANNUAL REPORT 2013

Oldtown Berhad (Oldtown or the Group) recognizes that acting responsibly and sustainably creates value for the Group, employees, customers, shareholders and society as a whole. Sustainability is an integral part of our business and corporate responsibility serves as key to sustainability.

The Groups corporate responsibility practices focus on four areas Environment, Workplace, Community and Marketplace which aim to deliver sustainable value to society at large.

The Group will continue to build sustainable practices in every aspect of the Groups business and remain steadfast in achieving excellence in its corporate responsibility activities.

A. ENVIRONMENT

Environmental Sustainability is of utmost importance due to the increasing depletion of the earths natural resources and global climate change issues. As a dynamic business entity, we rely on the earths natural resources every day and climate change issues will affect the supply chain and the source of many products. Therefore, it is essential to embed environmental sustainability principles into our business operations and practices.

We aim for business growth that is in harmony with environment and are committed to protecting the earths natural resources, conserving and preserving the environment.

Among the approaches seek to heighten the positive impact and minimize negative impacts of the Groups operations on the environment are:

The efficient use of energy, water and raw materials in all our operations.

The establishment of Oldtown EARTHCARE which inculcate environmentally intelligent practices with a variety of green initiatives, activities and awareness programs.

The implementation of ongoing product wastage elimination program and packaging design optimization.

The proper utilization of reusable resources and recyclable materials.

The practice of 3Rs (Reduce, Reuse and Recycle) at the workplace.

The participation in Earth Hour Campaign.

The support of green environment and Eco-friendliness concept through Plant a Tree Campaign.

The Group through Oldtown EARTHCARE takes a proactive approach to promote an environmentally-conscious culture in the workplace. Oldtown EARTHCARE sends out Oldtown Green Alert to all employees periodically to introduce various green initiatives and measures on the responsible use of resources to reduce, reuse and recycle materials wherever possible. It provides tips for resource-saving and promotes environmental friendly practices and awareness among employees to help make a difference to the environment.

During the financial period under review, the Group carried out Carnival of the Green 2012, it participated the Earth Hour Campaign and allocated Green Signage at nationwide Oldtown White Coffee outlets.

B. WORKPLACE

Employees are the backbone of the business. Essentially, employees are central to the smooth functioning of business operations and play a vital role in the success and sustainability of the Group.

The Group believes that human capital is the most valuable asset. In line with this belief, the Group strives to provide a dynamic and challenging workplace that gives emphasis on the opportunity to develop employee skills, talent and capability.

The Group, in fulfilling its corporate responsibility as a caring employer, places emphasis to build long lasting relationships with its employees.

The efforts towards achieving the above objectives are carried out in various aspects:

(i) Employee Welfare and Well-Being Program

The Group aims to enhance the employee benefits schemes to build an engaged workforce that stay loyal and grow with the Group. In pursuing the objective, we provide the following:

Adequate medical benefits, hospitalization and personal accident insurance coverage.

Financial assistance in the form of education subsidy and employee emergency assistance fund.

Organizes annual dinner and recognizes long service staff with the Long Service Award in recognition of their loyalty, dedication and commitment.

Review the Human Resource policies and staff benefits on regular basis.

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(ii) Safe, Healthy and Conducive Work Environment

The Group strives to provide a safe, healthy, comfortable and conducive work environment for its employees through the following initiatives:

Setting up of Occupational Safety and Health Committee to initiate various health and safety programs such as fire drills, fire safety briefings and safety system checks on the equipment.

Ensuring safe practices in all aspects.

Promoting the awareness of safety precautions and health.

(iii) Training and Development Program

The Group seeks to promote and develop its human assets to be competent, multi-skilled and well-motivated to increase their career advancement opportunities. The Group continues to carry out the following efforts:

Employees are provided with the necessary job related training, seminars and workshops on an ongoing basis to further enhance their skills, knowledge, core competencies and proficiency level.

Participation in various in-house and external training programs from technical-related skills to soft management skills.

Participation in international trade fairs/exhibitions locally and overseas, to broaden the knowledge base and exposure of the employees to keep abreast of new developments in their respective field of expertise.

(iv) Recreational, Sports and Leisure Activities

The Group acknowledges a good work-life balance will lead to a more productive workforce.

In order to cultivate balanced work life and create a caring, harmonious and cohesive working environment, employees are encouraged to participate in social, sports, recreational and leisure activities organized by the Group. Besides, communication and camaraderie among staff is fostered through social gatherings and team building events.

(v) Retention, Talent Management and Succession Planning

Retaining key employees is crucial to ensure business success. The Group shall continue to ensure the rewards package remain competitive to attract, retain and motivate the right talents.

A proper succession plan is put in place for critical positions to ensure sustainability in terms of continuous effective and efficient operations within the Group and a healthy leadership pipeline.

C. COMMUNITY

The Group recognizes the interdependent relationship between business growth and social well-being and welfare. Therefore, in fulfilling its corporate responsibilities to the community it serves, the Group is obligated to nourish and improve the quality of the society at large while doing business.

To be socially responsible, the Group focuses its corporate responsibilities on enhancing community sustainability through various activities and actions aim to promote community engagement and address the needs of less fortunate and underprivileged families.

The philanthropic activities and approaches include:

The setting up of Oldtown Children Care Fund to provide aid funds to orphaned, abandoned, vulnerable and deprived children.

Monetary donations to schools, charity, welfare and voluntary associations.

Distribution of gifts, goodie bags, basic supplies and necessities to the poor and impoverished communities during festivals.

Financial aids in the form of medical, emergency funds or short-term living expenses support to alleviate the hardships of needy families.

Building funds donations to orphanage.

During the financial period, the Group through Oldtown Children Care Fund extended monetary donations to schools, welfare association and needy families. It organized various festive celebrations, movie treats and day trips for children homes. It also sponsored products for fund raising projects and donated school bags, stationery, books and uniforms to schools.

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ANNUAL REPORT 2013

D. MARKETPLACE

To achieve the sustainable development of the marketplace, the Group endeavors to carry out activities in a sustainable manner and promote responsible practices among our investors, suppliers and customers.

(i) Investors

We strive to enhance corporate value and maintain stable and long term growth for the benefit of shareholders. It is through engagement with its shareholders that the Group may learn of new and better ways to enable a successful and sustainable business model. The Group continues its efforts to engage with its shareholders through the following initiatives:

Disclose and disseminate all material information in a timely, open, fair and transparent manner.

Ensuring a robust system of corporate governance.

Implementing policies that promote ethical behavior and conducting business responsibly through high standards and business ethics.

Actively engages with its shareholders and investors through various channels of communication such as investor relations activities, general meetings of shareholders, financial results briefings, dialogues and regular press releases.

Accessible in the public domain and regular investors updates on our website.

The Group aims to develop a good relationship with investors and is accountable for providing timely information about the Group to the investment community. During the financial period ended 31 March 2013, the Group has conducted 57 investor relations activities via various communication channels such as one-to-one meetings, small group briefings, conference calls and regular meetings.

(ii) Suppliers

We respect our suppliers and work with them through long-term relationships to realize mutual growth based on mutual trust. In this aspect, we engage with our suppliers in the following areas:

Fosters new partnerships and delivers new business opportunities to expand the suppliers business coverage in the industry.

Engages in ethical procurement practices by adopting standard procedures in vendors qualification.

Ensures the products supplied are in accordance with the Groups materials requirements.

Conducts more in-depth suppliers audits to ensure improved standards in the supply chain.

(iii) Customers

Based on our philosophy of Customer First, we develop and provide innovative, safe and high quality products and services that meet a wide variety of customers demands and earn the trusts of our customers.

Focuses on product innovation and development to meet the customers requirements.

Ensures halal compliance covering materials, employees and systems.

Enhances customers satisfaction and confidence by providing safe, reliable and affordable products.

Establishes customers complaint and feedback system through dedicated email address and suggestion boxes and ensures all customers complaints are acknowledged and resolved promptly.

Sets quantitative benchmarks for its customer service delivery standard such as Standard Waiting Time.

Continues to be covered by the internationally recognized ISO 9001:2008 (Quality Management System), ISO 22000:2005 (Food Safety Management System), HACCP (Hazard Analysis Critical Control Point) and GMP (Good Manufacturing Practice) certifications for its manufacturing of beverages segment to ensure uniform and high standards of product.

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Oldtown Children Care Fund (OCAF) Events & Activities:

School Projects

Sponsorships & Donations to charity, welfare and voluntary associations

Charity Trips

Festival Celebrations for the Unfortunates

Aid Fund to Deprived Children

EARTHCARE Initiatives & Activities: Carnival of the Green 2012

Earth Hour Campaign 2012

Allocations of Green Signage and Recycle Bins at nationwide Oldtown White Coffee outlets

Practise 3Rs Reduce, Reuse & Recycle in Oldtown Berhad

Deepavali Movie-cum-Lunch Outing conducted at The Mines on 3 November 2012.

Chinese New Year Karaoke Session with 114 orphans at OTK Studio Greentown, Ipoh on 2 February 2012.

Donation of 6 months medical supplies to 3-year-old Fenny Hee, Ipoh who is diagnosed with diabetes.

Donation of RM1,200 education aid fund to a single parent family with 3 children from Kampar.

Contribution of school essentials to 30 deprived students from SK Syed Idrus, Chemor.

Lost World of Tambun Charity Trip with 85 orphans on 9 June 2012.

Fitness Dance Performance during Carnival of the Green 2012.

Stage Modeling on dresses made from recyclable products during Carnival of the Green 2012. Allocations of Green Signage and

Recycle Bins at Oldtown White Coffee outlets.

Contribution of 20 units trash bins to Majlis Bandaraya Ipoh.

Contribution of RM2,400 living expenses aid fund to an underprivileged family with 3 children from Ipoh.

Donation of RM3,000 to Persatuan Insan Istimewa Cheras, Selangor.

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ANNUAL REPORT 2013

Corporate Responsibility Community & Workplace Events and Highlights

Workplace Activities and Events: Recreational, Sports & Leisure Activities

Employee Welfare Programs

Training, Development and Life-Long Learning

Health & Safety at the Workplace

Half Yearly Review Meeting for Operation Outlet Heads conducted at Corus Paradise Resort.

Refresher Training conducted at Oldtown White Coffee Taipan outlet.

National Conference conducted on 28 November 2012 at Nan Yang Siang Pau Auditorium.

Presentation of Staffs Long Service Awards during Oldtown Berhad Annual Dinner 2012 on 14 April 2012.

Basic Operations Management Training at Training Central USJ21.

Bowling Tournament conducted at Ampang Superbowl, Summit USJ on 14 July 2012.

Team Building conducted on 16 December 2012 at Bukit Kinding Resort, Ipoh.

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Corporate Responsibility Community & Workplace Events and Highlights

The Board of Directors (the Board) of Oldtown Berhad (the Company) recognizes the value of good governance and believes that a high standard of corporate governance will deliver long-term sustainable shareholder value. The Board is committed to ensure good corporate governance practices are applied throughout the Company and its subsidiaries (the Group).

This Statement sets out the key aspects of how the Company has applied the Principles and Recommendations of the Malaysian Code on Corporate Governance 2012 (MCCG 2012) during the financial period ended 31 March 2013 and any non-observation of the Recommendations of MCCG 2012, including the reasons thereof, has been included in the Statement in view of the transition to MCCG 2012.

PrinciPle 1 establish clear roles and resPonsibilities

1.1 clear functions of the board and Management

The Board leads the Group and plays a strategic role in overseeing the Groups corporate objectives, directions and long term goals of the business. The Board is responsible for oversight and overall management of the Group.

The Board Committees are established to assist the Board in discharging its responsibilities. The Board delegates specific responsibilities to three (3) Committees, namely the Audit Committee, the Nomination Committee and the Remuneration Committee. All committees have written terms of references and operating procedures and the Board receives reports on their proceedings and deliberations. The Chairman of the respective Committees shall report the outcome of their meetings to the Board, which are then incorporated into the minutes of the Board Meetings.

Independent Non-Executive Directors provide unbiased and independent views in ensuring that the strategies proposed by the Management are fully deliberated and examined objectively, taking into perspective the long term interests of shareholders, other stakeholders and the community at large.

The Board recognizes the importance of the role of the Independent Non-Executive Directors particularly in corporate accountability. They are essential for protecting the interests of non-controlling interests and can make significant contributions to a companys decision making by bringing in the quality of detached impartiality.

The Executive Directors take on primary responsibilities for implementing the Groups business plans and managing the business activities.

1.2 clear roles and responsibilities

In fulfilling its fiduciary and leadership functions, the Board meets regularly to perform its functions, amongst others, as follows:

a. reviewing and adopting the companys strategic plans

The Board provides strategic direction and guides the Group in promoting its core values, policies and objectives. The Board reviews the strategic plans presented by the Management.

b. overseeing the conduct of the companys business

To ensure the effective discharge of its functions and responsibilities, the Board delegates the day-to-day management of the Groups business to the Management. The Group Managing Director is

OTWC 2013 AR

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