INTRODUCTION

In the past year, the catering industry has seen skyrocketing material costs, which have driven up operational costs around the world. In Hong Kong, we have also found ourselves struggling under increased labour and rental costs. Recognising that these increases will be an ongoing issue in the foreseeable future, the Group implemented a number of measures to address these impositions, such as improving the efficiency of our existing shops.

Two new central food processing plants have been developed and will take over the majority of back-end food preparation. Our local businesses will be supported by the plant under development in Hong Kong, while the PRC plant and accompanying training centre currently in operation will support business development in China. Together these new plants will allow us to make improvements in product quality and implement cost control measures uniformly across brands. They will also permit us to accelerate our expansion. With simplified menus, the front-end can focus on improving services and generating larger sales.

There is growing demand among China's swelling middle class for quality quick service restaurants and Western eateries, and expansion in that fertile market is a priority for the Group. The brands Cafˆm de Coral and The Spaghetti House have already been successfully introduced in Southern China. With a multi-brand strategy and the flexibility to adapt, we will continue to strive for a long-term and sustainable development.

Exploratory studies are underway on the prospect of scaling up our Eastern China business platform, about which we are optimistic due to our experience and knowledge developed in the region.

In light of the challenges we faced this past year, the Group recorded a steady growth of 12% in total turnover to HK$5.96 billion, whilst profit attributable to shareholders was HK$474 million, a decline of 8% compared to the previous year. The Directors recommend a final dividend of 45 HK cents per share to be paid to shareholders for the past year.

HONG KONG OPERATIONS
¡@

Quick Service Restaurant

Cafˆm de Coral

Despite the challenging environment on operational costs this year, Cafˆm de Coral showed modest growth and continued its expansion strategy. This included investing more than HK$37 million in renovations at existing shops to enhance customers' dining experience and keep our outlets fresh and exciting. A total of 13 shops were renovated, including two shops at New Town Plaza and Shatin City One Plaza, and one new shop at Hennessy House, Causeway Bay, specially selected to launch the new 5G design.

We also opened six new shops in large-scale residential areas and high-traffic malls where there was strong demand, bringing the total number of Cafˆm de Coral shops in Hong Kong to 151 as of 31st March, 2012, with a target of 12 upgraded shops and seven new shops planned for next year.

Our focus this year has been on providing customers with extended upgrades while improving our productivities. We kept the menu fresh and customer interest engaged with quality new products such as Oishii Japanese Stone Hot Pot and Canadian Grain-fed Beef Hot Pot, as we improved service with efficiency-enhancing measures at the store level, including automated
ordering, simplified menus and front-line staff training. Removing the bulk of our food preparation from the storefront to new processing plants has significantly optimized in-store productivity and quality consistency.

We also launched original marketing initiatives and promotions to heighten customer awareness of new products. This included TV spots and print ads highlighting product freshness and originality, as well as coupon redemption offered by our "Club 100" VIP Loyalty Program.

Thinking outside the box as a responsible corporate citizen, we introduced new initiatives including "Green Monday", a campaign to promote meat-free diet and thus a lower carbon footprint, and the "Less Rice" promotion, in which we donated $1 to charity for every request for 'less rice'. They were well received by our customers and other stakeholders.

Super Super Congee & Noodles

Seven new Super Super Congee & Noodles shops were opened in the past year, including three outlets opened in private residential areas such as Whampoa Garden, Kingswood Ginza and Marina Square. The brand remains popular and successful, thanks to its health-conscious product range tapping into the public trend for green living, with broad recognition amongst our customers in the public housing estates, commercial districts and private residential developments.

As of today, we have a total of 26 outlets of Super Super Congee & Noodles, which now presents a scalable business platform and helps to broaden our customer base. We expect to open five new shops next year and continue to focus our resources toward Super Super Congee & Noodles' ongoing growth.

Oliver's Super Sandwiches

Specialising in freshly made sandwiches, Oliver's Super Sandwiches performed well this year. The brand's focus on increased efficiency, with smaller footprint retail spaces functioning at reduced operating costs, allows its locations to maximise both production and profits.

This year new product promotions were launched roughly every three months, alongside promotions highlighting an environmentally-friendly attitude with biodegradable packaging. The brand also engaged in numerous joint promotions with organisations that shared similar values about corporate social responsibility.

With 18 locations as of today and a brand message of a healthy, socially conscious lifestyle, Oliver's Super Sandwiches is popular among the middle class.

Other Quick Service Restaurants

In recognition of the growing demand for Western restaurants, the Group focused in recent years on developing other quick service theme restaurants, such as ME.N.U. and Cooking MaMa 360, as well as expanding into specialty markets such as the high-end cafˆm culture with Espressamente illy and the casual juice and smoothie trend with MIX. The adoption of these four brands with simplified menus, smaller footprints and lower labour requirements represents a great opportunity for the Group to reach higher-spending, middle-income consumers, and allows us to gain an increased presence in this market segment of great potential.

As of March 2012, ME.N.U., Cooking MaMa 360 and Espressamente illy had a total of seven locations. MIX is by far the largest of the four brands with six shops in operation and one more opening in April of 2012.
¡@

INSTITUTIONAL CATERING

Asia Pacific Catering

This year, Asia Pacific Catering renewed seven existing contracts and added 16 new branches, including Hong Kong Airport Services, Hong Kong Coliseum and Queen Elizabeth Stadium, which are outside of our tradition venues such as banks, hospitals and universities. Though sales remained positive, the profit margin was unavoidably affected by rising costs, leading to various efficiency enhancement measures.

In the year ahead, the brand's strategy will focus on existing contracts, especially on securing major clients. We will also move toward improving the efficiency of recently opened shops.

Luncheon Star

Luncheon Star is the biggest school lunch provider in Hong Kong. Part of this success lies in the strategy of offering a greater range of options to meet the varied needs of a wider client base. Known for its environmentally-friendly food processing and health-conscious food choices, the brand offers cook-chill technology and a highly successful on-site school catering program in which dishes are partially prepared in the lunchroom from fresh ingredients. This is a green trend Luncheon Star will expand upon and pursue in the year ahead with added on-site fresh vegetable and fruit preparation. The brand's promotion of healthy eating was recently recognized when two of the schools serviced by Luncheon Star were awarded the highest mark possible in the EatSmart School Accreditation Scheme for healthy lunches.

Though Luncheon Star faced a challenging margin squeeze due to rising food costs, it has maintained its commitment to being a socially and environmentally conscious company. Excess lunchboxes are donated to Food Angel, a non-profit organisation which runs programs that distribute excess food to individuals in need, and hence cut food waste. Moreover, green activities like organic farm visits for students and parents are common.
¡@

SPECIALITY RESTAURANT

The Spaghetti House & Spaghetti 360¢X

Already a very strong brand in the market, The Spaghetti House met rising food costs and intense competition with a series of successful marketing initiatives at its 22 locations. These included VIP membership promotions appealing to customer loyalty, joint promotions with banks, and advertising campaigns to promote new dishes such as the Fondue Combination Menu. Regular renovation has kept the brand's image fresh, and new menus were regularly introduced to spark renewed customer interest.

With a special menu and decor designed to appeal to a younger demographic, The Spaghetti House's fresh-faced spin-off specialising in contemporary Japanese- Western fusion cuisine, Spaghetti 360¢X, continues to grow. The brand currently has four Hong Kong locations, to which we expect to add one or two new shops each year

.

PRC OPERATIONS

Quick Service Restaurant

Cafˆm de Coral

Cafˆm de Coral is already well represented in PRC, with 90 locations in first-tier and second-tier developed cities throughout Southern China. In the past year, we experienced rental cost increases in these cities, and cost increases at our food processing plant and supporting facilities. Though this resulted in short-term profit impact, we continued to move forward in our goal of expanding into this affluent market by opening 13 new Cafˆm de Coral branches in carefully selected locations, some of which are located in developing cities in Southern China where the rent is less costly but the business takes time to mature.

With the support of our new food processing plant and training centre in Guangzhou, we expect to accelerate this expansion in the future. We anticipate that the logistical back-up provided by the plant, coupled with our flexible business model, will largely counteract rising costs in prime cities.

In Eastern China, we have 12 Cafˆm de Coral locations. While we continued to adjust our business model to adapt to the Eastern China market, we recently opened our Nanjing outlet, converting our semiservice mode to full-service mode and enhancing the menu offering. The initial result looks promising in terms of customer count and per head spending. We are currently evaluating the proposition to adopt the same full-service operating mode in Eastern China, and aim to open eight new stores in the coming year.

We are confident about the spread of our brand on the mainland, especially in Southern China, and its potential appeal to cosmopolitan consumers. We strive for a target of 30 new stores per year.
¡@

Institutional Catering

Asia Pacific Catering

In recent years, Asia Pacific Catering has successfully opened catering units in United International College in Zhuhai, PRC. This proves to the Group, upon strategic review, that the brand has the potential to grow beyond its traditional client base in the low value-added manufacturing sector and to explore expanding its market share among other high value-added institutional clientele in the Pearl River Delta Region.

As of today, we have a total of 16 operating units under this brand in the PRC.
.

Specialty Restaurant

The Spaghetti House

Further extending our reach into this lucrative market are The Spaghetti House outlets in cities such as Shenzhen, Guangzhou, Zhuhai and Foshan, where we currently have seven locations, as well as one Spaghetti 360¢X. With the Group's administrative network and knowledge base in Southern China, five new locations are under development to expand the brand and tap into the growing middle-class market for mid-priced Western restaurants.

Though the brand did see an increase in food costs, The Spaghetti House was proactive in countering this with a number of successful promotions, including a VIP membership package and joint promotions with select banks to drive sales and increase brand awareness among the target audience.

Food Processing and Distribution

Scanfoods

With the surge in labour and raw material costs, the year past was a tough one for Scanfoods, which provides ham and sausage products throughout Hong Kong and PRC under the Viking Boats brand.

Efficiency-improving measures such as stockpiling supplies when prices are low have helped offset some of the rising costs. We also plan to increase production and sales through the introduction of a smoked food line, as well as improved delivery logistics in the domestic market with a target of a 40% increase in sales.

NORTH AMERICAN

OPERATIONS

MANCHU WOK

This was a challenging year for Manchu WOK. Though the business delivered healthy cashflow this year, the North American economic recovery has been slow and shaky, consumer spending is down on all fronts, and many in the restaurant industry are adversely affected by overly cautious developers and increased operational costs.

Traditional mall locations continue to be a challenge, due to stagnation in the building industry as pertains to malls, untenable rent and competitive bids. As of 31st March, 2012, Manchu WOK had 150 locations operating throughout the United States and Canada. After a comprehensive strategic review by the management, the Group is now focusing on expanding its business in traditional mall and off-mall locations in Canada, whilst expanding its non-traditional business in North America in the year ahead.

LOGISTIC SUPPORT

Central Food Processing Plants

To maintain a competitive edge in the food industry, the Group invested in the development of two new central food processing plants this year. We are pleased to report that the plant located in Guangzhou Yonghe Development District, China, is now fully operational, and the plant in Tai Po Industrial Estate, Hong Kong, is expected to be in operation near the end of the year.

Information Technology

Recognising the role technology plays in effective business administration and management, the Group always looks for ways that new technology can be used to improve our efficiency.

In the past year, we implemented a number of reviews and upgrades on our information systems to improve shop operation, reduce the cost of food production, improve efficiencies of purchasing, warehousing and deliveries as well as human resources management. We also enhanced our internal email and communication network to improve productivity.

We will continue to put effort into investigating new IT solutions as they become necessary and practicable.

Human Resources & Training
To ensure that the Group has a regular pool of talent to draw from, a company-wide Executive Development Program was put into place to recruit staff with great potential. It helps guarantee the future growth and stability of the Group.

We also intend to implement new human resources policies, such as the 5-day work week, to encourage a healthier work-life balance for our employees.

FINANCIAL REVIEW
The Group's financial position, as at 31st March, 2012, continues to be very strong, with a net cash of close to about HK$854 million and available banking facilities of HK$536 million.

As at 31st March, 2012, the Group did not have any external borrowing (31st March, 2011: Nil) and maintained a healthy gearing (being total borrowings over shareholders' funds) of Nil (31st March, 2011: Nil). There has been no material change in contingent liabilities or charges on assets since 31st March, 2012.

As at 31st March, 2012, the Company has given guarantees approximately HK$536,000,000 (31st March, 2011: HK$626,000,000) to financial institutions in connection with the banking facilities granted to its subsidiaries.

Regarding foreign exchange fluctuations, the Group earned revenue and incurred costs and expenses mainly denominated in Hong Kong dollars, while those of our North America and PRC subsidiaries, associates and jointly controlled entities are denominated in United States dollars, Canadian dollars and Renminbi respectively. While foreign currency exposure did not pose significant risk for the Group, we will continue to take proactive measures and monitor closely of our exposure to such currency movement.

PROSPECTS
As an innovator and leader in the competitive catering industry, the Group has been able to achieve sustainable growth in the highly competitive operating environment of Hong Kong, even during these challenging times.

Now we have set ourselves a new challenge: to tap into the dynamic business environment of China. The efficiency of our operation is under constant enhancement as we break new ground in this promising frontier, with a solid foundation underfoot upon which to expand, a flexible strategy for the mission ahead, and an understanding both of customer eating habits and unique PRC market dynamics. We will penetrate into this market through a multi-brand strategy to achieve a greater presence and customer awareness. To meet this goal, we will invest greatly in the year ahead in human resources to build a team with the knowledge and skills necessary to tackle all the challenges.

In the face of the high labour, raw material and rental costs facing the catering industry in Hong Kong and worldwide, we must do more than get by. We must strive for excellence, improve efficiency, and establish a diverse multi-regional, multi-brand platform for sustainable growth into the future.

The Group will continue to increase efficiency without sacrificing quality or value, and we will persevere in an increasingly competitive industry.

Last but not least, on behalf of the management, I must thank our customers, shareholders and all our staff for their unfailing support.

Lo Hoi Kwong, Sunny
Chief Executive Officer

Hong Kong, 26th June, 2012