KFC Msia AR 2007

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KFC HOLDINGS (MALAYSIA) BHD (65787-T) Annual Report 2007

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Annual Report 2007 KFC HOLDINGS (MALAYSIA) BHD (65787-T)

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ContentsHighlights

Notice of Annual General Meeting

Notice of Dividend Entitlement

Statement Accompanying Notice of Annual General Meeting

Corporate Statement

Review of Operations

Corporate Information

Board of Directors

Senior Management

Head of Division

Group Structure

Corporate Governance Statement Nomination and Remuneration Committee

Audit Committee Report

Statement on Internal Control

Additional Compliance Information

Financial Statements

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�00� �004 �005 �006 �007 RM000 RM000 RM000 RM000 RM000

TOTAL REVENUE 1,380,564 1,410,933 1,456,547 1,523,839 1,730, 371

OPERATING PROFIT 50,102 43,354 123,784 142,304 150, 624

PROFIT BEFORE TAX 66,056 65,736 5,563 142,304 150,624

PROFIT/(LOSS) ATTRIBUTABLE TO EQUITY HOLDERS 40,264 48,094 (32,459) 98,280 104, 269

TOTAL ASSETS 1,128,464 1,061,722 925,672 974,078 1,006,128

SHAREHOLDERS’ EQUITY 442,700 468,125 437,043 528,476 602, 021

BASIC EARNINGS/(LOSS) PER SHARE (SEN) 20.5 24.3 (16.4) 49.6 52.6

GROSS DIVIDEND PER SHARE (SEN) 12 14 16 18 20

SHARE PRICE AS AT 31 DECEMBER (RM) 4.42 3.58 4.10 5.40 6.40

NO OF RESTAURANTS KFC MALAYSIA 336 350 350 375 410 KFC SINGAPORE 68 70 68 68 69

404 420 418 443 479

KEDAI AYAMAS 55 58 35 19 20 AYAMAS DEPOTS 11 11 10 4 3 RASAMAS 27 31 14 15 22

Financial Highlights

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1,381

1,411

1,4571,524

�,7�0

2007

2006

2005

2004

2003

66 66

6

142�5�

200720

06

200520

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2003

1,128 1,062

926

974�,006

2007

2006

2005

2004

2003

443

468

437

528

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2007

2006

2005

2004

2003

SHAREHOLDERS’ EQUITY(RM Million)

TOTAL KFC RESTAURANTS(No. of Restaurants)

TOTAL AYAMAS OUTLETS(No. of Outlets)

REvENUE(RM Million)

PROFIT BEFORE TAX(RM Million)

TOTAL ASSETS(RM Million)

Group Financial Highlights

KFC MALAYSIA

KFC SINGAPORE

KEDAI AYAMAS (including depots)

RASAMAS

336

350 350375

4�0

2007

2006

200520

04

2003

6970

68 68 69

27

31

14 15

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2007

2006

200520

04

2003

6669

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NOTICE IS HEREBY GIvEN that the �8th Annual General Meeting of KFC Holdings (Malaysia) Bhd will be held at Level �, Wisma KFC, No �7 Jalan Sultan Ismail, 50�50 Kuala Lumpur on Wednesday, �0 April �008 at ��:�0 a.m. for the following purposes: -

AGENDA

1. To receive and adopt the Audited Financial Statements of the Company for the year ended 31 December 2007 and the Reports of the Directors and Auditors thereon.

2. To approve the payment of a final dividend of 12 sen less 26% Malaysian income tax per share.

3. To approve the payment of Directors’ fees in respect of the financial year ended 31 December 2007.

4. To re-elect the following Directors retiring pursuant to Article 89 of the Company’s Articles of Association: (i) Hassim bin Baba (ii) Kua Hwee Sim 5. To re-appoint Messrs Ernst & Young as Auditors of the Company and authorize the Directors to fix their

remuneration.

6. As special business:

To consider and, if thought fit, to pass the following resolutions: -

(a) Ordinary Resolution - Authority to allot and issue shares pursuant to Section 132D of the Companies Act 1965 (the “Act”)

“THAT subject always to the Act, Articles of Association of the Company and approvals from the Bursa Malaysia Securities Berhad (“Bursa Securities”) and other governmental or regulatory authorities, where such approvals shall be necessary, full authority be and is hereby given to the Directors pursuant to Section 132D of the Act from time to time to issue and allot ordinary shares from the unissued share capital of the Company upon such terms and conditions and at such times as may be determined by the Directors of the Company to be in the interest of the Company Provided Always that the aggregate number of shares to be issued pursuant to this Resolution shall not exceed 10 percent of the issued share capital for the time being of the Company.”

(b) Ordinary Resolution - Proposed Share Buy-Back Authority

“THAT subject to the Act, rules, regulations and orders made pursuant to the Act, provisions of the Company’s Memorandum and Articles of Association and the Listing Requirements of Bursa Securities and any other relevant authorities, the Company be and is hereby authorized to purchase and/or hold such amount of ordinary shares of RM1.00 each in the Company’s issued and paid-up share capital (“Proposed Share Buy-Back Authority”) through Bursa Securities upon such terms and conditions as

Resolution �

Resolution �

Resolution �

Resolution 4Resolution 5

Resolution 6

Resolution 7

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Resolution 8


the Directors may deem fit in the interest of the Company provided that the aggregate number of shares so purchased and/or held pursuant to this ordinary resolution (“Purchased Shares”) does not exceed ten percent (10%) of the total issued and paid-up share capital of the Company at any time AND THAT an amount not exceeding the total retained profits of RM257,611,000 and share premium account of RM18,721,000 as disclosed in the audited accounts of the Company as at 31 December 2007 otherwise available for dividend for the time being be allocated for the Proposed Share Buy-Back Authority.”

“AND THAT the Directors be and are hereby authorized to decide at their discretion either to retain the Purchased Shares as treasury shares (as defined in Section 67A of the Act) and/or cancel the Purchased Shares and/or to retain part of the Purchased Shares and cancel the remainder and/or to resell the treasury shares or to distribute them as share dividend and/or subsequently cancel them and to deal with Purchased Shares in such other manner as may be permitted by the Act, rules, regulations, guidelines, requirements and/or orders of Bursa Securities and any other relevant authorities for the time being in force.”

“AND THAT the Directors be and are hereby empowered to do all acts and things (including the opening and maintaining of a central depositories account(s) under the Securities Industry (Central Depositories) Act, 1991) and to take such steps and to enter into and execute all commitments, transactions, deeds, agreements, arrangements, undertakings, indemnities, transfers, assignments, and/or guarantees as they may deem fit, necessary, expedient and/or appropriate in the best interest of the Company in order to implement, finalise and give full effect to the Proposed Share Buy-Back Authority with full powers to assent to any conditions, modifications, variations (if any) as may be imposed by the relevant authorities.”

“AND FURTHER THAT the authority conferred by this ordinary resolution shall be effective immediately upon passing of this ordinary resolution and shall continue in force until the conclusion of the next Annual General Meeting (“AGM”) of the Company or the expiry of the period within which the next AGM of the Company is required by law to be held (whichever is earlier), unless earlier revoked or varied by ordinary resolution of the shareholders of the Company in general meeting, but shall not prejudice the completion of purchase(s) by the Company before the expiry date and in any event in accordance with provisions of the Listing Requirements and other relevant authorities.”

(c) Ordinary Resolution - Proposed Renewal of Shareholders’ Mandate and additional mandate for KFC Holdings (Malaysia) Bhd and its subsidiaries (“KFCH Group”) to enter into Recurrent Related Party Transactions of a Revenue or Trading Nature with Related Parties (“Proposed Shareholders’ Mandate”)

“THAT authority be and is hereby given in line with Chapter 10.09 of the Listing Requirements of the

Bursa Securities, for the Company, its subsidiaries or any of them to enter into any of the transactions falling within the types of the Recurrent Related Party Transaction, particulars of which are set out in the Circular to Shareholders dated 8 April 2008 with the Related Parties as described therein, provided that such transactions are of revenue or trading nature, which are necessary for the day-to-day operations of the Company and/or its subsidiaries, within the ordinary course of business of the Company and/or its subsidiaries, made on an arm’s length basis and on normal commercial terms with those generally available to the public and are not detrimental to the minority shareholders of the Company;

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AND THAT such authority shall commence immediately upon the passing of this Ordinary Resolution until: -

(i) the conclusion of the next AGM of the Company at which time the authority shall lapse unless by a resolution passed at a general meeting, the authority is renewed;

(ii) the expiration of the period within which the next AGM after the date that is required by law to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

(iii) revoked or varied by a resolution passed by the shareholders of the Company at a general meeting,

whichever is earlier.

AND FURTHER THAT the Directors of the Company be authorized to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the Proposed Shareholders’ Mandate.”

7. To transact any other ordinary business of which due notice shall have been given.


Resolution 9

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A Depositor shall qualify for entitlement only in respect of: -

(a) Shares transferred into the Depositor’s Securities Account before 4.00pm on 7 May 2008 in respect of the ordinary transfers; and

(b) Shares bought on the Bursa Malaysia Securities Berhad (“Bursa Securities”) on a cum entitlement basis according to the Rules of the Bursa Securities.

BY ORDER OF THE BOARDMOHD ZAM BIN MUSTAMAN (LS 0009020)IDHAM JIHADI BIN ABU BAKAR, ACIS (MAICSA 7007381)

Company Secretaries

Kuala Lumpur8 April 2008

Notes:

1. A member of the Company entitled to attend and vote at the above AGM may appoint a Proxy to attend and vote in his stead. A Proxy may but

need not be a member of the Company. If the proxy is not a member of the Company, the proxy shall be an advocate or an approved company

auditor or person approved by the Companies Commission of Malaysia.

2. If the member is a corporation, this Proxy Form must be executed under its common seal or the hand of its duly authorized officer or attorney. If

this Proxy Form is signed under the hand of an officer duly authorized, it should be accompanied by a statement reading “signed as authorized

officer under an Authorisation Document which is still in force, no notice of revocation having been received”. If this Proxy Form is signed under the

attorney duly appointed under a power of attorney, it should be accompanied by a statement reading “signed under a Power of Attorney which is

still in force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid

in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed with this Proxy Form.

3. A member of the Company may appoint more than two (2) proxies to attend the AGM. Where a member of the Company appoints two (2) or more

proxies, the appointment shall be invalid unless the member specifies the proportion of his shareholdings to be represented by each proxy.

4. Any alteration made in this form should be initialed by the person who signs it.

5. This Proxy Form or a notarially certified copy thereof must be deposited at Tenaga Koperat Sdn Bhd, G-01, Ground Floor, Plaza Permata, Jalan

Kampar, Off Jalan Tun Razak, 50400 Kuala Lumpur, not less than forty-eight (48) hours before the time for holding the meeting or any adjournment

thereof.


NOTICE IS ALSO HEREBY GIvEN that the final dividend of �� sen less �6% Malaysian income tax per share will be paid on �8 May �008 to depositors who are registered in the Record of Depositors at the close of business on 7 May �008 if approved by members at the �8th Annual General Meeting on �0 April �008.

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Explanatory Notes on Special Business

�. Resolution pursuant to Section ��D of the Companies Act �965

The Ordinary Resolution proposed under item 6(a), if passed, will give the Directors of the Company, from the date of the above General Meeting,

authority to issue and allot ordinary shares from the unissued share capital of the Company being for such purposes as the Directors consider would

be in the interest of the Company. This authority will, unless revoked or varied at a General Meeting, expire at the conclusion of the next AGM of the

Company.

�. Resolution pursuant to the Proposed Share Buy-Back Authority

This resolution proposed under item 6(b) will empower the Directors of the Company to purchase the Company’s shares up to ten percent (10%)

of the issued and paid-up share capital of the Company by utilizing the funds allocated which shall not exceed the total retained earnings and

share premium of the Company. This authority will, unless revoked or varied at a General Meeting, expire at the conclusion of the next AGM of the

Company.

Further information on the Proposed Share Buy-Back Authority are set out in the Circular to Shareholders of the Company which is dispatched

together with the Company’s Annual Report for the year ended 2007.

�. Resolution pursuant to the Proposed Shareholders’ Mandate

This resolution proposed under item 6(c) will enable KFCH Group to enter into any recurrent transactions of a revenue or trading nature which are

necessary for the KFCH Group’s day-to-day operations, subject to the transactions being in the ordinary course of business, made at arm’s length

and on normal commercial terms and are not to the detriment of the minority shareholders of the Company.

Further information on the Proposed Shareholders’ Mandate are set out in the Circular to Shareholders of the Company which is dispatched

together with the Company’s Annual Report for the year ended 2007.


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Statement AccompanyingNotice of Annual General Meeting1. DIRECTORSWHOARESTANDINGFORRE-ELECTIONATTHEANNUALGENERALMEETING

The Directors retiring by rotation pursuant to Article 89 of the Company’s Articles of Association are: -

(i) Hassim bin Baba

(ii) Kua Hwee Sim

The details of the directors seeking re-election are set out in the Directors’ Profiles which appear on pages 40 and 41 of the Annual

Report.

2. DETAILSOFATTENDANCEATBOARDMEETINGSHELDINTHEFINANCIALYEARENDED31DECEMBER2007

There were five (5) Board Meetings held during the financial year ended 31 December 2007 and the following are the details of the

Board attendance: -

Name of Director No of Meetings Attended

1. YBhg Tan Sri Dato’ Muhammad Ali bin Hashim 5/5

2. Ahamad bin Mohamad 5/5

3. Jamaludin bin Md Ali 5/5

4. Hassim bin Baba 5/5

5. Kua Hwee Sim 5/5

3. THE28THANNUALGENERALMEETINGWILLBEHELDATLEVEL3,WISMAKFC,NO17JALANSULTANISMAIL,

50250KUALALUMPURONWEDNESDAY,30APRIL2008AT11.30A.M.

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KFC is by far the most popular restaurant chain in Malaysia, commanding a market share of over 44%. With over 400 KFC restaurants in Malaysia, 69 in Singapore and 7 in Brunei – plus new restaurants opening in Cambodia – KFC sees millions of people flocking to its various outlets year in, year out.


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KFC HOLDINGS (MALAYSIA) BHD (65787-T) Annual Report 2007KFC HOLDINGS (MALAYSIA) BHD (65787-T) Annual Report 2007

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JamaludinbinMdAliManaging Director

Corporate Statement

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TanSriDato’MuhammadAlibinHashimChairmanAhamadbinMohamad

Deputy Chairman


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Corporate Statement

Dear Shareholders,�007 proved to be another milestone in our corporate growth, being marked by our best

ever financial performance. We believe that the fundamental reason for our success is that

‘Customer Mania’ remained our guiding principle, enabling us consistently to deliver on the

promise we make to our customers of top quality products and service.

To further strengthen and leverage on our market leadership, during the year we expanded

our restaurant network and created an enticing range of new products. In addition, we

enhanced our operational processes, cut costs and further improved our governance.

Mindful of the vital importance of corporate citizenship, we also extended our Corporate

Social Responsibility programmes to effectively reach out to more people.

On behalf of the Board of Directors (the Board), we are happy to present the Corporate

Statement of KFC Holdings (Malaysia) Bhd (‘KFCH’) for the financial year ended

�� December �007.

LOOKINGBACK

In Malaysia, domestic consumption-led growth and the diversification of the economy continued to facilitate development and strengthen resilience. This protected the country from the uncertainties arising from global imbalances and the recent market volatility caused by the U.S. subprime mortgage crisis, and enabled the nation to achieve a GDP growth of 6.3%.

Meanwhile, the private sector was encouraged to assume a leading role in economic development. In a series of initiatives, the Government liberalized the Foreign Investment Committee guidelines, reduced corporate tax to 26% from 2008, and launched five economic corridors across the country.

Singapore’s economy also made good progress during the year, growing by 7.7%. Financial services and tourism performed strongly, driven in part by buoyant economies throughout the sub-region. Construction activity surged too, supported by a boom in high-end apartments building as well as new office cum retail projects and two large entertainment resorts.

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Corporate Statement

ENHANCINGRESULTS

Against this background in 2007, Group revenue surged to RM1,730.4 million, up 13.6% over prior year’s RM1,523.8 million, while profit before tax gained by 5.8%, from RM142.3 million in 2006 to RM150.6 million. As a result, earnings per share climbed 6.1% from 49.57 sen as at 31 December 2006 to 52.59 sen as at 31 December 2007.

Revenue from the KFC Restaurants Business segment accounted for approximately 77% of the Group’s total turnover with the balance of 18% and 5% contributed by our Integrated Poultry Businesses and Ancillary Businesses respectively.

The year’s financial highlights included:

• A 14.7% growth in revenue by KFC Restaurants to RM1,335.3 milllion from RM1,164.1 million in 2006

• A 9.4% growth in revenue by the Integrated Poultry Businesses segment to RM317.0 million from RM289.6 million in 2006

• An 11.4% growth in revenue by the Ancillary Businesses segment to RM78.1 million from RM70.1 million in 2006

Strategic Initiatives

The Group’s positive growth in revenue and profitability was driven by a series of initiatives:• Effective brand building and marketing promotions • New product launches such as Colonel Rice combo, Alaskan Fish Burger, Black

Pepper Chicken Chop, Chicken Poppers, Half-Half Meltz, Variety Bucket with Fish Fingers, and new X-meal combos

• The launch of KFC’s new “Colonel” logo, plus new staff uniform and product packaging

• Strong expansion of the KFC network, with 39 new stores being opened during the year in Malaysia and nine in Singapore

• Remodelling of 26 existing stores to enhance their ambience and attract more customers

• The extension of operating hours at 73 of our restaurants, which now open 24 hours a day

• The introduction of credit card facilities at our restaurants in the Klang Valley, Johor and Penang

• The launch by KFC Singapore of a dedicated KFC Delivery phone number• The expansion and upgrading of our processing plants• The launch by Ayamas of a variety of new offerings including Hot & Spicy Chicken

Fingers and Premium Popcorn Bites as well as a range of shelf-stable products • The opening of ten new Rasamas Restaurants


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Corporate Statement

Dividends

KFCH is committed to providing worthwhile returns for its investors. Given the Group’s sterling performance and strong fundamentals, the Board of Directors has recommended a total dividend of 20 sen per share (comprising an interim dividend of 8 sen and a final dividend of 12 sen) in comparison to 18 sen for 2006.

Asset Management

The Board and Management of KFCH are dedicated to the effective and efficient management of the Group’s assets and liabilities. During the year, surplus cash generated from our operations was invested in income-accretive assets and also to prepay loan commitments to lower Group borrowings.

Total borrowings dropped from RM200.4 million as at 31 December 2006 to RM123.0 million as at 31 December 2007 following the prepayment of the last instalment of the KFCH bonds and the scheduled repayment of various loans. As a result, the Group was in a net cash position as at 31 December 2007.

The positive impact of these measures was clearly demonstrated by the 25% drop in the Group’s financing cost which declined to RM11.3 million from RM15.0 million previously.

STRENGTHENINGTHEBUSINESS

In October 2007, KFCH entered into a Share Sale Agreement to purchase from Sindora Berhad a 55% equity stake in Tepak Marketing Sdn Bhd (“Tepak”) for RM2.97 million. Tepak’s main activities are the contract packing of tea, tea trading, and the sales and marketing of carbonated drinks under its own brand name “Zippie”.

As the Group regularly procures tea products for its restaurant chains, the acquisition will enable KFCH to participate in a profitable business that complements its existing operations. It will also guarantee our restaurants a level of price stability and ensure a consistent supply of quality tea. In addition, Tepak has considerable growth potential both from its contract manufacturing activities (which include Unilever’s Lipton Tea) and from the distribution of Zippie soft drinks. It will thus provide KFCH with an alternative platform for expansion, diversify its earnings base, and reinforce its foundation as a food conglomerate.

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Corporate Statement

DRIVINGPERFORMANCE

KFCH employs a rigorous set of Key Performance Indicators (KPIs) to build a performance culture and to help us define and gauge the progress we are making towards our organizational goals. Our KPIs are used to measure achievement and also form the basis for recognizing, rewarding and promoting employees. In this way, they enhance motivation and build momentum.

One of our most powerful tools in building a performance-driven business is the annual exercise known as Pedoman. Pedoman is a Group-wide interactive session that institutionalizes open dialogue and provides a fully transparent interface for those in leadership positions, including all our restaurant managers and the Chairman himself.

As well as enhancing open communication and giving everyone the chance to voice their ideas and concerns, Pedoman reinforces our strong corporate culture and strengthens Group bonding between all levels. In so doing, it gives a powerful new meaning to our principle of “People First”.

As our businesses grow and expand, Pedoman also helps us combat the dangers posed by size, as well as external change, shifts and uncertainties. All too often, in large organizations, creativity and entrepreneurship are stifled by bureaucracy and hierarchy. By its very openness and informality, Pedoman cuts through such breaks in progress, and enables us to maintain dynamism and focus. In addition, changes and shifts in the

external environment can affect the internal climate as well, especially if an organization lacks strong, lasting bonds and

common values that can override external pressures arising from uncertainty.

Pedoman facilitates open dialogue, and acts as a transparent interface for our

entire management team. By providing a forum in which everyone can voice their ideas and concerns and similarly giving the leadership an opportunity to quickly respond, provide solutions and articulate strategic issues, it significantly enhances open communication and facilitates fast and effective dissemination of strong, positive values.

Most important of all, Pedoman enhances mutual trust, faith and confidence – all of which are vital to delivering success in a challenging and rapid changing market place.

Another initiative aimed at driving performance is Hari Mekar, an acronym for Mengejar Kecemerlangan Dalam Kualiti or Pursuit of Excellence in Quality. This quality movement initiated by Johor Corporation (our ultimate holding corporation) in 1995 brings together representatives from all the companies under Johor Corporation in a forum where they share and compare best practices and compete with the most effective ideas to enhance productivity, improve efficiency and cut costs.

In October 2007, KFCH participated in Hari Mekar for the first time, and we are delighted to record that we won the Overall Champion’s Trophy. KFCH has set up a quality council with the objective to make the Group a quality focused organization. In addition, several teams have been formed to propel this quality movement, including suggestion scheme teams, innovative and creative circle teams and cross functional teams.

KFCH will co-host a Group-wide Hari Mekar with QSR in 2008.

Corporate Statement

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IMPROVINGGOVERNANCE

KFCH believes in the fundamental principles of disclosure and transparency. This means not only following best practices but also being open about the way we run our business. In everything we do, we seek to balance our economic and social goals, aligning as nearly as possible the varying interests of all our stakeholders. As part of our commitment to good governance, our management and staff are expected to demonstrate diligence, responsibility and absolute integrity in all their business dealings.

Measures taken in 2007 to enhance governance included requiring all our senior management to declare their assets, and all staff to sign a Work Ethics Declaration Form.

INVESTINGINCOMMUNITIES

KFCH believes in giving back to the community. In the past, we have focused mainly on reaching out to the less fortunate members of society, especially orphans, single mothers, the elderly, the homeless, the needy, and the disabled. Recently, however, we have implemented a new CSR structure that considerably broadens the scope of our CSR activities and the causes that they promote.

Since halal compliance is central to our business interests, we have recognized it as our core corporate social responsibility.

Other than embedding halal practices into our processes, the company is also committed to sponsoring the World Halal Forum and the Malaysia International Halal Showcase, at which we also promote our products. We participate on a similar basis in Halal Food Standards Realization MS 15500:2004 seminars, a programme to promote Malaysian Halal Standards; and also place advertisements and articles in the Halal Journal, which has a worldwide readership.

We are active in promoting healthy, active lifestyles and supporting local sports. KFCH is the official sponsor of the Johor FC football team and sponsors billboards in most football stadiums throughout the country. In addition, we sponsor both sailing and futsal, with the aim of encouraging young Malaysians to pursue them both as popular sports and as activities that offer opportunities for the most talented to be recognized up to the international level.

The future prosperity of our nation lies in the hands of tomorrow’s entrepreneurs and, as a responsible corporate entity, we have decided to play our part to help develop entrepreneurial skills, especially among young Malaysians who are excluded from the business sector. In this regard, we collaborate with Johor Corporation to build the success of the Corporation’s Tunas Bistari, Didik Bistari and Siswa Bistari programmes. These programmes are aimed at familiarizing uninitiated young Malaysians with commercial value orientation and the basics of business practices that are needed to turn them into future business practitioners and entrepreneurs.

To promote national unity and highlight how our brands have become an integral part of the lives of many Malaysians, we participate in both the annual Floral Float Parade organized by the Ministry of Tourism and the International Kite Festival; and also produce patriotic public service announcements and corporate advertisements.

Meanwhile, we continue to extend our help for the less fortunate. In addition to the many CSR programmes we have long been running, KFCH now sponsors three episodes per year of Tijarah Ramadhan – a television programme that highlights the plight of the less fortunate and poverty-stricken families and features companies donating to the underprivileged. In addition, in October 2007, we rolled out a hunger relief campaign nationwide to raise awareness and funds for the United Nations’ World Food Programme.

Corporate Statement

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WINNINGRECOGNITION

We were deeply honoured to receive a number of awards in 2007, chief among which were the following.

In October, Ayamas garnered the Malaysian Livestock Industry Award for Outstanding Meat Processor at the Livestock Asia Expo & Forum 2007 held at the KL Convention Centre. The forum was hosted by the Ministry of Agriculture & Agro Based Industries, and attracted over 514 companies from 35 countries.

In March 2008, the Yum! Franchise Business Partner luncheon was held at the Grand Hyatt, Bangkok. During the luncheon, awards were given to the region’s

franchisees for their achievements in year 2007. The most prestigious of all awards is the Franchisee of the Year Award and we are proud to report that KFC Malaysia was voted the Best Operator in the region and was awarded the Franchisee of the Year Award 2007.

LOOKINGFORWARD

Recent years have witnessed a shift in the Malaysian economy towards domestic demand, which in the immediate to mid term will be driven by the ongoing implementation of development projects under the Ninth Malaysia Plan. These include the Iskandar Development Region (a large logistics and tourism project in southern Peninsular Malaysia), the Northern Corridor Economic Region (involving Perlis, Kedah, Penang and the north of Perak), the East Coast Economic Corridor, and the the Sabah and Sarawak Development Corridors.

In addition, the extension of Visit Malaysia tourism-related activities to 2008 should continue to boost the local consumption of goods and services.

Despite the ongoing credit crunch in the US, a rise in Malaysian exports is forecast for 2008, particularly of electrical products, and the national economy is predicted to grow

by 6%. In Singapore, the economic slowdown in the US could lead to somewhat lower growth in 2008. However, robust domestic demand and a projected improvement

in the export of electrical goods are expected to sustain the island state’s economic momentum.

Inflationary pressures on the global economy from the rising prices of oil, food and commodities are expected to continue.

Malaysia’s inflation rate in 2008 is forecast to exceed the 2% registered in 2007, and Singapore is expected to also revise its

inflation forecast in response to rising costs.

While the higher cost of imported raw materials may have a negative impact on the Group’s cost of production, we believe that this will be mitigated by the strength of the

Corporate Statement

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Ringgit; and we are therefore confident that the possible slowdown in the world economy will not prevent the Group from making further progress in the year ahead.

BUILDINGTHEFUTURE

Despite the uncertain economic outlook, KFCH believes that in 2008 it can further boost both revenue and profitability by enhancing customer experience, developing attractive new products, expanding its marketing activities, deriving further cost efficiencies across all functions, and improving productivity at its restaurants and manufacturing facilities.

We also plan to open a significant number of new restaurants as well as refurbishing existing ones. The larger expansion of the restaurant network is likely to be in Sabah, Sarawak and the east coast of Peninsular Malaysia.

In 2008, the key factors driving fast food business in Malaysia will be the introduction of healthier products, non-carbonated drinks, longer operating hours and the expansion of Drive-Thru restaurants.

The biggest challenge faced by the fast food industry is to expand its food offerings into healthier alternatives, to maintain affordability and to educate consumers on the importance of a balanced diet and regular exercise. KFC has already introduced Garden Salad into its menu as a healthier alternative as well as provided nutritional information for its products. In addition, we plan to develop programmes and activities involving children and teenagers since, by catching consumers at a young age, we are able to help inculcate healthy lifestyles.

We also intend to take advantage of the increasing appeal of fast food as a snack among consumers who want a quick, light, simple and affordable meal. To encourage higher consumer visits, towards the end of 2007, KFC introduced an Afternoon Menu from 3.00pm to 6.00pm. In addition, in response to price competition from other fast food operators, KFC has also come up with affordable meal packages such as Jom Jimat starting from RM3.50 per set.

Corporate Statement

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Corporate Statement

With convenience becoming a necessity when choosing a place to eat, and with the internet part of today’s lifestyle, KFC is offering free internet access from 2.00pm to 6.00pm on weekdays. KFC has also introduced e-craving with an online discount voucher during certain promotion periods.

In term of competition, a major challenge is posed by hawker restaurants and food stalls (popularly known as Mamak restaurants). Some of these restaurants already run 24-hour operations, attracting consumers of various ages – particularly teenagers – with their choice of dishes, simple ambience, table service, and very affordable products. Meanwhile, the mushrooming of new shopping malls has increased the competition from food courts, which are also very popular with consumers. KFC is taking on these challenges by introducing local taste products such as sweet spicy prawn rice for Juadah Ramadhan and Colonel Rice with satay sauce.

The Group also has ambitious plans for its poultry operations, and is currently constructing its third poultry processing plant at Bandar Tenggara, Johor at a cost of approximately RM30 million. This will enhance the supply-sufficiency of the southern region and deliver major supply chain savings and synergies. It will also ensure consistency of supply and freshness of products in southern Malaysia and Singapore.

Ayamas is Malaysia’s number one brand for premium, halal, chicken-based products. In response to the growing global market for halal food, we now plan to capitalize on Malaysia’s aspiration to become an international halal food hub by establishing a new company, KFC Marketing Sdn Bhd, to focus specifically on sales and marketing of food products to increase our share of the frozen food segment.

Under the Ayamas and Life brands, further processed poultry products and sauces will be the mainstay of the new trading arm, while other foodstuffs such as seafood, side orders, bakery and ice cream will be included under different brand names.

We believe that the new entity will not only boost our frozen food market share and sales, but also enable us to penetrate new market segments in which we do not currently have a presence. At the same time, this move will provide an avenue for Ayamas to leverage its market expansion, especially in the Middle East.

Ayamas will now focus its marketing activities on building top-of-mind brand recall, promoting healthy products, further enhancing its position in the burger take-home category, and capitalizing on its logistical strengths to expand its exports, especially to

Singapore.

In 2005 to 2006, Kedai Ayamas underwent a rationalization exercise which saw the

closure of outlets that were poorly located and the maintenance of 19 units in niche trading areas. This positive development made further progress in 2007, which witnessed the turnaround of the business from a loss in 2006 to a

record level of profit.

Like Kedai Ayamas, Rasamas operations (the brand operated by Rasa Ayamas Sdn

Bhd) was rationalized in 2005 and 2006. In the process, Rasamas closed outlets that were poorly located and re-engineered its menu, pricing and operations to meet the challenges of the market. As a result, in 2007 the business broke even and is expected to return to profitability in 2008.

A key factor in the ongoing turnaround of Rasamas is our “Intrapreneur Scheme”. Initiated in 1999 by Johor Corporation, the aim of the scheme is to institutionalize a performance culture by creating opportunities for highly talented and committed employees to start new business ventures or revive existing ones.

A key factor in the success of the scheme is the introduction of a direct ownership element. Giving intrapreneurs the opportunity to own an equity stake of up to 25% in the business concerned has proved to be a powerful motivator.

Under the Rasamas Intrapreneur Scheme, three Rasamas outlets are now run by intrapreneurs, who have all initially been given a 10% stake in their outlet. The selected outlets are Rasamas Tebrau Sdn Bhd, Rasamas Larkin Sdn Bhd (both in Johor) and Rasamas Bangi Sdn Bhd (in Selangor).

In future, Rasamas proposes to take full advantage of the growing trend for fast casual concept eateries.

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Corporate Statement

With critical mass, Rasamas plans to embark on above the line advertising and starts a brand-building process which will further improve sales and profitability. The aim is to turn Rasamas into the most successful home grown brand in Malaysia. Rasamas expects to open a number of new outlets in 2008.

Our feedmill operations are faced with the extreme challenge of rising input costs. In addition, the open market for feed is shrinking as major livestock producers become more and more integrated and self sufficient in feed supply. Further rises in corn and soya bean meal prices are expected to continue through 2008 and thus threaten margins.

On a positive front, we predict that our LIFE brand sauces, produced by Region Food, will increasingly close the gap with its competitors in terms of market share. Meanwhile, the bakery and commissary will continue to support the needs of the Group with existing and new products, and the bakery will also look into venturing into the open market.

In the years ahead, KFCH will continue to pursue its strategy of seeking out opportunities for growth, both organically and through acquisition of food-related businesses, so as to fulfil our vision to be the leading integrated food services group in the ASEAN region, delivering consistently quality products and excellent customer-focused service.

Overall, the Board is therefore optimistic that the Group will once again perform well in 2008, to the benefit of all its stakeholders.

GIVINGTHANKS

In January 2008, Ms Rita A/P Benoy Bushon, En Abdul Wahab bin Jaafar Sidek and En Mohd Zam bin Mustaman resigned their directorships of KFCH (though En Mohd Zam remains Director of Legal & Corporate Services). On behalf of the Board and all our management, staff and shareholders, we would like to thank them for their insight, contributions and advice.

By their skills, initiative and commitment in 2007, our people once again delivered top quality products and an outstanding level of service. On behalf of the Board, we offer each and every one of them our warmest congratulations and gratitude.

We also deeply appreciate the support we received from our customers, shareholders, financiers, suppliers and various governmental and regulatory authorities. We are equally grateful to YUM! Brands Inc for their continued confidence in us and for the guidance we received from them throughout the year.

Finally, we would like to thank our colleagues on the Board and the entire management team for their outstanding contribution. Their dedication to the business has again produced results we can be proud of.

Tan Sri Dato’ Muhammad Ali bin HashimChairman

Ahamad bin MohamadDeputy Chairman

Jamaludin bin Md AliManaging Director

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High performance was the hallmark of �007. Despite challenging market

conditions, we retained our pole position as the largest and best selling

quick service restaurant chain in Malaysia, and made further inroads in

Singapore and Brunei. An imaginative series of product innovations and

promotions attracted an increasing number of customers, while most of our

upstream operations benefited from a healthy level of demand and increased

improved efficiencies.

Jamaludin bin Md AliManaging Director

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STRATEGICPLANS

All of the strategic initiatives implemented in accordance with our Strategic Business Plan 2007-2009, as approved by the Board of Directors, are based around a profound commitment to creating value for our stakeholders.

For our customers, we relentlessly seek to provide the highest quality products combined with outstanding and friendly service; we continuously develop new, appealing, affordable offerings; and enhance our accessibility by regularly opening more restaurants.

For our shareholders, we aim to maximize returns and deliver sustainable growth by constantly improving our financial results, operational processes, earnings per share and dividend payouts, as well as unlocking capital value, cutting costs and improving transparency and governance.

For our employees, we strive to build a positive, high-energy and nurturing culture that empowers every employee to fulfil their potential. We are also diligent in our efforts to recruit, retain, motivate and reward the best people.

KFCRESTAURANTS

KFCMalaysiaandBrunei

In 2007, the revenue achieved by KFC Malaysia and Brunei grew

18.3% to RM1,055.1 million from RM892.1 million in the previous

year. This substantial increase in sales resulted in a 17.0% improvement in profit

before tax, which rose from RM113.5 million to RM132.8 million. Operating profit

would have been higher but for the negative impact of higher commodity prices.

During the year, our restaurant network continued its vigorous expansion. Some 39

new restaurants were added, enabling us to increase our brand presence, tap new markets,

and get closer to our customers. There were seven relocations and four store closures in 2007.

Meanwhile, in line with our ongoing programme of restaurant image enhancement, 26 KFC restaurants were revamped in order to enhance customers’ dine-in experience and increase the frequency of visits. While store re-imaging normally boosts sales significantly, the exercise affects the annual revenue performance of the restaurant business due to the temporary closure of the stores.

March 2007 witnessed the successful launch of KFC’s new “Colonel” logo, plus new staff uniform and product packaging. In conjunction with the new logo, KFC introduced the Colonel Rice combo promotion, which created excitement at the restaurants and improved throughput. Throughout the year, effective brand building and marketing programmes were combined with innovative product offerings and promotions. To provide our customers with greater menu variety and value we introduced attractive new products such as Alaskan Fish Burger, Colonel Rice combo, Black Pepper Chicken Chop, Chicken Poppers, Half-Half Meltz, Variety Bucket with Fish Fingers, and new X-meal combos.

Value meal promotions were carried out on a regular basis, offering great savings to consumers. These value meals, which are much cheaper than ordering individual items, are very popular among our customers.

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In the second half of the year, we extended the operating hours of 73 of our restaurants, which now open 24 hours a day. The sales generated by this initiative were extremely encouraging. In another initiative to capitalize on untapped potential, breakfast meals were introduced in a number of restaurants.

In the last quarter of the year, KFC introduced payment card facilities at our restaurants in the Klang Valley, Johor and Penang. We plan for all our KFC restaurants to accept payment cards by mid 2008.

Once again in 2007, the combined efforts of our operations, training and quality assurance personnel ensured that we delivered on the KFC promise to our customers. As at the year end, KFC Malaysia’s 410-strong restaurant network comprised 336 restaurants in the Peninsular, 40 in Sabah, 27 in Sarawak and seven in Brunei.

Moving forward, in February 2008 KFC Malaysia passed another milestone with the celebration of the official opening of its 400th restaurant.

KFCSingapore

For KFC Singapore, 2007 was a record breaking year with sales and profits both surpassing their targets. Revenue touched a high of RM280.2 million, 3.0% above the RM272.0 million recorded in 2006. Driven mainly by the stronger top line, profit before tax reached RM10.1 million, 12.3% up on the 2006 figure of RM9.0 million.

Riding on strong economic growth in Singapore together with well-received marketing promotions, both Dine-in and Home Delivery segments achieved sales growth of 2.0% and 19.6% respectively.

The year started with a back-to-school deal featuring KFC’s signature Zinger Special, which struck a chord with Singaporeans

seeking value after the festive period. To celebrate Chinese New Year in February, consumers were treated to a special ‘Treasure Feast’ bucket

meal.

In March, KFC Singapore celebrated its 30th Anniversary with a campaign that included TV commercials, outdoor and online advertising and a commemorative coupon booklet. The celebrations were also used to launch the new KFC logo, uniform and packaging.

In April, Cheesy BBQ Meltz was launched as a first step towards a toasted range to its offerings. This was followed by a campaign leading up to the school holidays, which targeted youth. It involved a tie up with Pepsi and WOW! Meals, and offered

cool prizes like iPod and the latest Sony Ericsson phone.

During the June holiday period, the Japanese-themed Miso Crunch was launched. Following the increase of Goods

and Services Tax in July, consumers were on the lookout for better deals. KFC responded by rolling out a Coupon promotion based around the National Day celebrations in August. August also saw the introduction of a Surf and Turf seafood meal to test the acceptability of serving seafood in the light of the previous year’s Avian flu scare.

In September, KFC brought back an old favourite – Hot Devil Drumlets, while in October Chilli Pepper Meltz was added to the repertoire. To top off a highly successful year, the Buddy Meal was launched in November to ride on the year end festivities. In the same month, KFC also started a breakfast meal in a test store at the HarbourFront Centre.

The Chicky Goes to School programme continued in 2007, with visits to over 40 schools and attractive toys given away to the kids. Chicky Club membership is now 60,000-strong. Students, too, continued to enjoy privileges with attractively priced Student Specials burger meals.


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For several years, KFC Delivery had shared the same number with Pizza Hut Delivery. However in June 2007, KFC Delivery soft-launched a new number – 6222 6111. A multimedia campaign was run to create awareness of the number while to push use, a tie-up with HSBC gave consumers the chance to win S$10,000 weekly for five weeks and grand draw prizes worth S$20,000. The resulting sales were well above plan.

KFC Singapore ended the year with 69 stores, which included four new openings and five relocations offset by eight closures.

INTEGRATEDPOULTRYOPERATIONS

Ayamas is Malaysia’s leading halal chicken enterprise specializing in further processed products for take home consumption.

In 2007, the total revenue of our Ayamas Integrated Poultry Business climbed 13.5% to RM756.6 million from RM666.6 million in 2006. The previous year, the business was adversely affected by the impact of ‘Avian Flu’. In contrast, 2007 witnessed a growth in sales not only for KFC restaurants but also for the local open market and the export sector, as well as higher margin resulting from improved pricing.

However, profitability was hit by significant increase in the price of commodities which pushed up the cost of internally produced poultry products. This was exacerbated by the high prices paid to purchase poultry meat from local suppliers to fulfil the increased demand from KFC restaurants especially in the fourth quarter. As a result, profitability fell to RM6.8 million from RM21.4 million in the previous year.

PoultryProcessing

During the year, our Ayamas plants processed some 31.3 million birds and 16,500 metric tonnes of further processed products. To increase the efficiency of our plants, we embarked on a programme of structured improvements.

We expanded and upgraded our ‘Further Processing’ Plant A to increase the output of sausages, toppings and other cooked products. This involved extending the production space, streamlining the process flow and implementing clear segregation between cooked and raw meat areas. This is expected to boost output by 25% to 30%.

We also upgraded the facilities at our ‘Primary Processing’ Plant in Port Klang, Selangor. A new Belt Grader was installed to weight, grade and pack chicken parts on line; and the ACM-MX2 line was converted into a fully automated cut-up line including a thigh popper machine. This reduces manual popping by workers and thus cuts labour cost. In another initiative, the Chickway grading line was converted to a new Windows-based grading system.

Meanwhile, in an upgrade of our ‘Primary Processing’ Plant in Bukit Mertajam, the cut-up area was enlarged to increase production space and reduce congestion; and the chilling system was enhanced to reduce the temperature of incoming chilled water from 6˚C to 0˚C.

During the year Ayamas introduced a variety of new product offerings including Hot & Spicy Chicken Fingers and Premium Popcorn Bites as well as a range of shelf-stable products such as Best Quality Chilli Sauce, Best Quality Tomato Sauce, Oriental Sauce with Mushroom, canned Rendang and canned Masak Merah. The quality and convenience of these products, plus the strong and trusted Ayamas brand name, ensured positive response from consumers.


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In a brand-building exercise, from May to July, Ayamas sponsored the revival of the “Mmm…Sedapnya Bersama Ayamas” cookshow which focused on giving viewers great new ideas on how to use Ayamas products. Later, in October, Ayamas was honoured to receive the Outstanding Meat Processor Award and the Best Service Oriented Booth

Award at the Malaysian Livestock Industry Asia Expo 2007.

Looking ahead, we now aim to increase our frozen food sales by establishing a new company, KFC Marketing Sdn Bhd. Initially, this business will

focus on the sale and marketing of Ayamas further processed poultry products. However, other food products under different brand names will eventually be added to the stable. We believe the new company will help us to penetrate new market sectors as well as boost our share of the frozen food sector.

KedaiAyamasandRasamas

Kedai Ayamas sales increased 14.4% in 2007, to RM53.2 million from RM46.5 million in the previous year. Meanwhile, the business turned around its performance to achieve a profit of RM3.4 million as against a loss of RM0.2 million in 2006.

As at 31 December 2007, there were 20 Kedai Ayamas outlets in Malaysia and three Ayamas depots in Malaysia.

Meanwhile, our Rasamas restaurant chain made considerable progress. Sales leapt 33.0% from RM14.0 million in 2006 to RM18.6 million in 2007. Following a loss of RM1.9 million in 2006, the business broke even in 2007.

Rasamas operates a fast casual concept menu focusing around its popular trademark roasters. Besides roasters, Rasamas extended its menu range by adding baked fish which is now a mainstay in its menu. To meet customer demand and



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to stay competitive, in 2007 prices and menus were both modified to make them more appealing; while, to attract new customers, a range of imaginative marketing activities was implemented. Moreover, to improve customer service and build staff skills and loyalty, a series of training and development programmes were implemented.

Ten new Rasamas restaurants were opened during the year, bringing the total number to 21.

FeedmillDivision

The feedmill’s total sales for 2007 came to RM133.6 million as compared to RM117.6 million in 2006. However, there was a major drop in its financial performance, which fell to a RM0.1 million loss from a RM5.1 million profit in 2006. This was primarily due to the high commodity prices and freight costs which escalated by about 50% and 70% during the year.

In 2007 all major feed commodity prices were at a record high due to an increase in worldwide demand combined with limited supply. The three main feed commodities (corn, soya bean meal and crude palm oil) make up 80% of the total feed production cost.

BreederFarms&Hatchery

The breeder farms and hatchery increased its sales revenue to RM64.8 million from RM61.5 million in 2006, while profit before tax grew to RM2.3 million from RM1.5 million in the previous year. The improvement was mainly due to a better hatchability of 79% in 2007 as against 77% in 2006. This was reflected in the total

day-old chick (DOC) production of 35 million in 2007 versus 34 million in

2006.



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For 2008, the breeder farms will input 60% Cobb and 40% Ross parent stock. Cobb broilers are preferred by our contract broiler farmers since they are more efficient in terms of growth and better feed conversion ratio as compared to Ross broilers. However, Cobb is a more difficult breed to manage and produces fewer DOC per hen.

ANCILLARY

SauceManufacturing

The revenue generated by Region Food Industries Sdn Bhd (RFI) improved in line with the growth in KFC and Pizza Hut sales, and there was also an increase in sales to Ayamas as well as to the domestic and export open market. Turnover for the year stood at RM61.5 million, as against RM53.1 million in 2006, and profit before tax climbed to RM3.9 million from RM2.4 million in the previous year.

Bakery

The bakery, which supplies buns and garlic bread to KFC and Pizza Hut restaurants, achieved a healthy growth in sales turnover which rose from RM18.4 million in 2006 to RM20.8 million in 2007. This is in line with the expansion of both KFC outlets and Pizza Hut outlets under KFCH’s parent company QSR. However, operating profit dropped from RM1.1 million to RM0.1 million due

to the increase in the price of flour which increased by as much as 70%.

In September 2007, the bakery was certified as a HACCP production plant by Moody International. In the years ahead, the Bakery will continue to primarily supply to KFC and Pizza Hut restaurants and the rising cost of its commodity ingredients will be the principal factor affecting its financial performance.

Commissary

The commissary’s sales turnover for 2007 increased to RM2.0 million from RM1.8 million in 2006, while operating profit rose from RM0.1 million to RM1.0 million. The improvement in operating profit was principally due to the lower contract prices of vegetables which form the commissary’s main raw material. The commissary’s performance is largely dependent upon demand from KFC and Pizza Hut restaurants as it serves as a centre supplying vegetables, fruit, salad and coleslaw to the restaurant chains.

HUMANCAPITALDEVELOPMENT

What makes KFCH a great place to work? Our people. The Group’s success comes from the belief that our people’s capabilities are our greatest asset, and our employees’ development is top priority. We invest in people capability so that our staff can make the most of their careers.

With a diverse workforce and ongoing opportunities for personal and professional success, KFCH has a culture that rewards and recognizes great effort. Naturally, only the best individuals – those with the knowledge, skill, ability and motivation – are hired to help the Group achieve sustainable profit and maintain its competitive advantage in an increasingly demanding business environment.


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Spurred by the opening of additional outlets in 2007, the number of employees rose to nearly 16,000 in Malaysia, Singapore and Brunei.

The year saw KFCH invest more than RM4.5 million in training over 12,400 staff, mainly at our restaurants and restaurant support centre (RSC). On average, restaurant and RSC employees received one and two days of training respectively.

Many of our restaurant employees also took advantage of

our structured career advancement programmes. 159 were promoted

from Shift Manager to Restaurant Manager. There were also numerous lower level promotions, with

employees rising progressively from Team Member to STAR to All Star to Shift Manager.

The heart of our Group training programmes is CHAMPS, the acronym for Cleanliness, Hospitality, Accuracy of Order, Maintenance, Product Quality and Speed of Service. All our restaurants undergo CHAMPS Checks and Excellence Reviews on a regular basis.

At the 2007 Regional CHAMPS Challenge, six employees from Malaysia and three from Singapore won awards that recognized their outstanding commitment to superior standards of customer service. On top of this, some 18 of our people were rewarded with membership of the YUM! Champions Club which is reserved for the best of the best.

For 2007’s Excellent Service Awards, KFC staff won 67 awards (13 Star, 12 Gold and 42 Silver). The criteria had been made more stringent to reflect the increasing expectations of customers and the continuous efforts of service providers to enhance customers’ experience. As a result, the number of winners was lower than in 2006.

Workforce Skills Qualifications (WSQ) Organizational Accreditation was successfully achieved in August 2007 under the Singapore WSQ Framework, and KFC Singapore was awarded Approved Training Organisation (ATO) status. Currently, the company is working closely with the Field Training teams to achieve WSQ Course Accreditation for selected in-house training courses.

In response to the Singapore Government’s ongoing push for the employment of older workers and the re-employment of retirees beyond the age of 62, our Singapore operations continued to offer part-time employment to retirees on a year-to-year basis subject to medical fitness and work performance.

In November, KFC Singapore conducted a Training Needs Analysis to determine the relevant and importance of the job competencies required for restaurant management staff as well as RSC staff.

GROUPLOGISTICS

The Group Logistics Division (GLD) is a new division that started operations in November 2007 with a mandate to centralize and consolidate the logistics of warehousing and distribution within the Group. Its role is to provide the Group with the best and most cost effective logistics service.


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GLD comprises two main business units, namely Logistic Operations and Logistic

Support. Logistic Operations mainly handles, stores and distributes chilled, frozen and

dry stock to KFC, Rasamas and Kedai Ayamas, as well as to Pizza Hut and the open

market. The main functions of Logistic Support are planning, order taking, Enterprise

Resource Planning (ERP), quality assurance, human resources, accounts, security etc.

To combat the rising costs of repairs, maintenance, fuel and labour and to enhance

logistics management, GLD plans to implement the following strategies:

• Appraise the viability of building a centralized distribution centre or setting up satellite

warehouses nationwide to alleviate the shortage of warehouse space

• Ensure higher stock accuracy and integrity by implementing a fully-integrated

Warehouse Management System nationwide

• Install CCTV within the warehouses to tighten operations and enhance product

safety and security

• Consolidate and optimize resources and reduce transport costs by implementing a

Truck Optimization System for transport planning and routing

• Fulfill customer orders promptly and accurately and monitor truck movements by

installing a Global Positioning System

• Maintain product and truck temperature cold chain integrity by installing a Truck

Temperature Tracking System.

• Introduce ‘Cross Docking’ for deliveries within the logistic supply chain

The GLD also aims to adopt best practices such as ISO and HACCP.

GROUPPROCUREMENT

Group Procurement is responsible for sourcing the most

competitive suppliers and vendors.

In 2007, despite the ever-increasing prices of commodities

and related raw materials around the world, Group

Procurement was not only able to ensure continuous

supply of stocks to the restaurants but also managed

to cap the year’s overall price increase in 2007 for the


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Group to only 7.9% above the 2006 level. Significant Group-wide cost

savings were also achieved. Group Procurement also ensured that

only JAKIM Halal certified and/or approved food ingredients were

used by our restaurants.

HALALCOMMITMENT

Complete halal compliance is critically important in many

of our key markets, and we are proud to give our customers

a compliance guarantee.

To ensure compliance, we have a Syariah Advisory Council, whose

members are distinguished and prominent religious scholars from Islamic

institutions. The Council acts as an advisory body on all religious matters relating to

the Group’s businesses. It maintains close rapport with the relevant religious departments,

councils and bodies and also conducts regular inspections of our various plants and

operational facilities to ensure that they fully comply with the halal requirements of Islamic

Law as well as all Malaysian Government regulations.

KFCH is able to guarantee that all its products are halal because we have complete control

at each and every stage of our processes, from breeding and hatching to slaughtering,

processing, packaging and distribution.

We breed our own stock of chickens of the highest quality, and have our own world-class

hatcheries to ensure halal quality from eggs to chicks. We use a closed, ‘air-conditioned’

and contained system of breeding that is tightly monitored to ensure

cleanliness and halal, and we produce and use our own halal feed

exclusively for the entire system.

Every stage of slaughtering, processing and packaging strictly

observes Islamic religious requirements, monitored by

religious authorities. All Ayamas products are certified

halal by Jabatan Kemajuan Islam Malaysia and use the

JAKIM logo.


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The winner of numerous industry awards, Ayamas is a leading, fully-integrated Asia Pacific poultry enterprise, offering a wide range of quality, halal chicken-based products. Ayamas supplies Malaysia’s KFC, Pizza Hut and Rasamas restaurants, as well as over 600 Malaysian hypermarkets, supermarkets and convenience stores, plus thousands of food outlets. It also exports to Singapore, Brunei, China, Hong Kong and the Middle East.


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BOARDOFDIRECTORS

YBhg Tan Sri Dato’ Muhammad Ali bin HashimChairmanNon Independent Non Executive Director

Ahamad bin MohamadDeputy ChairmanNon Independent Non Executive Director

Jamaludin bin Md AliManaging Director/Chief Executive Officer

Hassim bin BabaIndependent Non Executive Director

Kua Hwee SimIndependent Non Executive Director

SYARIAHADVISORYCOUNCIL

YBhg Tan Sri Dato’ Muhammad Ali bin Hashim

Ahamad bin Mohamad

YBhg Tan Sri Dato’ Abdul Kader bin Talip

YB Dato’ Haji Nooh bin Gadot

YBhg Prof. Dato’ Dr. Abdul Shukor bin Hj. Husin

YBhg Dato’ Haji Md Hashim bin Yahaya

YBhg Prof. Dr. Yaakob bin Che Man

Mohd Roslan bin Mohd Saludin Secretary

AUDITCOMMITTEE

Kua Hwee SimChairman

Ahamad bin MohamadMember

Hassim bin BabaMember

COMPANYSECRETARIES

Mohd Zam bin Mustaman(LS 0009020)

Idham Jihadi bin Abu Bakar(MAICSA 7007381)

AUDITORS

Ernst & Young, Chartered AccountantsLevel 23A, Menara Milenium, Jalan DamanlelaPusat Bandar Damansara 50490 Kuala Lumpur

PRINCIPALBANKERS

Alliance Bank Malaysia BerhadCIMB Bank BerhadCitibank BerhadHSBC Bank Malaysia BerhadMalayan Banking Berhad

SOLICITORS

M/s Azmi & AssociatesM/s Kadir Andri & PartnersM/s Zainal Abidin & Co

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REGISTEREDOFFICE

Level 17, Wisma KFC No 17 Jalan Sultan Ismail50250 Kuala Lumpur

Tel: 03-2026 3388 Fax: 03-2072 8600

REGISTRAR&TRANSFEROFFICE

Pro Corporate Management Services Sdn BhdSuite 2, Tingkat 17, KOMTARJalan Wong Ah Fook80000 Johor Bahru

Tel: 07-222 5044Fax: 07-222 3044

STOCKExCHANGELISTING

Bursa Malaysia Securities Berhad, Main Board


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Board of Directors

TANSRIDATO’MUHAMMADALIBINHASHIM,Non Independent Non Executive Director Chairman


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TAN SRI DATO’ MUHAMMAD ALI BIN HASHIM,

Malaysian, aged 61, is a Non Independent Non Executive Director and the Chairman of KFC Holdings (Malaysia) Bhd (“KFCH”). He was appointed to the Board on 27 June 2006 and as the Chairman of KFCH on 2 July 2006.

Tan Sri is the Group Chief Executive of Johor Corporation (“JCorp”) since January 1982. He graduated from the University of Malaya with a Bachelor of Economics (Honours) degree in 1969 and participated in the Senior Executive Programme, Stanford University USA, in 1985.

Tan Sri was conferred the Honorary Doctor of Management by Universiti Teknologi Malaysia on 19 August 2000. In 2007, Tan Sri received a Honorary Doctor of Philosophy in Entrepreneurship from University Teknologi Mara and a Honorary Doctor of Philosophy in Technology Management from Universiti Tun Hussien Onn Malaysia.

Tan Sri’s tenacity entrepreneurial verve and visionary leadership has built JCorp into a leading Malaysian conglomerate involved in several business sectors such as Palm Oils and Oleochemicals, Quick Service Restaurants, Healthcare, Property and Hotels Logistics and Intrapreneur Venture.

JCorp has successfully managed Malaysia’s first “privatised” local authority, namely the Pasir Gudang Local Authority (PGLA), with Tan Sri as President since January 1982. JCorp was the single most important agency responsible for Pasir Gudang’s development into one of Malaysia’s most vibrant industrial townships. PGLA made history by becoming the first business-driven Local Authority in Malaysia to issue a Mudharabah Bond rated triple “A” by Ratings Agency Malaysia (RAM).

JCorp, under the leadership of Tan Sri has won many awards, whilst he himself was honoured with the Ma’al Hijrah 1428 Appreciation Awards by Seri Paduka Baginda Yang DiPertuan Agong in 2007.

Tan Sri sits as Chairman of Kulim (Malaysia) Berhad, KPJ Healthcare Berhad, Sindora Berhad and Johor Land Berhad, which are JCorp’s subsidiaries listed on the Main Board of the Bursa Malaysia Securities Berhad. Tan Sri also sits as Chairman

of Damansara Realty Berhad, an Associate of JCorp listed on the Main Board of the Bursa Malaysia Securities Berhad. He was appointed as a Director of QSR Brands Bhd (“QSR”) on 7 June 2006 and as the Chairman of QSR on 8 June 2006.

Tan Sri is also active as Council Member of the Malaysian Industrial Development Authority (“MIDA”), Vice President of the Malaysian Islamic Chamber of Commerce (“MICC”) and Chairman of the MICC Corporate Bureau, and Chairman of Kumpulan Waqaf An-Nur Berhad, a charitable organisation extending healthcare services to the poor and the needy. He is also Chairman and/or Director of several other companies and NGOs.

Tan Sri Dato’ Muhammad Ali has written several books on business and management entitled “Membujur Lalu …” in 1996, “Bisnes Satu Cabang Jihad” in 2003 and “Pengisian Agenda Ekonomi Di Bawah Konsep Islam Hadhari: Menjadikan Bisnes Satu Cabang Jihad” in 2004. The book “Bisnes Satu Cabang Jihad” has been translated into Bahasa Indonesia.

Other than as disclosed, he does not have any family relationship with any directors and/or major shareholders of the Company. He has no personal interest in any business arrangement involving KFCH. He has no conviction for any offences within the past years.

He attended all five (5) Board Meetings of the Company held during the financial year ended 31 December 2007.

Board of Directors

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Malaysian, aged 54, is a Non Independent Non Executive Director and the Deputy Chairman of KFC Holdings (Malaysia) Bhd (“KFCH”). He was appointed to the Board on 27 June 2006 and as Deputy Chairman on 2 July 2006. He graduated with a Bachelor of Economics (Honours) degree in 1976 from the University of Malaya. He joined JCorp in June 1979 as a Company Secretary for various companies within the JCorp Group and was involved in many of JCorp’s projects, among them, the Johor Specialist Hospital, prefabricated housing project and the Kotaraya Complex in Johor Bahru. At present, he is the Chief Executive of the Agro Business Division of JCorp. He is presently the Managing Director of Kulim (Malaysia) Berhad and a member of the Board of Directors of Johor Land Berhad, KPJ Healthcare Berhad and New Britain Palm Oil Limited (Papua New Guinea). He was appointed as a Director of QSR Brands Bhd (“QSR”) on 7 June 2006 and as the Deputy Chairman of QSR on 8 June 2006. He is also a Director of several other companies within the JCorp Group.

He is a member of the Audit Committee of KFCH.



AHAMADBINMOHAMAD,Non Independent Non Executive Director Deputy Chairman

Board of Directors

�9


Malaysian, aged 50, is the Managing Director of KFC Holdings (Malaysia) Bhd (“KFCH”). He was appointed to the Board on 27 June 2006 and as Managing Director on 2 July 2006.

He graduated with a Bachelor of Economics (Honours) degree from University of Malaya in 1982 and a Master of Business Administration from the University of Strathclyde, Glasgow, Scotland in 1987. He started his career with a local commercial bank as Trainee Officer in 1982 and later served as International Fund Manager in one of the leading investment houses in 1991. He joined JCorp in 1992 and was appointed the Managing Director of Johor Capital Holdings Sdn Bhd in 1998. He was appointed the Managing Director of Pelaburan Johor Berhad in 2000. Before his appointment as the Managing Director of KFCH, he was the Chief Operating Officer of JCorp since 2001. He is also a Director of Kulim (Malaysia) Berhad and sits on the board of various companies within the JCorp Group. He was appointed as a Director of QSR Brands Bhd (“QSR”) on 7 June 2006 and was appointed the Managing Director of QSR on 8 June 2006. He is also the Chief Executive Officer of KFCH.



JAMALUDINBINMDALI,Managing Director

Board of Directors

40


Malaysian, aged 62, was appointed as an Independent Non Executive Director of KFC Holdings (Malaysia) Bhd (“KFCH”) on 29 April 2005. He graduated with a Diploma in Business Administration from the then MARA Institute of Technology (“MIT”), Malaysia and passed the London Chartered Institute of Company Secretaries examinations and qualified as a Chartered Company Secretary.

He is a member of the Audit Committee of KFCH. Other than as disclosed, he does not have any family relationship with any directors and/or major shareholders of the Company. He has no personal interest in any business arrangement involving KFCH. He has no conviction for any offences within the past years.


HASSIMBINBABA,Independent Non Executive Director

Board of Directors

4�


Malaysian, aged 55, was appointed to the Board of KFC Holdings (Malaysia) Bhd (“KFCH”) on 27 June 2006. She is currently an Independent Non Executive Director of KFCH.

She is a Fellow of the Association of Chartered Certified Accountant (UK) and a Registered Accountant of Malaysia and Singapore. She has more than thirty years of corporate and financial experience in several industries within Malaysia and overseas. She is currently a Director of Kulim (Malaysia) Berhad, Johor Land Berhad and Sindora Berhad, which are JCorp’s subsidiaries listed on the Main Board of the Bursa Malaysia Securities Berhad. She was appointed as a Director of QSR Brands Bhd (“QSR”) on 7 June 2006. She is the Chairman of Audit Committee of QSR and a member of Audit Committee of the respective listed companies. As a professional Accountant she also provides financial training for Companies within Malaysia.

She is also the Chairman of the Audit Committee of KFCH. Other than as disclosed, she does not have any family relationship with any directors and/or major shareholders of the Company. She has no personal interest in any business arrangement involving KFCH. She has no conviction for any offences within the past years.

She attended all five (5) Board Meetings of the Company held during the financial year ended 31 December 2007.

KUAHWEESIM,Independent Non Executive Director

Board of Directors

4�


To increase our frozen food sales, we plan to establish a new company, KFC Marketing Sdn Bhd. The business will focus initially on the sale and marketing of Ayamas chicken further processed products and Life brands sauces, but other food products under different brand names will be added later. The new company will help us penetrate new markets as well boosting our share of the frozen food sector.


4�


44


1. JamaludinbinMdAli Managing Director

2. AzizahbtAbdulRahman Director Integrated Poultry & Food

Manufacturing

3. MohdZambinMustaman Director Legal & Corporate Services

4. MohammadbinAlwi Director Finance

5. S.K.Wong President KFC & Pizza Hut

6. AlanAu Vice President Finance, MIS & Corporate Planning

1 2 3

4 5 6

Senior Management

45


7. DrE.T.Kooi Deputy President Integrated Poultry & Food

Manufacturing

8. P.P.Foo Managing Director KFC Marketing Sdn Bhd

9. K.H.Mak Vice President Property & Technical

7 8 9

10.T.H.Lim Vice President KFC

11.H.S.Tang Senior General Manager Region Food Industries Sdn Bhd

12.HishamuddinbinMon Senior General Manager Quality and Employee Development

Head of Division

10 11 12

46


13.MohdDzuleqhrambinMohd General Manager Rasamas & Kedai Ayamas

14.RosnizabtBaharum General Manager Corporate Communications

15.MuhammadRizalbinIsmail General Manager Procurement

16.EdmundLoong General Manager Internal Audit

17.AzamibinMustapha General Manager Ayamas Food Corporation Sdn Bhd

18.BaharudinbinBasirun Deputy General Manager Logistics

13 14 15

16 17 18

Head of Division

47


19.MohdRoslanbinMohdSaludin Deputy General Manager Syariah and Halal Compliance

20.SharifahMusainahbinSyedAlwi Deputy General Manager Human Resources and Security

21.AddyLoo Manager Bakery and Commissary

19 20 21

22

22.SuhaimibinSulaiman General Manager Tepak Marketing Sdn Bhd

23.MichaelGian Chief Executive Officer KFC and Pizza Hut Singapore 24.NelkyGoh Managing Director KFC Brunei

Head of Division

23 24

48


100%Ayamas FranchiseSdn Bhd• Dormant

KFCHoldings(Malaysia)Bhd

100%KFC RestaurantsHoldings Sdn Bhd• IHC

100%KFC (PeninsularMalaysia) Sdn Bhd• QSR• Commissary• IHC

100%Asbury’s (Malaysia)Sdn Bhd• Property Holding

100%KFC (East Malaysia)Sdn Bhd• IHC

100%WQSR Holdings (S)Pte Ltd• IHC

100%SPM RestaurantsSdn Bhd• Meals on Wheels

100%Chippendales (M)Sdn Bhd• Property holding

100%Kentucky TradingSdn Bhd• Dormant

100%KFC TechnicalServices Sdn Bhd• Dormant

100%KFC (Sarawak)Sdn Bhd• QSR

90%KFC (Sabah)Sdn Bhd• QSR

51%KFC (B)Sdn Bhd• QSR

100%Kentucky FriedChickenManagementPte Ltd• QSR

100%Integrated PoultryIndustry Sdn Bhd• Poultry processing

plant

100%Ayamas IntegratedPoultry IndustrySdn Bhd• Breeder Farms • IHC • Hatchery • Feedmill

100%KFC ManufacturingSdn Bhd• IHC• Trading • Bakery

100%Signature ChefFoodservice & Catering Sdn Bhd• Restaurants• IHC

100%Signature ChefHoldings Sdn Bhd• Dormant

100%Region FoodIndustries Sdn Bhd• Sauce mfg

100%Ladang TernakanPutihekar (N.S.)Sdn Bhd• Breeder farm

100%Helix InvestmentsLimited• IHC

80%Yes GelatoSdn Bhd• Dormant

100%Signature ChefCatercare Sdn Bhd• Dormant

100%Kedai Ayamas Sdn Bhd• IHC• Convenience food store

100%MH IntegratedFarm Berhad• Property holding

50%Beijing Shakey’sFood Company Ltd• Dormant

100%Kentucky FriedChicken (Malaysia)Sdn Bhd• QSR

Group Structure

49


100%Roaster’s ChickenSdn Bhd• IHC

100%KFC AgrotechSdn Bhd• Dormant

100%Havprime Sdn Bhd• Dormant

100%Rangeview Sdn Bhd• Property

Holding

100%Restoran Keluarga Sdn Bhd(formerly known as Pan-Tiara Corporation Sdn Bhd)• IHC

100%Rasa GourmetSdn Bhd• Dormant

100%AyamasFeedmillSdn Bhd• Dormant

100%Ayamas FoodCorporation(S) Pte Ltd• Dormant

100%Bakers’ StreetSdn Bhd• Restaurants

81%Hiei Food IndustriesSdn Bhd• Dormant

100%Signature Chef Dining Services Sdn Bhd• Restaurants

100%SBC CoffeeHoldings Sdn Bhd• IHC

100%AFCB PropertiesSdn Bhd• IHC

100%RestoranSabangSdn Bhd• Restaurants

100%Rayaplex Sdn Bhd• IHC

100%Ayamas FoodCorporation Sdn Bhd• Poultry processing plant• IHC

100%Rasa AyamasSdn Bhd• Restaurants

100%Ayamas ContractFarming Sdn Bhd• Dormant

100%Ayamas Farms &Hatchery Sdn Bhd• Dormant

100%Seattle’s Best Coffee Sdn Bhd• Restaurants

100%Pintas TiaraSdn Bhd• Property holding

100%Ayamas Marketing(M) Sdn Bhd• IHC

100%Farm’s ChoiceMarketing(M) Sdn Bhd• Dormant

Group Structure

100%WP PropertiesHoldingsSdn Bhd• IHC

100%Wangsa ProgresiSdn Bhd• Property holding

100%Supreme MajesticSdn Bhd• Dormant

100%Sterling DistinctionSdn Bhd• Dormant

100%Rasamas Larkin Sdn Bhd(formerly known as Edgelink Sdn Bhd and Rasamas Plentong Sdn Bhd)• Restaurant

100%Rasamas Bangi Sdn Bhd (formerly known as Bintang Ikhtisas Sdn Bhd)• Restaurant

100%Rasamas Tebrau Sdn Bhd(formerly known as Aspirasi Bintang Sdn Bhd)• Restaurant

55%Tepak Marketing Sdn Bhd• Contract

packing of tea and tea trading

50


Region Food Industries (‘RFI’) is one of the country’s leading sauce manufacturers. Locally, RFI supplies Life tomato ketchup and Life chilli sauce to KFC, Pizza Hut and other fast-food operators. Its products are also found in most major supermarkets, hypermarkets and provision stores. Abroad, RFI products are sold in the UK, the USA, France, Australia, New Zealand, Japan, Hong Kong, Mauritius, the Maldives, the Middle East, Brunei and Singapore.


5�


52


INTRODUCTION

The Board of Directors (the “Board”) of the Company recognizes that the practice of good corporate governance in conducting the business and affairs of the Group with integrity, transparency and professionalism are key components for the Group’s continued growth and success. These will not only safeguard and enhance shareholders value but will at the same time ensure that the interests of other stakeholders are protected. The Board is pleased to report to the shareholders in particular and other stakeholders in general on the manner the Company has applied the Principles as set out in Part 1 of the Malaysian Code on Corporate Governance (“the Code”) as well as the extent of compliance with the Best Practices as set out in Part 2 of the Code.

COMPOSITION OF THE BOARD OF DIRECTORS

Composition, Size and Effectiveness of the Board

The Board is led and managed by an experienced Board with a wide range of expertise. The Board is primarily responsible for charting the strategic direction of the Group. The Board meets at least four (4) times a year with additional meetings convened as and when necessary.

The Board currently has 5 members comprising the Chairman (Non Independent Non Executive Director), Deputy Chairman (Non Independent Non Executive Director), Managing Director and 2 Independent Non-Executive Directors. The Company is in compliance with the Bursa Securities Listing Requirements which require at least two directors or one-third of the total number of Directors, whichever is higher, to be Independent Directors. The Board retains full and effective control of the Company. The Managing Director has direct responsibilities for business operations whilst non-executive directors have the necessary skill and experience to bring independent judgments to bear on the issues relating to strategy, performance and resources. Key matters, such as approval of annual and interim results, acquisitions and disposals, material agreements, major capital expenditures, budgets and long term plans would require Board’s approval.

The Board views that the number and composition of the current Board members is sufficient and well-balanced for the Company to carry out its duties effectively, whilst providing greater assurance that no individual or small group of individuals can dominate the Board’s decision making.

To ensure that there is balance of power and authority, the roles of the Chairman/Deputy Chairman and Managing Director are separated and clearly defined. The Chairman/Deputy Chairman is primarily responsible for the orderly conduct and effectiveness of the Board, including but not limited to organizing information necessary for the Board to deal with the agenda of meetings, whilst the Managing Director is responsible for the operating units, organizational effectiveness and implementation of Board policies and decisions.

Other than the Chairman and the Managing Director, the shareholders or stakeholders may convey any concerns that they may have to the Chairperson of the Audit Committee who is also an Independent Non Executive Director.

Principal Duties and Responsibilities

The Board assumes six principal stewardship’s responsibilities: -

a. Reviewing and adopting a strategic plan for the Company. The Board will review and approve the 5 year strategic plan for the Group.

Corporate Governance Statement

53


The strategic and business plan for the period 2008 – 2012 was tabled, discussed and approved by the Board at its meeting on 28 November 2007.

Additionally on an ongoing basis as the need arises, the Board will assess whether projects, purchases and sale of equity as well as other strategic consideration being proposed at Board meetings during the year are in line with the objectives and broad outline of the adopted strategic plans.

b. Overseeing the conduct of the company’s business to evaluate whether the business is being properly managed. At Board meetings, all operations matters will be discussed and expert advice will be sought if necessary.

The performances of the various operating units of the Group represent the major element of the Board agenda.

The Group uses Key Performance Indicator (“KPI”) system as the primary driver and anchor to its performance management system, of which is continually refined and enhanced to reflect the changing business circumstances.

c. Identifying principal risks and ensure the implementation of appropriate systems to manage these risks. The Group has set up a Risk Management Committee for this purpose to assist the Board.

The Board has approved the establishment of a Group Risk Management Committee (“GRMC”) and the implementation of the Enterprise Risk Management framework. The principal objectives of the Enterprise Risk Management are, amongst others, to meet the strategies, goal and objectives of the Group; to safeguard financial and non-financial assets of the Group; to allocate and optimize the use of resources and to comply with policies, procedures, guidelines, laws and regulations.

The Company has appointed the Director – Legal & Corporate Services as its Group Chief Risk Officer.

The GRMC consist of the following members: -

• Director – Legal & Corporate Services• Director - Poultry Integration & Manufacturing• Director - Group Finance• Other Heads of Division

The terms of reference of the GRMC: -

• Review and recommend to the Board of Directors the Enterprise Risk Management Policy and Framework;• Responsible for the Enterprise Risk Management Policies;• Ensure that Risk Management Department performs effective and efficient functions;• Monitor changes in business conditions parameters: -

This also includes review changes in the nature and extent of significant risks and the Company’s ability to respond effectively to changes in its business and external environment;

• Define risk priorities (through prioritization of severity and level of frequency of risks) and regularly assess the risk profile of the Company;

• Evaluate allocation of resources/capital in the management of risks; • Evaluate the effectiveness of the infrastructure in place for managing specific risks while ensuring alignment with the Company’s

risk management strategy; • Receive reports on the outcome of risk assessment exercise; • Ensuring that appropriate training in risk awareness and risk management is conducted at all levels.


54



d. Succession planning, including appointing, training, fixing the compensation of and where appropriate, replacing senior management.

The Board’s responsibility in this aspect is being closely supported by the Group Human Resource, Group Quality and Employee Development Division. As the first step, the Board had in the beginning of 2007 engaged an external consultant to provide an overview proposal in respect of the Group’s human policy. After several years of continuous efforts in emphasizing and communicating the importance of succession planning, the subject has now become an ongoing agenda being reviewed at various high-level management and operational meetings of the Group.

e. Developing and implementing an investor relations programme or shareholder communications policy for the Company.

Various strategies and approaches were employed by the Group including conducting press interviews and investor briefings so as to ensure that investors and shareholders are well-informed about the Group affairs and developments.

f. Reviewing the adequacy and the integrity of the Company’s internal controls and management information systems, including compliance with applicable laws, regulations, rules, directives and guidelines.

The Board’s function as regard to fulfilling the above responsibility is supported and reinforced through the various Committees established at both the Board and management level. Aided by an independent function of the Group Internal Audit Division, the active functioning of these Committees through their regular meetings/discussions would provide a strong check and balance and reasonable assurance on the adequacy of the Group’s internal controls. Details on the Group Internal Audit functions are further discussed in the Internal Control Statement and Audit Committee Report in this Annual Report.

Relationship of the Board to Management

The Organisational Chart and the Group Authority Limits and Guidelines define, amongst others, the limits to management responsibilities. At the end of each financial year the Board will set KPI that should be achieved by the management for the next financial year.

In between meetings, the Managing Director meets regularly with the Chairman and other Board members (where necessary) to keep them abreast of current development. Circular Resolutions are used for determination of matters arising in between meetings.

Use of Board and Management Committees

The Group has formed several committees to facilitate the operations of the Group. Each committee has written terms of reference defining their scope, powers and responsibilities. The list of committees includes, amongst others: -

i. Top Management Committeeii. Audit Committeeiii. Tender Committeeiv. Agreement Committeev. Risk Management Committee

SUPPLY OF INFORMATION

Operations Meetings are held once a month during which the Managing Director will be briefed by management on all operational aspects of the Group. During the meetings, they will be furnished with information on the progress of the operating units i.e. activities, performance, planned projects and problems arising so as to enable the former to participate in problem solving and decision-making process. The Group has also established a Top Management Committee wherein Divisional Directors and Top Senior Executives will meet weekly to, amongst others, set the management direction of the Group and provide the general management and corporate leadership. The Top Management Committee is also to facilitate collective decision-making at the top management level.

55


Board Meetings are scheduled 4 times a year and additional meetings are held as and when required. The specific agendas tabled for the Board’s deliberation are the key financial and operational results and performances of the Group, Company and its subsidiaries, strategic and corporate initiatives such as approval of corporate plans and budgets, acquisitions and disposals of material assets, major investments, and changes to management and control structure of the Group, including key policies, procedures and authority limits. The total number of Board Meetings held during the financial year was five (5). The Directors are provided with adequate Board Papers together with the agenda and minutes of the previous meeting on a timely manner prior to the Board Meeting so as to give the Directors time to deliberate on the issues to be raised at the meeting. Pursuant to the revised Code issued in 2007, all conclusions and deliberations of the Board meetings were duly recorded and minutes kept by the Company Secretary.

Directors have access to information within the Company and to the advice and services of the Company Secretaries. The Directors may also obtain independent professional advice, in furtherance of their duties. The Board is always provided with not just quantitative information but also those of qualitative nature that is pertinent and of a quality necessary to allow the Board to effectively deal with matters that are tabled in the meeting. These include current updates of the Group’s performances and external factors that may influence its business.

NOMINATION AND REMUNERATION

(a) Procedure

In line with Johor Corporation’s (“JCorp”) Group-wide corporate practice, the Board has approved that the functions of the Committee to be taken over by the Group Nomination and Remuneration Committee of JCorp (“JCorp Group NRC”), holding corporation of QSR Brands Bhd which in turn holds 46.79% shares in KFC Holdings (Malaysia) Bhd. KFC Holdings (Malaysia) Bhd is directly represented at the JCorp Group NRC by its Chairman, Deputy Chairman and Managing Director who are respectively the Chairman and official members of the JCorp Group NRC.

This approach in centralizing the Nomination and Remuneration functions is not an uncommon practice among top global companies and leading Multi National Corporations. The prime consideration is the strategic advantage that the JCorp Group NRC provides by allowing wider access and greater reach to a much larger pool of talent, skills and expertise as well as to benchmark remunerations on a group-wide basis.

For the Terms of Reference of the JCorp Group NRC and its members, please refer to page 58.

(b) Appointment of New Directors

The number and composition of Board membership are reviewed on a regular basis to ensure the effectiveness of the Board for the long term interest of the Company. In the event of a need to appoint new member(s) of the Board, JCorp Group NRC will nominate a qualified candidate with the required core competency to effectively discharge his/her role as a Director of the Company. In any case, the appointment of the Board Member(s) is effected only after the official approval by the Board and after taking into consideration the Best Practice Guidelines For Directors adopted by the Board.

(c) Re-election of the Board of Directors

In compliance with Paragraph 7.28(2) of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), all directors shall retire once at least in every 3 years.

In accordance with Article 89 of the Articles of Association of the Company, the following Directors retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-election: -

1. Hassim bin Baba

2. Kua Hwee Sim


56


DIRECTORS’ TRAINING

The Board oversees the training needs of its Directors. Directors are regularly updated on the Group’s businesses and the competitive and regulatory environment in which they operate. Directors, especially newly appointed ones, are encouraged to visit the Group’s operating centres to have an insight on the Group’s operations which would assist the Board to make effective decisions relating to the Group. All Board members have attended and completed the Mandatory Accreditation Programme (“MAP”) as required by the Bursa Securities. Save and except for those Directors that were appointed after the repealed of Practice Note 15/2003 on 1 January 2005, each Director has also accumulated the requisite minimum 72 Continuing Education Programme points by 31 December 2005 as required by Bursa Securities. Directors are encouraged to attend various external professional programmes deemed necessary to ensure that they are kept abreast on various issues facing the changing business environment within which the Group operates. For the year under review, the Directors had continuingly kept abreast with the development in the market place with the aim of enhancing their skills, knowledge and experience in order to fulfill their duties as Directors.

DIRECTORS’ REMUNERATION

The remuneration framework for Executive Directors has an underlying objective of attracting and retaining directors needed to run the Company successfully. Remuneration packages of Executive Directors are structured to commensurate with corporate and individual’s performance. The Non-Executive Directors are remunerated based on fixed annual fees approved by the shareholders of the Company.

The details on the remuneration of the Directors are as follows:

Basic * Fees - Employer’s Benefits Salary Fees Bonus Subsidiaries Allowance EPF -in-kind Total RM RM RM RM RM RM RM RM

EXECUTIVE DIRECTORS Jamaludin bin Md Ali 259,200 - 43,200 1,000 54,000 36,288 52,236 445,924 Mohd Zam bin Mustaman 162,000 - 27,000 1,000 54,000 22,680 12,931 279,611

421,200 - 70,200 2,000 108,000 58,968 65,167 725,535

NON-EXECUTIVE DIRECTORSYBhg Tan Sri Dato’ Muhammad Ali bin Hashim - 50,000 - 1,000 21,500 - 37,094 109,594 Ahamad bin Mohamad - 43,000 - 1,000 14,250 - 36,922 95,172 Kua Hwee Sim - 36,000 - - 16,500 - - 52,500 Rita a/p Benoy Bushon - 36,000 - - 5,000 - - 41,000 Hassim bin Baba - 36,000 - - 13,500 - - 49,500 Abdul Wahab bin Jaafar Sidek - 31,500 - - 12,000 - - 43,500

- 232,500 - 2,000 82,750 - 74,016 391,266

* Fees to be approved at the forthcoming AGM

SHAREHOLDER RELATIONSHIP

The Group recognizes the importance of keeping shareholders and investors informed of the Group’s business and corporate developments. Such information is disseminated via annual reports, quarterly financial results, circulars to shareholders and the various announcements released from time to time.

The management holds discussions and dialogues with analysts and investors on a regular basis. During the discussions and dialogues, presentations based on permissible disclosures are made to the analysts and investors to provide details on the Group i.e. financial performance, any major developments and future plans. Apart from the mandatory requirement to make public announcements via


57



the Bursa Securities, the Group also disseminates information through press releases on corporate events, product launches and any significant developments of the Group.

In addition to the above, the Group has an interactive web-site available at http:www.kfcholdings.com.my to communicate with investors and the investing public. The web-site is being used as a forum to answer inquiries and provide information on the activities of the Group.

The Annual General Meeting is the principal forum for dialogue and interaction with the shareholders of the Company. Besides the usual agenda of the Annual General Meeting, the Board presents the progress and performance of the business. Thereafter, the shareholders are presented with the opportunity to participate in question and answer sessions with the Directors.

ACCOUNTABILITY AND AUDIT

Financial Reporting

In presenting the annual financial statements and quarterly announcements of results to the shareholders, the Board aims to present a balanced and understandable assessment of the Group’s position and prospects. Before the financial statements were drawn up, the Directors have taken the necessary steps to ensure that the Group had used all the applicable accounting policies consistently, and that the policies are supported by reasonable and prudent judgment and estimates. The Audit Committee assists the Board in ensuring the accuracy, adequacy and completeness of the information to be disclosed. The Statement by Directors pursuant to Section 169 of the Companies Act 1965 is set out in page 76 of the Annual Report.

The quarterly reports, prior to tabling to the Board of Directors for approval, will be reviewed and approved by the Audit Committee.

Internal Control

The Group’s Statement on Internal Control is set out on page 67 of this Annual Report.

Relationship with the Auditors

The Board via the establishment of an Audit Committee, maintains a formal and transparent relationship with the Company’s auditors. The external auditors meet and report their findings to the Audit Committee pursuant to their audit for each financial year.

The Group’s internal audit department, reporting to the Audit Committee performs regular reviews of business processes to assess the effectiveness of internal controls and highlight significant risks impacting the Group. The Audit Committee conducts annual reviews on the adequacy of the internal audit department’s scope of work and resources.

The Report of the Audit Committee is set out in page 62 of the Annual Report.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE AUDITED FINANCIAL STATEMENTS

The provisions of the Companies Act, 1965 require the directors to be responsible in preparing the financial statements for each financial year which gives a true and fair view of the state of affairs of the Group and the Company at the end of the financial year and of their results and cash flows for the financial year then ended. In complying with these requirements, the directors are responsible for ensuring that proper accounting records are maintained and suitable accounting policies are adopted and applied consistently. In cases whereby judgment and estimates were required, the directors have ensured that these were made prudently and reasonably.

The Directors also ensured that all applicable accounting standards have been followed and confirmed that the financial statements have been prepared on a going concern basis.

In addition, the Directors are also responsible for safeguarding the assets of the Company by taking reasonable steps to prevent and detect fraud and other irregularities.

58


PURPOSE

The Nomination and Remuneration Committee (“the Committee”) is established primarily to:-

A. Nomination

1. Identify and recommend candidates for Board directorship of Public Listed Companies within Johor Corporation Group (“PLC”);

2. Recommend directors to fill the seats on Board Committee;

3. Evaluate the effectiveness of the Board of PLCs and Board Committee (including the size and composition) and contributions of each individual director;

4. Ensure an appropriate framework and plan for Board of PLC succession.

B. Remuneration

1. Provide assistance to the Johor Corporation and the Board of PLCs in determining the remuneration of executive directors, senior management and Chief Executive Officer. In fulfilling these responsibilities, the Committee is to ensure that executive directors and applicable senior management of Johor Corporation and PLCs:

• Are fairly rewarded for their individual contribution to overall performance; • That the compensation is reasonable in light of the Company’s objectives; and • That the compensation is similar to other companies.

2. Establish the Managing Director/Chief Executive Officer’s goals and objectives; and

3. Review the Managing Director/Chief Executive Officer’s performance against the goals and objectives set.

MEMBERSHIP

The Committee shall consist of at least the representative of Johor Corporation and PLCs as follows:-

1. YBhg Tan Sri Dato’ Muhammad Ali bin Hashim (Chairman) Chief Executive, Johor Corporation

2. YBhg Tan Sri Datuk Arshad Ayub Independent Representative

3. Kamaruzzaman bin Abu Kassim Chief Operating Officer, Johor Corporation

4. YB Datin Paduka Siti Sa’diah Sheikh Bakir Managing Director, KPJ Healthcare Berhad

5. Ahamad bin Mohamad Managing Director, Kulim (Malaysia) Berhad

Nomination and Remuneration Committee

59


6. AFM Shafiqul Hafiz Managing Director, Johor Land Berhad

7. Rozan bin Mohd Sa’at Managing Director, Sindora Berhad

8. Jamaludin bin Md Ali Managing Director, QSR Brands Bhd and KFC Holdings (Malaysia) Bhd

The appointment of a Committee member terminates when the member ceases to be a director of PLCs, or as determined by the Board of Johor Corporation.

The Committee shall have no executive powers.

In the event of equality of votes, the Chairperson of the Committee shall have a casting vote. In the absence of the Chairperson of the Committee, the members present shall elect one of their numbers to chair the meeting.

MEETINGS

The Committee shall meet at least once a year. Additional meetings shall be scheduled as considered necessary by the Committee or Chairperson. The Committee may establish procedures from time to time to govern its meeting, keeping of minutes and its administration.

The Committee shall have access to such information and advice, both from within the Group and externally, as it deems necessary or appropriate in accordance with the procedures determined by the Johor Corporation. The Committee may request other directors, members of management, counsels and consultants as applicable to participate in Committee meetings, as necessary, to carry out the Committee’s responsibilities. Non-Committee directors and members of management in attendance may be required by the Chairperson to leave the meeting of the Committee when so requested.

The Secretary of the Committee shall be appointed by the Committee from time to time. Committee meeting agendas shall be the responsibility of the Committee Chairperson with input from the Committee members. The Chairperson may also request management to participate in this process. The agenda of each meeting including supporting information shall be circulated at least seven days before each meeting to the Committee members and all those who are required to attend the meeting.

The Committee shall cause the minutes to be duly entered in the books provided for the purpose of all resolutions and proceedings of all meeting of the Committee. Such minutes shall be signed by the Chairperson of the meeting at which the proceedings were held or by the Chairperson of the next succeeding meeting, and if so signed, shall be the conclusive evidence without any further proof of the facts thereon stated.

The Committee, through its Chairperson, shall report to the Board of PLCs at the next Board of Directors’ meeting after each Committee meeting. When presenting any recommendation to the Board of PLCs, the Committee shall provide such background and supporting information as may be necessary for the Board to make an informed decision. The Committee shall provide such information to the Board as necessary to assist the Board of PLCs in making a disclosure in the Annual Report of PLCs and Johor Corporation in accordance with the Best Practices of the Malaysian Code on Corporate Governance Part 2 AAIX.

The Chairperson of the Committee shall be available to answer questions about the Committee’s work at the Annual General Meeting of the PLCs.


60


SCOPE OF ACTIVITIES

The duties of the Nomination Committee shall include the following:

A. Nomination

1. To determine the criteria for Board membership, including qualities, experience, skills, education and other factors that will best qualify a nominee to serve on the Board of respective PLCs;

2. To review annually and recommend to the Board with regards to the structure, size, balance and composition of the Board of PLCs and Committees including the required mix of skills and experience, core competencies which non-executive directors should bring to the Board and other qualities to function effectively and efficiently;

3. To consider, evaluate and propose to the Board any new board appointments, whether of executive or non-executive position. In making a recommendation to the Board of PLCs on the candidate for directorship, the Committee shall have regard to:

• Size, composition, mix of skills, experience, competencies and other qualities of the existing Board of PLCs, level of commitment, resources and time that the recommended candidate can contribute to the existing Board; and

• Best Practices of the Malaysian Code on Corporate Governance Part 2 AAIII which stipulate that non-executive directors should be persons of calibre, credibility and have the necessary skill and experience to bring an independent judgement to bear on issues considered by the Board and that independent non-executive directors should make up at least one-third of the membership of the Board of PLCs.

4. To propose to the Board of the PLCs the responsibilities of non-executive directors, including membership and Chairpersonship of Board Committees.

5. To evaluate and recommend the appointment of senior executive positions, including that of the Managing Director or Chief Executive and their duties and the continuation (or not) of their service.

6. To establish and implement processes for assessing the effectiveness of the Board of PLCs as a whole, the Committees of the Board and for assessing the contribution of each director.

7. To evaluate on an annual basis:

• The effectiveness of each director’s ability to contribute to the effectiveness of the Board and the relevant Board Committees and to provide the necessary feedback to the directors in respect of their performance;

• The effectiveness of the Committees of the Board; and

• The effectiveness of the Board of PLCs as a whole.

8. To recommend to the Board:

• Whether directors who are retiring by rotation should be put forward for re-election; and

• Termination of membership of individual director in accordance with policy, for cause of other appropriate reasons.


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9. To establish appropriate plans for succession at Board level, and if appropriate, at senior management level.

10. To provide for adequate training and orientation of new directors with respect to the business, structure and management of the Group as well as the expectations of the Board with regard to their contribution to the Board and Company.

11. To consider other matters as referred to the Committee by the Board.

B. Remuneration

1. To establish and recommend the remuneration structure and policy for directors and key executives, if applicable, and to review for changes to the policy as necessary.

2. To ensure that a strong link is maintained between the level of remuneration and individual performance against agreed targets, the performance-related elements of remuneration setting forming a significant proportion of the total remuneration package of executive directors.

3. To review and recommend the entire individual remuneration packages for each of the executive director and, as appropriate, other senior executives, including: the terms of employment or contract of employment/service; any benefit, pension or incentive scheme entitlement; any other bonuses, fees and expenses; and any compensation payable on the termination of the service contract.

4. To review with the Managing Director/Chief Executive Officer, his/her goals and objectives and to assess his/her performance against these objectives as well as contribution to the corporate strategy.

5. To review the performance standards for key executives to be used in implementing the Group’s compensation programmes where appropriate.

6. To consider and approve compensation commitments/severance payments for executive directors and key executives, where appropriate, in the event of early termination of the employment/service contract.

7. To consider other matters as referred to the Committee by the Board.


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Members of the Audit Committee

The Audit Committee presently comprises three non-executive directors and a majority of them are independent directors as follows:

1. Kua Hwee Sim (Independent & Non-Executive)2. Hassim bin Baba (Independent & Non-Executive)3. Ahamad bin Mohamad (Non-Independent & Non-Executive)

Kua Hwee Sim is the Chairperson of the Audit Committee as appointed by the Board.

Attendance of Meetings

The Audit Committee convened five meetings during the financial year ended 31 December 2007 and details of attendance of each member are as follows:

Dates of Meetings Audit Committee Members 25 Jan 12 Feb 17 May 23 Aug 20 Nov

Kua Hwee Sim √ √ √ √ √

Hassim bin Baba √ √ √ √ √

Abdul Wahab bin Jaafar Sidek(appointed on 15 February 2007, resigned on 1 January 2008) n/a n/a √ √ √Ahamad bin Mohamad (appointed on 1 March 2008) n/a n/a n/a n/a n/a

√ - attended the meeting

n/a - not applicable

The Managing Director, Divisional Directors, Chief Financial Officer and the Head of Internal Audit were invited to attend the audit

committee meetings. The external auditors were also invited to attend two of the meetings.

Summary of Activities

The Audit Committee carried out the following activities during the financial year in accordance to its terms of reference:

a. Reviewed the quarterly result announcements prior to the approval of the Board.

b. Reviewed the audited financial statements prior to the approval of the Board.

c. Reviewed the external auditor’s fees, scope of work and audit plan prior to the commencement of audit.

d. Discussed with the external auditors on significant matters arising from their examination of the audited financial statements,

including compliance with applicable accounting standards.

63



e. Reviewed the external auditor’s management letter and evaluated management response.

f. Reviewed and approved the internal audit plan and the key performance indicators of the internal audit department for the year.

g. Reviewed and monitor the adequacy of scope, function, competency and resources of the internal audit department towards the

achievement of the internal audit plan and its key performance indicators.

h. Deliberated on the internal audit findings and appraised management’s response to the key audit observations and recommendations

including following up on management’s implementation of the recommendations.

i. Reviewed the related party transactions entered into by the Group.

TERMS OF REFERENCE

The Securities Commission had on 1 October 2007 revised the Malaysian Code on Corporate Governance (“Code”) and Bursa Malaysia

Securities Berhad (“Bursa Securities”) had on 28 February 2008 issued amendments to the Listing Requirements pursuant to the

revised Code.

The Terms of Reference of the Audit Committee has been amended accordingly to be in line with the revised Code and Listing

Requirements as approved by the Audit Committee and the Board.

Composition

i) Audit Committee members shall be appointed by the Board from among its numbers and their appointment shall be concurrent

with their tenure on the Board.

ii) The Audit Committee shall comprise not less than three members and all the members must be non-executive directors with a

majority of them being independent directors.

iii) In the event a member retires or ceases to be a member resulting in the number reducing to below three, the Board shall within

three months appoint new members to make up the minimum number of three members.

iv) At least one member of the Audit Committee must be a member of the Malaysian Institute of Accountants or must have the

necessary experience and recognized qualifications or such other requirements as prescribed or approved by Bursa Securities.

v) No alternate director shall be appointed as an Audit Committee member.

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Chairperson

The Audit Committee Chairperson shall be an independent non-executive director appointed by the Board.

Secretary

The Company Secretary shall act as the Secretary of the Audit Committee.

Review of performance

The term of office and performance of the Audit Committee and each of its members shall be reviewed by the Board at least once every

three years.

Meetings

The Audit Committee shall meet not less than four times a year. Additional meetings may be called at any time at the discretion of the

Audit Committee Chairperson.

Quorum

The quorum for Audit Committee meetings shall be two members and the majority of the members present shall be independent non

executive directors.

Attendance

The Chief Financial Officer and Head of Internal Audit would normally attend meetings. Other board members, senior management and

external auditors may attend meetings upon the invitation of the Audit Committee.

Authority

The Audit Committee is empowered by the Board:

i) To have explicit authority to investigate any matter within its terms of reference.

ii) To have full and unrestricted access to all records, information, properties and personnel.

iii) To have direct communication channels with the external and internal auditors.

iv) To be able to obtain independent professional advice and to secure the attendance of outsiders with the relevant experience and

expertise if the Audit Committee considers this necessary.

v) To be able to convene meetings with the external auditors, the internal auditors, or both, excluding the attendance of other directors

and employees, whenever deemed necessary.


65



Duties and Responsibilities

i) To consider the appointment of the external auditor, the audit fee and any questions of resignation or dismissal.

ii) To discuss with the external auditor prior to the commencement of audit, the nature and scope of the audit and ensure co-

ordination where more than one audit firm is involved.

iii) To review the quarterly, half-yearly and year-end financial statements prior to the approval of the Board, focusing on:

• compliance with accounting standards and other legal requirements.

• any changes in the accounting policies and practices

• significant issues arising from the audit

• the going concern assumption

iv) To discuss problems and reservations arising from the interim and final audits, and any significant matter the external auditor may

wish to discuss (in the absence of management where necessary).

v) To review the external auditor’s management letter and management’s response.

vi) To undertake the following with the internal audit function:

• Review the adequacy of scope, function, competency and resources of the internal audit department and that it has the

necessary authority to carry out its work.

• Review the internal audit program and the results of audit work and where necessary ensure that appropriate action is taken

on the recommendations of the internal auditors.

• Review the co-ordination of external audit and internal audit.

• Review any major discoveries of audit investigations and management’s response.

• Approve the appointment of senior staff members of internal audit department, review performance appraisals and be informed

of resignations and providing the resigning staff an opportunity to submit his/her reason for resigning.

vii) To review any related party transaction and conflict of interest situation that may arise within the Company or Group including any

transaction, procedure or course of conduct that raises questions of management integrity.

viii) Where the Audit Committee is of the view that a matter reported by it to the Board has not been satisfactorily resolved resulting in

a breach of the Listing Requirements, the Committee shall promptly report such matter to the Bursa Securities.

ix) To undertake any other responsibilities as may be agreed by the Audit Committee and the Board.

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INTERNAL AUDIT FUNCTION

The internal audit function is undertaken by the Group Internal Audit Department. It reports directly to the Audit Committee and assists

the Committee in discharging its duties and responsibilities.

The Group Internal Audit Department is adequately staffed by experienced and qualified auditors and it incurred an estimated cost of

RM 1.2 million during the financial year. Its scope of work is spelt out in the approved audit plan which covers all the operating divisions

and support functions of the Group and its performance is measured against approved key performance indicators.

As part of every audit assignment, internal audit conducted risk evaluations, reviewed the adequacy and effectiveness of the system of

internal controls and reviewed the extent of compliance with the Group’s policies and procedures and regulatory requirements. Internal

audit also reviewed key business processes with the objective of improving the efficiency of the Group’s operations.

During the financial year, the Group Internal Audit Department issued forty two audit reports to management and the Audit Committee

and followed up to ensure pertinent audit recommendations are addressed.


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INTRODUCTION

This Statement on Internal Control is made in accordance with the Malaysian Code on Corporate Governance and paragraph 15.27 (b)

of the Bursa Malaysia Securities Berhad (“Bursa Securities”) Listing Requirements, which requires Malaysian public listed companies to make a statement about their state of internal control, as a Group, in their annual report.

BOARD RESPONSIBILITY

The Board acknowledges its responsibility for maintaining a sound system of internal control and the need to review its adequacy and integrity on a regular basis. The system of internal control is meant to effectively manage business risk towards the achievement of objectives so as to enhance the value of shareholders’ investments and to safeguard the Group’s assets.

However, as in any system of internal control, it is designed to manage rather than eliminate the risk of failure to achieve business objectives and therefore, it can only provide reasonable and not absolute assurance against material misstatement or loss.

THE GROUP’S SYSTEM OF INTERNAL CONTROL

The Group has a comprehensive internal control framework that encompasses the Board, the Board and Management Committees with its specific terms of reference and the Executive Management that is empowered and accountable for the performance of their respective operating units. They operate within an organization structure that is approved by the Board which clearly defines the authority for decision making and reporting and these are further reinforced with formal review, monitoring and reporting procedures that are embedded in each process or activity.

Board and Management Committees

The Group has established several Committees to assist the Board and Management in discharging its responsibilities. These Committees have delegated authority to act in accordance to its terms of reference and report on a periodic basis. The Committees are composed of individuals with high integrity and reliability and its members meet regularly in the discharge of its duties. Major corporate decisions and financial reporting are carefully reviewed by the designated Committees before they are tabled to the Board for consideration and approval.

Management Structure

There is a formal organizational structure with delineated lines of authority, responsibility and accountability within the Group. The Board has put in place suitably qualified and experienced Management personnel to head the Group’s diverse operating units into delivering results and their performance are measured against the Key Performance Indicators that are approved by the Board.


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Authorization Limits

Group Authority Limits are established for revenue and capital expenditures that defines the approval limits for each level of Management and this is further reinforced by diligent examination of each expense by the authorized cheque signatories. Major capital investments, acquisitions and disposals are referred to the Board and its Committee for approval. The Group Authority Limits are also reviewed on a regular basis by the designated Committee.

Budgets and Performance Monitoring

Annual budgets are prepared by each operating unit and consolidated by Group Finance. These are thoroughly reviewed before they are tabled to the Top Management Committee, Executive Committee and the Board for approval.

The Group’s performance is monitored by Group Finance who prepares monthly management accounts that compares against the approved budget. The monthly management accounts are reviewed and deliberated by Management in its Monthly Operations Meeting and a copy is extended to the Executive Committee for review.

The Board monitors the Group’s performance by reviewing its quarterly results and operations and examines the announcement to Bursa Securities. These are usually reviewed by the Audit Committee before they are tabled to the Board.

Human Resource

There are policies and procedures for recruitment, performance appraisals and promotion to ensure that suitably qualified and competent personnel are hired and retained and these policies are being continuously reviewed by Management and Top Management Committee.

Group Human Resource and Training department assumes the responsibility of developing employees with the relevant and appropriate skills.

Procurement and Disbursement

There is a centralized and coordinated Procurement function for major purchases, projects and maintenance expenditures that ensures adherence to approved procedures as well as to leverage on economies of scale. Major expenditures are subjected to tender procedures and appraised by the Tender Committee before they are approved by the Board or its Committee.

The Accounting and Disbursement function are centralized within Group Finance to ensure compliance with the established procedures and authorization limits.

Legal and Regulatory

The Group adheres strictly to health, safety, environmental and halal standards as enforced by the various authorities. Product safety and quality audits are conducted by the Quality Assurance function on an ongoing basis while the Syariah Advisory Council oversees halal compliance and related matters.

69


Risk Management

The Board acknowledges the importance of managing business risks and has established a Group Risk Management Committee that is dedicated to review the principal risks of the Group on an ongoing basis. This will involve the updating of the principal risks of all the Group’s operating units on a periodic basis in collaboration with Management and timely reporting of the principal risks to the attention of the Board.

Audit Committee and Internal Audit

The Board recognizes that the Audit Committee and internal audit form an integral part of the Group’s internal control framework and in promoting good corporate governance. The Audit Committee performs an important oversight role in maintaining the integrity of the Group’s system of internal control and it has direct access to both the internal and external auditors. The activities of the Audit Committee and internal audit function are reported in the Audit Committee Report on pages 62 to 66.

CONCLUSION

The Board is of the view that the present system of internal control is adequate for the Group to manage its risks and to achieve its business objectives. The Board is committed in ensuring that the Group continuously reviews the internal control system so that it is effective in enhancing shareholders’ investments and safeguarding the Group’s assets.


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NON-AUDIT FEES

The amount of non-audit fees paid and payable to the external auditors and their affiliated company by the Group for the financial year ended 31 December 2007 is as follows: -

RM’000

Ernst & Young 56Ernst & Young Tax Consultants Sdn Bhd 172

Total 228

RECURRENT RELATED PARTY TRANSACTIONS OF REVENUE NATURE (“RRPT”)

Details of transactions with related parties undertaken by the Group during the financial year are disclosed on page 124 to 127 of the financial statements.

MATERIAL CONTRACTS

Other than the following, there was no material contract including contracts relating to any loans entered into by the Group and its subsidiaries involving Directors and major shareholders’ interest:

(a) KFCH, has on 27 December 2007 entered into a conditional Sale and Purchase Agreement with Sindora Berhad, for the purchase of a piece of land (including all factory, buildings, structures, infrastructure and facilities built or erected on the land) measuring 20.533 acres that forms part of a leasehold industrial land (expiring on 30 January 2041) held under document of title HS(D) 2276, PTD 1384, Mukim Hulu Sungai Johor, Kota Tinggi, Johor for a cash consideration of RM6,150,000.00.

Sindora Berhad is a subsidiary of Johor Corporation (“JCorp”). JCorp is the holding corporation of QSR Brands Bhd (“QSR”) via Kulim (Malaysia) Berhad (“Kulim”). Kulim is a holding company of QSR. QSR is a major shareholder of KFCH.

DISCLOSURE OF THE RESTRICTIVE COVENANT CLAUSE IN THE INTERNATIONAL FRANCHISE AGREEMENTS (“IFA”) GOVERNING KFC FRANCHISE

KFCH group operates KFC restaurants in Malaysia, Singapore and Brunei under the International Franchise Agreements entered into with the Franchisor. The right to develop KFC restaurants in Malaysia, Singapore and Brunei is granted to KFCH by the Franchisor under the Development Agreements entered into with the Franchisor.

Any occurrence of events of default under the International Franchise Agreements may lead to the termination of the KFC franchise by the Franchisor. The International Franchise Agreements and/or Development Agreements are also subject to renewal.

The International Franchise Agreements also contain a covenant which requires the consent of the Franchisor for any direct or indirect acquisition by any third party competitor of QSR and/or KFCH or any third party holding twenty percent (20%) or more of QSR and/or KFCH, failing which the Franchisor may terminate the International Franchise Agreements and/or adopt any of the remedies specified in the International Franchise Agreements. As KFCH is listed on Bursa Securities and the respective shares are freely traded, any person, whether individually or together with persons acting in concert, could possibly acquire more than twenty percent (20%) of the voting shares of KFCH without obtaining the consent of the Franchisor. As such, if the Franchisor does not consent to any such acquisition, the Franchisor may terminate the International Franchise Agreements or choose not to renew the International Franchise Agreements upon the expiry.

Additional Compliance Information

71


Directors’ Report

Statement by Directors

Statutory Declaration

Report of the Auditors

Income Statements

Balance Sheets

Statements of Changes in Equity

Cash Flow Statements

Notes to the Financial Statements

List of Properties Held

Analysis of Shareholdings

Form of Proxy

Financial Statements72

76

76

77

78

79

80

81

83

132

143

72


Directors’ Report

The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2007.

PRINCIPAL ACTIVITIES

The principal activity of the Company is that of investment holding. The subsidiaries are primarily engaged in the operations of:

• restaurants

• integrated poultry - breeder farms - hatchery - feedmill - poultry processing and further processing plants - poultry retail and convenience food store chain

• ancillary - bakery - commissary - sauce manufacturing plant - trading in consumables

• property holding

• investment holding

RESULTS Group Company RM’000 RM’000 Profit for the year 105,543 36,770

Attributable to: Equity holders of the Company 104,269 36,770 Minority interests 1,274 -

105,543 36,770

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

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

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DIVIDENDS

The amount of dividends paid by the Company since 31 December 2006 were as follows:

RM’000

In respect of the financial year ended 31 December 2006 as reported in the directors’ report of that year:

Final dividend of 14 sen less 27% taxation per share, on 198,274,682 ordinary shares, declared on 18 May 2007 and paid on 9 July 2007 20,264

In respect of the financial year ended 31 December 2007:

Interim dividend of 8 sen less 27% taxation per share, on 198,274,682 ordinary shares, declared on 30 August 2007 and paid on 5 October 2007 11,579

At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 December 2007, of 12 sen less 26% taxation per share on 198,274,682 ordinary shares, amounting to a dividend payable of RM17,607,000 (8.9 sen net per ordinary share) will be proposed for shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in shareholders’ equity as an appropriation of retained earnings in the financial year ending 31 December 2008.

DIRECTORS

The names of the directors of the Company in office since the date of the last report and at the date of this report are: YBhg Tan Sri Dato’ Muhammad Ali bin Hashim (Chairman) Ahamad bin Mohamad (Deputy Chairman) Jamaludin bin Md Ali (Managing Director) Kua Hwee Sim Hassim bin Baba Mohd Zam bin Mustaman (Resigned on 1 January 2008) Rita a/p Benoy Bushon (Resigned on 1 January 2008) Abdul Wahab bin Jaafar Sidek (Resigned on 1 January 2008)

DIRECTORS’ BENEFITS

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement, to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company as shown in Note 8 to the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 34 to the financial statements.

Directors’ Report

74


DIRECTORS’ INTERESTS

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows:

Number of Ordinary Shares of RM1.00 Each 1 January 31 December 2007 Acquired Sold 2007 The Company Direct Interest Hassim bin Baba 100 - - 100

None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year.

OTHER STATUTORY INFORMATION

(a) Before the income statements and balance sheets of the Group and of the Company were made out, the directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render:

(i) the amount written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and

(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.

(e) As at the date of this report, there does not exist:

(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or

(ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial year.

Directors’ Report

75


OTHER STATUTORY INFORMATION (CONTD.)

(f) In the opinion of the directors:

(i) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made.

SUBSEQUENT EVENT

Details of a subsequent event are disclosed in Note 36 to the financial statements.

AUDITORS

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors dated 14 March 2008.

TAN SRI DATO’ MUHAMMAD ALI BIN HASHIM JAMALUDIN BIN MD ALI

Chairman Managing Director

Directors’ Report

76


PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965

We, TAN SRI DATO’ MUHAMMAD ALI BIN HASHIM and JAMALUDIN BIN MD ALI, being two of the directors of KFC HOLDINGS (MALAYSIA) BHD, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 78 to 131 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2007 and of the results and the cash flows of the Group and of the Company for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the directors dated 14 March 2008.

TAN SRI DATO’ MUHAMMAD ALI BIN HASHIM JAMALUDIN BIN MD ALI

Chairman Managing Director

Statutory Declaration

PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965

I, MOHAMMAD BIN ALWI, being the officer primarily responsible for the financial management of KFC HOLDINGS (MALAYSIA) BHD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 78 to 131 are in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed MOHAMMAD BIN ALWI at Kuala Lumpur in the Federal Territory on 14 March 2008 MOHAMMAD BIN ALWI

Before me

Maisharah binti Abu Hasan (W181)Commissioner for Oaths

Statement by Directors

77


Report of the Auditors to the members of KFC Holdings (Malaysia) Bhd

We have audited the accompanying financial statements set out on pages 78 to 131. These financial statements are the responsibility of the Company’s directors.

It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report.

We conducted our audit in accordance with applicable Approved Standards on Auditing in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion: (a) the financial statements have been properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable

Financial Reporting Standards in Malaysia so as to give a true and fair view of:

(i) the financial position of the Group and of the Company as at 31 December 2007 and of the results and the cash flows of the Group and of the Company for the year then ended; and

(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and

(b) the accounting and other records and the registers required by the Act to be kept by the Company and by its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

We have considered the financial statements and auditors’ reports thereon of the subsidiaries of which we have not acted as auditors, as indicated in Note 13 to the financial statements, being financial statements that have been included in the consolidated financial statements.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.

The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification material to the consolidated financial statements and did not include any comment required to be made under Section 174(3) of the Act.

ERNST & YOUNG LEE SENG HUAT AF: 0039 No. 2518/12/09(J) Chartered Accountants Partner Kuala Lumpur, Malaysia14 March 2008

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Income StatementsFOR THE YEAR ENDED 31 DECEMBER 2007

Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Revenue 3 1,730,371 1,523,839 88,000 83,000 Cost of sales 4 (770,048) (639,307) - -

Gross profit 960,323 884,532 88,000 83,000 Other income 22,797 17,744 26,972 32,586 Administrative expenses (109,061) (106,339) (22,713) (29,842)Selling and marketing expenses (712,109) (636,714) - - Other expenses (24) (1,957) (26,229) (28,335)

Operating profit 161,926 157,266 66,030 57,409 Finance costs 5 (11,302) (14,962) (5,823) (8,813)

Profit before tax 6 150,624 142,304 60,207 48,596 Income tax expense 9 (45,081) (43,255) (23,437) (19,888)

Profit for the year 105,543 99,049 36,770 28,708

Attributable to: Equity holders of the Company 104,269 98,280 Minority interests 1,274 769

105,543 99,049

Earnings per share attributable to equity holders of the Company (sen): Basic, for profit for the year 10 52.6 49.6

The accompanying notes form an integral part of the financial statements.

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Group Company Note 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

ASSETS

Non-current assets Property, plant and equipment 12 529,658 500,393 19,908 16,987 Investments in subsidiaries 13 - - 353,590 379,623 Investment properties 14 2,000 2,000 585 585 Prepaid land lease payments 15 63,941 62,687 - - Intangible assets 16 68,063 67,033 - - Other investment 17 4,500 4,500 - - Fixed deposits 18 6,324 15,793 6,324 15,793

674,486 652,406 380,407 412,988

Current assets Properties held for sale 19 - 5,162 - - Inventories 20 112,312 99,475 - - Trade and other receivables 21 78,972 67,798 156,642 183,786 Cash and bank balances 22 140,358 149,237 11,826 21,757

331,642 321,672 168,468 205,543

TOTAL ASSETS 1,006,128 974,078 548,875 618,531

EQUITY AND LIABILITIES Equity attributable to equity holders of the Company Share capital 23 198,275 198,275 198,275 198,275 Other reserves 24 50,963 50,177 26,560 26,406 Retained earnings 25 352,783 280,024 257,611 252,673

602,021 528,476 482,446 477,354

Minority interests 6,920 5,865 - -

Total equity 608,941 534,341 482,446 477,354

Non-current liabilities Retirement benefit obligations 26 3,758 2,971 - - Borrowings 27 110,907 123,028 60,000 60,000 ABBA NIF 28 - 5,000 - 5,000 Deferred tax liabilities 29 25,036 29,722 444 414

139,701 160,721 60,444 65,414

Current liabilities Retirement benefit obligations 26 - 235 - - Borrowings 27 12,080 12,367 - - ABBA NIF 28 - 60,000 - 60,000 Trade and other payables 30 242,110 203,624 5,985 15,763 Current tax payable 3,296 2,790 - -

257,486 279,016 5,985 75,763

Total liabilities 397,187 439,737 66,429 141,177

TOTAL EQUITY AND LIABILITIES 1,006,128 974,078 548,875 618,531


Balance SheetsAS AT 31 DECEMBER 2007

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Attributable to Equity Holders of the Company Minority Total Non-Distributable Distributable Interests Equity Exchange Share Share Capital Fluctuation Revaluation Retained Capital Premium Reserve Reserve Reserve Earnings Total Group Note (Note 23) (Note 24) (Note 24) (Note 24) (Note 24) (Note 25) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2006 198,275 18,736 1,790 341 21,881 196,020 437,043 5,312 442,355 Revaluation surplus, net of deferred tax: Land and buildings - - - - 7,388 - 7,388 - 7,388 Translation differences - - - 41 - - 41 - 41 Profit for the year - - - - - 98,280 98,280 769 99,049 Equity dividends 11 - - - - - (14,276) (14,276) - (14,276)Dividend of a subsidiary - - - - - - - (216) (216)

At 31 December 2006 198,275 18,736 1,790 382 29,269 280,024 528,476 5,865 534,341

At 1 January 2007 198,275 18,736 1,790 382 29,269 280,024 528,476 5,865 534,341 Transfer to retained earnings upon disposal of property, plant and equipment - - - - (36) 50 14 - 14 Reversal of deferred tax - - - - 990 - 990 - 990 Transfer from revaluation reserve - - - - (283) 283 - - - Translation differences - - - 115 - - 115 - 115 Profit for the year - - - - - 104,269 104,269 1,274 105,543 Equity dividends 11 - - - - - (31,843) (31,843) - (31,843)Dividend of a subsidiary - - - - - - - (219) (219)

At 31 December 2007 198,275 18,736 1,790 497 29,940 352,783 602,021 6,920 608,941

Non-Distributable Distributable Share Share Capital Revaluation Retained Total Capital Premium Reserve Reserve Earnings Equity Company Note (Note 23) (Note 24) (Note 24) (Note 24) (Note 25) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2006 198,275 18,721 4,459 78 238,241 459,774 Revaluation surplus, net of deferred tax: Land and buildings - - - 3,148 - 3,148 Profit for the year - - - - 28,708 28,708 Dividends 11 - - - - (14,276) (14,276)

At 31 December 2006 198,275 18,721 4,459 3,226 252,673 477,354

At 1 January 2007 198,275 18,721 4,459 3,226 252,673 477,354 Reversal of deferred tax - - - 165 - 165 Transfer from revaluation reserve - - - (11) 11 - Profit for the year - - - - 36,770 36,770 Dividends 11 - - - - (31,843) (31,843)

At 31 December 2007 198,275 18,721 4,459 3,380 257,611 482,446

Statements of Changes in EquityFOR THE YEAR ENDED 31 DECEMBER 2007


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Cash Flow Statements FOR THE YEAR ENDED 31 DECEMBER 2007

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 150,624 142,304 60,207 48,596

Adjustments for:

Amortisation of franchise fees 3,792 3,116 - -

Franchise fees written off - 60 - -

Depreciation of property, plant and equipment 57,639 57,351 1,347 1,517

Amortisation of prepaid land lease payments 803 788 - -

Impairment loss on

- land and buildings - 60 - -

- intercompany loans - - - 2,500

Interest expense 9,807 9,294 4,328 3,145

Redemption of Secondary Notes 1,495 5,668 1,495 5,668

Loss/(gain) on disposal of property, plant and equipment (751) 1,895 196 (550)

Gain on disposal of properties held for sale (1,266) (22) - (32)

Gain on disposal of prepaid land lease payments (67) - - -

Retirement benefits 552 527 - (1,375)

Dividend income from subsidiaries - - (88,000) (83,000)

Interest income (2,883) (3,371) (4,109) (7,838)

(Gain)/loss on disposal of quoted investments (133) 2 - -

Provision for diminution in value of investments in subsidiaries - - 26,033 25,835

Operating profit/(loss) before working capital changes 219,612 217,672 1,497 (5,534) Inventories (12,837) (20,657) - -

Receivables (11,174) (1,817) 358 (147)

Subsidiaries - - 25,659 17,537

Related companies (5,242) 11,882 100 -

Payables 43,728 32,555 (9,878) 1,085

Cash generated from operations 234,087 239,635 17,736 12,941 Secondary Notes redeemed (1,495) (5,668) (1,495) (5,668)

Interest paid (9,807) (9,294) (4,328) (3,145)

Taxes paid (51,590) (48,125) (500) (499)

Taxes refunded 3,333 - 2,145 -

Retirement benefits paid - (136) - -

Net cash generated from operating activities 174,528 176,412 13,558 3,629

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Cash Flow Statements FOR THE YEAR ENDED 31 DECEMBER 2007


CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (90,049) (69,581) (4,662) (532)

Prepayment of land lease (1,830) - - -

Proceeds from disposal of property, plant and equipment 3,563 1,602 198 550

Proceeds from disposal of properties held for sale 6,428 8,549 - 132

Proceeds from disposal of prepaid land lease payments 173 - - -

Proceeds from disposal of quoted investments 133 443 - -

Franchise fees (4,822) (5,425) - -

Interest received 2,883 3,371 4,109 7,838

Exchange translation adjustments 115 41 - -

Net dividends received from subsidiaries - - 64,240 62,700

Net cash (used in)/generated from investing activities (83,406) (61,000) 63,885 70,688

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of bank borrowings (12,408) (20,062) - -

Repayment of ABBA NIF (65,000) (60,000) (65,000) (60,000)

Reduction in the restriction on deposits pledged with licensed bank 9,469 5,207 9,469 5,207

Payment of dividend to shareholders of the Company (31,843) (14,276) (31,843) (14,276)

Payment of dividend to minority interest in a subsidiary (219) (216) - -

Net cash used in financing activities (100,001) (89,347) (87,374) (69,069)

NET CHANGE IN CASH AND CASH EQUIVALENTS (8,879) 26,065 (9,931) 5,248

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 149,237 123,172 21,757 16,509

CASH AND CASH EQUIVALENTS AT END OF YEAR (NOTE 22) 140,358 149,237 11,826 21,757


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Notes to the Financial Statements31 DECEMBER 2007

1. CORPORATE INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Board of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Level 17, Wisma KFC, No. 17 Jalan Sultan Ismail, 50250 Kuala Lumpur.

The principal activity of the Company is that of investment holding. The principal activities of its subsidiaries are as disclosed in the Directors’ Report of the Company. There have been no significant changes in the nature of the principal activities during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 14 March 2008.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation The financial statements of the Group and of the Company have been prepared on a historical basis, unless otherwise

disclosed in significant accounting policies, and comply with the provisions of the Companies Act, 1965 and applicable Financial Reporting Standards in Malaysia.

The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM’000) except where otherwise indicated.

2.2 Summary of Significant Accounting Policies (a) Subsidiaries and Basis of Consolidation (i) Subsidiaries Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to

obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.

In the Company’s separate financial statements, investments in subsidiaries are stated at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

(ii) Basis of Consolidation

The consolidated financial statements comprise the financial statements of the Company and all its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the Company.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. In preparing the consolidated financial statements, intragroup balances, transactions and unrealised gains or losses are eliminated in full. Uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

2.2 Summary of Significant Accounting Policies (Contd.)

(a) Subsidiaries and Basis of Consolidation (Contd.)

(ii) Basis of Consolidation (Contd.)

Acquisition of subsidiaries are accounted for using the purchase method. The purchase method of accounting involves allocating the cost of acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given up, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition.

Any excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in profit or loss.

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since then.

(b) Intangible Assets

(i) Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but instead, it is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

(ii) Other Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair values as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each balance sheet date.

Intangible assets with indefinite useful lives are not amortised but tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying value may be impaired either individually or at cash-generating unit level. The useful life of an intangible asset with an indefinite life is also reviewed annually to determine whether the useful life assessment continues to be supportable.


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(b) Intangible Assets (Contd.)

(ii) Other Intangible Assets (Contd.)

The restaurants’ initial and renewal franchise fees and territorial franchise fees are stated at cost and are amortised on a straight-line basis over 10 and 20 years respectively.

(c) Property, Plant and Equipment and Depreciation

All items of property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Subsequent to recognition, property, plant and equipment except for freehold land are stated at cost less accumulated depreciation and any accumulated impairment losses.

Freehold land is stated at revalued amount, which is the fair value at the date of the revaluation less any accumulated impairment losses. Fair value is determined from market-based evidence by appraisal that is undertaken by professionally qualified valuers. Revaluations are performed with sufficient regularity to ensure that the fair value of a revalued asset does not differ materially from that which would be determined using fair values at the balance sheet date. Any revaluation surplus is credited to the revaluation reserve included within equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss to the extent of the decrease previously recognised. A revaluation deficit is first offset against unutilised previously recognised revaluation surplus in respect of the same asset and the balance is thereafter recognised in profit or loss. Upon disposal or retirement of an asset, any revaluation reserve relating to the particular asset is transferred directly to retained earnings.

Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

Freehold land has an unlimited useful life and therefore is not depreciated.

Depreciation of other property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, at the following annual rates:

Buildings 2 - 5% Leasehold improvements and renovation 10% Plant and machinery 10% Motor vehicles 20% Restaurant and office equipment 10 - 20%


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(c) Property, Plant and Equipment and Depreciation (Contd.)

No depreciation is provided for crockery, cutlery and utensils. The cost of replacing these assets is charged against revenue as and when incurred.

The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimate and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any and the net carrying amount is recognised in profit or loss and the unutilised portion of the revaluation surplus on that item is taken directly to retained earnings.

(d) Investment Properties

Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value. Fair value is arrived at by reference to market evidence of transaction prices for similar properties and is performed by registered independent valuers having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued.

Gains or losses arising from changes in the fair values of investment properties are recognised in profit or loss in the year in which they arise.

A property interest under an operating lease is classified and accounted for as an investment property on a property-by-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at fair value.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year in which they arise.

(e) Impairment of Non-financial Assets

The carrying amounts of assets, other than investment property, inventories, deferred tax assets and non-current assets (or disposal groups) held for sale, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss.

For goodwill, intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date or more frequently when indicators of impairment are identified.


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(e) Impairment of Non-financial Assets (Contd.)

For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGU) to which the asset belong to. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s CGUs, or groups of CGUs, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or group of units.

An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset.

Impairment loss on goodwill is not reversed in a subsequent period. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.

(f) Inventories

Inventories are stated at the lower of cost (determined on an actual basis) and net realisable value. In arriving at net realisable value, due allowance is made for all obsolete and slow moving items. Cost includes the purchase price of goods and attributable expenditure. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution.

Cost of livestocks includes the original cost of purchase plus the cost of bringing the inventories to its present location and condition.

Cost of finished goods includes the cost of raw materials, direct labour and certain manufacturing overheads less recovery value of by-products.


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(g) Financial Instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instrument.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are recognised directly to equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

(i) Cash and Cash Equivalents

For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank, deposit at call and short term highly liquid investments which have an insignificant risk of changes in value, net of outstanding bank overdrafts.

(ii) Other Non-current Investments

Non-current investments other than investments in subsidiaries and investment properties are stated at cost less impairment losses. On disposal of an investment, the difference between net disposal proceeds and its carrying amount is recognised in profit or loss.

(iii) Marketable Securities

Marketable securities are carried at the lower of cost and market value, determined on an aggregate basis. Cost is determined on the weighted average basis while market value is determined based on quoted market values. Increases or decreases in the carrying amount of marketable securities are recognised in profit or loss. On disposal of marketable securities, the difference between net disposal proceeds and the carrying amount is recognised in profit or loss.

(iv) Trade Receivables

Trade receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

(v) Trade Payables

Trade payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.


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(g) Financial Instruments (Contd.)

(vi) Interest Bearing Loans and Borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

(vii) Equity Instruments

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared and approved by the shareholders.

The transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided.

The consideration paid, including any attributable transaction costs on repurchased ordinary shares of the Company that have not been cancelled, are classified as treasury shares and presented as a deduction from equity. No gain or loss is recognised in the income statement on the sale, re-issuance or cancellation of treasury shares. When treasury shares are reissued by resale, the difference between the sales consideration and the carrying amount of the treasury shares is recognised in equity.

(h) Leases (i) Classification

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All leases that do not transfer substantially all the risks and rewards are classified as operating leases, with the following exceptions:

- Property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a property-by-property basis and, if classified as investment property, is accounted for as if held under a finance lease (Note 2.2(d)); and

- Land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease.


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(h) Leases (Contd.)

(ii) Operating Leases - the Group as Lessee

Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

In the case of a lease of land and buildings, the minimum lease payments or the up-front payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term.

(i) Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(j) Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date.

Deferred tax is provided for, using the liability method. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of transaction, affects neither accounting profit nor taxable profit.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised as income or an expense and included in the profit or loss for the period, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or the amount of any excess of the acquirer’s interest is the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the combination.


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(k) Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost.

(l) Employee Benefits

(i) Short Term Benefits

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

(ii) Defined Contribution Plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in the profit or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (“EPF”). Some of the Group’s foreign subsidiaries also make contributions to their respective countries’ statutory pension schemes.

(iii) Defined Benefit Plans

The Group’s obligation under defined benefit plans is determined based on actuarial computations by independent actuaries using the Projected Unit Credit Method, through which the amount of benefit that employees have earned in return for their services in the current and prior years is estimated. That benefit is discounted in order to determine its present value. Actuarial gains and losses are recognised as income or expense over the expected average remaining working lives of the participating employees when the cumulative unrecognised actuarial gains or losses for the Scheme exceed 10% of the higher of the present value of the defined benefit obligation and the fair value of plan assets. Past service costs are recognised as an expense on a straight-line basis over the average period until the benefits become vested. If the benefits are already vested immediately following the introduction of, or changes to, a pension plan, past service costs are recognised immediately.

The amount recognised in the balance sheet represents the present value of the defined benefit obligations adjusted for unrecognised past service costs, and reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the net total of any unrecognised past service costs and the present value of any economic benefits in the form of refunds from the plan or reductions in future contributions to the plan.


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(l) Employee Benefits (Contd.)

(iv) Termination Benefits

Termination benefits are payable when employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits as a liability and an expense when it is demonstrably committed to either terminate the employment of current employees according to a detailed plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefits is based on the number of employees expected to accept the offer. Benefits falling due more than twelve months after balance sheet date are discounted to present value.

(m) Foreign Currencies

(i) Functional and Presentation Currency

The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.

(ii) Foreign Currency Transactions

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation. Exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation, where that monetary item is denominated in either the functional currency of the reporting entity or the foreign operation, are initially taken directly to the foreign currency translation reserve within equity until the disposal of the foreign operations, at which time they are recognised in profit or loss. Exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation, where that monetary item is denominated in a currency other than the functional currency of either the reporting entity or the foreign operation, are recognised in profit or loss for the period. Exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation, regardless of the currency of the monetary item, are recognised in profit or loss in the Group’s financial statements or the individual financial statements of the foreign operation, as appropriate.


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(m) Foreign Currencies (Contd.)

(ii) Foreign Currency Transactions (Contd.)

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

(iii) Foreign Operations

The results and financial position of foreign operations that have a functional currency different from the presentation currency (RM) of the consolidated financial statements are translated into RM as follows:

- Assets and liabilities for each balance sheet presented are translated at the closing rate prevailing at the balance sheet date;

- Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions; and

- All resulting exchange differences are taken to the foreign currency translation reserve within equity.

Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the balance sheet date. Goodwill and fair value adjustments which arose on the acquisition of foreign subsidiaries before 1 January 2005 are deemed to be assets and liabilities of the parent company and are recorded in RM at the rates prevailing at the date of acquisition.

The principal exchange rates used for every unit of foreign currency are as follows:

Year end rates Average rates 2007 2006 2007 2006 RM RM RM RM Hong Kong (HK$) 0.4353 0.4658 0.4393 0.4827 Brunei Darussalam (B$) 2.3170 2.3230 2.2805 2.3110 Singapore (S$) 2.3165 2.3225 2.2805 2.3110


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(n) Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Revenue from quick service restaurants is recognised at point of sales.

(ii) Dividend income is recognised when the Group’s right to receive payment is established.

(iii) Other revenues are recognised on an accrual basis or when the right of receipt has been established.

Intercompany sales are excluded from the revenue of the Group.

(o) Non-current Assets (or Disposal Groups) Held for Sale and Discontinued Operation

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary.

Immediately before classification as held for sale, the measurement of the non-current assets (or all the assets and liabilities in a disposal group) is brought up-to-date in accordance with applicable FRSs. Then, on initial classification as held for sale, non-current assets or disposal groups (other than investment properties, deferred tax assets, employee benefits assets, financial assets and inventories) are measured in accordance with FRS 5 that is at the lower of carrying amount and fair value less costs to sell. Any differences are included in profit or loss.

A component of the Group is classified as a discontinued operation when the criteria to be classified as held for sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations, is part of a single co-ordinated major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale.

2.3 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised FRSs

In prior year, the Group has early adopted FRS 117: Leases for the financial period beginning 1 January 2006.

On 1 January 2007, the Group and the Company adopted the following revised FRS and amendment to FRS:

a) FRS 124: Related Party Disclosures b) Amendment to FRS1192004: Employee Benefits - Actuarial Gains and Losses, Group Plans and Disclosures

The adoption of the revised FRS 124 and Amendment to FRS1192004 give rise to additional disclosures but did not result in significant changes in accounting policies of the Group and of the Company.

The MASB has also issued FRS 6: Exploration for and Evaluation of Mineral Resources which will be effective for annual periods beginning on or after 1 January 2007. This FRS is, however, not applicable to the Group or the Company.


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2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.4 Standards and Interpretations Issued but Not Yet Effective

At the date of authorisation of these financial statements, the following new and revised FRS, amendment to FRS and Interpretations were issued but not yet effective and have not been applied by the Group and the Company:

Effective for financial periods FRS, Amendments to FRS and Interpretations beginning on or after FRS 107: Cash Flow Statements 1 July 2007 FRS 111: Construction Contracts 1 July 2007 FRS 112: Income Taxes 1 July 2007 FRS 118: Revenue 1 July 2007 FRS 120: Accounting for Government Grants and Disclosure of Government Assistance 1 July 2007 FRS 134: Interim Financial Reporting 1 July 2007 FRS 137: Provisions, Contingent Liabilities and Contingent Assets 1 July 2007 FRS 139: Financial Instruments: Recognition and Measurement Deferred Amendment to FRS 121: The Effects of Changes in Foreign Exchange Rates - Net Investment In a Foreign Operation 1 July 2007 IC Interpretation 1: Changes in Existing Decommissioning, Restoration and Similar Liabilities 1 July 2007 IC Interpretation 2: Members’ Shares in Co-operative Entities and Similar Instruments 1 July 2007 IC Interpretation 5: Rights to Interests arising from Decommisioning, 1 July 2007 Restoration and Environmental Rehabilitation Funds IC Interpretation 6: Liabilities arising from Participating in a Specific 1 July 2007 Market - Waste Electrical and Electronic Equipment IC Interpretation 7: Applying the Restatement Approach under 1 July 2007 FRS 1292004 - Financial Reporting in Hyperinflationary Economies IC Interpretation 8: Scope of FRS 2 1 July 2007

The above new and revised FRS, amendment to FRS and Interpretations are not expected to have a significant impact on the financial statements of the Group and the Company upon their initial application except for the following:

Amendment to FRS 121: The Effects of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation

This amendment requires that where an entity has a monetary item that forms part of its net investment in a foreign operation, the exchange differences arising from such monetary items should always be recognised in equity in the consolidated financial statements and should not be dependent on the currency of the monetary item. Prior to this amendment, exchange differences arising on a monetary item that forms part of the Group’s net investment in a foreign operation are recognised in equity in the consolidated financial statements only when that monetary item is denominated either in the functional currency of the reporting entity or the foreign operation. The Group will apply this amendment from financial periods beginning 1 January 2008. As it is not possible to reasonably estimate the exchange rates applicable to such monetary items for future periods, the directors are therefore unable to determine if the initial adoption of this amendment will have a material impact on the consolidated financial statements for the financial ending 31 December 2008.

The Group and the Company are exempted from disclosing the possible impact, if any, to the financial statement upon the initial application of FRS 139.


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2.5 Significant Accounting Estimates and Judgements

(a) Critical Judgements Made in Applying Accounting Policies

The following are the judgements made by management in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial statements.

Classification between investment properties and owner-occupied properties

The Group has developed certain criteria based on FRS 140 in making judgement whether a property qualifies as an investment property. Investment property is a property held to earn rentals or for capital appreciation or both.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group would account for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property.

(b) Key Sources of Estimation Uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(i) Impairment of goodwill

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill and other indefinite life intangible assets are tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.

When value in use calculations are undertaken, management must estimate the expected future cash flows from the assets or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the key assumptions applied in the impairment assessment of goodwill are disclosed in Note 16 to the financial statements.

(ii) Deferred tax assets

Deferred tax assets are recognised for all unused tax losses and unabsorbed capital allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The total carrying value of recognised tax losses, capital allowances and reinvestment allowances of the Group was RM53,123,000 (2006: RM46,189,000) and the unrecognised tax losses, capital allowances and reinvestment allowances of the Group was RM63,026,000 (2006: RM75,711,000).


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3. REVENUE

Revenue of the Group and of the Company consists of the following: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Sales of goods 1,730,371 1,523,839 - - Gross dividends from subsidiaries - - 88,000 83,000

1,730,371 1,523,839 88,000 83,000

Revenue for the Group represents cash and invoiced amount for sales of goods and services rendered after allowing for sales discounts and returns and excludes intra-group transactions.

4. COST OF SALES

Cost of sales represents cost of inventories sold.

5. FINANCE COSTS


Interest payable - loans, bankers acceptances and others 9,141 8,451 4,328 3,145 - subsidiary of a corporate shareholder 666 843 - - Redemption of Secondary Notes 1,495 5,668 1,495 5,668

11,302 14,962 5,823 8,813


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6. PROFIT BEFORE TAX

The following amounts have been included in arriving at profit before tax:


Employee benefits expense (Note 7) 292,779 261,930 12,279 13,037 Non-executive Directors’ remuneration (Note 8) 317 (109) 315 (111) Auditors’ remuneration - statutory audits 445 438 43 41 - overprovision in prior year - (11) - - - other services 228 717 68 548 Amortisation of franchise fees 3,792 3,116 - - Franchise fees written off - 60 - - Depreciation of property, plant and equipment (Note 12) 57,639 57,351 1,347 1,517 Amortisation of prepaid land lease payments (Note 15) 803 788 - - Rental of land and buildings - subsidiary of a corporate shareholder 73 - - - - others 105,493 100,612 3,223 3,190 Impairment loss - land and buildings - 60 - - - intercompany loans - - - 2,500 Provision for diminution in value of investments in subsidiaries - - 26,033 25,835 Interest receivable - subsidiaries - - (3,395) (6,809) - deposits with licensed banks and financial institutions (2,851) (3,343) (713) (1,028) - others (32) (28) (1) (1) (Gain)/loss on disposal of property, plant and equipment (751) 1,895 196 (550) Gain on disposal of properties held for sale (1,266) (22) - (32) Gain on disposal of prepaid land lease payments (67) - - - (Gain)/loss on disposal of quoted investments (133) 2 - - Rental income - subsidiaries - - (46) (46) - subsidiary of a corporate shareholder (841) (795) - - - others (2,429) (1,916) (2,269) (1,666) Franchise fees income (217) (256) - -

7. EMPLOYEE BENEFITS EXPENSE Wages and salaries 183,746 168,091 7,816 8,749 Social security contribution 2,210 1,983 82 77 Contributions to defined contribution plan 22,911 20,739 1,293 1,464 Increase/(decrease) in liability for defined benefit plan (Note 26) 552 527 - (1,375) Termination benefits - 1,690 - 1,690 Other benefits 83,360 68,900 3,088 2,432

292,779 261,930 12,279 13,037

Included in employee benefits expense of the Group and of the Company are executive directors’ remuneration amounting to RM660,000 (2006: RM969,000) and RM658,000 (2006: RM967,000) respectively as further disclosed in Note 8.


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8. DIRECTORS’ REMUNERATION


Executive directors’ remuneration (Note 7): Fees 2 2 - - Other emoluments 658 967 658 967

660 969 658 967

Non-executive directors’ remuneration (Note 6): Fees - current year’s provision 234 139 232 137 - overprovision in prior year - (370) - (370) Other emoluments 83 122 83 122

317 (109) 315 (111)

Total directors’ remuneration 977 860 973 856 Estimated money value of benefits-in-kind 139 203 139 203

Total directors’ remuneration including benefits-in-kind 1,116 1,063 1,112 1,059

The details of remuneration receivable by directors of the Company during the year are as follows: Executive: Salaries and other emoluments 529 823 529 823 Fees 2 2 - - Bonus 70 - 70 - Defined contribution plan 59 144 59 144 Estimated money value of benefits-in-kind 65 172 65 172

725 1,141 723 1,139

Non-Executive: Fees - current year’s provision 234 139 232 137 - overprovision in prior year - (370) - (370) Other emoluments 83 122 83 122 Estimated money value of benefits-in-kind 74 31 74 31

391 (78) 389 (80)

The executive directors’ remuneration in year 2006 includes remuneration of the Company’s former executive directors totalling RM1,137,000.


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8. DIRECTORS’ REMUNERATION (CONTD.)

The number of directors of the Company whose total remuneration during the year fell within the following bands is analysed below:

Number of Directors 2007 2006 Executive directors: Below RM50,000 - 2 RM200,001 - RM300,000 1 3 RM400,001 - RM500,000 1 1 Non-executive directors: Below RM50,000 3 13 RM50,001 - RM100,000 2 - RM100,001 - RM150,000 1 -

9. INCOME TAX EXPENSE Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Current income tax: Malaysian income tax 50,193 44,998 24,059 20,800 Foreign tax 2,243 3,374 - -

52,436 48,372 24,059 20,800 Overprovision in prior years: Malaysian income tax (3,382) (1,911) (817) (743) Foreign tax (377) (376) - -

48,677 46,085 23,242 20,057

Real property gain tax (“RPGT”) 86 13 - -

Deferred tax (Note 29): Relating to origination and reversal of temporary differences 2,407 560 244 (107) Relating to changes in tax rates (502) (426) (5) (11) Overprovision in prior years (5,587) (2,977) (44) (51)

(3,682) (2,843) 195 (169)

Total income tax expense 45,081 43,255 23,437 19,888

Domestic current income tax is calculated at the statutory tax rate of 27% (2006: 28%) of the estimated assessable profit for the year. The domestic statutory tax rate will be reduced to 26% from the current year’s rate of 27%, effective year of assessment 2008 and to 25% in subsequent years of assessment. The computation of deferred tax as at 31 December 2007 has reflected these changes.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. During the current financial year, the income tax rate applicable to subsidiaries in Singapore was reduced from 20% in 2006 to 18% in 2007.


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9. INCOME TAX EXPENSE (CONTD.) A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense

at the effective income tax rate of the Group and of the Company is as follows:

2007 2006 Group RM’000 RM’000 Profit before tax 150,624 142,304

Taxation at Malaysian statutory tax rate of 27% (2006: 28%) 40,668 39,845 Different tax rates in other countries (913) (723) Effect of changes in tax rates on opening balance of deferred tax (502) (405) Deferred tax recognised at different tax rates (86) (21) Effect of income subject to tax rate of 20% (222) (167) Effect of income subject to RPGT rate of 5% 86 13 Income not subject to tax (234) (2,448) Expenses not deductible for tax purposes 17,771 11,971 Overprovision of deferred tax in prior years (5,587) (2,977) Utilisation of previously unrecognised unabsorbed capital allowances and unutilised reinvestment allowances (1,612) (106) Deferred tax assets recognised on previously unrecognised business losses and capital allowances (812) (108) Deferred tax not recognised in respect of current year’s tax losses and unabsorbed capital allowances 283 668 Overprovision of tax expense in prior years (3,759) (2,287)

Income tax expense for the year 45,081 43,255

Company Profit before tax 60,207 48,596

Taxation at Malaysian statutory tax rate of 27% (2006: 28%) 16,256 13,607 Effect of changes in tax rates on opening balance of deferred tax (5) (11) Deferred tax recognised at different tax rates (10) 3 Income not subject to tax - (5,362) Expenses not deductible for tax purposes 8,057 12,445 Overprovision of deferred tax in prior years (44) (51) Overprovision of tax expense in prior years (817) (743)

Income tax expense for the year 23,437 19,888

Tax savings during the financial year arising from: Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Utilisation of current year tax losses 3 - - - Utilisation of previously unrecognised tax losses 2,775 - - - Utilisation of current year capital allowances 29,079 22,603 1,133 394 Utilisation of previously unrecognised capital allowances 307 6,486 - - Utilisation of current year reinvestment allowances - 377 - - Utilisation of previously unrecognised reinvestment allowances 2,657 - - -


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10. EARNINGS PER SHARE Basic Basic earnings per share amount is calculated by dividing the profit for the year attributable to ordinary equity holders of the

Company by the weighted average number of ordinary shares in issue during the financial year. Group 2007 2006 Profit attributable to ordinary equity holders of the Company (RM’000) 104,269 98,280 Weighted average number of ordinary shares in issue (‘000) 198,275 198,275 Basic earnings per share (sen) 52.6 49.6

11. DIVIDENDS

Dividends Dividends in respect of Year Recognised in Year 2007 2006 2005 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 Recognised during the year: Final dividend for 2005: 6 sen less 28% taxation, on 198,274,670 ordinary shares (4.3 sen per ordinary share) - - 8,566 - 8,566 Interim dividend for 2006: 4 sen less 28% taxation, on 198,274,670 ordinary shares (2.9 sen per ordinary share) - 5,710 - - 5,710 Final dividend for 2006: 14 sen less 27% taxation, on 198,274,682 ordinary shares (10.2 sen per ordinary share) - 20,264 - 20,264 - Interim dividend for 2007: 8 sen less 27% taxation, on 198,274,682 ordinary shares (5.8 sen per ordinary share) 11,579 - - 11,579 - Proposed for approval at AGM (not recognised as at 31 December): Final dividend for 2007: 12 sen less 26% taxation, on 198,274,682 ordinary shares (8.9 sen per ordinary share) 17,607 - - - -

29,186 25,974 8,566 31,843 14,276


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11. DIVIDENDS (CONTD.) At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 December 2007, of 12

sen less 26% taxation per share on 198,274,682 ordinary shares, amounting to a dividend payable of RM17,607,000 (8.9 sen net per ordinary share) will be proposed for shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in shareholders’ equity as an appropriation of retained earnings in the financial year ending 31 December 2008.

12. PROPERTY, PLANT AND EQUIPMENT

Leasehold Improvements Restaurant Freehold and Plant and Motor and Office Land Buildings Renovation Machinery Vehicles Equipment Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 31 December 2007 Cost or valuation At 1 January 2007 At cost - 25,520 143,809 64,662 39,335 284,288 557,614 At valuation 171,431 175,870 - 73,573 - - 420,874

171,431 201,390 143,809 138,235 39,335 284,288 978,488 Reclassification to prepaid land lease payments - (333) - - - - (333) Additions 1,620 1,141 22,601 4,942 4,162 55,583 90,049 Disposals/write off - (130) (29,019) (1,569) (9,426) (44,514) (84,658) Reclassification - - 45 213 - (258) -

At 31 December 2007 173,051 202,068 137,436 141,821 34,071 295,099 983,546

Representing: At cost 1,620 26,661 137,436 69,590 34,071 295,099 564,477 At valuation 171,431 175,407 - 72,231 - - 419,069

At 31 December 2007 173,051 202,068 137,436 141,821 34,071 295,099 983,546


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12. PROPERTY, PLANT AND EQUIPMENT (CONTD.)

Leasehold Improvements Restaurant Freehold and Plant and Motor and Office Land Buildings Renovation Machinery Vehicles Equipment Total Group (Contd.) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Accumulated Depreciation and Impairment Losses At 1 January 2007 Accumulated depreciation - 21,281 89,443 77,380 33,683 173,723 395,510 Accumulated impairment losses 58,733 23,852 - - - - 82,585

58,733 45,133 89,443 77,380 33,683 173,723 478,095 Depreciation charge for the year - 4,936 12,553 12,934 2,612 24,604 57,639 Disposals/write off - (8) (27,694) (1,529) (9,108) (43,507) (81,846) Reclassification - - 21 131 - (152) -

At 31 December 2007 58,733 50,061 74,323 88,916 27,187 154,668 453,888

Analysed as: Accumulated depreciation - 26,209 74,323 88,916 27,187 154,668 371,303 Accumulated impairment losses 58,733 23,852 - - - - 82,585

58,733 50,061 74,323 88,916 27,187 154,668 453,888

Net Carrying Amount At cost 1,620 11,433 63,113 34,499 6,884 140,431 257,980 At valuation 112,698 140,574 - 18,406 - - 271,678

At 31 December 2007 114,318 152,007 63,113 52,905 6,884 140,431 529,658

At 31 December 2006 Cost or valuation At 1 January 2006 At cost - 21,195 133,640 66,069 43,280 257,718 521,902 At valuation 36,120 127,415 - 74,876 - - 238,411

36,120 148,610 133,640 140,945 43,280 257,718 760,313 Reclassification from properties held for sale 127,764 48,151 - - - - 175,915 Revaluation surplus 7,547 304 - - - - 7,851 Additions - 4,691 20,019 4,186 1,750 38,935 69,581 Disposals/write off - (366) (9,850) (6,896) (5,695) (12,365) (35,172)

At 31 December 2006 171,431 201,390 143,809 138,235 39,335 284,288 978,488

Representing: At cost - 25,520 143,809 64,662 39,335 284,288 557,614 At valuation 171,431 175,870 - 73,573 - - 420,874

At 31 December 2006 171,431 201,390 143,809 138,235 39,335 284,288 978,488


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Leasehold Improvements Restaurant Freehold and Plant and Motor and Office Land Buildings Renovation Machinery Vehicles Equipment Total Group (Contd.) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated Depreciation and Impairment Losses At 1 January 2006 Accumulated depreciation - 16,002 84,808 72,120 35,824 161,080 369,834 Accumulated impairment losses 178 17,671 - - - - 17,849

178 33,673 84,808 72,120 35,824 161,080 387,683 Reclassification from properties held for sale 58,555 6,121 - - - - 64,676 Impairment loss on revaluation - 60 - - - - 60 Depreciation charge for the year - 5,645 14,048 11,812 3,073 22,773 57,351 Disposals/write off - (366) (9,413) (6,552) (5,214) (10,130) (31,675)

At 31 December 2006 58,733 45,133 89,443 77,380 33,683 173,723 478,095

Analysed as: Accumulated depreciation - 21,281 89,443 77,380 33,683 173,723 395,510 Accumulated impairment losses 58,733 23,852 - - - - 82,585

58,733 45,133 89,443 77,380 33,683 173,723 478,095

Net Carrying Amount At cost - 11,507 54,366 35,551 5,652 110,565 217,641 At valuation 112,698 144,750 - 25,304 - - 282,752

At 31 December 2006 112,698 156,257 54,366 60,855 5,652 110,565 500,393

Leasehold Improvements Freehold and Motor Office Land Buildings Renovation Vehicles Equipment Total Company RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 31 December 2007

Cost or valuation At 1 January 2007 At cost - - 1,063 3,435 5,139 9,637 At valuation 13,077 1,240 - - - 14,317

13,077 1,240 1,063 3,435 5,139 23,954 Additions 1,620 1,020 138 530 1,354 4,662 Disposals/write off - - (827) (760) (1,905) (3,492)

At 31 December 2007 14,697 2,260 374 3,205 4,588 25,124

Representing: At cost 1,620 1,020 374 3,205 4,588 10,807 At valuation 13,077 1,240 - - - 14,317

At 31 December 2007 14,697 2,260 374 3,205 4,588 25,124


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12. PROPERTY, PLANT AND EQUIPMENT (CONTD.) Leasehold Improvements Freehold and Motor Office Land Buildings Renovation Vehicles Equipment Total Company (Contd.) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Accumulated Depreciation At 1 January 2007 - 61 537 2,679 3,690 6,967 Charge for the year - 47 101 614 585 1,347 Disposals/write off - - (515) (760) (1,823) (3,098)

At 31 December 2007 - 108 123 2,533 2,452 5,216

Net Carrying Amount At cost 1,620 1,004 251 672 2,136 5,683 At valuation 13,077 1,148 - - - 14,225

At 31 December 2007 14,697 2,152 251 672 2,136 19,908 At 31 December 2006 Cost or valuation At 1 January 2006 At cost - - 970 6,417 4,790 12,177 At valuation - 300 - - - 300

- 300 970 6,417 4,790 12,477 Reclassification from properties held for sale 9,900 759 - - - 10,659 Revaluation surplus 3,177 181 - - - 3,358 Additions - - 93 90 349 532 Disposals/write off - - - (3,072) - (3,072)

At 31 December 2006 13,077 1,240 1,063 3,435 5,139 23,954 Representing: At cost - - 1,063 3,435 5,139 9,637 At valuation 13,077 1,240 - - - 14,317

At 31 December 2006 13,077 1,240 1,063 3,435 5,139 23,954 Accumulated Depreciation At 1 January 2006 - 7 435 5,010 3,070 8,522 Charge for the year - 54 102 741 620 1,517 Disposals/write off - - - (3,072) - (3,072)

At 31 December 2006 - 61 537 2,679 3,690 6,967 Net Carrying Amount At cost - - 526 756 1,449 2,731 At valuation 13,077 1,179 - - - 14,256

At 31 December 2006 13,077 1,179 526 756 1,449 16,987


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(a) Revaluation of Land and Buildings

In prior years, the Group has performed valuation update by accredited professional valuers to determine the fair value of its buildings. Revaluation increase was credited to equity as a revaluation surplus. Valuations were made on the basis of open market values on an existing use basis.

Had the revalued property, plant and equipment been carried under the cost model, the carrying amounts of each class of property, plant and equipment that would have been included in the financial statements of the Group and the Company as at 31 December 2007 would be as follows:

Net Accumulated Carrying Group Cost Depreciation Amount RM’000 RM’000 RM’000 At 31 December 2007 Freehold land 151,627 - 151,627 Buildings 186,547 35,601 150,946 Plant and machinery 64,872 53,825 11,047

403,046 89,426 313,620

At 31 December 2006 Freehold land 151,627 - 151,627 Buildings 186,971 31,900 155,071 Plant and machinery 66,162 48,270 17,892

404,760 80,170 324,590

Company At 31 December 2007 Freehold land 9,900 - 9,900 Buildings 1,152 294 858

11,052 294 10,758

At 31 December 2006 Freehold land 9,900 - 9,900 Buildings 1,152 263 889

11,052 263 10,789

(b) Assets Pledged as Security

The net carrying amounts of property, plant and equipment pledged as securities for borrowings (Note 27) are as follows:

Group 2007 2006 RM’000 RM’000

Freehold land 27,960 27,960 Buildings 84,073 86,271

112,033 114,231


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(c) Title Deeds

The titles of certain properties are either still in the process of being transferred to the Group and the Company or are pending issuance of strata titles by the relevant authorities.

13. INVESTMENTS IN SUBSIDIARIES Company 2007 2006 RM’000 RM’000 Unquoted shares at cost 415,335 415,335 Less: Accumulated impairment losses (61,745) (35,712)

353,590 379,623

Details of the subsidiaries are as follows: Percentage of Country of Effective Name of Subsidiaries Incorporation Equity Held Activity 2007 2006 % % Held by the Company: Ayamas Food Corporation Sdn Bhd Malaysia 100.0 100.0 (biv) & (e) Ayamas Integrated Poultry Industry Malaysia 100.0 100.0 (bi), (bii) Sdn Bhd (biii) & (e) Bakers’ Street Sdn Bhd Malaysia 100.0 100.0 (a) Havprime Sdn Bhd Malaysia 100.0 100.0 (e) Integrated Poultry Industry Sdn Bhd Malaysia 100.0 100.0 (biv) KFC Manufacturing Sdn Bhd Malaysia 100.0 100.0 (ci), (civ) & (e) KFC Restaurants Holdings Sdn Bhd Malaysia 100.0 100.0 (e) Rangeview Sdn Bhd Malaysia 100.0 100.0 (d) Region Food Industries Sdn Bhd Malaysia 100.0 100.0 (ciii) Restoran Keluarga Sdn Bhd Malaysia 100.0 100.0 (a) & (e) (formerly known as Pan-Tiara Corporation Sdn Bhd) Roaster’s Chicken Sdn Bhd Malaysia 100.0 100.0 (e)


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13. INVESTMENTS IN SUBSIDIARIES (CONTD.)

Percentage of Country of Effective Name of Subsidiaries Incorporation Equity Held Activity 2007 2006 % % Signature Chef Dining Services Sdn Bhd Malaysia 100.0 100.0 (a) Signature Chef Foodservice & Malaysia 100.0 100.0 (a) & (e) Catering Sdn Bhd WP Properties Holdings Sdn Bhd Malaysia 100.0 100.0 (d) & (e) KFC Agrotech Sdn Bhd Malaysia 100.0 100.0 Dormant Signature Chef Holdings Sdn Bhd Malaysia 100.0 100.0 Dormant Hiei Food Industries Sdn Bhd Malaysia 81.0 81.0 Dormant Held through subsidiaries: AFCB Properties Sdn Bhd Malaysia 100.0 100.0 (e) Asbury’s (Malaysia) Sdn Bhd Malaysia 100.0 100.0 (d) Ayamas Marketing (M) Sdn Bhd Malaysia 100.0 100.0 (e) Chippendales (M) Sdn Bhd Malaysia 100.0 100.0 (d) Kedai Ayamas Sdn Bhd Malaysia 100.0 100.0 (bv) & (e) Kentucky Fried Chicken (Malaysia) Malaysia 100.0 100.0 (a) Sendirian Berhad KFC (East Malaysia) Sdn Bhd Malaysia 100.0 100.0 (e) KFC (Peninsular Malaysia) Sdn Bhd Malaysia 100.0 100.0 (a), (cii) & (e)

KFC (Sabah) Sdn Bhd * Malaysia 100.0 90.0 (a) KFC (Sarawak) Sdn Bhd * Malaysia 100.0 100.0 (a) Ladang Ternakan Putihekar (N.S.) Sdn Bhd Malaysia 100.0 100.0 (bi) MH Integrated Farm Berhad Malaysia 100.0 100.0 (d) Pintas Tiara Sdn Bhd Malaysia 100.0 100.0 (d) Rasa Ayamas Sdn Bhd Malaysia 100.0 100.0 (a) Rasamas Bangi Sdn Bhd Malaysia 100.0 100.0 (a) (formerly known as Bintang Ikhtisas Sdn Bhd)


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13. INVESTMENTS IN SUBSIDIARIES (CONTD.) Percentage of Country of Effective Name of Subsidiaries Incorporation Equity Held Activity 2007 2006 % % Rasamas Tebrau Sdn Bhd Malaysia 100.0 100.0 (a) (formerly known as Aspirasi Bintang Sdn Bhd) Rayaplex Sdn Bhd Malaysia 100.0 100.0 (e) Restoran Sabang Sdn Bhd Malaysia 100.0 100.0 (a) SBC Coffee Holdings Sdn Bhd Malaysia 100.0 100.0 (e) Seattle’s Best Coffee Sdn Bhd Malaysia 100.0 100.0 (a) SPM Restaurants Sdn Bhd Malaysia 100.0 100.0 (a) Wangsa Progresi Sdn Bhd Malaysia 100.0 100.0 (d) Helix Investments Limited * Hong Kong 100.0 100.0 (e) Kentucky Fried Chicken Management Pte Ltd * Singapore 100.0 100.0 (a) WQSR Holdings (S) Pte Ltd * Singapore 100.0 100.0 (e) KFC (B) Sdn Bhd * Brunei 46.0 46.0 (a) Darussalam

Ayamas Contract Farming Sdn Bhd Malaysia 100.0 100.0 Dormant Ayamas Farms & Hatchery Sdn Bhd Malaysia 100.0 100.0 Dormant Ayamas Feedmill Sdn Bhd Malaysia 100.0 100.0 Dormant Ayamas Franchise Sdn Bhd Malaysia 100.0 100.0 Dormant Farm’s Choice Marketing (M) Sdn Bhd Malaysia 100.0 100.0 Dormant

Kentucky Trading Sdn Bhd Malaysia 100.0 100.0 Dormant KFC Technical Services Sdn Bhd Malaysia 100.0 100.0 Dormant Rasa Gourmet Sdn Bhd Malaysia 100.0 100.0 Dormant Rasamas Larkin Sdn Bhd Malaysia 100.0 100.0 Dormant (formerly known as Rasamas Plentong Sdn Bhd and Edgelink Sdn Bhd)

Signature Chef Catercare Sdn Bhd Malaysia 100.0 100.0 Dormant Sterling Distinction Sdn Bhd Malaysia 100.0 100.0 Dormant Supreme Majestic Sdn Bhd Malaysia 100.0 100.0 Dormant Ayamas Food Corporation (S) Pte Ltd * Singapore 100.0 100.0 Dormant

Yes Gelato Sdn Bhd Malaysia 80.0 80.0 Dormant


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13. INVESTMENTS IN SUBSIDIARIES (CONTD.) The principal activities of the subsidiaries are in the operations of: (a) restaurants (b) integrated poultry (i) breeder farms (ii) hatchery (iii) feedmill (iv) poultry processing and further processing plants (v) poultry retail and convenience food store chain (c) ancillary (i) bakery (ii) commissary (iii) sauce manufacturing plant (iv) trading in consumables (d) property holding (e) investment holding * Audited by affiliate of Ernst & Young

With effect from 1 November 2007, Rasa Sayang Holdings Limited and Idmidton Resources Limited, being two wholly-owned subsidiaries of the Company, have been automatically struck off from the Register of Companies, British Virgin Islands (“BVI”) pursuant to Section 213(1)(c) of the BVI Business Companies Act, 2004 and BVI Business Companies (Amendment) Act, 2005.

14. INVESTMENT PROPERTIES

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 At 1 January/31 December 2,000 2,000 585 585

Group Company Valuation Valuation Amount Amount Description of Properties RM’000 RM’000 Freehold building at Kelana Jaya, Petaling Jaya - 585 Long leasehold land and building at Petaling Jaya 2,000 -

Investment properties are stated at fair value, which have been determined based on valuations performed by an independent professionally qualified valuer using open market value basis.

The property rental income earned by the Group for the year ended 31 December 2007 from its investment properties, all of which are leased out under operating leases, amounted to RM96,000. There were no direct operating expenses (including repairs and maintenance) arising on the rental-earning investment properties.

The strata title for the freehold building of the Company is pending issuance by the relevant authority.


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15. PREPAID LAND LEASE PAYMENTS Group 2007 2006 RM’000 RM’000 At 1 January 62,687 46,436 Addition 1,830 - Disposal (106) - Reclassification from properties held for sale - 17,039 Reclassification from property, plant and equipment 333 - Amortisation for the year (Note 6) (803) (788)

At 31 December 63,941 62,687

Analysed as: Long term leasehold land 63,868 62,506 Short term leasehold land 73 181

63,941 62,687

Leasehold land with an aggregate carrying value of RM30,822,000 (2006: RM31,210,000) are pledged as securities for borrowings (Note 27).

16. INTANGIBLE ASSETS Goodwill on Franchise Consolidation Fees Total Group RM’000 RM’000 RM’000 Cost At 1 January 2006 44,328 35,807 80,135 Additions - 5,425 5,425 Write-off - (456) (456)

At 31 December 2006 and 1 January 2007 44,328 40,776 85,104 Additions - 4,822 4,822 Write-off - (481) (481)

At 31 December 2007 44,328 45,117 89,445

Accumulated amortisation and impairment losses At 1 January 2006 1,566 13,785 15,351 Amortisation for the year - 3,116 3,116 Write-off - (396) (396)

At 31 December 2006 and 1 January 2007 1,566 16,505 18,071 Amortisation for the year - 3,792 3,792 Write-off - (481) (481)

At 31 December 2007 1,566 19,816 21,382

Net Carrying Amount At 31 December 2006 42,762 24,271 67,033

At 31 December 2007 42,762 25,301 68,063


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16. INTANGIBLE ASSETS (CONTD.)

Impairment tests for goodwill Allocation of goodwill

Goodwill acquired through business combination has been allocated to three individual cash - generating units, which are reportable segments, for impairment testing as follows:

• Restaurants • Integrated Poultry • Ancillary

Carrying amount of goodwill allocated to each of the Group’s cash-generating units as at 31 December were as follows:

Integrated Restaurants Poultry Ancillary Total 2007 / 2006 2007 / 2006 2007 / 2006 2007 / 2006 RM’000 RM’000 RM’000 RM’000 Carrying amount of goodwill 19,189 20,297 3,276 42,762

Key assumptions used in value-in-use calculations

The recoverable amounts of a CGU is determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management covering a ten-year period. Cash flows beyond the five-year period are extrapolated using the growth rate of 5% which is in line with the estimated GDP growth rate for the country.

The following describes the key assumptions on which management has based its cash flow projections to undertake impairment testing of goodwill:

• There will be no material changes in the structure and principal activities of the Group. • Raw material price inflation - there will not be any significant increase in the prices and supply of raw materials, wages and other

related costs, resulting from industrial dispute, adverse changes in the economic conditions or other abnormal factors, which will adversely affect the operations of the Group.

• Statutory income tax rate - the tax rate for Malaysia is 26% for year 2008 and thereafter 25% while Singapore tax rate is 18%.

There will be no material changes in the present legislation or regulations, rates and bases of duties, levies and other taxes affecting the Company’s activities.

• Discount rate - the discount rate used is pre-tax. • Interest rates - the interest rates on the existing financing facilities will prevail. • Foreign exchange rate - the foreign exchange rate will not be substantially and adversely different from the current rate.

17. OTHER INVESTMENT Group 2007 2006 RM’000 RM’000 Unquoted investment at cost 4,500 4,500

The unquoted investment relates to the subscription of some subordinated bonds which are redeemable in June 2009.


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18. FIXED DEPOSITS An amount of RM16,660,000 (2006: RM21,000,000) is deposited with a licensed bank as collateral for a term loan facility granted

to a subsidiary (Note 27).

This security deposit shall be reduced such that the amount of deposit shall not exceed the outstanding term loan principal at all times.

Based on the repayment schedule of the outstanding term loan as at 31 December 2007, the tenure of the deposit is as follows:

Group/Company 2007 2006 RM’000 RM’000 Current (Note 22) 10,336 5,207 Non-current 6,324 15,793

16,660 21,000

19. PROPERTIES HELD FOR SALE Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 At 1 January 5,162 141,967 - 10,759 Less: Disposals (5,162) (8,527) - (100) Reclassified to property, plant and equipment - (111,239) - (10,659) Reclassified to prepaid land lease payments - (17,039) - -

At 31 December - 5,162 - -

Properties held for sale consist of land and buildings that the Group obtains firm purchase commitment.

Properties held for sale are stated at the lower of carrying amount and fair value less costs to sell, in which their fair value have been determined based on valuations performed by independent professionally qualified valuers using open market value basis.

In prior year, certain properties held for sale have been reclassified to property, plant and equipment as these properties have not been successfully sold for a period exceeding 12 months from date of classification to properties held for sale.

20. INVENTORIES

Group 2007 2006 RM’000 RM’000 At cost Raw materials 24,521 18,113 Groceries, poultry and consumables 41,623 38,729 Equipment and spare parts 12,467 6,843 Advertising materials 1,969 2,290 Livestocks 7,829 7,749 Finished goods 23,903 25,751

112,312 99,475


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21. TRADE AND OTHER RECEIVABLES

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Trade receivables 29,931 24,265 - - Less: Allowance for doubtful debts (620) (697) - -

Trade receivables, net 29,311 23,568 - -

Other receivables Amount due from subsidiaries - - 152,010 177,669 Deposits 34,919 29,162 1,569 777 Tax recoverable - - 2,216 3,343 Other receivables 14,742 15,068 847 1,997

49,661 44,230 156,642 183,786

78,972 67,798 156,642 183,786

Included in the deposits of the Group and of the Company are deposits paid to a subsidiary of a corporate shareholder amounting to RM912,000 (2006: RM Nil) for the following purposes:

(i) acquisition of 440,000 ordinary shares of RM1.00 each representing 55% equity interest in Tepak Marketing Sdn Bhd; and

(ii) purchase of a leasehold industrial land at Kota Tinggi, Johor Darul Takzim.

The deposits of the Group also included deposits paid to an associate of a corporate shareholder amounting to RM324,165 (2006: RM Nil) for the purchase of a freehold land at Mukim of Tebrau, District of Johor Bahru.

(a) Credit risk

Credit risks, or the risk of counterparties defaulting, are controlled by the application of credit approvals, limits and monitoring procedures. Credit risks are minimised and monitored via strictly limiting the Group’s associations to business partners with high creditworthiness. Trade receivables are monitored on an ongoing basis via Group management reporting procedures.

The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any financial instruments.

As the Group’s transactions are substantially on cash basis, its credit risk is minimal.

The Group’s normal trade credit term ranges from 30 to 90 days. Other credit terms are assessed and approved on a case-by-case basis.

(b) Amount due from related parties

Amount due from related parties are interest bearing and are repayable on demand. All related parties receivable are unsecured and are to be settled in cash.

Further details on related party transactions are disclosed in Note 34.


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22. CASH AND CASH EQUIVALENTS Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Cash in hand and at banks 43,542 42,161 1,490 1,973 Deposits with: Licensed banks 35,438 33,360 - 4,545 Licensed financial institutions 51,042 68,509 - 10,032 Deposits pledged with licensed bank (Note 18) 10,336 5,207 10,336 5,207

Cash and bank balances 140,358 149,237 11,826 21,757

The weighted average interest rates of deposits at balance sheet date were as follows:

Group Company 2007 2006 2007 2006 % % % % Licensed banks 2.15 3.09 3.00 3.08 Licensed financial institutions 3.33 3.40 - 3.34

23. SHARE CAPITAL Number of Ordinary Shares of RM1 each Amount 2007 2006 2007 2006 ‘000 ‘000 RM’000 RM’000 Authorised 1,000,000 1,000,000 1,000,000 1,000,000

Issued and fully paid At 1 January 198,275 198,275 198,275 198,275 Conversion of warrants - * - *

At 31 December 198,275 198,275 198,275 198,275

* In prior year, the paid-up share capital of the Company was increased from RM198,274,670 to RM198,274,682, as a result of the issuance of 12 ordinary shares of RM1.00 each upon the conversion of 12 warrants at the exercise price of RM9.50 per share. The warrants had expired on 7 August 2006 and were removed from the Official List of Bursa Securities with effect from 8 August 2006.

24. OTHER RESERVES

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Asset revaluation reserve 29,940 29,269 3,380 3,226 Share premium 18,736 18,736 18,721 18,721 Capital reserve 1,790 1,790 4,459 4,459 Exchange fluctuation reserve 497 382 - -

50,963 50,177 26,560 26,406

The movements in each category of the reserves are disclosed in the statements of changes in equity.


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24. OTHER RESERVES (CONTD.) The nature and purpose of each category of reserve are as follows:

(a) Asset revaluation reserve

The asset revaluation reserve is used to record increases in the fair value of land and buildings and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in equity.

(b) Share premium

This reserve comprises the premium paid on subscription of shares in the Company over and above the par value of the shares.

(c) Capital reserve

This reserve comprises bonus shares issued by subsidiaries capitalised at group level.

(d) Exchange fluctuation reserve

The exchange fluctuation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Group’s net investment in foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation.

25. RETAINED EARNINGS

Prior to the year of assessment 2008, Malaysian companies adopted the full imputation system. In accordance with the Finance Act 2007 which was gazetted on 28 December 2007, companies shall not be entitled to deduct tax on dividend paid, credited or distributed to its shareholders, and such dividends will be exempted from tax in the hands of the shareholders (“single tier system”). However, there is a transitional period of six years, expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders under limited circumstances. Companies also have an irrevocable option to disregard the balance under Section 108 of the Income Tax Act, 1967 (“108 balance”) and opt to pay dividends under the single tier system. The change in the tax legislation also provides for the 108 balance to be locked-in as at 31 December 2007 in accordance with Section 39 of the Finance Act 2007.

The Company did not elect for the irrevocable option to disregrad the 108 balance. Accordingly, during the transitional period, the Company may utilise the credit in the 108 balance as at 31 December 2007 to distribute cash dividend payments to ordinary shareholdings as defined under the Finance Act 2007. As at 31 December 2007, the Company has sufficient credit in the 108 balance to pay franked dividends out of its entire retained earnings.

The Company has balance in the tax-exempt accounts available to be utilised for the distribution of reserves as tax-exempt dividend amounting to approximately RM18,184,000 (2006: RM18,184,000), subject to the agreement of the Inland Revenue Board.


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26. RETIREMENT BENEFIT OBLIGATIONS Certain subsidiaries operate an unfunded, defined benefit Retirement Benefit Scheme (“the Scheme”) for its eligible employees.

Under the Scheme, eligible employees are entitled to a retirement benefit calculated by reference to their length of service and earnings. Provision for retirement benefits is calculated based on the predetermined rate of basic salaries and length of service of the employees.

(i) Balance Sheet

The amounts recognised in the balance sheet are determined as follows: Group 2007 2006 RM’000 RM’000 Present value of unfunded defined benefit obligations 3,758 3,206

Analysed as: Current - 235

Non current: Later than 1 year but not later than 2 years 611 300 Later than 2 years but not later than 5 years 970 1,171 Later than 5 years 2,177 1,500

3,758 2,971

3,758 3,206

The movement in the present value of the defined benefit obligations over the year is as follows:

At 1 January 3,206 2,815 Current service cost 247 233 Interest cost 305 294 Contributions paid - (136)

At 31 December 3,758 3,206

(ii) Income Statement

The amounts recognised in the income statement are as follows:

Current service cost 247 233 Interest cost 305 294

Total, included in employee benefits expense (Note 7) 552 527

The Group’s charge for the year amounting to RM552,000 (2006: RM527,000) has been included in administrative expenses.


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26. RETIREMENT BENEFIT OBLIGATIONS (CONTD.) (iii) Actuarial Assumptions

The principal assumptions used for the purpose of the actuarial valuations were as follows: Group 2007 2006 % % Discount rate 6.0 6.0 Future salary increases 4.0 4.0

Assumptions regarding future mortality are based on published statistics and mortality tables.

27. BORROWINGS

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Short Term Borrowings Secured Term loan 9,845 7,896 - - Unsecured Term loans 2,235 4,471 - -

12,080 12,367 - -

Long Term Borrowings Secured Term loans 65,907 75,793 60,000 60,000 Unsecured Term loans 45,000 47,235 - -

110,907 123,028 60,000 60,000

Total Borrowings Secured Term loans 75,752 83,689 60,000 60,000 Unsecured Term loans 47,235 51,706 - -

122,987 135,395 60,000 60,000

Maturity of Borrowings Within one year 12,080 12,367 - - More than 1 year and less than 2 years 70,907 12,106 20,000 - More than 2 years and less than 5 years 40,000 90,922 40,000 40,000 5 years or more - 20,000 - 20,000

122,987 135,395 60,000 60,000


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27. BORROWINGS (CONTD.)

The term loans granted to the Group are secured by corporate guarantees of the Company.

The secured term loans are secured against a first and third party charge over certain land and buildings as disclosed in Note 12(b) and Note 15 while a term loan facility granted to a subsidiary in Singapore is secured by a deposit pledged with a licensed bank amounting to RM16,660,000 (2006: RM21,000,000) (Note 18).

The weighted average effective interest rates per annum for borrowings during the financial year were as follows:

Group Company 2007 2006 2007 2006 % % % % Term loans 5.47 5.49 4.77 5.53

28. ABBA NIF (“AL-BAI’ BITHAMAN AJIL”)

Group/Company 2007 2006 RM’000 RM’000 ABBA NIF - 65,000 Short term portion - (60,000)

Long term portion - 5,000

Maturity of Borrowing Within one year - 60,000 More than 1 year and less than 2 years - 5,000

- 65,000

On 19 July 2001, the Company entered into a Facility Agreement with Arab-Malaysian Merchant Bank Berhad (Primary Subscriber) to issue RM300 million nominal amount of Islamic Notes Issuance Facility based on the Syariah principle of Al-Bai’ Bithaman Ajil (“ABBA NIF”). The ABBA NIF which was structured under a “bought-deal” basis were issued in nine tranches ranging from three years to seven years. The various tranches of ABBA NIF bear profit rates ranging between 5.55% to 7.45% per annum, payable semi-annually in arrears. The ABBA NIF are redeemable at face value on maturity.

In 2001, part of the ABBA NIF facility was utilised to settle off the BaIDS facility, details of which are highlighted in the annual report of that year. In 2005, there was an early redemption of RM85 million on the outstanding ABBA NIF, in which the Company had to pay a premium of RM7.929 million. The early redemption reduced secondary notes redemption by approximately RM6 million per year.

During the year, the Company had early redeemed the RM5 million ABBA NIF maturing in year 2008. With this redemption, the whole ABBA NIF had been fully redeemed.


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29. DEFERRED TAX Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 At 1 January 29,722 32,102 414 373 Recognised in income statement (Note 9) (3,682) (2,843) 195 (169) Recognised in equity (1,004) 463 (165) 210

At 31 December 25,036 29,722 444 414

Presented after appropriate offsetting as follows: Deferred tax assets (14,950) (13,990) - - Deferred tax liabilities 39,986 43,712 444 414

25,036 29,722 444 414

The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:

Deferred Tax Liabilities of the Group: Accelerated Revaluation Capital of Land and Allowances Buildings Others Total RM’000 RM’000 RM’000 RM’000 At 1 January 2007 31,160 12,678 (126) 43,712 Recognised in income statement 133 (2,981) 126 (2,722) Recognised in equity - (1,004) - (1,004)

At 31 December 2007 31,293 8,693 - 39,986

At 1 January 2006 30,923 12,215 (126) 43,012 Recognised in income statement 237 - - 237 Recognised in equity - 463 - 463

At 31 December 2006 31,160 12,678 (126) 43,712

Deferred Tax Assets of the Group: Tax Losses and Retirement Allowance Unabsorbed Benefits for Doubtful Capital Obligations Debts Allowances Total RM’000 RM’000 RM’000 RM’000 At 1 January 2007 (869) (188) (12,933) (13,990) Recognised in income statement (108) 27 (879) (960)

At 31 December 2007 (977) (161) (13,812) (14,950)

At 1 January 2006 (255) (101) (10,554) (10,910) Recognised in income statement (614) (87) (2,379) (3,080)

At 31 December 2006 (869) (188) (12,933) (13,990)


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29. DEFERRED TAX (CONTD.)

Deferred Tax Liabilities of the Company: Accelerated Revaluation Capital of Land and Allowances Building Total RM’000 RM’000 RM’000 At 1 January 2007 174 240 414 Recognised in income statement 199 (4) 195 Recognised in equity - (165) (165)

At 31 December 2007 373 71 444

At 1 January 2006 343 30 373 Recognised in income statement (169) - (169) Recognised in equity - 210 210

At 31 December 2006 174 240 414

Deferred tax assets have not been recognised in respect of the following items: Group 2007 2006 RM’000 RM’000 Unused tax losses 18,951 35,063 Unabsorbed capital allowances 26,130 20,564 Unutilised reinvestment allowances 17,945 20,084

63,026 75,711

The unused tax losses and unabsorbed capital allowances of the Group are available indefinitely for offsetting against future taxable

profits of the respective entities within the Group, subject to no substantial change in shareholdings of those entities under the Income Tax Act, 1967 and guidelines issued by the tax authority. Deferred tax assets have not been recognised in respect of these items as they may not be used to offset taxable profits of other subsidiaries in the Group and they have arisen in subsidiaries that have a history of losses.

30. TRADE AND OTHER PAYABLES Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Trade payables 117,992 84,195 - -

Other payables Amount due to related companies 2,701 7,943 100 - Accruals 35,165 37,462 2,475 11,178 Payroll liabilities 36,665 22,049 2,659 4,022 Duties and other taxes payable 12,775 10,321 - - Other payables 36,812 41,654 751 563

124,118 119,429 5,985 15,763

242,110 203,624 5,985 15,763


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30. TRADE AND OTHER PAYABLES (CONTD.)

(a) Trade payables

Trade payables are non-interest bearing and the normal trade credit term granted to the Group is up to 90 days.

(b) Amount due to related parties Amount due to all related parties are interest bearing and are repayable on demand. These amounts are unsecured and are to

be settled in cash.

Further details on related party transactions are disclosed in Note 34.

31. CAPITAL COMMITMENTS Group 2007 2006 RM’000 RM’000 Capital expenditure Approved and contracted for: Property, plant and equipment 11,478 2,499 Approved but not contracted for: Property, plant and equipment 125,433 71,089

136,911 73,588

32. OPERATING LEASE ARRANGEMENTS The Group and Company as Lessee

The Group and Company have entered into non-cancellable operating lease agreements for the use of land and buildings. These leases have an average term of 15 years with no renewal or purchase option included in the contracts. Certain contracts include escalation clauses or contingent rental arrangements computed based on sales achieved while others include fixed rentals for an average of 3 years. There are no restrictions placed upon the Group by entering into these leases.

The future aggregate minimum lease payments under non-cancellable operating leases contracted for as at the balance sheet date but not recognised as liabilities is as follows:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Future minimum rentals payments: Not later than 1 year 70,625 59,004 3,210 3,210 Later than 1 year and not later than 5 years 96,947 86,128 12,838 12,838 Later than 5 years 11,505 17,257 6,419 9,629

179,077 162,389 22,467 25,677

The lease payments and contingent rent recognised in profit or loss during the financial year are disclosed in Note 6.


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33. CONTINGENT LIABILITIES (i) Guarantees Company 2007 2006 RM’000 RM’000 Unsecured Corporate guarantees in favour of various financial institutions in respect of credit facilities extended to certain subsidiaries 31,215 43,913 (ii) Legal Claim The Plaintiff, a former Managing Director of the Company, seeks, among others, damages of RM25 million for alleged defamation

arising from several press releases issued by the Company.

The matter have been settled amicably during the year and the Notice of Discontinuance has been filed on 13 December 2007.

34. RELATED PARTY DISCLOSURES

(a) In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year:

Company Relationship Johor Corporation (“JCorp”) Holding company of a corporate shareholder. QSR Brands Bhd (“QSR”) A corporate shareholder of the Company. Kulim (Malaysia) Berhad A subsidiary of JCorp and the holding company of QSR. Ampang Puteri Specialist Sdn Bhd A subsidiary of JCorp. (“Ampang Puteri Specialist”) Damansara Assets Sdn Bhd (“Damansara Assets”) A subsidiary of JCorp. Damansara Specialist Hospital Sdn Bhd A subsidiary of JCorp. (“Damansara Specialist”) Hotel Selesa Sdn Bhd (“Hotel Selesa”) A subsidiary of JCorp. Hotel Selesa (JB) Sdn Bhd (“Hotel Selesa (JB)”) A subsidiary of JCorp. IPPJ Sdn Bhd (“IPPJ”) A subsidiary of JCorp. JKing Sdn Bhd (“JKing”) A subsidiary of JCorp.


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34. RELATED PARTY DISCLOSURES (CONTD.)

(a) Company Relationship

Johor Specialist Hospital Sdn Bhd (“Johor Specialist”) A subsidiary of JCorp. Metro Parking (M) Sdn Bhd (“Metro Parking”) A subsidiary of JCorp. Pelaburan Johor Berhad A subsidiary of JCorp. Pro Communication Services Sdn Bhd A subsidiary of JCorp. (“Pro Communication”) Pro Corporate Management Services Sdn Bhd A subsidiary of JCorp. (“Pro Corporate”) Pusat Pakar Tawakal Sdn Bhd (“Tawakal”) A subsidiary of JCorp. Puteri Hotels Sdn Bhd (“Puteri Hotels”) A subsidiary of JCorp. Puteri Specialist Hospital Sdn Bhd A subsidiary of JCorp. (“Puteri Specialist”) Rajaudang Trading Sdn Bhd (“Rajaudang”) A subsidiary of JCorp. Seremban Specialist Hospital Sdn Bhd A subsidiary of JCorp. (“Seremban Specialist”) Skellerup Industries (Malaysia) Sdn Bhd (“Skellerup”) A subsidiary of Kulim (Malaysia) Berhad. Sindora Berhad A subsidiary of JCorp. Tepak Marketing Sdn Bhd (“Tepak”) A subsidiary of Sindora Berhad. Teraju Fokus Sdn Bhd (“Teraju”) A subsidiary of JCorp. TMR Urusharta (M) Sdn Bhd (“TMR”) A subsidiary of JCorp. Willis (Malaysia) Sdn Bhd (“Willis”) A subsidiary of JCorp. Pizza Hut Restaurants Sdn Bhd (“PHR”) A subsidiary of QSR. Pizza Hut Singapore Pte Ltd (“PHS”) A subsidiary of QSR. Multibrand QSR Holdings Pte Ltd (“Multibrand”) A subsidiary of QSR. Sarbjit & Co A firm in which a former director of the Company has interest. Yoong & Partners A firm in which a former director of the Company has interest.


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2007 2006 RM’000 RM’000 (a) Group Sale of goods to - Damansara Specialist 29 - - Hotel Selesa (JB) 5 - - PHR 69,664 60,306 - PHS 598 466 - Rajaudang 33 - - Tawakal 29 - Purchase of goods from - Rajaudang 5,295 - - Tepak 45 - Purchase of apparels from JKing 52 - Purchase of balloons from Skellerup 60 - Purchase of printing, publication materials from Pro Communication 64 - Rendering of services - Ampang Puteri Specialist 21 - - Damansara Specialist 106 - - Hotel Selesa (JB) 5 - - Hotel Selesa 2 - - IPPJ 192 - - JCorp 175 - - Johor Specialist 4 - - Metro Parking 59 - - Pelaburan Johor Berhad 2 - - Pro Corporate 176 - - Puteri Hotels 777 - - Puteri Specialist 58 - - Seremban Specialist 3 - - Tawakal 13 - - Teraju 22 - - TMR 1,820 - Agent fees payable to Willis 112 - Interest payable to Multibrand 666 843 Allocation of expenses to - PHR 1,556 1,692 - PHS 5,649 5,832 Rental income from - Metro Parking 105 - - PHR 841 795 Legal and professional fees to - Sarbjit & Co - 53 - Yoong & Partners - 352 Rental payable to a former director of QSR - Wong Seng Lee 56 23 Rental payable to - PHR 73 - - Damansara Assets 319 - - Puteri Hotels 86 -


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2007 2006 RM’000 RM’000 (a) Company Gross dividends from subsidiaries 88,000 83,000 Allocation of expenses to - subsidiaries 18,991 20,762 - PHR 1,556 1,692 Interest receivable from subsidiaries 3,395 6,810 Rental income from a subsidiary 46 46 Legal and professional fees to - Sarbjit & Co - 53 - Yoong & Partners - 352 Purchase of apparels from JKing 2 - Rendering of services - Ampang Puteri Specialist 4 - - Damansara Specialist 71 - - Hotel Selesa (JB) 1 - - IPPJ 2 - - JCorp 175 - - Johor Specialist 1 - - Metro Parking 59 - - Pelaburan Johor Berhad 2 - - Pro Corporate 176 - - Puteri Hotels 10 - - Puteri Specialist 8 - - Tawakal 4 - - Teraju 22 - - TMR 969 - Agent fees payable to Willis 112 - Rental income from Metro Parking 105 -

The directors are of the opinion that all sales and purchases have been entered into in the normal course of business and have

been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties.

(b) Compensation of key management personnel The remuneration of directors and other members of key management during the year was as follows:

Group Company 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 Salaries, wages and bonuses 1,424 1,305 978 823 Contribution to defined contribution plans 171 216 105 144

1,595 1,521 1,083 967

Included in the total key management personnel compensation was: Executive directors’ remuneration (Note 8) 660 969 658 967


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35. FINANCIAL INSTRUMENTS (a) Financial Risk Management Objectives and Policies

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses whilst managing its interest rate risk (both fair value and cash flow), foreign currency risk, liquidity risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. It is, and has been throughout the year under review, the Group’s policy that no trading in derivative financial instruments shall be undertaken.

(b) Interest Rate Risk

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest-bearing financial assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s interest-bearing financial assets are mainly short term in nature and have been mostly placed in fixed deposits or occasionally, in short term commercial papers.

The Group’s interest rate risk arises primarily from interest-bearing borrowings. Borrowings at floating rates expose the Group to cash flow interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. The Group had no substantial long term interest-bearing assets as at 31 December 2007.

The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings. To manage this mix in a cost-efficient manner, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and floating rate interest amounts calculated by reference to an agreed-upon notional principal amount. As at balance sheet date, the Group had entered into interest rate swaps with the following notional amounts and maturities:

Notional Amounts 2007 2006 RM’000 RM’000 Within 1 year 691 1,123 More than 1 year and less than 5 years 131 824

822 1,947

The interest rate relating to the interest rate swaps at the balance sheet date has been fixed at 5.34% per annum until its maturity in May 2009.

(c) Foreign Currency Risk The foreign exchange risk of the Group arises from borrowings denominated in foreign currencies. The Group has currency

swaps that are primarily used to hedge the foreign currency exposures on the borrowings. The currency exposures are primarily US dollars and Singapore dollars.

The Group also has subsidiaries operating in foreign countries, which generate revenue and incur costs denominated in foreign currencies. The currency exposures are primarily Singapore dollars and Brunei dollars.


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35. FINANCIAL INSTRUMENTS (CONTD.)

(d) Liquidity Risk

The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from both capital markets and financial institutions and prudently balances its portfolio with some short term funding so as to achieve overall cost effectiveness.

(e) Credit Risk

The Group’s credit risk is primarily attributable to trade receivables. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis and the Group’s exposure to bad debts is not significant. For transactions that are not denominated in the functional currency of the relevant operating unit, the Group does not offer credit terms without the specific approval of the Head of Credit Control. Since the Group trades only with recognised and creditworthy third parties, there is no requirement for collateral.

The credit risk of the Group’s other financial assets, which comprise cash and cash equivalents, marketable securities and non-current investments, arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these financial assets.

The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any financial assets.

As the Group’s transactions are substantially on cash basis, its credit risk is minimal.

(f) Fair Value

The carrying amounts of financial assets and liabilities of the Group and of the Company at the balance sheet date approximated their fair values except for the following:

Group Company Carrying Carrying Amount Fair Value Amount Fair Value RM’000 RM’000 RM’000 RM’000 Financial Assets At 31 December 2007: Investments in subsidiaries - - 353,788 * At 31 December 2006: Investments in subsidiaries - - 379,623 * Financial Liabilities At 31 December 2007: Term loans 122,987 119,737 60,000 58,240

At 31 December 2006: Term loans 135,395 131,895 60,000 58,278


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35. FINANCIAL INSTRUMENTS (CONTD.)

(f) Fair Value (Contd.)

* It is not practical to estimate the fair value of the Group’s non-current unquoted shares because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs.

It is not practical to estimate the fair value of amount due from/(to) subsidiaries and related companies due principally to a lack of fixed repayment term entered by the parties involved and the inability to estimate fair value without incurring excessive costs.

The methods and assumptions used by management to determine fair values of financial instruments other than those whose carrying amounts reasonably approximate their fair values is as follows:

Borrowings

Fair value has been determined using discounted estimated cash flows. The discount rates used are the current market incremental lending rates for similar types of lending, borrowing and leasing arrangements.

36. SUBSEQUENT EVENT

On 31 October 2007, the Company announced the proposed acquisition of 440,000 ordinary shares of RM1.00 each representing 55% equity interest in Tepak Marketing Sdn Bhd (“Tepak Marketing”) for a cash consideration of RM2,970,000 or RM6.75 per share (“Acquisition”).

The Foreign Investment Committee had on 22 January 2008 approved the Acquisition subject to Tepak Marketing continues to maintain at least 30% of its equity to be held by Bumiputra/Government Agency at all times.

The Acquisition was completed on 4 February 2008.

37. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform with the current year’s presentation.


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40. SEGMENT INFORMATION (a) Business Segments Restaurants Integrated Poultry # Ancillary Elimination Consolidated 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 REVENUE AND EXPENSES Revenue External sales 1,335,317 1,164,078 316,985 289,665 78,069 70,096 - - 1,730,371 1,523,839 Inter-segment sales - - 200,615 163,482 152,198 127,434 (352,813) (290,916) - -

Total Revenue 1,335,317 1,164,078 517,600 453,147 230,267 197,530 (352,813) (290,916) 1,730,371 1,523,839

Results Segment results 147,413 129,669 8,510 23,694 6,003 3,903 161,926 157,266 Finance costs (11,302) (14,962) Income tax expense (45,081) (43,255)

Profit after tax 105,543 99,049 Minority interests (1,274) (769)

Net profit for the year 104,269 98,280

ASSETS AND LIABILITIES Segment assets 454,949 409,791 265,678 255,293 242,739 266,232 963,366 931,316 Goodwill on consolidation 42,762 42,762

Consolidated total assets 1,006,128 974,078

Segment liabilities 176,197 173,986 107,222 80,602 113,768 120,149 397,187 374,737 Unallocated corporate liabilities - 65,000

Consolidated total liabilities 397,187 439,737

OTHER INFORMATION Capital expenditure 72,879 61,908 13,225 6,052 5,775 1,621 91,879 69,581 Depreciation 35,051 34,699 15,808 15,809 6,780 6,843 57,639 57,351 Amortisation 4,146 3,416 219 208 230 280 4,595 3,904 # Integrated Poultry includes retail operations

(b) Geographical Segments

The Group’s geographical segments can be categorised under Malaysia and foreign. Foreign comprises of Singapore and Brunei Darussalam.

Malaysia Foreign Total 2007 2006 2007 2006 2007 2006 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 External sales 1,438,492 1,242,152 291,879 281,687 1,730,371 1,523,839 Segment assets 856,169 828,747 107,197 102,569 963,366 931,316 Capital expenditure 67,536 51,577 24,343 18,004 91,879 69,581


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Net Book Value/ Date of Carrying Valuation/ Expiry Area Amount Location Acquisition Age* Tenure Date (sq ft) Description (RM’000)

AGRICULTURAL PROPERTIES

SELANGOR Geran 24766 Lot 1462 26/12/2007 18 Freehold - 62.937 Land used for 7,537 Mukim Beranang acres breeder farm Daerah Hulu Langat

HS (D) 20746 11/06/2007 9 Leasehold 25/01/2105 31.62 Land used 5,770 PT153 acres for breeder farm Bandar Baru Salak Tinggi District of Sepang

NEGERI SEMBILAN Geran 22067 Lot 3468 26/12/2007 17 Freehold - 55 Land used for 4,917 Mukim Linggi acres breeder farm Daerah Port Dickson

Geran 6348 PT 2149 26/12/2007 17 Freehold - 19.775 Land used for 2,406 Mukim Lenggeng acres breeder farm Daerah Seremban

Lot 559 Mukim Gemencheh 26/12/2007 11 Freehold - 38 Land used for 4,486 Daerah Tampin acres breeder farm

HS (D) 5977-5980 26/12/2007 - Freehold - 83,753.8 Vacant land 1,230 PT 924-927 square for future Mukim Titian Bintangor metre expansion Daerah Rembau

MELAKA Lots 1375-1397 26/12/2007 17 Freehold - 150.950.6 Land used for 6,616 1689 and 1706 acres breeder farm Mukim Ayer Pa’abas Daerah Alor Gajah PM 1026 Lot 2294 26/12/2007 12 Leasehold 27/05/2038 5.937 Land used for 156 Mukim Machap acres contract broiler Daerah Alor Gajah farming

List of Properties HeldAs At 31 December 2007

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AGRICULTURAL PROPERTIES (CONTD.)

JOHOR Mukim of Mersing 26/12/2007 - Freehold - 854.62 Vacant land and 39,400 District of Johor acres oil palm estate

COMMERCIAL PROPERTIES

PERLIS

9 Persiaran Putra Timur Satu 26/12/2007 13 Leasehold 25/09/2092 1,500 Double-storey 249 02000 Kuala Perlis intermediate shophouse for storage and accommodation

KEDAH

Lot No 269 Pekan Dindong 26/12/2007 13 Freehold - 1,119 3-storey 426 07000 Kuah intermediate Langkawi shopoffice for warehouse, commissary and staff hostel

45 Arked Pokok Asam 26/12/2007 12 Freehold - 2,357 Double-storey 702 Langkawi Mall corner shophouse 07000 Kuah for restaurant Langkawi

46 & 47 Lengkok Cempaka 1 26/12/2007 9 Freehold - 3,176 3-storey corner 518 Persiaran Cempaka and intermediate 08000 Amanjaya shopoffices for restaurant and hostel


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COMMERCIAL PROPERTIES (CONTD.)

PENANG 34 Jalan Mahsuri 26/12/2007 15 Leasehold 15/05/2090 3,780 Double-storey 2,259 11950 Bandar Bayan Baru shophouse for restaurant

3A-G-18 Blok 3A 26/12/2007 11 Freehold - 2,972 Ground floor of 2,247 Kompleks Bukit Jambul a shopping Jalan Rumbia complex for 11900 Pulau Pinang restaurant

Unit No G-103 Megamal Pinang 26/12/2007 11 Freehold - 3,342 Ground floor of 1,865 2828 Jalan Baru a shopping Bandar Perai Jaya complex for 13600 Seberang Perai Tengah restaurant

Parcel No S-C1-05 26/12/2007 4 Freehold - 1,399 Double-storey 212 Pusat Bandar Nibong Tebal intermediate 14300 Pulau Pinang shophouse for restaurant 1-6G & 1-9G 26/12/2007 7 Freehold - 2,988 2 adjoining 1,376 Eden Parade ground and Jalan Sungai Emas mezzanine 11100 Batu Ferringhi floors of a shopping complex for restaurant

GF-12A Queensbay Mall 26/12/2007 2 Leasehold 06/12/2095 5,870 Ground floor of a 3,430 100 Persiaran Bayan Indah shopping complex 11900 Bayan Lepas for restaurant Pulau Pinang


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PERAK 79 Jalan Dato’ Lau Pak Khuan 26/12/2007 37 Freehold - 2,490 Double-storey 417 Ipoh Garden intermediate 31400 Ipoh shophouse for restaurant

65 Jalan Dato’ Onn Jaafar 26/12/2007 21 Freehold - 3,395 6-storey commercial 1,607 30300 Ipoh building for restaurant and staff hostel

158 Jalan Idris 26/12/2007 23 Freehold - 2,400 3½-storey shopoffice 539 31900 Kampar for restaurant

SELANGOR 18A Ground Floor 26/12/2007 19 Freehold - 2,000 Ground floor of 535 Jalan SS6/3 a 5-storey Kelana Jaya shophouse for 47301 Petaling Jaya retail outlet

60 & 62 Jalan PJS 11/28A 26/12/2007 12 Leasehold 19/04/2086 3,786 4-storey shopoffice 3,164 Bandar Sunway for restaurant, office 46150 Petaling Jaya and hostel

9 Jalan Taiping 26/12/2007 27 Freehold - 2,402 4½-storey corner 1,685 41400 Klang shophouse for restaurant and staff hostel

18 & 20 Jalan Sulaiman 26/12/2007 26 Freehold - 4,000 4-storey shophouse 3,699 43000 Kajang for restaurant

Lot PT 12209 26/12/2007 - Leasehold 01/11/2092 95,788 Vacant land 4,235 Mukim Damansara for restaurant Daerah Petaling


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SELANGOR

2105 Jalan 3/1 26/12/2007 18 Leasehold 13/03/2087 1,400 Double-storey 477 Bandar Baru Sungai Buloh shophouse for 47000 Sungai Buloh restaurant

Lot C1-091 26/12/2007 4 Leasehold 20/10/2084 4,108 Concourse level 2,162 Kompleks Galaxy Ampang of shopping centre Jalan Dagang 5 for restaurant Taman Dagang 68000 Ampang

W.P. KUALA LUMPUR Lot 14083 Jalan Kuchai Lama 26/12/2007 2 Leasehold 08/02/2064 43,583 Single-storey 4,983 58200 Kuala Lumpur building for restaurant

437 Jalan Ipoh 26/12/2007 25 Freehold - 3,542 5-storey corner lot 3,313 51200 Kuala Lumpur commercial building for restaurant & staff training

140 Jalan Raja Laut 26/12/2007 35 Freehold - 1,795 4-storey intermediate 2,314 50350 Kuala Lumpur shophouse for restaurant and staff hostel Lot PT 16805 26/12/2007 7 Leasehold 28/04/2096 30,558 Double-storey 7,692 Jalan Prima 1 building for Metro Prima restaurants Off Jalan Kepong 52100 Kuala Lumpur


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W.P. KUALA LUMPUR

Lot PT 6878 26/12/2007 5 Leasehold 19/04/2083 57,608 Single-storey 10,120 Jalan 8/27A Wangsa Maju building for 53300 Kuala Lumpur restaurants

NEGERI SEMBILAN

26 Jalan Dato’ Sheikh Ahmad 26/12/2007 23 Freehold - 2,000 Double-storey 660 70000 Seremban corner shophouse for retail outlet and staff hostel

20 & 21 Jalan Dato’ 26/12/2007 27 Freehold - 4,800 2 adjoining units 2,097 Sheikh Ahmad of 4-storey 70000 Seremban shophouse for restaurant and hostel

24 & 26 Jalan Bunga Raya 7 26/12/2007 13 Freehold - 3,300 2 units of a 602 Pusat Perniagaan Senawang double-storey Taman Tasik Jaya shophouse for 70400 Senawang restaurant

1 Jalan Mahajaya 26/12/2007 11 Leasehold 31/01/2085 3,555 3-storey corner 1,218 Kawasan Penambakan Laut shophouse for Bandar Port Dickson restaurant 71009 Negeri Sembilan and staff hostel

Lot Nos PT 8241 to 26/12/2007 - Freehold - 119,946 Vacant land 5,000 8249 & 8262 Mukim Rantau (for shoplot and Daerah Seremban commercial complex) Negeri Sembilan

MELAKA 9 Jalan PPM 9 26/12/2007 10 Leasehold 09/06/2095 1,496 4-storey intermediate 614 Plaza Pandan Malim shophouse for 75250 Melaka restaurant and staff hostel


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COMMERCIAL PROPERTIES (CONTD.) MELAKA

555 Plaza Melaka 26/12/2007 21 Freehold - 2,486.46 4 ½ -storey corner 1,213 Jalan Hang Tuah shophouse with 75300 Melaka mezzanine floor for restaurant

JOHOR 11 Jalan Sri Perkasa 2/1 26/12/2007 11 Leasehold 13/04/2094 1,540 3-storey intermediate 484 Taman Tampoi Utama shophouse for 81200 Johor Bahru restaurant and staff hostel

TERENGGANU 10 Persiaran Melor 26/12/2007 13 Leasehold 27/11/2091 1,650 Double-storey 408 Kijal Beach Resort intermediate 24100 Kijal shophouse for restaurant

SABAH Lot 25 Block 3 Bornion Centre 26/12/2007 23 Leasehold 15/05/2915 1,900 3-storey corner 1,063 Jalan Kolam shophouse for 88300 Kota Kinabalu restaurant and hostel

SINGAPORE 18 Yung Ho Road 16/12/2007 32 Leasehold 16/12/2036 14,809.11 Purpose Built single- 4,640 Singapore 618591 storey building for restaurant


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INDUSTRIAL PROPERTIES PULAU PINANG 2718 Jalan Seladang Alma 26/12/2007 19 Freehold - 127,629 Single-storey 3,414 14000 Bukit Mertajam factory with double-storey office block for processing plant

29 & 31 Lorong IKS 26/12/2007 11 Freehold - 17,929 2 adjoining units 1,020 Juru 3, IKS Juru of a 1 ½-storey 14100 Simpang Ampat semi-detached Seberang Perai Selatan factories for commissary and warehouse

2022 Solok Perusahaan Satu 26/12/2007 27 Leasehold 02/12/2071 43,560 Single-storey 1,803 Kawasan Perusahaan Perai detached factory 13600 Perai building Pulau Pinang

SELANGOR Lot 5 Jalan 51A/223 26/12/2007 20 Leasehold 18/11/2067 42,009 Single-storey 3,140 46675 Petaling Jaya detached factory with 4-storey office block

Lot 7 Jalan 51A/223 26/12/2007 42 Leasehold 27/04/2065 10,883 Single-storey 2,000 46675 Petaling Jaya factory building with a double- storey office block

Lot 20153 26/12/2007 21 Leasehold 17/12/2086 16.63 Land and factory 43,803 Jalan Pelabuhan Utara acres buildings for 42000 Pelabuhan Klang primary processing and further processing plants


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INDUSTRIAL PROPERTIES (CONTD.)

SELANGOR

17, 19 & 21 Jalan Pemaju 26/12/2007 10 Freehold - 202,554 Industrial complex 28,274 U1/15 Seksyen U1 HICOM-Glenmarie Industrial Park 40150 Shah Alam Lot 166 Jalan Pemaju U1/15 26/12/2007 - Freehold - 205,603 Vacant land 13,360 Seksyen U1 HICOM-Glenmarie for future expansion Industrial Park of industrial complex 40150 Shah Alam

No 1,3 & 6 Lorong Gerudi 1 26/12/2007 13 Leasehold 15/03/2087 567,723 Single & double-storey 57,418 Off Jalan Pelabuhan Utara warehouse buildings 42000 Pelabuhan Klang and 4-storey office building

KEDAH Mukim of Sungai Petani/ 26/12/2007 - Freehold - 45,899.78 Vacant industrial/ 13,077 Sungai Pasir square residential land, District of Kedah metre residential and commercial properties

SABAH Lot 43A 26/12/2007 22 Leasehold 22/01/2901 6,360 3-storey corner 2,214 Karamunsing Warehouse warehouse and 88000 Kota Kinabalu office


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INDUSTRIAL PROPERTIES (CONTD.)

SABAH

Lot 5 Lorong Tembaga Tiga 26/12/2007 7 Leasehold - 22,077 1½-storey semi- 1,230 Kawasan MIEL KKIP Selatan detached warehouse Kota Kinabalu Industrial Park Menggatal 88450 Kota Kinabalu

RESIDENTIAL PROPERTIES W.P. KUALA LUMPUR No. 7 Jalan Tijani 26/12/2007 - Freehold - 19,041 Vacant land 4,380 Bukit Tunku 50480 Kuala Lumpur

90, Pinggir Zaaba 11/01/2007 16 Freehold - 5,400 Double-storey 2,624 Taman Tun Dr Tsmail bungalow 60000 Kuala Lumpur

NEGERI SEMBILAN Unit Nos 1D, 1E, 1F, 1G & 2D 26/12/2007 10 Leasehold 20/07/2094 4,188 5 units of condominium 873 Marina Bay Admiral Cove for staff training 71000 Port Dickson and recreation

PAHANG Unit No 3556 Block B 26/12/2007 20 Freehold - 1,258 Condominium for 275 Awana Golf & Country Resort staff training and 69000 Genting Highlands recreation

Unit No A7-22 (P) 26/12/2007 13 Freehold - 2,386 Condominium for 302 Amber Court Villa staff training and D’Genting Resort recreation 69000 Genting Highlands


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RESIDENTIAL PROPERTIES (CONTD.)

PAHANG

Unit No B1-22 (P) 26/12/2007 13 Freehold - 2,429 Condominium for 311 Amber Court Villa staff training and D’Genting Resort recreation 69000 Genting Highlands

Unit No B1-16 Level 16 26/12/2007 13 Freehold - 1,214 Condominium for 167 Amber Court Villa staff training and D’GentingResort recreation 69000 Genting Highlands


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Authorised Share Capital RM1,000,000,000 Class of Shares Ordinary Share of RM1.00 eachIssued and Paid Up Share Capital RM198,274,682 Voting Right 1 vote per Ordinary Share

DISTRIBUTION OF SHAREHOLDERS

Size of Shareholdings No. of % of Total No. of % of Total Shareholders Shareholders Shares Shares

1 – 99 9,069 77.78 18,030 0.01100 – 1,000 1,345 11.54 1,010,353 0.511,001 – 10,000 1,013 8.69 3,543,398 1.7910,001 – 100,000 163 1.40 4,844,930 2.44100,001 – Less than 5% of issued shares 65 0.56 70,511,871 35.565% and above of issued shares 4 0.03 118,346,100 59.69

Total 11,659 100.00 198,274,682 100.00

SUBSTANTIAL SHAREHOLDERS

Direct Indirect No. of Shares % No. of Shares %

QSR Ventures Sdn Bhd 57,080,000 28.79 - -QSR Brands Bhd 35,696,500 18.00 57,080,000(1) 28.79Kulim (Malaysia) Berhad - - 92,776,500(2) 46.79Johor Corporation - - 92,776,500(3) 46.79Amanah Raya Nominees (Tempatan) Sdn Bhd 18,457,800 9.31 - -Lembaga Tabung Haji 15,267,700 7.70 248,800(4) 0.13

Notes

1 Deemed interest through QSR Ventures Sdn Bhd pursuant to Section 6A of the Act.2 Deemed interest through QSR Brands Bhd pursuant to Section 6A of the Act.3 Deemed interest through Kulim (Malaysia) Bhd pursuant to Section 6A of the Act.4 The indirect shareholdings of Lembaga Tabung Haji are held through its portfolio managers.

DIRECTORS’ DIRECT AND INDIRECT INTERESTS IN THE COMPANY AND ITS RELATED CORPORATIONS

Save as disclosed below, none of the Directors has any interest, direct or indirect, in the Company and its related corporations.

Direct IndirectDirector No. of Shares % No. of Shares %

Hassim bin Baba 100 * - -

Notes

* Insignificant

Analysis of ShareholdingsAs At 11 March 2008

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LIST OF TOP THIRTY (30) SHAREHOLDERS AS AT 11 MARCH 2008

Name No. of % of Total Shares Shares

CIMB Group Noms (T) Sdn Bhd – A/C QSR Ventures Sdn Bhd (27038 JTRK) 57,080,000 28.79CIMB Group Noms (T) Sdn Bhd – A/C QSR Brands Bhd (27038 JTRK) 27,540,600 13.89Amanah Raya Noms (T) Sdn Bhd – A/C Skim Amanah Saham Bumiputera 18,457,800 9.31Lembaga Tabung Haji 15,267,700 7.70HSBC Noms (A) Sdn Bhd – A/C HSBC for Arisaig Asean Fund Limited 9,033,400 4.56Malaysia Noms (T) Sdn Bhd – A/C Great Eastern Life Assurance (Malaysia) Berhad (PAR 1) 6,772,700 3.42Amanah Raya Noms (T) Sdn Bhd – A/C Amanah Saham Malaysia 4,035,600 2.04Ke-Zan Noms (T) Sdn Bhd – A/C QSR Brands Bhd 3,870,000 1.95QSR Brands Bhd. 3,870,000 1.95Mayban Noms (T) Sdn Bhd – A/C Mayban Trustee Berhad for Public Ittikal Fund (N14011970240) 3,598,900 1.82BHLB Trustee Berhad – A/C Exempt An 3,427,000 1.73Amanah Raya Noms (T) Sdn Bhd – A/C Kumpulan Wang Bersama 3,350,000 1.69Cartaban Noms (T) Sdn Bhd – A/C MIDF Amanah Asset Noms (T) Sdn Bhd for Employees Provident Fund Board (JF404) 2,093,900 1.06OSK Noms (A) Sdn Bhd – A/C Unioncity Enterprises Limited 1,782,500 0.90Citigroup Noms (A) Sdn Bhd – A/C Goldman Sachs International 1,722,500 0.87Amanah Raya Noms (T) Sdn Bhd – A/C Public Islamic Dividend Fund 1,592,000 0.80RHB Noms (T) Sdn Bhd – A/C RHB Investment Management Sdn Bhd for Kumpulan Wang Simpanan Pekerja 1,500,000 0.76Mayban Noms (T) Sdn Bhd – A/C Mayban Trustees Berhad for Public Regular Savings Fund (N14011940100) 1,377,100 0.69HSBC Noms (A) Sdn Bhd – A/C Morgan Stanley & Co. International PLC (Firm A/C) 1,313,471 0.66Amanah Raya Noms (T) Sdn Bhd – A/C Public Islamic Opportunities Fund 1,229,000 0.62Cartaban Noms (T) Sdn Bhd – A/C Exempt An for MIDF Amanah Asset Noms (T) Sdn Bhd (Account 1) 1,090,000 0.55Amanah Raya Noms (T) Sdn Bhd – A/C Public Islamic Equity Fund 1,026,900 0.52Amanah Raya Noms (T) Sdn Bhd – A/C AUTB Progress Fund 948,700 0.48HSBC Noms (A) Sdn Bhd – A/C Exempt An for J.P. Morgan Bank Luxembourg S.A. 924,000 0.47Amanah Raya Noms (T) Sdn Bhd – A/C Amanah Saham Didik 898,200 0.45Kumpulan Wang Persaraan (Diperbadankan) 837,800 0.42Malaysia Noms (T) Sdn Bhd – A/C Great Eastern Life Assurance (Malaysia) Berhad (PAR 2) 814,800 0.41DB (M) Nom (A) Sdn Bhd – A/C Exempt An for Deutsche Bank AG Singapore (PWM ASING) 722,300 0.36Amanah Raya Noms (T) Sdn Bhd – A/C Kumpulan Wang Bersama (Syariah) 716,000 0.36Cartaban Noms (T) Sdn Bhd – A/C Petronas for Petroliam Research Fund 661,800 0.33

Total 177,554,671 89.56

Analysis of ShareholdingsAs At 11 March 2008

I/ We, (Full name and NRIC No. / Company No. in block letters)

of (Full address in block letters and telephone no.)

being a member/ members of KFC Holdings (Malaysia) Bhd (“Company”), hereby appoint

(Name of Proxy as per NRIC, in capital letters)

NRIC No (new) (old)

of (Full address in block letters)

or failing him/her (Name of Proxy as per NRIC, in capital letters)

NRIC No (new) (old)

of (Full address in block letters)

or failing him/her, the Chairman of the meeting as my/ our proxy to vote for me/ us and on my/ our behalf at the 28th Annual General Meeting (“AGM”) of the Company to be held at Level 3, Wisma KFC, No 17 Jalan Sultan Ismail, 50250 Kuala Lumpur on Wednesday, 30 April 2008 at 11:30 a.m. or any adjournment thereof in respect of my/ our holdings of shares in the manner indicated below:

FOR AGAINSTResolution 1 Financial Statements and ReportsResolution 2 Final DividendResolution 3 Payment of Directors’ Fees Re-election of Directors: -Resolution 4 Hassim bin BabaResolution 5 Kua Hwee SimResolution 6 Re-appointment of Ernst & Young as Auditors of the CompanyResolution 7 Resolution pursuant to Section 132D of the Companies Act 1965Resolution 8 Resolution pursuant to the Proposed Share Buy-Back AuthorityResolution 9 Resolution pursuant to the Proposed Shareholders’ Mandate

(Please indicate with a (“√”) in the appropriate box whether you wish your vote to be cast for or against the resolution. In the absence of specific direction, your proxy

will vote or abstain as he thinks fit. However, if more than one proxy is appointed, please specify the number of shares represented by each proxy, failing which the

appointment shall be invalid)

Signature(s)/ Common Seal of Shareholder(s) Dated this …….. day of …………. 2008

KFC HOLDINGS (MALAYSIA) BHD(65787-T)

28TH ANNUAL GENERAL MEETING

Form of Proxy No. of ordinary shares CDS account no. of authorised Nominee

Notes:

1. A member of the Company entitled to attend and vote at the abovementioned AGM may appoint a Proxy to attend and vote in his stead. A Proxy may but need not be a member of the Company. If the Proxy is not a member of the Company, the proxy shall be an advocate or an approved company auditor or person approved by the Companies Commission of Malaysia.

2. If the member is a corporation, this Proxy Form must be executed under its common seal or the hand of its duly authorized officer or attorney. If this Proxy Form is signed under the hand of an officer duly authorised, it should be accompanied by a statement reading “signed as authorised officer under an Authorisation Document which is still in force, no notice of revocation having been received”. If this Proxy Form is signed under the attorney duly appointed under a power of attorney, it should be accompanied by a statement reading “signed under a Power of Attorney which is still in force, no notice of revocation having been received”. A copy of the Authorisation Document or the Power of Attorney, which should be valid in accordance with the laws of the jurisdiction in which it was created and is exercised, should be enclosed with this Proxy Form.

3. A member of the Company may appoint more than two (2) proxies to attend the AGM. Where a member appoints two (2) or more Proxies, the appointment shall be invalid unless the member specifies the proportion of his shareholdings to be represented by each proxy.

4. Any alteration made in this form should be initialled by the person who signs it.

5. This Proxy Form or a notarially certified copy thereof must be deposited at Tenaga Koperat Sdn Bhd, G-01, Ground Floor, Plaza Permata, Jalan

Kampar, Off Jalan Tun Razak, 50400 Kuala Lumpur, not less than forty-eight (48) hours before the time for holding the AGM or any adjournment thereof.

Affixstamphere

Tenaga Koperat Sdn BhdG-01, Ground Floor, Plaza Permata

Jalan Kampar

Off Jalan Tun Razak

50400 Kuala Lumpur

Documents

KFC Msia AR 2007