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KFC HOLDINGS (MALAYSIA) BHD .. ,.

7-T

Annual Report 2011

After 38 years of serving food thats Finger Lickin Good, we ve got a new tagline thats simply , So Good . So Good is the experience of a fabulous meal shared with friends and family . Its all about bringing people together and creating great moments and great memories. And its not just about food! Its about a brand that delivers the best in product, place, people, price and promotion.

sogood'"

Contents
ShareholdersOverview
Financial Highlights 6 n otice of Annual General Meeting 9 Statement Accompanying n otice of Annual General Meeting 14

Our Performance in 2011


Corporate Statement 18 Review of o perations 32

Reliable Corporate Citizen


Corporate Social Responsibility 48

TheCorporation
Board of d irectors 60 Top Management Committee 76 Head of d ivision 77 Shariah Advisory Council 80 Corporate Information 81 Group Structure 82

Accountability
Corporate Governance Statement 84 Audit Committee Report 93 Statement on Internal Control 97 Additional Compliance Information 100

Financial Statements
d irectors Report 127 Statements of Financial Position 131 Statements of Comprehensive Income 132 Consolidated Statement of Changes in Equity 133 Statement of Changes in Equity 135 Statements of Cash Flows 137 n otes to the Financial Statements 139 Statement by d irectors 204 Statutory d eclaration 204 Independent Auditors Report 205 List of Properties Held 207 Analysis of Shareholdings 220 Analysis of Warrant Holdings 223 Form of Proxy

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

What We Bring To The Table...

we bring

a Family Meal thats just So Good...

...with a side of

Happiness.

Everyone enjoys great food but we all enjoy it even more when its shared with those we love. Bringing families and friends together is at the heart of everything we do. And to make the occasion special each and every time, we make sure we deliver quality right from fresh ingredients through excellent food preparation to fast and friendly service.

Financial Highlights

2007 RM000 REVENUE KFC Malaysia KFC Singapore KFC Brunei KFC India Integrated Poultry Education Ancillary Total Profit Before Tax 1,043,438 280,200 11,679 316,985 78,069 1,730,371 150,624

2008 RM000

2009 RM000

2010 RM000

2011 RM000 1,655,340

1,284,429 330,771 13,676 445,018 105,894 2,179,788 167,457

1,365,542 342,666 15,469 484,132 89,622 2,297,431 190,015

1,496,907 368,586 16,347 6,232 533,397 1,068 99,821 2,522,358 221,833 409,126 20,424 19,813 586,706 4,725 102,646 2,798,780 215,493

Profit After Tax net Profit Attributable to owners of the Company EBITdA Property, Plant and Equipment Total Assets Total Borrowings Share Capital (number) Shareholders Equity Return on Shareholders Equity (%) Return on Total Assets (%) Gearing Ratio (net debts/ Shareholders Equity) (%) Basic Earnings Per Share (Sen) net Assets Per Share (RM) Gross dividend Per Share (Sen)

105,543 104,269 224,160 593,599 1,006,128 122,987 793,099 602,021 17.32 10.36 13.15 0.76 20 6.40

120,350 118,535 241,986 678,900 1,154,407 141,055 793,099 692,158 17.13 10.27 6.22 14.95 0.87 22 7.45

132,797 130,403 281,326 773,241 1,290,470 116,436 793,099 791,757 16.47 10.11 16.44 1.00 24 7.40

159,702 156,848 312,785 999,984 1,583,032 152,547 793,231 990,247 15.84 9.91 2.10 19.78 1.25 15.5 3.82

146,571 144,005 330,606 1,228,459 1,838,226 254,249 793,266 1,074,215 13.41 7.83 14.08 18.18 1.36 3 3.84

Share Price as at 31 december (RM) NO. OF RESTAURANTS KFC Malaysia KFC Singapore KFC Brunei KFC India Kedai Ayamas RasaMas Malaysia RasaMas Brunei

403 69 7 20 22 521

436 73 8 25 34 2 578

475 77 9 35 40 3 639

515 77 9 7 49 39 3 699

539 80 12 13 75 25 2 746

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Financial Highlights

REVENUE RM (Million) 2007 2008 2009 2010 2011 0 2007 2008 2009 2010 2011 0 400 800 1200 1600 500 1000 1500 2000 2500

PROFIT BEFORE TAx RM (Million)

1,730 2,180 2,297 2,522 2,799


3000

2007 2008 2009 2010 2011 0 50 100 150

151 167 190 222 215


200 250

TOTAL ASSETS RM (Million)

SHAREHOLDERS EqUITY RM (Million)

1,006 1,154 1,290 1,583 1,838


2000

2007 2008 2009 2010 2011 0 250 500

602 692 792 990 1,074


750 1000 1250

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Financial Highlights

TOTAL KFC RESTAURANTS n o . of Restaurants 2007

403 69 7

2008

436 73 8

2009

475 77 9

2010

515 77 9 7

2011

539 80 12 13
0 100 200 300 400 500 600

KFC Malaysia KFC Singapore KFC Brunei KFC India

TOTAL AYAMAS OUTLETS n o . of o utlets 2007

20 22 25 34 2

2008

2009

35 40 3

2010

49 39 3

2011

75 25 2
0 15 30 45 60 75 90

Kedai Ayamas RasaMas Malaysia RasaMas Brunei

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the 32nd Annual General Meeting of KFC Holdings (Malaysia) Bhd will be held at Level 3, Wisma KFC, n o 17, Jalan Sultan Ismail, 50250 Kuala Lumpur on Tuesday, 22 May 2012 at 11:30 a.m. for the following purposes:AGENDA 1. To receive and adopt the Audited Financial Statements of the Company for the year ended 31 d ecember 2011 and the Reports of the d irectors and Auditors thereon. 2. To approve the payment of d irectors fees in respect of the financial year ended 31 d ecember 2011. 3. (a) To re-elect the following d irectors retiring pursuant to Article 89 of the Companys Articles of Association: (i) Ahamad bin Mohamad ( i i ) d atuk Ismee bin Ismail (iii)Hassim bin Baba (b) To re-elect the following d irector retiring pursuant to Article 96 of the Companys Articles of Association: (i) yAM Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj 4. To re-appoint Messrs KPMG as Auditors of the Company and to authorize the d irectors to fix their remuneration. 5. 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 pursuant to Section 132d of the Act, full authority be and is hereby given to the d irectors to issue shares of the Company from time to time upon such terms and conditions and for such purposes as the d irectors may in their absolute discretion deem fit provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed ten percent (10%) of the issued share capital of the Company and that such authority shall continue in force until the conclusion of the next Annual General Meeting (AGM) of the Company, and that the d irectors be and are hereby empowered to obtain the approval of the Bursa Malaysia Securities Berhad (Bursa Securities) for the listing and quotation for the new shares to be issued. Resolution 8 Resolution 7 Resolution 6 Resolution 3 Resolution 4 Resolution 5 Resolution 2 Resolution 1

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Notice of Annual General Meeting

(b)Ordinary Resolution - Proposed Renewal of the Share Buy-Back Authority THAT subject to the Act, rules, regulations and orders made pursuant to the Act, provisions of the Companys Memorandum and Articles of Association and the Listing Requirements of Bursa Securities (Listing Requirements) and any other relevant authority, the Company be and is hereby authorized to purchase and/or hold such amount of ordinary shares of RM0.50 each in the Companys issued and paid-up share capital ( Proposed Renewal of the Share Buy-Back Authority ) through Bursa Securities upon such terms and conditions as the d irectors may deem fit in the interest of the Company provided that:(a) 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 one time; and (b)the maximum amount of funds to be allocated for the Purchased Shares shall not exceed the aggregate of the retained profits and/or share premium of the Company; AND THAT the d irectors 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 the Purchased Shares as treasury shares for distribution as share dividends to the shareholders of the Company and/or be resold through Bursa Securities in accordance with the relevant rules of Bursa Securities and/or cancelled subsequently and/or to retain part of the Purchased Shares as treasury shares and/or cancel the remainder 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 d irectors 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 d epositories) 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 Renewal of the 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 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 that aforesaid expiry date and in any event in accordance with provisions of the Listing Requirements and other relevant authorities. Resolution 9

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Notice ofAnnual General Meeting

(c) Ordinary Resolution - Proposed Renewal of Existing Shareholders Mandate for Recurrent Related Party Transactions (RRPT) of a Revenue and/or Trading Nature and New Mandate for Additional RRPT of a Revenue and/or Trading Nature (Proposed Shareholders Mandate for RRPT) THAT authority be and is hereby given in line with Paragraph 10.09 of the Listing Requirements, for the Company, its subsidiaries or any of them to enter into any of the transactions falling within the types of the RRPT, particulars of which are set out in the Circular to Shareholders dated 27 April 2012 (the Circular), with the Related Parties as described in the Circular, provided that such transactions are of revenue and/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 arms length basis and on normal commercial terms which those generally available to the public and are not detrimental to the minority shareholders of the Company; AND THAT such authority shall commence immediately upon the passing of this o rdinary Resolution until:(i) the conclusion of the next AGM of the Company following the general meeting at which the ordinary resolution for the Proposed Shareholders Mandate for the RRPT is passed, at which time it shall lapse, unless the authority is renewed by a resolution passed at the next AGM; or (ii) the expiration of the period within which the next AGM after the date it is required by law to be held; or (iii) revoked or varied by ordinary resolution passed by the shareholders of the Company at a general meeting of the Company, whichever is earlier. AND FURTHER THAT the d irectors 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 for RRPT. Resolution 10

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Notice ofAnnual General Meeting

6. To transact any other ordinary business of which due notice shall have been given. FURTHER NOTICE IS HEREBY GIVEN THAT for the purpose of determining a member who shall be entitled to attend this 32nd AGM, the Company shall be requesting Bursa Malaysia d epository Sdn Bhd in accordance with Article 64 of the Companys Articles of Association and Paragraph 7.16 of the Listing Requirements to issue a General Meeting Record of d epositors (Ro d ) as at 14 May 2012. d epositors whose names appear on the Ro d as at 14 May 2012 are entitled to attend, speak and vote at the said meeting.

By o Rd ER o F THE Bo ARd

IDHAM JIHADI BIN ABU BAKAR, ACIS (MAICSA 7007381) HENG AI LENG (MAICSA 7017245) Company Secretaries Kuala Lumpur 27 April 2012

NOTES: 1. A member of the Company entitled to be present and vote at the above AGM may appoint a proxy or proxies to be present and vote instead of him. A Proxy may but need not be a member of the Company. 2. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorized in writing or if the appointor is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised. 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. Where a member of the Company is an authorized nominee as defined under the Securities Industry (Central d epositories) Act, 1991, he may appoint at least one (1) proxy in respect of each securities account he holds with ordinary shares of the Company standing to the credit of the said securities account. 5. Where a member of the Company is an exempt authorized nominee as defined under the Securities Industry (Central d epositories) Act, 1991, there will be no limit to the number of proxies which the exempt authorized nominee may appoint. 6. Any alteration made in this form should be initialed by the person who signs it. 7. The Proxy Form and the Power of Attorney or other authority, if any, under which it is signed or a notarially certified copy of that power of authority must be deposited at Tricor Investor Services Sdn Bhd, Level 17, The Gardens n orth Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur not less than forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Notice ofAnnual General Meeting

ExPLANATORY NOTES ON SPECIAL BUSINESS 1. Resolution Pursuant to Section 132D of the Companies Act 1965 The o rdinary Resolution proposed under item 5(a), if passed, will give the d irectors 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 d irectors 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. The Company had, at the 31st AGM held on 27 April 2011, obtained its shareholders approval for the general mandate for issuance of shares pursuant to Section 132d of the Act. The Company did not issue any new shares pursuant to this mandate obtained as at the date of this notice. The o rdinary Resolution 8 proposed under item 5(a) of the Agenda is a renewal of the general mandate for issuance of shares by the Company under Section 132d of the Act. At this juncture, there is no decision to issue new shares. If there should be a decision to issue new shares after the general mandate is obtained, the Company will make an announcement in respect of the purpose and utilisation of proceeds arising from such issue. The authority will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/or acquisitions. 2. Resolution pursuant to the Proposed Renewal of the Share Buy-Back Authority This resolution proposed under item 5(b) will empower the d irectors of the Company to purchase the Companys 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 Renewal of the Share Buy-Back Authority are set out in the Circular to Shareholders of the Company which is dispatched together with the Companys Annual Report for the year ended 2011. 3. Resolution pursuant to the Proposed Shareholders Mandate for RRPT This resolution proposed under item 5(c) will enable the Company, its subsidiaries or any one of them to enter into any recurrent transactions of a revenue or trading nature which are necessary for the Company and/or its subsidiaries day-to-day operations, subject to the transactions being in the ordinary course of business, made at arms 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 for RRPT are set out in the Circular to Shareholders of the Company which is dispatched together with the Companys Annual Report for the year ended 2011.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Statement Accompanying Notice of Annual General Meeting


1. DIRECTORS WHO ARE STANDING FOR RE-ELECTION AT THE ANNUAL GENERAL MEETING (a) The d irectors retiring by rotation pursuant to Article 89 of the Articles of Association are:(i) Ahamad bin Mohamad ( i i ) d atuk Ismee bin Ismail (iii) Hassim bin Baba (b) The d irector retiring by rotation pursuant to Article 96 of the Articles of Association is:(i) yAM Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj The details of the directors seeking re-election are set out in the d irectors Profiles which appear on pages 62 to 71 of the Annual Report.

2. DETAILS OF ATTENDANCE AT BOARD MEETINGS HELD IN THE FINANCIAL YEAR ENDED 31 DECEMBER 2011 There were six (6) Board Meetings held during the financial year ended 31 d ecember 2011 and the following are the details of the Board attendance:Name of Directors 1. Kamaruzzaman bin Abu Kassim 2. Ahamad bin Mohamad 3. Jamaludin bin Md Ali 4. Hassim bin Baba 5. Kua Hwee Sim 6. Tan Sri d ato d r yahya bin Awang 7 . d atuk Ismee bin Ismail 8 . d atin Paduka Siti Sadiah binti Sheikh Bakir 9. yAM Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj (Appointed on 1 June 2011) No of Meetings Attended 6/6 6/6 6/6 6/6 6/6 6/6 3/6 4/6 3/4

3. THE 32ND ANNUAL GENERAL MEETING WILL BE HELD AT LEVEL 3, WISMA KFC, NO 17, JALAN SULTAN ISMAIL, 50250 KUALA LUMPUR ON TUESDAY, 22 MAY 2012 AT 11.30 A.M.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

we bring

Cheery Smiles...
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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

...with a splash of

Mouth-watering Variety.
For every single one of us at KFCH, providing real value for money is a matter of pride whether we re serving meals for one or for many , at our restaurants or home-delivered. Whoever you are, at our restaurants youll always find a great meal at a great price.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Corporate Statement

The Group Continuously Achieves Spectacular Growth

CONSOLIDATING ACHIEVEMENTS Fellow stakeholders, The growth achieved by the KFC Holdings (Malaysia) Bhd (KFCH) Group between 2006 and 2010 was phenomenal. In just five years, the number of KFC outlets increased from 443 to more than 600, as the Group not only entrenched its leadership of the Malaysian food service sector but expanded its network in Singapore, Brunei and into India. Moreover, this massive increase in outlets was matched by a consistent and spectacular growth in both revenues and profits.

Against this background, 2011 was yet another year of outstanding achievement for KFCH. Most importantly, a fundamentally stellar financial performance has enabled the Group to continue making major capital investments that will secure the future of the Group for years to come, while maintaining a healthy bottom line for the period under review. In short, for KFCH, after five years of remarkable growth, 2011 was a story of consolidation that has positioned the Group to take the next leap forward in 2012 and beyond.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Corporate Statement

From Left to Right : AHAMAd BIn M o HAMAd Deputy Chairman KAMARUZZAMAn BIn ABU KASSIM Chairman JAMALUd In BIn M d ALI Managing Director

ECONOMIC BACKGROUND The global economy remained fragile throughout 2011. The still unfolding financial turmoil in Europe began to impact developing and other high-income countries. In certain parts of the world, this effectively depressed stock markets and pushed up borrowing costs, while capital flows to developing nations fell sharply. Towards the year end, these conditions dampened Southeast Asias growth outlook and started to weigh down on the near-term prospects for the Malaysian economy.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Corporate Statement

n evertheless, in 2011 the Malaysian economy remained resilient, achieving Gd P growth of 5.1%, underpinned by strong domestic demand and an improvement in the external sector arising from firm regional demand. However, growth moderated in the last quarter on account of external developments, while towards the year end both manufacturing sector sentiment and consumer sentiment declined, albeit slightly. In Singapore, Gd P stood at 4.9%, with a healthy 7.6% growth in the manufacturing sector offsetting a contraction in the electronics cluster and slower growth in the precision engineering and chemicals clusters. The Accommodation & Food Services and o ther Services industries grew by 5.8% and 6.7% respectively on the back of healthy visitor inflows. Gd P growth in India fell to around 7% in 2011, with the economy hampered by a mix of domestic and global events, including the Eurozone crisis, a rising fiscal deficit, high inflation and a lack of policy reforms to help industry and agriculture. DELIVERING RESULTS Against this background, although all the Groups business segments experienced inflationary pressures with higher food, commodity and energy costs, KFCH once again achieved commendable sales growth. Total revenue for the year increased to a record high of RM2,798.8 million, up 11% on the RM2,522.4 million achieved in 2010. n ot surprisingly however, given the strategic decision to make major capital investments, profit before tax (PBT) dipped 2.8% to RM215.5 million from RM221.8 million the year before. Specifically, the Group invested some RM104.2 million during the year in vital supply chain facilities, while its operations in KFC India and KFCH International College incurred initial start-up cost as they build the critical mass that will soon carry them from break-even to profit. In addition, the 2010 profit included a net surplus from revaluation of properties of RM6.7 million. o n a comparable basis, the Groups PBT therefore improved slightly by 0.2% or RM 0.4 million against the prior year. 2011 Key Financial Highlights: Revenue of all KFC restaurants of the Group climbed 11.5% to RM2,104.7 million Revenue at KFC Malaysia hit RM1,655.3 million, 10.6% up on last year, and achieved Same Store Sales Growth of 4.6% KFC Singapore achieved 11% revenue growth to RM409.1 million KFC Brunei advanced its revenue to RM20.5 million, a 25% increase on 2010s figure KFC India generated RM19.8 million of revenue, 217.9% higher than the previous year KFC Marketing Sdn Bhd (KFC Marketing) posted a 23.3% jump in revenue to RM273.1 million Kedai Ayamas sales shot up 41.1% to RM77.7 million KFC Events Sdn Bhd (KFC Events) reported RM4.1 million in revenue arising from commission generated from RM41 million sales, contributed by catering, site selling and voucher marketing of KFC, Pizza Hut, RasaMas and Kedai Ayamas to various corporate clients Revenue (including intercompany sales) at the Groups Integrated Poultry segment improved to RM1,472 million, a 13.8% gain on 2010

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Corporate Statement

DIVIDEND S The Group declared a total interim dividend of 3 sen less tax of 25% per ordinary share for the financial year ended 31 d ecember 2011. n o final dividend was proposed for the financial year 2011. INVESTING IN STRONG FOUNDATIONS KFCHs expansion in 2011 was dedicated to three vital aspects of the Groups operations: regional expansion; people and supply chain. Investing in Expansion 2011 saw KFCs Malaysian network expand by another 24 outlets. With the rapid growth of the KFC restaurant chain in Malaysia, our nation can now boast one of the highest ratios of KFC restaurants per capita in the world. Major initiatives implemented during the year included the construction of nine drive-thru outlets in Peninsular Malaysia, and the penetration of KFC into small towns especially in the east coast of Peninsular Malaysia, Sabah and Sarawak. Two new outlets were opened in Kelantan, in Kota Bharu and Koh Lanas. o ther small towns in Peninsular Malaysia that welcomed KFC included Padang Serai, Pekan Changlun and Kuala n erang in Kedah and Sabak Bernam in Selangor. Meanwhile three new outlets were launched in Sabah and Sarawak in Kota Kinabalu, Kunak and Betong. Meanwhile, KFCH has built a strong presence in Singapore and Brunei, and in 2011 increased its network by three outlets in each country. But the biggest opportunities lie with the Groups more recent venture into India, where in 2011 the number of outlets grew to 13. The potential of the Indian market is tremendous, but this is a volume game and it will need more than 50 outlets before the Indian operations achieve profitability. KFCHs 2011 investment of RM12.9 million in its Indian network therefore represents the foundation of a long-term plan for ongoing, aggressive expansion that before long will start to pay dividends in the future.

Major Initiatives Implemented During theYear Included the Construction of Nine Drive-Thru Outlets in Peninsular Malaysia, and the Penetration of KFC into Small Towns Especially in the East Coast of Peninsular Malaysia,Sabah and Sarawak.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Corporate Statement

KFCHs subsidiaries are also poised for continual expansion. Ayamas Shoppe Sdn Bhd entered into a joint venture agreement with Rastamas Trading Sdn Bhd (Rastamas) to form a joint venture company, Ayamas Shoppe (Sabah) Sdn Bhd to kick-start Kedai Ayamas operations in Sabah. Rastamas is the biggest poultry integrator in Sabah. The first Kedai Ayamas commenced its East Malaysia operations in Tawau in April 2011. There are currently three Kedai Ayamas outlets in Sabah. Investing in the Supply Chain The rapid growth of KFCHs restaurant business in Malaysia has resulted in an increasing demand for chicken related products. To meet this demand, in 2011 the Group continued to invest RM104.2 million in facilities to increase the capacity of its upstream operations. This will stand KFCH in good stead as even more people flock to its restaurants. In August 2011, the Group invested RM25 million in a breeder farm and hatchery in Sidam Kiri, Kedah. The 19-hectare breeder farm will produce 25% of the total d ay-o ld-Chicks (d o C) generated by the Groups five company-owned farms. The new hatchery has the capacity to produce one million d o C per month. Combined with the other company-owned hatchery in Salak Tinggi which produces three million d o C per month, total output of d o C will rise to four million per month, making KFCH self-sufficient in d o C supply. The Group has also built new broiler farms in Sedenak. The first phase, completed in 2010, has a capacity of 400,000 broilers per cycle. The second

Kedai Ayamas Commenced its East Malaysian Operations inTawau in April 2011. There are Currently Three Kedai Ayamas Outlets in Sabah.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Corporate Statement

phase was completed in mid 2011, with a capacity of 600,000 broilers per cycle, increasing the combined capacity of both phases to one million broilers per cycle. The total investment cost for the two phases came to RM22 million. The KFCH-owned broiler farms in Sedenak and Mantin currently supplies broilers to the Groups processing plants in Port Klang, Bukit Mertajam and Johor. They supply 16% of the Groups total broiler requirements by producing 580,000 broilers per month, with the remaining 84% coming from contract farms. In 2011, the Group also invested in new broiler houses using a cages system, which will increase capacity by a further two million broilers per year. In addition, end of April 2012 saw the commissioning of a new RM27.7 million sausage plant which increases the output of sausage production from 430 metric tonnes to 800 metric tonnes per month. Meanwhile, Region Food Industries Sdn Bhd (RFI) invested RM2.4 million to boost production capacity of its sachet line to meet current demand. This raises the maximum sachet production capacity from 325 metric tonnes per month to 650 metric tonnes per month.

The Logistics division opened its new warehouse in Port Klang in n ovember 2011. The new RM7.5 million facility, at 300,000 square feet, is nearly seven times the size of its previous warehouse in Glenmarie, Shah Alam. The Group also purchased a site at the Bukit Minyak Industrial Area in Penang and plans to relocate its IPI Plant there from its present location in Bukit Mertajam. o nce approval has been granted by the Land o ffice, construction will take approximately two and a half years. The new plant will be able to process 40,000 birds per day, which, when added to the existing two plants, will bring the Groups processing capacities to 160,000 birds per day. Investing in People It is essential for KFCH to constantly deliver, maintain and enhance its customer service. But delivering consistent customer service depends on recruiting quality staff a task that in recent years has become increasingly challenging. To tackle this issue, in 2010 the Group acquired Paramount International College in Puchong and set about transforming it into what is now known as KFCH International College. In 2011, the Group purchased a 4.5-hectare parcel of land within the Bandar d ato o nn township in Johor for the Colleges second campus. The Johor campus located in the Iskandar d evelopment Region will be developed in phases, with completion due in 2017, at which time its intake capacity will be 12,000 students per year. The first phase of the development of the Bandar d ato o nn campus which was completed in March 2011 and the upgrading of its Puchong campus facilities incurred a total investment cost of RM25 million. As a result, the two campuses now provide a conducive learning environment for students, with state-of-the-art teaching and learning facilities, including kitchen labs, a demo kitchen, a pastry lab, a sensory lab, a computer lab, an English language lab, a modern library and an auditorium. As of d ecember 2011, the total enrolment at the Puchong and Johor campuses was 681 students. The Groups vision for KFCH International College is for it to be Malaysias premier educational institution specialising in the hospitality and food services industries, particularly restaurant management, culinary arts, hotel management, tourism management and event management.

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The College has obtained full Malaysian Qualifications Agency (MQA) accreditation for its d iploma in Business Administration, d iploma in Information Technology and d iploma in Hotel Management, plus provisional accreditation for its d iploma in Restaurant Management, d iploma in Culinary Arts, d iploma in Event Management and d iploma in Tourism Management. The College is now preparing the MQA documentation for two new additional programmes, namely d iploma in Food Science & Technology and d iploma in Halal Toyyibban & Food Safety. The curriculum is expanding as well. The College has offered its first three-month Halal Executive Program, completion of which earns a certificate from the Halal Industry d evelopment Corporation (Hd C). The College is currently collaborating with Hd C to develop a comprehensive programme in this subject. In future, the College will act as a crucially important conduit to provide KFCH with a reliable source of skillful manpower.

RESTRUCTURING THE BUSINESS o n 14 d ecember 2011, Johor Corporation (JCorp), the Group s ultimate holding corporation, in partnership with CVC Capital Partners Asia III Limited (CVC), made a formal offer via a special purpose vehicle, Massive Equity Sdn Bhd (MESB), to acquire substantially all the business and undertakings of the Groups holding company, QSR Brands Bhd (QSR), and the entire business and undertaking of KFCH. JCorp holds 51% equity interest in MESB while CVC owns the balance 49%. At present, JCorp has a 57.18% equity interest in Kulim (Malaysia) Berhad, which holds 56.83% of shares in QSR, which in turn owns 51.07% stake in KFCH. The conditional offer by MESB to acquire the entire KFCHs businesses and undertakings, including all assets and liabilities, is for an aggregate cash consideration equivalent to: RM4.00 per ordinary share of KFCH of RM0.50 each multiplied by the total outstanding KFCH shares (less treasury shares, if any) at a date to be determined later; and RM1.00 per KFCH warrant multiplied by the total outstanding number of KFCH warrants in issue at a date to be determined later.

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Corporate Statement

The proposed acquisitions of QSR and KFCH are inter-conditional, and subject to the execution of the Sale & Purchase Agreement. The proposed acquisition offer is also subject to approval by both KFCH shareholders and yum! Brands, Inc. (yum!). Upon completion of the exercise, the Board intends to return the cash proceeds to all KFCH shareholders and warrantholders via a capital repayment exercise. ACCELERATING PERFORMANCE ExCELLENCE Performance goals must be measurable if they are to be met, and thus KFCH has defined a framework of Key Performance Indicators (KPIs) to establish goals, monitor progress, and boost performance. Every organisational unit and each staff member has an appropriate set of KPIs against which to measure achievement, and there are also indicators to establish guidance for less concrete values such as service quality and leadership skill. The KPI system has given the Group a supremely useful tool for analysing and quantifying new processes and procedures, and modifying them for greater efficiency if necessary. The Balanced Score Card methodology for the managements control of its restaurant operations complements the KPI framework. This is another tool that the Group uses to identify areas that

require improvement and provide a basis to develop programmes to improve operations. The Balanced Score Card also helps management to align strategic goals across the whole enterprise and thus maintain a more unified focus, allowing separate business units to align towards improving the Groups performance.

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The Groups holding company, QSR organises a popular annual event, Quality d ay or better known as Hari Mekar. Hari Mekar brings teams of employees together for one day every d ecember to take part in competitions. It is a vibrant forum in which staff pitch their best ideas for new methods and projects to increase productivity and reduce costs. The winners of the QSR Hari Mekar then progress to the JCorp Hari Mekar, where they compete against teams from JCorp and all its subsidiaries. They also go on to represent the Group at the Malaysia Productivity Corporation (MPC) Awards. At the JCorp Hari Mekar, these teams vie for prizes in three categories: Innovative Creative Circle (ICC), Poster d esign, and Cempaka (Suggestions & Ideas) and in 2011 three KFCH teams emerged as winners. o ptimus Prime won for the ICC Cross Functional category, Golden d ream won for ICC Technical, while Eagle won for the Cempaka category. The overall winner at the JCorp Hari Mekar for the fifth consecutive year was KFCHs holding company, QSR. Subsequently, at the MPC Awards, o ptimus Prime achieved second place in the Service Sector category at national level. In 2011, KFC employees participated in a series of workshops organised by yum! in areas including Marketing, Finance, Restaurant Excellence, and Human Resource. These sessions provided an opportunity for personnel in all the yum! markets regionwide to share best practices and improvements to operational efficiency.

BOOSTING q UALITY KFCH undertakes a range of initiatives to identify areas that are not operating at optimal levels. Teams convene and collaborate to find ways to standardise procedures, implement new methods and tools, and adopt industry-standard best practices to achieve peak efficiency. For the period of 2007-2011, these efforts generated significant collective cost savings for the Group which includes savings realized from the Best Practices project. The cost savings for projects that began in 2011 proved positive and are expected to produce higher savings when the projects are rolled out to other business areas and outlets. IMPROVING GOVERNANCE KFCHs success depends on the integrity and conduct of its people, and the Group is totally committed to conducting business in a responsible, accountable and ethical manner. In 2011, further efforts were dedicated to improving stewardship and governance processes for the benefit of stakeholders.

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Corporate Statement

For several years, the Group participated in the JCorp Remuneration and n omination Committee which ensured transparency both to staff and to external stakeholders. In 2011, KFCH formed its own Remuneration and n omination Committee with a more specific and focused mandate. To empower staff at every level of the organisation to address governance issues, the Group continued to implement the Work Ethics d eclaration Form, by which employees can safely and anonymously report suspected ethical violations. Further, KFCH has two additional mechanisms in place to allow personnel to raise concerns with the higher management. The Voice of Champions and Voice of Managers surveys allow team members and managers to express what they feel about their working environment, and their feedback provides insights on what needs to be done to make the restaurant a better place to work. Both surveys are carried out in a confidential manner, and the survey results are distributed to the o perations Leaders who then develop constructive actions to address employees concerns. Multi-directional annual performance appraisals are another area in which the Group incorporates transparency and encourages constructive feedback. Traditionally, managers write unilateral evaluations of the employees reporting to them. In contrast, KFCH employees at every level participate in peer performance appraisals, and reverse appraisals give staff an opportunity to evaluate the managers to whom they report. TAKING SOCIAL RESPONSIBILITY TO HEART KFCH has always believed that with success comes responsibility. This is why Corporate Social Responsibility (CSR) remains a Group priority. From enhancing products and services to reaching out to the communities in which it operates, KFCH continues to seek ways to enrich the lives of those around us. In 2010, KFCH and its holding company, QSR, established yayasan Amal Bistari (yAB), a nongovernmental, non-profit foundation that coordinates all QSR and KFCHs CSR activities, endeavours and programmes. Based on six CSR pillars championing the halal cause, improving educational standards, encouraging entrepreneurial development, promoting a healthy lifestyle, fostering a sense of national unity, and helping the less fortunate yAB conducts a wide range of initiatives to benefit both stakeholders and the wider community. o ne of the Groups most successful CSR campaigns in 2011 raised RM2.1 million for the famine-stricken around the world. To mark its fifth year of participation in the World Hunger Relief Programme, a joint effort with yum! and the United n ations World Food Program, KFCH together with its holding company QSR, organised a 5km charity walk in Putrajaya, and over 10,000 people took part. ACHIEVING RECOGNITION 2011 was a year of significant recognition for KFCH and its subsidiaries. KFC received the 2010/2011 BrandLaureate Award for the Best Brand in Brand Strategy. KFC also won a series of yum! s 2011 Franchise Awards for d evelopment Excellence (KFC Malaysia) and Advertising Excellence (KFC Singapore).

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Corporate Statement

Ayamas had an outstanding year as well. The Malaysia Womens Weekly magazine recognised two Ayamas products in their d omestic d iva Awards 2011. The Breaded d rummets & Midwings won the Straight from the Fridge: Best Ready-to-Fry-Frozen Meat category, and Ayamas QuikBurger took the prize for the Best Processed Meat. BrandLaureate selected Ayamas as their winner of the 2010/2011 Best Brand in Consumer Chicken-Based Products Award. The Ayamas Chicken Satay emerged at the top of the MIFT Product Innovation Platinum Award 2011 Competition in Malaysia. STRATEGISING 2012 Operational Excellence In the years ahead KFCH will be further expanding its network of restaurants, focusing especially on opening new drive-thru outlets, which offer exceptional convenience to people leading busy lives who need a quick and tasty meal. At the same time, the Group will be enhancing its restaurant ambiance to provide a more contemporary feel and create a pleasant place for families and friends to get together. KFCH will also be expanding into small towns to increase its market coverage. In tandem with its network expansion, the Group will be improving its KFC restaurants service quality and speed by investing in new IT Infrastructure. A new Kitchen d isplay System (Kd S), which positions packers at each cashier counter and cuts service time, especially during peak periods, will be introduced at high sales volume restaurants in Malaysia in early 2012. A self-service order kiosk is currently being tested to further reduce queue time.

In 2012, KFC is launching a vigorous programme of initiatives to boost its market leadership position. o f these strategies, the overall driver is the So Good campaign, designed to bring the Group ever closer to achieving its vision to be the leading integrated food services group in the Asia Pacific region, based on consistent quality products and exceptional customer-focused service. Launched in April 2012, the So Good campaign aims to deliver an experience that is so loved by customers that they describe it as So Good. It also provides an opportunity to relaunch the brand, refocus on the basics, generate internal pride, and strengthen the relationship between the brand and its customers. With the systematic improvements that the customers will experience, the campaign will enhance the total customer experience at the restaurants in terms of the Five Ps: product, place, people, price and promotion. Meanwhile, to improve customer service, all managers and staff will be recertified, and staff will go through the Learning Zone. The new Learning Zone initiative gives Restaurant Managers and team members access to web-based training. This provides a virtual classroom and online meetings as well as online assessments, tests and surveys. A staff competition will also be held, which will recognise and reward the best cooks and cashiers.

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o ther initiatives will also be effected to address the challenges of 2012. To reaffirm product superiority against all its competitors, KFC will leverage its strengths Chicken o n Bone (Co B), freshly prepared in-store meals, signature recipes, and products tailored for different times of day, namely breakfast, lunch, snacking and dinner.

Upstream Business To meet the ever-growing demands of KFCH restaurants, the Group will continue to grow its upstream business by investing in plants and increasing product capacity. As well as catering to its internal market, the

Meanwhile, KFCH is looking into the viability of a KFC home delivery service. If this proves promising, the service will begin in the third quarter of 2012. Overseas Expansion o verseas expansion is high on KFCHs agenda. In Singapore, the Group plans to leverage on product excellence and a series of imaginative campaigns and menu enhancements to bolster the market share. In Brunei, the Group will be opening two new in-line restaurants and two drive-thrus, as well as refreshing the image of the KFC Berakas facilities. But the biggest opportunities lie in the vast Indian market where KFCH aims to get closer to achieving critical mass by opening 16 new outlets in 2012. By offering an appealing range of vegetarian options alongside its traditional menu, the Group is confident that it will quickly make KFC one of Mumbai and Punes most popular restaurant chains. The long-term prospects for the Indian venture are outstanding.

Group will be growing its external market share. KFC Marketing now aims to introduce a variety of renowned international brands to Malaysia so as to become one of the nations biggest trading houses. To this end, in 2011 it clinched a number of exclusive deals with such brands as Kewpie, d ivella, Leggos, Mission and Simplot and is continually pursuing additional businesses in the domestic, Asian and Middle Eastern markets.

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Looking ahead, the demand for raw chicken, chicken parts and further processed chicken (such as nuggets, sausages, etc.) will continue to be boosted by Kedai Ayamas. Kedai Ayamas is the pioneer brand in Malaysia to sell chicken and chicken-based products through a network of airconditioned stores, and the first to offer an array of chicken roasters and light, chicken-based snacks. The Kedai Ayamas chain markets high quality, halal, branded chicken that is hygienically processed and packed in the companys own plants. In 2011, SKU numbers increased to 902 from 507 the year before, and in 2012, the target is to reach 1060. Kedai Ayamas also launched its delivery service in d ecember 2010, which is now available at 40 outlets in the Klang Valley as well as most stores in Johor and Melaka. In 2012, the service will be extended to Seremban and selected stores in Penang, Ipoh and Kedah. By the year end the total number of outlets offering delivery is expected to have risen to 67. Kedai Ayamas will also be making further inroads into Brunei in the coming year. KFCH International College By capitalising on its state-of-the-art facilities and outstanding academic foundation, the Group aims to grow the number of students at KFCH International College from 681 in 2011 to 2000 in 2012, at which point the College will break even. 40 agents have been appointed to facilitate growth by recruiting students both locally and internationally. In addition, an international marketing office has been set up to boost recruitment of international students. The College will be offering a number of new courses by collaborating with other accredited local and overseas universities. KFCH International College aims to achieve University College Status by 2015. Profit Centres Although consolidation is a priority, the Group is also aiming to turn its Logistics division into a profit centre in the future. The new double-storey warehouse facility in Port Klang, with its vast square footage, 16 loading bays and advanced equipment, currently serves 921 of the Groups restaurants and outlets but has the capacity to serve third parties as well as the other Groups subsidiaries.

LOOKING AHEAD The global economic outlook still appears uncertain in view of the lingering debt crisis in Europe, although there are nascent signs of recovery in the US economy judging by the improving job market and corporate earnings released thus far. The positive data from US appears to outweigh concerns in Europe at this moment and, if sustainable, will be pivotal to win back investors and consumers confidence in the global economy.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

Corporate Statement

The Malaysian economy will be sustained by the implementation of projects under the Governments ETP as well as private capital spending. Together with the incentives announced during the 2012 Budget, this is expected to boost consumer confidence and stimulate domestic demand, and Gd P growth of 5% is expected in 2012. The economies of the other markets where the Group operates, namely Brunei and India, are still robust with relatively healthy Gd P growth. The Singapore economy on the other hand is expected to grow between 1%-3%. The Group plans to continue growing in these markets through the sustained development and refurbishment of stores and the delivery of operational excellence. The food sector is relatively healthy but faces inflationary cost pressures. The Group expects profit margins to be tight and it plans to generate earnings growth by continuing to drive topline aggressively through new and repeat customer purchases. It will strive to develop and introduce new winning products, launch successful promotions that provide value for its consumers, invest in new facilities and refurbish existing ones, and improve customer service and experience. The Group is also continuously seeking better cost efficiencies as well as improving productivity in all its business segments. While the operating costs of the KFCH International College remain high, the College is confidently expected to break even in 2012, and the Group anticipates starting to reap the rewards of its recent major capital investments in the coming years. All in all, the Board is confident of maintaining the Groups current growth for the year.

ExPRESSING GRATITUDE In 2011, KFCH once again consistently delivered top quality products and customer service. o n behalf of the Board, we offer each of our employees heartfelt congratulations and gratitude. We also profoundly appreciate the support we received from customers, investors, financiers, suppliers and various governmental and regulatory authorities. We are equally grateful to yum! for their continued confidence and for the guidance received from them throughout the year. Finally, on a personal note, we would like to thank our colleagues on the Board and the entire management team for their outstanding contribution. Their commitment to the long term growth of the business has again produced results the Group can be proud of. The KFCH Board of d irectors grew from eight members to nine last year, and we offer a warm welcome to the newest member, yAM Tengku Sulaiman Shah Alhaj Ibni Almarhum Sultan Salahuddin Abdul Aziz Shah Alhaj, whose appointment took effect on 1 June 2011.

KAMARUZZAMAN BIN ABU KASSIM Chairman

AHAMAD BIN MOHAMAD d eputy Chairman

JAMALUDIN BIN MD ALI Managing d irector

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

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Customers Remain the Groups Number One Priority


INTRODUCTION Groupwide, 2011 was a year of commendable achievement. The KFC network continued to expand in Malaysia, Singapore, Brunei as well as India, and an imaginative programme of enticing new menu items, irresistible special promotions and appealing outlet enhancements continued to draw ever larger crowds. Subsidiaries also made considerable progress, particularly the Integrated Poultry o perations and Ancillary o perations, while the KFCH International College has already attracted more than 800 students to date, many of whom are expected to join the Group as staff members in due course. KFC MALAYSIA In 2011, KFC Malaysia revenue jumped to RM1,655.3 million, 10.6% up on the RM1,496.9 million recorded the year before. The Malaysian team achieved this success with a combination of compelling marketing and promotional campaigns and irresistible new products to draw customers into the outlets. Simultaneously, a range of service enhancements and facilities upgrades improved comfort and efficiency, whether customers are eating in, taking away or driving through. JAMALUDIN BIN MD ALI Managing Director

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The division initiated three projects during the year to increase operational efficiency. A new Kitchen d isplay System (Kd S) had its trial run at Wisma KFC. The Kd S is effectively a packing monitor, and its use has resulted in much improved service time, especially during lunch and dinner time. Having packers at each cash counter during peak periods have meant shorter queues and higher transaction counts. In early 2012, the Kd S will be rolled out to our high sales volume restaurants in Malaysia.

KFC also installed a Self-o rder Service Kiosk on a trial basis at Wisma KFC, which further cuts queue time by allowing customers to use the kiosk to place their orders, then collect their food and pay at the counter. Initial results have been encouraging. The Groups third quality initiative was the

development of two customer service squads. This concept clarified managerial roles in the restaurants by establishing the Customer Mania

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

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Squad, involving cashiers and dining staff, and the Product Champion Squad for the cooks and backup staff. Each manager is accountable for recruiting, training, engaging and energising his or her squad to deliver the most effective service. The goal is to achieve higher training levels and a better working environment in the restaurants. To keep the menu vibrant, eight new items were introduced throughout the year, each product launch celebrated with a well-advertised promotion. o fferings such as the Fish d onut, Chicken Chop with Mushroom Gravy, Quarter Chicken with Black Pepper Sauce, o l Pocketful, Tom yum Crunch, d ouble Zinger Burger and Krushers with new flavours enticed customers eager for variety. The Group implemented a comprehensive marketing programme in 2011. The large number of promotions throughout the year meant that customers could always find something exciting happening at KFC, and via several channels, customers were informed of the latest events. The year kicked off with a celebration to mark the opening of KFCs 500th restaurant. As an expression of gratitude to loyal customers, KFC Malaysia offered a Celebration Combo, which came with a limited edition 24-karat gold-inscribed Celebration Mug. Chinese n ew year followed soon after, and the outlets introduced the Fish d onut, either a la carte or in a combo meal with two pieces of chicken. This

was a very successful limited time offer, accounting for about 10% of the total sales for the promotional period. In April 2011, the spotlight shone on the new So Good tagline. But this is not just a tagline the objective is for customers to be so delighted with KFCs food and service that they cannot help but exclaim that it is So Good! The marketing team pitched a 5-star campaign to spread the word, and a new Chicken Chop with Mushroom Gravy was the anchor product. The Group also focused its attention on breakfast, offering customers a different experience during the morning hours by providing a Breakfast Corner with free coffee refills, daily newspaper and radio playing in the background. The breakfast menu was rejuvenated by the introduction of the new a.m.

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Cheezy Egg Bun Combo, an improved a.m. Chicken Porridge Combo, and an a.m. Riser Combo. KFC Malaysia honoured the fasting month of Ramadan and the Hari Raya holidays in July and August 2011 by offering a delectable Quarter Chicken with Black Pepper Sauce. In n ovember, the team kicked off a season of kids marketing efforts and got into the spirit of the Happy Feet 2 movie release. As parents and children flocked to the cinemas, they also celebrated the beginning of the school holidays by feasting on the KFC Happy Feet 2 Combo. In mid-d ecember, promotional offers continued to entice parents and children with the Ben 10 and PowerPuff Girls Chicky Meals. Both of these offerings included movie-themed buckets and collectible figurines. Reflecting the commitment to provide customers a fresh and inviting dining ambience, the Group

renovated 18 restaurants during the year. 24 new outlets expanded the networks reach further, and KFC aimed to better accommodate the needs of busy customers by increasing the number of outlets offering drive-thru service. With 539 restaurants in total 455 in Peninsular Malaysia and 84 in East Malaysia the Group retained its market dominance. KFC remains Malaysias largest restaurant chain. Another 15 new restaurants are planned in 2012. KFC SINGAPORE Singapores economic growth, especially in early 2011, and an increased store count led KFC Singapore to achieve record sales of RM409.1 million, up RM40.5 million (or 11%) on 2010. To celebrate Chinese n ew year, the menu featured the new KFC Fortune Feast signature food in a collectible bucket with complementary cushion covers. The Egg Tart (first launched in 2010) made another appearance, this time transformed for the festive season. The Mandarin o range Egg Tarts were sold individually and in colourful boxes of six. KFC Singapore officially launched its So Good tagline in February. This campaign highlighted fresh preparation techniques that set KFC apart from its competitors. All KFCs cooks were recertified to ensure consistently excellent quality. Special promotions and a So Good photo contest engaged Singaporeans in the celebration.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

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2011 was a year of exceptional product innovation. Blueberry Pancakes injected novelty and renewed interest in the KFC breakfast menu. The Ultimate Boxes were introduced in January 2011, and in April, the box meal range was expanded to include the Ultimate Roasta Box. In conjunction with the highly anticipated Transformers 3 d ark of the Moon movie, the team launched a new big eat targeting Transformers fans with hearty appetites. A series of collectible action figures and a limited edition beach mat added to the campaigns popular appeal. In July, chicken and two cheeses merged to create the Cheesy Crunch, which was received with great enthusiasm. In August, the Group focused on publicity for the KFC a.m. breakfast offerings. Singaporeans have embraced online media, and they responded warmly to the I a.m. campaign, which invited them to share via Facebook how KFC a.m. touches their lives. The four most inspiring stories were made into threeminute webisodes and shown online and on TV . The new KFC Singapore Facebook page now has over 130,000 fans and counting! d uring this period, customers were delighted by the d ouble Chocolate Egg Tart boasting the perfect blend of egg tart with dark and milk chocolate. In o c t o b e r, KFC added a seventh wonder to its range of six Snackers a pasta shrimp flavour. For every Snackers and meal coupon purchase, RM0.48 was donated to the World Hunger Relief Programme.

In 2011, KFC Singapore collected RM336,380 for victims of the continuing famine in the Horn of Africa, a 12% increase over 2010. The final campaign of 2011 returned to the So Good tagline, using television and digital media to convey the warm emotional connection that Singaporeans have with KFC, sharing authentic customer testimonials. KFC Singapore was the proud recipient of the Caring Employer Award from Singapore Compact CSR and the Leader Award from Enabling Employers n etwork, as well as four Markies awards from Marketing Magazine. 2011 ends with a count of 80 stores, which includes six new openings or relocations, offset by three closures. The Group predicts that 2012 will present challenges in the area of employment, as Singapore s unemployment hit a low of 2% in 2011. Competition for market share will also increase as new restaurant chains open outlets on the island. As always, the staff will respond to challenges positively and are confident that a programme of imaginative campaigns and products will continue to draw Singaporeans to KFC.

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In June, customers stayed cool with a new range of Kafeccino iced coffee drinks. The Frappe, Iced Kapuccino and Iced Mochaccino start with a base of strong, cold coffee then gain extra allure from vanilla cookie crumble, whipped cream, and chocolate. Catering to the 40% of Indians who are vegetarian, KFC India launched two new meatless combos in August. The Veg Rizo Meal comprises of flavourful rice and spicy gravy, served with three veg strips and a regular Pepsi. The Veg Zing Kong Box contained a spicy, crunchy Veg Zinger, three veg strips, regular fries, a regular Pepsi and a chocolate. Targeting young working adults, the September launch of the Fiery Grilled featured a unique combination of KFCs signature spices grilled with the steam roast technology in a combi oven. This offering accounted for 15% of total sales during the launch period. Currently, KFC India has 16 outlets, of which three were opened in early 2012. RASAMAS & KEDAI AYAMAS RasaMas reduced the number of outlets in Malaysia and Brunei from 42 to 27 during 2011. With fewer restaurants in service, 2011s sales of RM19 million were 23% down on 2010.

KFC BRUNEI KFC Brunei expanded from nine to 12 restaurants in 2011, and total revenue surged 25% to RM20.5 million. The Brunei team came up with a full calendar of new product releases, activities, and premiums to keep KFC in the public eye. Seven intriguing new products such as the Fish d onut and Tom yum Chicken successfully caught popular attention, and the team joined corporate marketing partners for ten assorted month-long activities and promotions. KFC Brunei also pursued a very energetic programme of in-house training, with staff attending nine different seminars. Expansion plans for 2012 include two new inline restaurants, two drive-thrus, and image enhancements for the KFC Berakas facilities. KFC INDIA In its second year of operations, KFC India reported revenue of RM19.8 million, an impressive increase on 2010 sales of RM13.6 million. To capitalise on the Indian passion for Cricket, KFC India was an o fficial Partner in the 2011 ICC World Cup. The staff got into the spirit by wearing special tournament t-shirts, and customers took advantage of the limited time offer of meals served in a cricketthemed Fan Bucket.

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The Integrated Poultry Operations Segment Saw AnotherYear of Growth in 2011. Revenue Including Intercompany Sales Advanced 13.8% from 2010,Climbing to RM1,472 Million.
More positively, vigorous marketing campaigns used varied media and creative tactics to reach consumers throughout 2011. RasaMas devised a new menu in February, and in April commenced a campaign to celebrate the brands Typically Malaysian identity. The redesigned website came online in April, and by July, the visitor count exceeded 10,000. The marketing team maximized the use of social media Twitter, Facebook, blog and website as well as e-mail and SMS to publicise 16 promotions throughout the year, including Chinese n ew year and Ramadan specials, new product announcements as well as coupon offers. Meanwhile, Kedai Ayamas sales jumped by 41.1% to RM77.7 million, and the new Kedai Ayamas (Sabah) contributed an additional RM743,000 to the 2011 revenue stream. The store count increased from 49 at the beginning of 2011 to 75 at the end of the year. 40 outlets now offer delivery services, and August saw the installation of e-pay terminals in the branches to give customers yet another level of convenience. 2011s new products included the Percik Roaster, and Ayamas re-launched the highly

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popular Auspicious and Spicy Siam roasters on a limited-time basis during the festive seasons. In addition, corporate partners d igi and Bank Rakyat helped publicise two other innovative special offers. INTEGRATED POULTRY OPERATIONS

Under the Groups Breeder Farm and Hatchery division, the breeder farms produce eggs which are sent to hatcheries to be hatched into d ay-o ldChicks (d o C). In 2011, the division produced 38.6 million d o Cs with a value of RM48.8 million. KFC Marketing

The Integrated Poultry o perations segment saw another year of growth in 2011. Revenue including intercompany sales advanced 13.8% from 2010, climbing to RM1,472 million. Ayamas Food Corporation Sdn Bhd (AFCSB) processing plants contributed greatly to the increase, up by 8.5% on 2010 levels. The Groups expanding restaurant chains and stores KFC, RasaMas and Kedai Ayamas continue to increase their order volumes, thus boosting internal sales figures. 2011 was not without challenges, as rising chicken prices made an impact for upon the Groups products, In addition to the Groups own products, KFC Marketing distributes third-party international brands such as Simplot, d ivella, Mission, Kewpie and Leggos. d atuk Redzuawan bin Ismail, better known as Chef Wan, now acts as brand ambassador for KFC Marketing, further strengthening the companys position. performance. d emand chicken KFC Marketing Sdn Bhd (KFC Marketing) was incorporated in 2001 as a sales, marketing and trading arm for KFC Holdings (Malaysia) Bhd (KFCH) and external markets, both domestically and internationally. With a vision to be the preferred distributor of superior quality halal brands, the subsidiary performed exceptionally well in 2011, with sales growing by 23.3% to reach RM273.1 million. Sales to the domestic open market increased once again, and open market export sales also jumped to RM15.9 million in 2011.

however especially processed foods such as sausage, nuggets, etc. continues to rise steadily, so this subsidiary took steps toward greater selfsufficiency and expansion into niche markets.

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Ayamazz Roti Impit Ayamazz Sdn Bhd was established in 2009 as a wholly owned subsidiary of KFCH. It began by selling quick, affordable chicken dishes from push-carts in Malaysias college, university and polytechnic campuses. Each push-cart is independently operated, and the Ministry of Higher Education has recognised the Ayamazz Roti Impit business model as a successful means of nurturing young entrepreneurs. 2011 was the second year that Ayamazz Roti Impit hot dog carts have plied Peninsular Malaysias higher education campuses, and there was a commendable 330.4% rise in gross sales, which reached RM581,000. Looking forward, Ayamazz has collaborated with Jati Bestari Sdn Bhd and other companies to expand its business by more aggressively marketing and promoting the programme and by establishing more Ayamazz Roti Impit kiosks nationwide, including in Sabah and Sarawak. The business model has also grown to include kiosks, flip-counters, and hawker vans, and the goal for 2012 is to add 100 new open market outlets by the end of the year. UBASBs business model engages housewives, single mothers and other lower income individuals who are interested in business to become Sudut Ayamas operators. Parallel objectives are to provide an opportunity for the operators to generate extra income and to inculcate entrepreneurship among their children and family members. The Sudut Ayamas operators are the front-line stocking and sales agents for the UBASB products. Although they are packaged differently and sold at lower prices, the products all maintain Ayamas hygiene, quality and halal certification. The pilot project was introduced in Pasir Gudang, Johor in collaboration with the local city council and Johor Corporations Waqaf d ana n iaga. At the end of 2011, there were 819 Sudut Ayamas operators all over Malaysia. UBASBs success has attracted the attention and support of several Government agencies such as Majlis Agama Islam n egeri, Majlis Amanah Rakyat (MARA), Jabatan Tenaga Kerja (JTK), Jabatan Kebajikan Masyarakat (JKM), the Ministry of Usahawan Bistari Ayamas Usahawan Bistari Ayamas Sdn Bhd (UBASB) is a wholly-owned subsidiary of KFC Marketing, and is a key element in the Groups CSR commitment to assist those in need. UBASB was established in 2009 to bring the Ayamas brand to the lower-income market sector.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

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International Trade and Industry (MITI), yayasan Pembangunan Keluarga (y PK), FELd A and also Pusat Pemulihan d alam Komuniti (Pd K). With the support of these partners, UBASB expects to continue on its rapid growth curve. Feedmill Division The Feedmill operations made good progress in the past year. Revenue for 2011 rose 8.6% to RM208 million. Increased broiler production to meet the Groups chicken requirements translated to 137,000 metric tonnes of feed milled, an increase of 1,000 metric tonnes over the previous years production. Estimates of broiler requirements for 2012 are higher still, and feed volume is also expected to grow. Breeder Farms & Hatchery In 2011, the revenue achieved by the Breeder Farms and Hatchery division rose to RM93.8 million. Meanwhile, the division considerably boosted its production by investing in additional facilities. ANCILLARY OPERATIONS d uring the year under review, the Groups ancillary operations made further commendable progress. Sauce Manufacturing Region Food Industries Sdn Bhd (RFI), which manufactures sauces both for the Group and for external markets under the brand name Life, reported an impressive sales growth of 12.5% from RM89.9 million to RM101.1 million in 2011. At RM46.2 million, internal sales accounted for 45.8% of the revenue, a rise of 9% over the previous year. Meanwhile, external domestic sales of RM38.6 million and export sales of RM16.3 million contributed 38.1% and 16.1% of the revenue respectively.

2011 was the Second Year that Ayamazz Roti Impit Hot Dog Carts have Plied Peninsular Malaysias Higher Education Campuses, and there was a Commendable 330.4% Rise in Sales,which Reached RM581,000.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

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Bakery & Commissary In 2011, the Bakery division recorded sales of RM31.2 million. It also achieved a 7.7% increase in bun production and introduced the Butter Scotch Bun to the KFC product line. The rectangular Butter Scotch Bun has a rich butter caramel and milk flavour and is already proving a popular addition to the KFC menu. Meanwhile, a new pizza dough line a 700 square metre facility providing dough for 42 PHd outlets to date began operations in February 2011.

In addition to continuing upgrades to existing equipment in 2012, the Bakery division will initiate the planning phase of a new bakery line to support KFC and Pizza Hut business expansion. Likewise, the Commissarys ongoing improvements will include primary and secondary wash and spin-dry equipment, which will both enhance quality and reduce costs. Tepak Marketing Tepak Marketing Sdn Bhd (T epak), a wholly owned

The renewal of the Bakerys HACCP (Hazard Analysis Critical Control Point) and ISo 9001:2008 certifications demonstrated its continued high production standards. In compliance with HACCP requirements, the Bakery completed a flooring upgrade in n ovember 2011. The Commissary division generated sales of RM1.7 million plus a 4.3% increase in coleslaw production, amounting to over two million packets in total. The coleslaw facilities also received flooring upgrades in April and May 2011 to meet yum! requirements.

subsidiary of KFCH produces, markets, and sells beverages and nutritional drinks for the domestic and export markets. In addition to various tea products sold in packets, pot bags and sachets, Tepak also manufactures carbonated drinks in PET bottles and aluminium cans. Tepaks revenue declined by 5.4% to RM23.6 million in 2011, mainly due to the restructuring of production and delivery by Unilever, one of the companys largest customers.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

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GROUP LOGISTICS DIVISION The Logistics division under KFC Manufacturing Sdn Bhd expanded its dry stock storage capacity in 2011 in line with the growing number of restaurants and stores. The Groups original 45,000 square foot warehouse was in Glenmarie. 2011 saw it shift to a new double-storey warehouse complex offering 300,000 square feet at Jalan Gerudi, Port Klang.

HUMAN CAPITAL DEVELOPMENT KFCH currently employs over 28,000 people in Malaysia, Singapore, Brunei and India, making it one of the largest food sector employers in the region. The Groups active and holistic approach to employee recruitment, training, and retention reflects the value it places on its staff. d uring 2011, KFCH used a variety of recruitment

The new facility offers 16 loading bays, five receiving bays, space for nearly 17,000 pallets, and new heavy equipment. The transition went smoothly, and the new warehouse was fully operational on 1 n ovember 2011. It now serves over 921 stores and restaurants in Malaysia, Brunei and Cambodia. In future, the Logistics division plans to extend its facilities and services to third parties, thus becoming a profit centre. KFCH INTERNATIONAL COLLEGE The KFCH International College now spans two campuses in Puchong and Johor Bahru. At present, over 800 students are enrolled in nine diploma programmes, including a variety of hospitalityrelated disciplines, as well as Early Childhood Education, Business Administration, and Information Technology. d uring the year, the College achieved a revenue of RM4.3 million from its diploma programmes and a further RM325,675 from short courses.

methods to fill vacant and newly-created positions. The Group participated in numerous job fairs and advertised its requirements in newspapers, leaflet and email campaigns, flyers and restaurant postings. It also offered referral incentives to current staff. KFCH is committed to retaining valued employees, and thus offers a variety of training, advancement and recognition opportunities, including organised activities and sports tournaments, conventions, and award ceremonies. The Group invested RM7.2 million in training and development programmes in 2011. This figure is equivalent to 5.25% of total employee compensation and illustrates the importance of training to the organisation. o n average, KFCHs full-time employees received 67 hours of training over the year, and nearly 8,000 staff participated in training. o pportunities included in-house soft skills training, and public programmes on a range of topics designed to build technical, financial, business and management abilities.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

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Furthermore, 40 students were sponsored in fulltime diploma courses at the two KFCH International College campuses and 23 more in various part-time programmes offered by other institutions. yum! Learning Zone offers an additional training medium for KFC employees. Through this new initiative, managers and team members at the restaurants have access to web-based training, including virtual classrooms, online meetings, and electronic assessments, tests and surveys. The Group continues to place great emphasis on o ccupational Safety and Health (o SH) training, and four particular activities dominated 2011s efforts. A proactive Hazard Identification, Risk Assessment and Risk Control (HIRARC) exercise was conducted for the restaurant operations, poultry farm and office-based employees in Wisma KFC. A new, comprehensive Safety and Health Manual was published for the Farm and Hatchery division, and the Procedures for Reporting of Accidents in the Workplace were enhanced. The new procedures cover not only reporting and documenting accidents but also aspects of investigation for the purpose of preventing recurrence. Finally, the d epartment of Safety and Health (JKKP) Audit Kit for the restaurant division was improved to assist employees as they prepare for the o SHA 1994 compliance audit. Effective organisations perform regular employee appraisals to identify areas for growth and to recognise successful achievements. KFCH updated its evaluation forms last year to include reverse peer appraisals.

At the Annual Long Service Awards, KFCH recognises employees who have served the company and its customers for ten years or more with awards of BSn savings bonds of RM500-RM1000 each. In 2011, the Group distributed some RM160,000 in savings bonds to 257 long-term employees. In 2012, the o SH unit will begin a General o SHA 1994 Compliance Audit. All operating units will be subject to the audit, which is in preparation for the full JKKP Audit. As part of the Groups unflagging efforts to improve workplace safety, the Accident Prevention Programme will also be revamped in the coming year. HALAL COMMITMENT KFCH guarantees full halal compliance in all of the Groups markets. Every aspect of our food manufacturing processes, including raw materials procurement, preparation, packaging, storage and utensils follow strict controls. The Group pays keen attention to any products acquired from foreign suppliers, requiring that they be halal certified within the source country and accepts only certificates recognized by the d epartment of Islamic d evelopment Malaysia (JAKIM).

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011

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Esteemed scholars from Islamic institutions comprise the KFCH Shariah Advisory Council, which inspects every stage of the food production chain. The Council examines equipment, ingredients, and preparation methods, touring all of the Groups facilities, restaurants and factories. o nce the internal Council is satisfied, JAKIM is requested to repeat the entire inspection process. After that, all of the Groups products bear the official JAKIM stamp indicating full halal compliance. KFCHs internal Shariah and Halal d epartment reports directly to the Shariah Advisory Council. The department plays a vital role in the Groups halal commitment, creating a deeper understanding of halal principles for all stakeholders both within KFCH and beyond via training exercises and media campaigns. The department strives to develop mutually beneficial relationships with relevant n Go s, and it acts as the first response unit for the Groups Shariah Advisory Council.

LOOKING FORWARD KFCH continues to prosper as families and friends get together to relish the Groups products in ever increasing numbers. Whether eating out or at home, customers of all ages demonstrate their delight with the menus. Superb service has won their loyalty, and the Groups commitment to corporate responsibility has strengthened the bond with the communities in which it operates across the region. KFCH moves forward upon a solid financial foundation, with a clear vision of future goals as well as the determination to achieve them. In 2012, all the Groups stakeholders can be confident of celebrating yet another year of success.

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KFC HoLd In GS (MALAy SIA) BHd (65787-T) Annual Report 2011