05 corporate statement

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QSR BRANDS BHD ANNUAL REPORT 2008

016

Introduction of Online Ordering

System to improve the performance

of Pizza Hut delivery business

Strong expansion of the KFC network,

with 37 new stores in Malaysia,

eight in Singapore and one in Brunei

Successful product launches

in KFC Malaysia and Brunei that

included our crowd pleaser, Colonel

Chicken Rice, which coincided withour 35th anniversary celebrations

The introduction of the KFC

breakfast menu to target the morning

crowds and 24-hour operating hours

extension at 139 KFC restaurant.

The increase in RasaMas stores

with 15 new openings, bringing the

total to 36 and an addition of five

Kedai Ayamas stores bringing the

total to 27 stores to date

New Primary Processing Plant

in Bandar Tenggara, Johor, now fully

operational since December 2008

Strong sales by KFC Marketing

Sdn Bhd of Ayamas further

processed products locally

and in the export market

The beginning of our foray

into Cambodia, beginning with

the opening of KFC Asia Hotel,

followed by another KFC restaurant

in Phnom Penh

Dividends

Worthwhile returns for the benefit of

our investors remain a mainstay of QSRs

corporate philosophy. For 2008, the Board

of Directors recommended a total dividend

of 11 sen per share (comprising an interim

dividend of 4 sen and a final dividend

of 7 sen).

The recommended total dividend isafter taking into account the rights issue

(mentioned below) which enlarged QSRs

share capital by 40,911,847 rights shares,

from 245,471,082 to 286,382,929 shares.

The total dividend for 2007 stood at 9 sen

per share.

STRENGTHENING OUR BUSINESS

Enhancing shareholder value has always

been at the heart of QSR. In that aspect,

our Strategic Plan 2008-2012 laid great

emphasis on what needs to be done

to forge our success story forward.

During the year, QSR continued to

increase its interest in KFCH by acquiring

shares in the open market. As of 2 January

2009, QSR acquired an additional 865,300

ordinary KFCH shares, increasing its total

holding in KFCH to 50.25%. Subsequently,

KFCH became a subsidiary of QSR.

This important milestone is crucial towards

streamlining of business activities and

most important towards long term

management stability and ensuring a

steady income contribution to QSR.

Our foray into Cambodia has been a

gradual rise upwards. On 29 February

2008, the venture was formalised by the

signing of the Joint Venture Agreement

with two partners: Royal Group of

Companies Ltd and Rightlink Corporation

Limited Hong Kong, with QSR having a

55% stake in the joint venture company.

The first KFC outlet in Cambodia opened

on 2 March 2008 and has been wellreceived by Cambodian customers.

Upon obtaining approval to operate KFC

restaurants in Cambodia from Yum! during

the third quarter of last year, we started

our upward spiral and to date we have

four KFC restaurants in Cambodia three

in Phnom Penh and one in Siem Reap.

Due to our commitment to building

the KFC brand in Cambodia, Yum! Brand

Inc (Yum!) has given us the approval to

also operate Pizza Hut restaurants in the

country. The first Pizza Hut restaurant

there is expected to be completed in

mid 2009.

In addition, we have completed our

capital restructuring through the carrying

out of the renounceable rights issuance

exercise. The renounceable rights issues

undertaken were of 40,911,847 new

ordinary shares of RM1 each with free

detachable warrants on the basis of one

Rights Share and one Warrant for every

six existing ordinary shares.


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With over 200 Pizza Hut restaurants

in Malaysia and Singapore, Pizza Hut

is the most popular pizzeria on either

side of the Causeway!


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KFC, with over 500 restaurants

in Malaysia, Singapore, Brunei and

Cambodia, is the regions #1 Western

quick service restaurant chain.


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QSRs paid-up share capital as at

end of last year has increased from

RM245,471,082 to RM286,382,929

following the issuance of 40,911,847 new

ordinary shares at RM1.00 each coupled

with 40,911,847 new free detachable

warrants. This was on the basis of one

rights share together with one free

warrant for every six existing ordinary

shares of RM1.00 each held.

The number of warrants outstanding as

at 31 December 2008 was 40,911,847.

The warrants, which will expire on 5

March 2013 provide an incentive to the

shareholders to subscribe to the Rights

Shares and allow them to benefit from the

future growth of the Group. At the same

time it will also raise further proceeds

for QSR when they are exercised.

The rights issue which was approved by

the Securities Commission, Bank Negara

Malaysia, Bursa Malaysia Securities

Berhad and the QSR shareholders,

was completed on 10 March 2008.

ENERGISING PERFORMANCE

QSRs work culture is one that is

fervently driven by performance.

Our Key Performance Indicators

(KPIs) support our performance culture.

The KPIs are used to measure corporate

achievement and also form the basis

for rewarding and promoting our

valued people.

Pedoman is one of our most powerful

cultural bonding and performance building

tools. It is conducted annually throughout

the Johor Corporation Group of Companies,

including QSR and our holding company

Kulim Malaysia Berhad. For the year 2008,

the theme Business Jihad was adopted

for the QSR Pedoman. The term Jihad,

a sustainable strive for higher success,

comes in various forms, be it spiritual,social, political and economic. Jihad in

Business advocates the enriching of all

members of the QSR community, and

through QSR outreach, the enriching of

the public at large, through QSRs ethical

business practises and consistently

delivering value.

Pedomans Business Jihad fundamentals

encourage an ethics-based business

module that is both market and business

driven. It also states that, in its pursuit

for profits, business must also contribute

positive outcomes to society, nature and

all creation. At the minimum it must not

bring harm and diminish value to society,

nature and creation.

As we move forward as one of the

fastest growing corporations in Malaysia,

Pedoman will help us overcome various

future challenges that might arise from

the size of the business, its ever growing

complexity, as well as the effects of

external shifts and changes.

Pedomans open and informal concept

which encourages mutual trust, faith

and confidence, will enable the Group

to progress forward while maintaining

our dynamic focus as a reputable,

sustainable Group.

During the year, QSR and KFCH

simultaneously hosted a Group-wide Hari

Mekar. We are delighted to announce thatQSR has garnered the Overall Champions

Trophy for two years running. With the

theme Pursuit of Excellence in Quality,

Hari Mekar, an annual quality event

organised by Johor Corporation, is a

quality movement that allows participants

to showcase their innovative ideas on

ways to increase sales, reduce costs,

enhance profitability, improve efficiency

and move creativity. Through the setup

of a quality focus in the Group, several

teams have been formed to propel this

quality movement, including suggestion

scheme teams, innovative and creative

circle teams and cross functional teams.

Hari Mekar encourages staff to put their

thinking caps on and come up with ideas

that can take the Group to a higher level.

IMPROVING GOVERNANCE

Realising the importance of strong

governance, QSR adheres to the

fundamental principles of disclosure and

transparency as a means to help realise

long term shareholder value. Taking into

account the interests of our many


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stakeholders, we try our utmost best

to be transparent in all our corporate

activities. Furthermore, for better

governance control, we ensure that all

staff, from the top management right

down to our service and front line,

adopt the highest ethical standards

and practise a strong sense of due

diligence, responsibility and absolute

integrity in all their business dealings.

BEING A RELIABLE, SUSTAINABLE

CORPORATE CITIZEN

QSR is highly committed in giving back

to the communities in which we serve and

operate. On a day-to-day basis, we work

together with all our stakeholders our

people, suppliers, governmental and NGO

bodies, right up to our shareholders to

help create a more sustainable approach

in how we operate our business. When

we act in a sustainable manner from

how we govern our business and enhanceour people skills right up to how we help

communities in need, we express our

respect for all of those around us. It is

about doing good and acting in an

honest, reliable manner.

Halalcompliance, a vital part of our

business, is duly recognised as our core

Corporate Social Responsibility. Other

than embedding halalpractices into our

processes, the company sponsors the

World Halal Forum and the Malaysia

International Halal Showcase, both

of which involve the promotion of our

many products.

The Group also participated at the

annual Halal Food Standards Realisation

(HAFSTAR) MS 1500:2004. The halal

market is not just for the Muslim community.

The concept of halalwhich puts great

emphasis on cleanliness, hygiene anda healthy lifestyle has also captured the

interest of non-Muslims globally. Having

identified halalas one of QSRs critical

success factors, we have put in place an

elaborate and professional halalAudit

infrastructure, the first of its kind in

Malaysias foods industry.

We also believe in the all encompassing

power of knowledge. As one of the

building blocks of the country, we heeded

the Governments call to increase English

proficiency in local schools. Pizza Hutsponsors The Star Newspaper-in-Education

(NIE), a programme that is supported by

the Ministry of Education, and helps students

grasp the internationally used language

of the masses. In 2008, close to 94,000

students from 362 schools throughout the

country participated in the programme.

Also well known as a health conscious

Group, QSR continues to promote a

healthy, active lifestyle especially in the

sponsorship programmes related to local

sports activities. We are proud to

associate ourselves with some of the

leading sporting personalities in the

country, including Datuk Nicole David,

through our support of squash in Malaysia.

We sponsor a state-of-the-art glass squash

court used by the Malaysian Squash

Association in some of the leading

tournaments in the country, including

the Malaysian CIMB Open 2008.

In addition, our subsidiary QSR, supports

the Johor FC football team. The Group

also sponsors the Malaysian Yachting

Association and futsal activities, with the

aim of encouraging young Malaysians to

pursue sports not only as a hobby, but

also as a means to garner international

recognition for oneself and country. Indee

some of the sailors trained under the

Association have made us and Malaysia

proud in some of the leading Yachting

competitions in Malaysia as well asinternationally.

Another cause close to our hearts is

entrepreneur development. A collaborative

effort with Johor Corporations, the

entrepreneurial development programmes

Tunas Bistari, Didik Bistari and Siswa

Bistari, help develop entrepreneurial skills

among young, talented Malaysians so tha

they are both market as well as global

ready individuals.


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A new name and a new logo, but the

same commitment to quality, service

and great taste. RasaMas currently

operates 36 restaurants in Malaysia.


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Fast, convenient, and gaining an

ever wide following, Ayamas currently

operates 27 stores selling freezer to

fryer and shelf chicken products,

roasters and snacks.


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Under our Intrapreneurship Development

programme, Johor Corporation has

initiated Catur Bistari a Malaysian

business board game which cultivates

entrepreneurial skills amongst the younger

generation. Developed by Bistari Young

Intraprenuers, a subsidiary of Johor

Corporation, the investment game is

currently sold at KFC outlets nationwide.

As part of our CSR effort, KFC alsoorganises and sponsors Catur Bistari

competitions yearly to encourage

entrepreneurship developmental skills

amongst Malaysians. This is part of our

CSR marketplace initiative, aimed at making

a success of Malaysias developmental

program in the next lap in the countrys

economic growth. This next lap has

obviously to be more business-driven

than before, thus relying extensively

on the role to be played by the countrys

entrepreneurs, and QSR has positioned

itself to play a strong supportive role.

In addition, we continue to extend

our hands and hearts to the less

fortunate. QSR and KFCH continued

the sponsorship of three episodes per

year of Tijarah Ramadhan a television

programme that helps many poverty

stricken families in Malaysia.

We also actively participated in the Yum!

Brands Annual World Hunger Relief

Campaign. The campaign, the worlds

largest volunteer movement and private

sector effort to combat hunger, aims

to help stop world hunger through

volunteerism and increased donations

to benefit the United Nations World Food

Programme (WFP) and other hunger relief

agencies. In 2008, KFC and Pizza HutMalaysias Hunger Relief Period 2008

campaign raised RM1million for charity.

Our Projek Penyayang founded in 1996,

is our avenue to feed and reach orphaned

and underprivileged children. Organised

every quarter, to date around 150 charitable

homes and institutions throughout the

country continue to receive finger lickin

good KFC meals.

AWARDS AND ACCOLADES

Our commitment to quality has not gone

unnoticed. Throughout the year, QSR has

been recognised and awarded for amongst

others, product excellence, marketing

excellence and brand promise delivery.

Pizza Huts commitment to winning

over Malaysian consumers, won the

Brand Laureate Award 2008-2009

excellence in Product Branding as

well as the Gold Trusted Brand for the

Readers Digest Trusted Brand poll,

considered the regions leading, objective

barometer of brand performance.

In addition, for our continuous dedication

and hard work, Pizza Hut Malaysia became

the proud recipient of two Yum! awards

- the Best Home Service award and the

White Plate Award. The Best Home Servic

Award was given for the outstanding

achievement in building Pizza Hut as a

strong brand and sales in Home Service.

Another feather in our cap is Pizza HutsBronze Award win at the 1st Malaysia

Effie Awards 2008 for the effectiveness

of the Sensasi Delight Campaign. The

Effie Awards programme is presented

annually in the United States by the New

York American Marketing Association in

recognition of the years most effective

marketing communications campaigns.

It is acknowledged as the most

recognised award by companies in

the communications industry.

KFCH, our subsidiary, received the

Gold Trusted Brand award in the Readers

Digest Trusted Brand poll. It was also

awarded the Brand Laureate Award 2008

-2009 for Brand Excellence in Product

Branding under the Fast Foods Chicken

Category, while Ayamas received the

Brand Laureate Award 2008-2009 for

Excellence in Product Branding under

the Chicken Based Products category.


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05 corporate statement

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