15 financial statements

Annual Report 2006

61 6161

Directors’ Report 62

Statement by Directors 67

Statutory Declaration 67

Report of the Auditors 68

Income Statements 69

Balance Sheets 70

Statements of Changes in Equity 71

Cash Flow Statements 72

Notes to the Financial Statements 74

List of Properties Held 127

Analysis of Shareholdings 138

Form of Proxy

Financial Statements

KFC HOLDINGS (MALAYSIA) BHD (65787-T)

62

Directors’ Report

The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2006.

PRINCIPAL ACTIVITIES

The principal activities of the Company are that of investment holding and provision of management services. The subsidiaries are primarily engaged in the operations of:

• restaurants

• integrated poultry - breeder farms - hatchery - feedmill - poultry processing and further processing plants - poultry retail and convenience food store chain • ancillary - bakery - commissary - sauce manufacturing plant - trading in consumables

• property holding • investment holding RESULTS Group Company RM’000 RM’000 Profit for the year 99,049 28,708

Attributable to: Equity holders of the Company 98,280 28,708 Minority interests 769 -

99,049 28,708

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

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature other than those disclosed in Note 5 to the financial statements.

Annual Report 2006

63

DIVIDENDS

The amount of dividends paid by the Company since 31 December 2005 were as follows:

RM’000

In respect of the financial year ended 31 December 2005 as reported in the directors’ report of that year: Final dividend of 6 sen less 28% taxation per share, on 198,274,670 ordinary shares, declared on 11 May 2006 and paid on 18 July 2006 8,566

In respect of the financial year ended 31 December 2006: Interim dividend of 4 sen less 28% taxation per share, on 198,274,670 ordinary shares, declared on 16 May 2006 and paid on 3 August 2006 5,710

At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 December 2006, of 14 sen less 28% taxation per share on 198,274,682 ordinary shares, amounting to a dividend payable of RM19,986,000 (10.1 sen net per ordinary share) will be proposed for shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in shareholders’ equity as an appropriation of retained earnings in the financial year ending 31 December 2007.

Directors’ Report

DIRECTORS

The names of the directors of the Company in office since the date of the last report and at the date of this report are: Tan Sri Dato’ Muhammad Ali bin Hashim (Appointed as director on 27 June 2006 & Chairman on 2 July 2006)Ahamad bin Mohamad (Appointed as director on 27 June 2006 & Deputy Chairman on 2 July 2006)Jamaludin bin Md Ali (Appointed as director on 27 June 2006 & Managing Director on 2 July 2006)Mohd Zam bin Mustaman (Appointed as director on 27 June 2006 & Executive Director on 1 August 2006) Kua Hwee Sim (Appointed on 27 June 2006) Rita a/p Benoy Bushon Hassim bin Baba Abdul Wahab bin Jaafar Sidek (Appointed on 15 February 2007) Dato’ Seri Abdul Ghani bin Abdul Aziz (Resigned on 24 January 2007) Dato’ Mohd Salleh bin Haji Hashim (Resigned on 1 January 2007) Datuk Johari bin Abdul Ghani (Resigned on 17 July 2006) Tan Sri Dato’ Nik Ibrahim Kamil bin Tan Sri Nik Ahmad Kamil (Resigned on 27 June 2006)Toh Chun Wah (Not re-elected as director on 27 June 2006)Nurolamin bin Abas (Not re-elected as director on 27 June 2006)Ahmad Aznan bin Mohd Nawawi (Not re-elected as director on 27 June 2006)Lim Kuan Yew (Not re-elected as director on 27 June 2006)Dato’ Abdullah bin Ngah (Not re-elected as director on 27 June 2006)Yoong Nim Chor (Not re-elected as director on 27 June 2006)Umar bin Abdul Hamid (Not re-elected as director on 27 June 2006)Dato’ Subahan bin Kamal (Not re-elected as director on 27 June 2006)Michael Tang Vee Mun (Not re-elected as director on 27 June 2006)


64

DIRECTORS’ BENEFITS Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement, to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company as shown in Note 9 to the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 35 to the financial statements. DIRECTORS’ INTERESTS According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows: Number of Ordinary Shares of RM1.00 Each 1 January 31 December 2006 Acquired Sold 2006

The Company

Direct Interest Hassim bin Baba 100 - - 100 Ahamad bin Mohamad 100 * - 100 - Corporate ShareholderQSR Brands Bhd

Direct Interest Ahamad bin Mohamad 100 * - 100 -

* At date of appointment None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year. ISSUE OF SHARES During the financial year, the Company increased its issued and paid-up share capital from RM198,274,670 to RM198,274,682 by way of the issuance of 12 new ordinary shares of RM1.00 each upon the conversion of 12 warrants at the exercise price of RM9.50 each. The share premium of RM102 arising from the issuance of the shares at the exercise price above the nominal value of RM1.00 each share has been credited to the share premium account. The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company. WARRANTS The main features of the warrants are disclosed in Note 24 to the financial statements.

Directors’ Report

Annual Report 2006

65

OTHER STATUTORY INFORMATION

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

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

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

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

(i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group

and of the Company inadequate to any substantial extent; and

(ii) the values attributed to the current assets in the financial statements of the Group and of the Company misleading. (c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the

existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

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

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

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

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

(f ) In the opinion of the directors:

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

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

Directors’ Report


66

AUDITORS

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

Signed on behalf of the Board in accordance with a resolution of the directors dated 28 March 2007.

TAN SRI DATO’ MUHAMMAD ALI BIN HASHIM JAMALUDIN BIN MD ALIChairman Managing Director

Directors’ Report

Annual Report 2006

67

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

We, TAN SRI DATO’ MUHAMMAD ALI BIN HASHIM and JAMALUDIN BIN MD ALI, being two of the directors of KFC HOLDINGS (MALAYSIA) BHD, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 69 to 126 are drawn up in accordance with the provisions of the Companies Act, 1965 and applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2006 and of the results and the cash flows of the Group and of the Company for the year then ended. Signed on behalf of the Board in accordance with a resolution of the directors dated 28 March 2007.

TAN SRI DATO’ MUHAMMAD ALI BIN HASHIM JAMALUDIN BIN MD ALIChairman Managing Director

Statutory Declaration

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

I, MOHAMMAD BIN ALWI, being the officer primarily responsible for the financial management of KFC HOLDINGS (MALAYSIA) BHD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 69 to 126 are in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed MOHAMMAD BIN ALWI at Kuala Lumpur in the Federal Territory on 28 March 2007 MOHAMMAD BIN ALWI

Before me

Maisharah binti Abu Hasan (W181)Commissioner for Oaths

Statement by Directors


68

We have audited the accompanying financial statements set out on pages 69 to 126. These financial statements are the responsibility of the Company’s directors.

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

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

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

MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities so as to give a true and fair view of: (i) the financial position of the Group and of the Company as at 31 December 2006 and of the results and the cash flows of the Group

and of the Company for the year then ended; and

(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and (b) the accounting and other records and the registers required by the Act to be kept by the Company and by its subsidiaries of which we

have acted as auditors have been properly kept in accordance with the provisions of the Act. We have considered the financial statements and auditors’ reports thereon of the subsidiaries of which we have not acted as auditors, as indicated in Note 14 to the financial statements, being financial statements that have been included in the consolidated financial statements. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.

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

ERNST & YOUNG MOHD SUKARNO BIN TUN SARDON AF: 0039 No. 1697/03/09 (J) Chartered Accountants Partner Kuala Lumpur, Malaysia28 March 2007

Report of the Auditors TO THE MEMBERS OF KFC HOLDINGS (MALAYSIA) BHD

Annual Report 2006

69

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

Income StatementsFOR THE YEAR ENDED 31 DECEMBER 2006

Group Company Note 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 (restated)

Revenue 3 1,523,839 1,456,547 22,454 25,457 Cost of sales 4 (639,307) (626,684) - -

Gross profit 884,532 829,863 22,454 25,457 Other income 17,744 18,665 93,132 83,859 Administrative expenses (106,339) (101,754) (29,842) (27,437)Selling and marketing expenses (636,714) (599,033) - - Other expenses 5 (1,957) (112,065) (28,335) (28,221)

Operating profit 157,266 35,676 57,409 53,658

Finance costs 6 (14,962) (30,113) (8,813) (22,743)

Profit before tax 7 142,304 5,563 48,596 30,915 Income tax expense 10 (43,255) (37,252) (19,888) (16,518)

Profit/(loss) for the year 99,049 (31,689) 28,708 14,397

Attributable to: Equity holders of the Company 98,280 (32,459) Minority interests 769 770

99,049 (31,689)

Earnings/(loss) per share attributable to equity holders of the Company (sen): Basic, for profit for the year 11 49.6 (16.4)


70


Balance SheetsAS AT 31 DECEMBER 2006

Group Company Note 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 (restated)

ASSETS

Non-current assets Property, plant and equipment 13 500,393 372,630 16,987 3,955 Investments in subsidiaries 14 - - 379,623 405,458 Investment properties 15 2,000 2,000 585 585 Prepaid land lease payments 16 62,687 46,436 - - Intangible assets 17 67,033 64,784 - - Other investments 18 4,500 4,945 - - Fixed deposits 19 15,793 21,000 15,793 21,000

652,406 511,795 412,988 430,998

Current assets Properties held for sale 20 5,162 141,967 - 10,759 Inventories 21 99,475 78,818 - - Trade and other receivables 22 67,798 69,920 183,786 202,934 Cash and bank balances 23 149,237 123,172 21,757 16,509

321,672 413,877 205,543 230,202

TOTAL ASSETS 974,078 925,672 618,531 661,200

EQUITY AND LIABILITIES:

Equity attributable to equity holders of the Company

Share capital 24 198,275 198,275 198,275 198,275 Other reserves 25 50,177 42,748 26,406 23,258 Retained earnings 26 280,024 196,020 252,673 238,241

528,476 437,043 477,354 459,774 Minority interests 5,865 5,312 - -

Total equity 534,341 442,355 477,354 459,774

Non-current liabilities Retirement benefit obligations 27 2,971 2,587 - 1,375 Borrowings 28 123,028 138,442 60,000 60,000 ABBA NIF 29 5,000 65,000 5,000 65,000 Deferred tax liabilities 30 29,722 32,102 414 373

160,721 238,131 65,414 126,748

Current liabilities Retirement benefit obligations 27 235 228 - -Borrowings 28 12,367 17,015 - - ABBA NIF 29 60,000 60,000 60,000 60,000 Trade and other payables 31 203,624 163,126 15,763 14,678 Current tax payable 2,790 4,817 - -

279,016 245,186 75,763 74,678

Total liabilities 439,737 483,317 141,177 201,426

TOTAL EQUITY AND LIABILITIES 974,078 925,672 618,531 661,200

Annual Report 2006

71

Attributable to Equity Holders of the Company Minority Total Non-Distributable Distributable Interests Equity Exchange Share Share Capital Fluctuation Revaluation Retained Capital Premium Reserve Reserve Reserve Earnings TotalGroup Note (Note 24) (Note 25) (Note 25) (Note 25) (Note 25) (Note 26) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 January 2005 As previously stated 198,275 18,736 1,790 (13) - 257,952 476,740 7,332 484,072 Prior year adjustment 36 - - - - - (922) (922) - (922)

At 1 January 2005 (restated) 198,275 18,736 1,790 (13) - 257,030 475,818 7,332 483,150 Revaluation surplus, net of deferred tax: Land and buildings - - - - 21,881 - 21,881 - 21,881 Acquisition of subsidiaries - - - - - - - (2,574) (2,574)Translation differences - - - 354 - - 354 - 354 (Loss)/profit for the year - - - - - (32,459) (32,459) 770 (31,689)Equity dividends 12 - - - - - (28,551) (28,551) - (28,551)Dividend of a subsidiary - - - - - - - (216) (216)

At 31 December 2005 198,275 18,736 1,790 341 21,881 196,020 437,043 5,312 442,355

At 1 January 2006 As previously stated 198,275 18,736 1,790 341 21,881 197,924 438,947 5,312 444,259 Prior year adjustment 36 - - - - - (1,904) (1,904) - (1,904)

At 1 January 2006 (restated) 198,275 18,736 1,790 341 21,881 196,020 437,043 5,312 442,355 Revaluation surplus, net of deferred tax: Land and buildings - - - - 7,388 - 7,388 - 7,388 Translation differences - - - 41 - - 41 - 41 Profit for the year - - - - - 98,280 98,280 769 99,049 Equity dividends 12 - - - - - (14,276) (14,276) - (14,276)Dividend of a subsidiary - - - - - - - (216) (216)

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

Non-Distributable Distributable Share Share Capital Revaluation Retained Total Capital Premium Reserve Reserve Earnings Equity Company Note (Note 24) (Note 25) (Note 25) (Note 25) (Note 26) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2005 198,275 18,721 4,459 - 252,395 473,850 Revaluation surplus, net of deferred tax: Land and buildings - - - 78 - 78 Profit for the year - - - - 14,397 14,397 Dividends 12 - - - - (28,551) (28,551)

At 31 December 2005 198,275 18,721 4,459 78 238,241 459,774

At 1 January 2006 198,275 18,721 4,459 78 238,241 459,774 Revaluation surplus, net of deferred tax: Land and buildings - - - 3,148 - 3,148Profit for the year - - - - 28,708 28,708 Dividends 12 - - - - (14,276) (14,276)

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


Statements of Changes in EquityFOR THE YEAR ENDED 31 DECEMBER 2006


72

Cash Flow StatementsFOR THE YEAR ENDED 31 DECEMBER 2006

Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 142,304 5,563 48,596 30,915 Adjustments for: Amortisation of franchise fees 3,116 2,847 - - Franchise fees written off 60 - - - Depreciation of property, plant and equipment 57,351 56,494 1,517 1,790 Amortisation of prepaid land lease payments 788 - - - Impairment loss on - land and buildings 60 24,093 - - - properties held for sale - 65,813 - - - plant and equipment - 2,669 - - - goodwill - 1,566 - - - intercompany loans - - 2,500 16,100 Gain on fair value adjustment on investment properties - (1,160) - (440) Interest expense 9,294 9,451 3,145 2,081 Redemption of Secondary Notes 5,668 20,662 5,668 20,662 Loss/(gain) on disposal of property, plant and equipment 1,895 11,177 (550) 1,440 Gain on disposal of properties held for sale (22) - (32) - Retirement benefits 527 1,818 (1,375) 1,375 Dividend income from - quoted investments - (9) - - - subsidiaries - - (83,000) (71,831) Interest income (3,371) (3,174) (7,838) (10,228) Loss on disposal of quoted investments 2 - - - Provision for diminution in value of investments in subsidiaries - - 25,835 5,600 Provision for diminution in value of quoted investments - 410 - -

Operating profit/(loss) before working capital changes 217,672 198,220 (5,534) (2,536)

Inventories (20,657) 4,513 - - Receivables (1,817) 91,693 (147) 88,282 Subsidiaries - - 17,537 58,783 Related companies 11,882 7,967 - - Payables 32,555 1,980 1,085 (1,395)

Cash generated from operations 239,635 304,373 12,941 143,134

Secondary Notes redeemed (5,668) (20,662) (5,668) (20,662) Interest paid (9,294) (9,451) (3,145) (2,081) Taxes paid (48,125) (30,677) (499) (500) Retirement benefits paid (136) (41) - -

Net cash generated from operating activities 176,412 243,542 3,629 119,891

Annual Report 2006

73

Cash Flow StatementsFOR THE YEAR ENDED 31 DECEMBER 2006

Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (69,581) (36,529) (532) (77)Proceeds from disposal of property, plant and equipment 1,602 21,680 550 38 Proceeds from disposal of properties held for sale 8,549 - 132 - Proceeds from disposal of quoted investments 443 - - - Franchise fees (5,425) (1,977) - - Acquisition of/Investment in subsidiaries - (3,101) - (58,101)Interest received 3,371 3,174 7,838 10,228 Exchange translation adjustments 41 354 - - Net dividends received from - quoted investments - 9 - - - subsidiaries - - 62,700 53,631

Net cash (used in)/generated from investing activities (61,000) (16,390) 70,688 5,719

CASH FLOWS FROM FINANCING ACTIVITIES

Drawdown of bank borrowings - 60,000 - 60,000 Repayment of bank borrowings (20,062) (26,477) - - Repayment of ABBA NIF (60,000) (145,000) (60,000) (145,000)Placement in deposits - (21,000) - (21,000)Reduction in the restriction on deposits pledged with licensed bank 5,207 - 5,207 - Payment of dividend to shareholders of the Company (14,276) (28,551) (14,276) (28,551)Payment of dividend to minority interest in a subsidiary (216) (216) - - Payment to hire purchase creditors - (3,019) - (314)

Net cash used in financing activities (89,347) (164,263) (69,069) (134,865)

NET CHANGE IN CASH AND CASH EQUIVALENTS 26,065 62,889 5,248 (9,255)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 123,172 60,283 16,509 25,764

CASH AND CASH EQUIVALENTS AT END OF YEAR (NOTE 23) 149,237 123,172 21,757 16,509



74

1. CORPORATE INFORMATION

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

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

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 28 March 2007.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation

The financial statements of the Group and of the Company have been prepared on a historical basis, unless otherwise disclosed in significant accounting policies, and comply with the provisions of the Companies Act, 1965 and applicable MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities.

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

2.2 Summary of Significant Accounting Policies (a) Subsidiaries and Basis of Consolidation (i) Subsidiaries

Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.

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

(ii) Basis of Consolidation

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

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

Notes to the Financial Statements31 DECEMBER 2006

Annual Report 2006

75

2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.)

2.2 Summary of Significant Accounting Policies (Contd.) (a) Subsidiaries and Basis of Consolidation (Contd.)

(ii) Basis of Consolidation (Contd.)

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

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

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

(b) Intangible Assets (i) Goodwill Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of business

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

(ii) Other Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired

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

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

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



76



2.2 Summary of Significant Accounting Policies (Contd.)

(b) Intangible Assets (Contd.)

(ii) Other Intangible Assets (Contd.)

Pre-production and pre-processing expenses for which future measurable economic benefits are expected to be derived, are amortised on a straight line basis over 15 years.

(c) Property, Plant and Equipment and Depreciation

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

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

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

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

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

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

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

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

Annual Report 2006

77




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

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

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

(d) Investment Properties Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Such

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

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

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

Investment properties are derecognised when either they have been disposed of or when the investment property is

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

(e) Impairment of Non-financial Assets The carrying amounts of assets, other than investment property, inventories, deferred tax assets and non-current assets (or

disposal groups) held for sale, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss.

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

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


78



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

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

An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued

amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset.

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

(f) Inventories

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

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

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

(g) Financial Instruments

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

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


Annual Report 2006

79



(g) Financial Instruments (Contd.)

(i) Cash and Cash Equivalents For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at bank, deposit at

call and short term highly liquid investments which have an insignificant risk of changes in value, net of outstanding bank overdrafts.

(ii) Other Non-current Investments

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

(iii) Marketable Securities

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

(iv) Trade Receivables Trade receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is

made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date. (v) Trade Payables Trade payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services

received.

(vi) Interest Bearing Loans and Borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable

transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

(vii) Equity Instruments Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they

are declared and approved by the shareholders.

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



80



(g) Financial Instruments (Contd.)

(vii) Equity Instruments (Contd.)

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

(h) Leases

(i) Classification

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

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

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

(ii) Operating Leases - the Group as Lessee

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

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

(i) Borrowing Costs

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


Annual Report 2006

81



(i) Borrowing Costs (Contd.)

All other borrowing costs are recognised in profit or loss in the period in which they are incurred. (j) Income Tax

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

Deferred tax is provided for, using the liability method. In principle, deferred tax liabilities are recognised for all taxable

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

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

(k) Provision Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow

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

(l) Employee Benefits

(i) Short Term Benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated

services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.



82



(l) Employee Benefits (Contd.)

(ii) Defined Contribution Plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into

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

(iii) Defined Benefit Plans

The Company and certain subsidiaries operate an unfunded, defined benefit Retirement Benefit Scheme (“the Scheme”) for its eligible employees. Their obligation under the Scheme, calculated using Projected Unit Credit Method, is determined based on actuarial computations by independent actuary, through which the amount of benefit that employees have earned in return for their service in the current and prior years is estimated. That benefit is discounted in order to determine its present value. Actuarial gains and losses are recognised as income or expense over the expected average remaining working lives of the participating employees when the cumulative unrecognised actuarial gains or losses for the Scheme exceed 10% of the higher of the present value of the defined benefit obligation and the fair value of plan assets. Past service costs are recognised immediately to the extent that the benefits are already vested, and otherwise are amortised on a straight-line basis over the average period until the amended benefits become vested.

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

(iv) Termination Benefits Termination benefits are payable when employment is terminate before the normal retirement date or whenever an

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

(m) Foreign Currencies

(i) Functional and Presentation Currency

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


Annual Report 2006

83



(m) Foreign Currencies (Contd.) (ii) Foreign Currency Transactions

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

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

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

(iii) Foreign Operations

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

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

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

- All resulting exchange differences are taken to the foreign currency translation reserve within equity. Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are treated

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



84



(m) Foreign Currencies (Contd.)

(iii) Foreign Operations (Contd.)

The principal exchange rates used for every unit of foreign currency are as follows: Year end rates Average rates 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 Hong Kong (HK$) 0.4658 0.4997 0.4827 0.4966 Brunei Darussalam (B$) 2.3230 2.2930 2.3110 2.2737 Singapore (S$) 2.3225 2.2925 2.3110 2.2737

(n) Revenue Recognition

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

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

(ii) Dividend income is recognised when the Group’s right to receive payment is established. (iii) Other revenues are recognised on an accrual basis or when the right of receipt has been established. (iv) Management fees are recognised when services are rendered.

Intercompany sales are excluded from the revenue of the Group.

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

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

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

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


Annual Report 2006

85

2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.3 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised FRSs On 1 January 2005, the Group and the Company have early adopted FRSs mandatory for financial periods beginning on or after 1

January 2006.

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

The Group has not early adopted the deferred FRS 139 - Financial Instruments: Recognition and Measurement and the following FRSs or amendment which are mandatory for application for annual financial period on or after 1 January 2007:

FRS 124 Related Party Disclosures (effective date: annual periods beginning on or after 1 October 2006)

FRS 6 Exploration for and Evaluation of Mineral Resources (effective date: annual periods beginning on or after 1 January 2007)

FRS 1192004 Employee Benefits – Actuarial Gains and Losses, Group Plans and Disclosures (effective date: annual periods beginning on or after 1 January 2007)

The directors anticipate that the adoption of FRS 119 and FRS 124 in future periods will not have a material impact on the financial statements of the Group except for additional disclosure requirements. FRS 6 is not applicable to the Group.

The principal changes in accounting policies and their effects resulting from the adoption of FRS 117 is discussed below: (a) FRS 117: Leases

(i) Leasehold Land Held for Own Use

Prior to 1 January 2006, leasehold land held for own use was classified as property, plant and equipment and was stated at cost less accumulated depreciation and impairment losses. The adoption of the revised FRS 117 has resulted in a change in the accounting policy relating to the classification of leases of land and buildings. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. Leasehold land held for own use is now classified as operating lease and where necessary, the minimum lease payments or the up-front payments made are allocated between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. The up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term.

The Group has applied the change in accounting policy in respect of leasehold land in accordance with the transitional provisions of FRS 117. At 1 January 2006, the unamortised amount of leasehold land is retained as the surrogate carrying amount of prepaid lease payments as allowed by the transitional provisions.The reclassification of leasehold land as prepaid lease payments has been accounted for retrospectively and as disclosed in Note 2.3(b), comparative has been restated.



86

2. SIGNIFICANT ACCOUNTING POLICIES (CONTD.) 2.3 Changes in Accounting Policies and Effects Arising from Adoption of New and Revised FRSs (Contd.)

(a) FRS 117: Leases (Contd.)

(ii) Initial Direct Costs Prior to 1 January 2006, the Group, as a lessor in operating lease arrangements, had recognised initial direct costs incurred

in negotiating and arranging leases as an expense in the profit or loss in the period in which they were incurred. The revised FRS 117 requires such costs to be added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income. According to the revised FRS 117, this change in accounting policy should be applied retrospectively. In general, the Group does not incur significant initial direct costs on negotiating and arranging leases and as a result, this change in accounting policy did not materially affect the financial statements of the Group and the Company.

(b) Restatement of Comparative

The following comparative amount has been restated as a result of adopting FRS 117: Previously Increase/ Stated (Decrease) Restated Description of change RM’000 RM’000 RM’000 At 31 December 2005

Group

Property, plant and equipment 419,066 (46,436) 372,630 Prepaid land lease payments - 46,436 46,436 2.4 Significant Accounting Estimates and Judgements (a) Critical Judgements Made in Applying Accounting Policies

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

Classification between Investment Properties and Owner-Occupied Properties The Group has developed certain criteria based on FRS 140 in making judgement whether a property qualifies as an investment

property. Investment property is a property held to earn rentals or for capital appreciation or both.

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


Annual Report 2006

87


2.4 Significant Accounting Estimates and Judgements (Contd.)

(b) Key Sources of Estimation Uncertainty

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

(i) Impairment of Goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value-

in-use of the cash-generating units (“CGU”) to which goodwill is allocated. Estimating a value-in-use amount requires management to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill as at 31 December 2006 was RM42,762,000 (2005: RM42,762,000). Further details are disclosed in Note 17.

(ii) Deferred Tax Assets Deferred tax assets are recognised for all unused tax losses and unabsorbed capital allowances to the extent that it is

probable that taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The total carrying value of recognised tax losses, capital allowances and reinvestment allowances of the Group was RM46,189,000 (2005: RM37,693,000) and the unrecognised tax losses, capital allowances and reinvestment allowances of the Group was RM75,711,000 (2005: RM70,072,000).

3. REVENUE

Revenue of the Group and of the Company consists of the following:

Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 Sale of goods 1,522,147 1,455,129 - - Management fees from subsidiaries - - 20,762 24,039 Management fees from a subsidiary of a corporate shareholder 1,692 1,418 1,692 1,418

1,523,839 1,456,547 22,454 25,457

Revenue for the Group represents cash and invoiced amount for sales of goods and services rendered after allowing for sales discounts

and returns and excludes intra-group transactions.



88

4. COST OF SALES Cost of sales represents cost of inventories sold.

5. OTHER EXPENSES

Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000

Impairment loss on - land and buildings 60 24,093 - - - properties held for sale - 65,813 - - - plant and equipment - 2,669 - - - goodwill - 1,566 - - - intercompany loans - - 2,500 16,100

60 94,141 2,500 16,100 Loss on disposal of property, plant and equipment - store closure - 9,404 - - - others 1,895 1,773 - 1,440 Loss on disposal of quoted investments 2 - - - Gain on fair value adjustment on investment properties (Note 15) - (1,160) - (440) Provision for diminution in value of quoted investments - 410 - - Provision for diminution in value of investments in subsidiaries - - 25,835 5,600 Contractual obligations - 7,497 - 5,521

1,957 112,065 28,335 28,221

6. FINANCE COSTS

Interest payable - bank overdrafts - 4 - - - hire purchase interest - 186 - 16 - loans, bankers acceptances and others 8,451 8,129 3,145 2,065 - subsidiary of a corporate shareholder 843 1,132 - - Redemption of Secondary Notes 5,668 20,662 5,668 20,662

14,962 30,113 8,813 22,743


Annual Report 2006

89

7. PROFIT BEFORE TAX

The following amounts have been included in arriving at profit before tax: Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 Employee benefits expense (Note 8) 261,930 241,498 13,037 11,920 Non-executive Directors’ remuneration (Note 9) (109) 423 (111) 423 Auditors’ remuneration - statutory audits 438 405 41 41 - (over)/under provision in prior year (11) - - 1 - other services 717 207 548 41 Amortisation of franchise fees 3,116 2,847 - - Franchise fees written off 60 - - - Depreciation of property, plant and equipment (Note 13) 57,351 56,494 1,517 1,790 Amortisation of prepaid land lease payments (Note 16) 788 - - - Rental of land and buildings 100,612 97,936 3,190 3,176 Gross dividends - unquoted subsidiaries - - (83,000) (71,831) - quoted investments - (9) - - Interest receivable - subsidiaries - - (6,809) (8,235) - deposits with licensed banks and financial institutions (3,343) (2,659) (1,028) (1,992) - subsidiary of a corporate shareholder - (437) - - - others (28) (78) (1) (1) Gain on disposal of property, plant and equipment - - (550) - Gain on disposal of properties held for sale (22) - (32) - Rental income - subsidiaries - - (46) (46) - subsidiary of a corporate shareholder (795) (721) - - - others (1,916) (2,193) (1,666) (1,755) Franchise fees income (256) (238) - -

8. EMPLOYEE BENEFITS EXPENSE Wages and salaries 168,091 156,382 8,749 7,020 Social security contribution 1,983 1,856 77 63 Contributions to defined contribution plan 20,739 20,027 1,464 1,085 Increase/(decrease) in liability for defined benefit plan (Note 27) 527 1,818 (1,375) 1,375 Termination benefits 1,690 - 1,690 - Other benefits 68,900 61,415 2,432 2,377

261,930 241,498 13,037 11,920

Included in employee benefits expense of the Group and of the Company are Executive Directors’ remuneration amounting to

RM969,000 (2005: RM3,508,000) and RM967,000 (2005: RM2,750,000) respectively as further disclosed in Note 9.



90

9. DIRECTORS’ REMUNERATION Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000

Executive directors’ remuneration (Note 8): Fees 2 136 - - Other emoluments 967 3,372 967 2,750

969 3,508 967 2,750

Non-executive directors’ remuneration (Note 7): Fees - current year’s provision 139 370 137 370 - overprovision in prior year (370) - (370) - Other emoluments 122 53 122 53

(109) 423 (111) 423

Total directors’ remuneration 860 3,931 856 3,173 Estimated money value of benefits-in-kind 203 717 203 518

Total directors’ remuneration including benefits-in-kind 1,063 4,648 1,059 3,691

The details of remuneration receivable by directors of the Company during the year are as follows:

Executive: Salaries and other emoluments 823 2,270 823 1,809 Fees 2 136 - - Bonus - 603 - 523 Defined contribution plan 144 430 144 349 Defined benefit plan - 69 - 69 Estimated money value of benefits-in-kind 203 717 203 518

1,172 4,225 1,170 3,268

Non-Executive: Fees - current year’s provision 139 370 137 370 - overprovision in prior year (370) - (370) - Other emoluments 122 53 122 53

(109) 423 (111) 423

The executive Directors’ Remuneration in the above analysis includes remuneration of the Company’s former executive directors

totalling RM1,137,000 (2005: RM2,023,000).


Annual Report 2006

91

9. DIRECTORS’ REMUNERATION (CONTD.)

The number of directors of the Company whose total remuneration during the year fell within the following bands is analysed below: Number of Directors 2006 2005

Executive directors: Below RM50,000 2 - RM200,001 - RM300,000 3 2 RM300,001 - RM400,000 - 1 RM400,001 - RM500,000 1 - RM800,001 - RM900,000 - 1 RM900,001 - RM1,000,000 - 1 RM1,600,001 - RM1,700,000 - 1 Non-executive directors: Below RM50,000 13 11

10. INCOME TAX EXPENSE Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 (restated)

Current income tax: Malaysian income tax 44,998 38,428 20,800 16,630 Foreign tax 3,374 1,937 - -

48,372 40,365 20,800 16,630 Overprovision in prior years: Malaysian income tax (1,911) (592) (743) (85) Foreign tax (376) (1) - -

46,085 39,772 20,057 16,545

Real property gain tax (“RPGT”) 13 21 - -

Deferred tax (Note 30): Relating to origination and reversal of temporary differences 560 1,035 (107) - Relating to changes in tax rates (426) - (11) - Overprovision in prior years (2,977) (3,576) (51) (27)

(2,843) (2,541) (169) (27)

Total income tax expense 43,255 37,252 19,888 16,518

Domestic current income tax is calculated at the statutory tax rate of 28% (2005: 28%) of the estimated assessable profit for the year. The

domestic statutory tax rate will be reduced to 27% from the current year’s rate of 28%, effective year of assessment 2007 and to 26% effective year of assessment 2008. The computation of deferred tax as at 31 December 2006 has reflected these changes.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.



92

10. INCOME TAX EXPENSE (CONTD.)

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows:

2006 2005 Group RM’000 RM’000 Profit before tax 142,304 5,563

Taxation at Malaysian statutory tax rate of 28% (2005: 28%) 39,845 1,558 Different tax rates in other countries (723) (260) Effect of changes in tax rates on opening balance of deferred tax (405) - Deferred tax recognised at different tax rates (21) - Effect of income subject to tax rate of 20% (167) (410) Effect of income subject to RPGT rate of 5% 13 21 Income not subject to tax (2,448) (4,694) Expenses not deductible for tax purposes 11,971 45,455 * Overprovision of deferred tax in prior years (2,977) (3,576) Utilisation of previously unrecognised unabsorbed capital allowances and unutilised reinvestment allowances (106) - Utilisation of current year’s reinvestment allowances - (459) Deferred tax assets recognised on capital allowances (108) - Deferred tax not recognised in respect of current year’s tax losses and unabsorbed capital allowances 668 210 Overprovision of tax expense in prior years (2,287) (593)

Income tax expense for the year 43,255 37,252

* This comprise of non-qualifying expenditure, impairment losses, contractual obligations, etc.

Company Profit before tax 48,596 30,915

Taxation at Malaysian statutory tax rate of 28% (2005: 28%) 13,607 8,656 Effect of changes in tax rates on opening balance of deferred tax (11) - Deferred tax recognised at different tax rates 3 - Income not subject to tax (5,362) - Expenses not deductible for tax purposes 12,445 7,974 Overprovision of deferred tax in prior years (51) (27) Overprovision of tax expense in prior years (743) (85)

Income tax expense for the year 19,888 16,518


Annual Report 2006

93

10. INCOME TAX EXPENSE (CONTD.)

Tax saving during the financial year arising from: Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000

Utilisation of current year tax losses - 1 - - Utilisation of current year capital allowances 22,603 22,577 394 500 Utilisation of unabsorbed capital allowances brought forward from previous years 6,486 - - - Utilisation of current year reinvestment allowances 377 459 - -

11. EARNINGS/(LOSS) PER SHARE Basic earnings/(loss) per share amount is calculated by dividing the profit/(loss) for the year attributable to ordinary equity holders of

the Company by the weighted average number of ordinary shares in issue during the financial year.

Group 2006 2005 Profit/(loss) attributable to ordinary equity holders of the Company (RM’000) 98,280 (32,459) Weighted average number of ordinary shares in issue (‘000) 198,275 198,275 Basic earnings/(loss) per share (sen) 49.6 (16.4)



94

12. DIVIDENDS

Dividends Dividends in respect of Year Recognised in Year 2006 2005 2004 2006 2005 RM’000 RM’000 RM’000 RM’000 RM’000

Recognised during the year:

Final dividend for 2004: 10 sen less 28% taxation, on 198,274,670 ordinary shares (7.2 sen per ordinary share) - - 14,276 - 14,276 First interim dividend for 2005: 4 sen less 28% taxation, on 198,274,670 ordinary shares (2.9 sen per ordinary share) - 5,710 - - 5,710 Second interim dividend for 2005: 6 sen less 28% taxation, on 198,274,670 ordinary shares (4.3 sen per ordinary share) - 8,565 - - 8,565 Final dividend for 2005: 6 sen less 28% taxation, on 198,274,670 ordinary shares (4.3 sen per ordinary share) - 8,566 - 8,566 -

Interim dividend for 2006: 4 sen less 28% taxation, on 198,274,670 ordinary shares (2.9 sen per ordinary share) 5,710 - - 5,710 - Proposed for approval at AGM (not recognised as at 31 December): Final dividend for 2006: 14 sen less 28% taxation, on 198,274,682 ordinary shares (10.1 sen per ordinary share) 19,986 - - - -

25,696 22,841 14,276 14,276 28,551

At the forthcoming Annual General Meeting, a final dividend in respect of the financial year ended 31 December 2006, of 14 sen less 28% taxation per share on 198,274,682 ordinary shares, amounting to a dividend payable of RM19,986,000 (10.1 sen net per ordinary share) will be proposed for shareholders’ approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in shareholders’ equity as an appropriation of retained earnings in the financial year ending 31 December 2007.


Annual Report 2006

95

13. PROPERTY, PLANT AND EQUIPMENT Leasehold Improvements Restaurant Freehold and Plant and Motor and Office Land Buildings Renovation Machinery Vehicles Equipment Total Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 31 December 2006

Cost or valuation At 1 January 2006 At cost - 21,195 133,640 66,069 43,280 257,718 521,902

At valuation 36,120 127,415 - 74,876 - - 238,411

36,120 148,610 133,640 140,945 43,280 257,718 760,313 Reclassification from

properties held for sale 127,764 48,151 - - - - 175,915 Revaluation surplus 7,547 304 - - - - 7,851 Additions - 4,691 20,019 4,186 1,750 38,935 69,581 Disposals/write off - (366) (9,850) (6,896) (5,695) (12,365) (35,172)

At 31 December 2006 171,431 201,390 143,809 138,235 39,335 284,288 978,488

Representing: At cost - 25,520 143,809 64,662 39,335 284,288 557,614

At valuation 171,431 175,870 - 73,573 - - 420,874

At 31 December 2006 171,431 201,390 143,809 138,235 39,335 284,288 978,488

Accumulated Depreciation and Impairment Losses At 1 January 2006

Accumulated depreciation - 16,002 84,808 72,120 35,824 161,080 369,834 Accumulated impairment losses 178 17,671 - - - - 17,849

178 33,673 84,808 72,120 35,824 161,080 387,683 Reclassification from properties held for sale 58,555 6,121 - - - - 64,676 Impairment loss on revaluation - 60 - - - - 60 Depreciation charge for the year - 5,645 14,048 11,812 3,073 22,773 57,351 Disposals/write off - (366) (9,413) (6,552) (5,214) (10,130) (31,675)

At 31 December 2006 58,733 45,133 89,443 77,380 33,683 173,723 478,095

Analysed as: Accumulated depreciation - 21,281 89,443 77,380 33,683 173,723 395,510

Accumulated impairment losses 58,733 23,852 - - - - 82,585

58,733 45,133 89,443 77,380 33,683 173,723 478,095

Net Carrying Amount At cost - 11,507 54,366 35,551 5,652 110,565 217,641

At valuation 112,698 144,750 - 25,304 - - 282,752

At 31 December 2006 112,698 156,257 54,366 60,855 5,652 110,565 500,393



96

13. PROPERTY, PLANT AND EQUIPMENT (CONTD.) Leasehold Improvements Restaurant Freehold and Plant and Motor and Office Land Buildings Renovation Machinery Vehicles Equipment Total Group (Contd.) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 31 December 2005

Cost or valuation At 1 January 2005 155,449 232,724 145,940 181,758 43,437 296,596 1,055,904 Elimination of accumulated

depreciation on revaluation - (20,486) - - - - (20,486) Elimination of accumulated

impairment losses - (226) - - - - (226) Reclassification to

properties held for sale (130,730) (54,938) - - - - (185,668) Reclassification to

investment properties - (423) - - - - (423) Revaluation surplus 12,258 7,635 - - - - 19,893 Additions - - 12,727 7,733 517 15,552 36,529 Disposals (857) (15,676) (25,027) (48,310) (910) (54,430) (145,210) Reclassification - - - (236) 236 - -

At 31 December 2005 36,120 148,610 133,640 140,945 43,280 257,718 760,313

Representing: At cost - 21,195 133,640 66,069 43,280 257,718 521,902

At valuation 36,120 127,415 - 74,876 - - 238,411

At 31 December 2005 36,120 148,610 133,640 140,945 43,280 257,718 760,313

Accumulated Depreciation and Impairment Losses At 1 January 2005

Accumulated depreciation - 38,201 93,487 103,142 33,083 183,876 451,789 Accumulated impairment losses - 226 - - - - 226

- 38,427 93,487 103,142 33,083 183,876 452,015 Elimination of accumulated

depreciation on revaluation - (20,486) - - - - (20,486) Elimination of accumulated

impairment losses - (226) - - - - (226) Reclassification to

properties held for sale - (4,318) - - - - (4,318) Reclassification to

investment properties - (133) - - - - (133) Impairment loss on

plant and equipment - - 595 1,158 - 916 2,669 Impairment loss on revaluation 178 17,671 - - - - 17,849 Depreciation charge for the year - 4,008 12,421 14,174 3,686 22,205 56,494 Disposals - (1,270) (21,695) (46,352) (947) (45,917) (116,181) Reclassification - - - (2) 2 - -

At 31 December 2005 178 33,673 84,808 72,120 35,824 161,080 387,683


Annual Report 2006

97

13. PROPERTY, PLANT AND EQUIPMENT (CONTD.) Leasehold Improvements Restaurant Freehold and Plant and Motor and Office Land Buildings Renovation Machinery Vehicles Equipment Total Group (Contd.) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Analysed as: Accumulated depreciation - 16,002 84,808 72,120 35,824 161,080 369,834

Accumulated impairment losses 178 17,671 - - - - 17,849

178 33,673 84,808 72,120 35,824 161,080 387,683

Net Carrying Amount At cost - 7,944 48,832 38,127 7,456 96,638 198,997 At valuation 35,942 106,993 - 30,698 - - 173,633

At 31 December 2005 35,942 114,937 48,832 68,825 7,456 96,638 372,630

Leasehold

Improvements Freehold and Motor Office Land Buildings Renovation Vehicles Equipment Total Company RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 31 December 2006

Cost or valuation At 1 January 2006

At cost - - 970 6,417 4,790 12,177 At valuation - 300 - - - 300

- 300 970 6,417 4,790 12,477

Reclassification from properties held for sale 9,900 759 - - - 10,659 Revaluation surplus 3,177 181 - - - 3,358 Additions - - 93 90 349 532 Disposals/write off - - - (3,072) - (3,072)

At 31 December 2006 13,077 1,240 1,063 3,435 5,139 23,954

Representing: At cost - - 1,063 3,435 5,139 9,637

At valuation 13,077 1,240 - - - 14,317

At 31 December 2006 13,077 1,240 1,063 3,435 5,139 23,954



98

13. PROPERTY, PLANT AND EQUIPMENT (CONTD.) Leasehold

Improvements Freehold and Motor Office Land Buildings Renovation Vehicles Equipment Total Company (Contd.) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated Depreciation At 1 January 2006 - 7 435 5,010 3,070 8,522 Charge for the year - 54 102 741 620 1,517 Disposals/write off - - - (3,072) - (3,072)

At 31 December 2006 - 61 537 2,679 3,690 6,967

Net Carrying Amount At cost - - 526 756 1,449 2,731 At valuation 13,077 1,179 - - - 14,256

At 31 December 2006 13,077 1,179 526 756 1,449 16,987

At 31 December 2005

Cost or valuation At 1 January 2005 10,000 1,356 2,536 6,541 10,881 31,314 Elimination of accumulated depreciation - (98) - - - (98) Reclassification to properties held for sale (10,000) (862) - - - (10,862) Reclassification to investment properties - (204) - - - (204) Revaluation surplus - 108 - - - 108 Additions - - - - 77 77 Disposals/write off - - (1,566) (124) (6,168) (7,858)

At 31 December 2005 - 300 970 6,417 4,790 12,477

Representing: At cost - - 970 6,417 4,790 12,177

At valuation - 300 - - - 300

- 300 970 6,417 4,790 12,477


Annual Report 2006

99

13. PROPERTY, PLANT AND EQUIPMENT (CONTD.) Leasehold

Improvements Freehold and Motor Office Land Buildings Renovation Vehicles Equipment Total Company (Contd.) RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Accumulated Depreciation At 1 January 2005 - 260 1,469 4,135 7,508 13,372 Elimination of accumulated depreciation - (98) - - - (98) Reclassification to properties held for sale - (103) - - - (103) Reclassification to investment properties - (59) - - - (59) Charge for the year - 7 97 999 687 1,790 Disposals/write off - - (1,131) (124) (5,125) (6,380)

At 31 December 2005 - 7 435 5,010 3,070 8,522

Net Carrying Amount At cost - - 535 1,407 1,720 3,662

At valuation - 293 - - - 293

At 31 December 2005 - 293 535 1,407 1,720 3,955

(a) Revaluation of Land and Buildings

During the financial year, the Group had performed valuation update by accredited professional valuers to determine the fair value of its buildings upon reclassification from properties held for sale. Arising from this reclassification, an impairment loss of RM60,000 was charged to current year profits. Revaluation increase is credited to equity as a revaluation surplus. Valuations were made on the basis of open market values on an existing use basis.

Details of the valuations update are as follows: Valuation Amount Description of Properties RM’000 Freehold land and building at Jalan Ipoh, Kuala Lumpur 3,400 Freehold land and building at Jalan Raja Laut, Kuala Lumpur 2,330 Freehold land and building at Kajang, Selangor 3,765 Freehold land and building at Kuah, Langkawi 450 Freehold land and building at Langkawi Mall, Langkawi 745 Freehold land and building at Senawang, Negeri Sembilan 630 Freehold land and building at Plaza Melaka, Malacca 1,250 Freehold land and building at Juru, Seberang Perai Selatan 1,050 Freehold land and building at Kampar, Perak 575 Freehold land and building at Klang, Selangor 1,735 Freehold land and building at Ipoh Garden, Ipoh 435 Freehold land and building at Cockman, Ipoh 1,705 Freehold land and building at Shah Alam 29,300 Freehold land and building at Bukit Mertajam 3,654



100

13. PROPERTY, PLANT AND EQUIPMENT (CONTD.)

(a) Revaluation of Land and Buildings (Contd.) Valuation Amount Description of Properties RM’000

Freehold land and building at Bangi, Selangor 8,000 Freehold land and building at Linggi, Negeri Sembilan 5,200 Freehold land and building at Mantin, Negeri Sembilan 2,560 Freehold land and building at Alor Gajah, Malacca 7,000 Freehold land and building at Tampin, Negeri Sembilan 4,800 Freehold land and buildings at Seremban, Negeri Sembilan 2,865 Freehold land and building at Amanjaya, Kedah 540 Freehold land and building at Nibong Tebal, Penang 220 Freehold land at Mukim Rantau, Seremban 5,000 Freehold land at Mukim of Sungai Petani/Sungai Pasir, Kedah 13,077 Freehold land at Mukim of Mersing, Johor 39,400 Freehold land at Bukit Tunku, Kuala Lumpur 4,380 Freehold land at Mukim Titian Bintangor, Daerah Rembau 1,230 Freehold land at Shah Alam 13,360 Freehold building at Kompleks Bukit Jambul, Penang 2,420 Freehold building at Megamall Penang 2,005 Freehold buildings at Batu Ferringhi, Penang 1,475 Freehold building at Kelana Jaya, Selangor 585 Freehold building at Genting Highlands 300 Freehold buildings at Genting Highlands 850 Long leasehold building at Bandar Sunway, Petaling Jaya 815 Long leasehold building at Sungai Buloh, Selangor 121 Long leasehold building at Bandar Bayan Baru, Penang 728 Long leasehold building at Port Dickson, Negeri Sembilan 642 Long leasehold building at Plaza Pandan Malim, Malacca 345 Long leasehold building at Taman Tampoi Utama, Johor Bahru 289 Long leasehold building at Kijal, Terengganu 158 Long leasehold building at Wangsa Maju, Kuala Lumpur 2,834 Long leasehold building at Metro Kepong, Kuala Lumpur 3,275 Long leasehold building at Kuchai Lama, Kuala Lumpur 897 Long leasehold building at Bornion Centre, Sabah 245 Long leasehold building at Kota Kinabalu, Sabah 1,463 Long leasehold building at Distrepark, Port Klang 45,782 Long leasehold building at Pelabuhan Klang 30,200 Long leasehold building at Section 51, Petaling Jaya 1,107 Long leasehold building at Solok, Perai 979 Long leasehold building at Kota Kinabalu Industrial Park, Sabah 1,300 Long leasehold building at Kuala Perlis 270 Long leasehold building at Taman Dagang, Ampang 2,300 Long leasehold building at Port Dickson 940 Leasehold building at Queensbay Mall, Penang 3,500 Leasehold building at Alor Gajah, Malacca 105 Leasehold building at Sekinchan 130

264,716


Annual Report 2006

101

13. PROPERTY, PLANT AND EQUIPMENT (CONTD.) (a) Revaluation of Land and Buildings (Contd.)

Had the revalued property, plant and equipment been carried under the cost model, the carrying amounts of each class of property, plant and equipment that would have been included in the financial statements of the Group and the Company as at 31 December 2006 would be as follows:

Net Accumulated Carrying Group Cost Depreciation Amount RM’000 RM’000 RM’000

At 31 December 2006 Freehold land 151,627 - 151,627 Buildings 186,971 31,900 155,071 Plant and machinery 66,162 48,270 17,892

404,760 80,170 324,590

At 31 December 2005 Freehold land 23,862 - 23,862 Buildings 134,676 23,464 111,212 Plant and machinery 67,517 44,178 23,339

226,055 67,642 158,413

Company

At 31 December 2006 Freehold land 9,900 - 9,900 Buildings 1,152 263 889

11,052 263 10,789

At 31 December 2005 Buildings 290 105 185

(b) Assets Pledged as Security The net carrying amounts of property, plant and equipment pledged as securities for borrowings (Note 28) are as follows:

Group 2006 2005 RM’000 RM’000 Freehold land 27,960 24,469 Buildings 86,271 89,202

114,231 113,671



102

13. PROPERTY, PLANT AND EQUIPMENT (CONTD.)

(c) Title Deeds

The titles of certain properties are either still in the process of being transferred to the Group and the Company or are pending issuance of strata titles by the relevant authorities.

14. INVESTMENTS IN SUBSIDIARIES Company 2006 2005 RM’000 RM’000 Unquoted shares at cost 415,335 415,335 Less: Accumulated impairment losses (35,712) (9,877)

379,623 405,458

Details of the subsidiaries are as follows: Percentage of

Country of Effective Name of Subsidiaries Incorporation Equity Held Activity 2006 2005 % %

Held by the Company:

Ayamas Food Corporation Sdn Bhd Malaysia 100.0 100.0 (biv) & (e)

Ayamas Integrated Poultry Industry Malaysia 100.0 100.0 (bi), (bii), Sdn Bhd (formerly known as KFC (biii) & (e)

Integrated Poultry Industry Sdn Bhd)

Havprime Sdn Bhd Malaysia 100.0 100.0 (e)

Integrated Poultry Industry Sdn Bhd Malaysia 100.0 100.0 (biv)

KFC Manufacturing Sdn Bhd Malaysia 100.0 100.0 (ci), (civ) & (e) KFC Restaurants Holdings Sdn Bhd Malaysia 100.0 100.0 (e)

Pan-Tiara Corporation Sdn Bhd Malaysia 100.0 100.0 (e)

Rangeview Sdn Bhd Malaysia 100.0 100.0 (d)

Region Food Industries Sdn Bhd Malaysia 100.0 100.0 (ciii)

Signature Chef Dining Services Sdn Bhd Malaysia 100.0 100.0 (a)


Annual Report 2006

103

14. INVESTMENTS IN SUBSIDIARIES (CONTD.) Percentage of


Signature Chef Foodservice & Malaysia 100.0 100.0 (d) & (e) Catering Sdn Bhd

WP Properties Holdings Sdn Bhd Malaysia 100.0 100.0 (d) & (e)

Bakers’ Street Sdn Bhd Malaysia 100.0 100.0 Dormant

Bintang Ikhtisas Sdn Bhd Malaysia 100.0 100.0 Dormant

Edgelink Sdn Bhd Malaysia 100.0 100.0 Dormant

KFC Agrotech Sdn Bhd Malaysia 100.0 100.0 Dormant

Roaster’s Chicken Sdn Bhd Malaysia 100.0 100.0 Dormant

Signature Chef Holdings Sdn Bhd Malaysia 100.0 100.0 Dormant

Idmidton Resources Limited British Virgin 100.0 100.0 Dormant Islands

Rasa Sayang Holdings Limited British Virgin 100.0 100.0 Dormant Islands

Hiei Food Industries Sdn Bhd Malaysia 81.0 81.0 Dormant

Held through sudsidiaries: AFCB Properties Sdn Bhd Malaysia 100.0 100.0 (e)

Asbury’s (Malaysia) Sdn Bhd Malaysia 100.0 100.0 (a)

Ayamas Marketing (M) Sdn Bhd Malaysia 100.0 100.0 (e)

Chippendales (M) Sdn Bhd Malaysia 100.0 100.0 (d)

Kedai Ayamas Sdn Bhd Malaysia 100.0 100.0 (bv) & (e)

Kentucky Fried Chicken (Malaysia) Malaysia 100.0 100.0 (a) Sendirian Berhad

KFC (East Malaysia) Sdn Bhd Malaysia 100.0 100.0 (e)

KFC (Peninsular Malaysia) Sdn Bhd Malaysia 100.0 100.0 (a), (cii) & (e)



104



KFC (Sabah) Sdn Bhd * Malaysia 90.0 90.0 (a)

KFC (Sarawak) Sdn Bhd * Malaysia 100.0 100.0 (a)

Ladang Ternakan Putihekar (N.S.) Sdn Bhd Malaysia 100.0 100.0 (bi)

MH Integrated Farm Berhad Malaysia 100.0 100.0 (d)

Pintas Tiara Sdn Bhd Malaysia 100.0 100.0 (d)

Rasa Ayamas Sdn Bhd Malaysia 100.0 100.0 (a)

Rayaplex Sdn Bhd Malaysia 100.0 100.0 (e)

SBC Coffee Holdings Sdn Bhd Malaysia 100.0 100.0 (e)

SPM Restaurants Sdn Bhd Malaysia 100.0 100.0 (d)

Wangsa Progresi Sdn Bhd Malaysia 100.0 100.0 (d)

Helix Investments Limited * Hong Kong 100.0 100.0 (e)

Kentucky Fried Chicken Singapore 100.0 100.0 (a) Management Pte Ltd *

WQSR Holdings (S) Pte Ltd * Singapore 100.0 100.0 (e)

KFC (B) Sdn Bhd * Brunei Darussalam 46.0 46.0 (a)

Aspirasi Bintang Sdn Bhd Malaysia 100.0 100.0 Dormant

Ayamas Contract Farming Sdn Bhd Malaysia 100.0 100.0 Dormant

Ayamas Farms & Hatchery Sdn Bhd Malaysia 100.0 100.0 Dormant

Ayamas Feedmill Sdn Bhd Malaysia 100.0 100.0 Dormant

Ayamas Franchise Sdn Bhd Malaysia 100.0 100.0 Dormant

Farm’s Choice Marketing (M) Sdn Bhd Malaysia 100.0 100.0 Dormant

Kentucky Trading Sdn Bhd Malaysia 100.0 100.0 Dormant

KFC Technical Services Sdn Bhd Malaysia 100.0 100.0 Dormant


Annual Report 2006

105



Rasa Gourmet Sdn Bhd Malaysia 100.0 100.0 Dormant

Restoran Sabang Sdn Bhd Malaysia 100.0 100.0 Dormant

Seattle’s Best Coffee Sdn Bhd Malaysia 100.0 100.0 Dormant

Signature Chef Catercare Sdn Bhd Malaysia 100.0 100.0 Dormant

Sterling Distinction Sdn Bhd Malaysia 100.0 100.0 Dormant

Supreme Majestic Sdn Bhd Malaysia 100.0 100.0 Dormant

Ayamas Food Corporation (S) Pte Ltd * Singapore 100.0 100.0 Dormant

Yes Gelato Sdn Bhd Malaysia 80.0 80.0 Dormant

The principal activities of the subsidiaries are in the operations of: (a) restaurants (b) integrated poultry (i) breeder farms (ii) hatchery (iii) feedmill (iv) poultry processing and further processing plants (v) poultry retail and convenience food store chain (c) ancillary (i) bakery (ii) commissary (iii) sauce manufacturing plant (iv) trading in consumables (d) property holding (e) investment holding

* Audited by affiliate of Ernst & Young



106

15. INVESTMENT PROPERTIES Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 At 1 January 2,000 - 585 - Transfer from owner-occupied property - 840 - 145 Fair value adjustments (Note 5) - 1,160 - 440

At 31 December 2,000 2,000 585 585

Group Company Valuation Valuation Amount Amount Description of Properties RM’000 RM’000 Freehold building at Kelana Jaya, Petaling Jaya - 585 Long leasehold land and building at Petaling Jaya 2,000 -

Investment properties are stated at fair value, which have been determined based on valuations performed by an independent

professionally qualified valuer using open market value basis.

The property rental income earned by the Group for the year ended 31 December 2006 from its investment properties, all of which are leased out under operating leases, amounted to RM96,000. There were no direct operating expenses (including repairs and maintenance) arising on the rental-earning investment properties.

The strata title for the freehold building of the Company is pending issuance by the relevant authority.

16. PREPAID LAND LEASE PAYMENTS Group 2006 2005 RM’000 RM’000

At 1 January 46,436 46,436 Reclassification from properties held for sale 17,039 - Amortisation for the year (Note 7) (788) -

At 31 December 62,687 46,436

Analysed as: Long term leasehold land 62,506 46,436 Short term leasehold land 181 -

62,687 46,436

Leasehold land with an aggregate carrying value of RM31,210,000 (2005: RM31,598,000) are pledged as securities for borrowings (Note 28).


Annual Report 2006

107

17. INTANGIBLE ASSETS Pre-production Goodwill and on Franchise Pre-processing Consolidation Fees Expenditure Total Group RM’000 RM’000 RM’000 RM’000 Cost At 1 January 2005 81,921 33,830 3,631 119,382 Elimination of accumulated amortisation (38,120) - - (38,120) Acquisition of subsidiaries 527 - - 527 Additions - 1,977 - 1,977 Write-off - - (3,631) (3,631)

At 31 December 2005 and 1 January 2006 44,328 35,807 - 80,135 Additions - 5,425 - 5,425 Write-off - (456) - (456)

At 31 December 2006 44,328 40,776 - 85,104

Accumulated amortisation and impairment losses At 1 January 2005 38,120 10,938 3,631 52,689 Elimination of accumulated amortisation (38,120) - - (38,120) Amortisation for the year - 2,847 - 2,847 Impairment loss 1,566 - - 1,566 Write-off - - (3,631) (3,631)

At 31 December 2005 and 1 January 2006 1,566 13,785 - 15,351 Amortisation for the year - 3,116 - 3,116 Write-off - (396) - (396)

At 31 December 2006 1,566 16,505 - 18,071

Net Carrying Amount At 31 December 2005 42,762 22,022 - 64,784

At 31 December 2006 42,762 24,271 - 67,033



108

17. INTANGIBLE ASSETS (CONTD.)

Impairment tests for goodwill Allocation of goodwill

Goodwill acquired through business combination has been allocated to three individual cash-generating units, which are reportable segments, for impairment testing as follows:

• Restaurants • Integrated Poultry • Ancillary

Carrying amount of goodwill allocated to each of the Group’s cash-generating units as at 31 December were as follows: Restaurants Integrated Poultry Ancillary Total 2006 2005 2006 2005 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Carrying amount of goodwill 19,189 19,189 20,297 20,297 3,276 3,276 42,762 42,762

Key assumptions used in value-in-use calculations

The recoverable amounts of a CGU is determined based on value-in-use calculations using cash flow projections based on financial budgets approved by management covering a ten-year period. Cash flows beyond the five-year period are extrapolated using the growth rate of 5% which is in line with the estimated GDP growth rate for the country.

The following describes the key assumptions on which management has based its cash flow projections to undertake impairment

testing of goodwill: • There will be no material changes in the structure and principal activities of the Group. • Raw material price inflation - there will not be any significant increase in the prices and supply of raw materials, wages and other

related costs, resulting from industrial dispute, adverse changes in the economic conditions or other abnormal factors, which will adversely affect the operations of the Company.

• Statutory income tax rate - the tax rate for Malaysia is 28% for current year, 27% for year 2007 and thereafter 26% while Singapore

tax rate maintains at 20%. There will be no material changes in the present legislation or regulations, rates and bases of duties, levies and other taxes affecting the Company’s activities.

• Discount rate - the discount rate used is pre-tax. • Interest rates - the interest rates on the existing financing facilities will prevail.

• Foreign exchange rate - the foreign exchange rate will not be substantially and adversely different from the current rate.


Annual Report 2006

109

18. OTHER INVESTMENTS Group 2006 2005 RM’000 RM’000

Quoted shares at cost: In Malaysia - 1,251 Less: Accumulated impairment losses - (806)

- 445 Unquoted investment at cost 4,500 4,500

4,500 4,945

Market value of quoted shares: In Malaysia - 444

The unquoted investment relates to the subscription of some subordinated bonds which are redeemable in June 2009.

19. FIXED DEPOSITS An amount of RM21 million is deposited with a licensed bank as collateral for a term loan facility granted to a subsidiary (Note 28).

This security deposit shall be reduced such that the amount of deposit shall not exceed the outstanding term loan principal at all times.

Based on the repayment schedule of the outstanding term loan as at 31 December 2006, the tenure of the deposit is as follows: Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 Current (Note 23) 5,207 - 5,207 - Non-current 15,793 21,000 15,793 21,000

21,000 21,000 21,000 21,000



110

20. PROPERTIES HELD FOR SALE Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000

At 1 January 141,967 - 10,759 - Net carrying amount upon classification to properties held for sale - 207,780 - 10,759 Less: Impairment loss - (65,813) - - Disposals (8,527) - (100) - Reclassified to property, plant and equipment (111,239) - (10,659) - Reclassified to prepaid land lease payments (17,039) - - -

At 31 December 5,162 141,967 - 10,759

Group Valuation Amount 2006 Description of Properties RM’000 Freehold land and building at Bukit Pantai, Kuala Lumpur 3,800 Freehold land and building at Abelink Industrial Park, Klang 3,000

6,800

Properties held for sale consist of land and buildings that the Group obtains firm purchase commitment.

Properties held for sale are stated at the lower of carrying amount and fair value less costs to sell, in which their fair value have been determined based on valuations performed by independent professionally qualified valuers using open market value basis.

Certain properties held for sale have been reclassified to property, plant and equipment during the year as these properties have not been successfully sold for a period exceeding 12 months from date of classification to properties held for sale.

21. INVENTORIES Group 2006 2005 RM’000 RM’000

At cost Raw materials 18,113 10,637 Groceries, poultry and consumables 38,729 38,987 Equipment and spare parts 6,843 7,615 Advertising materials 2,290 1,223 Livestocks 7,749 8,293 Finished goods 25,751 12,063

99,475 78,818


Annual Report 2006

111

22. TRADE AND OTHER RECEIVABLES Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000

Trade receivables 24,265 24,366 - - Less: Provision for doubtful debts (697) (793) - -

Trade receivables, net 23,568 23,573 - -

Other receivables Amount due from related parties: Subsidiaries - - 177,669 197,706 Related companies - 3,939 - -

- 3,939 177,669 197,706 Deposits 29,162 27,961 777 327 Tax recoverable - - 3,343 2,601 Other receivables 15,068 14,447 1,997 2,300

44,230 46,347 183,786 202,934

67,798 69,920 183,786 202,934

(a) Credit risk Credit risks, or the risk of counterparties defaulting, are controlled by the application of credit approvals, limits and monitoring

procedures. Credit risks are minimised and monitored via strictly limiting the Group’s associations to business partners with high creditworthiness. Trade receivables are monitored on an ongoing basis via Group management reporting procedures.

The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any financial instruments.

As the Group’s transactions are substantially on cash basis, its credit risk is minimal.

(b) Amount due from related parties

Amount due from related parties are interest bearing and are repayable on demand. All related parties receivable are unsecured and are to be settled in cash.

Further details on related party transactions are disclosed in Note 35.



112

23. CASH AND CASH EQUIVALENTS Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 Cash in hand and at banks 42,161 42,914 1,973 1,365 Deposits with: Licensed banks 33,360 11,692 4,545 - Licensed financial institutions 68,509 68,566 10,032 15,144 Deposits pledged with licensed bank (Note 19) 5,207 - 5,207 -

Cash and bank balances 149,237 123,172 21,757 16,509

The weighted average interest rates of deposits at balance sheet date were as follows: Group Company 2006 2005 2006 2005 % % % %

Licensed banks 3.09 2.55 3.08 - Licensed financial institutions 3.40 2.75 3.34 2.80

24. SHARE CAPITAL Number of Ordinary Shares of RM1 each Amount 2006 2005 2006 2005 ‘000 ‘000 RM’000 RM’000 Authorised 1,000,000 1,000,000 1,000,000 1,000,000

Issued and fully paid At 1 January 198,275 198,275 198,275 198,275 Conversion of warrants * - * -

At 31 December 198,275 198,275 198,275 198,275

* During the current financial year, the paid-up share capital of the Company was increased from RM198,274,670 to RM198,274,682,

as a result of the issuance of 12 ordinary shares of RM1.00 each upon the conversion of 12 warrants at the exercise price of RM9.50 per share.

The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company.

Warrants 1996/2006 The number of outstanding warrants as at 31 December 2006 was Nil (2005: 37,350,630). Each warrant entitles the holder the right to

subscribe for a new ordinary share of RM1.00 each in the Company at an exercise price of RM9.50 per share. These had expired on 7 August 2006 and were removed from the Official List of Bursa Securities with effect from 8 August 2006. The number of lapsed warrants was 37,350,618.


Annual Report 2006

113

25. OTHER RESERVES Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 Asset revaluation reserve 29,269 21,881 3,226 78 Share premium 18,736 18,736 18,721 18,721 Capital reserve 1,790 1,790 4,459 4,459 Exchange fluctuation reserve 382 341 - -

50,177 42,748 26,406 23,258

The movements in each category of the reserves are disclosed in the statements of changes in equity. The nature and purpose of each category of reserve are as follows: (a) Asset revaluation reserve The asset revaluation reserve is used to record increases in the fair value of land and buildings and decreases to the extent that such

decrease relates to an increase on the same asset previously recognised in equity. (b) Share premium This reserve comprises the premium paid on subscription of shares in the Company over and above the par value of the shares. (c) Capital reserve This reserve comprises bonus shares issued by subsidiaries capitalised at group level. (d) Exchange fluctuation reserve

The exchange fluctuation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Group’s net investment in foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation.

26. RETAINED EARNINGS

This comprises the cumulative results of the Group and of the Company net of taxation and minority interests. As at 31 December 2006, based on estimated tax credits available and subject to the agreement of the Inland Revenue Board, all of the distributable reserves of the Company are available for distribution by way of dividend without incurring additional tax liability.

The Group and the Company have balances in the tax-exempt accounts available to be utilised for the distribution of reserves as tax-exempt dividend amounting to approximately RM75,660,000 (2005: RM75,187,000) and RM18,184,000 (2005: RM11,184,000) respectively, subject to the agreement of the Inland Revenue Board.



114

27. RETIREMENT BENEFIT OBLIGATIONS

The Company and certain subsidiaries operate an unfunded, defined benefit Retirement Benefit Scheme (“the Scheme”) for its eligible employees. Under the Scheme, eligible employees are entitled to a retirement benefit calculated by reference to their length of service and earnings. Provision for retirement benefits is calculated based on the predetermined rate of basic salaries and length of service of the employees.

The amounts recognised in the balance sheet are determined as follows: Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000

Present value of unfunded defined benefit obligations 3,206 2,815 - 1,375

Analysed as: Current 235 228 - -

Non current: Later than 1 year but not later than 2 years 300 84 - - Later than 2 years but not later than 5 years 1,171 725 - - Later than 5 years 1,500 1,778 - 1,375

2,971 2,587 - 1,375

3,206 2,815 - 1,375

The amounts recognised in the income statement are as follows:

Current service cost 233 1,029 - 778 Interest cost 294 789 - 597

Total, included in employee benefits expense (Note 8) 527 1,818 - 1,375

The Group and Company’s charge for the year amounting to RM527,000 (2005: RM1,818,000) and Nil (2005: RM1,375,000) have been included in administrative expenses.

Movements in the net liability in the current year were as follows: Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000

At 1 January 2,815 1,038 1,375 - Recognised in income statement 527 1,818 (1,375) 1,375 Contributions paid (136) (41) - -

At 31 December 3,206 2,815 - 1,375

Principal actuarial assumptions used: Group Company 2006 2005 2006 2005 % % % %

Discount rate 6.0 6.0 - 6.0 Expected rate of salary increases 4.0 5.0 - 5.0

Assumptions regarding future mortality are based on published statistics and mortality tables.


Annual Report 2006

115

28. BORROWINGS Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000

Short Term Borrowings Secured Term loan 7,896 7,795 - -

Unsecured Term loans 4,471 9,220 - -

12,367 17,015 - -

Long Term Borrowings Secured Term loans 75,793 83,383 60,000 60,000


123,028 138,442 60,000 60,000

Total Borrowings Secured Term loans 83,689 91,178 60,000 60,000


135,395 155,457 60,000 60,000

Maturity of Borrowings Within one year 12,367 17,015 - - More than 1 year and less than 2 years 12,106 12,265 - - More than 2 years and less than 5 years 90,922 86,177 40,000 20,000 5 years or more 20,000 40,000 20,000 40,000

135,395 155,457 60,000 60,000

The term loans granted to the Group are secured by corporate guarantees of the Company.

The secured term loans are secured against a first and third party charge over certain land and buildings as disclosed in Note 13(b) and Note 16 while a term loan facility granted to a subsidiary in Singapore is secured by a deposit pledged with a licensed bank amounting to RM21,000,000 (Note 19).



116

28. BORROWINGS (CONTD.)

The weighted average effective interest rates per annum for borrowings during the financial year were as follows: Group Company 2006 2005 2006 2005 % % % % Term loans 5.49 4.37 5.53 4.13

29. ABBA NIF (“AL-BAI’ BITHAMAN AJIL”) Group/Company 2006 2005 RM’000 RM’000 ABBA NIF 65,000 125,000 Short term portion (60,000) (60,000)

Long term portion 5,000 65,000

Maturity of Borrowing Within one year 60,000 60,000 More than 1 year and less than 2 years 5,000 60,000 More than 2 years and less than 5 years - 5,000

65,000 125,000

On 19 July 2001, the Company entered into a Facility Agreement with Arab-Malaysian Merchant Bank Berhad (Primary Subscriber) to issue RM300 million nominal amount of Islamic Notes Issuance Facility based on the Syariah principle of Al-Bai’ Bithaman Ajil (“ABBA NIF”). The ABBA NIF which was structured under a “bought-deal” basis were issued in nine tranches ranging from three years to seven years. The various tranches of ABBA NIF bear profit rates ranging between 5.55% to 7.45% per annum, payable semi-annually in arrears. The ABBA NIF are redeemable at face value on maturity.

In 2001, part of the ABBA NIF facility was utilised to settle off the BaIDS facility, details of which are highlighted in the annual report of that year. In prior year, there was an early redemption of RM85 million on the outstanding ABBA NIF, in which the Company had to pay a premium of RM7.929 million. The early redemption reduced secondary notes redemption by approximately RM6 million per year.

Attached together with the BaIDS facility were 37,353,050 detachable warrants which were offered to the entitled shareholders of the Company on a renounceable basis at a price of 62.45 sen per warrant in the proportion of 1 warrant for every 5 shares held in the Company after the bonus issue.

The warrants are convertible into fully paid-up ordinary shares of RM1.00 each in the Company at any time on or before 7 August 2006 at the rate of RM9.50 cash per warrant subject to the terms and conditions set out in the Deed Poll. On 7 August 2006, the unexercised warrants had lapsed and ceased to be valid for any purpose.


Annual Report 2006

117

30. DEFERRED TAX Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 (restated) At 1 January 32,102 30,050 373 370 Recognised in income statement (Note 10) (2,843) (2,541) (169) (27) Recognised in equity 463 4,593 210 30

At 31 December 29,722 32,102 414 373

Presented after appropriate offsetting as follows: Deferred tax assets (13,990) (10,910) - - Deferred tax liabilities 43,712 43,012 414 373

29,722 32,102 414 373

The components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows: Deferred Tax Liabilities of the Group: Accelerated Revaluation Capital of Land and Allowances Buildings Others Total RM’000 RM’000 RM’000 RM’000

At 1 January 2006 30,923 12,215 (126) 43,012 Recognised in income statement 237 - - 237 Recognised in equity - 463 - 463

At 31 December 2006 31,160 12,678 (126) 43,712

At 1 January 2005 27,522 7,622 (126) 35,018 Recognised in income statement 3,401 - - 3,401 Recognised in equity - 4,593 - 4,593

At 31 December 2005 30,923 12,215 (126) 43,012



118

30. DEFERRED TAX (CONTD.)

Deferred Tax Assets of the Group: Tax Losses and Retirement Provision Unabsorbed Benefits for Doubtful Capital Obligations Debts Allowances Total RM’000 RM’000 RM’000 RM’000 At 1 January 2006 - (356) (10,554) (10,910) Recognised in income statement (614) (87) (2,379) (3,080)

At 31 December 2006 (614) (443) (12,933) (13,990)

At 1 January 2005 As previously stated - (356) (5,534) (5,890) Prior year adjustment (Note 36) - - 922 922 Recognised in income statement - - (5,942) (5,942)

At 31 December 2005 (restated) - (356) (10,554) (10,910)

Deferred Tax Liabilities of the Company: Accelerated Revaluation Capital of Land and Allowances Building Total RM’000 RM’000 RM’000 At 1 January 2006 343 30 373 Recognised in income statement (169) - (169) Recognised in equity - 210 210

At 31 December 2006 174 240 414

At 1 January 2005 370 - 370 Recognised in income statement (27) - (27) Recognised in equity - 30 30

At 31 December 2005 343 30 373

Deferred tax assets have not been recognised in respect of the following items:

Group 2006 2005 RM’000 RM’000 Unused tax losses 35,063 22,471 Unabsorbed capital allowances 20,564 27,139 Unutilised reinvestment allowances 20,084 20,462

75,711 70,072


Annual Report 2006

119

30. DEFERRED TAX (CONTD.)

The availability of the unused tax losses and unabsorbed capital allowances for offsetting against future taxable profits of the subsidiaries are subject to no substantial changes in shareholdings of the subsidiaries under Section 44(5A) & (5B) of Income Tax Act, 1967. Deferred tax assets have not been recognised in respect of these items as they may not be used to offset taxable profits of other subsidiaries in the Group and they have arisen in subsidiaries that have a history of losses.

31. TRADE AND OTHER PAYABLES Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 Trade payables 84,195 66,482 - -

Other payables Amount due to related companies 7,943 - - - Accruals 37,462 34,572 11,178 12,806 Payroll liabilities 22,049 17,347 4,022 1,579 Duties and other taxes payable 10,321 9,491 - - Other payables 41,654 35,234 563 293

119,429 96,644 15,763 14,678

203,624 163,126 15,763 14,678

(a) Trade payables Trade payables are non-interest bearing and the normal trade credit term granted to the Group is up to 90 days. (b) Amount due to related parties Amount due to all related parties are interest bearing and are repayable on demand. These amounts are unsecured and are to be

settled in cash. Further details on related party transactions are disclosed in Note 35.

32. CAPITAL COMMITMENTS Group 2006 2005 RM’000 RM’000

Capital expenditure Approved and contracted for: Property, plant and equipment 2,499 1,398 Approved but not contracted for: Property, plant and equipment 71,089 75,074

73,588 76,472



120

33. OPERATING LEASE ARRANGEMENTS The Group and Company as lease

The Group and Company have entered into non-cancellable operating lease agreements for the use of land and buildings. These leases have an average term of 15 years with no renewal or purchase option included in the contracts. Certain contracts include escalation clauses or contingent rental arrangements computed based on sales achieved while others include fixed rentals for an average of 3 years. There are no restrictions placed upon the Group by entering into these leases.

The future aggregate minimum lease payments under non-cancellable operating leases contracted for as at the balance sheet date but not recognised as liabilities is as follows:

Group Company 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 Future minimum rentals payments: Not later than 1 year 59,004 65,277 3,210 3,166 Later than 1 year and not later than 5 years 86,128 77,616 12,838 12,665 Later than 5 years 17,257 22,877 9,629 12,665

162,389 165,770 25,677 28,496

The lease payments and contingent rent recognised in profit or loss during the financial year are disclosed in Note 7.

34. CONTINGENT LIABILITIES (i) Guarantees Company 2006 2005 RM’000 RM’000 Unsecured Corporate guarantees in favour of various financial institutions in respect of credit facilities extended to certain subsidiaries 43,913 59,576

(ii) Legal Claim The Plaintiff, a former Managing Director of the Company, seeks, among others, damages of RM25 million for alleged defamation

arising from several press releases issued by the Company.

The Company has been advised by its solicitors that the chances of the Plaintiff’s success in the above suit is minimal and moreover the claim of RM25 million as damages is highly inflated and untenable and inconsistent with current awards in defamation actions.


Annual Report 2006

121

35. RELATED PARTY DISCLOSURES

In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year:

Company Relationship

QSR Brands Bhd (“QSR”) A corporate shareholder of the Company

Pizza Hut Restaurants Sdn Bhd (“PHR”) A subsidiary of QSR. Pizza Hut Singapore Pte Ltd (“PHS”) A subsidiary of QSR. Multibrand QSR Holdings Pte Ltd (“Multibrand”) A subsidiary of QSR.

Permanis Sandilands Sdn Bhd (“Permanis”) A corporation in which former directors of the Company

have deemed interest.

Sarbjit & Co A firm in which a former director of the Company has interest.

Yoong & Partners A firm in which a former director of the Company has

interest.

2006 2005 RM’000 RM’000 Group Purchase of goods from

- Permanis - 16,074 Sale of goods to

- PHR 60,306 54,102 - PHS 466 327 Interest receivable from PHS - 437 Interest payable to Multibrand 843 1,132 Management fees from PHR 1,692 1,418 Allocation of expenses to PHS 5,832 5,264 Rental income from PHR 795 721 Legal and professional fees to

- Sarbjit & Co 53 209 - Yoong & Partners 352 - Rental payable to a director of corporate shareholder

- Wong Seng Lee 23 -



122

35. RELATED PARTY DISCLOSURES (CONTD.) 2006 2005 RM’000 RM’000

Company

Gross dividends from subsidiaries 83,000 71,831 Management fees from

- subsidiaries 20,762 24,039 - PHR 1,692 1,418 Interest receivable from subsidiaries 6,810 8,235 Rental income from a subsidiary 46 46 Legal and professional fees to

- Sarbjit & Co 53 209 - Yoong & Partners 352 -

The directors are of the opinion that all sales and purchases have been entered into in the normal course of business and have been

established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties.

36. PRIOR YEAR ADJUSTMENT

In prior years, the Group recognised deferred tax assets on unutilised reinvestment allowances as required by FRS 112 paragraph 37. During the current year, the Group changed its accounting policy and accordingly, deferred tax assets on unutilised reinvestment allowances are no longer recognised.

This has been effected by a prior year adjustment to decrease the retained earnings and increase the deferred tax liability by RM1,904,000.

The effect arising from this change on the comparative figures are as follows: 2006 2005

RM’000 RM’000 Effects on retained earnings: At 1 January, as previously reported 197,924 257,952 Effect of prior year adjustment (1,904) (922)

At 1 January, as restated 196,020 257,030

Effects on net profit for the year: At 31 December, as previously reported (31,477) Effect of prior year adjustment (982)

At 31 December, as restated (32,459)


Annual Report 2006

123

36. PRIOR YEAR ADJUSTMENT (CONTD.)

Comparative amount as at 31 December 2005 has been restated as follows: Previously Stated Adjustment Restated RM’000 RM’000 RM’000

Deferred tax assets (Note 30) (12,814) 1,904 (10,910)

37. FINANCIAL INSTRUMENTS

(a) Financial Risk Management Objectives and Policies The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development

of the Group’s businesses whilst managing its interest rate risk (both fair value and cash flow), foreign currency risk, liquidity risk and credit risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. It is, and has been throughout the year under review, the Group’s policy that no trading in derivative financial instruments shall be undertaken.

(b) Interest Rate Risk

Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest-bearing financial assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s interest-bearing financial assets are mainly short term in nature and have been mostly placed in fixed deposits or occasionally, in short term commercial papers.

The Group’s interest rate risk arises primarily from interest-bearing borrowings. Borrowings at floating rates expose the Group to cash flow interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. The Group had no substantial long term interest-bearing assets as at 31 December 2006.

The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings. To manage this mix in a cost-efficient manner, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and floating rate interest amounts calculated by reference to an agreed-upon notional principal amount. As at balance sheet date, the Group had entered into interest rate swaps with the following notional amounts and maturities:

Notional Amounts 2006 2005 RM’000 RM’000 Within 1 year 1,123 1,525 More than 1 year and less than 5 years 824 1,922

1,947 3,447

The interest rate relating to the interest rate swaps at the balance sheet date has been fixed at 5.34% per annum until its maturity

in May 2009.



124

37. FINANCIAL INSTRUMENTS (CONTD.) (c) Foreign Currency Risk

The foreign exchange risk of the Group arises from borrowings denominated in foreign currencies. The Group has currency swaps that are primarily used to hedge the foreign currency exposures on the borrowings. The currency exposures are primarily US dollars and Singapore dollars.

The Group also has subsidiaries operating in foreign countries, which generate revenue and incur costs denominated in foreign currencies. The currency exposures are primarily Singapore dollars and Brunei dollars.

(d) Liquidity Risk

The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. As part of its overall prudent liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from both capital markets and financial institutions and prudently balances its portfolio with some short term funding so as to achieve overall cost effectiveness.

(e) Credit Risk

The Group’s credit risk is primarily attributable to trade receivables. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis and the Group’s exposure to bad debts is not significant. For transactions that are not denominated in the functional currency of the relevant operating unit, the Group does not offer credit terms without the specific approval of the Head of Credit Control. Since the Group trades only with recognised and creditworthy third parties, there is no requirement for collateral.

The credit risk of the Group’s other financial assets, which comprise cash and cash equivalents, marketable securities and non-current investments, arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these financial assets.

The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any financial assets.

As the Group’s transactions are substantially on cash basis, its credit risk is minimal.


Annual Report 2006

125

37. FINANCIAL INSTRUMENTS (CONTD.)

(f) Fair Value The carrying amounts of financial assets and liabilities of the Group and of the Company at the balance sheet date approximated

their fair values except for the following: Group Company Carrying Carrying Amount Fair Value Amount Fair Value RM’000 RM’000 RM’000 RM’000 Financial Assets At 31 December 2006: Investments in subsidiaries - - 379,623 *

At 31 December 2005: Investments in subsidiaries - - 405,458 *

Financial Liabilities At 31 December 2006: Term loans 135,395 131,895 60,000 58,278

At 31 December 2005: Term loans 155,457 151,904 60,000 58,543

* It is not practical to estimate the fair value of the Group’s non-current unquoted shares because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs.

It is not practical to estimate the fair value of amount due from/(to) subsidiaries and related companies due principally to a lack of fixed repayment term entered by the parties involved and the inability to estimate fair value without incurring excessive costs.

The methods and assumptions used by management to determine fair values of financial instruments other than those whose carrying amounts reasonably approximate their fair values is as follows:

Borrowings

Fair value has been determined using discounted estimated cash flows. The discount rates used are the current market incremental lending rates for similar types of lending, borrowing and leasing arrangements.



126


38. SEGMENT INFORMATION

(a) Business Segments Restaurants Integrated Poultry # Ancillary Elimination Consolidated 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 (restated)

REVENUE AND EXPENSES Revenue External sales 1,164,078 1,073,422 289,665 318,932 70,096 64,193 - - 1,523,839 1,456,547 Inter-segment sales - - 163,482 162,401 127,434 122,345 (290,916) (284,746) - -

Total Revenue 1,164,078 1,073,422 453,147 481,333 197,530 186,538 (290,916) (284,746) 1,523,839 1,456,547

Results Segment results 129,669 102,687 23,694 4,024 3,903 (71,035) 157,266 35,676 Finance costs (14,962) (30,113) Income tax expense (43,255) (37,252)

Profit/(loss) after taxation 99,049 (31,689) Minority interests (769) (770)

Net profit/(loss) for the year 98,280 (32,459)

ASSETS AND LIABILITIES Segment assets 409,791 346,290 255,293 273,387 266,232 263,233 931,316 882,910 Goodwill on consolidation 42,762 42,762

Consolidated total assets 974,078 925,672

Segment liabilities 173,986 152,566 80,602 85,431 120,149 120,320 374,737 358,317 Unallocated corporate liabilities 65,000 125,000

Consolidated total liabilities 439,737 483,317

OTHER INFORMATION Capital expenditure 61,908 23,218 6,052 12,680 1,621 631 69,581 36,529 Depreciation 34,699 32,886 15,809 15,956 6,843 7,652 57,351 56,494 Amortisation 3,416 2,847 208 - 280 - 3,904 2,847 # Integrated Poultry includes retail operations

(b) Geographical Segments

The Group’s geographical segments can be categorised under Malaysia and foreign. Foreign comprises of Singapore and Brunei Darussalam.

Malaysia Foreign Total 2006 2005 2006 2005 2006 2005 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

External sales 1,242,152 1,200,129 281,687 256,418 1,523,839 1,456,547 Segment assets 828,747 809,348 102,569 73,562 931,316 882,910 Capital expenditure 51,577 28,496 18,004 8,033 69,581 36,529

Annual Report 2006

127

List of Properties HeldAS AT 31 DECEMBER 2006

Net Book Value/ Date of Carrying Valuation/ Expiry Area Amount Location Acquisition Age* Tenure Date (sq ft) Description (RM’000)

AGRICULTURAL PROPERTIES

SELANGOR Geran 24766 Lot 1462 26/12/2006 17 Freehold - 62.937 Land used for 7,691 Mukim Beranang acres breeder farm Daerah Hulu Langat

NEGERI SEMBILAN Geran 22067 Lot 3468 26/12/2006 16 Freehold - 55 Land used for 5,011 Mukim Linggi acres breeder farm Daerah Port Dickson

Geran 6348 PT 2149 26/12/2006 16 Freehold - 19.775 Land used for 2,457 Mukim Lenggeng acres breeder farm Daerah Seremban

Lot 559 Mukim Gemencheh 26/12/2006 10 Freehold - 38 Land used for 4591 Daerah Tampin acres breeder farm

HS (D) 5977-5980 26/12/2006 - Freehold - 83,753.8 Vacant land 1,230 PT 924-927 square for future Mukim Titian Bintangor metre expansion Daerah Rembau

MELAKA Lots 1375-1397 26/12/2006 16 Freehold - 150.950.6 Land used for 6,744 1689 and 1706 acres breeder farm Mukim Ayer Pa’abas Daerah Alor Gajah PM 1026 Lot 2294 26/12/2006 11 Leasehold 27/05/2038 5.937 Land used for 168 Mukim Machap acres contract broiler Daerah Alor Gajah farming


128


AGRICULTURAL PROPERTIES (CONTD.)

JOHOR Mukim of Mersing 26/12/2006 - Freehold - 854.62 Vacant land and 39,400 District of Johor acres oil palm estate

COMMERCIAL PROPERTIES

PERLIS

9 Persiaran Putra Timur Satu 26/12/2006 12 Leasehold 25/09/2092 1,500 Double-storey 256 02000 Kuala Perlis intermediate shophouse for storage and accommodation

KEDAH

Lot No 269 Pekan Dindong 26/12/2006 12 Freehold - 1,119 3-storey 434 07000 Kuah intermediate Langkawi shopoffice for warehouse, commissary and staff hostel

45 Arked Pokok Asam 26/12/2006 11 Freehold - 2,357 Double-storey 716 Langkawi Mall corner shophouse 07000 Kuah for restaurant Langkawi

46 & 47 Lengkok Cempaka 1 26/12/2006 8 Freehold - 3,176 3-storey corner 525 Persiaran Cempaka and intermediate 08000 Amanjaya shopoffices for restaurant and hostel


Annual Report 2006

129



COMMERCIAL PROPERTIES (CONTD.)

PENANG 34 Jalan Mahsuri 26/12/2006 14 Leasehold 15/05/2090 3,780 Double-storey 2,299 11950 Bandar Bayan Baru shophouse for restaurant

3A-G-18 Blok 3A 26/12/2006 10 Freehold - 2,972 Ground floor of 2,305 Kompleks Bukit Jambul a shopping Jalan Rumbia complex for 11900 Pulau Pinang restaurant

Unit No G-103 Megamal Pinang 26/12/2006 10 Freehold - 3,342 Ground floor of 1,912 2828 Jalan Baru a shopping Bandar Perai Jaya complex for 13600 Seberang Perai Tengah restaurant

Parcel No S-C1-05 26/12/2006 3 Freehold - 1,399 Double-storey 215 Pusat Bandar Nibong Tebal intermediate 14300 Pulau Pinang shophouse for restaurant 1-6G & 1-9G 26/12/2006 6 Freehold - 2,988 2 adjoining 1,409 Eden Parade ground and Jalan Sungai Emas mezzanine 11100 Batu Ferringhi floors of a shopping complex for restaurant

GF-12A Queensbay Mall 26/12/2006 1 Leasehold 06/12/2095 5,870 Ground floor of a 3,500 100 Persiaran Bayan Indah shopping complex 11900 Bayan Lepas for restaurant Pulau Pinang


130




PERAK 79 Jalan Dato’ Lau Pak Khuan 26/12/2006 36 Freehold - 2,490 Double-storey 423 Ipoh Garden intermediate 31400 Ipoh shophouse for restaurant

65 Jalan Dato’ Onn Jaafar 26/12/2006 20 Freehold - 3,395 6-storey commercial 1,640 30300 Ipoh building for restaurant and staff hostel

158 Jalan Idris 26/12/2006 22 Freehold - 2,400 3½-storey shopoffice 551 31900 Kampar for restaurant

SELANGOR 18A Ground Floor 26/12/2006 18 Freehold - 2,000 Ground floor of 552 Jalan SS6/3 a 5-storey Kelana Jaya shophouse for 47301 Petaling Jaya retail outlet

60 & 62 Jalan PJS 11/28A 26/12/2006 11 Leasehold 19/04/2086 3,786 4-storey shopoffice 3,215 Bandar Sunway for restaurant, office 46150 Petaling Jaya and hostel

9 Jalan Taiping 26/12/2006 26 Freehold - 2,402 4½-storey corner 1,702 41400 Klang shophouse for restaurant and staff hostel

18 & 20 Jalan Sulaiman 26/12/2006 25 Freehold - 4,000 4-storey shophouse 3,721 43000 Kajang for restaurant

Lot PT 12209 26/12/2006 - Leasehold 01/11/2092 95,788 Vacant land 4,284 Mukim Damansara for restaurant Daerah Petaling

Annual Report 2006

131




SELANGOR

23 Jalan Peria 26/12/2006 15 Leasehold 25/06/2049 1,463.9 Double-storey 231 45400 Sekinchan intermediate shophouse for restaurant

2105 Jalan 3/1 26/12/2006 17 Leasehold 13/03/2087 1,400 Double-storey 484 Bandar Baru Sungai Buloh shophouse for 47000 Sungai Buloh restaurant

Lot C1-091 26/12/2006 3 Leasehold 20/10/2084 4,108 Concourse level 2,208 Kompleks Galaxy Ampang of shopping centre Jalan Dagang 5 for restaurant Taman Dagang 68000 Ampang

W.P. KUALA LUMPUR Lot 14083 Jalan Kuchai Lama 26/12/2006 1 Leasehold 08/02/2064 43,583 Single-storey 5,080 58200 Kuala Lumpur building for restaurant

437 Jalan Ipoh 26/12/2006 24 Freehold - 3,542 5-storey corner lot 3,342 51200 Kuala Lumpur commercial building for restaurant & staff training

140 Jalan Raja Laut 26/12/2006 34 Freehold - 1,795 4-storey intermediate 2,319 50350 Kuala Lumpur shophouse for restaurant and staff hostel Lot PT 15144 26/12/2006 6 Leasehold 28/04/2096 30,558 Double-storey 7,816 Jalan Kepong Batu 6 ½ building for 52100 Kuala Lumpur restaurants


132




W.P. KUALA LUMPUR

Lot PT 6878 26/12/2006 4 Leasehold 19/04/2083 57,608 Single-storey 10,276 Jalan 8/27A Wangsa Maju building for 53300 Kuala Lumpur restaurants

NEGERI SEMBILAN

26 Jalan Dato’ Sheikh Ahmad 26/12/2006 22 Freehold - 2,000 Double-storey 680 70000 Seremban corner shophouse for retail outlet and staff hostel

20 & 21 Jalan Dato’ 26/12/2006 26 Freehold - 4,800 2 adjoining units 2,113 Sheikh Ahmad of 4-storey 70000 Seremban shophouse for restaurant and hostel

24 & 26 Jalan Bunga Raya 7 26/12/2006 12 Freehold - 3,300 2 units of a 611 Pusat Perniagaan Senawang double-storey Taman Tasik Jaya shophouse for 70400 Senawang restaurant

1 Jalan Mahajaya 26/12/2006 10 Leasehold 31/01/2085 3,555 3-storey corner 1,241 Kawasan Penambakan Laut shophouse for Bandar Port Dickson restaurant 71009 Negeri Sembilan and staff hostel

Lot Nos PT 8241 to 8249 & 8262 26/12/2006 - Freehold - 119,946 Vacant land 5,000 Mukim Rantau (for shoplot and Daerah Seremban commercial complex) Negeri Sembilan

MELAKA 9 Jalan PPM 9 26/12/2006 9 Leasehold 09/06/2095 1,496 4-storey intermediate 625 Plaza Pandan Malim shophouse for 75250 Melaka restaurant and staff hostel

Annual Report 2006

133



COMMERCIAL PROPERTIES (CONTD.) MELAKA

555 Plaza Melaka 26/12/2006 20 Freehold - 2,486.46 4 ½ -storey corner 1,225 Jalan Hang Tuah shophouse with 75300 Melaka mezzanine floor for restaurant

JOHOR 11 Jalan Sri Perkasa 2/1 26/12/2006 10 Leasehold 13/04/2094 1,540 3-storey intermediate 494 Taman Tampoi Utama shophouse for 81200 Johor Bahru restaurant and staff hostel

TERENGGANU 10 Persiaran Melor 26/12/2006 12 Leasehold 27/11/2091 1,650 Double-storey 414 Kijal Beach Resort intermediate 24100 Kijal shophouse for restaurant

SABAH Lot 25 Block 3 Bornion Centre 26/12/2006 22 Leasehold 15/05/2915 1,900 3-storey corner 1,073 Jalan Kolam shophouse for 88300 Kota Kinabalu restaurant and hostel

SINGAPORE 18 Yung Ho Road 16/12/2006 31 Leasehold 16/12/2036 14,809.11 Purpose Built single- 4,678 Singapore 618591 storey building for restaurant


134



INDUSTRIAL PROPERTIES PULAU PINANG 2718 Jalan Seladang Alma 26/12/2006 18 Freehold - 127,629 Single-storey 3,494 14000 Bukit Mertajam factory with double-storey office block for processing plant

29 & 31 Lorong IKS 26/12/2006 10 Freehold - 17,929 2 adjoining units 1,030 Juru 3, IKS Juru of a 1 ½-storey 14100 Simpang Ampat semi-detached Seberang Perai Selatan factories for commissary and warehouse

2022 Solok Perusahaan Satu 26/12/2006 26 Leasehold 02/12/2071 43,560 Single-storey 1,837 Kawasan Perusahaan Perai detached factory 13600 Perai building Pulau Pinang

SELANGOR Lot 5 Jalan 51A/223 26/12/2006 19 Leasehold 18/11/2067 42,009 Single-storey 3,200 46675 Petaling Jaya detached factory with 4-storey office block

Lot 7 Jalan 51A/223 26/12/2006 41 Leasehold 27/04/2065 10,883 Single-storey 2,000 46675 Petaling Jaya factory building with a double- storey office block

Lot 20153 Jalan Pelabuhan Utara 26/12/2006 20 Leasehold 17/12/2086 16.63 Land and factory 44,898 42000 Pelabuhan Klang acres buildings for primary processing and further processing plants

Annual Report 2006

135



INDUSTRIAL PROPERTIES (CONTD.)

SELANGOR

Lot PT 19239 26/12/2006 13 Freehold - 52,065 Factory building 2,072 Ablelink Industrial Park Jalan Haji Abd Manap Off Batu 5 Jalan Meru 41050 Klang

17, 19 & 21 Jalan Pemaju U1/15 26/12/2006 9 Freehold - 202,554 Industrial complex 28,616 Seksyen U1 HICOM-Glenmarie Industrial Park 40150 Shah Alam Lot 166 Jalan Pemaju U1/15 26/12/2006 - Freehold - 205,603 Vacant land 13,360 Seksyen U1 HICOM-Glenmarie for future expansion Industrial Park of industrial complex 40150 Shah Alam

No 1,3 & 6 Lorong Gerudi 1 26/12/2006 12 Leasehold 15/03/2087 567,723 Single & double-storey 58,567 Off Jalan Pelabuhan Utara warehouse buildings 42000 Pelabuhan Klang and 4-storey office building

KEDAH Mukim of Sungai Petani/ 26/12/2006 - Freehold - 45,899.78 Vacant industrial/ 13,077 Sungai Pasir square residential land, District of Kedah metre residential and commercial properties

SABAH Lot 43A Karamunsing Warehouse 26/12/2006 21 Leasehold 22/01/2901 6,360 3-storey corner 2,252 88000 Kota Kinabalu warehouse and office


136



INDUSTRIAL PROPERTIES (CONTD.)

SABAH

Lot 5 Lorong Tembaga Tiga 26/12/2006 6 Leasehold - 22,077 1½-storey semi- 1,259 Kawasan MIEL KKIP Selatan detached warehouse Kota Kinabalu Industrial Park Menggatal 88450 Kota Kinabalu

RESIDENTIAL PROPERTIES W.P. KUALA LUMPUR 2 Lorong Bukit Pantai 7 26/12/2006 35 Freehold - 10,548.63 Double-storey 3,090 Bukit Pantai bungalow 59100 Kuala Lumpur

Lot No 4 Jalan Langgak Tunku 26/12/2006 - Freehold - 19,041 Vacant land 4,380 Bukit Tunku 50480 Kuala Lumpur

NEGERI SEMBILAN Unit Nos 1D, 1E, 1F, 1G & 2D 26/12/2006 9 Leasehold 20/07/2094 4,188 5 units of condominium 895 Marina Bay Admiral Cove for staff training 71000 Port Dickson and recreation

PAHANG Unit No 3556 Block B 26/12/2006 19 Freehold - 1,258 Condominium for 284 Awana Golf & Country Resort staff training and 69000 Genting Highlands recreation

Unit No A7-22 (P) 26/12/2006 12 Freehold - 2,386 Condominium for 311 Amber Court Villa staff training and D’Genting Resort recreation 69000 Genting Highlands

Annual Report 2006

137



RESIDENTIAL PROPERTIES (CONTD.)

PAHANG

Unit No B1-22 (P) 26/12/2006 12 Freehold - 2,429 Condominium for 321 Amber Court Villa staff training and D’Genting Resort recreation 69000 Genting Highlands

Unit No B1-16 Level 16 26/12/2006 12 Freehold - 1,214 Condominium for 171 Amber Court Villa staff training and D’GentingResort recreation 69000 Genting Highlands


138

Analysis of Shareholdings23 April 2007

Authorised Share Capital RM1,000,000,000 Issued and Paid Up Share Capital RM198,274,682Class of Shares Ordinary Share of RM1.00 eachVoting Right 1 vote per Ordinary Share

DISTRIBUTION OF SHAREHOLDERS

Size of Shareholdings No. of % of Total No. of % of Total Shareholders Shareholders Shares Shares

1 – 99 9,049 76.32 17,397 0.01100 – 1,000 1,348 11.37 1,060,783 0.531,001 – 10,000 1,112 9.38 3,973,740 2.0010,001 – 100,000 243 2.05 8,139,762 4.11100,001 – Less than 5% of issued shares 101 0.85 79,645,800 40.175% and above of issued shares 3 0.03 105,437,200 53.18

Total 11,856 100.00 198,274,682 100.00

SUBSTANTIAL SHAREHOLDERS

Direct Indirect No. of Shares % No. of Shares % QSR Ventures Sdn Bhd 57,080,000 28.79 - -QSR Brands Bhd 27,956,500 14.10 57,080,000 (1) 28.79Kulim (Malaysia) Bhd - - 85,036,500 (2) 42.89Johor Corporation - - 85,036,500 (3) 42.89Employees Provident Fund 20,816,600 10.50 2,492,900 (4) 1.26

Notes(1) Deemed interest through QSR Ventures Sdn Bhd pursuant to Section 6A of the Act.(2) Deemed interest through QSR Brands Bhd pursuant to Section 6A of the Act.(3) Deemed interest through Kulim (Malaysia) Bhd pursuant to Section 6A of the Act.(4) Deemed interest through its portfolio managers.

DIRECTORS’ DIRECT AND INDIRECT INTERESTS IN THE COMPANY AND ITS RELATED CORPORATIONS

Save as disclosed below, none of the Directors has any interest, direct or indirect, in the Company and its related corporations.

Direct IndirectDirector No. of Shares % No. of Shares %

Hassim bin Baba 100 * - -

Notes

* Insignificant

Annual Report 2006

139

Analysis of Shareholdings23 April 2007

LIST OF TOP THIRTY (30) SHAREHOLDERS AS AT 23 APRIL 2007

Name No. of % of Total Shares Shares

CIMB Group Noms (T) Sdn Bhd – A/C QSR Ventures Sdn Bhd (27038 JTRK) 57,080,000 28.79

CIMB Group Noms (T) Sdn Bhd – A/C QSR Brands Bhd (27038 JTRK) 27,540,600 13.89

Employees Provident Fund Board 20,816,600 10.50

Malaysia Noms (T) Sdn Bhd – A/C Great Eastern Life Assurance (Malaysia) Berhad (PAR 1) 8,470,000 4.27

Lembaga Tabung Haji 6,968,700 3.51

DB (M) Nom (A) Sdn Bhd – A/C Deutsche Bank Ag Singapore PBD for Unioncity Enterprises Limited 6,474,000 3.27

BHLB Trustee Berhad – A/C Exempt An 6,190,700 3.12

HSBC Noms (A) Sdn Bhd – A/C BBH (LUX) SCA for Fidelity Funds Malaysia 3,581,500 1.81

Permodalan Nasional Berhad 2,575,000 1.30

Malaysia Noms (T) Sdn Bhd – A/C MIDF Amanah Asset Management Berhad FOR Amanah Millenia Fund Berhad (JM730) 2,284,500 1.15

Amanah Raya Noms (T) Sdn Bhd – A/C Kumpulan Wang Bersama 2,261,900 1.14

Lembaga Tabung Angkatan Tentera 2,161,000 1.09

OSK Noms (A) Sdn Bhd – A/C Unioncity Enterprises Limited 2,000,000 1.01

Malaysia National Insurance Berhad 1,691,700 0.85

Amanah Raya Noms (T) Sdn Bhd – A/C Public Dividend Select Fund 1,669,700 0.84

Mayban Noms (T) Sdn Bhd – A/C Mayban Trustee Berhad for Public Ittikal Fund (N14011970240) 1,487,000 0.75

Takaful Nasional Sdn Berhad 1,250,000 0.63

Cartaban Noms (T) Sdn Bhd – A/C Amanah SSCM Noms (T) Sdn Bhd for Employees Provident Fund Board (JF404) 1,208,000 0.61

Malaysia Noms (T) Sdn Bhd – A/C Great Eastern Life Assurance (Malaysia) Berhad (PAR 2) 1,072,000 0.54

HSBC Noms (A) Sdn Bhd – A/C Nomura BK LUX for TMA South East Asian Equity Fund 1,000,000 0.50

Cartaban Noms (T) Sdn Bhd – A/C Exempt An for Amanah SSCM Noms (T) Sdn Bhd (Account 1) 994,900 0.50

Citigroup Noms (A) Sdn Bhd – A/C Exempt An for American International Assurance Company Limited 965,000 0.49

Amanah Raya Noms (T) Sdn Bhd – A/C AUTB Progress Fund 948,700 0.48

Amanah Raya Noms (T) Sdn Bhd – A/C Public Islamic Equity Fund 876,900 0.44

Amanah Raya Noms (T) Sdn Bhd – A/C Public Equity Fund 822,000 0.41

Amanah Raya Noms (T) Sdn Bhd – A/C Public Islamic Opportunities Fund 760,000 0.38

Amanah Raya Noms (T) Sdn Bhd – A/C Public Islamic Dividend Fund 745,000 0.38

Asia Life (M) Berhad – As Beneficial Owner (PF) 710,600 0.36

Citigroup Noms (T) Sdn Bhd – A/C Manulife Insurance (Malaysia) Berhad (OL PAR) 684,000 0.34

Cartaban Noms (T) Sdn Bhd – A/C Petronas for Petroliam Research Fund 684,000 0.34

Total 165,974,000 83.69

15 financial statements

Documents