STRATEGY ACTION TAKEN BY AYAMAS

1.0 Spin Off the Marketing Activities into KFCH

As of 2 January 2009, KFCH became a subsidiary of QSR Brands Bhd (QSR) through the

acquisition of another 865,300 ordinary KFCH shares, increasing QSR’s total holding in KFCH

to 50.25%. This is a significant milestone for the Group as it enhances management capability

and streamlines the Group’s business activities. In the long term, this exercise will result in

management stability and positive income contribution.

Another initiative undertaken by the Group was to spin off the marketing activities of Ayamas

Food Corporation Sdn Bhd (AFCSB) into a company called KFC Marketing Sdn Bhd (KFCM).

Established in July 2008, this new business division was set up with the vision to become the

marketing arm of all further processed products by the Group. It now aims to expand further by

penetrating into the ASEAN and the Middle East regions.

Open up RasaMas Restaurant

To help enhance the performance of our companies, we have continued the implementation of

the Johor Corporation Intrapreneurship Scheme at selected RasaMas restaurants. The scheme

provides opportunities for selected employees in the Group who meet the criteria set to own up

to 25% equity stake in RasaMas restaurants.

2.0 Energizing Group Or Staff Performance

For the year 2008, the theme “Business Jihad” was adopted for the KFCH Pedoman. The term

Jihad, a sustainable strive for higher success, comes in various forms, be it spiritual, social,

political and economic. Jihad in Business advocates the enriching of all members of the KFCH
community, and through KFCH outreach, the enriching of the public at large, through KFCH’s

ethical business practises and consistently delivering value. Pedoman’s “Business Jihad”

fundamentals encourage an ethics-based business module that is both market and business

driven. It also states that, in its pursuit for profits, business must also contribute positive

outcomesto society, nature and all creation. At the minimum it must not bring harm and diminish

value to society, nature and creation.

In addition to Pedoman, the Group hosted in 2008 a Group-wide Hari Mekar event with the

theme “Pursuit of Excellence in Quality”. Hari Mekar, an annual quality event organised by

Johor Corporation, is a quality movement that allows participants to showcase innovative ideas

on ways to increase sales, reduce costs, enhance profitability, improve efficiency and move

creativity. It encourages staff to put their thinking caps on and come up with ideas that can take

the Group to a higher level. It gives us great pleasure to announce that KFCH garnered the

Overall Champion’s Trophy for the second straight year.

3.0 Being a Reliable, Sustainable Corporate Citizen

Other than embedding Halal practices into Ayamas processes, KFCH sponsors the World Halal

Forum and the Malaysia International Halal Showcase, both of which involve the promotion of

our many products.

The Group also participated at the annual Halal Food Standards Realisation (HAFSTAR) MS

1500:2004. In retrospect, the Halal market is not just for the Muslim community. The concept of

Halal which puts great emphasis on cleanliness, hygiene and a healthy lifestyle has also captured

the interest of non-Muslims globally. Having identified Halal as one of KFCH’s critical success
factors, they have put in place an elaborate and professional Halal Audit infrastructure, the first

of its kind in Malaysia’s foods industry.

They are also a health conscious Group. In their efforts to promote a healthy, active lifestyle for

Malaysians, they support local sports, which include officially sponsoring of the Johor FC

football team. On top of these, they also sponsor Malaysian Yachting Association and futsal

activities, with the aim of encouraging young Malaysians to pursue the sports as not only a

hobby, but also to look at the sports as a means to garner international recognition for oneself

and country. They are proud to say that some of the sailors trained under the Association

participated and won in some of the leading Yachting competitions held in Malaysia as well as

internationally.

Entrepreneur development is another cause that they are passionate about. As such, they continue

to play their part to help develop entrepreneurial skills among young, talented Malaysians.

Collaborative efforts with Johor Corporation’s current entrepreneurial programs are aptly called

Tunas Bistari, Didik Bistari and Siswa Bistari. These developmental programs aim to churn out

global-ready business practitioners and entrepreneurs of tomorrow.

As a committed caring Group, they took part in the Yum! Brands Annual World Hunger Relief

Campaign, which is the world’s largest volunteer movement and private sector effort to combat

hunger. The relief campaign aims to help stop world hunger through volunteerism and increased

donations to benefit the United Nations World Food Programme (WFP) and other hunger relief

agencies. Through Malaysia’s Hunger Relief Period 2008 campaign, the Group together with our

holdings company, QSR, raised RM1 million for the relief fund.
4.0 High Quality Halal Chicken

The company spends over RM5 million on research and development annually. They are also

ISO 9001 certified and is currently in the process of being Hazard Analysis and Critical Control

Points or HACCP compliant, an integral part of quality assurance for the food industry

worldwide.

Ayamas Food Corporation Sdn Bhd was the first company in Malaysia to not only brand high

quality halal chicken, hygienically processed and packed at its plant but also to market

Malaysian branded halal chicken and chicken-based products domestically and internationally.

It is today Malaysia’s foremost chicken breeding, processing and retailing enterprise with fully

integrated operations and one of the largest and most modern poultry processing plants in the

Asia-Pacific region in Port Klang with a capacity to process 85,000 birds per day.

It supplies whole chicken, cut chicken parts and further processed chicken to both the domestic

and export markets, including Singapore, Indonesia, Brunei, Hong Kong, the Middle East and

other countries.

Its fresh chicken and further processed and shelf stable chicken products help to get rid of much

of the hassle of food preparation for cooking in kitchens. Whole chicken and specially cut

chicken parts come ready processed, cleaned, dressed, chilled and sold and exported under the

most stringent hygienic conditions. They save the messy work, helping to keep kitchens dry and

clean.

Ayamas freezer-to-fryer further processed chicken products come ready to cook. They just have

to be taken out of the freezer and put straight into the fryer, cooked and eaten.
They don’t need thawing, they save a lot of time and are very convenient. Among Ayamas’s

freezer-to-fryer products are its ever popular Golden Nuggets, Premium Frankfurters, Breaded

Drummets, Breaded Meatballs and Ayamas Crispy Fried Chicken.

The company spends over RM5 million on research and development annually. At its fully

equipped Research and Development Centre nutritionists continually develop new products that

are well received locally and overseas, including the development of product line extensions into

ready-to-eat products such as canned curry chicken.

Ayamas recently ventured into Chicken Curry with Potato, its first ready to serve and eat canned

food item. The landmark event is the forerunner to more shelf stable products it plans to bring

out to make Ayamas even more relevant to consumers and attract a wider cross section of them

to the brand domestically and internationally.

To capitalise on growing consumer demand for value and convenience food, its marketing and

sales department has been expanded to further improve brand awareness and market penetration

domestically and overseas. It is in the process to beef up its export team to further develop the

Hong Kong, Middle East and other overseas markets.

Ayamas has ISO 9001 certification and is currently in the process of obtaining the Hazard

Analysis and Critical Control Points or HACCP, an integral part of quality assurance for the food

industry worldwide. HACCP focuses attention on the potential hazards to the safety and quality

of food products during their processing and handling.

The process ensures their safety and quality from raw material stage to the end product. That’s

why the company’s tagline is ‘First in Freshness, First in Quality".

Ayamas has a Syariah Advisory Council, whose members are distinguished and prominent

religious scholars from Islamic institutions, that acts as an advisory body to it on all religious

matters relating to its business. It maintains close rapport with the various religious departments,

councils and bodies and also conducts regular inspections on Ayamas’s various plants and

operational facilities to ensure that it fully complies with the halal requirements of Islamic Law

and all Malaysian Government regulations.

Ayamas guarantees that all its products are halal because it has 100% control at each and every

stage of its processes, from breeding and hatching to slaughtering, processing, packaging and

distribution. It breeds its own stock of chickens of the highest quality, has its own world-class

hatcheries to ensure halal quality from eggs to chicks, ensures a closed, air conditioned and

contained system of breeding that is tightly monitored to be absolutely clean and halal and

produces and uses its own halal feed exclusively for the entire system.

It ensures that every stage of slaughtering, processing and packaging strictly observes Islamic

religious requirements, monitored by religious authorities and uses only certified halal

ingredients for all its products. All Ayamas products are certified halal by Jabatan Kemajuan

Islam Malaysia and use the JAKIM logo.

Ayamas’s efforts to maintain high quality control standards have also won recognition and

support from Yum! Brands, Inc., the global operator of KFC, Pizza Hut, Taco Bell, A&W and

Long John Silver restaurants and other leading international food importers.

Recently the Malaysian Superbrands Council selected Ayamas as a Superbrand. On the occasion

of the bestowment of the award, Mr. Peter Pek, Publisher of Superbrands Malaysia, said:
“Consumers have come to trust Ayamas for its quality, healthy, fresh and wholesome products

… its long standing commitment to quality has helped reinforce its brand values.”

Ayamas is also a winner of Livestock Asia"s Outstanding Meat Processor Award in recognition

of its contributions to management excellence and best practices in the livestock industry.

5.0 Ayamas Join Ventures with BOC

Ayamas Food is the single largest player in the Malaysian poultry business. Ayamas supplies

poultry products to all KFC and Pizza Hut restaurants in Malaysia and Singapore. It also supplies

its own restaurants, Rasa Ayamas, which serve local cuisine, and a chain of corporately owned

convenience stores.

BOC negotiated the deal through its Malaysia affiliate, Malaysia Oxygen Berhad (MOX).

According to Weng-Tat Kan, sales manager, food and beverage,MOX, the contract followed

MOX's successful installation and operation of a BOC 30-foot cryogenic tunnel freezer at the

Ayamas poultry processing plant in Port Klang, Malaysia. Ayamas selected BOC's freezer after

head-to-head performance tests against mechanical freezers showed that only the BOC system

was capable of meeting Singapore's strict food regulations for processed chicken.

Weng Tat-Kan said, "Our ability to access information from BOC's corps of global technology

experts and from BOC's Internet-based knowledge management system enabled us to design a

production solution for Ayamas that could be implemented and supported locally."

Bill Baker, vice president, food and beverage markets, Process Gas Solutions, BOC, said, "This

win clearly demonstrates BOC's competitive advantage in the market place. We understand the
food market and our customers' processes better than our competitors, we share information

globally and provide solutions tailored to the customer's need."

World poultry production is growing at about four percent annually. Four nations, the U.S.,

China, Brazil and the European Union European Union (EU), account for 70 percent of the

production. Brazil, which has the lowest production costs, has experienced double-digit growth.

Thailand, which only has three percent of the world's production, is growing at 13 percent

annually. The United States poultry market is growing at about two percent; the remainder of the

market is relatively flat.

"As the world's leading solutions provider to the food industry with the broadest offer of

equipment, customer process knowledge, and gas supply, BOC is well-positioned to take

advantage of the poultry industry's growth. BOC is the world's leading supplier of carbon dioxide

carbon dioxide, chemical compound, CO2, a colorless, odorless, tasteless gas that is about one

and one-half times as dense as air under ordinary conditions of temperature and pressure. and

liquid nitrogen for the cryogenic chilling and freezing of processed poultry and can design,

deliver and service a wide range of freezing equipment and technology to customers located

anywhere in the world" Baker said.

Food processors look to BOC for the engineered solutions they need to achieve total process

control in their plants. BOC uses the best available services and technologies to help customers

address their atmosphere, and temperature control needs. Customers benefit from BOC's

experience and expertise in providing a range of custom offerings, such as ozone and U/V light

technologies, cryogenic gases, modified atmosphere packaging, and water management services

so they can deliver the highest quality food to their customers.

The BOC Group (NYSE:BOX), the worldwide industrial gases, vacuum technologies and

distribution services company, serves two million customers in more than 50 countries. It

employs 46,000 people and had annual sales of over $7 billion in 2003. Further information

about The BOC Group may be obtained on the Internet at http://www.boc.com.

6.0 Embark on Sudut Ayamas or Ayamas Corner Campaign and Ayamas Targets 30

Percent Contribution to Group's Sales

Ayamas Food Corporation Sdn Bhd is targeting to raise its contribution to 30 percent of the KFC

Holdings (Malaysia) Bhd group's sales within three years.This is expected to be achieved

through its Sudut Ayamas or "shop-in-shop" marketing initiative which was launched today as

well as a series of new products, said KFC Holdings' chairman Tan Sri Muhammad Ali Hashim.

Ayamas Food Corporation will embark on a Sudut Ayamas 'shop-in-shop' marketing initiative in

a bid to raise its sales contribution by 10% in three years to parent company KFC Holdings.

Ayamas currently contributes 20% to the group's sales figures. Last year KFC Holdings reported

a revenue growth of 26% to RM2.18 billion from the RM1.73 billion it recorded in 2007. Tan Sri

Muhammad Ali Hashim, chairman, KFC Holdings said the group will set up freezers in retail

outlets like hypermarkets, mini-markets and provision shops throughout the country under the

Sudut Ayamas (Ayamas Corner) campaign.

The effort will involve a budget of RM4 million to upgrade the current 1,500 freezers in

suburban and rural areas as well as the acquisition of another 1,500 freezers for new retail
outlets.

At a press conference on the Sudut Ayamas launch here, he said Ayamas, a wholly-owned

subsidiary, was currently contributing about 20 percent to the group's sales. KFC Holdings

recorded a revenue growth of 26 percent to RM2,179.8 million last year from RM1,730.4 million

in 2007. Under the Sudut Ayamas initiative, freezers will be installed at retail outlets such as

hypermarkets, mini-markets and provision shops across the country to offer Ayamas frozen food

and canned products. Muhammad Ali said RM4 million will be spent over a three-year period to

upgrade the existing 1,500 Sudut Ayamas freezers in suburban and rural areas, and install an

additional 1,500 freezers at new retail outlets.

He said the upgraded and new generation freezers will be dual-purpose two-in-one freezers that

are able to store both frozen and freeze-to-fryer products as well as shelf stable products.

"The freezers will enhance Ayamas' new 'shop-in-shop' concept and increase sales by offering

more choices in the form of frozen foods and dry consumer products to customers at these

outlets," he added. Muhammad Ali said Ayamas was in the process of discovering new markets,

particularly for its frozen food and freeze-to-fryer products that are non-chicken-based to further

stabilise its current market share.

"It is an important step by us to respond to the changing patterns of consumer demand and bring

the benefits of our food products to a wider cross-section of Malaysian consumers," he said.

According to him, Ayamas currently has 36 percent overall market share in frozen and freezer-

to-fryer products in the country. Muhammad Ali said Ayamas also planned to expand its dine-in

restaurant Rasamas by another 10 new outlets by this year, adding to the existing 30 outlets. KFC
Marketing Sdn Bhd's managing director Foo Peng Peng said eight new products will be launched

this year, with four chicken-based and the other four non-chicken-based.

7.0 Entering Asia Market

In 2004, KFC Holdings (M) Bhd (KFCH) sees a silver lining behind the dark clouds looming

over the country’s poultry and related industries due to the regional bird flu from which Malaysia

is still safe. Its group managing director Datuk johari Abdul Ghani said exports of its processed

chicken, including nuggets and chicken balls, have improved and remained bright.

Demand for processed chicken had increased by 10%-15% from KFC Singapore and Brunei

since a week ago, he said, but KFCH unit Ayamas Corp Bhd was unable to fulfill the requests, as

it had to cater to local consumption. Johari said the group remained very concerned over bird flu

and had intensified monitoring at its poultry farms, working closely with the Veterinary Services

Department. "We have not seen any impact on the group’s business, or any drastic drop in sales

at our outlets (KFCH and Ayamas), at the moment. We believe consumer confidence in our

products is still intact, as our customers know that we have our own poultry farms, and do not

import chickens," he said, adding that it was premature to comment on the impact on the group’s

revenue.

According to Johari, Ayamas has 68 contract poultry farmers breeding: chickens exclusively for

the group. “The farmers are only allowed to get their supply of chicks and feed from us; this

enables us to control the quality of the chicken," he said, adding that the breeder chicks were

imported from Scotland and France. He said much emphasis had been placed on the quality of
KFC’s chicken as the group had to maintain the high standards imposed by its international fran-

chiser, US-based YUM! Brands Inc.

"In such time must up our operations even further," he said, adding that about three million birds

are produced monthly, Johari said the key to preventing infection was at the poultry farms, and to

this end the group had taken several measures. Ayamas has set up a task force comprising

veterinary officers to monitor and collect data from its farms daily instead of weekly. "The

farmers are also reminded to inform us if the mortality rate of the chickens is above 3% daily,"

he said.

The firm also has provided strict guidelines on husbandry practice - for instance, allowing only

authorised personnel to enter the farms - as well as tightened its bio-security policy, by ensuring

all farm workers wear special clothing 4d adhere to a thorough cleaning process.

Japan has expressed interest in importing chickens from Malaysia while Singapore maintains it

imports of 110,000 chickens a day, showing confidence is high in Malaysia’s measures to keep avian

flu at bay.

“This shows the two countries have, confidence in our hygienic practices and industry and

Government measures to ward off the disease," Federation of Livestock Associations of

Malaysia honorary adviser Datuk Francis Lau said today. Japan has also made inquiries with

Singapore, Brunei and the Philippines, countries that are still free of the virus.

Lau said the confidence stems from the Government’s success in curbing poultry smuggling

and transparency in implementing measures to-curb the flu. "Malaysia is very serious about

protecting itself," said Lau who is also Leong Hup Holdings Bhd executive director. "The

authorities are working closely together to ensure there is no smuggling."   

Police, army and Customs officials have stringent inspection procedures at their three

checkpoints along the Thai border, he added. Farmers should maintain good hygienic

procedures and continue working with the authorities to ensure their livestock are not

infected, he said. On a possible mutation of the virus into something which could harm

humans, Lau said this was not proven yet.