Business Overview

6. INFORMATION ON OUR GROUP 6. INFORMATION ON OUR GROUP 6.1 Our Company 6.1.1 History and background Our Company was incorporated in Malaysia under the Act on 16 August 2013 as a private limited company under the name of Seven Convenience Sdn. Bhd. On 3 September 2013, our Company was converted into a public limited company under the name of Seven Convenience Berhad. Subsequently, on 3 October 2013, our Company’s name was changed to 7-Eleven Malaysia Holdings Berhad. Our Company was incorporated to facilitate our Listing. Our principal activity is investment holding whilst our subsidiaries, comprising the 7-Eleven Malaysia Group, are principally involved in operating and franchising of convenience stores under the “7-Eleven” brand name in Malaysia. Pursuant to a Sub-Licence Agreement entered into with Jardin Matheson Holdings (Malaysia) Sdn. Bhd. (the former franchisee of “7-Eleven” brand name) on 20 December 1986, 7-Eleven Malaysia was granted the rights to develop and operate “7-Eleven” convenience stores and grant sub-franchises to franchisees to operate “7­Eleven” convenience stores solely in Malaysia and Brunei Darussalam. However on 1 December 2003, 7-Eleven Malaysia entered into an Area License Agreement with 7­Eleven USA which supercedes the Sub-Licence Agreement. The said Area Licence Agreement grants 7-Eleven Malaysia the right to establish and operate, and to grant sub franchises to franchisees to establish and operate, “7-Eleven” convenience stores solely in Malaysia and Brunei Darussalam. Pursuant to the ALA, 7-Eleven Malaysia is an independently-owned and operated licensee of 7-Eleven USA. 7-Eleven USA is the world’s largest convenience retailer from Texas, United States. It operates, franchises and licences more than 10,300 stores in the United States and Canada and more than 52,100 “7-Eleven” and other convenience stores operated under other brands worldwide. 7-Eleven USA does not have any interest in 7-Eleven Malaysia. The history and evolution of our Group since 7-Eleven Malaysia became part of the Berjaya Family is as follows: Date Event 2 January 2001 12 March 2003 7-Eleven Malaysia became part of the Berjaya Family when Global Empires Sdn. Bhd. (“GESB”), a wholly-owned subsidiary of BGroup, completed the acquisition of 5,000,000 ordinary shares of RM1.00 each in 7-Eleven Malaysia, representing its entire issued and paid-up share capital, from Antah Holdings Berhad for a purchase consideration of RM80.0 million. There were only 176 “7-Eleven” convenience stores in Malaysia. PMSB completed the acquisition of the entire issued and paid-up share capital of 7-Eleven Malaysia from its holding company, GESB, for a purchase consideration of RM90.0 million, which had resulted in 7-Eleven Malaysia becoming a Wholly-owned subsidiary of PMSB instead. 6. INFORMATION ON OUR GROUP (Cont’d) Date Event 1 October 2004 Setween September 2004 and January 2006 12 July 2006 12 September 2006 From 17 January 2007 IUS completed a restructuring exercise which had involved, among others, the subscription of 99,998 new ordinary shares of RM1.00 each in PMSS and 90,000,000 redeemable preference shares of RMO.01 each in PMSS, representing the enlarged issued and paid up share capital of PMSS for a cash consideration of RM99,998 and RM90.0 million respectively (“IUB Restructuring Exercise”), which resulted in 7-Eleven Malaysia becoming an indirect wholly-owned SUbsidiary of IUS. The restructuring exercise resulted in a change in IUS’s core business from manufacturing, packaging, warehousing and trading of semiconductors components and potable water treatment and supply, to operations of convenience stores under the “7-Eleven” brand name in Malaysia. There were approximately 407 “7-Eleven” convenience stores in Malaysia. Various extensions of time were granted by the authorities to IUS for purposes of complying with the public shareholding spread requirement, with the final extension of time granted until 29 April 2006. IUS received a directive from Sursa Securities to comply with the public shareholding spread requirement by 12 October 2006. The Soard of IUS received a proposal from Vista Meranti to undertake a voluntary withdrawal of listing of IUS due to non­compliance with the public shareholding spread requirement, lack of investors’ interests and trading liquidity. The voluntary withdrawal of listing of IUS had entailed an exit offer by Vista Meranti to acquire all the remaining ordinary shares of RM1.00 each in IUS (“IUB Shares”) not already owned by Vista Meranti (“IUB Offer Shares”) at an offer price of RM2.10 per IUS Share (“IUB Offer”) which represented an illustrative market capitalisation of approximately RM202.4 million based on the total number of IUS Shares in issue of 96,377,404 at the time of the IUS Offer. The IUS Offer price of RM2.1 0 per IUS Share represented a PE Multiple of 15.8 times based on the annualised audited net EPS of IUS for the 17 months ended 31 December 2005 of 13.31 sen. Following the IUS Offer, Vista Meranti undertook a compulsory acquisition to acquire all the IUS Offer Shares held by the IUS shareholders who did not accept the IUS Offer, resulting in Vista Meranti owning the entire issued and paid-up share capital of IUS. 6. INFORMATION ON OUR GROUP (Cont’d) 6. INFORMATION ON OUR GROUP (Cont’d) Date  Event—‘——‘=———————­ 25 January 2007  IUB was delisted from the Main Market) of Bursa Securities.  Board (now known  as  Main  There were 841 “7-Eleven” convenience stores in Malaysia.  14 June 2010  In conjunction with BRetail’s initial public offering and listing on the Main Market of Bursa Securities, BRetail had completed the following acquisition:  (i)  the entire issued and paid-up share capital of 7-Eleven Malaysia for a purchase consideration of RM600.0 million which was satisfied via the assumption by BRetail of a sum of RM165,379,000 due from PMSB, and its holding companies to the 7-Eleven Malaysia Group and the issuance of 60,000,000 new BRetail Shares and 809,242,000 BRetaii ICPS both at an issue price of RMO.50 each; and  (ii)  the entire issued and paid-up share capital of Singer for a purchase consideration of RM360.0 million which was satisfied via the assumption by BRetail of a sum of RM45,905,000 due from the BCorporation group of companies to the Singer group of companies (“Singer Group”) and issuance of 475,000,000 new BRetail Shares and 153,190,000 BRetail ICPS both at an issue price of RMO.50 each.  16 August 2010  BRetail was listed on (“Listing of BRetail”).  the  Main  Market  of  Bursa  Securities  There were 1,157 “7-Eleven” convenience stores in Malaysia.  11 March 2011  PMSB served a notice of take-over offer on the Board of BRetail to acquire all the remaining BRetail Shares and BRetaillCPS not already owned by PMSB (collectively referred to as “BRetaii Offer Securities”) for a cash offer price of RMO.65 for each BRetail Share and BRetail ICPS (“BRetail Offer”).  From 2011  25  April  Following the BRetail Offer, PMSB undertook a compulsory acquisition to acquire all the BRetail Offer Securities held by the BRetail shareholders and holders of the BRetail ICPS who did not accept the BRetaii Offer, resulting in PMSB owning the entire issued and paid-up share capital of BRetail.  3 May 2011  BRetail was delisted from the Main Market of Bursa Securities (“Delisting of BRetail”).  There were 1,251 “7-Eleven” convenience stores in Malaysia.
6.1.2 Rationale for the indirect listings and privatisation of 7-Eleven Malaysia 7-Eleven Malaysia first became part of a listed group when it was acquired by GESB, a wholly-owned subsidiary of BGroup in 2001 and subsequently in 2004, it became part of the IUB group of companies pursuant to the IUB Restructuring Exercise. On 12 September 2006, Vista Meranti, a wholly-owned subsidiary of HQZ which in turn is 99.99%-owned by one of our Promoters, TSVT, submitted a proposal to the Board of IUB for the voluntary withdrawal of listing of IUB after taking into consideration the following: (i) non-compliance of IUB with the public shareholding spread requirement after having sought various extensions from the authorities between the period of September 2004 and January 2006 to comply with the public shareholding spread requirement and the rejection of IUB’s request by Bursa Securities for a waiver from having to comply with the minimum public shareholding spread. On 12 July 2006, IUB had received a directive from Bursa Securities to comply with the public shareholding spread requirement by 12 October 2006;
(ii) lack of investors’ interests although the management of IUB had taken various measures including organising analyst briefing for coverage, participation in the CMDF-Bursa Research Scheme for research coverage and fund managers’ briefing; and

(iii) low trading liquidity of the ordinary shares of RM1.00 each in IUB (“IUB Shares”). The daily average trading volume of IUB Shares for the past 12 months prior to the proposal for the voluntary withdrawal of listing of IUB was approximately 12,131 IUB Shares, representing approximately 0.013% of the issued and paid-up share capital of IUB. The voluntary withdrawal of listing of IUB had entailed an exit offer by Vista Meranti to acquire all the remaining IUB Shares not already owned by Vista Meranti (“IUB Offer Shares”) at an offer price of RM2.10 per IUB Share (“IUB Offer”). Based on the total number of IUB Shares in issue of 96,377,404, the value of the IUB Offer represented an illustrative market capitalisation of approximately RM202.4 million. This represented a PE Multiple of 15.8 times based on the annualised audited net profit of IUB for the 17 months ended 31 December 2005 of RM18.2 million after taking into consideration, among others, the losses incurred by IUB’s non 7-Eleven businesses, namely manufacturing, packaging, warehousing and trading of semiconductors components and potable water treatment. Post the delisting of IUB from the Main Market of Bursa Securities, the 7-Eleven Malaysia Group had continued to grow and had in fact, changed its business model involving the implementation of the “7-Eleven” Store Franchise Programme which is a strategy to substantially increase the number of stores operated on franchise basis, expansion of its distribution channel by leveraging on the “7-Eleven” Store Franchise Programme and the expansion of its products and services offerings such as new premium fresh food and beverages. 6. INFORMATION ON OUR GROUP (Cont’d) Having grown the business and strengthened the presence of “7-Eleven” convenience stores locally which saw an increase of 259 net new stores from the time of the delisting of IUB on 25 January 2007 to 1,100 “7-Eleven” convenience stores at the time of the Listing of BRetail on 16 August 2010, representing a CAGR of 18.6%, the Promoters decided to re-introduce 7-Eleven Malaysia together with Singer to the Malaysian equity market under BRetail since both 7-Eleven Malaysia and Singer are in the retailing industry. The Promoters believed that consolidating both 7-Eleven Malaysia and Singer under BRetail would enable BRetaii to achieve optimum diversification of business and risk because BRetail would be able to derive stable and consistent income from Singer and at the same time, benefit from the growth of 7-Eleven Malaysia, apart from being able to reach out to different market segments given the different product offerings. Based on the total number of BRetail Shares in issue of 1,497,432,004 (assuming full conversion of 962,432,000 BRetail ICPS into new BRetaii Shares) at the time of the Listing of BRetail, the market capitalisation of BRetaii was RM748.7 million. The initial public offering price of RMO.50 per BRetaii Share represents a PE Multiple of 21.7 times based on BRetail’s pro forma consolidated profit after tax for the year ended 31 December 2009 of RM34.5 million. However, in March 2011, one of our Promoters, PMSB undertook the BRetail Offer which arose as a result of a statutory obligation under the Malaysian Code on Take-Overs & Mergers, 2010 to extend a take-over offer following the increase in PMSB’s shareholding in BRetail from 26.62% to 58.71% from the conversion of PMSB’s BRetaiIICPS. PMSB had also undertaken the BRetaii Offer after taking into consideration that the BRetail Shares and BRetail ICPS had not performed well on Bursa Securities since the Listing of BRetai!. In fact, the BRetail Shares and BRetaii ICPS had traded below the initial public offering price of RMO.50 most of the time. The highest traded price for the BRetail Shares and BRetaillCPS between 16 August 2010, being the date of the Listing of BRetail, and 4 March 2011, being the last full trading day prior to the service of the notice for the BRetail Offer by PMSB, was RMO.565 and RMO.510 respectively. The value attributed to the 7-Eleven Malaysia Group at the time of the Delisting of BRetail as ascribed by KIBB, being the Independent Adviser for the BRetaii Offer, was RM468.99 million, representing 56.2% of the value of the BRetaii group of companies of approximately RM834.28 million. Based on the total number of BRetaii Shares in issue of 1,497,432,004 (assuming full conversion of 1,551,640 BRetaii ICPS into new BRetail Shares), the value of the BRetail Offer represented an illustrative market capitalisation of approximately RM973.33 million, representing a PE Multiple of 18.56 times based on the unaudited consolidated profit after tax of BRetail of RM52.43 million for the year ended 31 December 2010. Based on the value of the BRetail Offer, the implied privatisation value of the 7-Eleven Malaysia Group is RM547.16 million (“7-Eleven Malaysia Privatisation Value”), representing a PE Multiple of approximately 19.30 times based on the unaudited profit after tax of the 7-Eleven Malaysia Group for the year ended 31 December 2010 of RM28.4 million.
6. INFORMATION ON OUR GROUP (Cont’d) 6.1.3 Significant events since the Delisting of BRetaii Since the Delisting of BRetail, we have continued to focus on the following areas which we view as critical success factors to further improve our performance and solidify our market position: (i) Expansion of our store nationwide network From the time one of our Promoters, TSVT, assumed indirect control of 7-Eleven Malaysia in January 2001 up to the Listing of BRetail, our chain of convenience stores in Malaysia has grown significantly from 176 “7-Eleven” convenience stores in January 2001 to 1,157 “7-Eleven” convenience stores on 16 August 2010, at the time of the Listing of BRetail. In fact, our chain of convenience stores in Malaysia has further increased from 1,251 stores at the time of the Delisting of BRetail to 1,583 stores as at the LPD, representing a CAGR of 18.4% for the period from January 2001 up to the LPD. Since the Delisting of BRetaii up to the LPD, we have invested approximately RM82.2 million for our store roll-out programme and we plan to accelerate our store network expansion with a total of 600 net new stores to be opened from 2014 to 2016. We opened 150 net new stores in 2013 and a total of 332 net new stores since the Delisting of BRetail up to the LPD. In addition, given the importance of our store roll-out programme to our future performance, since the Delisting of BRetail, we have created one new senior position within our Group, dedicated on strategising and supervising our store development. As at the LPD, we have a team of 21 personnel who are responsible for the execution of our store expansion plans and strategies. In expanding our network, we have also entered into a strategic collaboration with Chevron Malaysia, who operates a network of approximately 423 “Caltex” petrol stations in Malaysia as at the LPD, which provides us with an opportunity to further expand our presence in the “petro marts” segment. Through the said collaboration, we are able to identify potential as well as existing “Caltex” petrol stations which we can lease retail space to operate our stores. We believe that the chosen “Caltex” petrol stations would offer us prime retail space given the customer traffic which in turn would help improve our revenue and consequently, our gross margin. As at the LPD, we have already opened two stores at “Caltex” petrol stations and we target to open an additional 23 stores at “Caltex” petrol stations by June 2015. Please refer to Section 7.4.3 of this Prospectus for further information on the said collaboration. (ii) Increase economies of scale with our store nationwide network Our network of stores is supported by our CDC in Shah Alam, Selangor. At the time of the Delisting of BRetail, our CDC handled and distributed approximately 36% of our products by volume to all our stores in Peninsular Malaysia. With the increase in our number of stores, our CDC now handles and distributes approximately 53% of our products by volume to all our stores in Peninsular Malaysia paving the way for increased efficiency and economies of scale.

6. INFORMATION ON OUR GROUP (Cont’d) As we aim to handle and distribute up to approximately 75% of our inventories in terms of volume, we have since the Delisting of BRetail up to the LPD, invested RM1.2 million for the pre-construction works of the new CDC with a gross built-up area of 166,000 sq ft in Shah Alam, Selangor. The new CDC which will have 38% greater capacity is expected to improve our distribution capabilities and allows us to supply to a larger network of stores with a broader assortment of products such as ready-to-eat frozen foods. Upon completion of the construction, the new CDC will replace our existing CDC. Please refer to Section 7.9.1 of this Prospectus for further details on our new CDC. At the time of the Listing of BRetail, 7-Eleven Malaysia had intended to complete the construction of the new CDC within two years from the date of the Listing of BRetail. However, the construction of the new CDC was delayed because the satisfaction of all the requirements imposed by the relevant authorities in terms of, among others, building layout and specifications, prior to obtaining the approval from the local council to commence construction took longer than expected. In order to support our strategy to further expand our distribution and logistics capabilities, since the Delisting of BRetail, we have created two new senior positions within our Group, covering the area of information systems and logistics. As at the LPD, we have a team of 211 personnel comprising 45 permanent staff and 166 outsourced workers who are responsible for the execution of our store logistics. As the majority of our stores operate 24 hours a day, 7 days a week, the expansion of our store network allows us to spread our operating costs across an increasing number of stores, which in turn has contributed to the improvement in our selling and distribution expenses and merchandise margins. Please refer to Sections 10.2.4(i)(c) and (e) of this Prospectus for further details on the improvement in our selling and distribution expenses and merchandise margins. (iii) Introduction of new products and services In order to further increase traffic to our stores which can lead to higher average sales per store (for both merchandise sales and commission revenue) as well as our profitability margin, since the Delisting of BRetail, we have embarked upon several initiatives involving the introduction of new products and services at our stores as follows: (a) we introduced a new range of food products such as donuts, croissants, pies and ready-to-eat frozen food in May 2013. Also, since May 2013, we have collaborated with PK Agro-Industrial Products (M) Sdn. Bhd. which is part of the Charoen Pokphand Group, an established food operator, for the supply of ready-to-eat frozen food to our stores. As at the LPD, 299 of our stores are already supplied with donuts, croissants and pies while 165 of our stores are already supplied with ready-to-eat frozen food. We have also introduced multiple daily delivery programme where the distribution is undertaken based on store orders, instead of delivery by our vendors to our stores. As at the LPD, 102 of our stores are being supplied through our multiple daily delivery programme. 6. INFORMATION ON OUR GROUP (Cont’d) Our fresh and frozen food initiatives have helped to increase customer traffic during breakfast, lunch and dinner periods as well as after-hours which in turn, helps to improve the average sales of these stores. The said initiative complements our “hot beverage” programme which was first launched in 2009 to provide customers with high-quality and freshly brewed specialty coffee at affordable prices which are available to customers 24 hours a day and 7 days a week. At the time of the Listing of BRetail, we had intended to roll out the “hot beverage” programme to 100 “7-Eleven” stores by 2010. However, subsequent to the Listing of BRetail, we decided to slow down the roll-out of the “hot beverage” programme because we believed that the programme should be rolled out together with complementary products such as pastries and other ready-to-eat frozen foods in order to maximise the results that we expect from the rolling-out of this programme, be it in terms of higher customer traffic, higher merchandise sales and/or higher average sales per store. As at the LPD, we have rolled out the “hot beverage” programme to 66 stores from 45 stores at the time of the Delisting of BRetail. Beginning 2014, we plan to roll-out the “hot beverage” programme with other food service items based on selected store clusters, details of which are set out in Section 7.2.2(iv) of this Prospectus; and (b) we have continued to leverage on our strategic relationship with MOL for the provision of in-store services such as mobile phone and online gaming reloads since the Delisting of BRetail. Please refer to Section 7.2.2(iii) of this Prospectus for further details on our enhanced strategic relationship with MOL. In focusing our efforts towards improving our merchandising margins, since the Delisting of BRetail, we have created one new senior position within our Group, covering the area of merchandising. As at the LPD, we have a team of 30 personnel who are responsible for our store merchandising. (iv) Improve our in-store customers’ shopping experience In order to improve our customers’ experience at our stores which in turn promotes customer loyalty, we have since the Delisting of BRetail up to the LPD undertaken refurbishment/facelifts at at our stores. Since 1 January 2013 up to the LPD, we have invested approximately RM14.7 million for the refurbishment of 93 stores comprising the following: (a) 71 stores were refurbished in 2013 where:
(i) 57 stores were refurbished under our store refurbishment programme which commenced in September 2013; and
(ii) 14 stores were refurbished in the first eight months of 2013 which were not part of our store refurbishment programme; and

 

(b) the remaining 22 stores were refurbished from 1 January 2014 up to the LPD, all of which were refurbished under our store refurbishment programme.

6. INFORMATION ON OUR GROUP (Cont’d) We plan to accelerate our store refurbishment programme where we target to refurbish 600 stores from 2014 to 2016 of which approximately 60% will be major refurbishment and 40% will be minor refurbishment. 6.1.4 The listing of our Group We as well as our Promoters believe that it is timely to re-introduce 7-Eleven Malaysia to the Malaysian equity market via our IPO so as to allow us to seize the opportunities of long-term growth and to raise the necessary funds to accelerate the implementation of our strategies to further grow our business. According to the IMR Report, the prospects of the 7-Eleven Malaysia Group is supported by the following growth drivers set out in Section 10.2 of the IMR Report: (i) the population growth in Malaysia which is expected to reach 31.3 million by 2017, creating a larger consumer base for its stores;
(ii) Malaysia’s relatively young population as 54.9% of Malaysia’s population is 29 years of age and younger as at mid-year 2013 which bodes well for the convenience stores segment as households headed by younger person have a higher average monthly expenditure on food and beverage products away from home compared to households with older heads;

(iii) the increase in consumer affluence and consumer spending in Malaysia where Malaysia’s per capita income is expected to grow at an estimated CAGR of 10.7% from 2013 to 2015. Generally, an increase in consumer affluence as reflected by the growth in per capita income is likely to increase overall consumer spending; (iv) the increase in private final consumption expenditure on food and non-alcoholic beverages which increased at a CAGR of 7.5%, while alcoholic beverages and tobacco increased at a CAGR of 6.9% for the period from 2008 to 2012 respectively, which augur well for operators in the retail industry, including convenience store operators;
(v) the increase in urbanisation rate in Malaysia which is expected to reach 77.9% by 2020 which will continue to provide opportunities in the convenience store segment; and
(vi) the Malaysian Government is actively promoting the tourism industry as a National Key Economic Area under the Economic Transformation Plan (“ETP”) and some of the 12 Entry Point Projects that have been identified as part of the ETP are to position Malaysia as a duty-free shopping destination for tourist goods. The Malaysian Government’s initiative to drive the growth of the tourism industry would indirectly benefit the overall retail industry including the convenience store segment in Malaysia.

We view these factors as indicators of substantial long term growth opportunities and potential for our Group. These factors would bode well for the future plans and strategies of the 7-Eleven Malaysia Group which include, among others: (i) further store network expansion as well as store refurbishment; and
(ii) expansion of in-store services.

6. INFORMATION ON OUR GROUP (Cont’d) In fact, we have already commenced implementing our strategies to accelerate our growth, among which is the expansion of our network of self-operated stores. We opened 150 net new stores in 2013 and target to open a total of 600 net new stores between 2014 and 2016. In addition, as part of our business plans and strategies, we intend to spend approximately RM352.0 million from 2014 to 2016 to fund the expansion of our store network, on minor and major stores refurbishments, the construction of our new CDC and upgrade of IT systems, of which RM184.8 million will be funded from the proceeds from the Public Issue whilst the remaining RM167.2 million will be funded from internally generated funds. We also believe that the re-listing of the 7-Eleven Malaysia Group without Singer as a pure-play convenience store operator would allow us to wholly focus on our operations and growth strategies. Prior to the Listing of BRetail, BRetaii had assumed a debt due from PMSB and its holding companies to the 7-Eleven Malaysia Group of RM165.4 million as part of the purchase consideration for the acquisition of 7-Eleven Malaysia which was completed on 14 June 2010. Subsequently from 14 June 2010 and up to 14 April 2014, 7-Eleven Malaysia had advanced a total of RM285.2 million to BRetaii which gave rise to an interest income of RM48.6 million earned for the said period. The net amount owing by BRetail to 7-Eleven Malaysia (including interest) of RM180.0 million has been fully settled by BRetail via the Note pursuant to the Pre-IPO Reorganisation which was completed on 2 April 2014, as explained below and also in cash amounting to RM43.2 million on 14 April 2014. As part of the Pre-IPO Reorganisation, our Company and BRetaii had entered into the SSA for the acquisition of the entire issued and paid-up share capital of 7-Eleven Malaysia, free from all encumbrances, for a purchase consideration of RM1,378.25 million to be satisfied via the issuance of 1,051,999,980 new Shares at an issue price of RM 1.18 per Share and the Note. Pursuant to the indorsement of the Note from BRetaii to 7-Eleven Malaysia, there is a net amount owing by us to 7-Eleven Malaysia amounting to RM136,887,521 which will be settled by our Company after the IPO using the proceeds from the Public Issue and in turn, 7-Eleven Malaysia will utilise the cash received pursuant to the settlement of the Note in accordance with the utilisation of proceeds as set out in Section 4.10 of this Prospectus. The purchase consideration for the Pre-l PO Reorganisation of RM1,378.25 million was arrived at on a “willing-buyer Willing-seller” basis after taking into consideration, inter alia, the following: (i) the equity value of 7-Eleven Malaysia of RM1,241.36 million (“Equity Value”) which represents a PE Multiple of approximately 36.17 times (“Equity PE Multiple”) based on the adjusted unaudited profit after tax of the 7-Eleven Malaysia Group for the LTM ended 30 September 2013 of approximately RM34.32 million after adjusting for interest income (net of tax) earned on the amount owing by BRetail to 7-Eleven Malaysia of approximately RM11.90 million; and
(ii) the amount owing by BRetail to 7-Eleven Malaysia which will be settled pursuant to the issuance of the Note.

 

6. INFORMATION ON OUR GROUP (Cont’d) The key drivers which contributed to the increase in the value of the 7-Eleven Malaysia Group, as represented by the Equity Value, as compared to the 7-Eleven Malaysia PrivatisaUon Value are as follows: (i) Capital expenditure investments The 7-Eleven Malaysia Group has invested approximately RM85.6 million from the time of the Delisting of BRetaii up to 30 September 2013 for the following capital expenditure initiatives: (a) RM61.5 million, which has been invested for its store roll-out programme;
(b) RM5.5 million, which has been invested for its refurbishment/facelifts at 31 stores (14 stores in the first eight months of 2013 which were not part of the store refurbishment programme and 17 stores commencing from September 2013 which were part of the store refurbishment programme); and
(c) RM18.6 million, which has been invested on head office equipment and spare equipment for ad-hoc repairs

The 7-Eleven Malaysia Group has further invested approximately RM56.7 million from 1 October 2013 up to the LPD for the following capital expenditure initiatives: (a) RM20.7 million, which has been invested for its store roll-out programme;
(b) RM9.2 million, which has been invested for its refurbishment/facelifts at 62 stores (40 stores and 22 stores which were refurbished under its store refurbishment programme in the fourth quarter of 2013 and from 1 January 2014 up to the LPD, respectively); and
(c) RM26.8 million, which has been invested on head office equipment and spare equipment for ad-hoc repairs.

Please refer to Section 10.2.2(iii) for further details of the refurbishments undertaken by the 7-Eleven Malaysia Group. For the past four years ended 31 December 2010, 2011,2012 and 2013, 7­Eleven Malaysia Group invested approximately RM38.9 million, RM36.3 million, RM24.5 million and RM63.8 million respectively for its capital expenditure initiatives. 6. INFORMATION ON OUR GROUP (Cont’d) (ii) Expansion of the network of “7-Eleven” convenience stores throughout Malaysia 7-Eleven Malaysia Group’s chain of convenience stores in Malaysia has increased by 268 stores or 21.4% from 1,251 stores at the time of the Delisting of BRetaii to 1,519 stores as at 30 September 2013. 7-Eleven Malaysia has also entered into a strategic collaboration with Chevron Malaysia, who operates a network of approximately 420 “Caltex” petrol stations in Malaysia as at 30 September 2013, which provides the 7-Eleven Malaysia Group with an opportunity to further expand its presence in the “petro marts” segment. As at the LPD, two stores were already opened at “Caltex” petrol stations and the 7-Eleven Malaysia Group targets to open an additional 23 stores at “Caltex” petrol stations by June 2015. As a result of the increase in the number of stores from 1,212 stores as at 31 December 2010 to 1,407 stores as at 31 December 2012, revenue of the 7­Eleven Malaysia Group increased from RM1.314 billion for the year ended 31 December 2010 to RM1.579 billion for the year ended 31 December 2012, representing an increase of RM265.4 million or 20.2%, of which revenue from stores that had opened during or after the year ended 31 December 2010 increased by RM238.3 million whilst revenue from stores that had existed prior to 2010 increased by RM27.0 million. The number of stores increased from 1,383 stores as at 30 September 2012 to 1,519 stores as at 30 September 2013 where revenue of the 7-Eleven Malaysia Group increased from RM1.183 billion for the nine months ended 30 September 2012 to RM1.250 billion for the nine months ended 30 September 2013, representing an increase of RM67.3 million or 5.7%. The number of stores had further increased from 1,519 stores as at 30 September 2013 to 1,557 stores as at 31 December 2013 and to 1,583 stores as at the LPD. (iii) Improved product mix and operational efficiency The improvement in product mix and operational efficiency of the 7-Eleven Malaysia Group has also resulted in an increase in the gross margin and profitability of the 7-Eleven Malaysia Group since the Delisting of BRetail as follows: (a) Product mix • Historically, tobacco products have been the 7-Eleven Malaysia Group’s highest-revenue products but also the lowest-margin products. The 7-Eleven Malaysia Group has since increased its offerings of non-tobacco products. Revenue from non-tobacco merchandise sales as a percentage of revenue (net of rental income) increased from 63.9% for the year ended 31 December 2010 to 64.1% for the year ended 31 December 2012. With the increase, merchandise gross margin had improved from 23.9% for the year ended 31 December 2010 to 24.5% for the year ended 31 December 2012.
6. INFORMATION ON OUR GROUP (Cont’d) For the year ended 31 December 2013, revenue from non­tobacco merchandise sales as a percentage of revenue (net of rental income) increased slightly from 64.1 % for the year ended 31 December 2012 to 64.2% for the year ended 31 December 2013. Merchandise gross margin had improved further from 24.5% for the year ended 31 December 2012 to 25.4% for the year ended 31 December 2013; and • The 7-Eleven Malaysia Group has also increased its provision of in-store services, particularly mobile phone and online gaming reloads, which helped drive the increase in the 7-Eleven Malaysia Group’s overall gross margin. The 7-Eleven Malaysia Group enjoys 100% gross profit on commission revenue from mobile phone and online gaming reloads due to negligible associated cost of sales. Gross profit from commissions as a percentage of overall gross profit had increased in each period, at 10.7%,11.2% and 11.9% for the years ended 31 December 2010, 2011 and 2012 respectively and 12.3% for the nine months ended 30 September 2013. In fact, gross profit from commissions as a percentage of overall gross profit had increased from 11.9% for the year ended 31 December 2012 to 12.3% for the year ended 31 December 2013. (b) Operational efficiency • The 7-Eleven Malaysia Group’s network of stores is supported by its CDC in Shah Alam, Selangor. At the time of the Delisting of BRetail, the CDC handled and distributed approximately 36% of its products by volume to all its stores in Peninsular Malaysia. With the increase in the 7-Eleven Malaysia Group’s number of stores, the CDC now handles and distributes approximately 53% of its products by volume to all its stores in Peninsular Malaysia paving the way for increased efficiency and economies of scale. As the majority of its stores operate 24 hours a day, 7 days a week, the expansion of its store network allows it to spread its operating costs across a higher number of stores, which in turn has contributed to the improvement in selling and distribution expenses and merchandise margins. Selling and distribution expenses as a percentage of revenue declined from 26.0% for the year ended 31 December 2010 to 25.0% for the year ended 31 December 2012. However, for the nine months ended 30 September 2013, selling and distribution expenses as a percentage of revenue was 25.7%, and in fact, for the year ended 31 December 2013, selling and distribution expenses as a percentage of revenue was 26.0%, largely due to the increase in the Malaysian statutory minimum wage in 2012. 6. INFORMATION ON OUR GROUP (Cont’d) Although selling and distribution expenses as a percentage of revenue improved from 2010 to 2012 due to increased economies of scale as the 7-Eleven Malaysia Group had expanded its network of stores, the increase in the Malaysian statutory minimum wage in December 2012 had largely offset the benefits of increased economies of scale, resulting in selling and distribution expenses as a percentage of revenue remaining relatively stable from 2010 to 2013. As a result of these improvements, profit after tax of the 7-Eleven Malaysia Group increased from RM27.3 million for the year ended 31 December 2010 to RM40.5 million for the year ended 31 December 2012, representing an increase of RM13.2 million or 48.4% whilst profit after tax increased from RM30.9 million for the nine months ended 30 September 2012 to RM36.6 million for the nine months ended 30 September 2013, representing an increase of RM5.7 million or 18.4%. For the year ended 31 December 2013, profit after tax of the 7-Eleven Malaysia Group was RM51.8 million. (iv) Re-rating of the retail sector The PE Multiple of the FTSE Asian Sector Retail Index had increased by 54.1 % from 17.65 times at the time of the Delisting of BRetail to 27.19 times as at 18 December 2013 (Source: Bloomberg). The overall re-rating of the retail sector has resulted in a significant enhancement in the PE Multiple of a majority of the Convenience Store Operators, ranging from 26.1 % to 219.7%, since the Delisting of BRetail up to 18 December 2013 as tabulated below: [The rest of this page has been intentionally left blank] ICompany No.: 1058531-W I 6. INFORMATION ON OUR GROUP (Cont’d) Name of company Emerging markets CPAll PCl Midi Utama Indonesia Tbk PT Modern Internasional Tbk PT Philippine Seven Corporation Country of listing I Market Index
Thailand I Stock Exchange of Thailand Index
Indonesia I Jakarta Stock Exchange
Indonesia I Jakarta Stock Exchange
Philippines I Philippines Stock Exchange Composite Index
Principal activities(11 • Operation of convenience store chains in Thailand and China
• Ownership and operation of the department store chain located primarily in Shanghai city and Chonqing city of China

Operates a chain of retail stores and convenience stores in Indonesia • Development and operation of “7­Eleven” convenience stores in Indonesia(4)
• Distribution of imaging industrial products and equipment for medical, graphic art, and document solutions with various brands
• Operates “7-Eleven” convenience stores in Philippines
• leases commercial properties and constructs retail store building

Market capitalisation as at 18 December 2013(2) (RM million) 39,617.4 417.1 880.5 3,354.9 (A) PE Multiple as at4 April 2011 prior to the Delisting of SRetaii (times) 26.67 (3) .15) 21.17 (S) PE Multiple as at 18 December 2013 (times) 34.72 36.02 47.76 67.69 (SI -(AI (A) Increase I (Decrease) in PE Multiple 30.2% )31 .15) 219.7% 78
ICompany No.: 1058531-W I 6. INFORMATION ON OUR GROUP (Cont’d) Name of company  Country of listing I Market Index  Principal activities(1)  Market capitalisation as at 18 December 2013(2) (RM million)  (A) PE Multiple as at4 April 2011 prior to the Delisting of 8Retail (times)  (8) PE Multiple as at 18 December 2013 (times)  181 ­IAI (A) Increase I (Decrease) in PE Multiple  Developed marketsI”)  Convenience Ltd.  Retail  Asia  Hong Kong I Hang Seng Index  Operation of convenience store chains in Hong Kong under the “Circle K” trade name  1,778.8  14.88  26.94  81.0%  President Corporation  Chain  Store  Taiwan I Taiwan Stock Exchange Index  Operation of “7-Eleven” convenience stores in Taiwan  23,147.4  21.39  27.18  27.1%  Taiwan Ltd.  FamilyMart  Co.,  Taiwan I Taiwan Stock Exchange Index  Operates, franchises and licenses convenience stores throughout Taiwan and China  4,529.4  19.63  39.03  49.7%  Ministop Co., Ltd.  Japan I Tokyo Stock Price Index  • •  Operates convenience stores primarily in the Kanto and the Chubu areas of Japan Sells fast foods, daily dishes, processed foods, home necessities and magazines. It is also affiliated with Aeon Co. Ltd.  1,499.6  23.00  36.78  59.9%  Lawson, Inc.  Japan I Tokyo Stock Price Index  • •  Operates a chain of convenience stores in Japan Sells a variety of products including fast food, beverages, snacks, magazines, newspapers and sundry goods  24,049.7  30.08  22.03  (26.8)%  79
ICompany No.: 1058531-W I 6. INFORMATION ON OUR GROUP (Cant’d) Country of listing I Name of company Market Index Developed marketsl6) (Cont’dJ FamilyMart Co., Ltd. Japan I Tokyo Stock Price Index Seven & I Holdings Co., Japan I Tokyo Ltd. Stock Price Index Poplar Co., Ltd. Japan I Tokyo Stock Price Index CVS Bay Area Inc. Japan I Tokyo Stock Price Index Principal activitiesl1 ) • Operates a chain of convenience stores primarily in the Tokyo metropolitan area
• Oversees area franchising stores in Taiwan, South Korea and Thailand

A holding company which plans, manages and operates mainly convenience stores, supermarkets and restaurants • Operates a convenience store chain in • • • Source: Bloomberg as at 18 December 2013, company filings and the independent advice circular issued by KIBB on 11 April 2011 in relation to the Delisting of BRetaii (“lAC’). metropolitan area Sells a variety of items such as foodstuffs, pre-packed lunch boxes, beverages, magazines and basic household necessities Operates and manages a chain of convenience stores in Tokyo and Ch iba area. Also has a franchise contract with Sunkus & Associates Inc. Sells fresh foods including rice, cooked food and breads and non-perishable goods including magazines, cigarettes, games and software Market capitalisation as at 18 December 2013121 (RM million)  (A) PE Multiple as at4 April 2011 prior to the Delisting of BRetail (times)  (B) PE Multiple as at 18 December 2013 (times)  (B) -(A) (A) Increase I (Decrease) in PE Multiple  14,430.3  18.59  16.80  (9.6)%  109,219.0  16.46  22.27  26.1%  169.3  34.89  j71  )71  395.7  10.42  j71  )7)
80 6. INFORMATION ON OUR GROUP (Cont’d) Notes: (1)
(2)

(3)
(4)

(5) (5)
(7)

The Convenience Store Operators fulfill all the following criteria: (i) compenies which are involved in the operation of convenience stores which operate on a 24-hour basis;
(ii) contribution in terms of revenue and/or operating income, whichever is applicable, from the operation ofconvenience stores of at least 50% *; and

(iii) target market is convenience shopping. Save for the following companies, the revenue contribution from the operation of convenience stores is at least 75% based on the financial results of the Convenience Store Operators for the latest financial year: (a) Seven & I where the revenue contribution from the operation of convenience stores is only 38. 1% but operating income contribution from the operation of convenience stores is 74.6%; and
(b) Modem Intemasional where the revenue contribution from the operation of convenience stores is 50.3%. However, based on Modem Intemasional’s latest available unaudited quarterly reports for the first three quarters of 2013, the revenue contribution from the operation of convenience stores is approximately 64.0% on average. In addition, as stated in its 2011 and 2012 Annual Report, the management of Modern Internasional acknowledged that Modern Internasional will focus on the growth of its convenience store business going forward whilst maintaining its other existing business so long as it remains profitable.

The respective reported currencies of the Convenience Store Operators are translated to RM based on the exchange rates as at 18 December 2013. Not applicable as the financial data of Midi Utama was insufficient prior to the Delisting of BRetail as Midi Utama was only listed in November 2010. Revenue contribution from the operation of “7-Eleven” convenience stores has grown since the opening of its first convenience store in 2009. Based on the Annual Report of Modem Internasional for the years ended 31 December 2010 and 31 December 2011, contribution from the operation of “7-Eleven” convenience stores to total revenue were approximately 9.8% and 35.6% respectively. However, based on the Annual Report of Modern Internasional for the year ended 31 December 2012, contribution from the operation of “7-Eleven” convenience stores to total revenue was approximately 50.3%. Not applicable as revenue contribution from the operation of “7-Eleven” convenience stores was insignificant at the time of the Delisting of BRetail. Three F Co., Ltd. which was previously stated in the lAC, has been excluded as it was loss­making at the time of the Delisting of BRetail and also as at 18 December 2013. Not applicable as the company is loss-making. [The rest of this page has been intentionally left blank] 6. INFORMATION ON OUR GROUP (Cont’d) 6.1.5 Our Group structure As at the LPD, our Group structure is as follows:

CSSSB
6.1.6 Share capital As at the LPD, our authorised share capital is RM300,000,000 compnslng 3,000,000,000 Shares whilst our issued and paid-up share capital is RM105,200,000 comprising 1,052,000,000 Shares. The changes in our issued and fUlly paid-up share capital since the date of our incorporation up to the LPD are as follows: No. of Cumulative Date of Shares issued and paid-allotment allotted Par value Consideration up share capital (RM) (RM) 16 August 2013 20 0.10 Cash 2 2 April 2014 1,051,999,980 0.10 Issued pursuant to 105,200,000 the Pre-IPO Reorganisation Our issued and paid-up share capital will increase to RM123,338,500 comprising 1,233,385,000 Shares following the completion of the Public Issue. As at the LPD, our Company do not have any outstanding warrants, options, convertible securities or uncalled capital. [The rest of this page has been intentionally left blank] 6. INFORMATION ON OUR GROUP (Cont’d) 6.2 Our subsidiaries As at the LPD, our subsidiaries are as follows: Our Name! Issued and effective Registration Date!Place of paid-up share equity number incorporation capital interest Principal activities (%) Subsidiary of 7-Eleven Malaysia Holdings 7-Eleven Malaysia! 4 June 1984! RM35,000,000 100 Operating and franchising of 120962-P Malaysia convenience stores under the “7-Eleven” brand name and investment holdings Subsidiaries of7-Eleven Malaysia 7 Properties! 12 May 1994! RM3,000,000 100 Real property investments 299688-K Malaysia CSSSBI 27 March 1996! RM2,000,000 100 Operation of convenience 381437-U Malaysia stores under the “7-Eleven” brand name in Sabah Teluk Juaral 17 August 19921 RM3,000,000 100 Property investment, 246986-X Malaysia warehousing and distribution of merchandise We do not have any associated companies as at the LPD. As at the LPD, our subsidiaries do not have any outstanding warrants, options, convertible securities or uncalled capital. 6.2.1 7-Eleven Malaysia (i) History and business 7-Eleven Malaysia was incorporated in Malaysia under the Act on 4 June 1984 as a private limited company under the name Convenience Shopping Sdn. Bhd. and commenced operations on the same date. On 17 October 2007, Convenience Shopping Sdn. Bhd. changed its name to 7-Eleven Malaysia. 7-Eleven Malaysia is principally involved in operating and franchising of convenience stores under the “7-Eleven” brand name and investment holding of shares in its wholly-owned subsidiaries. Pursuant to the ALA, 7-Eleven Malaysia was granted the right to establish and operate “7-Eleven” convenience stores and to grant sub-franchises to franchisees who will operate “7-Eleven” convenience stores solely in Malaysia and Brunei Darussalam. 6. INFORMATION ON OUR GROUP (Cont’d) (ii) Share capital As at the LPD, the authorised share capital of 7-Eleven Malaysia is RM50,000,000 comprising 50,000,000 ordinary shares of RM1.00 each. The issued and paid-up share capital of 7-Eleven Malaysia is RM35,000,000 comprising 35,000,000 ordinary shares of RM1.00 each. There has been no change in the issued and paid-up share capital of 7­Eleven Malaysia for the past three years preceding the LPD. (iii) Shareholder 7-Eleven Malaysia is our wholly-owned subsidiary. (iv) Subsidiary and associated company As at the LPD, the direct subsidiaries of 7-Eleven Malaysia are 7 Properties, CSSSB and Teluk Juara. Please refer to Section 6.2.2 of this Prospectus for further information. As at the LPD, 7-Eleven Malaysia does not have any indirect sUbsidiary or associated company. 6.2.2 Subsidiaries of 7-Eleven Malaysia 6.2.2.1 7 Properties (i) History and business 7 Properties was incorporated in Malaysia under the Act on 12 May 1994 as a private limited company under the name Infortech Holdings Sdn. Bhd. On 15 June 2004, it changed its name to Hitac Holdings Sdn. Bhd. and later assumed the name of 7-Connect Sdn. Bhd. on 22 November 2006. On 1 April 2010, 7-Connect Sdn. Bhd. changed its name to 7 Properties. 7 Properties is principally involved in property investment and commenced its business on 1 April 1996. Properties owned by 7 Properties are mainly rented to and used by 7-Eleven Malaysia as premises for “7-Eleven” convenience stores. As at the LPD, the ground floor of all 13 properties owned by 7 Properties are primarily used by 7-Eleven Malaysia as premises for “7-Eleven” convenience stores whilst the upper floors of these properties which are not used by 7-Eleven Malaysia as offices are rented out to third parties. (ii) Share capital As at the LPD, the authorised share capital of 7 Properties is RM5,000,000 comprising 5,000,000 ordinary shares of RM1.00 each. The issued and paid-up share capital of 7 Properties is RM3,000,000 comprising 3,000,000 ordinary shares of RM1.00 each. There has been no change in the issued and paid-up share capital of 7 Properties for the past three years preceding the LPD. (iii) Shareholder 7 Properties is a wholly-owned sUbsidiary of 7-Eleven Malaysia. 84 6. INFORMATION ON OUR GROUP (Cont’d) (iv) Subsidiary and associated company As at the LPD, 7 Properties does not have any subsidiary or associated company. 6.2.2.2 CSSSB (i) History and business CSSSB was incorporated in Malaysia under the Act on 27 March 1996 as a private limited company under its present name and commenced operations on the same date. CSSSB is principally involved in the operation of convenience stores under the “7-Eleven” brand name in Sabah. As at the LPD, CSSSB operates 33 “7-Eleven” convenience stores in Sabah. (ii) Share capital As at the LPD, the authorised share capital of CSSSB is RM2,000,000 comprising 2,000,000 ordinary shares of RM1.00 each, all of which have been issued and fully paid-up. There has been no change in the issued and paid-up share capital of CSSSB for the past three years preceding the LPD. (iii) Shareholder CSSSB is a wholly-owned sUbsidiary of 7-Eleven Malaysia. (iv) Subsidiary and associated company As at the LPD, CSSSB does not have any sUbsidiary or associated company. 6.2.2.3 Teluk Juara (i) History and business Teluk Juara was incorporated in Malaysia under the Act on 17 August 1992 as a private limited company under its present name. Teluk Juara is principally involved in property investment, warehousing and distribution of merchandise. Teluk Juara had commenced its activity of property investment in 2009 but has yet to commence its activities of warehousing and distribution of merchandise as at the LPD. (ii) Share capital As at the LPD, the authorised share capital of Teluk Juara is RM5,000,000 comprising 5,000,000 ordinary shares of RM1.00 each. The issued and paid-up share capital of Teluk Juara is RM3,000,000 comprising 3,000,000 ordinary shares of RM1.00 each. There has been no change in the issued and paid-up share capital of Teluk Juara for the past three years preceding the LPD. 85 6. INFORMATION ON OUR GROUP (Cont’d) (iii) Shareholder Teluk Juara is a wholly-owned sUbsidiary of 7-Eleven Malaysia. (iv) Subsidiary and associated company As at the LPD, Teluk Juara does not have any subsidiary or associated company. [The rest of this page has been intentionally left blank] 7. BUSINESS (Cont’d) 7.1 Overview We are the largest convenience store operator in Malaysia in terms of number of stores, with a market share of 82% of the standalone convenience store segment, as of March 2014, according to the IMR Report. We opened our first “7-Eleven” convenience store 30 years ago under the “7-Eleven” brand name, and as at the LPD, we and our franchisees operate a nationwide chain of 1,583 “7-Eleven” convenience stores throughout Peninsular and East Malaysia serving over 900,000 customers per day based on the number of transactions recorded. We are the sole operator of “7-Eleven” convenience stores in Malaysia. We believe that the “7-Eleven” brand name is one of the most well-established and global brand names which has high brand awareness and generates trust among consumers. Our relationship with our licensor, 7-Eleven USA, provides us with strong benefits both in terms of brand equity, as well as operational and merchandising support. According to the IMR Report, standalone convenience stores in Malaysia grew at a CAGR of 13% from 2009 through 2013 both in terms of sales and number of stores. We believe that we are best positioned to capitalise on the continued growth we expect in the segment. As at the LPD, we self-operate 1,417 of our stores and our franchisees operate the remaining 166 stores. We have a well-established presence across all states in Malaysia. Our stores are commonly located at high pedestrian and vehicle traffic areas and easily accessible sites such as alongside busy roads, petrol stations, transportation hubs and shopping centres, with the intention of making it easy and convenient for customers to visit the stores. Our stores operate 24 hours a day, seven days a week to maximise convenience for customers, with the exception of 19 stores which are located in shopping malls or at light rail transit stations. We opened 150 net new stores in 2013 and we plan to accelerate our store opening programme going forward and are targeting a total of 600 net new store openings from 2014 to 2016. Our merchandising strategy is to offer our customers a wide range of products and services that cater to their “on-the-go” daily needs. Our stores typically offer a broad range of food and non-food items, including beverages, confectionaries and snack foods, household products and publications, perishables and other foods and tobacco, as well as certain products that are exclusive to our stores, such as our own fresh foods, proprietary products such as “Slurpee” and “Big GUlp”, and to improve customer loyalty and increase margins we are developing fast-moving items under a private label. In addition, many of our stores also offer services that are usually only available in more specialised retail outlets, such as mobile phone and online gaming reloads, and we plan to extend our offering of such services to further improve our offerings to our customers. We also aim to tailor the product mix of each of our stores to meet the needs of the types of customers we serve. We believe that our broad range of products and services provides us with a competitive advantage over other convenience store operators, and helps to drive customer traffic to our stores. Our operations are supported by an integrated supply chain and IT system. This system allows our procurement, sales and inventory and control processes to be centrally controlled. We manage and oversee an approximately 90,000 sq ft of usable warehouse space in our CDC in Shah Alam, Selangor to handle and distribute approximately 53% of our products by volume to our stores in Peninsular Malaysia, and whose on-the-ground operations we outsource to LF, a third-party logistics provider. We plan to construct a new and larger CDC to be opened by end 2015 with a higher capacity to support the continued expansion of our store network going forward. Our IT system, integrated computerised logistics and management system known as SEMRIS, is integrated with our supply chain, connecting our stores to our distribution system and our headquarters. We plan to invest approximately RM56.3 million in our IT systems during 2014 to further improve our operational efficiency and support our growth, including a new warehouse management system allowing for automation at the CDC, as well as a new IRIS for improved reporting and analytical capabilities and control. 7. BUSINESS (Cont’d) We have a strategic relationship with the Berjaya Family. We are able to leverage on this relationship and the “Berjaya” brand name to access its networks and resources across the consumer, retail, property and entertainment segments in Malaysia. Examples of this include our strategic partnership with MOL (part of the Berjaya Family and a Southeast Asian online solutions provider) to provide in-store services such as mobile phone and online gaming reloads, as well as working with the Berjaya Family to access prime locations at competitive rental rates. In addition, we believe we are able to leverage on the Berjaya Family’s expertise and understanding of consumers in Malaysia. For the past four years ended 31 December 2010, 2011, 2012 and 2013, we recorded revenues of RM1,313.7 million, RM1,462.4 million, RM1,579.1 million and RM1,672.5 million respectively, representing a CAGR of 8.4%, and we recorded gross profit of RM342.5 million, RM384.2 million, RM425.2 million and RM467.1 million, respectively, representing a CAGR of 10.9%. We saw a decline in our same-store sales growth from 3.4% in 2010 to -0.1% in 2013 primarily due to, inter-alia, decrease in customers per store per day in the fourth quarter of 2012 and the first quarter of 2013 as a result of economic factors which had slowed the growth of the Malaysian consumer sector as well as our store refurbishment programme which had commenced in September 2013. However, excluding the 71 stores which we had refurbished in 2013, our same-store sales growth in 2013 would have been 1.1 %. Please refer to Section 10.2 of this Prospectus for further information on the management’s discussion and analysis of financial condition and results of operations and prospects for the past four years ended 31 December 2010 to 2013. 7.2 Competitive strengths, future plans and strategies 7.2.1 Competitive strengths We believe that we have strong advantages over our competitors given the following key strengths: (i) The leading convenience store operator in Malaysia best positioned to capitalise on future strong growth ofthe convenience store segment We are the leading convenience store operator in Malaysia with 82% market share of the standalone convenience store segment as of March 2014 based on the number of stores according to the IMR Report. Established in 1984 as the first convenience store chains in Malaysia, we have enjoyed strong first mover advantage which has allowed us to establish our leading position in the convenience store industry. We have grown significantly since we commenced operations, expanding our store network from the opening of our first store in 1984 to 1,583 stores as at the LPD throughout Malaysia. In addition, our competition in the convenience store segment in Malaysia is SUbstantially smaller in terms of network size and geographical coverage and as of March 2014, our number of convenience stores is approximately 10 times more than the next largest standalone convenience store chain in Malaysia and in aggregate has more than the total number of stores operated by the next three largest convenience store chains in Malaysia, based on the IMR Report. 7. BUSINESS (Cont’d) According to the IMR Report, standalone convenience stores in Malaysia grew at a CAGR of 13% from 2009 to 2013 in terms of number of stores and sales value, respectively which compares to a CAGR of 9.3% in terms of overall growth in sales value for the retail sector over the same period. Going forward, the standalone convenience store segment is expected to grow at a CAGR of 9% in terms of number of stores between 2013 to 2018. Compared to other countries in Asia and globally, the convenience store segment in Malaysia is also relatively underdeveloped as demonstrated by its low penetration rates. According to the IMR Report, as at year end 2012 being the latest available date, convenience stores in Malaysia had a penetration rate of 131 stores per million people (56 stores per million people based on standalone convenience stores) as compared to 192 stores in Thailand, 340 stores in Japan, 429 stores in Taiwan and 490 stores in Korea. We believe that this underscores the significant long term growth potential for the segment. Given our leading market position in the convenience store segment in Malaysia and our significantly larger and longer established presence than our competitors, we believe that we are well positioned to take advantage of the significant growth potential of the convenience store industry. (ii) Significant brand and operational benefits from being the only operator of “7-Eleven” convenience stores in Malaysia We are the only company that has been granted the right by 7-Eleven USA to establish and operate, and to grant sub-franchises to franchisees to establish and operate, ”7-Eleven” convenience stores in Malaysia. We believe that our relationship with our licensor, 7-Eleven USA, brings strong benefits to us both in terms of brand equity as well as in terms of operational and merchandising support. 7-Eleven USA is the world’s largest global convenience store chain with over 52,100 convenience stores in 16 countries worldwide. We believe that as a result of this, ”7-Eleven” has become an iconic brand name with strong customer recognition and loyalty both in Malaysia and globally. In addition, we believe that the “7-Eleven” brand is a highly trusted brand that customers associate with convenience, choice, quality and value. We believe that these attributes provide us with a significant strategic advantage over our competitors who do not have the same brand heritage and characteristics that makes us the convenience store of choice for many customers. In addition, by leveraging on 7-Eleven USA’s global and regional expertise and experience, our relationship with 7-Eleven USA has provided us with strong operational support which allowed us to improve our efficiency and productivity. For example, 7-Eleven USA may, from time to time, assist us with and review our business planning processes and introduce best practices from other markets in a number of areas including operations, merchandising, real estate, human resource and repair and maintenance. In addition, 7-Eleven USA has also contributed by introducing other initiatives into our business such as the mystery shopper programme. We believe that such support and initiatives help to improve not only the operating efficiency and profitability of our business, but also the shopping experience of our customers which reinforces our brand attributes and customer loyalty. 7. BUSINESS (Cant’d) (iii) Broad merchandise mix anchored by a differentiated offering of fresh foods, proprietary products, private label and in-store services Our merchandising mix strategy offers our customers a broad range of products and services that cater to their “on-the-go” daily needs. To this end, we believe that we have a wide range of products and services, providing us with a significant competitive advantage. Given our scale and market leading position, we believe we have developed strong relationships with our suppliers which have allowed us to offer a substantial range of products across a number of food and non-food product categories to cater for a wide range of customers and their needs. In addition, we believe that we are able to differentiate our customer proposition by offering the following products and services: (a) Fresh and frozen foods -In order to increase customer traffic during breakfast, lunch and after-hours, we introduced a range of fresh food products in April 2009 and given its success we have continued to expand our range of products. Our fresh food products include donuts, croissants, pies and sandwiches at our stores and in addition, since May 2013, we have been working with PK Agro­Industrial Products (M) Sdn. Bhd., which is part of the Charoen Pokphand Group, an established food operator to supply our stores with ready-to-eat frozen food, which now supplies to 165 of our stores;
(b) Proprietary prodUCts -Through the ALA, we are able to offer proprietary products branded by 7-Eleven USA on a global basis such as “Slurpee” and “Big GUlp”. Such prodUcts are unique to our stores and help to drive traffic and generate publicity. In addition, such products are among our highest margin products and have led to improved profitability of our stores;
(c) Private label -To improve customer loyalty and increase profit margins, we are developing exclusive fast-moving items such as personal care products and beverages under private labels which we intend to roll out in the fourth quarter of 2014. We believe that by associating our products with private labels, we can increase brand awareness among our customers, who may then associate our stores with these personal care products and beverages and consequently increase traffic to our stores and eventually improve our profit margins; and
(d) In-store services -In addition to selling products, we also offer in­store services to provide increased levels of convenience for our customers and help drive store traffic. Our current in-store services offered are as follows:

• Mobile phone reloads We sell a variety of mobile phone reloads packages for various telephone network operators or service providers in Malaysia (“Telcos”) at our “7-Eleven” convenience stores. We purchase our supply of mobile phone reloads through various methods, which differs across the respective Telcos, namely, (i) direct purchase from the Telcas via purchase orders issued by our merchandising department; (ii) direct purchase from MOL which purchases from a reseller (“Telco A”); and (iii) on consignment basis, whereby mobile phone reloads in the form of electronic codes (“Soft PINs”) are sent to us with payment expected only on completed sales. 90 7. BUSINESS (Cont’d) On receiving our orders, the respective Telcos will send the Soft PINs to MOL, which are then immediately uploaded to the MOLReloads server. The Soft PINs would be automatically distributed to the MOL terminals located at each of our stores. The MOL terminals will then convert these Soft PINs into vouchers upon purchase, which are printed onto paper stock and issued to our customers. • Gaming reloads Gaming reloads such as MOLPoints, are also available to our customers via the MOL terminals. MOLPoints are an e­currency which enables customers to make online purchases of over 100 online game titles, game credits and other products and services. Customers can purchase these MOLPoints in the form of Soft PI Ns printed on the vouchers issued by the MOL terminals at anyone of our stores and top-up their MOLPoints accounts on MOL’s website. [The rest of this page has been intentionally left blank] ICompany No.: 1058531-W I 7. BUSINESS (Cont’d) We set out below the process flow for the sale of mobile phone and online gaming reloads which involves MOL: Portion f~)I’ MOL from Telcos (except Telco A and.three other Telcos) Commission uwenue for :sale of MOLPnlnts and Telco A reloads

Payment by Commission MOL for revellue and ptll’ch-as:e of Soft PIN TeleoA reloads Pay for reloads v~’1ll1e

We are able to provide mobile phone and online gaming reloads to our customers through our strategic partnership with MOL. As part of our business strategy to expand our in-store services, we have since September 2013 enhanced our strategic partnership with MOL, details of which are set out in Section 7.2.2(iii) of this Prospectus. 92
7. BUSINESS (Cont’d) • Fax, print, scan and photocopying services We have more than 1,200 stores with multi-functions copier machines where we provide fax, print, scan and photocopying services to our customers at a pre-ascertained rate depending on the service provided. • Touch ‘n Go reloads Touch ‘n Go is an electronic payment system which enables users of the card to perform cashless low value transactions. As at the LPD, 89 of our stores provide Touch ‘n Go reload services through the Touch ‘n Go terminal. We receive a commission from Touch ‘n Go for the provision of Touch ‘n Go reload services at our stores. We believe that by offering a wide range of products and services we will have a competitive advantage over our competitors and as a result, we are able to increase store traffic and improve customer loyalty. (iv) Nationwide network of 1,583 stores supported by an integrated supply chain and centralised functions allOWing for highly efficient operations, strong controls and economies of scale As at the LPD, we have the largest nationwide network of convenience stores consisting of 1,583 self-operated and franchised stores in Peninsular and East Malaysia. We believe that our established nationwide presence provides us with a strong platform, and positions us well to continue to capitalise on the growth of consumer spending in Malaysia. In addition, our network has allowed us to obtain an in-depth understanding of consumers’ needs and preferences in different regions and different location types in Malaysia. We believe that our strong infrastructure and IT systems are invaluable in allowing us to increase our scale while at the same time maximising the efficiency of our business, providing us with an ability to respond to changing customer preferences, maintaining optimal inventory levels and reducing costs. To this end, our nationwide store network is supported by an integrated supply chain system and our IT system, SEMRIS. We currently manage and oversee an approximately 90,000 sq ft of usable warehouse space CDC located in Shah Alam, Selangor which, handles and distributes approXimately 53% of our inventories by volume and typically delivers to our stores in Peninsular Malaysia three times per week. In the future, we plan to expand our distribution capabilities to support the continued growth of our store network through the construction of a new CDC in Shah Alam, Selangor which is expected to commence operations by end of 2015. Please refer to Section 7.9.1 of this Prospectus for further information. Our IT system is integrated throughout the supply chain from the store level to the CDC and to our headquarters, which allows us to have visibility and control over the flow of our merchandise. We believe that this enables us to actively manage our merchandise and inventory effectively and efficiently. We plan to invest in our IT systems to drive efficiency and profitability of our business. Please refer to Section 7.11 of this Prospectus for further information. Furthermore, our procurement, sales and marketing, store leasing, human resource, and finance functions are fully centralised allowing for increased efficiency and economies of scale as we continue to grow our store network. 93 7. BUSINESS (Cont’d) (v) Relationship with the Berjaya Family provides significant advantages and opportunities for us The Berjaya Family is a leading consumer-focused conglomerate in Malaysia and we believe that our strategic relationship with the Berjaya Family provides significant advantages and synergies for us. We believe that we benefit from the experience that the Berjaya Family has in managing consumer-focused businesses and their exposure to Malaysian consumer trends and market dynamics given its extensive presence in Malaysia. In addition, we believe we can leverage on other consumer-related businesses within the Berjaya Family. An example of this includes our existing partnership with MOL in providing services within our stores including mobile phone and online game reloads. The Berjaya Family also operates the “Krispy Kreme” and “Starbucks” chain in Malaysia and we believe that there is potential for future areas of collaboration to further enhance our product and service offering at our stores. We are also able to benefit from our relationship with the Berjaya Family through the implementation of BLoyalty Sdn. Bhd.’s (a member of the Berjaya Family) customer loyalty programme, “BCard” loyalty programme, which enables customers to earn points on purchases made at participating businesses and redeem these points for products and rewards at participating businesses within the Berjaya Family and other participating merchants. We believe that the launch of the “BCard” loyalty programme in the second quarter of 2014 allow us to leverage on the success of Berjaya Family’s other brands and will help to increase traffic and customer loyalty. Furthermore, we also expect to benefit from our strategic relationship with the Berjaya Family in securing more attractive store locations in high traffic areas. Our relationship with the Berjaya Family provides us with access to highly attractive locations in properties owned by the Berjaya Family such as “Berjaya Times Square”. In addition, in approaching third party shopping mall operators for locations, we are able to leverage off the multi-format network of the Berjaya Family to secure attractive locations at more attractive rental rates as we are able to jointly negotiate with mall developers to establish multiple retail sites at their malls. (vi) Highly experienced management team with significant expertise in each of their respective areas of operation Our Group is managed by our highly experienced senior management and industry professionals. Led by our Chief Executive Officer and our Managing Director, both of whom have over 20 years of experience in senior management positions, we have further strengthened our management team with the recent appointment of a Deputy Chief Executive Officer and several new general managers who are highly experienced professionals in their respective area of expertise. 7. BUSINESS (Cont’d) For example, our Deputy Chief Executive Officer has more than 30 years of experience in food, beverage and household products retailing, manufacturing and wholesaling, our General Manager of Merchandising has 15 years of retail and merchandising experience with a number of leading retailers in Malaysia and overseas, our Chief Information Officer has more than 29 years of experience in the IT and telecommunication industry, our General Manager of Logistics has 16 years of experience in the logistics industry, our Senior Manager of Store Development has more than 24 years of experience in the real estate industry and our General Manager of Sales and Operations has previously worked as the Store Director with Carrefour Malaysia Sdn. Bhd. (“Carrefour Malaysia”) (now known as AEON Big (M) Sdn. Bhd.) and prior to his stint with Carrefour Malaysia, he had worked in sales and marketing for several years. We believe that the experience of our management team in their respective functions will be invaluable in executing our strategies going forward and in improving the operating efficiency and productivity of our business. 7.2.2 Future plans and strategies Our principal goals are to further strengthen and consolidate our position as the leading convenience store operator in Malaysia as well as improve our sales productivity and operating efficiency. We aim to achieve this goal by implementing the following strategies: (i) Further consolidate and strengthen our market position by expanding our store network We intend to continue to capitalise on our strong brand and market leadership by further increasing our market penetration through rapid store expansion. We believe that our existing network and infrastructure provides us with a strong platform to accelerate our store rollout plan nationwide. We are continuing to build our pipeline of store openings and have opened a total of 26 self-operated net new stores from 1 January 2014 up to the LPD. We plan to accelerate our store rollout plan and we are targeting a total net increase in the number of stores of approximately 600 stores between 2014 and 2016. For 2014, we intend to roll out the 200 new stores in the following regions: Region No. of new stores (i) Peninsular Malaysia
(a) West Coast
• Northern Region(1) 32
• Central Region(2) 70
• Southern Region(3) 38

 

(b) East Coast(4) 36

 

(ii) East Malaysia(S) 24

Total 200 Notes: (1) Refers to Per/is, Kedah, Pu/au Pinang and Perak.
(2) Refers to Se/angor and Kua/a Lumpur.
(3) Refers to Negeri Sembi/an, Me/aka and Johor.
(4) Refers to Ke/antan, Terengganu and Pahang.

(5) Refers to Sabah and Sarawak. 95 7. BUSINESS (Cont’d) Given the relatively low penetration rate of convenience stores in Malaysia, we are confident that there will be significant opportunities to grow our store network both within the Kuala Lumpur and Selangor region, east coast of Peninsular Malaysia as well as East Malaysia, which we believe are still underpenetrated. Furthermore, our collaboration with Chevron Malaysia targets an opening of 23 additional convenience stores at “Caltex” petrol stations by June 2015 which will further help to underpin our store target. Subject to prevailing market conditions of each region, we intend to adopt a similar store roll out plan in 2015 and 2016. In order to facilitate the acceleration of our store rollout programme, we have focused on enhancing our store development capabilities and practices. For example, we have put in place a highly experienced Senior Manager of Store Development to lead our new store rollout plan. Furthermore, so as to enhance our visibility in potential new sites, in addition to our store development team working with real estate agents, we also leverage on our extensive network of self-operated stores and empower our store managers to identify and evaluate new sites for us going forward. With our enhanced capabilities, we are confident in our ability to secure sufficient new site locations to implement our expansion plan and accelerate our growth profile. While we plan to accelerate our store opening profile, we will continue to be disciplined in our execution and to have strict selection criteria and financial targets for each of our new stores. Our store selection criteria include the population of the local catchment area, site traffic, accessibility, activity generators in the area e.g. hawkers, local competition, as well as expected sales and profitability. (ii) Continue to invest in and improve our supply chain and IT infrastructure to facilitate growth and further improve our operating efficiency and productivity While our operations are supported by an integrated supply chain and IT system, we plan to invest significantly in the next one to three years to further enhance our capabilities to support our next phase of growth and to improve our operating efficiency and productivity. We plan to expand our distribution and logistics capabilities, with the aim of our CDC handling and distributing up to approximately 75% of our inventories in volume in the future as compared to approximately 53% at present, and shortening the lead time between ordering and delivery. To this end, we plan to execute the following initiatives: (a) Implementation of a “put away” inventory management system -Currently inventory orders from our stores are aggregated by a business-to-business web portal that subsequently sends orders to suppliers. With the new “put away” inventory management system, store orders will be consolidated centrally at our CDC. This not only allows for our CDC to better manage our inventory but also to keep our own inventory, which in turn will significantly shorten our delivery lead time from the present five days to as low as one to two days, thus improving our inventory management and allowing our stores to carry a broader product assortment with lower levels of inventory required for each product at the store level. We expect that this new system will be operational by the third quarter of 2014. 7. BUSINESS (Cont’d) (b) Construction of new CDC -we plan to construct a new 166,000 sq ft with a total usable warehouse space of 124,000 sq ft CDC in Shah Alam, Selangor to replace the existing CDC. Our new CDC is expected to commence operations by end of 2015 and will have 38% greater capacity and will significantly improve our distribution capacity and capabilities and allow us to supply to a larger network of stores with a broader assortment of products. As at the LPD, we have invested approximately RM12.0 million, for the construction of the new CDC which includes land cost of RM10.8 million and we estimate that the construction of the new CDC will cost approXimately RM40.8 million, exclusive of land cost. In addition to our investment in distribution and logistics infrastructure, we also plan to invest significantly in upgrading our existing IT platform to further enhance our operational efficiencies as well as support the implementation of our strategic initiatives. We plan to upgrade SEMRIS, our existing IT system, and implement a new IRIS by 2016 which combines best in class enterprise resource planning and POS systems and enhances integration and scalability throughout our organisation and provides our management team with improved control over our retail and merchandising operations. We believe that the implementation of this new system, combined with the significant investment in distribution and logistics infrastructure will improve the operational performance and efficiency of our business in the future. Including the investment in the “put away” inventory management system, we plan to invest a total of approximately RM66.3 million in our IT systems. (iii) Expand our in-store services to drive store traffic and profitability We believe that the provision of in-store services at our convenience stores is one of the key drivers of store traffic. Our in-store services include, among others, the provision of mobile phone and online gaming reloads, further details of which are set out in Section 7.2.1(iii)(d) of this Prospectus. In addition to being a key driver of store traffic, our in-store services have also significantly enhanced the profitability of our stores via commission-based income. For the year ended 31 December 2013, commissions revenue earned from the provision of our in-store services accounted for approximately 12.3% of our gross profit. We have benefited from our strategic partnership with MOL, a payment service provider which facilitates electronic distribution of prepaid mobile phone and online gaming reloads through web-based and terminal-based infrastructure provided by MOL who owns, manages and maintains it. MOL is part of the Berjaya Family and is also a related party of our Group. We are able to earn commissions through our strategic partnership with MOL for the sale of mobile phone and online gaming reloads, which contributed 35.3% of our total commissions revenue earned for the year ended 31 December 2013. MOL has been appointed as our exclusive partner for the provision of mobile phone and gaming reloads services since 2009. As part of our business strategy to expand our in-store services, we have since September 2013, enhanced our strategic relationship with MOL which will allow us to expand our in-store services to include the following: 7. BUSINESS (Cont’d) (a) MOL Games Rack and POS Application Store Cards -Leveraging on the growth of mobile and online gaming, MOL is partnering with application stores using MOLPoints. In conjunction with this strategy, we plan to start selling POS cards at our stores for use in application stores. In addition, MOL has partnered with large global games publishers to distribute CDs for online games (e.g. World of Warcraft). We believe that both selling POS cards and CDs for online games, combined with our existing MOLPoints service for online gaming reloads will make our “7-Eleven” convenience store a destination store for purchasing online and mobile games and will help to drive traffic into our stores as well as improve our stores’ profitability.
(b) MOLPay -MOLPay is an e-commerce payment system that currently functions as a payment processor for credit card and online banking payments for e-commerce merchants. MOLPay is expected to expand its functions further to enable customers of such e­commerce merchants to pay by cash at our stores for their online purchases.
(c) Bill payment -Through MOL terminals, customers will be able to make cash payments for their monthly satellite television and utilities bills at our stores for which we will receive a commission from MOL for bill processing.
(d) Touch ‘n Go -As at the LPD, only 89 of our stores provide the Touch ‘n Go reload services through the Touch ‘n Go terminal as there are limited Touch ‘n Go terminals available. Going forward, we intend to utilise the MOL terminal for Touch ‘n Go reloads which would enable all of our stores to provide Touch ‘n Go reload services.

We believe that the provision of additional services will increase customer traffic in our stores, which in turn will help to increase sales of merchandise and income received from the use of such services. In addition, as part of our collaboration, MOL has agreed to fund the investment in the back-end capability, integration hosts and capital expenditure requirements to integrate with service providers at no cost to us, with our Company only being responsible for integration and operation processes between our POS system and the MOL terminal. (iv) Actively manage our merchandising and promotional strategy to improve our product offering and drive sales productivity In order to continue to drive store traffic and sales per store, we will continue to actively manage our product assortment. Notably, with continued investment in our IT systems, as well as our enhanced distribution and inventory management capabilities, we believe that our merchandising capabilities will improve significantly. 7. BUSINESS (Cont’d) One of the key elements of our merchandising strategy is to increasingly differentiate our product assortment by store type. Our merchandising strategy is focused on moving away from a single strategy for our stores where fine tuning of merchandise mix relies largely on each individual store manager, to a strategy where general product assortment for each store is controlled centrally and adapted by the type of store. We segment our stores into a number of clusters, such as colleges, commercial, hospitals, residential, industrial and tourist areas, and going forward, we plan to increasingly examine our product assortment by cluster to optimise product mix and drive customer traffic for those store types. For example, we will focus on non-alcoholic beverages at stores located near bus terminals which tend to have higher demand for such items. Furthermore, we also plan to drive sales of fresh foods and proprietary products at our stores which we continue to see as key points of differentiation with our competitors. In addition, we will increasingly consider the use of promotions to actively drive traffic to our stores and increase the average transaction size per customer. For example, we will actively promote multi-buy programmes where we offer bundled products to our customers at a discount. In addition, we will seek to increase the level of customer communication and interaction through various means, including the use of social media to increase the level of customer communication. Furthermore, we aim to launch the “BCard” loyalty programme in the second quarter of 2014 which we believe will further improve customer traffic as well as provide us with customer data which will allow us to use targeted promotional strategies as well as gain a better understanding of our customers’ need and trends. (v) Accelerate refurbishment of stores to improve in-store customer experience We believe that customer shopping experience is one of the key drivers of store traffic and customer loyalty. With this in mind, we began our store refurbishment programme in September 2013 whereby 57 stores were refurbished under the programme in 2013 (with 17 stores refurbished in September 2013 and 40 stores refurbished in the fourth quarter of 2013). We plan to accelerate our store refurbishment programme in the coming years to improve the appearance and ambience of some of our stores and we target to refurbish 600 stores from 2014 to 2016 of which approximately 60% will be major refurbishments and 40% will be minor refurbishments. We focused our refurbishment programme in 2013 on many of our top performing stores in our effort to increase sales further at these stores. Our store refurbishment programme focuses on both improving customer experience as well as providing greater emphasis for our other strategic initiatives. In addition to improvements in lighting and upgrading of our store appearance, other store improvements will focus on increasing sales of fresh foods and service income. To target younger customers, we plan to expand some of our stores with seating space comprising approximately 25% of store space and place greater emphasis on fresh foods as well as provide wireless network coverage within our stores. We believe that a larger store size with space for seating, combined with an enhanced fresh food offering as well as an expansion of in-store services such as online gaming reloads and POS application store cards will transform our stores into a destination store for younger customers. 7. BUSINESS (Cont’d) 7.3 Business milestones Date Event 1984 We began operations and opened the first “7-Eleven” convenience store in Bukit Bintang, Kuala Lumpur, Malaysia. 1996 We commenced operations of our stores in Sabah. We opened the 100’h “7-Eleven” store in Malaysia. 2003 We signed the ALA with 7-Eleven USA, which directly grants us the exclusive right to establish and operate “7-Eleven” stores, and to grant “7-Eleven” sub-franchises in Malaysia and Brunei Darussalam. 2004 We made our first delivery from a CDC, which we established to substantially centralise logistics for our stores in Peninsular Malaysia. 2005 Our initial CDC expanded its reach to serve all of our stores located in Peninsular Malaysia. 2008 We opened the 1,000th “7-Eleven” store in Malaysia. 2009 We introduced hot beverages at our stores. We began franchising “7-Eleven” stores. We began our strategic relationship with MOL. 2011 We were accredited by Jabatan Pembangunan Kemahiran for Sistem Latihan Dual National (national dual training system) (“SLON”), which provides employees an opportunity to obtain academic qualifications and certifications while working at our stores. We launched our first SLDN intake. 2012 We moved our CDC operations to our current CDC in Shah Alam, Selangor 7.4 Our stores As at the LPD, we and our franchisees operate 1,583 stores nationwide throughout Peninsular and East Malaysia, of which we self-operate 1,417 stores and our franchisees operate the remaining 166 stores. As at the LPD, we and our franchisees operate 1,562 of the stores on tenanted properties and we own the remaining 21 properties. From 1 January 2010 up to the LPD, we opened 480 stores, of which 445 are in Peninsular Malaysia and the remaining 35 in East Malaysia (each net of store closures). 7. BUSINESS (Cont’d) The following map depicts the locations of our stores as at the LPD.
Terengganu (57) Selangor (471) Wilayah Persekutuan
(264) Negeri Sembilan
(82) The following table depicts the number of our stores in each state throughout Malaysia as at the LPD alongside the state’s population and population density in 2010. State Stores l1/Population l1/Population density (million) (persons per sq km) Johor 178 3.4 174 Kedah 56 2.0 205 Kelantan 68 1.5 102 Melaka 70 0.8 493 Negeri Sembilan 82 1.0 153 Pahang 86 1.5 42 Pulau Pinang 73 1.6 1,490 Perak 100 2.4 112 Perlis 10 0.2 282 Sabah 38 3.2 44 Sarawak 30 2.5 20 Selangor 471 5.5 674 Terengganu 57 1.0 79 Wilayah Persekutuan (Federal Territories) -Kuala Lumpur 261 1.7 6,891 -Putrajaya 3 0.1 1,478 Total 1,583 28.3 Note: (1) Sourve: The 2010 Population and Housing Census of Malaysia. 7. BUSINESS (Cont’d) Our stores are commonly located at high pedestrian and vehicle traffic areas and easily accessible sites such as alongside busy roads, petrol stations, transportation hubs and shopping centres, with the intention of making it easy and convenient for customers to visit the stores. Our stores operate 24 hours a day, seven days a week, to maximise convenience for customers, with the exception of 19 stores which are located in shopping malls or at light rail transit stations. As part of our strategy, we plan to expand and strengthen our store network by accelerating our store opening programme, which will allow us to capture growth in Malaysia’s underserved convenience retail market. We believe that there will continue to be significant opportunities to grow our store network, both within the Kuala Lumpur and Selangor regions, as well as the rest of Malaysia. As such, we intend to expand across Malaysia, especially in underserved markets such as East Malaysia and the east coast of Peninsular Malaysia, as well as other areas where there is a low penetration of convenience stores. We plan to accelerate our store opening programme going forward and are targeting a total of 600 net new store openings from 2014 to 2016. We have a dedicated store development team that works with real estate agents to identify leads and prospects for potential store locations on an ongoing basis, and our operations team is also tasked with identifying potential sites for new stores. We also plan to continually upgrade our stores by carrying out major refurbishments programme to enhance stores’ images and customers’ shopping experience, in addition to the continual minor refurbishments that we routinely undertake at our stores. Our store management team selects stores that are profitable and have been in operation for more than seven years for refurbishment. For tenanted outlets, in addition to profitability and years in operation, our store management team also selects stores with a remaining tenancy term of three years for refurbishment. From 2014 to 2016, we intend to undertake approximately 600 refurbishments (around 200 stores each year), approximately 60% of which we intend to undertake major refurbishments and the remaining 40% of which we intend to undertake minor refurbishments. We estimate that the refurbishments will take between two to four weeks to complete for each store and cost ranging from RM100,000 to RM150,000 for each store, of which RM27.3 million will be funded from proceeds raised from our Public Issue and the balance from internally generated funds. Despite having the exclusive right to establish and operate “7-Eleven” stores, and to grant “7­Eleven” sub-franchises in Brunei Darussalam, we do not have any stores in Brunei Darussalam at this point in time as we believe the Malaysian convenience store market is still relatively underpenetrated with a penetration rate of 131 stores per million people (56 stores per million people based on standalone convenience stores) as compared to 192 stores in Thailand, 340 stores in Japan, 429 stores in Taiwan and 490 stores in Korea, according to the IMR Report and we intend to focus our growth strategy in Malaysia. Further, we are of the view that Brunei Darussalam market is not presently ready for us to develop a convenience store network given the scale involved and demand required. 7.4.1 Store opening process We believe that the locations of our stores are crucial to our success. Accordingly, we have strict site selection criteria that take into account a number of factors. Prior to opening a new store in a particular area, we source potential sites and conduct a site evaluation, which includes assessing the number of houses in the catchment area, local activity generators (such as restaurants, banks, hotels, pubs and other retail businesses), the overall level of competition and estimated traffic flow. We also make an assessment on operational feasibility, potential sales, profitability and returns on investment based on our experience with other stores with similar demographics and characteristics. Once we have selected a site, we will negotiate and execute the tenancy agreement and then take vacant possession of the site. 102 7. BUSINESS (Cont’d) We appoint a contractor from our regular panel of contractors to fit out a new store, including the installation of equipment, furniture and fittings, security systems and telephone and data lines. We then hand over the store to our operations team to complete an asset checklist and verification. Following that, we arrange for inventory to be delivered to the store and then open the store for business. To determine our initial product mix, we review the sales history of our other similar stores in the area with similar demographics and adjust the product mix based on our experience. If a store is our first store in an area, we determine its initial product mix by reviewing the sales history of the most-closely comparable store. Typically, we take on average 25 days from the time we conduct site markings of the store to the time we commence operations for stores located in Peninsular Malaysia and additional two to three weeks for stores located in East Malaysia due to shipping of certain custom-made materials from Peninsular Malaysia. During the year ended 31 December 2013, our average capital expenditure per new store, excluding inventory, was approximately RM245,000. 7.4.2 Design, layout and presentation of stores In choosing the design, layout and presentation of our stores, we first classify each store by its store type based on surrounding demographics. We maintain a variety of store design templates with distinctive key features applicable to different store types, such as modern chic designs for stores located in a central business district and light and easy designs for stores located in suburban areas. Certain design features are common to all of our stores to provide them with a standard contemporary look, such as full glass frontages, standardised shelving unit sizes and low shelves that allow for easy browsing. We design the layout of our stores according to the visual merchandising principle, in which we use colour, lighting, signage and other visual communications in order to encourage customers to enter our stores and make purchases. We have pre-defined layouts applicable to each store type and which we optimise by strategically locating high-traffic items, such as beverages, in areas that will allow customers to manoeuvre past impulse purchase products. Additionally, all of our store layouts conform to the “7-Eleven” brand’s global style guidelines, which help us to ensure a consistent customer experience. 7.4.3 Strategic collaboration with Chevron Malaysia Pursuant to a Memorandum of Agreement, dated 13 June 2013, we have a collaboration with Chevron Malaysia, who operates a network of approximately 423 “Caltex” petrol stations in Malaysia as at the LPD, to identify potential and existing “Caltex” petrol stations where we are able to rent retail space from them to operate our stores. We believe that this arrangement provides us with an opportunity to expand our presence into the “Petro marts” segment and to explore the potential for new stores. Also, we believe that selected “Caltex” petrol stations offer us prime retail space given their high customer traffic. We have two stores at “Caltex” petrol stations as at the LPD, and we aim to open 23 more by June 2015. Our stores located at petrol stations offer our customers a product mix similar to our other retail stores, in addition to certain motoring products. 7. BUSINESS (Cont’d) 7.4.4 Franchises As at the LPD, our franchisees throughout Peninsular Malaysia operate 166 stores, with a concentration of franchisees in Kuala Lumpur and Selangor. A potential franchisee must pay us an upfront non-refundable fee of RM 100,000 and security deposits of RM150,000, which are refundable without interest upon expiration (usually 10 years) or termination of the relevant franchise agreement. The franchisee must purchase inventory and pay for store-operating costs and, in return, the franchisee receives a share of the gross profit of the store, which percentage varies depending on the store’s gross profit margin, as well as other income in compliance with franchise guidelines. This profit sharing arrangement incentivises franchisees to maximise the performance of their stores, thereby increasing the revenues and profit that we earn. In addition to the profit sharing arrangements, we also receive small fees from our franchisees for services such as payroll processing, maintenance and repairs of store equipment and monthly inventory counts. We believe that by franchising stores to locals who are familiar with the local demographics, trends and needs of their community, the franchisees will be well-positioned to maximise their performance, particularly when coupled with the operational support that we provide to them. During the year ended 31 December 2012 and 31 December 2013, franchisees represented 5.9% and 4.1 % of our gross profit (net of their share of operating expenses), respectively. We also provide support to franchisees in terms of training, management development, advertising, promotions and other services. Our franchised stores are also integrated onto our SEMRIS IT platform that we use for all of our self-operated stores, which provides us with the same transactional and financial information from our franchised stores that it does from our self-operated stores. Moreover, our franchisees receive their supplies in the same fashion as our self-operated stores, either directly from the supplier or passed-through our CDC, depending on the product. Our franchise agreements with our franchisees prescribe mInimUm terms and conditions with which our franchisees must comply relating to, among others, health and safety standards, security, maintenance of insurance, cash-collection policies and training programmes. Our store operations team randomly audits our franchised stores to review compliance with these terms. We have decided to re-evaluate our store franchising model in early 2012 in part due to the regulatory challenges faced in trying to successfully develop our franchise stores. In Malaysia, in complying with the Franchise Act 1998, we are unable to offer customised terms to different franchisees. This constrains us from optimising performance and profitability from these stores as stores profitability are affected by location, sales and other factors and hence, the offering of the same terms to all franchisees does not lead to an optimal outcome to us. Therefore, we have decided to suspend the franchise model given the unattractive economics relative to existing stores. However, we do not rule out franchising and may have plans to resume our franchising strategy in the foreseeable future. 7. BUSINESS (Cont’d) 7.5 Products and services Our merchandising strategy is to offer our customers a broad range of products and services that cater to their “on-the-go” daily needs. We offer a wide variety of food and non-food products to appeal to a wide range of customers, and, as at the LPD, each of our stores typically carried from approximately 800 SKUs for smaller stores (such as kiosks) to approximately 2,300 SKUs for larger stores, with our median store carrying approximately 1,800 SKUs. We aim to further tailor the product mix by the type of each store to meet the needs of the profile of customers we serve. For each new store, we base the store’s initial product mix on that of an existing store with a similar profile, and subsequently refine the mix of products and brands on an ongoing basis based on sales trends at a particular store. Our range of products and services includes: (a) beverages;
(b) confectionaries and snack foods;
(c) household products and pUblications;
(d) perishables and other foods;
(e) food services including sandwiches, fresh brew coffee and bakery items;
(f) tobacco products; and
(g) in-store services, such as mobile phone, online gaming and Touch ‘n Go reloads, ATM machines, fax, print, scan and photocopying services.

We continually review our product mix and new product opportunities in order to respond to the changing demands of our customers and to provide a competitive advantage over some of our competitors. We believe that the following products and services, which will be the focus for our merchandising and service strategy, differentiates us from our competitors and helps to drive store traffic to our stores: (a) Fresh and frozen foods -We introduced fresh foods in selected stores starting in April 2009 and given the success of fresh food sales in these stores we have expanded our range of fresh food products and intend to continue introducing fresh foods in more stores. Our fresh food products include a range of donuts, croissants, and pies. Since May 2013, we have also worked with PK Agro-Industrial Products (M) Sdn. Bhd., which is part of the Charoen Pokphand Group an established food operator to supply our stores with ready-to-eat frozen food, which now supplies to 165 of our stores as at the LPD. We believe that our fresh food initiatives will increase our customer traffic during breakfast, lunch and dinner periods, as well as after-hours, and lift overall sales per store;
(b) Proprietary products -Proprietary products branded by 7-Eleven USA on a global basis such as “Slurpee” and “Big Gulp” are among our highest margin products. We intend to continue leveraging on the branding of these products to generate pUblicity, customer traffic and customer loyalty. We also market our fresh brew coffee and chocolate drink under the “7-Eleven” brand name and have plans to continue this success by launching chilled drinks and fresh food under proprietary brands;
(c) Private label -To improve customer loyalty and increase profit margins, we are developing exclusive fast-moving items, such as personal care products and beverages which we intend to roll out in the fourth quarter of 2014. We believe that by associating our products with private labels, we can increase brand awareness among our customers, who may then associate our convenience stores with these personal care products and beverages and consequently increasing traffic to our stores and eventually our profit margins; and

7. BUSINESS (Cont’d) (d) Other services -Many of our stores offer services that are usually only available in more specialised retail outlets, such as mobile phone, online gaming and Touch ‘n Go reloads, fax, print, scan and photocopying services. A selected number of our stores also offer automotive supplies and access to ATMs. We intend to further increase the number of services offered in-store through further collaboration with MOL, further details of which are set out in Section 7.2.2(iii) of this Prospectus. Historically, tobacco products have been our highest-revenue products, but they are our lowest-margin products. As part of our continual efforts to review our product mix and provide expanded value and choice to our customers, a key part of our strategy is to increasingly focus on offerings of non-tobacco products. Correspondingly, while tobacco products are still our highest-revenue products, our revenue from tobacco as a percentage of our total revenue began decreasing in 2012 as compared to 2011, a trend that continued into 2013. Similarly, given our increasing focus on providing in-store services, our revenue from in-store services as a percentage of total revenue has increased every year since 2010. By adjusting our product mix towards commissions and other non-tobacco products, we have achieved increased gross profit margins every year since 2010. 7.6 Customers We serve over 900,000 customers per day in Malaysia, based on the number of transactions recorded at our stores, and our customer base primarily comprises walk-in customers at our stores. As such, we do not have any material exposure to nor are we dependent upon any particular customer, and no single customer contributed 10% or more of sales in any of the past four years ended 31 December 2010 to 2013. Whilst our customers come from all socio­economic and demographic groups, we focus in particular on convenience-oriented individuals, such as young working adults, who are an increasingly affluent demographic and tend to appreciate the convenience and 24-hour accessibility that our stores offer. We believe that as Malaysia continues to become increasingly urbanised, and there is a transition from traditional to modern grocery retail outlets, our stores will continue to be well-positioned to meet the adapting lifestyle preferences of the urban population. 7.7 Pricing Our pricing strategy seeks to offer products at competitive prices taking into account our brand positioning and product features for each product category. We continually monitor market prices and trends and implement appropriate adjustments to our prices and promotions as and when necessary. As a convenience store operator, our primary aim is to ensure convenience and accessibility and, as such, we do not engage in price-wars with our competitors. 7.8 Marketing and promotions Our marketing strategy for the “7-Eleven” brand name is to position us as the convenience store of choice in Malaysia. We strive to create strong brand values to associate shopping at our stores with convenience, quality, value and choice. We conduct national advertisement campaigns to promote the “7-Eleven” brand name which are normally placed on television, radio and in print media such as newspapers and magazines. In addition, we advertise using leaflets, displays and other in-store media, and online media such as Facebook, which we use to maintain regular and direct contact with our customers. Periodically, we have promotional offers and also organise events and competitions in which customers can win prizes, such as “7-Eleven Ville”, a social network game, to encourage customers to visit our stores. For the year ended 31 December 2013, we spent approximately 0.4% of our revenue on advertising and promotions. 7. BUSINESS (Cont’d) We conduct a variety of sales and promotional campaigns at our stores, which we generally time to coincide with festive holidays, such as Hari Raya, New Year and Chinese New Year. During our sales and promotional campaigns, we offer our customers discounted products and special festive products, such as Chinese New Year snacks, to encourage greater patronage at our stores and increase sales. In addition to holiday promotions, we conduct other promotional campaigns, such as our “Hello Kitty” campaign, which was launched on 1 July 2013. Under this promotion, every purchase of RM5.00 and above (excluding certain products such as tobacco and mobile phone reloads) is entitled to one sticker, where the bonus stickers can be used for purchases of sponsored products. Customers can redeem these stickers for certain “Hello Kitty” promotional items. All of our stores highlight products of participating suppliers throughout the 11-week promotional period. To support our promotional and other initiatives, we are implementing a customer loyalty programme and have started implementing a mix-and-match promotion that will provide us with increased pricing and promotional flexibility. Under our customer loyalty programme, we will participate in BLoyalty Sdn. Bhd.’s (a member of the Berjaya Family) customer loyalty programme, “BCard” loyalty programme, which enables customers to earn points on purchases made at participating businesses and redeem these points for products and rewards at participating businesses within the Berjaya Family and other participating merchants. We expect to launch the ”BCard” loyalty programme in the second quarter of 2014 in all of our stores. Our mix-and-match promotion implemented in November 2013 features targeted promotions and provide discount structures on qualified purchases. We are able to activate mix-and-match promotions, such as “buy one get one free”, discounts for buying in bulk and discounts during certain times of the day and on certain days of the week, as well as other innovative purchase bundling, to increase customers’ purchase sizes and drive traffic to our stores. [The rest of this page has been intentionally left blank] 7. BUSINESS (Cont’d) 7.9 Inventory management The chart below summarises our inventory management process. Store prepares sales forecast 1
Store places orders ~
Business-to-business web portal consolidates orders 1
Place order with suppliers 1
Receive products at CDC 1 Direct delivery to stores Deliver products to stores 1 Receive products at stores 1
Sell prodUcts to customers Our store systems enable us to directly replenish stock. We order fast-moving items, such as non-alcoholic drinks and snacks, three times per week on two ordering cycles, either Monday, Wednesday and Friday or Tuesday, Thursday and Saturday, in order to ensure a consistent level of traffic through our CDC, and slower-moving items once a week. We refer to the previous four weeks’ sales data at each store to arrive at a sales forecast, which is prepared by each store every week. Each store has access to 14 weeks of historical sales analysis data that we generate through SEMRIS (please refer to Section 7.11 of this Prospectus for further information on SEMRIS) to assist in preparing the sales forecast. After the store creates its sales forecast, SEMRIS automatically calculates the stores’ order size based on its remaining stock and the typical time that each item takes to sell. Our order sizes are calculated so as to maintain a minimum number of days’ stock for each item, in order to avoid any potential stock-outs at any given store. 7. BUSINESS (Cont’d) SEMRIS sends all of our stores’ orders to our head office for further consolidation by product code and by vendor. After consolidation, our head office sends the order to our vendors via a business-to-business web portal that allows vendors to download their respective purchase orders for further processing and tracking. Our vendors deliver approximately 53% of the products by volume that we purchase for our stores in Peninsular Malaysia to our CDC, which then processes and arranges for distribution of the products to our individual stores. Our vendors deliver the remaining products, including all products for our stores in East Malaysia, directly to our stores. The remaining products, which are delivered directly by suppliers to our stores, comprise products that are not suitable for delivery from the CDC, namely, products with short shelf lives (such as newspapers and fresh foods), products that require specialised distribution channels (such as ice cream) and high risk products (such as tobacco products). After delivery from the CDC, the products are received by individual stores, where the store manager checks them to ensure that the order is complete and that the products arrive in acceptable condition. Upon completion of our “put away” project that we are currently implementing at the CDC and which we expect to complete by the third quarter of 2014, the CDC will not only process and arrange products for distribution, but will keep its own inventory as well. We expect that completion of this project will significantly shorten our delivery lead time from the present five days to as low as one to two days, thus improving inventory management and allowing our stores to carry a broader product assortment with lower levels of inventory required for each product at the store level. In the future, with the planned opening of our new CDC as well as the investments that we are making in our IT systems, we plan to increase the percentage of products handled and distributed by our new CDC to approximately 75% of all of our products by volume for our stores in Peninsular Malaysia by 2016, from approximately 53% at present. 7.9.1 Combined distribution centre Approximately 53% of the products by volume that we purchase for our stores throughout Peninsular Malaysia are processed and distributed through an approximately 90,000 sq ft of usable warehouse space CDC located in Shah Alam, Selangor, which serves our operations in Peninsular Malaysia only. We manage and oversee the CDC, but outsource on-the-ground operations to LF, a third-party logistics provider as the provider is able to supply us with and manage the recruitment of the required pool of labour for on-the-ground operations. This bodes well for us as we focus our resources and management’s time on, among others, our accelerated store roll-out programme. We believe that the CDC and our supporting distribution network infrastructure provide us with scalability and indirectly, help us to reduce our costs. We also derive a number of operational benefits from the CDC and our supporting distribution infrastructure which includes the following: (a) reduced time taken from the time we place an order for products until such time the products are delivered to each of our stores in Peninsular Malaysia from five days currently to as low as one to two days upon completion of the “put away” project;
(b) increased frequency of delivery of products to our stores which allows our stores to carry less inventory thereby minimising store space required at our stores, reduces the likelihood of our stores being out of stock and provides our stores with better order forecasting and hence, are able to restock more efficiently;

109 7. BUSINESS (Cont’d) (c) reduced total deliveries because without a managed distribution network, our stores would receive delivery via trucks from hundreds of vendors, generally once or twice each month, compared to only one truck three times per week from the CDC;
(d) improved ability to track delivery volumes and quality from vendors more accurately which improves quality control and reduces losses due to delivery variances;
(e) improved ability to schedule off-peak delivery hours which improve store efficiency;
(f) greater control over inventory that we receive from vendors; and
(g) simplified invoicing and accounting.

The CDC also generates revenue through rebates and incentives from our vendors who deliver their products to the CDC, instead of directly to our stores, but we also incur expenses in managing the CDC. As at the LPD, we had invested approximately RM12.0 million, for the construction of the new CDC which includes land cost of RM1 0.8 million. The new CDC, with a gross built-up area of approximately 166,000 sq ft and usable warehouse space of approximately 124,000 sq ft which will eventually replace the existing CDC, is located approximately nine km away from the existing CDC in Shah Alam, Selangor. We estimate that construction of the new CDC will cost approximately RM40.8 million, exclusive of land cost, which we will fund via the proceeds from the Public Issue, and will replace the existing CDC by end of 2015. The new CDC will have 38% greater capacity than the existing CDC and will feature air-conditioned and chilled facilities, as well as improved IT systems and a warehouse management system. With the chilled facilities, the new CDC will enable us to handle a variety of perishable products that vendors currently deliver straight to our stores. We have obtained all the necessary approval from the authorities inclUding the approval from Majlis Bandaraya Shah Alam for the building plan for the new CDC which was received on 9 December 2013. Currently we are fine tuning the final design. We expect the new CDC to commence operations by end of 2015. [The rest of this page has been intentionally left blank] 7. BUSINESS (Cont’d) 7.9.2 Quality control We maintain rigorous quality control oversight at our CDC and stores and regularly monitor the quality of our products. Our policies require the CDC and each store to inspect product deliveries for damage, missing products, expiry dates and other health and safety concerns, and return unsatisfactory products to our suppliers. We have a dedicated quality assurance department which is tasked with monitoring the quality of our stores and franchises through unannounced store assessments. We enforce quality control at both the CDC and at each store, and we may impose disciplinary action on responsible parties in the event any individual store fails to meet our required standards. We only purchase from suppliers whose products meet all applicable health and safety standards, and all of our products (as applicable) are halal certified by the Department of Islamic Development Malaysia, the Malaysian governmental authority responsible for halal certification. From time to time, we engage third-party laboratory operators to test products from our suppliers for compliance with applicable health and safety standards. 7.10 Branding and intellectual property We believe “7-Eleven” is an established and iconic brand globally and in Malaysia with strong customer recognition and loyalty. We believe customers associate the “7-Eleven” brand with convenience, choice, quality and value. We rely on a combination of trademarks, service marks, copyright protection and domain name registrations to establish and protect our brand names and logos, marketing designs, trade dress, internet domain names and other intellectual property. The ALA with 7-Eleven USA grants us the right to use various trade secrets (including manuals, forms, drawings, methods, specifications, techniques and compilations of data that 7-Eleven USA provides), trade marks and names, related and ancillary trademarks, services marks, trade names, emblems, logos, designs, labels, domain, signs, symbols, trade dress and works, including copyrighted materials, as 7-Eleven USA may from time to time make available to us, as well as derivative works based thereon. 7-Eleven USA has registered various intellectual property rights with the Intellectual Property Corporation of Malaysia and granted us, through the ALA, the license to use this intellectu<;ll property. Save as disclosed above, we do not own any trademark or patent and have not paid or received any royalties for any licenses or use of any intellectual property material. Please refer to Section 7.26 of this Prospectus for further information on a description of the ALA. 7.11 Technology To support our store growth and new in-store services, our policy is to maintain a scalable and robust IT architecture with reusability and rich product features which, coupled with IT discipline with proactive monitoring, increases the efficiency of our operations and enhances the customer experience at our stores. We utilise technology related to an integrated computerised logistics and management system known as SEMRIS. This system links our head office in Kuala Lumpur to our CDC in Shah Alam, Selangor and each of our stores, including those of our franchisees. 7. BUSINESS (Cont’d) SEMRIS enables each of our stores to track and manage their inventory, and enables the CDC to track and manage inventory, order products from suppliers and organise and schedule deliveries of products from the CDC to each of our stores in Peninsular Malaysia. SEMRIS’ sales forecasting assists us in streamlining our warehousing and procurement functions by creating sales forecasts and calculating suggested order sizes. The SEMRIS sales system allows us to analyse consumer spending patterns and thereby enables us to respond to changing customer preferences quickly and accurately. Moreover, through SEMRIS, we are able to track sales from all of our stores and SEMRIS is integrated with our accounting software, which provides us with enhanced cash-management and internal audit security. SEMRIS is also integrated with a service provider facilitating the consolidation of the purchase orders from each “7-Eleven” convenience store into a single purchase order to each supplier for delivery to the CDC (“B2B Exchange”), a web portal through which our vendors can access purchase orders from us and prepare products for delivery to our CDC. To support our promotional and other initiatives, the third-party developer of SEMRIS is developing new SEMRIS features for us that implement a customer loyalty programme and additional mix-and-match promotion features. Our customer loyalty programme will enable SEMRIS to accept the Berjaya Family’s “BCard”, and our additional mix-and-match promotion features for SEMRIS will enable us to activate targeted promotions and provide discount structures on qualified purchases. Please refer to Section 7.8 of this Prospectus for further information on our promotional initiatives. Moreover, SEMRIS is now enhanced with promotional features, part of our initiative aimed at increasing customer loyalty and return visits, an example of which is our “Hello Kitty” campaign. To achieve the next phase of our growth, we will invest significantly in our core IT systems so that we could maintain our competitive advantage and to accommodate today’s evolving business trends, which includes the expansion of online business, such as online gaming reloads. We plan to upgrade, SEMRIS, our existing IT system, and implement a new platform, IRIS, by 2016, which will sUbstantially enhance integration throughout our organisation and provide our management team with improved control over our retail and merchandising operations. Currently, our inventory replenishment and ordering system utilises a business-to-business vendor who aggregates orders from our stores and sUbsequently sends orders to suppliers. We are implementing a new “put away” inventory management system, through which store orders will be consolidated centrally at the CDC (by vendor, store and SKU) and integrated with B2B Exchange, which will significantly shorten our delivery lead time from the present five days to as low as one to two days, thus improving inventory management and allowing our stores to carry broader product assortment with lower levels of inventory required for each product at the store level. We expect that this new system will be operational by the third quarter of 2014. 7.12 Suppliers Our purchases principally comprise products for our stores. We generally source our supplies from Malaysia-based suppliers. We aim to provide a comprehensive range of quality products at competitive prices to our customers. We believe that the quality of our suppliers plays an important part in our merchandising strategy. We strive to manage the quality of the products supplied to ensure strict adherence to quality standards. In selecting our suppliers, we consider their quality of product offerings, financial stability, product selection, price competitiveness and after-sales services. We only purchase from suppliers whose products meet all applicable health and safety standards. 7. BUSINESS (Cont’d) The following table depicts our suppliers with purchases exceeding 10% of our total purchases for any of the past four years ended 31 December 2010 to 2013. Year ended 31 December Supplier 2010 2011 2012 2013 % of total purchases Commercial Marketers & Distributors Sdn. Bhd. (“Commercial Marketers”) 23.9 24.0 23.8 23.6 Lein-Hing Enterprise Sdn. Bhd. (“Lein-Hing”) 9.7 9.6 10.2 9.9 Our largest supplier is Commercial Marketers, from whom we purchase British American Tobacco (Malaysia) Berhad products, and our second largest supplier is Lein-Hing, from whom we purchase “Philip Morris” products. While we have historically maintained a good working relationship with these suppliers, we cannot guarantee that our relationship with them will not deteriorate in the future, nor that our business would not be adversely affected if our relationship with them were to deteriorate. We have a commercial relationship with Commercial Marketers and Lein-Hing for more than 20 years and 14 years respectively, and we are one of Commercial Marketers’ largest customers in Malaysia. We have dealt with the majority of our top 20 suppliers for 10 years or more and we believe that we have cultivated a good working relationship with our suppliers, which includes various multinational companies. For the past four years ended 31 December 2010, 2011, 2012 and 2013, our total purchases from our top five suppliers accounted for 50.1%, 50.7%, 51.0% and 51.2% of our total purchases, respectively. For the past four years ended 31 December 2010 to 2013 up to the LPD, we have not experience any material disruptions to our supply. 7.13 Competition We are the largest convenience store operator in Malaysia in terms of number of stores, with a market share of 82% of the standalone convenience store segment, as of March 2014, according to the IMR Report. Generally, the retail industry in Malaysia is segmented into three key segments, namely retail trade in non-specialised stores, retail trade in specialised stores and non-store based retailing. Non-specialised stores are typically those that are involved in selling more than one type of goods and, in that respect, convenience stores fall under this category. Other examples of non-specialised stores include departmental stores, hypermarkets, supermarkets, provision stores and mini-markets, among others. We compete with other convenience store operators primarily on the basis of convenience, presentation, price, customer loyalty, product mix and quality customer services. Our closest competitors include retailers such as “KK Super Mart”, “QE”, “MyMart” and “Circle K”. In addition, we compete with other larger-format supermarket and hypermarket operators, including “Tesco”, “AEON Big” and “Giant”, as well as petrol stations such as “Shell”, “Petronas” and “Petron” that also operate convenience stores at their petrol stations under the brand name of “Select”, “Mesra” and ”Treats” respectively. Foreign convenience store operators may also enter the convenience retail market in Malaysia in the future through local businesses, franchises or licenses, increasing competition further. In particular, established foreign convenience store chains such as “ampm”, “Lawson” and “FamilyMart” are direct competitors of “7-Eleven” worldwide, and some already have interests in the Asian region. 7. BUSINESS (Cont’d) We believe that convenience and location will continue to be the key factors in determining the success of our stores. Our extensive network of 1,583 strategically located stores as at the LPD with a nationwide presence across Peninsular and East Malaysia ensures that we are a convenient option for customers. The fact that most of our stores are opened 24 hours a day also gives us a competitive advantage over most non-convenience store retailers, which do not operate on this basis. Furthermore, our stores have been operating in Malaysia for the past 30 years, over which time we have successfully built a strong reputation, which provides us with a competitive advantage over new entrants and even mature participants with less established brands. 7.14 Awards The following table depicts selected information with regards to awards that we have won since 2010: Award Year Grantor Super Star of 201 0 Award 2010 Malaysian Retailers Chain Association Achiever Award 2010 Malaysian Retailers Chain Association Super Brand Award 2011 Super Brand Malaysia National Sales Growth Award, 2010,2011 Platinum and 2012 Malaysian Retailers Chain Association Super Brand Award 2013 Super Brand Malaysia 7.15 Properties We tenant the majority of retail space and corporate offices we use. As at the LPD, we and our franchisees operate 1,562 of the stores on tenanted properties and the remaining 21 of our stores on our owned properties. With the exception of stores which are located in shopping and other complexes, we generally enter into three-year tenancies that are renewable at our option for up to four additional three-year terms. Our tenancies typically contain price escalation clauses whereby the price we pay for tenancies is subject to renegotiation at the end of each renewal period, subject generally to applicable maximum increases. LF, being the third-party operator of our CDC in Shah Alam, Selangor, leases the property for the CDC. In turn, we pay LF a monthly service fee which includes the use of storage space for our existing CDC. We own the property for the new CDC which will be built in Shah Alam, Selangor. Some of our “7-Eleven” convenience stores are located at buildings which have not been issued with the requisite CF/CCC. Such non-compliance will render the registered proprietor/occupier liable to a fine and/or imprisonment and a further fine for any continuing offence. 7. BUSINESS (Cont’d) In addition, the occupation of some of our “7-Eleven” convenience stores is inconsistent with the category of land use or express conditions set out in the IDT. Such non-compliance in Peninsular Malaysia may result in a forfeiture of the land by the Land Administrator, pursuant to the National Land Code, 1965, resulting in the outlet having to be closed down. In addition, 7-Eleven Malaysia, being the occupier of such outlets could be in breach of certain provisions of the Town and Country Planning Act, 1976, which may result in the imposition of a fine and/or imprisonment of persons such as our Directors, secretary or similar officers, and a further fine for each day during which the offence continues after the conviction. If a notice has been served on the owner and occupier of the land by a local planning authority requiring us to comply with such requirements specified in the notice and in the event we fail to comply with any requirements of the notice within the period specified, we could be liable to a fine and/or imprisonment of persons such as our Directors, secretary or similar officers and to a further fine for each day during which the failure continues after the first conviction of the offence. Further, we could also be liable under the Street, Drainage and Building Act, 1974 for using any building or part of a building for a purpose other than which it was originally constructed for without the prior written permission from the local authority. On conviction, we could be liable to a fine and also to a further fine for every day during which the offence is continued after a notice to cease using for other purpose has been served on the occupier. As Sabah and Sarawak have their own land law and various other local requirements which apply to certain districts only, we may be exposed to various offences under their respective laws for our “7-Eleven” convenience stores in Sabah and Sarawak which are in breach of the category of land use and/or express condition. Please refer to Section 5.1.26 of this Prospectus for further information. Please also refer to Sections 7.15.1 and 7.15.2 of this Prospectus for further Information on non-compliances relating to CF/CCC and land use of the material properties owned by our Group and tenanted outlets of our Group. In addition, each of our “7-Eleven” convenience stores has to obtain from the relevant local councils a trading licence to carry on business operations within the prescribed districts, prior to the commencement of business operations as well as an advertising licence to advertise and to display signboards at its premises. As at the LPD, some of our “7-Eleven” conveniences stores are operating without the requisite trading and/or advertising licences. Further details on the trading and advertising licences are set out in Sections 7.27.2(i) and 7.27.2(ii) of this Prospectus respectively. [The rest of this page has been intentionally left blank] ICompany No.: 1058531-W I 7. BUSINESS (Cont’d) The summary of our non-compliances relating to CF/CCC, land use, trading licence and advertising licence are as follows: Owned outlets  Aggregate revenue  Aggregate gross profit  No. of stores in breach  No. of stores without  of category of land  Year ended 31 December 2013  Year ended 31 December 2013  Region/State  No. of affected stores  CF/CCC  use/express condition  (RM’OOO)  (RM’OOO)  Kuala Lumpur  1  1  1  2,329  697  Selangor  1  1  2,815  806  Perak  1  1  1,327  377  Total  3  3  1  6,471  1,880  Aggregate  Aggregate  Tenanted outlets  revenue!’)  gross profit!’)  No. of stores with  No. of stores in  No. of  No. of  no information on  breach of  No. of stores  No. of stores  No. of  stores with  stores  category of land  category of land  without  without  Year ended 31  Year ended 31  affected  no records  without  use/express  use/express  trading  advertising  December 2013  December 2013  Region/State  stores!’)  ofCF/CCC  CF/CCC  condition  condition  licence  licence  (RM’OOO)  (RM’OOO)  Kuala Lumpur  121  85  4  40  9  3  2  151,773  41,737  Selangor  172  117  2  69  16  1  1  192,114  53,180  Perlis  3  3  3,538  998  Kedah  17  15  1  1  2  2  16,726  4,846  Perak  39  36  2  2  1  1  36,426  10,395  Kelantan  21  10  3  12  20,332  5,853  Johor  33  30  5  2  2  2  37,262  9,739  Melaka  29  29  2  34,900  9,447  Pahang  22  20  2  2  1  24,599  6,909  Pulau Pinang  35  24  7  1  2  11  30,598  8,855  Negeri Sembilan  19  15  1  3  3  18,465  5,022  Terengganu  18  13  4  3  3  18,256  5,217  Sabah  22  13  8  5  1  2  19,237  5,662  Sarawak  15  3  2  3  1  10  12,620  3,783  413  10  137  44  Total  566  423  181  22  49  616,846  171,643  116
ICompany No.: 1058531-W I 7. BUSINESS (Cont’d) Notes:  (1)  Refers to the number of stores which are not in compliance with either one or more of the following categories: (i) category ofland use and/or express condition; (ii) CFfCCC; or (iii) trading and/or advertising licences.  (2)  Aggregate revenue or gross profit of the affected stores.  7.15.1  Material properties owned by our Group  As at 31 December 2013, the total NBV of our land and bUildings was RM34.3 million. The following table sets forth the details of the material properties that we own:  Property addressfTitle identification  Registered owner  Tenure of property  Type of property  Description and existing use/ Approximate age of building  Category of land use/Express condition  Date of CF/CCC  Major encumbrances  Land area/Built -up area  NBVas at 31 December 2013  (sq tt)  (RM’million)  GRN 33869, Lot 746 and GRN 24043, Lot 887 both in Section 57, Town and District of Kuala Lumpur, State of Federal Territory Kuala Lumpur No. 49, Sultan 50250 Lumpur/ Jalan Ismail, Kuala  7-Eleven Malaysia  Freehold  2)1, storey terrace shop office (Intermediate lot)  Ground floor as “7-Eleven” convenience store and other floors for rental purpose/56 years  None/Subject to the conditions and agreements, expressed or implied in Lease For Agricultural Land No. 863 in perpetuity and to such restrictions in interest expressed therein and shown by memorial thereon, and to such registered interests as are shown by memorial thereon(2)  J1)  Charged to RHB Bank Berhad vide Presentation Nos. 402812006 dated 13 March 2006 and 653512010 dated 12 March 2010  1,813/ 3,440  3.1  117
ICompany No.: 1058531-W I 7. BUSINESS (Cant’d) Property  Tenure  addressfTitle  Registered  of  Type of  identification  owner  property  property  No.2, Jalan  7 Properties  Freehold  4-storey  Hang Lekiu,  terrace shop  50100 Kuala  office  Lumpur/  (Corner lot)  GRN 7917, Lot  79 Section 13,  in the Town and  District of Kuala  Lumpur, State  of Federal  Territory Kuala  Lumpur  No.1, Block 6,  7 Properties  Freehold  4-storey  Jalan Jalil Jaya  terrace shop  7, Jalil Link  office  Bukit Jalil,  (Corner lot)  57000 Kuala  Lumpur/  GRN 73247, Lot  45943, in the  Mukim of  Petaling, District  of Kuala  Lumpur, State  of Federal  Territory Kuala  Lumpur
Description  and existing  use/  NBVas at  Approximate  Category of land  Land  31  age of  use/Express  Date of  Major  area/Built  December  building  condition  CF/CCC  encumbrances  -up area  2013  (sq ttl  (RM’millionl  Ground floor  None/None  24 March  None  1,033/  2.9  as “7-Eleven”  1998  4,125  convenience  store and  other floors for  rental  purpose/15  years  Ground floor  Building/  9 October  None  1,787/  2.2  as “7-Eleven”  Commercial  2009  6,688  convenience  building only  store and  other floors for  rental  purpose/ five  years
118 ICompany No.: 1058531-W I 7. BUSINESS (Cont’d) Property addresslTitle identification  Registered owner  Tenure of property  Type of property  Description and existing use/ Approximate age of building  Category of land use/Express condition  Date of CF/CCC  Major encumbrances  Land area/Built -up area  NBVasat 31 December 2013  (sq tt)  (RM’million)  Lot 3, Persiaran Gerbang Utama, Bukit Jelutong Industrial Park, 40150 Shah  Teluk Juara  Freehold  Vacant land  Vacant/Not applicable  Industriall Industrial building only  Not applicable  None  174,182/ None  10.8  Alam, Selangor Darul Ehsan/
GRN 97607, Lot 64408, in the Mukim of Damansara, District of Petaling, State of Selangor Darul Ehsan Notes: (1) The GF was not delivered to 7-Eleven Malaysia when the property was purchased from a third party. We had attempted to obtain the GF from Dewan Bandaraya Kuala Lumpur (“DBKL”) but DBKL could not locate a copy of the GF in its database. On 12 April 2007, in line with the Malaysian Govemment’s effort towards se/f-certification and self-regulation approach in the construction indust/}’, the Street, Drainage and Building (Amendment) Act 2007 came into force, whereupon the issuance of GF by local councils was replaced by the issuance of the GGG by either professional architects, professional engineers or registered building draughtsmen. Upon obtaining a development order from DBKL on 6 April 2012, our architect had on 24 Janua/}’ 2014 submitted the application involving the submission of bUildingplans with setback of25 feet to DBKL and Jabatan Bomba dan Penyelamat Malaysia, which forms part of the process to procure the GGG. The approval process will take approximately 8 months from the date of submission of the application. Once approval is obtained, we will call for tender and appoint a contractor to commence demolition and renovation works on the building and our architect is expected to issue the GGG thereafter.
(2) We had obtained a development order to change the zoning of land use to “commercial” vide a letter from DBKL to our architect dated 6 April 2012. Subsequently, our land surveyor has SUbmitted the plan for change of catego/}’ of land use to the DBKL for endorsement on 22 October 2013. Once the plan is endorsed by the DBKL, our land surveyor will submit the application together with the endorsed plan to the land office of Kuala Lumpur to convert the catego/}’ of land use to “bUilding” and the express condition to “commercial building”. The approval is expected to be obtained by the second quarter of 2015.

119 7. BUSINESS (Cont’d) In respect of the property located at No. 49, Jalan Sultan Ismail, 50250 Kuala Lumpur, our Board has undertaken to obtain the CCC by 7 February 2015, being 12 months from the date of obtaining the SC’s approval for our IPO, and to convert the category of land use and express condition to commercial building by the second quarter of 2015, to make half-yearly announcements on the status of the undertaking to Bursa Securities and to update the SC on the same when such announcements are made. In addition to the material properties mentioned above, our Group also owns non­material properties, of which two of them do not have CF. The said non-material properties are 2-storey freehold shop offices, one located at Subang Jaya, Selangor and the other in Ipoh, Perak. To rectify the non-compliance for these two properties, our Board has undertaken to procure a CCC for the respective non-material properties by 7 February 2015, to make half-yearly announcements on the status of the undertaking to Bursa Securities and to update the SC on the same when such announcements are made. To the best knowledge of our Board, save as disclosed above, none of the properties owned by our Group are in breach of any land use conditions and/or are in non­compliance with current statutory requirements, land laws or building regUlations/by­laws which will have a material adverse impact on our operations as at the LPD. No valuations have been conducted on any of the properties disclosed above. As at the LPD, our Group has not been convicted for breach of any land use conditions and/or non-compliance with current statutory requirements, land laws or building regulations/by-laws. 7.15.2 Tenanted outlets of our Group A summary of our Group’s tenanted outlets as at the LPD is as follows: No. of tenanted  Range of tenanted  Region/State  outlets  Total tenanted area  area  (sq ttl  (sq ttl  Kuala Lumpur  255  315,023  172-2,702  Putrajaya  3  2,896  569-1,347  Selangor  466  599,588  192-2,585  Perlis  10  11,255  763-1,543  Kedah  56  65,244  621 -1,728  Perak  99  124,968  632-2,100  Kelantan  68  78,556  608 -1 ,931  Johor  173  232,878  467 -2,310  Melaka  69  83,582  745-2,058  Pahang  86  103,264  377 -2,636  Pulau Pinang  72  80,351  500-2,065  Negeri Sembilan  80  106,789  751 -2,552  Terengganu  57  62,054  523 -2,151  Sabah  38  42,103  248 -2,233  Sarawak  30  32,922  362 -2,547  Total  1,562  1,941,473
The total rental paid by our Group during the years ended 31 December 2012 and 31 December 2013 for all the tenanted outlets is approximately RM57.4 million and RM63.1 million respectively. We typically have tenancies that carry three-year terms and are renewable at our option for up to four additional three-year terms, subject to rental price increases depending on prevailing market conditions and agreed maximum increases. 7. BUSINESS (Cont’d) To the best knowledge of our Board, save as disclosed below, none of the outlets tenanted by our Group are in breach of land use conditions and/or are in non­compliance with current statutory requirements, land laws or building regulations/by­laws which will have a material adverse impact on our operations as at the LPD: No. of tenanted outlets Without  In breach of category of land  Region/State  CF/CCC  use/express condition  Kuala Lumpur  4  9  Selangor  2  16  Perak  2  2  Pahang  2  1  Pulau Pinang  1  Terengganu  4  Sabah  5  Sarawak  3  Kedah  1  Johor  2  Total  10  44
In addition, we do not have in our possession the CF/CCC as well as information relating to the category of land use and express condition for the following outlets as at the LPD: No. of tenanted outlets No information on category of  No records of  land use and express  Region/State  CF/CCC—-_-‘-‘–.:.–‘—‘–­ condition
Kuala Lumpur  85  40  Selangor  117  69  Perlis  3  Kedah  15  Perak  36  Kelantan  10  Johor  30  5  Melaka  29  2  Pahang  20  2  Pulau Pinang  24  7  Negeri Sembilan  15  1  Terengganu  13  Sabah  13  8  Sarawak  3  2  Total  413  137
The absence of records of CF/CCC for the aforesaid locations is attributed to the following: (a) enquires have been made for 205 tenanted outlets with the relevant local councils but pending feedback;
(b) relevant local councils have informed that they have no CF/CCC in their records for 175 tenanted outlets; and
(c) enquiries for 33 tenanted outlets located at the premises of “Shell” petrol stations where enquiries cannot be made with the respective local councils as we do not have sufficient details to make such enquiries. The final and conclusive status of the tenancy for these outlets is the sUbject of an on-going legal suit, details of which are set out in Section 15.5 of this Prospectus.

121 7. BUSINESS (Cont’d) On the other hand, the absence of information on category of land use and express condition for the aforesaid locations is attributed to the following: (a) searches have been conducted for six tenanted outlets but pending issuance of results by the relevant land offices;
(b) land searches cannot be conducted for 119 tenanted outlets as insufficient or no land title particulars have been/can be provided by the property owners, of which 20 tenanted outlets are located at the premises of “Shell” petrol stations. The final and conclusive status of the tenancy for these outlets located at “Shell” petrol stations are sUbject of an on-going legal suit, details of which are set out in Section 15.5 of this Prospectus; and
(c) searches have been conducted for 12 tenanted outlets but the search results revealed that the land title for said tenanted outlets is sUbject to the expressed/implied conditions and/or agreements in the specified grant/lease for land, for which no information of such conditions or agreements is found in the records of 7-Eleven Malaysia or the relevant land offices. We have liaised with the relevant land offices as well as landlords and where applicable, the former registered proprietors of these tenanted outlets, to obtain a copy or details of the conditions and/or agreements in the specified grant/lease for land but we have not been successful in our attempts to ascertain the status of compliance of these tenanted outlets with the express condition of land use, having exhausted all avenues on a best-effort basis.

Our Board has undertaken the following: No. Description Proposed action CF/CCC (a)
(b)
(c)
(d)

Outlets without CF/CCC Outlets where enquiries have been made with the relevant local councils but pending feedback Outlets where the relevant local councils have informed that there is no CF/CCC in their records Outlets where enqUiries cannot be made with the respective local councils as the Company does not have sufficient details to make such enquires We will continue to liaise and negotiate with the property owners to apply for CCC for these outlets and, where possible, to rectify the non-compliance within 12 months from 7 February 2014, being the date of obtaining the SC’s approval for our IPO. We will continue to liaise with the local councils for these outlets as well as the property owners. In the event we are able to establish that the outlets have no CF/CCC, we will liaise and negotiate with the property owners to rectify the non-compliance, where possible within 12 months from 7 February 2014. We will continue to liaise with the property owners to locate the CF/CCC. If there are no CF/CCC in the records of relevant councils or property owners, within 12 months from 7 February 2014 and where possible, we will liaise and negotiate with the property owners to apply for CCC for those outlets. In respect of the 33 outlets located at the premises of “Shell” petrol stations, we will follow up, where possible, to get the necessary information before making enquiries with the respective local councils as the 33 tenanted outlets are the subject of an on-going legal suit, the details of which are set out in Section 15.5 of this Prospectus. 7. BUSINESS (Cont’d) No. Description Proposed action Category of land use and express condition (a) Outlets in breach of We will continue to negotiate with the respective land category of land use owners to rectify/amend the category of land use and/or and/or express condition express condition so as to allow for the operation of the “7­Eleven” business at that location and where possible, to rectify the non-compliance within 18 months from the date of our Listing. (b) Outlets with no information on the category of land use and/or express condition in the records of 7-Eleven Malaysia
Outlets where We will continue to liaise with the relevant land offices to • searches have been obtain the search results. In the event that we are able to conducted but establish that the outlets are in breach of category of land pending issuance of use and/or express condition, we will negotiate with the results by the respective land owners to rectify/amend the category of relevant land offices land use and/or express condition, where possible, within 18 months from the date of our Listing. Outlets where land For those outlets where a search could not be conducted • searches cannot be due to non-availability of land title particUlars, we will conducted as continue to follow up with the property owners and the insufficient or no land respective land offices to get the necessary information and title particUlars have conduct the searches, save for the outlets located at the been/can be premises of “Shell” petrol stations which we will follow up, provided by the where possible, to obtain the necessary information as they property owners are the subject of an on-going legal suit, the details of which are set out in Section 15.5 of this Prospectus. In the event that we are able to establish that that the outlets are in breach of category of land use and/or express condition, we will continue to negotiate with the respective land owners to rectify/amend the category of land use and/or express condition, where possible, within 18 months from the date of our Listing. Our Board has also undertaken to make half-yearly announcements on the status of the above undertakings to Bursa Securities and update the SC when such announcements are made. 7.16 Seasonality Our stores typically experience higher customer traffic, transaction value and sales during weekends, public holidays, school holidays and festive periods such as Chinese New Year, Christmas, Deepavali and Hari Raya. 7. BUSINESS (Cont’d) 7.17 Employees As at 31 March 2014, we employ a total of 8,865 permanent staff (which include 26 contract staff) and 202 temporary/casual staff. Permanent staff generally includes executive directors, senior management, administrative and headquarters staff, contract staff and store staff, while our temporary staff generally includes staff on part-time and hourly-rated employment. The following table sets forth our permanent staff by function as at the dates indicated. As at 31 December As at 31 March Category of employees 2010 2011 2012 2013 2014 Executive directors and senior management 23 26 24 30 34 Managerial and professional 70 73 71 90 93 Administrative and headquarters staff 833 865 888 966 1,006 Store staff 6,370 6,186 6,689 7,663 7,732 7,296 7,150 7,672 8,749 8,865Total Store staff excludes foreign workers whom we outsource from various third-party recruitment agencies. Our store staff increased by approximately 8.1 % and 14.6% from 31 December 2011 to 31 December 2012 and 31 December 2012 to 31 December 2013 respectively primarily due to the growth of our network of stores. As the majority of our stores operate 24 hours a day and seven days a week, we employ two shifts of staff at each store. At any given time, we require at least two employees to be stationed at each store. We select store managers from a pool of our promising and talented convenience store employees. Store managers and employees both receive a base salary and incentives based on the revenue, gross profit, inventory control and operating standards of their store. The base salary for newly hired employees is in accordance with the Malaysian statutory minimum wage of RM900 per month in Peninsular Malaysia and RM800 per month in East Malaysia, and our employees’ compensation increases concurrently with their length of service. We offer our employees incentive-based compensation depending on their ability to meet our incentive programme’s criteria, which include sales, profitability, inventory control and compliance with standard operating procedures. Given the greater incentives now placed on our employees, we believe that our incentive programme will allow us to achieve a higher retention rate and reduce our training and recruitment costs, as well as increase our sales. Malaysian employment regulations require employers and employees to contribute to the Employees Provident Fund (“EPF”) to provide for the retirement and other needs of employees. Under present regUlations, employees contribute 11 % of their monthly salary to the EPF via payroll deductions. Employers are required to contribute a minimum amount equivalent to 12% of an employee’s monthly salary to the EPF. Under employment contracts entered into by us, we contribute 12% of the employees’ salaries to the EPF (or 13% after 31 December 2011 for employees earning less than RM5,000 per month in salary). We believe that we offer a comprehensive and competitive remuneration and benefits package to our employees. Any adjustment of the remuneration and benefits of our employees depends on their respective performance. 7. BUSINESS (Cont’d) Other than our contributions to the EPF, we do not maintain any retirement, pension or severance plans or have any unfunded pension liabilities, nor do we owe any amounts to any present or former employees that are not in the ordinary course of our business. As at the LPD, none of our employees belong to any union nor are they parties to any collective agreements and we have not experienced any strikes or other disruptions due to labour disputes. In addition, the relationship between our management and our employees has always been good. 7.17.1 Staff training We recognise the importance of having a strong team of management and technical personnel to meet our growth plans, and so we place great emphasis on staff training and development. When employees commence work, they receive basic training, and are subsequently given opportunities to attend further training including managerial and leadership, sales agent, credit control, system and technical trainings programmes. 7.17.2 National dual training system We are accredited by the Department of Skill Development of the Ministry of Human Resources to employ and train apprentices under a structured national dual training system. Any school-Ieaver may apply to enrol into the programme. This programme, which leads to a diploma in 4.5 years, trains apprentices with retail management knowledge and entails classroom training to enhance practical on-the-job experience. Apart from technical competence, apprentices are trained on social skills relevant to the work environment. Apprentices do not pay any tuition or fees to earn this qualification and, since learning is on-the-job, they continue to receive wages as full­time employees. We provide coaches and trainers, training resources, evaluation and feedback to apprentices. By providing this opportunity for further education, not only do we fulfil our role as a socially responsible organisation, we mutually benefit through recruiting and developing valuable and knowledgeable employees who are practically trained for the roles in our stores. We have registered a total of 788 apprentices in the programme. The inaugural intake was in November 2011. 7.18 Cash management policy We believe that strong internal controls for cash collection are necessary to prevent mishandling of funds. Our cash collection policy is designed to standardise practices across our stores with respect to cash handling to prevent possibilities of cash mismanagement and fraud, outlines the responsibilities of individuals who are authorised to receive, deposit, disburse and reconcile cash and equivalents, ensures cash and equivalents are handled in a safe manner, ensures cash and equivalents are deposited in the designated bank account on a daily basis at a specified cut-off time and identifies the consequences of non-adherence to the policy. For the past four years ended 31 December 2010, 2011, 2012 and 2013, our cash losses were approximately 0.02%, 0.02%, 0.03% and 0.05% of our revenue respectively. 7. BUSINESS (Cont’d) The following chart illustrates our cash collection procedures. Cash Collection Procedures 1 11 Store manager saves the sales collection data for the day I
Data [s uploaded to the server at headquarters J
IT team generates the dally sales collection report
/ If the treasu ry team is ” unable to match the IT report to the bank statement. they will check with the regional office and operations team and the electronic data processing department for a copy of the bank-In slips Store manager banks in the daily sales collection at the designated bank …
Store manager reports the amount banked in to the regional cffice .&. Reg[onal office emails the banking report they have complied to the treasury !
‘I Store manager submits the bank-in slip together with other documentations to headquarters through the mail bag I courier I by hand for verification ‘-~ 1
Headquarters receives the bank-in slip and other documentation from stores within five to seven days .I. Treasury team matches Treasury team extractsthe report to the amounts the daily bank statement that appears in the online bank statement to ensure all sales collection are banked in • ‘\. submitted by the store~ 7.19 Security and loss prevention As nearly all of our stores operate 24 hours, we are affected by pilferage, shoplifting, theft and robbery. In order to minimise the risk of loss, we maintain strict security procedures. Examples of our security policies include the requirement that all of our stores have closed circuit televisions and time-delayed safes and maintain minimal cash in their tills. Also, store staffs perform regular checks on the cigarette display units, as tobacco products are particularly prone to pilferage, shoplifting and theft. For the past four years ended 31 December 2010, 2011,2012 and 2013, our losses due to merchandise and cash shortages (including delivery variances, which are losses of products while en route to stores) were RM1 0.4 million, RM9.4 million, RM7.6 million and RM9.6 million respectively, representing 0.8%, 0.6%, 0.5% and 0.6% of our revenue respectively. In 2011, we introduced an incentive programme, which pays bonuses to stores that are able to achieve low loss rates. From then on, our losses due to merchandise and cash shortages (inclUding delivery variances) have decreased both relative to our revenue and in absolute terms. Our internal audit function oversees stores’ efforts to reduce losses, particUlarly inventory shrinkages and sales collection shortages and reports on a monthly basis to management, who assess the overall effectiveness of our loss prevention policies. 7. BUSINESS (Cont’d) 7.20 Corporate social responsibility We are firmly committed to being a good corporate citizen. We have established procedures to help ensure compliance with all applicable statutory and regulatory requirements and with our Code of Business Conduct with respect to relations with customers, suppliers and fellow employees. We also comply with applicable environmental standards to minimise any impact operations may have on the environment. We believe in giving back to the communities in which we operate, with a commitment to support underprivileged groups and to sustain environmental conservation efforts at the local community level across all regions in Malaysia. In 2010, we set up “7-Eleven Community Care”, a programme set up to implement our corporate social responsibility and philanthropic initiatives. 7.21 Insurance We have purchased insurance policies to cover a variety of risks that are relevant to our business needs and operations. We maintain property insurance in respect of all tenanted and owned real property, and once our CDC “put away” project is complete allowing us to stock products at the CDC, we will insure our CDC inventory as well. We maintain product and other liability insurance for our operations. These insurance policies have specifications and insured limits that we believe are appropriate in view of our exposure to the risk of loss, the cost of such insurance, applicable regulatory requirements and the prevailing industry practice in Malaysia. We also maintain various insurance policies for employees, such as group-term life insurance with total permanent disability benefits and group accident, hospital and surgical policies, as well as fidelity insurance. In respect of our franchisees, we cover most of their operations and assets with our group insurance policies, and we encourage our franchisees to take their own personal insurance and fidelity insurance policies. Our internal audit function oversees our franchisees to help ensure that they maintain all requisite insurance policies. We believe that the insurance policies and coverage we have subscribed for are adequate for our business needs and operations and are in line with customary insurance coverage for similar companies in Malaysia. We periodically conduct reviews of our insurance coverage. 7.22 Research and development We do not conduct any research and development activities and we do not have any specific research and development policy. 7.23 Health and safety issues We value the health of our employees and place great emphasis on safety at all our stores, offices, and our warehouse. We ensure that new employees are advised of our safety and health policy and we provide them with the necessary in-house training. 7.24 Business interruptions Save for our planned major refurbishments to some of our stores, there has not been any material interruption to our business activities during the past 12 months prior to the date of this Prospectus. 7.25 Legal proceedings Please refer to Section 15.5 of this Prospectus for further information on 7-Eleven Malaysia’s litigation with Shell Malaysia. 7. BUSINESS (Cont’d) 7.26 Dependency on contracts, agreements or other arrangements We are highly dependent on the ALA. Our business of operating and franchising convenience stores under the “7-Eleven” brand name in Malaysia is subject to the terms and conditions of the ALA. Pursuant to the ALA, 7-Eleven USA grants us the right to establish and operate, and to grant sub-franchises to franchisees to establish and operate, ”?-Eleven” convenience stores solely in Malaysia and Brunei Darussalam (“Territories”). We cannot use the “7-Eleven” brand to operate stores other than convenience stores, which the ALA defines as stores with an area between 30 and 300 square metres and that sell between 200 and 4,000 SKUs. The ALA grants us the right to use various trade secrets (including manuals, forms, drawings, methods, specifications, techniques and compilations of data that 7-Eleven USA provides), trademarks and trade mark names, related and ancillary trademarks, services marks, trade names, emblems, logos, designs, labels, domain, signs, symbols, trade dress and works, including copyrighted materials, as 7-Eleven USA may from time to time make available to us, as well as derivative works based thereon. The ALA is valid until 30 November 2033, and is renewable at our option for additional terms of 10 years each sUbject to, among others, material compliance with the terms of the ALA and except in limited circumstances, the signing of 7-Eleven USA’s then-current form of renewal area license agreement, which shall superseded the ALA in all respects. As long as we are in full compliance with the terms and conditions of the ALA during the term of the ALA, 7-Eleven USA shall not: (i) grant franchises or licenses to any person or entity other than us for the operation of convenience stores in these Territories; and/or
(ii) operate convenience stores in these Territories.

We are not permitted to compete in the convenience store business or any similar or competing business in the Territories or in any country in which 7-Eleven USA has registered or used any of its trademarks or in which it is engaged, directly or indirectly, in the convenience store business. We pay 7-Eleven USA on or before the tenth day of each month during the initial term, a royalty from all “7-Eleven” stores in the Territories owned or operated by us or by our franch isees. 7-Eleven USA has a right of first refusal to match the same terms of any bona fide offer for the purchase of all or any part of our rights and obligations under the ALA or any substantial portion of our other assets (or our controlling principals receive any bona fide offer for any direct or indirect ownership interest in us that does not constitute a permitted transfer under the ALA). Upon termination or expiration of the ALA, 7-Eleven USA has the right to purchase us at a price equal to the fair market value of our assets less our indebtedness. 7-Eleven USA has the right to terminate the ALA including for our (or any or all of our controlling principals’) breach or default in the performance of any term, covenant or condition of the ALA, subject to the right to cure such breach or default. For certain particularly egregious breaches of the ALA, including, without limitation, breach of the covenants regarding protection of trade secrets and business information, maintenance of false books or records, certain fraudulent and criminal acts, commencement of voluntary bankruptcy or other insolvency proceedings, breach of the covenant not to compete, repeated defaults of the ALA (even if cured) and any attempted transfer by us or our equity holders of our rights and obligations under the ALA, all or a substantial portion of our assets or direct or indirect ownership in us or our controlling principals without 7-Eleven USA’s prior written consent (unless such transfer does not result in a change of control), 7-Eleven USA has the right to terminate the ALA without any applicable cure period. The ALA is interpreted, construed and enforced under the laws of the State of Texas, US. ICompany No.: 1058531-W I 7. BUSINESS (Cont’d) 7.27  Regulations and licences for our “7-Eleven” convenience stores  7.27.1  Franchise registration  The franchising of our convenience stores under the “7-Eleven” brand name requires the following registration:  Registered Master Franchisee  Issuer==—-­ Registration  Date of Issuel Validity  Conditions Affecting Operations  Status of Compliance  7-Eleven Malaysia  MDTCC  Form 3­Franchise Act 1998­Notice of Decision of Registration of Franchise and Effective Date of Registration of Franchise  19 May 2000 I Valid from 16 May 2000  1. 2.  This registration will continue to take effect unless the registrar provides a written notice stating that it has suspended, terminated or prohibited the sale or the registration of this franchise pursuant to the Franchise Act 1998. Any amendments to the disclosure document shall be filed to the Registrar of Franchise, Malaysia.  Noted  [The rest of this page has been intentionally left blank)
129 7. BUSINESS (Cont’d) 7.27.2 Governmental and Regulatory Requirements (i) Trading Licence For our “7-Eleven” convenience stores in Peninsular Malaysia and Sabah, the Local Government Act 1976, Local Government Ordinance 1961 of Sabah, Trades Licensing Ordinance of Sabah and the by-laws of the relevant local councils which regulate the licensing of trades, businesses and industries require a trading licence (“Trading Licence”) to be obtained for each of our “7­Eleven” convenience stores prior to commencing business. We are required to adhere to the by-laws of such local councils in which the stores are located. The Trading Licence is normally valid for a period of one year, although some local council may issue a temporary Trading Licence for a period not exceeding six months or a Trading Licence which is valid for a period of up to three years. The Trading Licence must be renewed either prior to or on the date of expiration of the licence, failing which would render the licensee liable under the relevant by-laws for penalties. Nevertheless, subject to the relevant by­laws, in some instances, a licensee may still continue to operate his trade, business or industry if he can prove to the relevant local council that he has applied for the renewal of his Trading Licence. Some of the Trading Licences issued to our “7-Eleven” convenience stores have conditions attached to them and we are obliged to comply with these conditions together with the requirements under the by-laws of the relevant local councils. Any non-compliance in Peninsular Malaysia with the conditions and the provisions of the by-laws may result in the imposition of a fine not exceeding RM2,000 or imprisonment for a term not exceeding one year or both and a further fine not exceeding RM200 for each day of non-compliance after conviction. In certain areas, the local councils are also given the power to revoke a Trading Licence if there is a non-compliance with its conditions and the by-laws. Further, any non-compliance in Sabah with the provisions of the Trades Licensing Ordinance of Sabah may result in the imposition of a fine of four times the amount of the Trading Licence fee and to a further fine of RM10 for each day or part of a day sUbsequent to a conviction during which the contravention continues. As for our “7-Eleven” convenience stores in Sarawak, we require a trading licence from the Inland Revenue Board of Malaysia (“IRBM”) pursuant to the . Businesses, Professions and Trades Licensing Ordinance of Sarawak. This Trading Licence is usually valid for a period of one year. Any non-compliance with the provisions of the Businesses, Professions and Trades Licensing Ordinance of Sarawak may result in the imposition of a fine of RM1 ,000. As at the LPD, each of our “7-Eleven” convenience stores which require a Trading Licence has been issued with a Trading Licence by the relevant local councils/IRBM, save for 22 “7-Eleven” convenience stores located in the following regions/states: Region/State No. of stores Kuala Lumpur 3 Selangor 1 Kedah Perak Kelantan Johor Pulau Pinang Negeri Sembilan 213223 7. BUSINESS (Cont’d) Region/State No. of stores Terengganu 3 Sabah 1 Sarawak 1
Total 22 The lack of Trading Licences at the aforesaid locations is due to the following: (a) the applications for a Trading Licence for 20 outlets are pending the approval from the relevant local councils; and
(b) the applications for a Trading Licence for two outlets (being one outlet located in Sabah (“Sabah Outlet”) and one outlet in Sarawak) are pending our submission to the relevant local council and the IRBM.

We are enquiring with the relevant local councils on the status of the new applications under item (a) above for Trading Licences whilst we have temporarily ceased operations of the two outlets under item (b) above prior to 25 April 2014. The recommencement of operations of the said two outlets will only take place once the Trading Licences have been obtained. Our Board has undertaken to obtain the Trading Licence for outlets referred to in item (a) above by the fourth quarter of 2014 save for one outlet in Kedah. The application for Trading Licence in respect of the outlet in Kedah will only be considered for approval after the completion of the conversion and subdivision of its master land title as well as the approval of its building plan. In addition, our Board has also undertaken to make half-yearly announcements on the status of the above undertaking to Bursa Securities and to update the SC on the same when such announcements are made. (ii) Advertising Licence Each of our “7-Eleven” convenience stores requires licence to advertise, and to display signboards at its premises (“Advertising Licence”). The application for an Advertising Licence is governed by the Local Government Act 1976, Local Government Ordinance 1961 of Sabah, Local Authorities Ordinance 1996 of Sarawak and the by-laws of the relevant local councils. The Advertising Licence is also normally valid for a period of one year, although some local councils may issue an Advertising Licence which would be valid for a period of up to three years. The renewal of an Advertising Licence must be done prior to the expiration of the licence. Some of the Advertising Licences issued to our stores have conditions attached to them and we are obliged to comply with these conditions together with the requirements under the by-laws of the relevant local councils. Any non-compliance in Peninsular Malaysia with the conditions and the provisions of the by-laws may result in the imposition of a fine not exceeding RM2,000 or imprisonment for a term not exceeding one year or both and a further fine not exceeding RM200 for each day of non-compliance after conviction. In certain areas, the local councils are also given the power to revoke an advertisement licence if there is any non-compliance with the conditions and by-laws. 7. BUSINESS (Cont’d) Further, any non-compliance by our “7-Eleven” convenience stores in Sabah with the provisions of the by-laws of the relevant local councils may result either in the imposition of a fine or imprisonment as stated in the by-laws of the relevant local councils. Additionally, any non-compliance by our “7-Eleven” convenience stores in Sarawak with the conditions of the Advertising Licence and the provisions of the Local Authorities (Advertisements) By-Laws 2012 may result in the imposition of a fine not exceeding RM5,000 and imprisonment for a term not exceeding six months and to a further fine not exceeding RM200 for each day during which the non-compliance is continued. The local councils are also given the power to revoke an Advertising Licence if there is any non­compliance with its conditions and the by-laws. As at the LPD, each of our “7-Eleven” convenience stores which require an Advertising Licence has been issued with an Advertising Licence by the relevant local councils, save for 49 “7-Eleven” convenience stores located in the following regions/states: Region/State No. of stores Kuala Lumpur Selangor Kedah Perak 2121 Kelantan 12 Johor2 Pulau Pinang 11 Negeri Sembilan Terengganu Sabah 332 Sarawak 10 Total 49 The lack of Advertising Licences at the aforesaid locations is due to the following: (a) the applications for an Advertising Licence for 48 outlets are pending the approval from the relevant local councils; and
(b) the application for an Advertising Licence for one outlet, being the Sabah Outlet referred to in Section 7.27.2(i) of this Prospectus, is pending our submission to the relevant local council.

We are enquiring with the relevant local councils for the status of the new applications for Advertising Licences under item (a) above whilst we have temporarily ceased operation for the Sabah Outlet under item (b) above prior to 25 April 2014. The recommencement of operation of the Sabah Outlet will only take place once its Trading Licence has been obtained. [The rest of this page has been intentionally left blank] 7. BUSINESS (Cont’d) Our Board has undertaken to obtain the Advertising Licence for outlets referred to in item (a) above by the fourth quarter of 2014, save for two outlets in Kedah and Sarawak respectively. The application for Advertising Licence in respect of the outlet in Kedah will only be considered for approval after the completion of conversion and subdivision of its master land title as well as the approval of its bUilding plan. For the outlet in Sarawak, the application for Advertising Licence will only be considered for approval upon the issuance of a CF/CCC in respect of the premise. In addition, our Board has also undertaken to make half-yearly announcements on the status of the above undertaking to Bursa Securities and to update the SC on the same when such announcements are made. (iii) Licence for the Sale of Rice Each of our store which sells rice is required to obtain a retail licence (“Rice Licence”) under the Control of Padi and Rice (Licensing of Wholesalers and Retailers) Regulations 1996 from the Ministry of Agriculture and Agro-Based Industry Malaysia. The Rice Licence is normally valid for a period of two years, and shall be renewed at least 30 days prior to the expiration of the licence. The Rice Licence is issued with conditions attached to them which we are obliged to comply with. Any non-compliance with the conditions and provisions in the Control of Padi and Rice Act 1994 and Control of Padi and Rice (Licensing of Wholesalers and Retailers) Regulations 1996 by a company may result in the imposition of a fine not exceeding RM25,000 and for the second and subsequent offence, to a fine not exceeding RM50,000. Further, any person including the director or officer of a company who fails to comply with the conditions and provisions of the Control of Padi and Rice Act 1994 and Control of Padi and Rice (Licensing of Wholesalers and Retailers) Regulations 1996, may be subject to the imposition of a fine not exceeding RM15,000 or imprisonment for a term not exceeding two years or both. For the second and SUbsequent offence, a fine not exceeding RM25,000 or imprisonment for a term not exceeding five years or both shall be imposed. As at the LPO, each of our 536 stores which sell rice has a valid Rice Licence. (iv) Licence for the Sale of Sugar, Flour and Oil Each of our stores which sells controlled goods such as sugar, flour and oil is required to apply for and obtain a retail licence (“Sugar, Flour and Oil Licence”) for the sale of such goods under the Control of Supplies Regulation 1974 from the MOTCC. The Sugar, Flour and Oil Licence is valid for a period of five years and shall be renewed prior to its expiration. As at the LPO, each of our 1,461 stores which sell sugar, flour and oil has a valid Sugar, Flour and Oil Licence. 7. BUSINESS (Cont’d) (v) Retail Outlet Licences Each of our nine stores situated in Kuching Utara, Kuching Selatan and Samarahan, Sarawak, in addition to the Trading Licence, is also required to hold a retail outlet licence (“Retail Outlet Licence”) issued by the relevant local councils to carry out sale of food and drinks. As at the LPD, all nine of our stores situated in Kuching Utara, Kuching Selatan and Samarahan, Sarawak requiring such licence have valid Retail Outlet Licences. (vi) Licence for the Sale of Delicacies Each of our three stores situated in Padawan, Sarawak, in addition to the Trading Licence issued by the IRBM, is also required to hold a delicacies licence (“Delicacies Licence”) from the relevant local councils to sell local Sarawak delicacies. As at the LPD, all three of our stores in Padawan, Sarawak which require such licence have valid Delicacies Licences. (vii) Licences for the Sale of Liquor and Confectionaries Each of our 18 stores situated in Kuching Selatan, Padawan, Miri and Bintulu, Sarawak, in addition to the Trading Licences which were issued by the IRBM, is also required to hold a licence for the sale of liquor and confectionaries (“Liquor and Confectionaries Licence”) from the relevant local councils. As at the LPD, all our 18 “7-Eleven” convenience stores in Kuching Selatan, Padawan, Miri and Bintulu, Sarawak which require such licence have valid Liquor and Confectionaries Licences. (viii) Personal Data Protection Act 2010 (“PDPA”) On 13 February 2014, 7-Eleven Malaysia and CSSSB have each submitted an application for registration as data user to the Personal Data Protection Commissioner of Malaysia within the three month period from the date the PDPA came into force. As at the LPD, the Commissioner has not issued the certificate of registration to 7-Eleven Malaysia and CSSSB. Other than as disclosed above, as at the LPD, we are in compliance with all conditions of our licences. For the years ended 31 December 2010, 2011, 2012 and 2013, and the period from 1 January 2014 up to the LPD, we have paid compound charges of RM28,720, RM20,951, RM29,001, RM18,439 and RM6,255 respectively, primarily due to the outlets which are operating in contravention of the relevant by-laws regulating and/or conditions attached to the Trading Licence and/or Advertising Licence. As at the LPD, although certain of our outlets have been fined for operating without the requisite Trading Licence and Advertising Licence, our Group has not been convicted by the court for such non-compliances. Notwithstanding the above, our Group’s operations have not been materially and adversely affected (including compounds, penalties, cessation of operations, seizure of products, revocation of licences) in the past for failure to obtain or renew the regulatory licences, approvals and permits to operate our stores.

 

 

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